November 18, 1998
Mr. Jonathan Katz, Secretary
Securities and Exchange Commission
450 5th Street Northwest
Washington, D.C. 20549
Re: Securities Exchange Act Release No. 39,844 (File No. S7-12-98)
Dear Mr. Katz,
I am writing regarding the Securities and Exchange Commissionís proposal to require that all institutional orders submitted to electronic brokers be displayed to the public quote. I understand that the SEC wants to include this requirement as part of its new Regulation ATS. The purpose of this letter is to voice our objection to the proposed rule.
Brookhaven Capital Management currently manages money for our clients in pooled asset vehicles. We frequently find it necessary to place large orders outside the public quote. If we are forced to display these orders to the quote, we will lose the ability to manage the exposure of these orders and control how they are executed. Clearly this will cost our clients money, because it is a fact of supply and demand that putting a large order into a shallow market will drive the quote. The money that we now save through upstairs trading will go straight into the pockets of the dealer community and the day traders.
We find it difficult, to say the least, to see why institutional orders submitted to electronic brokers have to be published when dealers can keep them secret. What is the benefit of a rule that would cause such a fundamental unfairness in the marketplace?
In conclusion, we oppose any rule requiring display of institutional orders sent to electronic brokers, particularly one that would unbalance the market the way this rule would.
Stacey Carter Fleece
Chief Financial Officer
Brookhaven Capital Management