Re: BOX - SR-BSE-2002-15From: gary.kemp@earthlink.net
Sent: Wednesday, September 03, 2003 7:54 AM
To: rule-comments@sec.gov
Subject: Re: BOX - SR-BSE-2002-15

To:     Mr. Jonathan G. Katz, Secretary, SEC 

Dear Mr. Katz, 

I am a retail customer of Interactive Brokers.  I actively trade stocks, 
options and futures offered on exchanges world-wide.  I have further been 
involved in the development of several electronic markets as a technologist.  

The BOX exchange is an important step in providing fair access to markets 
for small customers.  Electronic exchanges provide a see-what-you-get trading 
environment.  This is the opposite of open outcry exchanges which very often 
have inconsistent price discovery and execution levels to anyone outside the 
"pit" environment.  

The BOX exchange will also provide price improvement capabilities for orders 
on a penny basis, which means simply that retail customers don't have to buy 
the offers or sell the bids being offered by market makers, rather retail 
customers (and others of course) can better the bids and offers in penny 
increments (if a PIP is started for the strike), allowing them a chance to buy 
at lower prices and sell at higher prices.  This is good market philosophy.  
However, price improvement matching is limited to OFP and Market Makers, which 
means that participants other than OFP and Market Makers are not able to provide 
price improvements generally to the market and match with each other.  Said a 
different way, it should be possible for retail customers (non-OFP/non-MM) to 
post a price improvement to the market, perhaps give the OFP and Market Makers 
an opportunity to trade at that price, but if they do not, have the price post 
to the market and allow other non-OFP/non-MM customers the ability to trade at 
the improved price.  The current model is an improvement to current US exchange 
matching models, but still falls short of a fair matching approach.

The BOX market model is still unecessarily complex.  Why not just offer a 
price/time priority order book, where all participants can freely pick price 
levels at penny increments?  This would allow far superior prices in the market 
and would force market makers to compete more aggressively. 

I urge the SEC to seek modification to the matching approach, but in either case 
to make every effort to quickly approve this exchange so options customers have 
another competitive forum in which to trade.

Thank you, 

Gary Kemp 
Retail Customer 



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