Subject: File No. SR-NASD-2004-175
From: David Patch

December 10, 2004

Folks,

Are we not jumping the gun here. Regulation SHO has not even become policy yet January 3, 2005 and the NASD is repealing their in-place regulations with an immediate approval out of the SEC Ref: Dec. 9, 2004 SEC News Digest. As for the rules you are repealing, it took you 2.5 years to approve Rule 3370, 6 months to impliment and now, after 8 months, you repeal it. Why? Do you need to justify your salaries?

There is no reason to repeal overlapping regulations as overlapping regulations still contain value:

1. Regulation SHO has no jurisdiction over non-member firms and SHO has no terminology regarding Affirmative Determination responsibilities of non-member firms. By Repealing Rule 3370, the emphasis reponsibility of Members in being a check and balance for non-member firms is lost. The elimination of this check and balance simply places a higher risk of liability on Members who are caught with non-member settlement failures when buy-ins occur for failures. These Member firms will lose if the liability is lost to an offshore investor/firm is willing to walk away from the settlement failure.

2. The SEC has stated that the rules of Bona-Fide Market Making would be left at the SRO levels. The NASD is eliminating several rules that address Bona-Fide Market Making and arbitrage responsibilities as these rules are repealed. What then becomes the determinant NASD rules for Bona-Fide Market Making should the NASD decide to take enforcement action?

I find it appalling that the NASD would initiate such swift action to repeal laws that it took considerable time to create and create only after major outpourings of abused investors and issuers took place. The NASD, as I read these laws, was negligent in the enforcement of these laws and is only adding to that negligence by repealing these laws that contain added clarifications of responsibility where SHO falls short. The NASD is opening up the laws to allow for further loopholes to be used to defraud teh investors.

The Question is, Are the SROs really there to protect Investors or is this simply a shell game about who is responsible for what?

How stupid can the SEC and NASD be to actually approve the repeal of the old laws before new ones have ever come into affect and proven to be effective? The gap of no regulations, while small, is inexcuseable. The repeal itself was clearly not evaluated for the differences between laws and was merely rushed through without thought.