Anthony J. Masso, Esq.
99 Regis Drive
Staten Island, N.Y. 10314
October 15, 2001
Mr. Jonathan G. Katz, Secretary
Securities Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609
Re: SR-NASD-2001-66 SuperSoes Reserve Size Display Requirement & Refresh Increment Change (herein after "reserve size display requirement and refresh increment change")
Dear Mr. Katz:
The proposed reserve size display requirement and refresh increment rule change proposed by the NASD is patently unfair. Its application would only serve to decrease liquidity, destroy transparency and absolve market makers of their obligations within the Nasdaq market place. In addition, it would aid in the unfair manipulation of stocks and operate to the detriment of the small individual investor. In principal, its most basic purpose serves only to decrease the accountability of market makers and would operate in direct contradiction to a fair and equitable market.
As a professional trader representing the individual public investor through the operation of a discretionary account, it is my experience that this market place is in need of more accountability in trading not less. One of the most basic functions of market makers is to provide liquidity to the market. In turn they are afforded certain privileges in profiting from orders and in operations beyond the scope of the average trader, like shorting stocks on a down tick. The functional operation of the proposed rule absolves them from accountability by decreasing the amount of shares present on the inside market and the number of share they are responsible to trade if they choose to trade. Naturally, this lack of accountability translates into a lack of transparency. A market maker would now have the unbridled ability to play games with their order and not display the true size of the order held in an attempt to unfairly maximize their own proprietary trades. The end result is further stock manipulation and less true movement of stocks within the market.
The more dismissive nature of this rule is that it is not even offered with a sound reason as to its purpose. Instead, investors are left to harken back to a time before SuperSoes when market makers were able to destroy stock momentum, and all but stop a stock in its tracks, by simply remaining low offer and giving out 100 share minimums. This type of self-serving manipulation decreases liquidity and further stymies stock movement.
Ironically it was under this banner that Nasdaq championed SuperSoes. SuperSoes was to increase liquidity and allow stocks free and true movement. In practice, the new system has done just that, it provides the necessary liquidity, holds market makers responsible for their trades and provides a fair amount of transparency. In addition, it has relieved market makers of dual liability under the combined executions of the soes and select-net system previously in use. Admittedly these types of dual executions were unfair and needed a viable system update like the recently instituted SuperSoes system. However, without so much as a word, let alone a valid reason, Nasdaq now seeks to undo all the planning, effort and operation that is now successfully working in the Super Soes system.
It appears that Nasdaq is not content with the fair system that has become SuperSoes. They now seek to go one step further and unfairly give market makers unaccountability in trading. Market makers cannot be given this kind of unbridled and unfettered control over the market. They wish to unfairly maintain their privileges as market makers while conveniently foregoing any and all accountability, duties and services that they are intended to provide as market makers. Market makers were relieved of dual liability and in this latest rule change are now seeking to be relieved of all liability.
I certainly do not condemn all market makers as pirates. Operating within the appropriate rules they provide a valid and useful service to the public. However this does not negate the fact that many clearly have a history of trading abuses and cannot be left with the unfettered powers this rule is attempting to bestow. The institution of this rule will undermine and undo years of work toward raising and maintaining investor confidence and fair dealings within this market place. As a result, the reserve size display rule and refresh increment rule must remain as it currently stands. These rules exist to provide the minimum required liquidity, the desired transparency and to prevent the market manipulation that would occur if this rule is changed and Nasdaq has its way.
On behalf of myself as a professional trader and the individual/public investor, I thank you for you attention to this matter.
Very Truly Yours,
Anthony J. Masso