April 13, 1998
     
Mr. Jonathan Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC  20549
     
Re: File No. SR-NASD-98-21
     
Dear Mr. Katz:
     
This letter is in response to the request for public comment on the 
proposed rule changes.  My biggest concern is extending the Actual Size 
Rule to all issues.
     
It has been argued that the actual size rule as implemented in the pilot 
stocks has not had any effect on spreads or liquidity, but this is certainly 
not my experience as an investor/trader.  I have, on numerous occasions, 
witnessed several ways this rule provides market makers with means to refuse 
making a market, such as backing away behind ECNs, posting small sizes when 
the market is trending strongly, and when trading is quiet, posting small sizes to 
make the spread appear small, but for lots of more than 100 shares, the 
effective spread  (when considering the actual liquidity) is as much as 3/4 to a 
full point.
     
I question the conclusions that the rule has had no effect on spreads or
liquidity, and I am further concerned that for thinly trades issues, 
liquidity and effective spreads will grow much worse (they are not very good 
now!).  I feel that any study that concludes there is no effect on liquidity 
could not possibly be based on trading experience. 
     
In my opinion, extending the actual size rule to all stocks has the 
effect of allowing a market maker to behave as just another trader, relieving him 
of the responsibility to provide one of the key services market makers 
exist to provide (and indeed one reason they enjoy certain other trading
advantages, such as no uptick rule for short sales, and preferential 
treatment for fills - as a trader, I cannot buy at the inside bid 
through SOES by filling a sale from another trader).
     
If the intent is to eliminate market makers and go to a kind of 
electronic open outcry system, then let's go all the way and level the playing 
field, and eliminate these advantages.   The drawback, of course, would be 
risking a return to the days when there was almost no real market 
for OTC issues (isn't that why we have market makers?!?).  
     
The real question should be, how does the consumer of NASDAQ services 
benefit from this rule change?   I have seen no arguments on this side, 
only that some study (whose results I question) says that it won't HURT. 
Yet if liquidity and spreads will be "unchanged", my question is, why is
anyone in favor of this rule?  It seems plain that the effect of this 
rule change only increases the considerable edge that market makers 
already enjoy.
     
Thank you very much for your kind attention.
     
John D. Bunda, Ph.D.
12726 Timberside Dr.
Austin, Texas  78727
(512) 218-4365