Jonathan G. Katz
Secretary
The Securities and Exchange Commission 
45 0 Fifth St, NW
Washington DC 20549                                                April 6, 1998
     
Re:  SR-NASD-98-21   Expansion of NASD's Rule Permitting Market Makers to Display
                                     Their Actual Quotation Size
     
Dear Mr. Katz,
     
     Please accept this from Jefferies & Company, Inc. ("Jefferies") as
comment on the above-referenced proposed rule change by the NASD . 
Jefferies is an NASD member firm catering to an institutional clientele and 
is a NASDAQ market maker in approximately 500 National Market System (NMS) 
issues.

     Jefferies is writing in support of the NASD proposal to expand
permission for market makers to quote their actual size.   Fundamentally, 
Jefferies believes in free and unencumbered markets.  We believe that, with 
some exception, natural market forces rather than artificial regulatory 
constructs should shape market structure.  We think that the mere 
recitation of a proposal which espouses one's actual market interest - as 
opposed to a mandatory, artificial interest - should lead to its 
endorsement.

     Jefferies is mindful that regulatory changes to the markets may result
in unintended consequences.   We have pointed out our concern for such 
results in the past.  As to the instant proposal however, we have had the 
benefit of two studies analyzing market quality and volatility when NASDAQ 
dealers were permitted to display their actual intent. The NASD issued a 
study with its first proposal to expand the "Actual Size Rule" ("ASR) in 
June of 1997 and more recently in January of this year.  The latter study 
was directed specifically at the issue of what if any effect freeing up 
market makers' true sizes would have on the full breadth of NASDAQ issues 
(because the expanded pilot included 110 securities selected randomly from 
groupings based on average daily dollar volume).  We do not see that these 
studies revealed any statistically significant differences in market 
spreads, volatility,  depth, or liquidity.  Consequently, with respect to 
the instant proposal - due to the fact that an actual test of the rule 
change has been already studied - we do not have our usual trepidation 
concerning unintended consequences.

      On the other hand, we believe that an intended consequence of the
rule proposal will permit dealers to expend capital and manage risk as they 
see fit.   This flexibility should reduce the barriers to the market place 
and permit greater competition from smaller market makers.

     Jefferies does not believe it has seen the full effect of  SEC Rule
11Ac1-4 on the market.  We have seen an increase in current and proposed 
Electronic Communications Networks ("ECN's").  We have seen a variety of 
proposals, including the NASD's Integrated Order Delivery and Execution 
System. And we have seen that many dealers have ceased to make market in 
some issues.   Whether or not this decision to "drop stocks" will prove to 
be permanent by these certain firms is unknown.  However, anything that 
will allow access to new capital and new dealers should be encouraged in 
this changing marketplace. We believe the proposed expansion of the ASR 
should be championed for this reason.

    In summary, Jefferies believes that the SEC should approve the NASD
proposal.  We believe that the proposal is philosophically positive, that 
it has been tested and no adverse effects have been detected, and that it 
will lower the costs of entering the dealer market and providing for even 
greater competition.

     Thank you for affording us this opportunity to share our thoughts.
     
     
Very truly yours,
David A. Rich
Associate Compliance Director