Subject: File No. S7-03-10
From: Michael Gareri
Affiliation: CEO, Microtrade Networks, Inc. member FINRA/SIPC

February 3, 2010

Chairman Shapiro likens naked access to handing car keys over to let someone drive that doesnt have a license. The solution proposed is to offer large broker/dealers a license to steal.

Requiring other traders, including small broker/dealers, to route orders through pre-trade auditing systems could expose trading patterns and techniques to a potential competitor. The auditing broker/dealer can attach network sniffers, reverse engineer trading strategies, and derive algorithms either by targeting trades of a successful trader or deriving patterns from an amalgam of order flow. This is valuable data which can be turned over to their proprietary trading shops without fingerprints. Small broker/dealers and traders will never know until their profits, if any, disappear. And the regulators will never know.

Until this behavior can be detected and severely punished, the proposed rule as written will do nothing but feed sheep to the lions.

To continue a level playing field, at least among broker/dealers, I suggest offering a much easier path for small broker/dealers to achieve self clearance. For non licensed traders, I have no suggestions, apart from predicting their speed sensitive algorithms will be severely crippled.