Date:    06/28/2000  11:04 PM

Subject: RE: Copy with name added to bottom
 
It seems as if the way things stand, the SEC is giving the Market makers 
the right to steal from the individual investor. Not only do they profit 
from trading with the individual investors stocks, but they can profit by 
owning and holding the stock themselves. To make matters worse, the SEC 
allows Market Makers to trade with the individual investors shares if they 
are held by that Market Maker/Broker on behalf of the individual investor. 
To me this is a definite conflict of interest creating a very large 
advantage for the Market Makers and against the individual investor. We, as 
individual investors, entrust our shares to a broker or Market Maker when 
we purchase through them. To me, the SEC allows these Market Makers to 
neglect their fiduciary duties.
     
Market maker advantages;
     
. The ability to profit from the individual investors trade.
     
. Market Makers can own the stock themselves. They are the closest to the 
actual market and can sense the pulse of the market. Therefore they have a 
great advantage over the individual investor when it comes to trading. They 
hear the good and the bad before the individual giving them the advantage 
to buy low and sell high. If the Market Maker is trading our stocks and 
making a profit from us on those trades then it would seem they should be 
working in our best interest and not that of themselves.
     
. Market Makers can trade with shares WE own but left in their possession. 
To me this is a HUGE disadvantage to the individual investor, especially 
when the Market maker also works for large institutions AND can also own 
shares themselves. If our shares are made available to the Market Maker, it 
seems there are a number of scenarios that can be used to control the price 
of the stock to their advantage. Here are some examples.
     
1. The Market maker could decide to sell a number of these "Borrowed" 
shares at the Bid. If a number of Market Makers get involved this could 
easily move the price down by selling back and forth at the bid. Moving the 
price down without any reason such as news, market conditions or for any 
unknown reason could scare the small investor who is afraid of losing there 
whole investment they entrusted to the Market Maker for holding in the 
first place. The Market Maker is able to then purchase these shares at the 
lower price and replace the "Borrowed" shares. Another advantage with this 
ability of the Market Maker to move the price down is that they are able to 
take shares away from people who are not able to monitor there stocks all 
day as the Market Maker can. The individual uses a tool  called a "Stop 
loss limit" created  to help keep from losing their money if it drops below 
a certain level. The Market Makers use this to their advantage. By allowing 
the Market Maker the ability to use "Borrowed" shares and walk the price 
down, they are able to reach stop loss limits set by the working investor 
who is unable to monitor their stocks all day and the Market Makers actu 
ally STEALS the individuals shares.
     
2. Because the Market Maker has a complete view of the market they know 
when there is a good time to increase the stock price and because Market 
Makers can own shares, the Market maker could buy shares at the ask price. 
If  the conditions are right and there are many small lots of shares with 
large gaps between shares, the Market Maker could continually buy these 
small amounts at the ask. This would move the price up and bring attention 
to investors. When the price reaches a point where it is over bought, the 
Market makers then could sell "Borrowed" shares. With a typical sell-off, 
the price decreases and could also be helped back down in the same way that 
was mentioned above.  The market makers again would buy back the shares at 
a lower price profiting while replacing the "Borrowed" shares.
     
     
The real kicker is that the Market Maker does not even pay much for these 
transactions while the individual investor is paying a commission to the 
Brokers and/or the Market Makers while they are being stolen from.
     
I can understand the need for a business to represent a company and its 
stock. I can understand the need for a company to supply a hub for many 
individual investors to trade and hold their stocks. I can also understand 
a company needed to possibly represent large institutions for large 
purchases of stocks over time so as not to affect the stock price 
dramatically. I also understand the desire of a company to trade and profit 
from investing in the stock market. These are all needed for the stock 
market to work. The problems come when the SEC, the overseeing body who 
must make sure the ways of the market are fair to all, allows an unfair 
advantage to one type of investor over another.
     
In Summary;
     
        The SEC is responsible for allowing the Market Makers to neglect their 
fiduciary duties.
        Market Makers profit from the individual investors trading and by
working 
the market against that same investor.
     
What needs to be done;
     
        The SEC MUST stop Market Makers from using "Borrowed" Shares to trade 
with.
        Market Makers should be limited in the amount of shares they can own in 
any given company.
        Market makers must become either a representative of the individual 
investor OR an investment firm, NOT both.
     
     
The SEC's decision should be based strictly on equal rights and NOT on 
money. That is the SEC's responsibility. I hope that you will truly 
consider the power you have and the power you grant and that it is the 
SEC's responsibility to make the market fair to all.
     
Thank you for your time on this matter.
     
Sincerely,
     
Bill Smith