Subject: File No. S7-8-99 Author: Jon Mosle Date: 4/12/99 6:24 PM April 12, 1999 Jonathan G. Katz Secretary, Securities and Exchange Commission Via email to rule-comments@sec.gov Re: Comments concerning proposed Year 2000 requirements; File No. S7-8-99 Ladies and Gentlemen: I am writing on behalf of HBK Finance L.P. and HBK Securities Ltd., which are registered broker-dealers and members of the NASD (the "HBK Entities"), to provide comments concerning proposed Rule 15b7-2, which creates new Year 2000 regulatory obligations for broker-dealers. The proposed rule seems to relate primarily to the recording and execution of customer orders and the maintenance of customer accounts. The proposing release states that "the rule is aimed at overall capacity and mission critical systems that affect processing of customer securities transactions . . . ." SEC Release No. 34-41142, Section III.A. Except for a limited number of introduced accounts that are maintained at other broker-dealers on behalf of certain employees and affiliates, the HBK Entities do not carry any customer accounts or receive or hold any customer funds, and substantially all trading activity conducted by the HBK Entities is proprietary. As a result, the HBK Entities are in the same position as a typical brokerage customer, rather than a broker-dealer that maintains customer accounts. In the context of the HBK Entities' activities, the application of the proposed rule seems inappropriate and unclear. In particular, the proposed rule imposes various requirements concerning "mission critical systems." Based on the proposing release and the context of the proposed rule, it seems that this phrase is intended to refer to systems that are critical to processing and maintaining customer orders and customer accounts. The definition of "mission critical system," however, is not limited in this manner, but instead refers broadly to systems that relate to "processing of securities transactions." Accordingly, the proposed rule might inadvertently cover the internal trade accounting systems of the HBK Entities, which are used to monitor activity in proprietary trading accounts that the HBK Entities maintain at other brokerage firms. These accounting systems might be considered "mission critical" to the HBK Entities, which naturally have a need for reliable systems to monitor their proprietary trading activities. However, these systems, which are in no way related to customer orders or customer accounts, do not seem to be an appropriate subject for additional regulation. To the extent that the SEC or the NASD has any interest in these types of systems, it would have an identical interest in the internal accounting systems of any brokerage customer that uses its own computer systems to monitor its brokerage accounts, regardless of whether such customer happens to be a registered broker-dealer. Furthermore, the consequences of any failure of such systems would fall exclusively on HBK, giving HBK every incentive to insure that the systems are Year 2000 compliant. The SEC's desire to protect innocent customers is not applicable in this context. Accordingly, we believe that the proposed rule, if adopted, should not apply to broker-dealers that do not have significant customer business. Alternatively, the definition of "mission critical systems" should be revised to apply only to systems that are critical to customer-related functions. Sincerely, Jon L. Mosle, General Counsel