April 13, 1998

Mr. Jonathan Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
     
Re:File No. SR-NASD-97-26
     
Dear Mr. Katz:
     
We would like to respectfully submit my opposition to the Actual Size 
Rule (NASD Rule 4613(a)(1)(C)).  
     
Kira and I are small professional investors.  We are concerned the 
Actual Size rule will make the NASD Market even more of an unleveled 
playing field.  We are even more concerned that the Actual Size Rule is 
being justified by a study funded by NASD.  There has been no 
independent study done, not to mention the NASD study was done on a 
small number of stocks that trade very high volume which is hardly 
representative of the NASDAQ market.  The Market Markers were also aware 
of the study and on their best behavior.  (I know you are aware of the 
SEC censure of the NASDAQ market makers.)
     
     
The Actual Size Rule was put in place to reduce the financial risk to 
Market Makers from the negative consequences of the Order Handling Rules 
implementation. The Order
Handling Rules, from our observation, have had the effect of narrowing 
the spreads on the implemented stocks.  Actual Size Rules has had 
nothing to do with reducing spreads.  Any spreads that have narrowed are 
only from day traders laying off their limit orders using the ECNs.
     
Market Makers receive a host of advantages that are not available to the 
investing public. The margin required for a Market Maker to hold a 
position is superior to what is required of a public customer. in 
addition, a Market Maker does not have to have an uptick to sell short 
as is required for a public customer. For these subsidies, the Market 
Makers are required to deal in an exposure limit for the stocks that 
they make markets in only if they are at the inside market. To reduce 
the exposure limit to 100 shares essentially gives the Market Makers 
huge advantages over the investing public with almost no responsibility 
to actually "make a market".
     
Please require the NASD to statistically prove by an independent source 
that the Actual Size Rule does not diminish the public customer's 
ability to execute orders on SOES at the inside market. The NASD should 
be required to provide all of the necessary market data to the 
independent analyst to that a complete study can be accomplished. Until 
the independent analysis has been completed and conclusively shown that 
the Actual Size Rule has no impact, then the Actual Size Rule should be 
put on hold.
     
The Market Makers got away with murder during the 1987 crash.  I was 
trying to exit position that day and I was not allowed to put an order 
in, not Market Maker would answer the phones.  I would hate to see them 
in a position to refuse to "make market" when it is not convent.  They 
are already practicing buy using the 100 tier limit to "block" the 
market so they can reduce their shares to 100 and effectively "back 
away" from posted prices and amounts.
     
Let's not make decisions on hearsay.  Lets make decisions on sound 
study, not a biased study.  I can think of no other public institution 
that would be allowed to make such sweeping changes on such a study, 
especially after a major censure on its own ability to self regulation.
     
Thank you very much for you consideration.
     
Sincerely,
     
Ed Naylor and 
Kira Stadele
PO Box 160425
Austin, TX 78716-0425