Subject: SR-NASD-9909 Author: "millenniumtrading" Date: 6/27/99 4:44 PM I am writing to you to express my concern about the proposed rules regarding Agency Quotes. While in theory not a bad idea, the way the implementation is being proposed if approved as is, will signifcantly hurt the efficiency and fairness of the market. The fact that only market makers will be able to display an agency quote is unfair. Why can't broker-dealers who are not market makers display their customer orders through an Agency Quote. This to me does not seem fair and just. The fees which will be charged are by far the worst aspect of this proposed rule. Any additional fees imposed on broker-dealers generally is not a good idea. However, when these fees could be different depending on who accesses the Agency Quote, this is not only unfair, but the most extreme form of discrimination there is. Why should the access be charged at varying rates depending on who accesses it? This would be unfair to the participant who accessed the quote, worse to the customer wanting the best execution (because chances are the broker-dealer will pass this cost along). This is not consistent with giving the investor the best access to market, since another participant may be charged a smaller fee for accessing the same quote. Charging a fee in general is not a good idea since there is a greater chance that the customer which is behind the Agency Quote will not get the execution which he/she may have recieved if there were no fees being imposed. For instance, Customer A wants to sell 500 shares of Intel at 55 1/4 which is displayed in Market Maker ABCD's Agency Quote. In addition, there is an ECN on the offer (say ISLD which most firms do not charge any extra fees to access). If I am customer B and I want to buy Intel at 55 1/4, I am going to access the quote on ISLD in order to avoid having to pay ? (well I don't know how much because the Market Maker behind the Agency Quote can charge me whatever they want). The point is, is that Customer A who wants to sell Intel at 55 1/4 may not get their execution for no other reason then the fee being imposed. The implementation of fees will be further unjust because the customer, who will probably bear the cost, in most cases will have no say whether their order gets filled from an Agency Quote. The way the rules and systems currently work, is if a market order is entered into SOES it will be executed by the next market maker in the rotation which could be an Agency Quote. This will act to increase the customer's transaction costs only for the benefit of the market maker. This lack of control where the order gets routed to is further hampered by the proposed change in Selectnet, specifically getting rid of the Selectnet preference capability (all in the guise of removing the double liability exposure of market makers). The commission should keep in mind the increase in global competition which exists especially in the financial markets. As you are aware, the technology exists for US investors to invest globally almost as asily as domestically. This trend is only going to increase in the coming years. Adding to the costs associated with accessing the markets does not seem to be the prudent thing to do in this era of increased competition. The arguement that market makers are using to convince this commission to allow them to charge for accessing Agency Quotes is that ECN's are allowed to charge fees while they're not. While this is true, it is so for a reason. These trading networks were allowed to give market articiapants better access to the markets. Anyone can see that this has in fact happened. Spreads have narrowed in large part because of the ECN's. In addition, liquidity has improved dramatically because of their presence. Just from observation alone these important benefits can be attributed to the ECN's presence. For instance, so many market makers quote only 100 shares, while ECN's in the same stock will be quoting several thousand shares. Since ECN's are solely a matching system, they do not have any other way of receiving compensation. Market makers can and do profit from the order flow in which they receive. Market makers are just angered by these ECN's because they have narrowed the spreads which they used to profit from, and in addition to that, have taken a large part of the order flow away form them. In this environment I think it is proper to reward the participants who help create a more efficient and just market place and not the market makers who more and more are becoming a less important factor in the marketplace. If the commission believes that it is beneficial to have separate Agency Quotes then allow all market participants to have this same right. However, in any case do not allow fees to be charged, since this benefits no one except the market makers and it does so at the expense of the customer. Let's work to lower costs not increase them. Thank you for taking the time out to hear my opinion. Steve