Subject: File No. S7-05-04
From: Jess L. Haberman

July 13, 2004

Thank you for the opportunity to comment on this rule regarding Section 31 fees. The rule should exempt OTC riskless trades that are reported no tape. These trades are essentially the same as Agency trades. Where an Agency trade is only levied a Section 31 fee once, however, it appears that the rule requires riskless principal sells to be levied the Section 31 fee twice.

The Commission has previously recognized the similarity between riskless trades and agency trades in terms of soft dollar arrangements. In addition, the NASD recognizes the similarity between riskless trades and agency trades in terms of their Manning rule, exempting trades that are allocated to customer orders on a riskless basis from triggering Manning.

There appears to have been no mention of riskless trades in this rule filing File No. S7-05-04. The result is that both legs of riskless principal sell transactions would be levied a Section 31 fee, whereas if the customer order was filled on an Agency basis the Section 31 fee would be levied only once. This seems fundamentally unfair.

Please feel free to contact me to discuss this matter further. Thank you for your consideration.

Regards,

Jess Haberman