December 22, 2003
Ticker Magazine
127 Top of World Way
Green Brook, NJ 08812

To: Securities and Exchange Commission
Email: rule-comments@sec.gov

Re: SEC Proposed Rule, File No. S7-27-034 
Subj: A Better Solution

Dear Sir:

As a former chairman of a mutual fund complex and the editor of 
"Ticker", a trade magazine for investment professionals with a 
circulation of 100,000, I would like to express my concern regarding 
the approach being taken by the SEC to solve the illegal after-hours 
trading problem. I believe there is a much simpler solution that 
offers several other benefits.  

The SEC proposal for a rigid cutoff time for mutual fund trades has 
a serious flaw. Under the proposed rule, either the designated 
transfer agent or a registered securities clearing agency must 
receive an investor's purchase or redemption order by the time the 
fund has established for calculating its net asset value to receive 
that day's closing price (usually 4 p.m.).

If implemented, the rule would put investors that purchase funds 
through 401(k) plans, brokers, or other intermediaries at a 
disadvantage to investors that buy and sell shares directly from 
the funds. Investors tied to the slower systems would have to place 
orders as early as 10 a.m. to make the 4 p.m. cutoff. Rather than 
leveling the playing field, the rule will end up causing even greater
inequities between fund investors than the recent illegal after-hours 
trading.

To suggest that a 401(k) investor is not concerned about the timing 
of a buy or sell order is probably correct in general. But if even 
one investor wants to trade today and is unable to because he is on 
a slower platform, while another investor is able to trade, that is 
unfair and unacceptable.

A far simpler approach would be to impose a "next day" rule that 
disallows same day trading of all open-ended mutual fund shares. An 
order placed today would be executed at tomorrow's closing net asset 
value - regardless of the time it was received. Under a next day rule, 
illegal late trading would be impossible unless there were direct 
collusion between fund management and its primary transfer agent.

Besides solving the after hours trading problem, the next day rule 
would offer two other advantages: it would discourage market timing 
and reduce management costs.

Investors who engage in market timing are only successful if they are 
able to predict movements in a fund's share price due to relative 
distortions in the underlying markets. If their trades were delayed 
by the next day rule, the increased market uncertainty would negate 
any advantage they might enjoy. Mutual fund shares would then cease 
being attractive vehicles for market timing and timing practitioners 
would turn their skills to ETFs or other instruments.

For fund managers, the next day rule would offer a huge advantage 
since knowing their expected end-of-day cash position at the beginning 
of the day would permit them to optimize their portfolios. Rather than 
hold excess cash to meet potential redemptions, managers could put 
additional money to work generating greater returns for the fund's 
shareholders.

In addition, if the SEC rule is adopted, many financial intermediaries 
will be forced to undertake considerable investments in their systems 
to attempt to meet the closing cut off time. Under the next day rule, 
that expense will be saved. 

Since most mutual fund investors have a long-term prospective, a 
one-day delay in trading shares would not generally be viewed as a 
hardship. While some of their trades might occur at a lower price, 
others will occur at a higher price, and the gains and losses will 
average out overtime. 

As one of the 95 million Americans that invest in mutual funds and 
one who understands the importance of keeping the mutual fund industry 
viable, I greatly appreciate the efforts the SEC is doing on our behalf.


Sincerely yours,


Thomas Buckingham
tom@ticker.com