From: Matt Rea [matthew_rea@hotmail.com] Sent: Wednesday, October 24, 2001 1:43 PM To: rule-comments@sec.gov Subject: Comments on NASDAQ rule change October 15, 2001 Jonathan G. Katz, Secretary Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549-0609 Dear Mr. Katz, I would like to voice my concern with the proposed rule changes in the NASDAQ Marketplace. It has recently been brought to the attention of NASDAQ traders that the NASDAQ marketplace is considering rule changes that would allow market makers to refresh to 100 shares instead of the current rule which requires them to refresh to 1000 shares. In my opinion, there is no upside to this rule change. By lowering market maker refresh minimums, the NASDAQ will reinstate the same problems that it faced prior to SuperSOES. In the days of preference orders, certain market makers would attempt to destroy momentum of moves and take advantage of the rule that allowed them to give out 100 share preferences every 10 seconds. When momentum would shift, they would then fill their large orders still remaining in their system, thereby manipulating the stock. With the advent of SuperSOES, these actions ceased to occur and the marketplace was considerably fairer for all who participate in trading. It is my fear that these actions will again occur if this new change goes into affect. The momentum that makes the NASDAQ so enticing to trade will once again be manipulated. A fair and orderly market has always been the goal of the NASDAQ; a goal that is not easily achievable. This rule change would cause the opposite effect on the market place, giving an unfair advantage to market makers who use rules to their advantage. These new rules will cause an unfair pricing structure that is discriminatory to NASD members, such as registered traders who do not make markets, which would be a direct violation of Section 15A (b)(6) of the 1934 Exchange Act. If market makers wish to display different size orders, with different refresh rates, they can use an ECN. Market makers, under the Manning Rule, can always forward retail customer’s orders to an ECN for display if they choose. Which is one of the many reasons why we have ECNs. ECN’s have increased the liquidity of the marketplace, and added liquidity is always good for markets. This new proposed rule will eliminate liquidity, as those who wish to purchase and sell stock through SOES will only be able to get out or purchase 100 shares at a time. Lastly, I would like to bring to your attention the ill timing of this proposed change. In the wake of our nation’s greatest tragedy, the state of mind of our people is dramatically shaken. Uncertainty and fear is a very bad combination for the marketplace. Why add to the uncertainty of already shaky traders, who already are on edge? This rule could only add to the already growing pot of uncertainty in the marketplace. With the war on terrorism in full force, why create confusion and change in a time when news stories can tank or bounce the marketplace. In this time of extreme volatility, I believe it is best to stay with what people know, as security is welcome in any form right now. I believe that this issue needs to be readdressed with more voices being heard. I believe that with enough information given to traders, you would hear a large dissent. Please address this issue with the whole marketplace in mind, not exclusively with the ideals of market makers who possess a large influence. Sincerely, Matthew C. Rea Registered Representative _________________________________________________________________ Get your FREE download of MSN Explorer at http://explorer.msn.com/intl.asp