From: howard Teitelman []
Friday, October 19, 2001 1:14 PM
Alert # 2001-158

186 Ormond St.
Albany, NY 12208

October 14, 2001

Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington DC, 20549-0609

Re: Alert 2001-158

Dear Mr. Katz,

As a registered principal at Heartland Securities I have written to you on several occasions to inform you about my most recent observations of the NASDAQ marketplace and to comment on some of the rule changes. After thoroughly reading Head Trader Alert #2001-158, rule change by the National Association of Securities Dealers, Inc., I am writing to let you know that if the NASDAQ is allowed to eliminate the 1000-share display requirement when using SuperSoes reserve size, the quality of the marketplace will be destroyed.

The proposed rule change "eliminates the current requirement that a quoting market participant display 1000 shares". This rule would completely change the purpose and agreement of SuperSoes. SuperSoes was originally designed to help prevent market makers from getting a second execution on either SOES or SelectNet. In return, market makers would create a more transparent and efficient market by quoting at least 1000 shares if they had reserve size. If this rule is passed, market makers would be giving up on their end of the bargain. In fact, it would be much better if there was no reserve size at all. The NASDAQ market would be much more real if market makers were forced to show the exact size that they were willing to purchase or sell. Many market participants would benefit by knowing how much available stock there is at every price level. Currently market makers are frequently violating the display size rule by showing 100 shares and then refreshing. They should not be rewarded for their NASDAQ violations by having the rule changed in their favor.

Before implementing any changes to SuperSoes it is crucial that we wait several months. SuperSoes was only fully implemented about two months ago. We have only seen SuperSoes in two of the slowest, lowest volume months of the year. While most market participants are still just getting accustomed to the system, we must wait and gather more information and data before adding or changing anything about the system. Alert #2001-158 proposes effecting the display requirement for November, 1 2001. I propose that we avoid any changes until five or six months from now.

I would also like to comment on the fact that market makers are now receiving a fee for making a market with the new SOES rates. These fees are in violation of 15(A)(b)(6) of the 1934 Exchange Act. The change would create a pricing structure that discriminates against market participants that do not make markets. Also, all market participants, not just market makers, should benefit from a liquidity rebate. Once again, it is important to recognize that we have only seen SuperSoes in the slowest of markets and it is absolutely impossible to determine any kind of pricing structure by extrapolating numbers from the recent market volume. Before making any changes, there should be allowed plenty of comment time between the announcement and the implementation.

I want to conclude by thanking you for your continued effort to serve the public. I hope that my suggestions will be helpful in creating a more equitable market place for all. I appreciate your consideration in the above matters.


Howard Teitelman
Columbia University B.S., M.S. '96