Subject: Rule Filing SR-NASD-98-21
Author:  "Scott Budner" <sbud7@mindspring.com> at Internet 
Date:    3/31/98 11:01 PM
     
     
The actual size rule should not be implemented; furthermore the trial should be 
immediately terminated because of its massive negative impact on small investors
and traders.  As a trader constantly entering orders on an agency basis from 
9:30 - 4pm, I have a very difficult time getting anything other than a partial 
'fill' on the majority of my orders.  If it weren't for the minimal level of 
commitment now required of market makers, none of them would ever trade in 
'unfavorable' conditions.  

I also strongly object to the proposal's observation that "No other equity 
market requires such a minimum."  Other exchanges require one Specialist to keep
an orderly market and show all customer orders within the current market.  The 
difference is the sole specialist book reflects everything there is to see in 
that particular market.  If you need to enter an agency order, you do not find 
yourself frantically having to "preference each market maker or ECN" in the 
hopes that their particular bid or offer has not been exhausted...thus wasting 
precious time in having to re-preference another market maker.  The very nature 
of a market-maker based system such as the NASDAQ presents problems that require
these minimums exist in order to ensure the liquidity and integrity of the 
market.  What if your customer wants to buy 600 shares of a particular security 
and the best offer is 100 shares, the offer next in line is another 100 shares, 
and so on.....How many customer trades (tickets) must a customer have to make in
 order to fill what we've commonly come to believe is a "small" 600 share order? 

 Is NASDAQ facilitating liquidity by only requiring 100 share minimums (or the
all-too-common odd lots that plague some ECNs)?  All you need to do is look at 
the size of bids and offers on a stock such as Amazon.com ("AMZN") which, at any
part of the trading day, has few, if any at all, market makers showing 1000 
shares.  If we are not going to impose any kind of minimum market size on a 
stock like AMZN, then even I (a NASDAQ trader and Broker-Dealer), would like to 
see such a stock move to the NYSE.

What the NASDAQ is ultimately saying in their proposal is that the market in 
many of their stocks are "facades" and that no one,including their own market 
makers,  are willing to position or day trade them to facilitate an orderly 
market.  If that is true, I do not see why the NASDAQ just doesn't transform 
completely into an auction market.  You just can't have it both ways.
     
Scott Budner