From: Mike Parsons [mparsons@hrld.com]
Sent: Friday, October 26, 2001 7:10 AM
To: rule-comments@sec.gov
Subject: SR NASD-2001-66
								Michael Parsons
								121 W 20th St Apt 5C
								NY, NY 10011
Mr. Johnathan G Katz, Secretary
SEC
450 Fifth St NW
Washington, DC  20549-0609
RE: SR NASD-2001-66
Dear Mr. Katz,
I am writing to you because I am very concerned about the recent proposal
the NASD has put forth regarding changing the Supersoes reserve display
requirement and refresh increment changes.  There are four main reasons that
I am against these changes, and I hope after reading my letter you will
agree with me.  The SEC has long been the champion of the individual
investor, and the public looks to you to maintain a fair and just
marketplace for all.  When looking at this proposal, I hope you see clearly
why it is both unfair and unnecessary.  That having been said, I will go
into why.
The first reason that this proposal should not pass is a simple one to
understand and spot.  Reduction in transparency.  Giving the Market Makers
even more ability to hide their actual size in no way contributes to the
market, and instead detracts from it.  If a Market Maker has a specific
amount of stock to sell, it should not be hidden.  He should certainly not
be able to continuously post a 100 share offer or bid if he has thousands of
shares to buy or sell.  This is misleading and manipulative.
Second and perhaps more serious is the tremendous drain this proposal will
cause in liquidity.  As the rule stands now Market Makers are allowed
(dubiously) to post quotes on the offer or bid and give out prints through
Supersoes.  At least, however, they are supposed to refresh to 1000 shares
when their size (usually 100 shares) has been executed.  If you allow Market
Makers to refresh their quote to 100 shares continuously it will be
impossible to execute any order of any reasonable size whenever the market
is moving.  Gone are the days when, if a Market Maker was holding up a stock
you could preference through on Selectnet to the next Market Maker to get
stock (yes, I know that you still can preference, but without Selectnet
liability, does anyone actually think that Market Makers will accept these
preferences, considering their long history of backing away even when they
were required to fill those orders?).  Now the only way to get stock at the
inside market is through Soes, or on an ECN.  If a Market Maker is only
there for 100 shares, he should execute it and get up!  Not give out 100
shares over and over and over again.  This causes longer execution times,
poorer prices, and lack of access to liquidity in the market place.
Third, there can be no doubt that we have not had proper time to evaluate
the Supersoes system at all.  Very light trading followed by the September
11th tragedy have hampered trading greatly.  Supersoes was a long time in
coming, and if these changes were necessary why werent they included in the
original proposal?  Could it be that the Market Makers and the NASD knew
that it would make the proposal unpalatable?  We need more time to evaluate
the Supersoes platform and see what changes may or may not be necessary.
After taking so long to implement, a change this soon is a preposterous
notion.
Fourth, and most bothersome, ask yourself why this change?  What possible
justification can the NASD have for making this change.  Most proposals from
the NASD are lengthy and wordy.  This one seems very brief.  Why?  Because
there is NOTHING TO SAY to support this rule change!  What could they say?
We want to give Market Makers the ability to halt the momentum of stocks
with little to no exposure?  We want to give Market Makers the chance to
manipulate stocks more easily?  How about Market Makers really need to be
able to give the public a good screwing over?  They cannot say those things.
So they say nothing.  How will this change benefit the small investor?  The
public?  Anyone at all besides the Market Makers?  Easy  it wont.  Market
Makers get many benefits as Market Makers, including the ability to short on
down ticks, and to get paid for being executed on Soes, according to the
NASDAQs new pricing structure effective November the 1st.  What the NASD is
trying to do is eliminate the Market Makers responsibility to provide
liquidity at the inside market unless it is in a manipulative and protective
way.  Why, then, do we need Market Makers at all?  All they in this
situation is ensure that you will get a worse execution than you should
have.
The NASDAQ was built on the competing Market Maker idea.  Then there was the
elimination of the excess spread rule, and many other changes that turned
the marketplace into the Market Makers against the public, as far as trading
and executions goes.  Market Makers no longer compete against each other to
give the best prices.  They compete against the public to see if they can
make money.  Please, do not give them another tool to do so.
I trust you will keep the NASDAQ as fair as possible for all investors.  I
have to trust you in this, because I have no power myself.  But I rely on
you to use sound judgement and to ask intelligent questions.  I know you
will not let me down, and not let the public at large down.  Thank you for
your time.
Sincerely,
Michael Parsons
Brown University 96
Registered Representative