Date:    02/03/2000  12:31 PM

Subject: SR-NYSE-99-47
02/03/2000
     
     
     
1. COMMENTS...INTRODUCTION
today the 3nd of february, 2000, and yesterday, and the day before, 
despite considerable searching by me, i was unable to locate, at the sec 
site, rthe above proposal rule change...SR-NYSE-99-47... referred to at
     
http://www.mtrader.com/secupdate.htm
     
the substance of which, is contained in the first two paragraphs at the 
top of the page, as set out immediately below....
     
For those of you who have not heard about or are looking for an update 
on the proposed change to the NYSE Rule 431 and NASD Rule 2520 which, 
among other  items, increases margin requirements for daytraders, here 
is an update.
     
We "believe" the major change will be that traders who have been 
identified as "pattern traders" or daytraders, who trade on margin must 
maintain a   minimum equity of $25,000,at all times, up from the current 
requirement of $2,000.
     
therefore, if i have incorrectly directed these comments to 
SR-NYSE-99-47, would you kindly redirect them to the correct location, 
and advise me that you have done so, and how within your website i could 
have located the correct proposal on which to make these comments
     
below, i have broadly set out my comments using the following general 
scheme...
     
firstly, i have directed my attention to what i believe to be the 
substance of the proposed rule, and made comments/criticisms along the 
way on the proposal, and at times added my position
     
next, i have made comments that were not included in the first part, 
plus more general comments, critcisms, and statements of my position
     
BACKGROUND
i am a full-time daytrader
     
the above proposed rule change,  poses a serious threat to my financial 
interests ...although currently i exceed the prposed threshold, i might 
in future split my capital among several firms, and so be caught by the 
rule...or, at some time in the future i might have less than the overall 
proposed $25,000 in an account, and i don't want to have some arrogant, 
cliquish, intrusive  jackass from the nyse and the nasd  imposing a more 
stringent margin requirement according to the quantum of my account... i 
don't want them inappropriately poking their nose into my business, 
telling me how i should deal with my capital...
     
unfortunately, i have been totally unable access any specifics of their 
proposals, including access to their rationale for this proposal, and 
most importantly access to any evidence...should there be any ?..in 
support of  their proposal
     
one kindly interpretation of their motives is that it is simply 
half-baked,  paternalistic garbage..
     
in passing, i have no qualms in speculating about  improper motives to 
such people and entities...naively many people express reluctance to 
extrapolate judicial evidentiary rules proscribing such motive 
attributions to wider settings such as these
     
alternatively, maybe it's simply the nyse, and the nasd later,  throwing 
their weight around and  kicking the butts, of theur new nemeses, those 
upstart interlopers, the day traders, who have had the afrontary, the 
audacity to challenged their incredibly lucrative long history of 
financial privilege and wealth
     
i first heard about the proposal two days ago...0201200...for the first 
time, in a daytrading chat room...and because of its potentially serious 
impact on me, i know i  have had insufficient time to adequately state 
my position, and request permission to supplement my submission after 
the formal comment period has expired...which i am informed is on 
02/03/200...
accordingly, i request at least  one month extension of time to file 
additional supplementary material.
     
since, others are, and indicated that they were seriously effected by 
the nyse/nasd proposals, i ask that the comment period be  extended for 
everyone...i would suggest that the comment period be extended say at 
least 6 months, given the difficulty in locating details of the 
proposal, and the seriousness of the impact on traders/investors
     
also, i am not sure this proposed purely conceptual dichotomy between 
traders and investors is a realistic, meaningful or helpful one...
isn't it totally arbitrary and capricious to permit an investor, who say 
buys and holds a $30,000 investment in stock xyz, which unbeknown to 
him/her tanks in a straight line downwards for 2 years, to be permitted 
to use a margin account...
but not an active, and for the skae of argument,  more knowledgeable 
trader with a $24,000 account ?...
on the assumption that protection of capital was part/all of the nyse's 
rationale...but who knows among the public ?...certainly not me... from 
what i've not been able to find
     
this ( charitably ? ) naive oversimplification by the nyse/nasd has 
shades of the procrustean bed, where the short are stretched to fit the 
bed, and the long have their legs cut back
     
when the details of this matter became known in the day trading chat 
room this morning ... 02/01/200...it was apparent that effected  others, 
who  became aware of this for the first time today were alarmed
     
now, if there is a claim that some emergency has arisen...which requires 
expeditious action, such as to curtail my  requested extension for 
myself particularly, and others more generally, then i request full 
details as to the nature of any nyse's/nasd's claims that there is such 
an emergency be published...
     
2.    COMMENTS
     
as mentioned above i was unable to locate proposal...SR-NYSE-99-47...
     
accordingly, firstly, i request access to the full details of the above 
proposal...including in particular...
     
        1.    CHANGES
        The NATURE AND DETAILS OF THE CHANGES SOUGHT sought by the nyse
and the nasd,
     
        2.    REASONS
        Their REASONS for the these changes ...including...
                1.    including, the nature and seriousness of the
HARMS AND BENEFITS they allege/claim/assert is falling on this targeted 
subgroup of the investing/trading  public, whom they propose to 
regulate...and in consequence, how such benefits and harms will be 
ameliorated by the adoption of their proposals...and conversely, why 
persons/entities over the proposed  threshold should not be subject to 
the same/equal margin requirements ?
     
                2.    also, since the nyse and nasd are comprised of
large, powerful, privileged and vested groupings of financial and 
commercial interests, i need time to examine and assess the influence
of  biases, on these self regulatory organisations ostensibly neutral or 
altruistic proposals...in particular...
     
                        1. an examination of what benefits and harms or
detriments currently occur to the interests of the members of the nyse 
and the nasd, under the present arrangements...and which  presumably 
would continue if the status quo were maintained?...here i am looking 
for evidence to support a potential charge by me, that the nyse/nasd are 
secretly promoting improper ulterior motives
     
all constitutional protections, including due process, equality before 
the law, property rights, etc., demand no less
     
                        2.    next,  how the interests of the
constituent members of the nyse and nasd would be effected/benefitted, 
if their proposals were adopted unchanged by the sec?
     
clearly, since they are self-regulatory organizations, who's members may 
potentially may directly benefit from their proposals, they cannot 
escape very careful scrutiny of their proposals...there is at the least 
an apparent conflict of interest
     
to my mind, it is totally inappropriate, absent full details of their 
proposals to take on faith alone, proposals by the fox with regard to 
changes in the arrangements for his care of the chicken in the 
chicken-house
     
that's how i see the nyse/nasd proposals, which are directly contrary to 
my interests
     
their proposals, i maintain,  would unreasonably restrict open and equal 
access/entry to the stock markets on the basis of a spurious 
criteria...and, in consequence, would augment the power of constituent, 
and related,  members of those exchanges, including larger 
financial/commercial interests,  by reducing competition with them, from 
a less wealthy section of the investing public...this scapegoating, i 
believe, is simply a ruise to restrict competition...
     
also, it would reduce liquidity in the market...
     
conversely, promoting open and reasonably unfettered freedom of entry 
into the us stock market by all sections of the investing 
publics...including as a corollary, one of its pre-eminent strengths, 
the potential to fail... promotes successful wealth creating free market 
capitalism...
     
the removal of this potentiality, has proven to be a hallmark of 
stagnant economies throughout the world, of which perhaps india is the 
prime example
     
if it is claimed by the nyse and the nasd, that their rationale is the 
SAFETY of the capital of those less wealthy members of the investing 
public,
then i would ask, where is their supporting evidence ?
     
this raises at least several questions...
what significant evidence is there that all of the targeted group has 
requested such paternalistic protection...
and if there is no such uniformity...which in fact there isn't...is it 
to be imposed even on those who don't want ?
and what evidence is there that the targeted subgroup are less 
successful traders/investors
and even if they were, are they not to be permitted to take on that risk
     
and what evidence is there that persons who hold their 
investments/trades for longer periods have better results, than those 
who invest/trade for shorter periods...assuming  the analysis is 
adjusted for risk
and even if such were the case, might not a greater spread or range of 
gains and/or losses be an outcome that shorter terms traders were 
knowingly willing to undertake
     
for example, although the lottery offers a very poor return, for the 
sake of argument it combines a great short term risk to the capital 
invested, but with a potentially very high pay-off..by analogy  the 
nyse/nasd would similarly eliminate this risk
     
charitably, the nyse/nasd are muddled in their thinking and analysis of 
their margins proposals
     
in elaboration of some of the points made above, i am unaware of any 
plausible and/or reasonable  evidence that the nyse/nasd have 
proferred,  in support of their proposal,  that those individuals, 
corporations, etc.,... including the large brokerage firms...who/which
are trading with larger amounts of capital, have per se incurred  lesser 
losses to their capital ...adjusted for risk...
put another way ...i know of no relationship between the quantum of 
capital traded and losses incurred, other things being equal
     
perhaps as an aside, the nyse and the nasd might next propose to forbid 
traders/investors with less than their proposed  arbitrary level of 
capital, from buying and selling stock with a beta greater than another 
arbitrary level...
if they are, perhaps they could let us know this appropriate threshold 
beta level ?
     
their unwarranted and unasked for intrusions remind me of an item on a 
restaurant's menu, the dish of the day ...perhaps we could have the 
quantum of the day
and what proposals do they have for changing it over time
     
anther anomalous absurdity of their proposals can also be seen if one 
looked at the case of a person who invested/traded a small of capital in 
a mutual fund with a high turnover...presumably, for the sake of 
consistency, that would be caught by their proposal ?
if a straight-faced  exception was proposed by the nyse/nasd that mutual 
funds have professional managers...the humorous rejoinder would 
be...that almost invariably mutual funds...other than with index mutual 
funds... such professional managers can't even beat the indexes
     
absent any plausible evidence in this area, this removes support for 
this leg of the argument of the nyse/nasd to regulate margins
     
to my mind, education in this field is a primary source of  protection 
from loss...bookstores and websites are overflowing with such 
material...and i would argue that it is a matter which should primarily 
be left to individual initiative ...where prospect for success are 
better ...rather than controlled by central regulation...irrespective of 
the motivation of the principal actors
     
my main concern, is just the opposite of the kernal or substance of the 
rationale, which i believe is inherent in  the nyse/nasd proposals...
i believe that most people are unreasonably fearful of the stock market 
and fail to obtain adequate rewards for the risks to which they put 
their capital
     
in a more specialized sense, with respect to day traders the 
potentiality for loss, in this novel phenomenon of online day trading, 
has been so well publicised, that i cannot believe there are many day 
traders unaware of the risks
     
growing online day/pattern trading by a small section of the investing 
public is a developing, organic, evolutionary phenomenon and protections 
are evolving a pace, but at present i see no justification to single out, 
or treat unequally, traders with less than  some arbitrary, and 
unreasonably high, capital threshold
     
on a more sinister note, adam smith in his wealth of nations was not a 
starry eyed optimist about the invisible hand of free market forces...he 
was fully aware of the proclivity of large commercial interests to 
conspire, at the very first opportunity, against the public and lesser 
commercial interests,  under a multitude of guises to restrict, or impede 
less powerful interests, and so thereby gain advantage for themselves...
     
i believe the actions by the nyse and the nasd are most likely simply 
viewed as a rearguard action by vestigial vested interests to protect and 
augment their interests, by unwarrantedly discouraging and impeding the 
publics burgeoning participation in the market...or, charitably, and very 
implausibly it might just be, at the least,  misguided altruism
     
3.    EVIDENCE
        the nyse and the nasd would need to provide appropriate
EVIDENCE...as opposed to mere/bald assertions... of  alleged harms and 
benefits that would fall on this  targeted subgroup of the trading 
public by maintaining the status quo by not changing the 
regulations...and then provide compelling, or at least reasonably 
plausible evidence to show how this alleged harm would be remedied if 
their proposals were adopted ..
     
4.    FINALLY,
        since details of the nyse/nasd are hidden from me, if they were
to suggest that there are potentially wider, and more serious 
ramifications across the entire market...leading to a disorderly markets 
through excessive volatility, which need to be curbed by imposing more 
stringent margin requirements on less wealthy members of the trading 
public, who presumably, they would argue, are comparatively more 
ignorant, and so in need of greater protection ...then, they would need 
to make that case, including providing supporting evidence..
     
fed chairman greenspan recently before the senate banking committee 
raised this aspect, when he said he'd examined whether the level of 
margin requirement effected volatility...he unequivocally said that the 
outcome of his research was that there was no such causal connection
     
if the nyse/nasd proposes to or in furure seeks to widen the basis of 
their reasoning, in this way, to suggest general market disequilibrium 
might flow unless this subgroup of traders were so regulated, then i 
would argue that this would  require the sec to give all effected 
parties additinal notice and adequate time to comment...
     
presumably, in fairness, to support the argument that the less wealthy 
are more ignorant, and could generate greater general disequilibrium 
across the markets, the levels of ignorance would need to be assessed 
across the entire spectrum of the trading/investing 
community...including all employees, principals and officers of all the 
large investments houses and brokerage firms
     
anything less might uncharitably be viewed as favoring the promotion of 
a plutocracy/wealthy elite
     
in my opinion, the i believe the current  volatility in the markets is 
related to large fundamental changes in economic forces, including the 
accelerating rapidity of technological change, with the concommittent 
uncertainty of the outcomes, plus wider more direct participation by the 
public in the friuts of capitalism via the markets
     
there is a novel historic convergence of forces which is generating 
enormous real wealth...and the public demand tp participate
     
this is real...not ephemeral like the tulip mania in amsterdam centuries 
ago...and the later south sea bubble
     
yours sincerely.
michael pahl
     
economist, attorney, investor/trader
     
3617 n grand e # 79
springfield, illinois, 62702
     
217-523-3911