From: Trading Indexes Support [support@fundtradingindexes.com]
Sent: Thursday, February 05, 2004 9:04 PM
To: rule-comments@sec.gov
Subject: S7-26-03:

I would like to add to previous comments I made last month regarding this rule.  I am 
particularly disappointed that the SEC has suggested and endorsed a 2%/ 60 day redemption 
fee for curbing market timing.  If market timing is defined as "rapid in-and-out trading 
of mutual funds", a 60-day time period is hardly "rapid".  The time period ought to be 
just a few days, like two or three, if the intent is to curb this type of trading.

Another device some companies are using is to restrict or bar a person from future 
purchases of their funds if they buy, then sell a fund within a few weeks (one offense is 
enough).  Some have defined this a "pattern of short term trading".  How can one event be 
a pattern?

A looser concept is that of limiting the number of trades in a year.  Most fund companies 
seem to be using this, rather than redemption fees, to discourage market timing.  
Recently, VALIC (Variable Annuity Life Insurance Company) announced that they have added 
restrictions to making exchanges among their investment options (funds) as a means to 
discourage short-term trading.  They clearly state that this is a reaction to the recent 
concerns over timing.  They will limit trades to 15 per 12-month period.  Fidelity VIP 
annuity has had a similar rule for years, limiting trades to 18 per year.  Fidelity 
mutual funds have the restriction that a person cannot make more than 4 exchanges or 
"round trips" in and out of any given fund in a year.  Other fund companies have similar 
restrictions.  These are all intended to discourage short-term trading or timing.

Of all the rules, the last type are most fair and least disruptive to normal trading 
habits of small investors.  If anything, I think the SEC should encourage this.  However, 
I don't think any of the above devices target the type of in-and-out trading that has 
caused all the furor.  A 60-day or a 30-day time period for a redemption fee will only 
discourage people from trading within those stated time periods.  A limit of 15 trades 
per year will only limit in that specific way.  A rule of no more than 4 exchanges in and 
out of a fund in a year will only stop a person from trading that specific way.  Barring 
a person from future purchase of funds seems like "cutting off your nose to spite your 
face".  Who cares, when there are thousands of funds in hundreds of fund companies?  NONE 
of these address the problem you are supposedly concerned with!  If you want to curb 
trading within a day or two, then the time period for the restrictions, must be a day or 
two.  Does that make sense?

I would like to see the SEC devise something to control frenetic and rapid trading, but 
still keep the fund companies from gouging us with more fees and imposing restrictions on 
what many of us consider normal trading (sometimes within a month or two).  I would like 
to see the SEC as an advocate of the small investors who have no intention of timing the 
markets, and not endorse more redemption fees, as is done in your policy statement.

Ben Buckner