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