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 werent 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 wont. 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 NASDAQs new pricing structure effective November the 1st. What the NASD is trying to do is eliminate the Market Makers 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