Date: 05/03/2000 4:07 PM Professional Expert Trading Systems, Inc. 210 Route 4 East, Suite 206 Paramus, NJ 07652 Mr. Jonathan G. Katz Secretary U.S. Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Dear Mr. Katz, Thank you for the opportunity to comment on the matters contained in the Commission's Concept Release on the Regulation of Market Information Fees and Revenues. These issues have been of great business importance to me over many years; during which time I have presented my views and recommendations both in writings and in personal appearances before the Commission and members of its staff. As the co-founder and Former Chairman and President of Instinet - a "radical" investment industry concept when it began operations in December 1969 - I have advocated on several of those occasions an equally radical approach to market information fees. There shouldn't be any. The passage of time has confirmed and strengthened that opinion. The significant revenues Self Regulatory Organizations (SROs) currently receive from their market fees and charges notwithstanding, the data stream and the data should be supplied free to vendors and, through them, to all end users free of any SROs charges. Is this really such a radical idea? When we examine the broadest business landscape of information providers and information receivers - advertising - it's apparent that free is the norm; and the security industry's current model is an anomaly. Advertisers don't charge their media conduits to carry their promotional and informational messages. Advertisers also pay their agencies and consultants to prepare and format these messages into the most effective form before delivering it to their distributors - newspapers and magazines and TV. Those vendors who may or may not charge their customers to receive this information. But I know of no advertiser who extends his hand into the pockets of his end users, extracting a fee. Why is there a different pricing model for the securities industry and the SROs? Like other businesses and organizations it's engaged in advertising - its markets and their activity and price changes. But unlike other advertisers it is under a regulatory mandate to provide this disclosure. Nobody compels Intel to advertise each of its chip designs or products; but the securities laws require that every trade in INTC be reported in all its details as quickly as possible. While economists have frequently debated whether a strongly branded product needs to continue a comprehensive advertising campaign, does anyone believe INTC would continue to be a major investment holding if the advertising of its trades and trading activity were to stop? Would the NASD and its INTC market-making members tolerate that? I respectfully submit this reasoning is logical not simplistic. The SROs have long recognized this same logic in providing time delayed market information free to end users. In a world of broad band, DSL and the Internet coupled with the intense volatility of today's equity markets how can we justify pushing end users further away from real-time, full-time disclosure unless they pay a fee to an advertiser who must advertise to them for commercial and regulatory reasons?. In overseeing the regulation of market information fees and revenues, I also strongly urge the commission to require the SROs to provide their data streams without fee to vendors of market information. Here, again, I ask the commission and its staff to look at advertisers and the media for an analogy. After an advertiser has chosen his message for presentation to the vendors who will distribute it to end users, he provides it to the media in the format they require. The media distribute it without making any payment to the advertiser or his representative who have consolidated the material into the format the media requires. Why should the paradigm be any different for an advertiser who needs to advertise and is under regulatory requirements to do so? Hopefully, my proposals will not reignite the debate over who "owns" market data. As the commission stated in its own release, referring to the Securities Exchange Act of 1934, as amended in 1975, any ownership rights in market data is subordinated to the commission authority in establishing a national market system. In its oversight of this area, I urge the commission to break up the monopolistic agreement that currently exists between the NASD and MCI Worldcom with respect to the transmission and distribution of market information. Here, as in all areas, the commission should allow competitive forces to operate. The NASDAQ - MCI Worldcom arrangement is the antitheses of that economic goal. Vendors of NASDAQ market information are compelled (as they have been for years under the NASDAQ - MCI agreement) to receive their datafeed only from MCI Worldcom, and only under a long-term contract at MCI's fees, and only using technology and equipment that MCI specifies. Certainly, MCI's distribution system and network have been robust and reliable; but this arrangement has created a monopolist wielding broad ranging powers that I believe have never been contemplated by the commission. (In a side letter to the Division of Market Regulation I ask them to contact me regarding my company's disputes with MCI, the circumstances of which enable MCI to be an arbiter of who receives NASDAQ market information.) Vendors of market information should be able to choose the manner and mode in which they receive the datastream of market information. They should be able to elect to receive it directly from SRO like from SIAC - as many now do - over a high speed communications linkage provided by their communications carrier of choice. Alternatively, entrepreneurial firms might arise who will provide either enhanced communications technology or more attractive data characteristics. These entrepreneurs should be entitled to charge for their services in a fully competitive environment. I believe it is realistic to expect these competitive sources to arise. How many people - in the 1950's - thought a Chicago - St. Louis based upstart, like MCI, could ever challenge the great communications consolidator, AT&T? Closer to my own experience, who would have ever thought, prior to the Internet, that Instinet's growing hegemony in computerized transactions would be challenged by a proliferation of ECN's? My conclusions are, I believe, implicit in what I've already suggested. The commission should strive to avoid the quicksands of rate regulation and rate setting and continue its salutary record of encouraging competition in all areas of our securities markets. Real-time, fully disclosed market information should be available free of any SRO imposed fees to end users and vendors of market information alike. The NASDAQ - MCI Worldcom monopoly should be broken up forthwith and no new ones permitted as technology and innovation continue to stimulate, enrich and change the securities industry.. I appreciate the opportunity to present my comments to the commission and to its staff. Very truly yours, Jerome M. Pustilnik President cc: The Honorable Arthur Levitt, Chairman The Honorable Norman S. Johnson, Commissioner The Honorable Isaac C. Hunt, Jr., Commissioner The Honorable Paul R. Carey, Commissioner The Honorable Laura Simone Unger, Commissioner Annette L. Nazareth, Director, Division of Market Regulation Robert L.D. Colby, Deputy Director, Division of Market Regulation, and Senior Advisor to the Chairman Belinda Blain, Associate Director, Division of Market Regulation Elizabeth K. King, Associate Director, Division of Market Regulation Daniel M. Gray, Division of Market Regulation