[Federal Register Volume 67, Number 111 (Monday, June 10, 2002)]
[Notices]
[Pages 39759-39768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14139]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45998; File No. SR-NASD-2001-66]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Amendment Nos. 1 and 2 Thereto by the National Association 
of Securities Dealers, Inc. Relating to Display Requirements When Using 
Reserve Size in the Nasdaq National Market Execution System

May 29, 2002.

I. Introduction

    On October 4, 2001, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its subsidiary The Nasdaq 
Stock Market, Inc. (``Nasdaq''), submitted to the Securities and 
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change relating to display requirements 
when using reserve size in the Nasdaq National Market Execution System 
(``NNMS'' or ``SuperSOES''). On October 23, 2001 and October 29, 2001, 
NASD submitted Amendment Nos. 1 and 2 to the proposed rule change, 
respectively.\3\ The proposed rule change, as amended, was published 
for comment in the Federal Register on November 13, 2001.\4\ The 
Commission received 233 comment letters on the proposed rule change.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letters from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine England, Assistant Director, Division of Market 
Regulation (``Division''), Commission, dated October 23, 2001 
(``Amendment No.1''); and October 29, 2001 (``Amendment No. 2'').
    \4\ See Securities Exchange Act Release No. 45016 (November 5, 
2001), 66 FR 56875 (November 13, 2001).
    \5\ A list of the commenters appears in the Appendix.
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    In addition, Nasdaq submitted two letters in response to 
comments.\6\ This order approves the proposed rule change, as amended.
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    \6\ See letters from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Jonathan G. Katz, Secretary, Commission, dated March 8, 
2002 (``Nasdaq Letter I'') and April 17, 2002 (``Nasdaq Letter 
II'').
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II. Description of Proposal

    Under the NNMS, market makers are allowed to keep shares in 
reserve. Known as reserve size, shares kept in reserve are available 
for execution through SuperSOES, but are not shown to the 
marketplace.\7\ Currently, the SuperSOES rules prohibit the use of the 
system's reserve size functionality unless a market maker is displaying 
at least 1000 shares in its public quote. Nasdaq proposes to eliminate 
the 1000-share display requirement for using reserve size. Under the 
proposed rule change, market makers would be allowed to use NNMS'' 
reserve size any time they displayed a quote of at least one round lot 
(100 shares). Nasdaq would continue its policy of allowing the use of 
reserve size even if a particular displayed quotation dropped below 100 
shares based on partial, interim executions against that un-updated 
quote.
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    \7\ Under NNMS's execution algorithm, the system executes 
against all publicly-displayed shares at the same price level before 
executing in time priority against reserve size at that same price.
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III. Summary of Comments

    As noted above, the Commission received 233 comment letters 
regarding the proposed rule change.\8\ A large majority of the letters 
were submitted by registered representatives, but commenters also 
included broker-dealer and market making firms, private investors, and 
a professional association. Five commenters supported the proposal,\9\ 
while the remaining 228 commenters opposed the proposal.
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    \8\ See supra note 5.
    \9\ See Davenport Letter, Levine Letter, Morgan Keegan Letter, 
Robertson Stephens Letter, and STA Letter.
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IV. Discussion

    After carefully considering all the comments, the Commission finds, 
for the reasons discussed below, that the proposed rule change is 
consistent with the Act and the rules and regulations applicable to the 
NASD.\10\ In particular, the Commission finds that the proposal

[[Page 39760]]

is consistent with the requirements of Sections 15A(b)(6) of the 
Act.\11\
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    \10\ In approving the proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \11\ 15 U.S.C. 78o-3(b)(6). Section 15A(b)(6) requires that the 
rules of a registered national securities association be designed to 
prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest.
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1. Transparency Issues

    Four commenters who supported the proposed rule change noted that 
the purpose of the reserve size feature is to provide market makers 
with a tool to limit the negative market impact associated with public 
knowledge of large pending transactions.\12\ They further noted that 
electronic communication networks (``ECNs'') offer reserve size 
functionality but are not subject to the 1000-share minimum display 
requirement that currently applies on Nasdaq. In the words of one 
commenter, the current 1000-share minimum display requirement on Nasdaq 
``serves as an alert to other market participants to the existence of 
reserve size in the system,'' and thus ``defeats the purpose of the 
reserve size functionality.'' \13\ By contrast, this commenter 
contended, market participants cannot easily infer the existence of 
reserve size from ECN quotations.\14\
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    \12\ See Davenport Letter, Morgan Keegan Letter, Robertson 
Stephens Letter, and STA Letter. As explained in the Robertson 
Stephens Letter, the potential negative impact results from the fact 
that public knowledge of unusual supply or demand in a particular 
security can cause other market participants to revise their 
displayed quotations to price levels that would be less favorable to 
the customer.
    \13\ See Robertson Stephens Letter.
    \14\ See Robertson Stephens Letter, see also Morgan Keegan 
Letter.
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    One commenter added that market makers should be free to enter any 
displayed or reserve size that suits their trading intentions, and 
forcing them to display such a large minimum size is unfair.\15\ This 
commenter noted that while proponents of the 1,000 share minimum 
display size for reserve orders claim that it forces market makers to 
display larger size to the marketplace, the opposite is true. The 
commenter noted that this argument assumes that if you restrict a 
market maker from entering his full intent with a 100 share displayed 
size, then he will enter it with a 1,000 share displayed size instead. 
The commenter believed that this assumption ignores several more 
attractive options available to a market maker in this situation, such 
as: ``(1) Withhold[ing] his intention to trade from the marketplace 
entirely and wait[ing] until the order becomes marketable to execute 
it, (2) forgo[ing] the Nasdaq reserve feature and enter[ing] only the 
number of shares he wishes to display into the marketplace and then 
manually 'refresh[ing]' his quote each time the displayed portion is 
executed, or (3) enter[ing] his order into an approved display 
alternative ATS that is not subject to the 1,000 share restriction.'' 
According to the commenter, each of these alternatives legally defeats 
any purported benefits of the 1,000 share minimum rule, because each 
one also has a negative impact on market quality when compared to 
permitting the market maker use his reserve quote directly.
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    \15\ See Levine Letter.
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    Other commenters argued that the ability of a market maker to 
conceal a large reserve size while displaying only 100 shares runs 
counter to the goal of market transparency \16\ and would controvert 
price discovery.\17\ Specifically, several commenters expressed concern 
that investors would be unable to properly assess risk and reward, 
gauge the market's direction, and make informed decisions about how to 
invest with the reduced display size.\18\ At the same time, some added, 
the market maker will have the advantage of knowing the size of 
incoming orders.\19\
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    \16\ See A. Wang Letter, Abelson Letter, Arberman Letter, Atreya 
Letter, B. Hepner Letter, B. Lee Letter, B. Williams Letter, Bailyn 
Letter, Balber Letter, Ball Letter, Bauer Letter, Block Letter, 
Bouldin Letter, Bradshaw Letter, Burgess Letter, C. Kim Letter, C. 
Shapiro Letter, Cammarata Letter, Catrina Letter, Chan Letter, 
Chesler Letter, Chinnock Letter, Ciemens Letter, Corl Letter, 
Cosenza Letter, Cosic Letter, Crosby Letter, Crowell Letter, D. 
Cohen Letter, D.H. Kim Letter, Daulong Letter, Deligiannis Letter, 
Dershow Letter, Dhillon Letter, Diamond Letter, Diemar Letter, 
Dolnier Letter, Dondero Letter, Donitz Letter, Donnelly Letter, 
Dubin Letter, E. Goldstein Letter, E. Knight Letter, E. Shapiro 
Letter, El-Assad Letter, Erman Letter, Ettles Letter, F. Raffaele 
Letter, Falcone Letter, Federici Letter, Feeny Letter, Feinstein 
Letter, Flaherty Letter, Gaida Letter, Getz Letter, Giannone Letter, 
Giaquinto Letter, Giordano Letter, Goldhair Letter, Gormley Letter, 
Gosling Letter, Greeley Letter, Gregg Letter, Grill Letter, H. Liu 
Letter, Hansford Letter, Hassell Letter, Helfman Letter, Herrick 
Letter, Heyman Letter, Hinkel Letter, Hite Letter, Hodges Letter, 
Hong Letter, Hotchkiss Letter, Ingles Letter, Ingram Letter, 
Isaacson Letter, Ives Letter, Iwasa Letter, J. Choi Letter, J. 
Hughes Letter, J. Kirstein Letter, J. Raffaele Letter, J. Schmidt 
Letter, J. Weintraub Letter, J. Williams Letter, Jahng Letter, Jones 
Letter, K. Kirstein Letter, K. Murphy Letter, K. Schroeder Letter, 
K.Y. Lee Letter, Kaneti Letter, Keane Letter, Kerman Letter, King 
Letter, Klarreich Letter, Klaus Letter, Klein Letter, Kobin Letter, 
Kobin Letter, Kott Letter, Kovac Letter, Kropf Letter, Kushner 
Letter, L. Waxman Letter, LaBonar Letter, Lay Letter, Leung Letter, 
Linton Letter, Liu Letter, Lopez Letter, Lopin Letter, Lovett 
Letter, M. Murphy Letter, M. Schroeder Letter, Magat Letter, Majid 
Letter, Malizia Letter, Markasevic Letter, Masso Letter, Mikhelson 
Letter, Miller Letter, Miller Letter, Morant Letter, Morgan Letter, 
Namolik Letter, Nemcic Letter, Nicoletta Letter, Nierling Letter, No 
Letter, O'Malley Letter, Oahana Letter, Panayotov Letter, Parsons 
Letter, Petrov Letter, Piskun Letter, Poulton Letter, R. Murphy 
Letter, Ratto Letter, Rea Letter, Roth-McEnroe Letter, Rotter 
Letter, S. Hughes Letter, S. Kim Letter, S. Sherwood Letter, Salti 
Letter, Schreiber Letter, Schulberg Letter, Schuldenfrei Letter, 
Schultz Letter, Senna Letter, Sharon Letter, Shatkin Letter, Sherman 
Letter, Sinclair Letter, Skinner Letter, Sohn Letter, Song Letter, 
Squires Letter, Stengel Letter, Strum Letter, Stuzin Letter, 
Sukenick Letter, Talib Letter, Thompson Letter, Towne Letter, Vo 
Letter, Ward Letter, Washburn Letter, Watts Letter, Weckherlen 
Letter, West Letter, Wilson Letter, Yang Letter, Yang Letter, Z. 
Hepner Letter, Zemeck Letter, Zlatkovic Letter, and Zour Letter.
    \17\ See Goldhair Letter, J. Weintraub Letter, M. Murphy Letter, 
Nierling Letter, and Weckherlen Letter.
    \18\ See B. Hepner Letter, Bailyn Letter, Bouldin Letter, 
Ciemens Letter, Consenza Letter, Deligiannis Letter, Dhillon Letter, 
E. Shapiro Letter, Gaida Letter, Giannone Letter, Giaquinto Letter, 
Hite Letter, J. Hughes Letter, K. Schroeder Letter, Klein Letter, 
Kobin Letter, M. Murphy Letter, M. Schroeder Letter, Malizia Letter, 
Roldan Letter, Schreiber Letter, Schuldenfrei Letter, Sinclair 
Letter, Vo Letter, Watts Letter, and Weckherlen Letter, see also C. 
Shapiro Letter, (discussing the effect of ``information 
asymmetry'').
    \19\ See Schreiber Letter, M. Schroeder Letter, and Washburn 
Letter.
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    In response, Nasdaq offered several arguments in support of its 
view that, contrary to commenters' concerns, the proposal will not 
materially impact transparency in its market.\20\ First, Nasdaq 
challenged the premise that the 1000-share minimum display requirement 
is a key component in encouraging the display of significant trading 
interest. A recent review of SuperSOES indicated that only 13.9 percent 
of market maker quotes large enough to use reserve size actually had a 
reserve share amount attached to them.\21\
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    \20\ See Nasdaq Letter I.
    \21\ In Nasdaq Letter I, Nasdaq provided data for Nasdaq market 
makers and exchanges trading Nasdaq stocks pursuant to unlisted 
trading privileges (``UTP exchanges''). According to Nasdaq, only 
13.5 percent of market maker and UTP exchange quotes large enough to 
use reserve size actually had a reserve share amount attached to 
them. In a subsequent telephone conversation, Nasdaq provided data 
for just market maker quotes. Telephone conversation between Terri 
Evans, Assistant Director, Division, Commission, and Thomas P. 
Moran, Associate General Counsel, Nasdaq, on May 23, 2002.
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    Second, Nasdaq argued that transparency has more than one 
component, such as trade price and volume information. Nasdaq asserted 
that the speed and reliability of such information has dramatically 
improved, with SuperSOES providing instantaneous automatic executions 
and immediate dissemination of the resulting transaction information 
via the public tape.
    Finally, Nasdaq argued that, because all displayed size at a given 
price level

[[Page 39761]]

has priority in execution over reserve size at the same price, market 
participants desiring to trade immediately and in size have incentives 
to quickly display larger share amounts. In this context, Nasdaq cited 
statistics to show that the average display size of quotes today has 
increased 83 percent from the average display size immediately 
following decimalization and before SuperSOES was introduced. Nasdaq 
believes that these statistics show that market participants are more 
inclined to display larger size in the fast-moving SuperSOES 
environment.
    The Commission believes that Nasdaq has adequately addressed the 
concerns raised by commenters. While the Commission recognizes that the 
proposed rule change appears to limit transparency by reducing the 
minimum number of shares that must be displayed before a market maker 
can use reserve size, the Commission agrees with the opinion of one 
commenter that market makers will not necessarily display 1000 shares 
just to use the reserve size feature in SuperSOES, in lieu of other 
options such as sending an order to an ECN. Even aside from the minimum 
display requirement, the Commission believes that market participants 
will still have an incentive to display greater size, because SuperSOES 
executes incoming orders against displayed size at the best price 
before accessing reserve size at the same price level. Therefore, it 
may be in a market participant's best interest to display greater size 
and receive an immediate execution. The Commission notes that Nasdaq 
has offered data that indicates that only a small portion of quotes 
large enough to potentially use reserve size, actually have a reserve 
share amount attached to them.

2. Liquidity Issues

    One commenter who supported the proposed rule change believed that 
the current, 1000-share minimum display requirement inhibits 
liquidity.\22\ Rather than meet that requirement, this commenter 
argued, a market maker may choose to withhold his intention to trade 
from the marketplace entirely and wait until an order he is holding 
becomes marketable to execute it.\23\
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    \22\ See Levine Letter.
    \23\ Id.
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    On the other hand, many commenters objected to the proposal on the 
grounds that it would negatively impact market liquidity.\24\ Some of 
these commenters expressed the view that the ability to display only 
100 shares would allow market makers to limit the availability of stock 
at the inside market,\25\ and provide little liquidity during a severe 
upturn or downturn.\26\ These commenters appeared to believe that, 
under the proposal, when a market maker at the inside price is 
displaying only 100 shares while maintaining a large reserve size at 
that same price, the system would fill incoming orders at a rate of 
only 100 shares at a time. During the time lag that would result, the 
market maker would have time to withdraw most of the liquidity stored 
in his reserve size if this would be to his advantage, as it might be 
in volatile markets.\27\
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    \24\ See Abelson Letter, Arberman Letter, Atreya Letter, B. 
Hepner Letter, Bailyn Letter, Benetti Letter, Bouldin Letter, C. Kim 
Letter, C. Shapiro Letter, Cammarata Letter, Catrina Letter, Chan 
Letter, Ciemens Letter, Crosby Letter, Crowell Letter, D. Cohen 
Letter, D. H. Kim Letter, D'Aleo Letter, Deligiannis Letter, Diemar 
Letter, E. Goldstein Letter, El-Assad Letter, Erman Letter, F. 
Raffaele Letter, Feeney Letter, Getz Letter, Giaquinto Letter, 
Goldhair Letter, Greeley Letter, Gregg Letter, Grill Letter, H. Liu 
Letter, Hansford Letter, Hassell Letter, Hodges Letter, Hotchkiss 
Letter, Ingles Letter, Isaacson Letter, Iwasa Letter, J. Hughes 
Letter, J. Raffaele Letter, Jones Letter, K. Choi Letter, K. 
Kirstein Letter, Kaneti Letter, Klarreich Letter, Klaus Letter, 
Kobin Letter, LaBonar Letter, Landsman Letter, Lovett Letter, Lutz 
Letter, Magat Letter, Majid Letter, Masso Letter, McCabe Letter, 
Nicoletta Letter, Nierling Letter, O'Malley Letter, Oahana Letter, 
Orgen Letter, Parsons Letter, Petrov Letter, Plotkin Letter, Ratto 
Letter, Rebatta Letter, Schulberg Letter, Senna Letter, Sharon 
Letter, Shatkin Letter, Sherman Letter, Sinclair Letter, Sohn 
Letter, Squires Letter, Stancevic Letter, Stengel Letter, Stuzin 
Letter, Sullivan Letter, Weckherlen Letter, West Letter, Wilson 
Letter, Yang Letter, Zemeck Letter, and Zour Letter.
    \25\ See Cammarata Letter, Ciemens Letter, Isaacson Letter, J. 
Hughes Letter, Linton Letter, Lovett Letter, McCabe Letter, Song 
Letter, Stengel Letter, and Zucker Letter.
    \26\ See Giaquinto Letter.
    \27\ Many commenters explicitly stated their belief that the 
proposal would create market slowdowns due to multiple executions of 
displayed and refreshed 100-share lots at the inside price. See more 
at infra notes 32-37 and accompanying text.
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    One commenter observed that in approving the original SuperSOES 
system and its reserve size feature, the Commission cited the 
justification set forth by Nasdaq that the 1000-share display 
requirement would increase liquidity by providing an incentive for 
market makers to display a larger quotation size.\28\ ``We are 
confounded,'' this commenter stated, ``that the NASD would reverse its 
previous position and propose to pare back the reserve size requirement 
to a single round lot,'' particularly in view of ``the substantial 
deterioration of displayed market liquidity in the post-decimals 
environment.'' \29\
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    \28\ See Morgan Stanley Letter (citing Securities Exchange Act 
Release No. 42344 (January 14, 2000), 65 FR 3987 (January 25, 
2000)).
    \29\ Id.
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    In response to liquidity concerns, Nasdaq insisted that nothing in 
the reduction of the display size requirement could be expected to 
remove liquidity from its market.\30\ According to Nasdaq, even though 
a market participant may elect to apportion their total trading 
interest between displayed size and reserve size differently, the same 
number of shares remain immediately accessible through the system. In 
addition, Nasdaq believes that to the extent the proposal limits the 
negative impact associated with the required display of large share 
size, the total amount of shares entered into SuperSOES may increase 
and thereby increase overall liquidity on Nasdaq.\31\
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    \30\ See Nasdaq Letter I.
    \31\ Id.
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    The Commission understands the concerns raised by commenters. 
However, the Commission believes that the ability to use reserve size 
under the proposal may give market participants on Nasdaq greater 
flexibility in representing large orders. In particular, the proposed 
rule change may prove useful to market participants who wish to 
minimize the market impact of their orders. Increased participation 
should, in turn, enhance liquidity of the market, to the benefit of all 
market participants. In addition, the Commission notes that a reduction 
in the displayed amount of liquidity does not necessarily signify a 
reduction in the amount of actual liquidity accessible in a market. As 
clarified by Nasdaq, the same amount of shares will be immediately 
accessible through the system.

3. Impact on Executions and Potential for Abuse

    Many commenters believed that orders sent to Nasdaq that today can 
be filled in one execution would require multiple executions to be 
filled under the proposed system,\32\ and that the

[[Page 39762]]

resulting time lag would slow down the entire market, unfairly 
advantage market makers, and lend to widespread abuse. Various 
commenters believed that the proposal would promote deception,\33\ 
foster manipulative conduct,\34\ facilitate monopoly pricing and 
collusion,\35\ and result in inefficiency.\36\
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    \32\ See A. Wang Letter, Abelson Letter, Atreya Letter, B. Lee 
Letter, B. Williams Letter, Bailyn Letter, Balber Letter, Bauer 
Letter, Ben-Aharon Letter, Benetti Letter, Block Letter, Bouldin 
Letter, Brook Letter, C. Kim Letter, Cammarta Letter, Caputo Letter, 
Catrina Letter, Chan Letter, Chan Letter, Chaudry Letter, Chesler 
Letter, Chinnock Letter, Ciemens Letter, Corl Letter, Cosenza 
Letter, Cosic Letter, Crosby Letter, Crowell Letter, D.H. Kim 
Letter, D'Aleo Letter, Daulong Letter, Diamond Letter, Diemar 
Letter, Dondero Letter, Dubin Letter, E. Goldstein Letter, E. Knight 
Letter, El-Assad Letter, Erman Letter, F. Raffaele Letter, Falcone 
Letter, Feinstein Letter, Flaherty Letter, Gaida Letter, Getz 
Letter, Gormley Letter, Gregg Letter, Grill Letter, Gussin Letter, 
H. Liu Letter, Hansford Letter, Hassell Letter, Hayden Letter, 
Helfman Letter, Hite Letter, Hodges Letter, Hong Letter, Ingles 
Letter, Isaacson Letter, Ives Letter, J. Choi Letter, J. Goldstein 
Letter, J. Hughes Letter, J. Raffaele Letter, J. Weintraub Letter, 
J. Williams Letter, Jones Letter, K. Choi Letter, K. Kirstein 
Letter, K. Schroeder Letter, K.Y. Lee Letter, Kaneti Letter, Keane 
Letter, Kinzelberg Letter, Klaus Letter, Klein Letter, Kobin Letter, 
Kott Letter, Kropf Letter, L. Waxman Letter, LaBonar Letter, 
Laughlin Letter, Lazarus Letter, Liu Letter, Lovett Letter, Lutz 
Letter, M. Schroeder Letter, M. Sherwood Letter, Magat Letter, Majid 
Letter, Malizia Letter, Markasevic Letter, Masso Letter, McCabe 
Letter, Miller Letter, Morant Letter, Morgan Letter, Nemcic Letter, 
No Letter, Oahana Letter, Panayotov Letter, Parsons Letter, Petrov 
Letter, Philip Letter, Plotkin Letter, R. Murphy Letter, Rea Letter, 
Rebatta Letter, Roldan Letter, Roth-McEnroe Letter, Rotter Letter, 
S. Hughes Letter, S. Kim Letter, S. Sherwood Letter, Salti Letter, 
Sc. Sullivan Letter, Schreiber Letter, Schulberg Letter, 
Schuldenfrei Letter, Schwartz Letter, Senna Letter, Sharon Letter, 
Shatkin Letter, Sherman Letter, Shorack Letter, Sinclair Letter, 
Sinnreich Letter, Sohn Letter, Stancevic Letter, Stengel Letter, 
Strum Letter, Stuzin Letter, Talib Letter, Thompson Letter, Towne 
Letter, Voldarsky Letter, Ward Letter, Washburn Letter, Watts 
Letter, Williamson Letter, Yang Letter, Zemeck Letter, Zlatkovic 
Letter, Zour Letter, and Zucker Letter.
    \33\ See Cammarata Letter, D.H. Kim Letter, Deligiannis Letter, 
Gaida Letter, Garby Letter, Gregg Letter, Hansford Letter, Heyman 
Letter, Isaacson Letter, J. Williams Letter, Kernan Letter, Lazar 
Letter, Morgan Letter, R. Murphy Letter, Rebatta Letter, Squires 
Letter, and Stengel Letter.
    \34\ See Atreya Letter, Bailyn Letter, Benetti Letter, Burgess 
Letter, Crosby Letter, Crowell Letter, Dershow Letter, F. Raffaele 
Letter, Garby Letter, Goldhair Letter, Gregg Letter, Herrick Letter, 
Heyman Letter, J. Kirstein Letter, J. Raffaele Letter, Keane Letter, 
Lazar Letter, Linton Letter, Magat Letter, Masso Letter, Morgan 
Letter, Nierling Letter, Oshins Letter, Petrov Letter, Rea Letter, 
S. Kim Letter, Sherman Letter, Sinclair Letter, Stancevic Letter, 
Talib Letter, Watts Letter, and Wilson Letter, see also infra notes 
27-30 and accompanying text.
    \35\ See C. Kim Letter, C. Shapiro Letter, and Crowell Letter.
    \36\ See Gaida Letter, Jones Letter, Kobin Letter, Kropf Letter, 
Landsman Letter, Linton Letter, and Weckherlen Letter.
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    By way of example, many commenters noted that under the current 
system, when a market maker displays 1000 shares at the inside market--
as required for use of the reserve size feature--an incoming order of 
up to 1000 shares is filled immediately against that displayed 
quotation, in one execution. Under the proposal, these commenters 
believe, because the same market maker would be required to display 
only 100 shares and could hold the remaining 900 shares in reserve 
size, each time 100 shares of an incoming order is filled, the system 
would need to refresh the displayed size again before the next 100 
shares could be filled, causing the execution of a full 1000 shares to 
take ten times as long.\37\
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    \37\ See Atreya Letter, C. Kim Letter, Chan Letter, Crowell 
Letter, F. Raffaele Letter, Gregg Letter, Hodges Letter, Ingram 
Letter, Ives Letter, J. Kirstein Letter, J. Raffaele Letter, J. 
Williams Letter, Jahng Letter, K. Kirstein Letter, Klaus Letter, L. 
Waxman Letter, Landsman Letter, Magat Letter, Oahana Letter, 
Panayotov Letter, Petrov Letter, Philip Letter, Plotkin Letter, 
Rebatta Letter, Rotter Letter, S. Kim Letter, Salti Letter, Sherman 
Letter, Sinclair Letter, Watts Letter, Yang Letter, and Zlatkovic 
Letter.
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    Many commenters contended that the reduced display requirement 
would benefit market makers at the expense of investors, allowing them, 
for example, to slow down the movement of a stock while minimizing 
their own exposure.\38\ In the view of these commenters, under the 
proposal, a market maker could display the minimum 100 shares at the 
inside market while entering a large number of shares in reserve size 
at the same price. If he then saw the market shift direction, he could 
withdraw the liquidity in his reserve size and move it to a higher 
price level before investors could reach it, because the multiple 
executions of incoming orders at the inside price at a rate of only 100 
shares at a time would give him the time to do so. In the words of many 
commenters, the proposal would thus effectively ``eliminate liability 
orders.'' \39\
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    \38\ See Atreya Letter, Bauer Letter, Ben-Aharon Letter, Benetti 
Letter, Bouldin Letter, Brook Letter, C. Kim Letter, Cammarata 
Letter, Caputo Letter, Ciemens Letter, Dubin Letter, Gaida Letter, 
Giannone Letter, Hansford Letter, Hite Letter, Isaacson Letter, J. 
Goldstein Letter, J. Kirstein Letter, Keane Letter, Landsman Letter, 
Laughlin Letter, Linton Letter, Rea Letter, S. Sherwood Letter, Sc. 
Sullivan Letter, Stashefsky Letter, Stengel Letter, and Stuzin 
Letter.
    \39\ See A. Donnelly Letter, A. Wang Letter, Arberman Letter, 
Balber Letter, Brook Letter, Chan Letter, Chaudhry Letter, Chesler 
Letter, Daulong Letter, E. Goldstein Letter, Erman Letter, Ettles 
Letter, Garby Letter, H. Liu Letter, Hassell Letter, Hong Letter, 
Hotchkiss Letter, Ingles Letter, Ives Letter, Iwasa Letter, J. Choi 
Letter, J. Williams Letter, Jahng Letter, Kaneti Letter, Klaus 
Letter, Kott Letter, Kovac Letter, Kushner Letter, Lay Letter, Lopin 
Letter, Markasevic Letter, Miller Letter, Morant Letter, Nemcic 
Letter, O'Malley Letter, Oahana Letter, Piskun Letter, Rebatta 
Letter, Rotter Letter, S. Kim Letter, S. Sherwood Letter, 
Schuldenfrei Letter, Shatkin Letter, Shorack Letter, Sohn Letter, 
Song Letter, Strum Letter, Talib Letter, Thompson Letter, Z. Hepner 
Letter, Zemeck Letter, and Zour Letter.
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    Commenters also variously argued that market makers would 
artificially stall the momentum of a stock so they could ``back away'' 
from liability for their reserve size;\40\ misrepresent true supply and 
demand; \41\ and interfere with the natural direction of the 
market.\42\ Among the other abuses commenters feared were: a market 
maker holding up the price of a downward moving stock in order to 
short-sell ahead of the market; \43\ a market maker holding down the 
price of an upward moving stock in order to buy more at a lower price; 
\44\ and a market maker slowing the upward movement of a stock to 
prevent call options from being exercised against him.\45\
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    \40\ See Chesler Letter, Corl Letter, Crowell Letter, Erman 
Letter, Fennell Letter, Hassell Letter, Hite Letter, J. Weintraub 
Letter, J. Williams Letter, K. Kirstein Letter, K.Y. Lee Letter, 
Kaneti Letter, Laughlin Letter, Lazarus Letter, Magat Letter, Murphy 
Letter, S. Sherwood Letter, Schuldenfrei Letter, Sharon Letter, 
Shatkin Letter, Sinclair Letter, Stengel Letter, Strum Letter, and 
Watts Letter.
    \41\ See Bailyn Letter, Jones Letter, and Lovett Letter.
    \42\ See Lazarus Letter, and Zour Letter.
    \43\ See Klein Letter, Lazarus Letter, and Morant Letter.
    \44\ See Helfman Letter, Heyman Letter, Ingram Letter, and 
Linton Letter.
    \45\ See Liu Letter.
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    Nasdaq believes that the above concerns may flow from a 
``fundamental misapprehension about how SuperSOES works.'' \46\ 
According to Nasdaq, although shares held in the reserve size feature 
are not displayed, these shares remain immediately and continuously 
available for execution through the system.
---------------------------------------------------------------------------

    \46\ See Nasdaq Letter II.
---------------------------------------------------------------------------

    As described by Nasdaq, SuperSOES matches incoming orders with 
quotes based on price and size information resident in the system, and 
automatically executes against all shares of automatic-execution 
participants--whether displayed or in reserve--instantaneously. 
According to Nasdaq, ``at no point during this execution process are 
automatic-execution market participants given an opportunity to decline 
to trade, or sent orders that require their assent to consummate a 
transaction.'' In addition, according to Nasdaq, ``SuperSOES is already 
a powerful salve for exactly those maladies that the commenters assert 
will befall the Nasdaq market if the 1,000-share display requirement is 
removed.'' \47\ For example, Nasdaq stated that the SuperSOES 
requirement

[[Page 39763]]

that automatic execution market participants be firm for the amounts 
and prices of the trading interest they place into the system reduces 
the potential for, and increases the costs of, attempts to manipulate 
the market. Likewise, the swift and sure execution of orders by 
SuperSOES based on price-time priority greatly increases the confidence 
of investors that they are being treated fairly.
---------------------------------------------------------------------------

    \47\ See Nasdaq Letter II. Nasdaq provided the following example 
to illustrate the process. Assume that there are three market makers 
at the inside bid. Market Maker A (``MMA'') is bidding $20.00 with a 
display size of 200 and a reserve size of 1,000. Market Maker B 
(``MMB'') is bidding $20.00 with a display size of 300 and a reserve 
size of 4,000. Market Maker C (``MMC'') is bidding $20.00 with a 
display size of 100 and a reserve size of 1,500. Market Maker D 
(``MMD'') is bidding $19.99 with a display size of 100 and a reserve 
size of zero.
    A 3,000-share market order to sell is entered into SuperSOES. A 
total of 600 shares would be instantaneously taken from the 
displayed sizes of MMA (200), MMB (300), and MMC (100). In addition, 
1,000 shares would be instantaneously taken from MMA's reserve size, 
and 1,400 shares would also be instantaneously taken from MMB's 
reserve size, filling the incoming order in full.
    This process would result in a single automatic execution of 
1,200 shares for MMA, a single automatic execution of 1,700 shares 
for MMB, and a single automatic execution of 100 shares for MMC. 
Nasdaq represents that as a result of the automatic execution 
process ``there is simply no way that an automatic-execution market 
participant, having placed share amounts (displayed or reserve) in 
SuperSOES, can inhibit or manipulate subsequent executions against 
that trading interest while those shares remain in the system.''
---------------------------------------------------------------------------

    The Commission agrees that a great many of the commenters appear to 
have misunderstood the way the reserve size feature operates and the 
nature of the proposed rule change. This misunderstanding appears to be 
the basis of many of the opposing comments. The Commission notes that 
when an order is sent to Nasdaq for automatic execution through 
SuperSOES, the system immediately accesses all liquidity at the best 
price residing within the system to fill that order, whether that 
liquidity is displayed or held in reserve size. As Nasdaq has 
represented in its responses to commenters' objections, the automatic 
execution against all such resident size takes place 
instantaneously.\48\ When an order cannot be filled by the market 
maker's displayed size alone (or by the aggregate displayed size of all 
market makers at the same best price, if there is more than one market 
maker at that price), the system immediately accesses the reserve size 
behind it (and behind the displayed size of all market makers at that 
price, in time priority), and trades against it all in a single 
execution for each market maker.
---------------------------------------------------------------------------

    \48\ See Nasdaq Letter I.
---------------------------------------------------------------------------

4. Competitive Issues

    Four commenters maintained, in support of the proposal, that it 
would promote fair competition across the markets.\49\ As explained by 
one commenter, for example, it would level the playing field between 
Nasdaq participants and members of UTP exchanges, and between Nasdaq 
and its primary competitors, ECNs and the regional exchanges.\50\ 
Specifically, two commenters argued that Nasdaq is the only market 
center that imposes a 1000-share display requirement, and is thus 
competitively disadvantaged.\51\ Another commenter noted that it is 
``fundamentally unfair to force a market participant to depend on a 
potential competitor [if a market maker enters an order into an ATS] 
due to an artificial regulatory disparity between the two 
participants.'' \52\
---------------------------------------------------------------------------

    \49\ See Davenport Letter, Morgan Keegan Letter, Robertson 
Stephens Letter, and STA Letter.
    \50\ See STA Letter, see also Levine Letter.
    \51\ See STA Letter and Davenport Letter.
    \52\ See Levine Letter.
---------------------------------------------------------------------------

    Other commenters argued that the function of an ECN is different 
than that of market makers on Nasdaq,\53\ in that an ECN's purpose is 
to display and execute orders and not to make markets.\54\ Some 
commenters added that an ECN is not afforded the same advantages as 
market makers \55\ (e.g., the ability to make a profit on the market 
spread),\56\ and thus should not be subject to the same minimum display 
requirements.
---------------------------------------------------------------------------

    \53\ See Abelson Letter, Benetti Letter, Burgess Letter, Herrick 
Letter, J. Kirstein Letter, J. Raffaele Letter, J. Williams Letter, 
Kott Letter, Oahana Letter, Panayotov Letter, Rebatta Letter, 
Stengel Letter, Thompson Letter, and Zlatkovic Letter.
    \54\ See Abelson Letter, Ball Letter, Burgess Letter, E. 
Goldstein Letter, Gosling Letter, Hansford Letter, Ingram Letter, J. 
Kirstein Letter, J. Raffaele Letter, J. Williams Letter, Kernan 
Letter, Oahana Letter, Panayotov Letter, Rebatta Letter, Stengel 
Letter, Thompson Letter, Voldarsky Letter, and Zlatkovic Letter.
    \55\ See Benetti Letter, Herrick Letter, Ingram Letter, J. 
Raffaele Letter, Kott Letter, Schultz Letter, and Stengel Letter.
    \56\ See, e.g., Kroft Letter.
---------------------------------------------------------------------------

    One commenter cited a recent Nasdaq study indicating that in the 
post-decimalization environment, the average quote size posted by an 
ECN was 1190 shares, challenging with this data Nasdaq's argument that 
it needs to reduce Nasdaq's display-size requirement to 100 shares in 
order to compete.\57\ This commenter believed that the proposed rule 
change would provide a ``rather marginal competitive benefit'' to 
Nasdaq at a ``high cost to market liquidity and transparency.'' \58\ 
The same commenter further argued that Nasdaq, as a subsidiary of a 
national securities association, is bound by the Act to maintain rules 
that ``remove impediments to and perfect the mechanism of a free and 
open market,'' which, the commenter stated, is a higher standard than 
that imposed by the regulatory framework governing ECNs.\59\
---------------------------------------------------------------------------

    \57\ See Morgan Stanley Letter.
    \58\ Id.
    \59\ Id.
---------------------------------------------------------------------------

    In response, Nasdaq noted that Archipelago Exchange, an equity 
trading facility of the Pacific Exchange, offers reserve size 
functionality with no apparent minimum display requirement, as do ECNs 
that provide alternative venues to trade Nasdaq securities.\60\ In 
addition, Nasdaq asserted that, in fact, no other market center 
providing reserve size imposes a requirement to display a 1000 share 
quote for the privilege.
---------------------------------------------------------------------------

    \60\ See Nasdaq Letter I.
---------------------------------------------------------------------------

    Nasdaq also challenged the relevance of data showing that the 
average display size on ECNs is 1,190 shares as undermining Nasdaq's 
contention that it needs to reduce its own minimum display size to 100 
shares in order to compete.\61\ According to Nasdaq, in many cases ECNs 
aggregate orders from multiple subscribers, while market makers may or 
may not aggregate trading interest. Further, an average quote on a 
system that places no restriction on the use of reserve size is 
different, Nasdaq maintained, than a system that has a minimum display 
requirement inhibiting the use of its reserve size feature. Moreover, 
Nasdaq argued, an average size of 1,190 indicates that in many cases 
ECNs in fact display quotes of less than 1000 shares, with reserve size 
functionality, while Nasdaq market makers cannot provide their 
customers with the same. To further bolster its argument that it needs 
to reduce the display minimum in order to compete, Nasdaq cited a 
recent review it conducted of reserve size usage by ECNs, which found 
that almost 40 percent of ECN quotes accessed by SelectNet had a 
reserve size behind them, and that of those 40 percent, 75 percent were 
displaying less than 1000 shares.\62\
---------------------------------------------------------------------------

    \61\ Id.
    \62\ Id.
---------------------------------------------------------------------------

    As noted above, the Commission has previously approved rules of an 
exchange (specifically, the Archipelago Exchange) \63\ that provide for 
a reserve size functionality with no minimum-size display requirement, 
reflecting the Commission's belief that such rules are not inconsistent 
with the Act. Moreover, the Commission believes that the proposed rule 
change may afford participants on Nasdaq greater flexibility in 
handling large orders in a manner enabling them to compete with 
participants in other market centers. The Commission is not aware of 
any issues regarding the use of reserve size with no display 
requirement on the Archipelago Exchange, and believes, further, that 
Nasdaq has adequately addressed the other major issues raised by 
commenters concerning transparency, liquidity, and impact on executions 
and potential for abuse in its own proposed system. Thus, to deny 
Nasdaq the ability to reduce its display size requirement, in the 
Commission's view, would inhibit fair competition among markets.
---------------------------------------------------------------------------

    \63\ See supra, note 24.
---------------------------------------------------------------------------

5. Timing of the Proposed Rule Change

    A large number of commenters argued that it was too soon after the 
implementation of SuperSOES to

[[Page 39764]]

introduce the proposed changes,\64\ and that more time was necessary to 
collect meaningful data and evaluate the current system before 
modifying it in this significant way.\65\ Some commenters believed that 
the two months of trading on the SuperSOES System before the proposal 
was first filed were a slow trading period and unrepresentative of 
typical market conditions.\66\ Many commenters also noted that the 
proposal was published relatively soon after the impact of the 
September 11, 2001 terrorist attacks on America,\67\ and wrote that it 
was difficult to meaningfully consider the potential effect of the 
proposed changes during a period in which the markets and market 
participants were still recovering from that episode.
---------------------------------------------------------------------------

    \64\ See A. Donnelly Letter, A. Wang Letter, Abelson Letter, 
Atreya Letter, B. Donnelly Letter, Balber Letter, Ben-Aharon Letter, 
Benetti Letter, Block Letter, Bouldin Letter, Burgess Letter, C. Kim 
Letter, Caputo Letter, Chesler Letter, Choi Letter, Ciemens Letter, 
Cosenza Letter, Crowell Letter, D'Aleo Letter, Dershow Letter, 
Diemar Letter, Dolnier Letter, Donitz Letter, E. Goldstein Letter, 
E. Knight Letter, Edmonds Letter, Erman Letter, Ettles Letter, F. 
Raffaele Letter, Feinstein Letter, Frank's Lee Letter, Gaida Letter, 
Garby Letter, Getz Letter, Giannone Letter, Giordano Letter, 
Goldhair Letter, Gormley Letter, Gregg Letter, Grill Letter, Gussin 
Letter, H. Liu Letter, Hansford Letter, Hayden Letter, Helfman 
Letter, Herrick Letter, Hodges Letter, Hotchkiss Letter, Ingram 
Letter, Ives Letter, Iwasa Letter, J. Goldstein Letter, J. Hughes 
Letter, J. Kirstein Letter, J. Raffaele Letter, J. Schmidt Letter, 
J. Williams Letter, Jahng Letter, K. Kirstein Letter, K. Murphy 
Letter, K.Y. Lee Letter, Kaneti Letter, Keane Letter, Kinzelberg 
Letter, Klarreich Letter, Klaus Letter, Klein Letter, Kobin Letter, 
Kott Letter, Kovac Letter, Kushner Letter, L. Waxman Letter, LaBonar 
Letter, Landsman Letter, Leung Letter, Lopin Letter, Lovett Letter, 
Lutz Letter, Magat Letter, McCabe Letter, Miller Letter, Miller 
Letter, Morant Letter, Morgan Letter, Namolik Letter, Nemcic Letter, 
Nicoletta Letter, Nierling Letter, Oahana Letter, Orgen Letter, 
Oshins Letter, Panayotov Letter, Parsons Letter, Petrov Letter, 
Philip Letter, Plotkin Letter, Poulton Letter, R. Murphy Letter, R. 
Murphy Letter, Rea Letter, Rebatta Letter, Roth-McEnroe Letter, 
Rotter Letter, S. Hughes Letter, S. Kim Letter, S. Sherwood Letter, 
Salti Letter, Schreiber Letter, Schulberg Letter, Schuldenfrei 
Letter, Schultz Letter, Schwartz Letter, Senna Letter, Shatkin 
Letter, Sherman Letter, Shorack Letter, Sinclair Letter, Sinnreich 
Letter, Skinner Letter, Sohn Letter, Stancevic Letter, Stuzin 
Letter, Talib Letter, Teitelman Letter, Thompson Letter, Towne 
Letter, Voldarsky Letter, Ward Letter, Watts Letter, Weckherlen 
Letter, West Letter, Williamson Letter, Wilson Letter, Yang Letter, 
Yang Letter, and Zlatkovic Letter.
    \65\ See Abelson Letter, Ball Letter, Ball Letter, Bradshaw 
Letter, C. Kim Letter, Crowell Letter, Dolnier Letter, Federici 
Letter, Garby Letter, Giannone Letter, Gregg Letter, H. Liu Letter, 
Hinkel Letter, Hodges Letter, Ingles Letter, Ingram Letter, Isaacson 
Letter, Ives Letter, J. Kirstein Letter, J. Raffaele Letter, J. 
Williams Letter, Jahng Letter, Kernan Letter, Klaus Letter, L. 
Waxman Letter, Landsman Letter, Leung Letter, Magat Letter, Miller 
Letter, Nicoletta Letter, Oahana Letter, Orgen Letter, Oshins 
Letter, Panayotov Letter, Paper Letter, Plotkin Letter, Ratto 
Letter, Rebatta Letter, Rotter Letter, S. Kim Letter, Salti Letter, 
Sherman Letter, Sinclair Letter, Skinner Letter, Smith Letter, Sohn 
Letter, Squires Letter, Teitelman Letter, Travers Letter, Watts 
Letter, Weckherlen Letter, West Letter, Yang Letter, Yang Letter, 
and Zlatkovic Letter.
    \66\ See Feeney Letter, Garby Letter, Hotchkiss Letter, Ingles 
Letter, Ingram Letter, J. Raffaele Letter, Jahng Letter, Landsman 
Letter, Leung Letter, Magat Letter, Miller Letter, Nicoletta Letter, 
Oahana Letter, Salti Letter, Sinclair Letter, Smith Letter, 
Teitelman Letter, Watts Letter, Weckherlen Letter, and West Letter.
    \67\ See Benetti Letter, Burgess Letter, Cosenza Letter, Crowell 
Letter, Getz Letter, Giordano Letter, Ingram Letter, Kernan Letter, 
Klaus Letter, Magat Letter, Miller Letter, Nicoletta Letter, 
Nierling Letter, Oahana Letter, Oshins Letter, Plotkin Letter, R. 
Murphy Letter, Sherman Letter, Sohn Letter.
---------------------------------------------------------------------------

    Nasdaq contended that, in view of the competitive process, it must 
be free to quickly respond to the marketplace, and rejected the notion 
that its ability to alter and improve its systems is limited by how 
short a period of time had elapsed since a system was last changed.\68\
---------------------------------------------------------------------------

    \68\ See Nasdaq Letter I.
---------------------------------------------------------------------------

    The Commission believes that in view of the further passage of time 
since the proposed rule change was filed, these timing issues are no 
longer sufficient a concern to warrant a delay in the Nasdaq's ability 
to adopt the proposed rule change. The Commission expects NASD 
Regulation and Nasdaq to monitor trading to ensure the proper use of 
the reserve size feature and reevaluate the minimum display requirement 
if there is an overall decline in the quality of the market.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\69\ that the proposed rule change (SR-NASD-2001-66) be, and hereby 
is, approved.
---------------------------------------------------------------------------

    \69\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\70\
---------------------------------------------------------------------------

    \70\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.

Appendix

    1. Letter from Robert A. Gaida Jr., Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``Gaida 
Letter'').
    2. Letter from Edward J. Keane Jr., Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Keane 
Letter'').
    3. Letter from David Schwartz, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 18, 2001 (``Schwartz 
Letter'').
    4. Letter from Keith A. Donitz, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``Donitz 
Letter'').
    5. Letter from Frantisek Kovac, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 17, 2001 (``Kovac Letter'').
    6. Letter from Brian J. Dershow, Equities Trader, to Jonathan G. 
Katz, Secretary, SEC, dated October 15, 2001 (``Dershow Letter'').
    7. Letter from Kathleen Murphy, to Jonathan G. Katz, Secretary, 
SEC, dated October 17, 2001 (``Murphy Letter'').
    8. Letter from Matthew C. Rea, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Rea 
Letter'').
    9. Letter from David B. Feinstein, Principal, Dodo Ventures, to 
Jonathan G. Katz, Secretary, SEC, dated October 17, 2001 
(``Feinstein Letter'').
    10. Letter from Eugene C. Giaquinto, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Giaquinto Letter'').
    11. Letter from Joseph J. Gormley III, Small Investor, to 
Jonathan G. Katz, Secretary, SEC, dated October 14, 2001 (``Gormley 
Letter'').
    12. Letter from R. Travis Williamson, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Williamson Letter'').
    13. Letter from David Lui, Jr., Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 18, 2001 (``Lui 
Letter'').
    14. Letter from Seth Helfman, to Jonathan G. Katz, Secretary, 
SEC, dated October 19, 2001 (``Helfman Letter'').
    15. Letter from David M. Kushner, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 13, 2001 (``Kushner 
Letter'').
    16. Letter from Edward Miller, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 17, 2001 (``Miller 
Letter'').
    17. Letter from Jonathan R. Goldstein, to Jonathan G. Katz, 
Secretary, SEC, dated October 18, 2001 (``J. Goldstein Letter'').
    18. Letter from Harlan R. Schreiber, Esquire, to Jonathan G. 
Katz, Secretary, SEC, dated October 18, 2001 (``Schrieber Letter'').
    19. Letter from Eric A. Shapiro, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``E. Shapiro Letter'').
    20. Letter from Sean Ward, to Jonathan G. Katz, Secretary, SEC, 
dated October 19, 2001 (``Ward Letter'').
    21. Letter from Stephen M. Hughes, to Jonathan G. Katz, 
Secretary, SEC, dated October 20, 2001 (``S. Hughes Letter'').
    22. Letter from John R. Hughes III, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``J. 
Hughes Letter'').
    23. Letter from Erika Roth-McEnroe, to Jonathan G. Katz, 
Secretary, SEC, undated, received November 20, 2001 (``Roth-McEnroe 
Letter'').
    24. Letter from Matthew Bouldin, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Bouldin Letter'').
    25. Letter from Joseph Dondero, Individual Investor, to Jonathan 
G. Katz, Secretary, SEC, dated October 15, 2001 (``Dondero 
Letter'').
    26. Letter from Ronen T. Zour, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``Zour Letter'').
    27. Letter from Michael Parsons, Registered Representative, to 
Jonathan G. Katz,

[[Page 39765]]

Secretary, SEC, undated, received November 20, 2001 (``Parsons 
Letter'').
    28. Letter from Bryan M. Donnelly, to Jonathan G. Katz, 
Secretary, SEC, undated, received November 20, 2001 (``B. Donnelly 
Letter'').
    29. Letter from Jeffrey S. Schultz, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC., undated, 
received November 20, 2001 (``Schultz Letter'').
    30. Letter from John Chinnock, Securities Principal, Heartland 
Securities, to Jonathan G. Katz, Secretary, SEC, undated, received 
November 20, 2001 (``Chinnock Letter'').
    31. Letter from Joel Brandon Jones, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``J. 
Jones Letter'').
    32. Letter from Richard Lutz, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated, received November 20, 
2001 (``Lutz Letter'').
    33. Letter from Corey N. Shapiro, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``C. Shapiro Letter'').
    34. Letter from Justin Namolik, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``Namolik Letter'').
    35. Letter from Ryan E. Poulton, Registered Representative, 
NASD, to Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Poulton Letter'').
    36. Letter from Mathew LaBonar, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``LaBonar 
Letter'').
    37. Letter from David Kinzelberg, Equity Trader, to Jonathan G. 
Katz, Secretary, SEC, dated October 14, 2001 (``Kinzelberg 
Letter'').
    38. Letter from Blair Ettles, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Ettles Letter'').
    39. Letter from Daniel Balber, NASD Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Balber 
Letter'').
    40. Letter from Feral Talib, Registered Principal, to Jonathan 
G. Katz, Secretary, SEC, dated November 15, 2001 (``Talib Letter'').
    41. Letter from Andrew Donnelly, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 13, 2001 (``A. 
Donnelly Letter'').
    42. Letter from Eric Klein, to Jonathan G. Katz, Secretary, SEC, 
dated October 16, 2001 (``E. Klein Letter'').
    43. Letter from Carl Z. Giannone, Registered Representative, 
Limited Representative Equity Trader, General Securities Principal, 
to Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Giannone Letter'').
    44. Letter from Choi Kilyoung, to Jonathan G. Katz, Secretary, 
SEC, dated October 17, 2001 (``Kilyoung Letter'').
    45. Letter from Matthew Nemcic, to Jonathan G. Katz, Secretary, 
SEC, dated October 13, 2001 (``Nemcic Letter'').
    46. Letter from Kevin McCabe, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``McCabe Letter'').
    47. Letter from Elizabeth Goldstein, Registered Representative, 
MS, to Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 
(``E. Goldstein Letter'').
    48. Letter from Benjamin Lee, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``B. Lee 
Letter'').
    49. Letter from John J. Morgan, Series 7 Trader, to Jonathan G. 
Katz, Secretary, SEC, dated October 16, 2001 (``J. Morgan Letter'').
    50. Letter from Daniel M. Stuzin, Esquire, to Jonathan G. Katz, 
Secretary, SEC, dated October 18, 2001 (``Stuzin Letter'').
    51. Letter from Justin M. Gosling, Equities Trader, to Jonathan 
G. Katz, Secretary, SEC, dated October 17, 2001 (``Gosling 
Letter'').
    52. Letter from Peter Ciemins, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Ciemins Letter'').
    53. Letter from Markham E. Murphy, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, undated, 
received November 30, 2001 (``M. Murphy Letter'').
    54. Letter from Favian A. Roldan, Registered Broker, Heartland 
Securities Corporation, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Roldan Letter'').
    55. Letter from Jason A. Strum Registered Representative, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 13, 2001 (``Strum Letter'').
    56. Letter from George F. Hassell, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 14, 2001 (``Hassell Letter'').
    57. Letter from David Lazarus, Registered Nasdaq Principal, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 14, 2001 (``Lazarus Letter'').
    58. Letter from Ziad El-Assad, Registered NASD Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 14, 2001 (``El-Assad Letter'').
    59. Letter from Kevin Diemar, Registered Nasdaq Principal, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 14, 2001 (``Diemar Letter'').
    60. Letter from Michael Washburn, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, undated, 
received October 17, 2001 (``Washburn Letter'').
    61. Letter from Adam S. Chesler, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Chesler Letter'').
    62. Letter from Christian Daulong, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Daulong Letter'').
    63. Letter from Shari M. Sherwood, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``S. Sherwood Letter'').
    64. Letter from John D. Lovett, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 17, 2001 (``Lovett 
Letter'').
    65. Letter from Stephen Edmonds, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Edmonds Letter'').
    66. Letter from Jay Bailyn, Registered Representative, Heartland 
Securities, LLC, NASD Member, to Jonathan G. Katz, Secretary, SEC, 
dated October 14, 2001 (``Bailyn Letter'').
    67. Letter from Michael D. Linton, Registered Representative, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 12, 2001 (``Linton Letter'').
    68. Letter from Michael Sherwood, Registered Principal, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 12, 2001 (``M. Sherwood Letter'').
    69. Letter from Christopher A. Hite, Registered NASD Principal, 
Heartland Securities, Inc., to Jonathan G. Katz, Secretary, SEC, 
dated October 15, 2001 (``Hite Letter'').
    70. Letter from Grier Laughlin, Registered Nasdaq Principal, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 16, 2001 (``Laughlin Letter'').
    71. Letter from Christopher Brook, Registered Principal, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``Brook Letter'').
    72. Letter from Damian Falcone, Registered Representative, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, undated, received October 18, 2001 (``Falcone Letter'').
    73. Letter from Scott Sullivan, Registered Representative, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 14, 2001 (``Scott Sullivan Letter'').
    74. Letter from Sal Chaudhry, Registered Principal, Heartland 
Securities Corporation, to Jonathan G. Katz, Secretary, SEC, dated 
October 16, 2001 (``Chaudhry Letter'').
    75. Letter from William Nathan Shorack, Registered Principal, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Shorack Letter'').
    76. Letter from Richard T. Hayden, Registered Representative, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Hayden Letter'').
    77. Letter from Glen Dubin, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``Dubin 
Letter'').
    78. Letter from Edward E. Hong, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Hong 
Letter'').
    79. Letter from Tal Sharon, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 17, 2001 (``Sharon 
Letter'').
    80. Letter from Christopher Greeley, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Greeley Letter'').
    81. Letter from Jeremy Zucker, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``Zucker Letter'').
    82. Letter from Joel Arberman, Registered Representative, to 
Jonathan G. Katz,

[[Page 39766]]

Secretary, SEC, dated November 19, 2001 (``Arberman Letter'').
    83. Letter from Joon Hwan Choi, Securities Trader, to Jonathan 
G. Katz, Secretary, SEC, dated October 17, 2001 (``J. Choi 
Letter'').
    84. Letter from Boris M. Piskun, to Jonathan G. Katz, Secretary, 
SEC, dated October 14, 2001 (``Piskun Letter'').
    85. Letter from Marc R Grossman, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Grossman Letter'').
    86. Letter from Edward T. Flaherty Jr., to Jonathan G. Katz, 
Secretary, SEC, dated October 12, 2001 (``Flaherty Letter'').
    87. Letter from Richard Lay, Professional Trader, to Jonathan G. 
Katz, Secretary, SEC, dated October 17, 2001 (``Lay Letter'').
    88. Letter from Coreina Chan, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 17, 2001 (``Coreina 
Letter'').
    89. Letter from Zachary Hepner, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Hepner 
Letter'').
    90. Letter from Douglas Song, Professional Trader, to Jonathan 
G. Katz, Secretary, SEC, dated October 18, 2001 (``D. Song 
Letter'').
    91. Letter from Michael O'Malley, Professional Trader, to 
Jonathan G. Katz, Secretary, SEC, dated October 14, 2001 (``O'Malley 
Letter'').
    92. Letter from Karl Sohn, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 12, 2001 (``Sohn 
Letter'').
    93. Letter from Greg T. Bauer, to Jonathan G. Katz, SEC, dated 
October 15, 2001 (``Bauer Letter'').
    94. Letter from Evan Stashefsky, Equities Trader, to Jonathan G. 
Katz, Secretary, SEC, dated October 15, 2001 (``Stashefsky 
Letter'').
    95. Letter from Keith Corl, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Corl 
Letter'').
    96. Letter from Alexander F. Zemek, to Jonathan G. Katz, 
Secretary, SEC, dated October 13, 2001 (``Zemek Letter'').
    97. Letter from Michael C. Malizia, to Jonathan G. Katz, 
Secretary, SEC, dated October 17, 2001 (``Malizia Letter'').
    98. Letter from Jeffrey Kirstein, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 14, 2001 (``Kirstein 
Letter'').
    99. Letter from Keith Kirstein, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``K. 
Kirstein Letter'').
    100. Letter from Brian Ingram, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Ingram 
Letter'').
    101. Letter from Andrew Rotter, to Jonathan G. Katz, Secretary, 
SEC, undated, received November 20, 2001 (``Rotter Letter'').
    102. Letter from Ira Landsman, CPA, to Jonathan G. Katz, 
Secretary, SEC, dated October 17, 2001 (``Landsman Letter'').
    103. Letter from Jimmie E. Williams, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``J. 
Williams Letter'').
    104. Letter from Adam B. Salti, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Salti Letter'').
    105. Letter from Rami Abelson, Trader, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Abelson Letter'').
    106. Letter from Andrew C. Sohn, to Jonathan G. Katz, Secretary, 
SEC, dated October 18, 2001 (``Sohn Letter'').
    107. Letter from Brandford Hotchkiss, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Brandford Letter'').
    108. Letter from Jefferson Magat, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 13, 2001 (``Magat 
Letter'').
    109. Letter from Howard Teitelman, Registered Principal, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 14, 2001 (``Teitelman Letter'').
    110. Letter from Lee Waxman, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, undated, 
received November 20, 2001 (``Waxman Letter'').
    111. Letter from Lee M. Weckherlen, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, Dated October 15, 2001 
(``Weckherlen Letter'').
    112. Letter from Eric Orgen, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Orgen Letter'').
    113. Letter from Kevin Jahng, to Jonathan G. Katz, Secretary, 
SEC, dated October 14, 2001 (``Jahng Letter'').
    114. Letter from Brian M. Crowell, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Crowell 
Letter'').
    115. Letter from Marc Miller, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``M. 
Miller Letter'').
    116. Letter from Jeremy Ives, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Ives 
Letter'').
    117. Letter from Tyler Isaacson, Registered Principal, Heartland 
Securities Corporation, to Jonathan G. Katz, Secretary, SEC, 
undated, received November 30, 2001 (``Isaacson Letter'').
    118. Letter from Timothy J. Wilson, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Wilson Letter'').
    119. Letter from Richard P. Getz, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Getz Letter'').
    120. Letter from Frank J. Kropf, Day Trader, Self-Employed, to 
Jonathan G. Katz, Secretary, SEC, dated October 13, 2001 (``Kropf 
Letter'').
    121. Letter from Kristin Hinkel, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``Hinkel 
Letter'').
    122. Letter from Neal King, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 14, 2001 (``King 
Letter'').
    123. Letter from Do Hoon Kim, to Jonathan G. Katz, Secretary, 
SEC, dated November 30, 2001 (``D. Kim Letter'').
    124. Letter from Daniel J. Cosenza, Registered principal, to 
Jonathan G. Katz, Secretary, SEC, dated November 30, 2001 (``Cosenza 
Letter'').
    125. Letter from Diane P. Murphy, Managing Director, Robertson 
Stephens, Inc., to Jonathan G. Katz, Secretary, SEC, dated December 
3, 2001 (``Robertson Stephens Letter'').
    126. Letter from Hedi H. Reynolds, Managing Director, Nasdaq 
Trading, Morgan Keegan & Company, Inc., to Jonathan G. Katz, 
Secretary, SEC, dated December 3, 2001 (``Morgan Keegan Letter'').
    127. Letter from Richard Cammarata, General Securities 
Prinicpal, to Jonathan G. Katz, Secretary, SEC, dated October 15, 
2001 (``Cammarata Letter'').
    128. Letter from Thomas Ingles, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Ingles 
Letter'').
    129. Letter from Charles R. Nierling, Registered Options 
Principal, to Jonathan G. Katz, Secretary, SEC, dated December 4, 
2001 (``Nierling Letter'').
    130. Letter from Bill J. Deligiannis, Andover Trading, dated 
October 31, 2001.
    131. Letter from Hummayun Majid, to Jonathan G. Katz, Secretary, 
SEC, dated October 17, 2001 (``Majid Letter'').
    132. Letter from Lee Lazar, Equity Trader, Chimera Capital, to 
Jonathan G. Katz, Secretary, SEC, dated October 24, 2001 (``Lazar 
Letter'').
    133. Letter from Samuel S. Mikhelson, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Mikhelson Letter'').
    134. Letter from Tal Plotkin, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``Plotkin Letter'').
    135. Letter from Thomas A. Stengel, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 24, 2001 (``Stengel Letter'').
    136. Letter from Jay Crosby, Registered Representative, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 14, 2001 (``Crosby Letter'').
    137. Letter from Raymond J. Murphy, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 16, 2001 (``R. Murphy Letter'').
    138. Letter from Anthony J. Masso, Professional Trader, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Masso 
Letter'').
    139. Letter from Joshua Levine, to Jonathan G. Katz, Secretary, 
SEC, dated December 6, 2001 (``Levine Letter'').
    140. Letter from Ronn Diamond, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated received December 13, 2001 
(``Diamond Letter'').
    141. Letter from Matthew R. Keegan, Registered Principal, 
Heartland Securities Corporation, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``Keegan Letter'').
    142. Letter from Mehmed Markasevic, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, undated, received December 18, 
2001 (``Markasevic Letter'').
    143. Letter from Scott Sukenick, Registered Representative, to 
Jonathan G. Katz,

[[Page 39767]]

Secretary, SEC, undated, received December 26, 2001 (``Sukenick 
Letter'').
    144. Letter from Chris Paper, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Paper Letter'').
    145. Letter from Todd Skinner, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Skinner 
Letter'').
    146. Letter from Samson Leung, Registered Principal, to Jonathan 
G. Katz, Secretary, SEC, dated October 15, 2001 (``Leung Letter'').
    147. Letter from Robert B. Smith, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``R. Smith Letter'').
    148. Letter from Shuming Yang, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Shuming Letter'').
    149. Letter from Angelo C. Nicoletta, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Nicoletta Letter'').
    150. Letter from Timothy K. Dolnier, to Jonathan G. Katz, 
Secretary, SEC, dated October 12, 2001 (``Dolnier Letter'').
    151. Letter from Nicholas E. Federici, Registered 
Representative, to Jonathan G. Katz, Secretary, SEC, dated October 
14, 2001 (``Federici Letter'').
    152. Letter from Alex J. Lopez, Registered Principal/Equity 
Trader, Heartland Securities, to Jonathan G. Katz, Secretary, SEC, 
dated October 15, 2001 (``Giordano Letter'').
    153. Letter from Michael D. Giordano, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Giordano Letter'').
    154. Letter from Giangi Ratto, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Ratto Letter'').
    155. Letter from Darren L. Heyman, Esquire, to Jonathan G. Katz, 
Secretary, SEC, dated October 16, 2001 (``Heyman Letter'').
    156. Letter from Richard J. Travers III, Registered 
Representative, to Jonathan G. Katz, Secretary, SEC, dated October 
15, 2001 (``Travers Letter'').
    157. Letter from Michael Feeney, to Jonathan G. Katz, Secretary, 
SEC, undated, received January 2, 2002 (``Feeney Letter'').
    158. Letter from Ryan West, Registered Principal, to Jonathan G. 
Katz, Secretary, SEC, dated October 14, 2001 (``R. West Letter'').
    159. Letter from Thomas F. Bradshaw, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Bradshaw Letter'').
    160. Letter from John Kernan, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated received January 7, 2002 
(``Kernan Letter'').
    161. Letter from Douglas Squires, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 17, 2001 (``Squires Letter'').
    162. Letter from Christoper Ball, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 16, 2001 (``C. Ball Letter'').
    163. Letter from David Kobin, to Jonathan G. Katz, Secretary, 
SEC, dated October 17, 2001 (``Kobin Letter'').
    164. Letter from Alexander Chan, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``A. Chan Letter'').
    165. Letter from Kenneth Garby, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated, received January 7, 2002 
(``Garby Letter'').
    166. Letter from Anton Panayotov, Equity Trader, to Jonathan G. 
Katz, Secretary, SEC, undated, received January 8, 2002 (``Panayotov 
Letter'').
    167. Letter from Greg A. Oshins, to Jonathan G. Katz, Secretary, 
SEC, dated October 15, 2001 (``Oshins Letter'').
    168. Letter from C. Kevin Yang, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``Yang 
Letter'').
    169. Letter from Samuel Oahana, Professional Trader, to Jonathan 
G. Katz, Secretary, SEC, dated October 15, 2001 (``Oahana Letter'').
    170. Letter from Charles J. Kim, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``C. Kim 
Letter'').
    171. Letter from Sunil Philip, Securities Trader, Heartland 
Securities, to Jonathan G. Katz, Secretary, SEC, dated October 18, 
2001 (``Philip Letter'').
    172. Letter from Harlan Thompson, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``H. Thompson Letter'').
    173. Letter from Jonathan W. Hodges, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Hodges Letter'').
    174. Letter from Yusef J. Burgess, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated, received January 8, 2002 
(``Burgess Letter'').
    175. Letter from Matthew Watts, Broker, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Watts Letter'').
    176. Letter from John J. Raffaele, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 14, 2001 (``Raffaele 
Letter'').
    177. Letter from Peter Zlatkovic, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Zlatkovic Letter'').
    178. Letter from David Sherman, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 17, 2001 (``Sherman 
Letter'').
    179. Letter from Alexander Benetti, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 12, 2001 
(``Benetti Letter'').
    180. Letter from Adam Sinclair, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 17, 2001 (``Sinclair 
Letter'').
    181. Letter from Nikhil Atreya, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 15, 2001 (``Atreya Letter'').
    182. Letter from Ilian Petrov, NASD Principal, to Jonathan G. 
Katz, Secretary, SEC, dated October 15, 2001 (``Petrov Letter'').
    183. Letter from Richard Rebatta, to Jonathan G. Katz, 
Secretary, SEC, dated October 16, 2001 (``Rebatta Letter'').
    184. Letter from Christopher H. Klaus, Registered 
Representative, to Jonathan G. Katz, Secretary, SEC, dated October 
14, 2001 (``Klaus Letter'').
    185. Letter from John C. Giesa, President, and Michael A. Bird, 
Senior Vice Chairman, Security Traders Association, to Jonathan G. 
Katz, Secretary, SEC, dated December 12, 2001 (``STA Letter'').
    186. Letter from Howard M. Liu, Securities Trader, to Jonathan 
G. Katz, Secretary, SEC, dated October 18, 2001 (``H. Liu Letter'').
    187. Letter from Frank J. Raffaele, Jr., Registered 
Representative, to Jonathan G. Katz, Secretary, SEC, dated October 
11, 2001 (``F. Raffaele Letter'').
    188. Letter from Chris Gregg, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Greg 
Letter'').
    189. Letter from Igor Stancevic, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, undated, received January 8, 2002 
(``Stancevic Letter'').
    190. Letter from Saeyoon Kim, Registered Principal, Heartland 
Securities, to Jonathan G. Katz, Secretary, SEC, dated October 15, 
2001 (``S. Kim Letter'').
    191. Letter from Dokyun No, NASD Member, to Jonathan G. Katz, 
Secretary, SEC, undated, received January 8, 2002 (``D. No 
Letter'').
    192. Letter from Kyle J. Schroeder, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 12, 2001 
(``Schroeder Letter'').
    193. Letter from Alexander Shatkin, to Jonathan G. Katz, 
Secretary, SEC, dated October 14, 2001 (``Shatkin Letter'').
    194. Letter from Darin E. Cohen, Individual Investor, to 
Jonathan G. Katz, Secretary, SEC, undated, received January 8, 2001 
(``D. Cohen Letter'').
    195. Letter from Michael Sinnreich, Equity Trader, to Jonathan 
G. Katz, Secretary, SEC, dated October 14, 2001 (``Sinnreich 
Letter'').
    196. Letter from Robert L. Oliver, Professional Trader, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, dated 
October 17, 2001 (``Oliver Letter'').
    197. Letter from Randy Gussin, Registered Representative, 
Heartland Securities, to Jonathan G. Katz, Secretary, SEC, undated, 
received January 8, 2001 (``Gussin Letter'').
    198. Letter from Bruce Hepner, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated, received January 8, 2001 
(``Hepner Letter'').
    199. Letter from Dror Ben-Aharon, to Jonathan G. Katz, 
Secretary, SEC, dated October 14, 2001 (``Ben-Aharon Letter'').
    200. Letter from Bradford Kott, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Kott 
Letter'').
    201. Letter from Matthew Schroeder, Registered Representative, 
NASD, to Jonathan G. Katz, Secretary, SEC, dated October 12, 2001 
(``Schroeder Letter'').
    202. Letter from Jason Klarreich, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Klarreich Letter'').

[[Page 39768]]

    203. Letter from Eli Lopin, to Jonathan G. Katz, Secretary, SEC, 
dated October 16, 2001 (``Lopin Letter'').
    204. Letter from Ben Williams, Registered Representative, NASD, 
to Jonathan G. Katz, Secretary, SEC, dated October 12, 2001 (``B. 
Williams Letter'').
    205. Letter from Jason Towne, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated January 9, 2001 (``Towne 
Letter'').
    206. Letter from Kiet T. Vo, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``Vo 
Letter'').
    207. Letter from Isaak Volodarsky, to Jonathan G. Katz, 
Secretary, SEC, dated October 14, 2001 (``Volodarsky Letter'').
    208. Letter from Dario Cosic, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated, received January 9, 2001 
(``Cosic Letter'').
    209. Letter from Jason Herrick, to Jonathan G. Katz, Secretary, 
SEC, undated, received January 9, 2001 (``Herrick Letter'').
    210. Letter from Simrin Dhillon, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 14, 2001 (``Dhillon 
Letter'').
    211. Letter from Thomas N. McManus, Executive Director and 
Counsel, Morgan Stanley, to Jonathan G. Katz, Secretary, SEC, dated 
December 4, 2001 (``Morgan Stanley Letter'').
    212. Letter from John Schmidt, Registered Principal, Heartland 
Securities, to Jonathan G. Katz, Secretary, SEC, undated, received 
January 9, 2001 (``J. Schmidt Letter'').
    213. Letter from Robert V. Morant, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, undated, received January 9, 2001 
(``Morant Letter'').
    214. Letter from Hirokazu Iwasa, to Jonathan G. Katz, Secretary, 
SEC, dated October 17, 2001 (``Iwasa Letter'').
    215. Letter from Eric P. Knight, Equity Trader, Heartland 
Securities, to Jonathan G. Katz, Secretary, SEC, dated October 16, 
2001 (``E. Knight Letter'').
    216. Letter from Junghyun Won, Heartland Securities, to Jonathan 
G. Katz, Secretary, SEC, dated October 15, 2001 (``Won Letter'').
    217. Letter from Joshua A. D'Aleo, Equity Trader, Heartland 
Securities, to Jonathan G. Katz, Secretary, SEC, undated, received 
January 7, 2001 (``D'Aleo Letter'').
    218. Letter from Kerry Senna, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 16, 2001 (``Senna 
Letter'').
    219. Letter from Kon-Young Lee, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``K. Lee Letter'').
    220. Letter from Alexander Wang, to Jonathan G. Katz, Secretary, 
SEC, dated October 16, 2001 (``A. Wang Letter'').
    221. Letter from Charles William Hansford, to Jonathan G. Katz, 
Secretary, SEC, dated October 18, 2001 (``Hansford Letter'').
    222. Letter from Cary S. Grill, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 12, 2001 (``Grill 
Letter'').
    223. Letter from Jonathan Schuldenfrei, to Jonathan G. Katz, 
Secretary, SEC, dated October 15, 2001 (``Schuldenfrei Letter'').
    224. Letter from Jeffrey Schulberg, to Jonathan G. Katz, 
Secretary, SEC, dated October 18, 2001 (``Schulberg Letter'').
    225. Letter from Cornel Catrina, to Jonathan G. Katz, Secretary, 
SEC, dated October 18, 2001 (``Catrina Letter'').
    226. Letter from Eliav Bock, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 18, 2001 (``Bock 
Letter'').
    227. Letter from Marina J. Kaneti, Registered Principal, to 
Jonathan G. Katz, Secretary, SEC, dated October 18, 2001 (``Kaneti 
Letter'').
    228. Letter from Kristopher Goldhair, Registered Representative, 
to Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Goldhair Letter'').
    229. Letter from Joshua Weintraub, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 
(``Weintraub Letter'').
    230. Letter from David Caputo, Registered Representative, to 
Jonathan G. Katz, Secretary, SEC, dated October 15, 2001 (``Caputo 
Letter'').
    231. Letter from Tolga Erman, Registered Principal, to Jonathan 
G. Katz, Secretary, SEC, undated, received February 22, 2001 
(``Erman Letter'').
    232. Letter from Brenda C. Blackard, First Vice President, 
Manager Nasdaq Trading, Davenport & Company LLC, to Jonathan G. 
Katz, Secretary, SEC, dated March 7, 2001 (``Blackard Letter'').
    233. Letter from Piers Fennell, Individual Investor, to Jonathan 
G. Katz, Secretary, SEC, dated April 2, 2001 (``Fennell Letter'' ).

[FR Doc. 02-14139 Filed 6-7-02; 8:45 am]
BILLING CODE 8010-01-M