Subject: SR-NASD-9-42
Author:  chris@cs.caltech.edu (Christopher K. Lee) at Internet 
Date:    7/21/96 1:54 PM
     
     
SR-NASD-9-42
     
I would like to see the removal of pricing in terms of 1/8 ths and 
for low priced stocks in 1/16, 1/32 fractions.  It seems to be an 
archaic pricing mechanism designed to benefit broker/dealer's profits 
through the spread.
     
An order-driven system with time priority and with public access to 
limit orders on the book is highly desirable to improve transparency 
and to benefit liquidity for investors.
     
It seems the proposed system still inures benefits to market makers 
that are unnecessary and against investors.  The market microstructure 
should be free of as many inefficiencies as possible.  Market makers 
should not be accorded preferential status against investors. Market 
makers and the investing public should be on a level playing field. 
Market makers will never be able to provide the buying power and 
liquidity the investing public provides.  Thus, the use of artificial 
spreads to compensate market makers for providing liquidity is 
outdated and unnecessary.  If a market maker desires to be a counter 
party to a transacation, the market maker should assume the same
risks as a public investor.  A trading system should facilitate 
the carrying out of transactions in an efficient way and not to
provide benefits to market makers at the expense of public investors. 
The capital provided by market makers is no different than the 
capital provided by the investing public and thus should not be 
accorded any special benefits.