Subject: File No. S7-10-04
From: Victor L. Genez
Affiliation: Consulting actuary enrolled with the U.S. Departments of Treasury and Labor

December 31, 2004

I generally agree with the NMS proposed rules. However, an important aspect of promoting a fair market is disclosure of the costs of executing a trade. As you note on page 8 of the introduction, for the small retail trader, the most significant implicit trading cost is the spread between the bid and asked prices. I would like to see the spread explicitly disclosed on all trades so that both the buyer and seller know the total cost of the transaction. The simplest approach would be to allocate one-half of the spread to each party.

To use an analogy, when I purchase real estate, I receive a closing statement that shows both parties all of the expenses, who received compensation for a particular service, how much they received, and which party to the transaction paid the expense. Why should not the spread paid to the market-maker in a securities trade be subject to similar disclosure rules?

A prospectus for a mutual fund contains detailed disclosure of almost all of the many expenses that will affect the net return on the investment of a shareholder. Yet, when the portfolio manager of the fund trades securities, he incurs a cost that is largely hidden from the investor, although the investor bears it nonetheless.

I recognize that there are other forces in the market that will tend to keep spreads from becoming unreasonably high, but disclosing the spread on each trade will assist in that effort.

Thank you for your consideration.