From: Spinelli, Franc [FSpinelli@refco.com]
Sent: Thursday, May 16, 2002 11:30 AM
To: 'rule-comments@sec.gov'
Subject: comment on file number S7-14-02

I would like to comment on the proposed SEC guidance with respect to section
31 (b) and (c) of the exchange act.

The SEC proposes  to amend the Preliminary Note to Rule 31-1 which
'clarifies that the aggregate dollar amount of sales of securities resulting
from the physical settlement of a security future should be calculated based
on the price at which the security future was sold by the market
participent...'

Neither the OCC nor NQLX retain the original trade price information
pertaining to open positions for more than one day . Since Securities
futures can be traded and held ' open' for up to months at a time , this
information at expiration is lost . SEC fees for exercised stock options are
based upon the strike price of the option series which ARE available to the
OCC at expiration , and is the benchmark price  against which securities and
cash change hands . With single stock futures , the more appropriate
benchmark I feel would be the settlement price at expiration , which for
Single Stock Futures  is the price against which securities and cash change
hands and which is readily available to the OCC and market participants.
With respect to  practicalities , should back office systems be required to
transmit open position and original trade price information to a third party
to assist in the SEC fee collection ( Market participants need to supply
this info since no one else will have it ) then the whole system is prone to
errors . The OCC ( or another 3rd party) needs to be comfortable that the
information supplied by ALL market participants at expiration is accurate .
This is impossible . At any time information supplied could be incorrect ,
which pre supposes that the OCC will run a reconciliation application ( if
they have one ) to ensure that the positional information supplied to the
OCC by the Market participant actually agrees with that participants open
position at the OCC . There is no program on the planet which will reconcile
original trade price information given to the OCC by a market participant
only the word of the participant.The OCC do not know on what basis
Participants close out Single stock futures for their customers since there
are many possible choices for example first in first out , last in first out
, or hold open . Hold open is where the customer elects to close out trades
in a manner of his choosing. This particular method could allow a customer
who has a net short single stock futures position but with many longs and
even more shorts , to cherry pick which open trades he has at expiration. IE
, close out the higher priced short positions  and leave a short position
with the lowest original trade prices  which will directly impact on the
amount of the fees collect by the SEC , lower of course . Basing these fees
on the settlement price will eliminate any possibility of customers of
market participants ' tampering' for want of a better word with the fee
collection process , not require any significant system changes for market
participants nor indeed i suspect for the OCC or NQLX , and would appear to
be a sensible unbiased solution to ensure SEC assessment fee collection is
processed easily.
Should the proposal to benchmark these fees against original trade price
proceeds, then this will require costly system changes by all market
participants as well as OCC / NQLX , and in the end sounds good , but will
not be smooth , seamless or reasonable to implement .

Thank you