Jonathan G. Katz,

Secretary

Securities and Exchange Commission

Mail Stop 6-9

450 Fifth Street, NW, Washington, D.C. 20549.

RE:Publication or Submission of Quotations Without Specified Information

17 CFR PART 240; Release No. 34-41110;

File No. S7-5-99; RIN: 3235-AH40

Dear Mr. Katz:

This comment letter is submitted on behalf of the Independent Broker-Dealer Association (IBDA) in response to the Commission's recent proposal entitled "Publication or Submission of Quotations Without Specified Information," File No. S7-5-99, Release No. 34-41110; 17 CFR PART 240; RIN: 3235-AH40. IBDA was incorporated in 1991 under the former name of the Long Island Broker-Dealer Association as a Not-For-Profit Professional Association and is dedicated to servicing the needs of independent/regional broker-dealers. IBDA presently has 150 members in 17 states and maintains a strategic alliance with the California Association of Independent Broker Dealers (CAIBD), which has 160 members.

IBDA is concerned that the Commission has not fully anticipated the costs and burdens the proposed rule will place upon market makers. Further, we are concerned that the effective result of the rules will be to impede the ability of legitimate, smaller issuers to raise public funds and to attract reputable market makers. Similarly, we fear that the natural outcome of the proposals will be an increased, anti-competitive consolidation of the market making community to the detriment of smaller firms.

IBDA will not further burden the record with a reiteration of the many excellent criticisms and arguments already submitted in opposition to the proposal. Notably, we fully support members' complaints that the proposal has failed to distinguish between so-called Microcap stocks (and by this we mean the term in its most pejorative sense, i.e., thinly capitalized, fraudulent offerings) and the legitimate OTC issues that are the bread and butter of many of IBDA's members' businesses. Although the Commission is not engaging in the regulatory equivalent of yelling "fire" in a crowded auditorium, it is important that context and rationale be brought into this critical debate. That a problem merits serious consideration does not mean that the problem is widespread. That a problem involves some participants in the OTC marketplace does not indicate an epidemic. According to a Commission representative "widespread micro-cap fraud" refers to the misconduct of 1% of the issuers. Further, IBDA believes that most Microcap enforcement and criminal cases stem from unregistered promoters and from disreputable business persons engaging in fraudulent misuse of the Internet. The individuals so identified are by no means main stream market makers or investment bankers. Those abusing Microcaps are not our traditional colleagues or competitors. By contrast, IBDA membership is limited to NASD members in good standing.

Fraud - - even if only 1% of the issuer universe or even if limited to unregistered miscreants - - is serious and must be dealt with. IBDA will continue to support any bona fide efforts to protect the public and to ensure the integrity of our capital markets. Nonetheless, the proposal does not address the misconduct of the culprits and, if adopted, will drive them further underground, making the market less transparent to the public. Sadly, the proposal seems an admission by the regulatory community that it is unable to deal with Microcap fraud. IBDA sees the proposal as an improper effort to shift regulation to the trading desk. While it may be laudable to pretend that all departments within any securities firm engage in some form of regulation, the simple fact is that "regulation" is too easily confused with "compliance."

All participants in the securities industry, especially NASD and IBDA members, are in business to make money. Our members compete with each other for business. By and large they do so in a compliant, legal manner. Clearly, at times, firms stray. IBDA does not defend such misconduct and supports the prosecution of any violative activity to the full extent of the law. However, in the scheme of the United States securities markets, member firms have not been allocated a regulatory role; to the contrary, they are defined as "regulated entities." Members must follow the rules and be compliant, but they cannot investigate the misconduct of other market participants, they cannot issue subpoenas, and they cannot sanction their competitors. Those roles are for the SROs, the states, and the Commission. Sadly, the proposal appears to attempt to deputize market makers and have them regulate the issuer community. Not only is such an approach misguided, but also it is dangerous.

Microcap fraud is better prevented and dealt with at the clearing firm level, rather than at the trading desks of our members. In a misguided sense, this is the approach of the proposal: to move the first line of defense to the trading desk. There are already significant numbers of laws, rules, and regulations on the books detailing the due diligence necessary as a preliminary basis for going on the "box." The proposal simply does not address the day-to-day impact that requiring market makers to now act as regulators will have upon the trading community and the underwriting community. Frankly, IBDA believes that the proposals will drive the cost of capital up and will result in fewer markets being made. There is absolutely no proof that fewer markets will mean fewer fraudulent issuers. To the contrary, IBDA's experience is that the more difficult the regulatory community makes entry into the industry, whether as a General Securities Representative, a Broker-Dealer, or a market maker, the more "good" people are discouraged. The unintended net result of such misguided regulation is to curtail the influence of the overwhelming majority of decent market participants. Crooks have two things that the rest of us often lack: time and money. By raising the cost of market making and by unnecessarily increasing the time required to review trading candidates, we believe that the proposal will further consolidate the influence of a minority of malefactors within the industry.

IBDA predicts that the most probable effect of the proposals will be to nurture a cadre of hard-core, non-compliant market makers. By limiting the "sunshine" effect of the majority of market makers, dishonest market makers will thrive in the vacuum that the proposal will inevitably create. And let there be no doubt about it! As proposed, the rule will not prevent the initial market making by disreputable firms. They will find a way . . . as they always do . . . regardless the cost or the time. What will be accomplished is that the influence of such dishonest firms will not be diluted. Effectively the Commission will be creating a franchise, because the barriers to entry into the Microcap issues will overwhelm decent market makers.

In conclusion, the proposal is fatally flawed because it fails to recognize "the vast majority of good, hard-working, decent people in the industry" as Chairman Levitt recently stated. For the proposal to gain widespread support among market makers it must acknowledge that the root of the Microcap problem is found among unscrupulous promoters and shady operators now finding a refuge on the Internet. IBDA urges the Commission to reject implementation of the proposal and to impanel a panoramic industry task force to develop more flexible and realistic approaches to the issues involved

Respectfully submitted,

Alan Davidson, President

Bill Singer, General Counsel

CC:

Ch. Arthur Levitt, Jr. 202-942-9646

Com. Paul Carey, Esq. 202-942-9521

Com. Isaac Hunt, Esq. 202-942-9647

Com. Norman Johnson, Esq. 202-942-9666

Com. Laura Unger, Esq. 202-942-9563