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To: Magrathea who wrote (215157)	10/29/2006 11:07:33 PM
From: Dinesh	Respond to of 275872

Until your buy order settles, you are not entitled to dividends, proxy, reorgs action, whatever. BUT, some portfolio accounting packages may not support all types of transactions or may have bugs. Also, DTCC may have been referring to the glitches in the stock borrow systems themseleves - because these are not real-time. DTCC is BTW not a completely disinterested party here - it too wants to play in this stock borrow market via its NSCC subsidiary. Actually, it wants to use its position to pretty much own this market. Byrne apparently has a complaint, probably also has a lawyer, and I am not fully conversant with all the pertinent facts of that situation. Switching to MMs. Market Makers don't see their short positions as naked or covered. It's just short, and may flip-flop between long and short several times every hour. There is no benefit to mandate that an MM commit capital to maintain inventory of stocks. Instead they can just post a bond and enjoy a credit limit. There is also a question of placing a theoretical upper limits on levels of liquidity. Consider this picture - stock is owned by investors and X wants to buy. X will have to wait for liquidity in the model you describe. But the NASDAQ dealer market system is designed to offer some liquidity at all times, without fail. When the market rising and you want to buy, or when it's falling and you want to sell. In return, the MMs get to pocket the spread. For larger orders, MMs are forced to take sides at competitive prices, even if just for a moment. Sometimes they may already have the other side lined up, sometimes they take position and then work it out. I still don't see how MM is violating any ethics this way. Maybe what you are looking for is a continuous-auction w/o specialists; or, maybe you consider the whole NASDAQ system unethical by design. Those are different takes... you won't be the first one to complain... and it's not your daddy's nasdaq. All, as always, JIMHO. regards -d