berg. That is what we use inoptimizing our portfolios. We use it especially for actively managedportfolios. We have a certain alpha to capture, whether it is momentumdriven or earnings driven. What is the cost that we expect to pay to captureit? If the formula is wrong, we are not in the best position to capture thatalpha. It will come up as a negative performance. It will have aperformance drag. But it is an integrated process, and we are fairlyconfident about the way in which we come up with the expected transactioncosts.It also goes to the way we measure the total transaction cost. It really istrade specific. And whether VWAP is appropriate or not depends on thetrade. If you are trading 40,000 shares within the next 30 minutes, and thetrade is driven by an earnings announcement that will be out in the next houror so, you want to trade now. In such a case, a VWAP benchmark isunreasonable. You may match the benchmark perfectly, but at the sametime miss the point of capturing the alpha. So it has to be all in. It is not justabout trading. It is about the whole investment process (which goes back toyour point).WAGNER: Two short comments. At the Plexus conference and also atthe European Trader Forum, I heard U.K. traders stand up and say, therecommendations of the Myners report that research costs be paid by themanagers rather than by the money owners is the right thing to do, we aregoing to move forward on this to a degree. Based on my experience withU.S. traders, I was surprised at their willingness to pick up the sword and saythat what Myners has put forward makes sense, that we should go ahead anddo that. We are going to see some pressure coming from across the Atlanticto do this all in a better way here.Finally, I would like to go back to Anthony Neuberger’s suggestion thatbest execution is a precursor to market quality. I would add that it is also aprecursor to market design. We should have had this panel first becausethen we would have known what we were talking about for the rest of theday. Clearly a problem in the scheduling (laughter).MADHAVAN: On that note of gratitude, we will conclude. Thanks toall of our distinguished panelists. It has been very informative.
CHAPTER 7: THOUGHTS FROM A FORMERREGULATOR
Laura UngerIndependent Director and Consultant
ROBERT SCHWARTZ: Laura Unger was a keynote speaker at ourconference three years ago, and it is a pleasure to have her back. WhenLaura was here on the last occasion as a Commissioner of the SEC, shemade an extremely thought-provoking speech. That speech is now presentedas a chapter in the book on the conference, which we published. Welcomeback, Laura. This time it will be a little different. You will not have to startwith a disclaimer.LAURA UNGER: Actually, I heard somebody else give the disclaimerfor me, so I suppose that I should not worry about it. I was here threeconferences ago, and left feeling that people didn’t like the SEC. I see thatthings really haven’t changed much (laughter). I know I have three strikesagainst me. I am a former regulator, I am the last person speaking, and I amthe only thing that separates you from your cocktail hour.Bob thought it would be interesting – for all of you – if I look back andtalk about what it was like at the SEC, and discuss some of the issues thatyou were interested in during that period. When I was here three years ago,I talked about the regulatory process. I do not think most people reallyunderstand what it is like. As regulators, we tend to focus on the particulararea that we are interested in – for example, best execution – but there isalways a bigger picture into which all of this fits.I learned three key things about regulating the markets. First, regulatorscannot be ahead of the markets, ever. No matter how forward thinking wewould like to believe that we are, we can only hope to keep up with themarkets. Regulation is really a lagging indicator of market conditions. Thecommission – and I won’t speak for all the regulators (that is the onlydisclaimer I will give) – responds to market conditions. It does not createmarket conditions. Sometimes there may be unintended consequences, but
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we are mostly responding to market conditions. I will give you a real lifeillustration once I complete these three points.My second comment is that the size of the budget and economicconditions significantly impact the SEC’s agenda. As you probably know,the SEC’s budget is less than $500 million,90 and the US equity markets arevalued at least at $3 trillion. The SEC also has a very broad mandate interms of regulation, including mutual funds, investment advisors, registeredbroker dealers, public company filings, and the markets. It is a delicatebalancing act to allocate our limited resources across all of thesejurisdictions. And, of course, regulating in a bull market is very differentfrom regulating in a bear market. I will also discuss that.My third comment is that my first two observations cause a lot ofregulators to be far more myopic than we would like to be. That is acombination of the budget constraints (as I mentioned), the broadjurisdiction (as I mentioned), the changing economic environment, shortterm demands and, believe it or not, political forces. They all have asignificant impact on the commission.I will give you one example that is fairly complex but interesting, andthen a short example, to illustrate these points. The more complex exampleinvolves the commission’s attempt to find a way to eliminate fragmentationin the marketplace that came about as a result of Regulation ATS. In RegATS, the commission allowed for ECNs to register as exchanges, and forexisting markets and exchanges to demutualize and become publiccompanies.91There are various issues surrounding Reg ATS. One is that the strongeconomic conditions in 1999-2000 caused the NYSE and the NASD, at thattime, to want to demutualize, conduct an IPO and become public companies.People had an insatiable appetite for IPOs at the time and, of course, withthis new regulation in place, the exchanges wanted to take advantage of theopportunity.Of course, the two market centers were fighting to be the first todemutualize. In the summer of 1999, Dick Grasso was saying that, by
90
The Wall Street Journal reported on January 3, 2003 that Senate Republicans proposeincreasing the Securities and Exchange Commission’s budget to approximately $650million.
91
Regulation ATS also requires Alternative Trading Systems that trade 5% or more of thevolume in national market system securities to be linked with a registered market in orderto disseminate the best priced orders. The Regulation ATS compliance date was August23, 1999.
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Thanksgiving, people would be having turkey and buying a share of the NewYork Stock Exchange. We know that has not happened yet.Also, we saw competition among the marketplaces that was prompted inlarge part by the ECNs. These electronic markets were really giving thetraditional marketplaces a run for their money. An important regulatoryissue that came up as a result of this confluence of events involved the delinking of the Self Regulatory Organization (SRO) function (in the case ofthe NYSE) from a public company. The NASD was initially included in theconversation about de-linking the SRO function. Then the commission feltthat the NASD’s new model was significantly disinterested, so it would notbe that big of an issue.But could a public company have the mandate of maximizingshareholder return, and still provide sufficient regulatory oversight? Woulda public company devote the resources necessary to conduct oversight andregulation? Even if it were possible in theory, would the appearance of aconflict of interest undermine the regulatory authority of an SRO?The demutualization issue was brought about by the NASD and theNYSE. Both markets wanted to go public. It was not something that theSEC could have raised, even with it having become a big issue at the time.So this is my example of market conditions driving both competition and theSEC’s agenda.A lot of proposals were discussed. One was to create a Super SRO.Well, why do that? It would be like a mini-SEC. And the NYSE reallyclung to wanting to maintain the regulatory function. The exchange believedthat it was a franchise, that it provided value. The commission spent asignificant amount of time looking at, and talking about this issue. In theprocess, it became linked with the bigger issue of market fragmentation.While we were talking about these new structures, what were we going todo about fragmentation generally? Fragmentation was being prompted againby the same bull market economic conditions, and by the ECNs competingwith the traditional marketplaces. As the ECNs captured more and moremarket share from the traditional marketplaces, we started asking ourselves,how are investors going to know where they will get the best possible price?What are we going to do about it?I remember spending time talking to Arthur Levitt, our chairman at thetime, and to the rest of the commission, about what we were going to doabout the fragmentation issue. Probably not since 1975,92 and certainly not92
The significant market structure issue in 1975 was the abolition of fixed commissionsunder the amendments to the Securities Exchange Act of 1934. The Securities ActAmendments of 1975 also mandated the creation of a National Market System (NMS).The creation of the NMS has been haphazard at best but it did cause change, such as thecreation of the Intermarket Trading System. ITS is designed to electronically link trading
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since Reg ATS, has the commission had such a significant market structureissue in place, with such potentially far-reaching consequences. The issuewas obviously driven in large part by technological systems, in particular theoperation of ECNs and ATSs. Finding a solution to the problem wouldrequire determining the appropriate use of technology in the trading markets.We had some Congressional hearings here in New York with the heads offive firms, the NYSE and the NASD.93 The SEC issued a concept release,which is a document that outlines our position on the critical issues.94 Therelease laid out a series of alternatives, the least of which was to providemarket data – that’s a word that many of you probably dislike – and theorder execution quality disclosure rules. At the other end of the spectrumwas a central limit order book.One alternative was completely non-controversial and the otheralternative was completely controversial. There was also a range of optionsin between. It was helpful to get feedback on this range of options.Then, during the course of this development, the NYSE announced that itwould no longer seek an IPO. And, to add another twist – it all happenedaround the same time – the NASD published its SuperMontage proposal.The NASD claimed it needed to get SEC approval for SuperMontage inorder to conduct its IPO. It claimed that this would solve the central limitorder book issue and reduce fragmentation.But many other problems were raised as a result of that proposal. One isthe residual market issue, which is both fascinating and far-reaching.95 Whatin U.S. stock exchanges. The ITS system is not popular with market participants whooperate outside the listed markets. Some market participants, including the NYSE, havecalled for reform of the ITS.93Hearings were held in New York on Feb. 29, 2000. The five firms represented wereMerrill Lynch, Goldman Sachs, Morgan Stanley, Charles Schwab and Credit Suisse FirstBoston. ECNs were not represented. The represented firms advocated the creation of acentral limit order book, or CLOB. The proposal was opposed by the NYSE and theNASD.94
The SEC concept release, which was issued during the same period, solicited opinion onwhether market fragmentation was then, or would in the future, become a problem thatdamaged the operations of the U.S. markets. It also requested comment on six potentialoptions. The most controversial option was the creation of a CLOB, or central limit orderbook (see Exchange Act Release No. 42450 (February 23, 2000) 65 FR 10577 (“ConceptRelease”).
95
The residual market refers to the operation and regulatory approval of the NASD’sAlternative Display Facility, or ADF, a precondition for the approval of Nasdaq’sSuperMontage. The ADF was mandated by the SEC as a venue that would provide analternative market – a new OTC unlisted market, in effect – for stocks that did notparticipate in a Nasdaq stock exchange and the SuperMontage.
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happens to the Over-the-Counter market when you only have exchanges?What happens when the SEC has rules that say you must display yourorders, and you have this built in potential to capture order flow? Whathappens when the market then shifts to a totally different model? Whathappens to that order flow? What happens with that need to comply with theregulation? Something needed a comprehensive fix, and a big pictureapproach would have provided a significant change to the market structure.What happened?The commission adopted the most incremental steppossible to cure market fragmentation.96SuperMontage has been approved, but the NASD is still awaitingapproval on its exchange application for Nasdaq. But it is not much closerto an IPO for Nasdaq.97 Again, this is an example of market forces andeconomic conditions pushing the SEC. SuperMontage – including a numberof other issues – was the complete focus of the commission at the time.Another example was market data fees. This issue is a bull marketphenomenon. Its final resolution could have broad-ranging impacts. Theissue is over the cost of fees for market data charged by exchanges andNasdaq to online brokers, ATSs and other broker dealers. This group wasupset that it had to pay exchanges for market data to satisfy the demand fromits own customers for real-time price quote information. ATSs argued, forinstance, that they added value to the transparency of trading information butthey did not receive compensation in return. It became a hot topic during theheight of on-line trading. A number of the firms that provided real-timemarket data information, real-time stock quote information to customerssaid, ‘We can’t afford to do this, the customers really want it, but it iscosting us a lot of money.’98 And they would continue, ‘You, the SEC,96
The incremental step mentioned is Rules 11Ac1-5 and 6. Under Rule 11Ac1-5, marketcenters that trade national market system securities are required to make available to thepublic monthly electronic reports that include uniform statistical measures of executionquality. Rule 11Ac1-6 requires all broker dealers that route customer orders to disclosethe identity of the market center and material aspects of their relationship with the marketcenter.
97
Nasdaq’s plan to demutualize and become a for-profit exchange through an IPO was stillin limbo as of early 2003. Laura Unger cites NASD’s IPO application though some mightthink she has mistaken the NASD for Nasdaq. Unger, of course, is correct because theNASD was the parent of Nasdaq. As of early 2003, the NASD is still Nasdaq’s parentthough in practical terms Nasdaq, which is separating from the NASD, is largelyindependent of the NASD.
98
An advisory panel headed by Joel Seligman, the Dean of Washington University LawSchool, studied the issue for several months. The panel concluded that the SEC shouldallow a competitive system in which entities known as “consolidators” could gather anddisseminate market data. That system would replace the current model in which a “single
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could not possibly have thought that this model that you have approved wasOK, and that the information providers, that the exchange and the NASDshould be making so much money off of market data. After all, it belongs tothe market. They shouldn’t be profiting.’ As you know, some of theregional exchanges subsist primarily off of market data fees.Once again, the SEC put out a concept release. It is a highly complicatedissue, and something that is hard to regulate in a vacuum, particularlybecause the commission had a broad mandate to make the market dataavailable on a fair, reasonable and non-discriminatory basis.We came up with a complicated proposal, which was put out in a conceptrelease. We did not receive that many responses (about 35), but it wasenough to show that this issue was one that the commission could not solveon its own. We created a federal advisory committee, which is somethingthe commission does not often do. Again, this was driven by market forces;the popularity of on-line trading, the desire for real-time quote information,and the rising cost of purchasing it.It has been two years since the discussion started. There was a reportprovided in the Fall, but no action has taken place yet with respect to marketdata. It is interesting to note, however, how the market has changed in theinterim. So too has the commission’s focus. This underscores what I havebeen saying. Of course, part of it is more than market driven, it is worldevent driven. 9/11 took a lot of the commission’s focus. We tried to be asresponsive as possible, and to maintain liquidity, transparency in themarketplace, and investor confidence. Then the Enron and Andersensituations have consumed a lot of the commission’s time and resources. Yousee a shift away from the markets, away from on-line brokerage (theinvestor’s are turning away from that too), a shift away from ‘the bigpicture, market structure, market efficiency, promote competition, promoteinnovation.’ My sense is that this is because, in a bear market, investorswant more government. They want more of a protectionist feeling. Theywant to know that the commission is bringing enforcement cases and takingcare of investors.The shift to a corporate governance focus because of Enron andAndersen has also been event driven. It is interesting to note that thecommission has shifted completely away, in my view, from the primaryfocus of big-picture, market structure issues (although there are many forwhom it still is a primary focus, so don’t get nervous) to a completelydifferent kind of focus – raising capital, protecting investors, andconsolidator” – the Consolidated Tape Association – has control over the distribution ofmarket data.
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maintaining transparency and liquidity in a different kind of way. Themandate is the same, but the focus on how to accomplish it is different.I will finish by saying that I hope the Commission will be able tocontinue to accomplish its task. As a commissioner, I found one thing kindof frustrating. It is very difficult to step aside from current marketconditions, from current short-term demands, and the budget constraints thatface us, and be able to really embrace big, big issues like the globalmarketplace, the fact that technology has made the global marketplace areality, and that there is a huge demand for a global marketplace. Maybe nottoday, because people have the sense that we first have to get our domesticmarketplace in order. But certainly in the back of everyone’s minds is, whenand how will the global marketplace happen?I don’t know what economic condition and outside forces will bring thatto bear. The European community has been strident in their support of theCommission moving in their direction, toward global accounting standardsand listing standards. It will be interesting to watch as the Commission getsthe domestic agenda in place and moves on. I know that one of the passionsof the current Chairman, Harvey Pitt, is technology. I assume that willextend to the global marketplace.Going forward, in addition to getting investors to feel comfortable andconfident about the markets, and to we need to restore people’s confidencein the integrity of financial information. I think that is why you see adisconnect between the fact that the economy is doing well, but the marketsaren’t doing as well as they should. Investor confidence is not at the level itshould be. Even if you say, OK, everything is fine, I have got my job, I havegot my mortgage paid, and everything else, now is not a time when peopleare going to be new investors in the markets. You have people who aremaintaining a presence in the markets, and thinking that now is not a goodtime to sell either. But we are not hearing many people say, ‘wow, I reallyfeel good about this. I want to get in there and participate. I want to buy.’However, even though bottom fishing is probably not a bad idea, I am notmaking any investment recommendations (laughter).I gave you a big picture. I would be happy to answer any specificquestions. I am in the transition of being a former SEC commissioner(actually I prefer to say former Acting Chairman), and I am now in aposition where I can truly be independent for a little while.SEAN MCHUGH99 [From the Floor]: I read the comments on theconcept release on market structure. One of my favorites was by an investorin Colorado who said (this is not an exact quote) that, ‘trying to address99
Sean McHugh is Vice President at Goldman Sachs.
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market structure problems with execution disclosure as a solution’ (and Iknow it wasn’t viewed as the ultimate solution) ‘is a lot like, if you arehaving engine problems, it is OK as long as the engine light on the dashboard is flashing.’ This means that the car is at least disclosing to you thatthere is a problem with the engine (laughter).I have the following question about fixing markets. It seems thatsomething like SuperMontage would solve a lot of the problems on Nasdaq.Absent all the confusion in creating an ADF (that no one can really define orguess what it is going to be like), there is a sense that maybe a boat wasmissed. One way or the other, not necessarily because of the SEC (but ingeneral), it seems that we did have the opportunity to have a central limitorder book (or close to it) on Nasdaq. Now if we have SuperMontage andliquidity on the ADF, will it be even more of a mess than it is today?UNGER: The notion of a central limit order book is very interesting. Atfirst blush you think, wow, that is all we need. We just need one place tofunnel in all the orders. Then you have complete transparency, connectivityand efficiency. But there are also dangers. You would also have a singlepoint of failure. Further, a lot of the incentives to innovate and competewould be taken away. Competition is a powerful force, as you well know.But competition often results in competition to the lowest commondenominator, which is not a good thing. However, it is a good thing in termsof innovation.That is the trade off. It is a very big trade off, and many people were notprepared to let it go. The upstairs departments of many of the firms werevery supportive of a central limit order book. Interesting, I thought. Butmany other industry participants and professionals were not. So it was not aslam-dunk. And you are right, the SuperMontage does raise many issuesabout competing with a regulator.100STEVEN WUNSCH101 [From the Floor]: You said earlier that the SECis always playing catch-up, that it does not lead the markets. As I recall, in1996 or 1997, there were a bunch of order handling rules that came out and,roughly around that time, a whole lot of ECNs were created. Which came100
Critics said the SuperMontage proposal would create a conflict of interest for Nasdaq andthe NASD, which was Nasdaq’s regulator. For one thing, NASD member firms includedmarket maker firms and ECNs. For another, NASD still had a financial interest in Nasdaq,a stake that could grow in the event of a Nasdaq IPO. There was also a fear that executionson SuperMontage, which was sanctioned by the SEC, would become a critical factor injudging standards of best execution. SuperMontage was viewed by some critics, especiallyECNs, as a super ECN that had been granted monopoly powers. That concern drove ECNsto press the SEC to mandate the NASD’s ADF.
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Steven Wunsch is a Partner at Exchange Lab.
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first, the rules or the ECNs? Which was the response to the other? Or didthey just simultaneously happen to come out independently?UNGER: I thought that the ECNs have been around for a long time.WUNSCH [From the Floor]: Instinet is the only one that was therearound that time. All of the others simultaneously came into existence withthe order handling rules. I know a number of the creators of those ECNswho said that they were creating them strictly in response to the rules. I amasking this in relation to your statement that the SEC does not push themarkets, but rather follows the markets.UNGER: Then maybe I should have qualified my remarks by saying thatduring my tenure, that is how it was (laughter).WUNSCH [From the Floor]: Good answer.UNGER: Any more hostile questions (laughter)?BRETT REDFEARN102 [From the Floor]: The issue of regulatoryharmonization came up in one of the earlier panels. We now have asituation where the Amex is looking to trade Nasdaq stocks, Nasdaq islooking to trade listed stocks, the ECNs are trading Nasdaq and listed stocks,and they are all operating with fairly different rule structures. Do you haveany thoughts, going forward, about whether or not the rules that apply toNasdaq or the listed markets, or even to ECNs, are, at some point, going tobecome more on a par with one another? Or will the different marketscontinue to operate under fairly different regulatory frameworks?UNGER: That is a very interesting question. Probably someone islooking at the issue right now, although I could not say for sure. But I agree.The thing that was going through my mind as you were asking the questionwas, what then would differentiate the markets? If everybody has the samerules, then why would you go to one or the other? For liquidity, I guess?But don’t the rules have some effect on liquidity?REDFEARN [From the Floor]: There will still be differences betweenthe technologies that are employed in the different markets. The issue thatis nearest and dearest to our heart, for example, involves Island ECN and theETF market.103 When Island started trading ETFs, and initially Reg ATSsaid that after you get above a 5% threshold...UNGER: I have been asked that a number of times.REDFEARN [From the Floor]: So now we are in a situation whereIsland basically has the most volume in the product, and they are still102
Brett Redfearn is Senior Vice President at the American Stock Exchange.
103
An ETF (Exchange Traded Fund) is an index product that trades like ordinary shares.Examples include, SPDRs (S & P 500) Diamonds (Dow 30), and QQQ (Nasdaq). TheQQQ is sometimes referred to as “Q” and sometimes as “Triple Q.”
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operating under the ECN rules. Our market, for example, cannot put in thesame sort of AutoEx features right now because we are an auction market.We cannot go the same route that Island is free to follow. So there is asubstantial regulatory disparity. It is not necessarily a level, competitiveplaying field. We are wondering how this will all be resolved.UNGER: I think that as that becomes more common, people will belooking at the situation. Situations like that are always brought to theCommission’s attention by competitors in the marketplace. The competitorsare not shy about coming to us and saying, ‘hey, this disadvantages us.’Similarly, the ECNs were not shy about saying that the NASD had a realfranchise because of its regulatory oversight authority. I suspect, if theCommission staff has not noticed it already (and I am sure that the Q issuehas been raised), that you, or somebody like you, will be visiting them soon.It will have to be examined.WAYNE WAGNER104 [From the Floor]: Laura, another issue that cameup in the conversations today involved the meshing of the institutionalmarket and the retail market. The meshing involves complications,particularly for institutional investors. How firmly seated is that in thethinking of the SEC?UNGER: I do not know what the complications are, not having had thebenefit of hearing the earlier discussions today. I do not know the ones thatyou identified. Can you give me an idea?WAGNER [From the Floor]: Basically, as Seth Merrin said, the problemis that average institutional order size is something like 250,000 shares, andaverage execution size is somewhere around 1000 shares. Obviously a bigslicing and dicing process is necessary to break an institutional order into thebite size pieces that will fit through the funnel and get it into the exchange.UNGER: That is a really interesting question. It relates to decimals too.One thing about a decimal market (and this is something the market needs toturn to) is that it sounds really good. Because as a retail investor you ofcourse want the smallest possible increments. But decimalization definitelyhas, or appears to have had, an adverse impact on the depth, liquidity, andtransparency of the markets. Decimalization can increase execution costsbecause of the multiple price points that it creates. That is one very realimpact that is felt by institutional investors. I know that they feel stronglyabout it.104
Wayne Wagner is Chairman of Plexus Group.
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In terms of leveling the marketplace, you saw Regulation FD.105 I thinkthat came in under a different Chairman, but it is a real indication of thebelief that there should not be favoritism in the marketplace. Institutionalinvestors have enjoyed many benefits over retail investors. Currently, theInternet has a lot to do with investors having this sense of entitlement toinformation because the Internet makes it possible for them to get theinformation. And it is cheap for the issuers and the investment communityto disseminate the information. Therefore they must. I think that drives a lotof it.THOMAS DOYLE106 [From the Floor]: At the end of the previous panelon best execution, it was suggested that soft dollars are an impediment in themeasurement process. Then another panelist retorted that you cannot talkabout soft dollars without talking about bundled commission services.Could you speculate as to where you think the Commission may go in thattug-of-war debate?UNGER: The Commission already has done a little something on28(e).107 But the discussion of soft dollars and best execution is a verydifficult one. Soft dollars is such an entrenched practice in the industry, andit is a political hot potato. People ask, how can you possibly fulfill your bestexecution obligation with soft dollar payments? It seems impossible.Everybody scratches their head and answers, ‘yes but in picking yourbattles, this is not the one to pick.’ It all goes back to our limited resources,political reality, and economic conditions.The Commission might get there eventually, but this issue has beenpercolating for a long time. Some people think that the market will take careof itself as far as that goes. They think this because profit margins havegotten so narrow. They believe that, at some point, with the order executiondisclosure quality rules, the decimal market, and everything else, that this issomething that can eventually be removed by competitive forces. Theycould be right, they might be wrong. I see people nodding their heads inboth directions, but that is all I know.105
The SEC Regulation FD (fair disclosure) went into effect October 23, 2000. The maingoal of the regulation was to snuff out the selective release of material corporateinformation to a handful of Wall Street analysts or large institutional holders.
106
Thomas Doyle is Institutional Sales/Trader at Nutmeg Securities.
107
Section 28(e) of the Securities Exchange Act of 1934 generally provides that a moneymanager will not be deemed to breach its fiduciary duty to a client when it executes theclient’s trades with a broker/dealer that charges more than the lowest commission ratesavailable, so long as the money manager determines the commissions paid are reasonablein relation to the value of the brokerage and research services provided by thatbroker/dealer.
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Thank you.S