TWO SMA'S HAVE NMAC IN VICINITY OF MRY.

Narrative

I WAS IN CONTACT WITH MONTEREY APCH FOR SEVERAL MINS PRIOR TO INCIDENT. RADAR CONTACT WAS ESTABLISHED AND A DISCRETE CODE WAS GIVEN. I WAS ALSO SENDING MODE C INFO. I WAS ABOUT TO BEGIN A VFR DSCNT WHEN I SPOTTED THE OTHER ACFT (AN SMA) COMING WITHIN 5 DEGS OF HEAD ON AT MY ALT. THERE WAS INSUFFICIENT TIME TO INITIATE EVASIVE ACTION; HOWEVER I COULD TELL WE WOULD MISS. THE OTHER ACFT DID NOT TAKE EVASIVE ACTION EITHER. MY ACFT WAS TRAVELING AT 125 KTS TRUE AIRSPD AND MY POS AND STROBE LIGHTS WERE ON. THIS IS ESPECIALLY DISTRESSING DUE TO THE PRESENCE OF TRSA SVC AND THE FACT THAT BOTH ACFT HAD BEEN IN CONTACT WITH MONTEREY APCH. THE OTHER ACFT HAD JUST DEPARTED MONTEREY AND HAD BEEN ASKED TO SQUAWK 1200 AND SVC WAS TERMINATED A FEW MOMENTS BEFORE THE INCIDENT. ALSO HEARD ON THE FREQ SHORTLY BEFORE THE INCIDENT WAS THE CTLR ASKING FOR ALT VERIFICATION FROM THE OTHER ACFT. THE PLT RESPONDED 5500'. AS THE OTHER ACFT LEFT HE REQUESTED ALT READOUT. THE CTLR RESPONDED 6300'. THE CTLR RELEASED THE ACFT BASED ON A INCORRECT MODE C READOUT THAT HAD BEEN VERIFIED. THE ACFT WAS ACTUALLY STILL WITHIN THE TRSA AT 5500'. TFC LEVEL AT THE TIME WAS NOT ESPECIALLY HIGH; I NOTED ONE IFR ARR DURING THE SEQUENCE. THE CTLR HAD A VERY DIFFICULT TIME COMMUNICATING A TRANSPONDER CODE ASSIGNMENT TO WHAT SOUNDED LIKE A STUDENT PLT SHORTLY BEFORE THE INCIDENT. IN CLOSING; IT IS CLR THAT SEE AND BE SEEN SIMPLY IS NOT EFFECTIVE. TO SPOT A SMA HEAD ON AT SAME ALT IS EXTREMELY DIFFICULT. THE TRSA CONCEPT FAILED TO WORK.