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April 1, 1998

New SEC Commissioner Speaks on Market

By Jeffrey L. Winograd

Laura Unger, the Securities and Exchange Commission's newest commissioner, provided a glimpse of how she will guide her policies in office, promising flexibility and foresight.

Speaking at the Security Traders Association's annual Washington Conference in the Watergate Hotel, Unger said she would strive to "maintain the appropriate balance between investor protection and liquid and competitive markets."

"The approaches we take should be flexible, and the industry should consider 30 years ahead," Unger said.

This view seemed contrary to the vast majority of comment letters submitted in response to the SEC's concept release published last June. Most of these letters took the view that the status quo was preferable, according to Unger.

The National Association of Securities Dealers' proposal for a voluntary limit-order book, she said, "raises a lot of fundamental market-structure issues," including the role of Nasdaq as both regulator and market participant.

However, she supports a new order-delivery and execution system combining SelectNet and SOES in a single system. "[Currently these two systems] work at cross purposes, " Unger added.

Turning to the controversy on 31(a) fees, Unger said without elaboration that these fees affect traders' "bottom line. The feeling is you're being squeezed in the pocket book."

Elsewhere, Unger is a proponent of quoting in decimals. "At least with decimals, people will know what you are talking about," she said.

One Cent

Once decimalization is in place, the remaining issue would be whether to quote in increments of one cent or five cents, according to Unger. "You will all work that out in the industry," she added.

However, she acknowledged the challenge of adjusting systems to quote stocks in decimals, recognizing the other major operational challenges ahead, such as Year-2000 compliance.

Unger thinks SEC Chairman Arthur Levitt agrees with her outlook, and speculated that the House, which is considering legislation mandating decimalization, will probably base any new initiative on the results of a General Accounting Office (GAO) report. "Left at the mercy of the GAO," is how she put it.

Prior to Unger's November 1997 appointment to the SEC, she served as counsel to the Senate Banking, Housing and Urban Affairs Committee which is headed by Sen. Alfonse D'Amato (R-N.Y.). Earlier, she was an attorney in the SEC's enforcement division.