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May 31, 1998

Bleak Capitol Hill Outlook on 31(a) Fees

By Jeffrey L. Winograd

Lobbyists for U.S. exchanges are still pounding the pavement in the Senate, fighting for a reduction in Section 31(a) fees on Nasdaq transactions that could save dealers up to $20 million annually.

But prospects for a cut look bleak in the House, according to several sources who spoke to Traders Magazine. "Nothing is new here," said a Republican source who has closely followed the issue.

"I haven't heard of any additional activity," said a spokesman for Rep. Edward Markey (D-Mass.). "There doesn't seem to be any general sentiment for it."

"It's fairly difficult to make it happen," added the Markey aide, explaining that the legislation necessary to reduce the fees would follow too closely on the heels of the 1996 legislation which authorized Nasdaq transaction fees in the first instance. Section 31(a) fees fund the annual Securities and Exchange Commission budget.

The Senate

Meanwhile, the situation remains confusing in the Senate.

In late April, Nasdaq President Alfred R. Berkeley III fired off a strong letter to Senate Banking Committee Chairman, Sen. Alfonse D'Amato (R-N.Y.), in support of the Security Traders Association's proposal to slash fees on dealer-to-dealer trades.

Despite some speculation to the contrary, D'Amato maintained that he had not read Berkeley's letter.

Speculation that D'Amato may jump on the issue was fueled by a story in a weekly trade publication saying he was preparing to sponsor legislation. "That report was erroneous," a D'Amato aide told Traders Magazine.

The only official mention D'Amato has made on 31(a) fees appeared in a pro forma letter he sent several months ago to Sen. Peter Domenici (R-N.M.), chairman of the Senate Budget Committee. The letter outlined a number of issues the Senate Banking Committee examined for budgetary implications.

"He hasn't said anything else," said a banking-comASD proposal was "blatantly slanted in favor of a small minority of market makers."

Adminstration Officials

The issue may reemerge when Senate and House budget negotiators huddle with administration officials. If that happens, the president's Office of Management and Budget (OMB) is expected to add its voice. "I expect the OMB will vigorously oppose it," said a House source. "You know, technically it's a violation of the [balanced] budget agreement."

The major Senate stumbling block, as previously reported, remains Sen. Judd Gregg (R-N.H.), who heads the Senate Appropriations Subcommittee, with jurisdiction over the SEC. He is opposed to a fee cut.