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December 1, 1998

New Battle Simmering for Trade-Fee Reduction: But Departure of STA President Throws Coalition Eff

By Jeffrey L. Winograd

The Security Traders Association is promising to resume its fight for a reduction in so-called Section 31 fees as soon as the new Congress convenes in January.

"The STA has laid the groundwork for fee reform, hopefully, by early next year," said outgoing STA President John Tognino, in a letter to STA members and leaders of the Section 31 Coalition. The coalition, led by the STA, represents 40 groups, including U.S. stock exchanges and trade organizations.

But there is uncertainty about whether the STA will commit the resources necessary to continue the painstaking and expensive lobbying effort in Washington, given the surprise resignation of Tognino in November.

"It's a substantial undertaking," said an STA member who requested anonymity. "We don't know whether the new president will want to do it, and the outgoing president can't make such a commitment."

Strategy Session

One immediate question is whether the STA-led coalition will retain the services of the Washington lobbyist Williams & Jensen. As recently as last month, the coalition held a strategy session with the law firm.

Tognino, however, downplayed concerns raised by his impending departure that relief efforts will be temporarily immobilized. "My departure won't have any effect" on future Section 31 efforts, he said.

Despite the failure to enact Section 31 reform in the last Congress, the STA's efforts were seen as the catalyst for the modest fee reduction proposed in a rule by the National Association of Securities Dealers. The rule, which is subject to approval by the Securities and Exchange Commission, would eliminate double-counting on riskless principal trades on Nasdaq.

Meanwhile, the new focus in Congress for any planned Section 31 relief efforts would be House Commerce Committee Chairman Thomas Bliley (R-Va.). Bliley was seen by many observers as the major obstacle to the inclusion of a Section 31 provision in the catch-all 1999 Omnibus Appropriations Bill.

According to Tognino, Bliley has promised to hold hearings on the issue early in 1999. Unfortunately for the Section 31 Coalition, Rep. Gerald Solomon (R-N.Y.), their key ally on the issue, has left Congress.

Solomon, the outgoing chairman of the House Rules Committee, who first took up the issue in July, had offered a last-minute compromise in the waning hours of the last Congress a one-year cap on revenues raised by the fees.

Solomon believed his bill, a replacement for the permanent relief measure contained in legislation he previously co-sponsored with Rep. Robert Menendez (D-N.J.), would mollify Bliley.

A former Marine, Solomon waged a tough battle to get his compromise provision in the omnibus legislation.

Declared Support

Even though most of the top House Republicans, including incoming House Speaker Robert Livingston (R-La.), declared their support for Solomon's position, Bliley wasn't willing to lend his support.

Now in what pundits see as an attempt to rewrite history, some people on Capitol Hill are trying to deflect blame from Bliley and place it squarely on the shoulders of the Clinton administration.

"Tom Bliley and David Cavicke [a Bliley staffer on the House Commerce Committee] are trying to get everybody to believe it was the fault of Erskine Bowles," a source told Traders Magazine. "They didn't want to take responsibility." Bowles recently left his post as White House Chief of Staff. Attempts to reach Cavicke for comment were unsuccessful.

Congressional budget rules still afford a limited opportunity to get legislative action in 1999.

Solomon was able to craft a bill which passed muster with the Congressional Budget Office (CBO) when the agency scored it as revenue neutral.

If Congress acts quickly, according to Tognino, the Solomon bill would retain that scoring. If there is any significant delay, there will be an obstacle when the CBO revises its budget baseline upwards.

"The CBO revision will not foreclose further action, but will reduce the amount of economic benefit which could be achieved without triggering budget-scoring problems," Tognino stated in his letter.