Commentary

Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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December 1, 2000

Six Years of Section 31 Futility?

By William Hoffman

Barring its unlikely resurrection in a post-election lame-duck session of Congress, legislation to reduce or cap Section 31 fees on securities transactions is dead.

David Franasiak, Washington counsel for the Security Traders Association, said fee relief proponents, such as the STA, would persevere as Congress entered post-election budget negotiations.

"Though it would be a very long shot, we're not leaving the field," he said.

Yet while anything can happen during a free-wheeling, lame-duck session, Franasiak said, "I would not give [Section 31 fee relief] a high probability at all."

"It's not likely it'll pass this year," agreed Craig Donner, press secretary for Rep. Vito Fossella (R-N.Y.), who helped lead the fight to reduce the securities industry's most hated fee.

Donner added, "It is our intention to pick up where we left off and pass this legislation" during the 107th Congress, which opens in January.

Third Attempt

The 106th is the third Congress to try, and fail, to cut the 1/300th of one percent fee levied on the total value of every stock sale. That means the industry has spent about six years fighting against excessive Section 31 fees.

Critics complain that Section 31 fees generate more than five times the revenue needed for its statutory purpose of funding the Securities and Exchange Commission.

Donner said congressional advocates of Section 31 fee relief made some progress in the 106th Congress.

Separate bills introduced in 1999 were merged early in 2000. One bill aimed at reducing the fee, the other at capping the sum the fee could collect in a given year.

Supporters also forged a bipartisan consensus in favor of relief. Donner said these developments offer a promising start on next year's Section 31 efforts.

Sources said this year's efforts failed because of congressional in-fighting.

One Capitol Hill source recalled a weeks-long effort to fashion a compromise bill including a rate cut, a cap, and a pay raise for SEC staff championed by Chairman Arthur Levitt. "But in the time it took to walk back to our offices, the deal fell apart," the source said.

Another source involved in the negotiations said two "riders" attached to the compromise bill provoked a House Commerce Committee Democrat to object.

These amendments were unrelated to the main purpose of the legislation.

Chairman Thomas J. Bliley (R-Va.) then derailed the compromise effort. (Bliley is retiring in January.)

Levitt Attack

Bliley may have been sticking it to Levitt, who this source said "has been driving [Congress members] crazy, calling up on about eight million different issues."

The SEC chairman "wore out his welcome with some of those appropriators," this source said. A spokesman for the SEC said the agency had no comment on the matter. Bliley, who didn't want an SEC pay raise, may simply have used the riders as a pretense to kill the compromise legislation, the source said.