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July 31, 2001

Radical Idea Becomes Fashionable

By Gregory Bresiger

Maybe it's not such a wacky idea after all. The Securities and Exchange Commission's Market Data advisory panel was expected to endorse the idea of competing consolidators for market data.

However, the panel will also support the retention of mandatory display of the national best bid and offer (NBBO), Joel Seligman, the panel chairman said in a published report.

Surprise Decision

The competing consolidators decision is a surprise because the panel seemed to be locked on this issue.

But Seligman said the panel had attempted to find a compromise and "gratifyingly that had happened."

The committee was formed after complaints from Charles Schwab & Co. and other firms with a large online presence.

Schwab raised the market data issue. It argued that the New York Stock Exchange, through the Consolidated Tape Association/Consolidated Quote regime, had used monopolistic powers to hurt online businesses.

The panel is due to submit its report to the SEC in mid-September.

"Most of us started thinking that we would modify the existing CTA/

CQS structure," said Bernard L. Madoff, head of Bernard L. Madoff Investment Securities and a member of the panel.

"But as we got into the process, it became clear that with the technology we have today, we could give everyone what they were now getting - and more. There was no downside," he said.

Part of the panel's decision was likely the result of Schwab's intensive lobbying on Capitol Hill and with regulators. The SEC, two years ago, issued a concept release that proposed a cost-based utility type rate making structure. That didn't settle the public debate between competing interests.

Unexpected Step

However, it probably led the NYSE to take an unexpected step: It gave up on the CTA/CQS national market system regime and withdrew from the CTA. The Big Board then proposed a system of competing consolidators.