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June 30, 2002

Summertime Fireworks on the Hill?

By Gregory Bresiger

It can get very hot in Washington during the high point of the summer. This year will probably be no different.

The U.S. House of Representatives Financial Services Committee, in the midst of fireworks because of the Enron and accounting industry scandals, is holding a hearing on market structure.

"They'll be discussing the SuperMontage, who owns the market data and the transformation of Nasdaq into a for-profit exchange," according to David Franasiak, who is the Washington counsel for the Security Traders Association. A spokesman for the committee declined comment.

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However, a Congressional source said that the committee - barring some new scandals - will definitely conclude a market structure hearing this summer.

"They want to know what is going on with things like the Alternative Display Facility and the SuperMontage," the source said. "And they are very interested in the effect on the market of the pending merger between Island and Instinet ECNs," said the source, who declined to be quoted by name. He added that members of Congress want to know how the merger will affect the competitive nature of the marketplace.

Those testifying at the hearings, the source said, will include representatives "of all the SROs as well as officials of the market makers and the electronic communications networks."

Sources said that various Congressional committees have previously wanted to look at the multiple controversies of market structure, but have been overwhelmed with other issues.

A veteran observer of the securities industry said he thinks there is little chance that Congress will do anything about market structure this year, given that this session of Congress ends in the fall and members would have little time to offer and pass legislation.

"That, I believe is the best bet for this hearing," said Sam Scott Miller, a New York-based securities attorney. "However, I think there should be a fair amount of controversy given that you'll have all these representatives of various competing interests all in the same room. I'd like to see what happens at this hearing."