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March 1, 2004

Shame on Street for Section 31 Reform?

By Peter Chapman

Section 31 reform legislation, which reduced transaction fees, was a penny wise and a pound foolish because it resulted in SEC underfunding, according to Rep. Paul Kanjorski (D-Pa.). That was followed by massive Wall Street scandals, he added.

Kanjorski, who sat on the key committee that reviewed the Section 31 legislation, ripped the securities industry for its part in the tax-cutting measure.

"Wall Street came in to Congress and said, Oh, my heavens, we have all these fees on transactions and we are overpaying billions of dollars. We think we ought to reduce those fees on transactions,'" Kanjorski thundered at a hearing of the House Financial Services Capital Markets Subcommittee, which was held last month in New York in the heart of Wall Street. The hearing was convened to study the role of specialists.

Kanjorski charged that the SEC, because of the reduction, was put on "a starvation diet." He claimed that the securities industry knew that the SEC was "underfunded" and "lacked enforcement" resources. He also said that the administration had now seen the light and was on the way to doubling or tripling the SEC budget. Speaking directly to securities industry officials, Kanjorski said that "you guys ought to cooperate too."

"All you up here on Wall Street are just as responsible as anyone else for not having the enforcement that allowed things to get out of hand," he added. "You've gotta stop that."