Securities regulators and Wall Street officials
are lining up to support proposed legislation that would
dramatically reduce stock trading transaction fees charged to
The proposed bill, which would also slash registration fees paid
by companies planning to issue stock, as well as charges related to
mergers and tender offers, is designed to bring fees collected by
the SEC more in line with the agency's budget.
Under the current fee system, the SEC collects about five times
more than its annual budget. The agency raked in $1.7 billion in
fees in 1999. It's budget, meanwhile, came to just $339 million.
The surplus emerged and grew in the 1990s as stock trading
volume increased, in part due to an explosion in online trading by
individual investors. The extra money goes to the U.S. Treasury
Department and is then distributed to other government programs.
"The proposed legislation you are considering today achieves
meaningful reductions in fee rates in a comprehensive manner,"
Securities and Exchange Commission Chairman Arthur Levitt told
members of the Senate Banking Committee, which held hearings Monday
at the SEC's field office in Manhattan.
The bill under consideration would alter the fee structure so
the agency would collect fees totaling just twice the agency's
Sen. Phil Gramm, R-Texas, chairman of the Banking Committee,
said the only hurdle facing the bill is convincing voters and their
Congressional representatives that the legislation benefits small
investors as well as large Wall Street trading firms.
"This is basically a working person issue," Gramm said.
Investors stand to save $7 billion over five years if stock
trading transaction fees are reduced in accordance with the
proposed legislation, titled the Competitive Market Supervision
Act, Gramm said.
Those savings could be plowed into mutual funds and retirement
plans, Gramm said.
Levitt, in answer to a question from Sen. Rod Grams, R-Minn.,
said individual investors pay 87 percent of the transaction fees
assessed for trading New York Stock Exchange stocks, and 82 percent
of the fees for trading Nasdaq stocks.
Levitt added, however, that he feared some politicians might
"demagogue" the bill by labeling it a tax break for wealthy Wall
J. Patrick Campbell, chief operating officer of the Nasdaq
market, was one of several Wall Street officials who testified in
favor of the bill.
The fees, Campbell said, "comprise a tax because they are
charged in excess of the governmental purpose for which they were
enacted. The excess collections should be returned to investors to
employ toward the continued growth of the economy."
Officials from the New York Stock Exchange and three Wall Street
trade organizations the Securities Industry Association, the
Securities Traders Association and the Specialists Association
also testified in support of the bill.
Levitt used the hearing to plead his case for additional funding
to hire and retain qualified SEC staffers. The agency has requested
a 12 percent budget increase over 1999. Part of the money will pay
for 50 additional employees.
The SEC chairman has complained that the SEC is losing top
employees to higher paying jobs in the private sector.