[Congressional Record Volume 145, Number 83 (Monday, June 14, 1999)]
[House]
[Pages H4132-H4137]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             BOND PRICE COMPETITION IMPROVEMENT ACT OF 1999

  Mr. BLILEY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 1400) to amend the Securities Exchange Act of 1934 to 
improve collection and dissemination of information

[[Page H4133]]

concerning bond prices and to improve price competition in bond 
markets, and for other purposes, as amended.
  The Clerk read as follows:

                               H.R. 1400

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Bond Price Competition 
     Improvement Act of 1999''.

     SEC. 2. EXTENSION OF TRANSACTION REPORTING TO DEBT 
                   SECURITIES.

       (a) Amendment.--Subsection (d) of section 11A of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78k-1(d)) is 
     amended to read as follows:
       ``(d) Minimum Requirements for Transaction Information on 
     Debt Securities.--
       ``(1) Action Required.--The Commission shall adopt such 
     rules and take such other actions under this section as may 
     be necessary or appropriate, having due regard for the public 
     interest, the protection of investors, and the maintenance of 
     fair and orderly markets to assure the prompt, accurate, 
     reliable, and fair collection, processing, distribution, and 
     publication of transaction information, including last sale 
     data, with respect to covered debt securities so that such 
     information is available to all exchange members, brokers, 
     dealers, securities information processors, and all other 
     persons. In determining the rules or other actions to take 
     under this subsection, the Commission shall take into 
     consideration, among other factors, private sector systems 
     for the collection and distribution of transaction 
     information on corporate debt securities.
       ``(2) Effect on other authority.--Nothing in this 
     subsection limits or otherwise alters the Commission's 
     authority under the other provisions of this section or any 
     other provision of this title.
       ``(3) Definitions.--For purposes of this subsection:
       ``(A) Covered debt securities.--The term `covered debt 
     securities' means bonds, debentures, or other debt 
     instruments of an issuer, other than--
       ``(i) exempted securities; and
       ``(ii) securities that the Commission determines by rule to 
     except from the requirements of this subsection.
       ``(B) Transaction information.--The term `transaction 
     information' means information concerning such price, volume, 
     and yield information associated with a transaction involving 
     the purchase or sale of a covered debt security as may be 
     prescribed by the Commission by rule for purposes of this 
     subsection.
       ``(C) Factors in definitional rules.--In prescribing rules 
     pursuant to this paragraph, the Commission shall take into 
     consideration the extent to which a security is actively 
     traded, market liquidity, competition, the protection of 
     investors and the public interest, and other relevant 
     factors.''.
       (b) Conforming Amendment.--Section 11A(a)(3)(A) of such Act 
     is amended by striking ``(which shall be in addition to the 
     National Market Advisory Board established pursuant to 
     subsection (d) of this section)''.
       (c) Deadline for Action.--The Securities and Exchange 
     Commission shall take action to implement the requirements of 
     section 11A(d) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78k-1(d)), as amended by subsection (a) of this 
     section, within 12 months after the date of enactment of this 
     Act.

     SEC. 3. EXCHANGE LISTING OF DEBT SECURITIES.

       Section 12(a) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78l(a)) is amended by striking the period at the end 
     thereof and inserting the following: ``, except that a 
     registration is not required to be effective for trading on 
     an exchange of a class of debt securities of an issuer that 
     has another class of securities for which a registration is 
     effective for such exchange. Such a class of debt securities 
     shall, for purposes of any provision of this title or the 
     rules or regulations thereunder, be treated as a class of 
     securities registered under this section upon approval of the 
     listing of such class of debt securities by the exchange.''.

     SEC. 4. TECHNICAL AMENDMENT.

       Section 3(a)(12)(B) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)(12)(B)) is amended by adding at the end the 
     following new clause:
       ``(iii) Notwithstanding subparagraph (A)(i) of this 
     paragraph, securities, other than equity securities, that are 
     described in subparagraphs (B) and (C) of paragraph (42) of 
     this subsection shall not be deemed to be exempted securities 
     for purposes of section 11A of this title.''.

     SEC. 5. STUDIES.

       (a) Studies Required.--The Comptroller General shall 
     conduct a study of measures needed in the public interest and 
     for the protection of investors to improve the prompt, 
     accurate, reliable, and fair collection, processing, 
     distribution, and publication of information concerning 
     transactions--
       (1) in debt securities as to which transaction information 
     is collected but not disseminated pursuant to section 11A(d) 
     of the Securities Exchange Act of 1934, as amended by this 
     Act (15 U.S.C. 78k-1(d)); and
       (2) in municipal securities (as such term is defined in 
     section 3(a)(29) of such Act (15 U.S.C. 78c(a)(29)).
       (b) Commission and MSRB Participation.--The Comptroller 
     General shall conduct the study required by subsection (a)(1) 
     in consultation with the Securities and Exchange Commission, 
     and the study required by subsection (a)(2) in consultation 
     with the Securities and Exchange Commission and the Municipal 
     Securities Rulemaking Board.
       (c) Submission of Reports.--The Comptroller General shall 
     submit to the Congress a report on the studies required by 
     subsection (a) within one year after the date of enactment of 
     this Act. Such reports shall include an identification of the 
     measures needed to improve the prompt, accurate, reliable, 
     and fair collection, processing, distribution, and 
     publication of information concerning transactions in the 
     debt securities and municipal securities described in such 
     subsection, including measures requiring legislative or 
     regulatory action.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Virginia (Mr. Bliley) and the gentleman from Michigan (Mr. Dingell) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Virginia (Mr. Bliley).


                             General Leave

  Mr. BLILEY. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
and include extraneous material on H.R. 1400.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Virginia?
  There was no objection.
  Mr. BLILEY. Mr. Speaker, I yield myself 5 minutes.
  Mr. Speaker, I rise in strong support of H.R. 1400, the Bond Price 
Competition Improvement Act of 1999. This is a bill designed to 
accomplish a simple but very important goal, to make investors' dollars 
go farther in the bond markets.
  How will this legislation accomplish that goal? By improving the way 
our country's bond markets work. Today, investors simply do not have 
the same access to bond price information that they do to price 
information about stocks or, for that matter, cars or bananas or plane 
tickets. In fact, investors have practically no information about the 
prevailing market prices of bonds when they seek to invest in the bond 
market.
  As we learned in our hearings before the Subcommittee on Finance and 
Hazardous Materials, two investors buying the same bond at the same 
time from the same dealer can be given very different prices, prices 
differing by as much as 6 percent. That can amount to a full year's 
worth of interest.
  The reason for this is that there exists no mechanism to provide 
investors with bond prices, like the ticker that investors see every 
day for stock prices. Without price information, investors do not have 
the tools they need to comparison shop. So competition cannot influence 
the market to bring investors the best prices.
  This legislation will fix this deficiency in our securities markets. 
I believe that the forces of competition should bring investors the 
best prices, not only in the stock market, but also in the bond market. 
H.R. 1400 ensures that the Securities and Exchange Commission will 
adopt rules to unleash those competitive forces.
  Although the Commission has had authority to adopt transparency rules 
for the bond market since 1975, this legislation is necessary to 
guarantee that those rules will be adopted. The legislation also 
ensures that bond price information will be provided to the public on 
their trades.
  I am pleased that H.R. 1400 enjoys the support of the Bond Market 
Association, the National Association of Securities Dealers, and the 
Securities and Exchange Commission, each of whom worked closely with 
the committee throughout the development of this legislation.
  In particular, I commend the Bond Market Association for taking steps 
to develop a system that will improve competition in the bond market 
for investors. I note that H.R. 1400 contemplates the development of 
such a private sector initiative in achieving its goal, and it is my 
hope that the marketplace will embrace that goal and develop a system 
that precludes the need for any additional transparency requirements. 
The legislation also ensures that the SEC will take such private sector 
initiatives into consideration in promulgating rules under the bill.
  In addition, the legislation includes a technical provision dealing 
with the treatment of exchange-listed debt securities. This provision 
eliminates needless regulatory requirements relating

[[Page H4134]]

to these instruments, to reduce costs and streamline the provision of 
information to the marketplace.
  I commend the gentleman from Ohio (Mr. Oxley), chairman of the 
Subcommittee on Finance and Hazardous Material, for his leadership on 
this issue, from his initial hearings in the 105th Congress to today's 
vote. I also commend the gentleman from Michigan (Mr. Dingell), the 
ranking member of the committee on Commerce, who has worked hard to 
ensure our markets are the fairest and most transparent possible for 
investors.
  I thank and commend the gentleman from New York (Mr. Towns), ranking 
member of the Subcommittee on Finance and Hazardous Material, as well 
as the gentleman from Massachussetts (Mr. Markey), the ranking member 
of the Subcommittee on Telecommunications, Trade, and Consumer 
Protection for their leadership and constructive input at every stage 
of this legislation's develop.
  This legislation continues the tradition we have had in the committee 
during my chairmanship of quietly modernizing the laws governing 
financial markets. We enacted litigation reform to diminish securities 
strike suits brought against public companies.
  In the National Securities Markets Improvement Act, we eliminated 
State regulation of securities offerings. We provided for cost-benefit 
analysis of SEC rules. We reduced the fees assessed by the SEC on 
securities offerings. We extended the protections of litigation reform 
to the States and the Uniform Standards legislation.

                              {time}  1415

  And we worked to bring decimal pricing to the exchanges.
  The corporate bond market covered by this legislation is significant. 
Every day investors trade over $15 billion worth of corporate bonds. 
Every Member of this body has constituents who are relying on that 
market for their retirement, their children's education, and their 
financial future. It is our obligation to make that market the fairest, 
most competitive and most efficient it can be. H.R. 1400 will help us 
fulfill that obligation.
  The purpose of H.R. 1400, the Bond Price Competition Improvement Act 
of 1999, is to improve the collection and dissemination of information 
concerning prices for debt securities to enable all investors to make 
more informed investment choices by providing a means by which they can 
more readily compare prices of debt securities. Recognizing the 
important role the nation's debt markets play in capital formation, 
consideration of the effects transparency may have on market liquidity 
is also included under the scope of this bill. Improved transparency 
will likely lead to increased competition among dealers, and will also 
serve to foster investor confidence in the bond markets. Regulators 
will also benefit by gaining access to an increased amount of 
transactions data for use in market surveillance.
  On September 29, 1998, the Subcommittee on Finance and Hazardous 
Materials held a hearing, ``Improving Price Competition for Mutual 
Funds and Bonds.'' At that hearing, the Subcommittee heard testimony 
regarding bond market transparency from the SEC, The Bond Market 
Association, The Vanguard Group, and Clover Capital Management, among 
others. In their testimony, the SEC described the results of a recently 
completed review of the U.S. debt markets. Overall, the report found 
that ``the debt markets are functioning well.'' The U.S. Treasury 
market was found to be ``highly transparent,'' and the federal agency 
securities market was characterized as having ``a very good level of 
pricing information.'' The SEC found that for mortgage- and asset-
backed securities, including collateralized mortgage obligations, the 
``quality of pricing information and interpretive tools available to 
the market is good.'' The quality of pricing information for high-yield 
corporate bonds was found to be ``relatively poor,'' yet the SEC found 
that dealers ``do not appear to enjoy a great advantage over their 
institutional clients.'' For investment grade bonds, the SEC reported 
that the quality of pricing information available ranges from ``fairly 
good to fair.'' Witnesses from The Vanguard Group and Clover Capital 
Management echoed the SEC's comments about price transparency in the 
high yield and investment grade corporate bond markets. The Bond Market 
Association testified in support of the goal of providing investors 
with more meaningful price information, and reaffirmed their commitment 
to improving price transparency in the corporate bond market. Testimony 
indicated that improvements in corporate bond price transparency were 
needed.
  Price transparency in the Treasury, municipal, and high yield bond 
market has received much attention from regulators and Congress in 
recent years. For each of these markets, a different, market-specific 
approach to price transparency was developed in coordination with 
regulators, legislators, and industry participants. The Committee heard 
testimony that detailed the existing price transparency systems in 
these markets, and was  told that experience gained in developing these 
systems will assist in the development of relevant systems for the 
corporate bond market. According to a joint report by the SEC, the 
Treasury Department, and the Federal Reserve Board, private sector 
systems in the Treasury market have been credited with contributing to 
``significant advances in price transparency for government 
securities.'' Recognizing the importance of private sector initiatives, 
H.R. 1400 contains a provision requiring the SEC to consider ``private 
sector systems for the collection and distribution of transaction 
information on corporate debt securities.''

  In the municipal and high yield bond markets, dealers are already 
required to report their transactions in these securities. All 
transactions in municipal bonds are reported to the Municipal 
Securities Rulemaking Board, and have been reported to the MSRB for 
several years. Since 1995, dealer market transactions have been 
reported, and since 1998, dealer to customer transactions have also 
been reported. Regulators have access to this data, and The Bond Market 
Association provides the MSRB's data on its investor web site--
www.investinginbonds.com_to the public free of charge. For high yield 
corporate bonds, the Nasdaq's Fixed Income Pricing System (FIPS) 
collects data for regulatory purposes, provides it to participants, and 
to vendors who then transmit it to their subscribers. There are NASD 
rules that require the reporting of all high yield transactions in 
FIPS. For exchange-listed bonds, prices are reported in many newspapers 
each day, and NYSE bond trades are available throughout the day on the 
high speed bond quote line and also on the Internet.
  The Subcommittee heard testimony on March 18, 1999 that highlighted 
the fact that regulators have recognized the difference between liquid 
and illiquid securities when developing regulations for equities and 
also for high yield bonds. While the equities market is considered by 
many to represent an exemplary approach to price transparency, it was 
noted that vast differences in the level of price transparency between 
liquid and illiquid equities exist. Real-time reporting and immediate 
dissemination of price and quantity characterize the level of 
transparency for listed equities--which are for the most part, liquid 
securities. However, in the market for unlisted ``pink sheet'' or 
``bulletin board'' equities--which are not very liquid securities--
prices are not reported in real-time nor are prices publicly 
disseminated. In fact, there are no real-time transaction reporting 
systems that require or provide immediate public dissemination of every 
trade in a given class of illiquid securities. In testimony from The 
Bond Market Association, the Subcommittee heard that the industry has 
undertaken a private sector initiative that is designed to cover inter-
dealer broker trades in investment grade corporate bonds, and that the 
data will be made available to regulators. The NASD also testified that 
they are currently developing a comprehensive system that will include 
an historical database that can be used for market surveillance.
  The nature of the bond markets raises some difficult challenges in 
crafting price transparency solutions. There are numerous corporate 
bond issues outstanding at any given time--estimates range from 300,000 
to 400,000 for corporate bonds--in contrast to  only approximately 
11,000 listed equities. Testimony indicated that only 4 percent of 
corporate bonds trade at least once in any given year. Bond markets are 
not continuous trading markets--i.e., most bonds do not trade every 
day--and as such, the market structure of the bond market is 
necessarily different from the structure of the equities market. 
Corporate bond trades occur as a result of negotiations between trading 
parties, and most trades are conducted over-the-counter, as opposed to 
on the New York Stock Exchange or American Stock Exchange. Corporate 
bonds trade in relation not only to one another, but more importantly 
in relation to a benchmark Treasury security (spread to Treasury). The 
Committee recognizes that the high level of transparency in the 
government securities markets therefore provides a critically important 
relative evaluation benchmark for corporate bonds. The market is 
largely institutional, with retail investors holding less than five 
percent of corporate bonds outstanding. Additionally, most 
institutional investors have access to numerous sources of benchmark 
securities prices and other related price information from commercial 
vendors. These sources enable investors to make price comparisons 
between similar corporate bonds--even if a particular bond did not 
trade--which is a very likely scenario. Since corporate bonds trade in 
relation to one

[[Page H4135]]

another, specific bonds of like credit quality and maturity may be 
fungible with one another, which facilitates the ability of investors 
to comparison shop among dealers.

  Currently, the bond markets provide a vital source of capital for the 
U.S. Government, federal agencies, states and localities, and America's 
corporations. In 1998 alone, over $10 trillion of new debt was issued 
in the United States debt markets. The Subcommittee heard testimony 
that advised regulatory authorities to proceed carefully when 
developing systems to improve price transparency so that market 
liquidity will not be harmed. Testimony highlighted the concerns of 
large institutional investors and market participants who hold large 
blocks of bonds. Testimony suggested that these investors and 
participants are concerned that the immediate dissemination of price 
and trading volume could make it harder for them to unwind positions, 
and subsequently, the amount of capital supplied to the market may be 
reduced. Although the Committee made no determination as to whether or 
not liquidity would be affected by increased price transparency, the 
Committee recognizes the importance of these concerns, and a provision 
in H.R. 1400 requires the SEC to take market liquidity, as well as 
other factors, into account before prescribing rules.
  The CBO Cost Estimate included in the Committee Report identifies the 
NASD as the statutorily mandated private sector collector and 
disseminator of bond price information and ignores all costs to other 
market participants--including dealers and investors. However, H.R. 
1400 specifically and purposefully omits the identity and character of 
the entity responsible for the collection and dissemination of prices 
for ``covered debt securities.'' Although only the SEC, or a self-
regulatory organization like the NYSE or NASD, can impose rules and 
conduct market surveillance, the exact method of collecting pricing 
data and disseminating pricing data is left to the discretion of the 
SEC subject to the guiding factors identified in the bill. One 
important factor, that ``the Commission shall take into consideration . 
. . private sector systems for the collection and distribution of 
transaction information on corporate debt securities,'' was in fact 
specifically added to H.R. 1400 to ensure maximum competition in the 
marketplace for those functions not required to be undertaken by 
regulators or self-regulatory organizations. The CBO cost estimate 
misstates the statutory language of H.R. 1400 in identifying the NASD 
as the sole entity required to ``collect, process, distribute and 
publish'' pricing information. Moreover, the CBO estimate ignores true 
private sector costs--i.e., the cost (both hard and soft) to the dealer 
community associated with H.R. 1400.
  Mr. BLILEY. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. Mr. Speaker, I rise in support of the bill H.R. 1400, 
the Bond Price Competition Improvement Act of 1999, and urge its 
adoption by the House.
  I filed a comprehensive additional set of views which appear at page 
11 through 13 of the Committee Report.
  Mr. Speaker, I would like to first commend my good friend, the 
gentleman from Virginia (Mr. Bliley), chairman of the Committee on 
Commerce, and the gentleman from Ohio (Mr. Oxley) chairman of the 
Subcommittee on Finance and Hazardous Materials, for their strong 
leadership in this legislation. This is an issue that has been boiling 
around for a long time and the committee has been telling the industry 
that this is a matter which has to be corrected.
  In 1993 in the fall, Mr. Markey, then chairman of the Subcommittee on 
Finance and Hazardous Materials, warned, ``I have little sympathy for 
those who keep information about quotes, trades, prices, and markups in 
the dark away from investors. Markets are more efficient, more fair, 
and more liquid when investors can readily determine how much a 
security costs.''
  At the September 29, 1999, hearing on price competition for bonds, my 
good friend, the gentleman from Virginia (Chairman Bliley) issued a 
challenge to the SEC and the bond market to get going and clean this 
market up and promised to introduce legislation in the next Congress. 
The gentleman from Virginia was true to his word and I commend him for 
working with those of us on this side of the aisle, the Federal 
regulators, and the bond industry to fashion this targeted and 
bipartisan bill that is cosponsored by a large numbers of Members on 
the Subcommittee on Finance and Hazardous Materials, including myself.
  Mr. Speaker, in this bill we tell the markets to stop treating 
investors like mushrooms. We require that the investing public no 
longer be kept in the dark, away from the world of prompt, accurate, 
and reliable transaction information; in other words, keeping them away 
from the sunlight. And we require them to include the last sale 
reported.
  Bond markets are an important function in the U.S. economy. Their 
complexity will raise more difficult challenges to crafting transparent 
solutions. This is why we have charged the SEC, the Federal securities 
regulator, with the responsibility for overseeing this initiative.
  The private market has raised concerns that this effort will hurt 
market liquidity. We are aware of those concerns, but I must confess 
that personally I have small regard for the concerns and some doubts 
about those who have raised them. They also were raised in conjunction 
with earlier initiatives to facilitate transparency in the market for 
government securities. These markets were totally unharmed, and 
investors were significantly benefited. They remain the most liquid and 
efficient in the world.
  Mr. Speaker, in closing, I commend the ongoing private sector and 
NASD responses to the challenge. I believe that the bond markets and 
the investors both will reap significant benefits from the actions we 
take today. I reserve the balance of my time.
  Mr. BLILEY. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Ohio (Mr. Oxley), chairman of the Subcommittee on 
Finance and Hazardous Materials, who so ably steered this legislation 
through.
  Mr. OXLEY. Mr. Speaker, I thank the gentleman from Virginia (Mr. 
Bliley) for yielding me this time.
  Mr. Speaker, I rise today in support of H.R. 1400, the Bond Price 
Competition Improvement Act. Although bond trading may not be the most 
exciting topic in the world, there are $15 billion of corporate bonds 
traded each day in the United States. It is our obligation to see that 
those who are relying on bonds for their retirement and their 
children's education can buy bonds in a fair and open market.
  The Subcommittee on Finance and Hazardous Materials began examining 
the bond market in the 105th Congress. In September, we heard testimony 
that two investors buying the same bond at the same time from the same 
dealer can be given very different prices, prices differing as much as 
6 percent, amounting to a full year's worth of interest.
  In the equity markets there is a mechanism for distributing price 
information to the public. All one has to do is turn on CNBC and see 
the ticker at the bottom of the screen which lists the price of stocks 
traded during the day. No such system currently exists in the bond 
markets, and that needs to be corrected.
  H.R. 1400 was reported unanimously by the Committee on Commerce. This 
bipartisan bill was originally cosponsored by 27 of the 28 members of 
the subcommittee and enjoys the support of the Securities and Exchange 
Commission and the National Association of Securities Dealers.
  H.R. 1400 directs the Securities and Exchange Commission to use 
authority it has had since 1975 to adopt rules facilitating 
transparency in the bond market with certain minimum standards. By 
enacting this legislation we will guarantee that these important 
changes take place. We also make clear that information should be 
provided to the public for their trades.
  Additionally, the legislation provides some regulatory relief to 
exchange listed bonds. It also includes a provision indicating that the 
legislation does not affect the exemption from registration 
requirements for securities of government-sponsored enterprises.
  When the committee first raised concerns regarding transparency in 
the corporate bond markets, market participants responded quickly by 
developing and implementing a voluntary trade reporting system. The 
industry has responded positively to transparency challenge in other 
markets as well. These actions demonstrate a genuine commitment to 
improving bond market transparency. This commitment should form the 
basis of a productive partnership between industry and the SEC to 
improve price transparency.

[[Page H4136]]

 The SEC should consider this progress as it moves forward under this 
legislation.
  Mr. Speaker, I understand that the gentleman from Virginia (Chairman 
Bliley) has included in the record some additional legislative history 
of H.R. 1400. I understand this legislative history will amplify the 
record on private sector initiatives in the bond market. I would like 
to ask the distinguished gentleman if that is correct.
  Mr. BLILEY. Mr. Speaker, will the gentleman yield?
  Mr. OXLEY. I yield to the gentleman from Virginia.
  Mr. BLILEY. Mr. Speaker, the gentleman is absolutely correct.
  Mr. OXLEY. Mr. Speaker, reclaiming my time, and I would like to 
indicate that I join the gentleman in that additional legislative 
history, and I would like to commend the Bond Market Association for 
their very constructive participation during the consideration of this 
legislation. The Bond Market Association is developing a voluntary 
system to display bond prices publicly. This system will improve the 
availability of bond prices to investors, and, Mr. Speaker, that just 
began last week, and we expect a great amount of progress in bringing 
that price information to the public.
  Mr. Speaker, I would like to commend the gentleman from Virginia (Mr. 
Bliley) for his leadership on this issue. This is his legislation that 
he introduced. And I thank him for helping to bring meaningful 
legislation to the floor for the benefit of all Americans. I also 
commend our good friend the gentleman from Michigan (Mr. Dingell); the 
gentleman from New York (Mr. Towns), the ranking member of our 
subcommittee; and the gentleman from Massachusetts (Mr. Markey) for 
their assistance on this project. Without their help, we would not be 
here today.
  Mr. DINGELL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I have a couple of brief comments that I think will be 
helpful to the Record. The first is to again express my great affection 
and respect for the gentleman from Virginia (Mr. Bliley), distinguished 
chairman of the Committee on Commerce, and for the distinguished 
gentleman from Ohio (Mr. Oxley), chairman of the Subcommittee on 
Finance and Hazardous Materials.
  Mr. Speaker, I have not seen these ``additional remarks'' which are 
being used to constitute legislative history. Could my two good friends 
enlighten me as to what they are, where they come from, and what they 
say?
  Mr. BLILEY. Mr. Speaker, if the gentleman would yield, he will have a 
chance to peruse them before they become a part of the Record.
  Mr. DINGELL. Mr. Speaker, reclaiming my time, I am comforted to hear 
that. Am I to assume that they are not part of the legislative history 
or they are a part of the legislative history?
  Mr. BLILEY. Mr. Speaker, if the gentleman would continue to yield, 
they are not part of the legislative history at the moment.
  Mr. DINGELL. Mr. Speaker, again reclaiming my time, I am much 
comforted to know that. I am comforted because I have always been told 
in this place that the legislative history is a history of the 
legislation, and it involves discussion amongst all the people who are 
handling the legislation so that they all know what it is. I assume 
that I will have a chance to look at these and perhaps approve them 
before they become legislative history.
  Mr. BLILEY. The gentleman is absolutely correct.
  Mr. DINGELL. Very good. Then I thank my good friend.
  Mr. MARKEY. Mr. Speaker, I rise in strong support of H.R. 1400, the 
Bond Price Competition Improvement Act of 1999.
  I would like to begin by commending Chairman Bliley, Subcommittee 
Chairman Oxley, the Ranking Democratic Member of the Committee, the 
gentleman from Michigan (Mr. Dingell), and the Ranking Democrat on the 
Subcommittee, the gentleman from New York (Mr. Towns) for their 
leadership in bringing this bill forward for today's Subcommittee 
markup. I am pleased to be an original cosponsor of this legislation, 
which is aimed at improving price competition in the nation's bond 
markets.
  On Wall Street, the term ``Price Transparency'' refers to the 
dissemination of market quotation and transaction information. Such 
transparency is of critical importance to all participants in our 
nation's securities markets. Experience has shown that price 
transparency produces several important benefits. It can help improve 
the liquidity and efficiency of a market by assuring that comprehensive 
price and trading information is disseminated to as many market 
participants as possible, so that the market price of securities will 
move more quickly to reflect the underlying economic value of the 
security. In addition, price transparency provides investors with 
greater protection from abuses by reducing the disparity of information 
that may exist between market ``insides'' and ``outsiders'' and 
providing public investors with more equal access to information that 
is available to primary and other dealers.
  With equal access to pricing information, investors in stocks or 
bonds can better evaluate the quality of execution and the value of 
their securities. This information is particularly useful for investors 
evaluating prices for less actively traded securities, where bid-asked 
spreads may be wider. Such data also can encourage competition among 
dealers and assist regulators in discovering possible manipulation, 
fraudulent mark-ups, or other wrongful conduct, or in determining the 
state of the market at any point in time.
  In 1975, the Congress directed the SEC to facilitate the creation of 
a National Market System for qualified securities. When the Congress 
enacted that legislation, it did not limit its application merely to 
stocks, but also included corporate debt securities. At the time, there 
were many in the broker-dealer community who vigorously opposed it. But 
some 24 years later the Dow Jones Industrial Average has been routinely 
topping the 10,000 mark, and all observers agree that the stock markets 
is much more efficient and more liquid in large part due to their 
increased transparency.
  In the 1980s, under the Subcommittee on Telecommunications and 
Finance, which I then chaired, Congress passed landmark government 
securities legislation that, in part, addressed the lack of 
transparency in that segment of the bond market. In 1991, the industry 
responded with GovPX, a 24-hour, global electronic reporting system for 
U.S. Treasury and other government securities.
  In the fall of 1993, the Subcommittee held comprehensive hearings on 
the municipal securities market. I observed at the close of those 
hearings that I have little sympathy for those who would keep 
information about quotes, trades, prices, and markups in the dark, away 
from investors, and that markets are more efficient, more fair and more 
liquid when investors can readily determined how much a security costs. 
The Subcommittee challenged the SEC and the market to respond to this 
need, and promised carefully targeted and bipartisan legislative 
reforms if they failed to do so.
  In response the industry in 1995, the Municipal Securities Rulemaking 
Board (MSRB) started collecting data on dealer-to-dealer transactions 
in the municipal bond market as well as disseminating daily summary 
reports. In 1998, the MSRB added coverage of customer trades to this 
system.
  I should note that in 1994 the National Association of Securities 
Dealers (NASD) established the Fixed Income Pricing System which covers 
some but not all high-yield corporate bonds. Aside from this action, 
over the years the SEC has not made much use of the powers Congress 
granted it in this area to bring transparency to the corporate bond 
market. The legislation we are taking up today would help change that. 
H.R. 1400 would direct the SEC, within the next 12 months, to use the 
authorities Congress granted it back in 1975 to issue rules or take 
other actions to improve price transparency in the corporate bond 
market. Specifically, the bill would mandate that the SEC assure the 
prompt collection, processing, distribution, and publication of 
transaction information in the corporate debt market. This would 
specifically include, but not be limited to, last sale information. 
Under the bill, the SEC would be directed to assure that such 
information is made available to all exchange members, broker-dealers, 
securities information processors, and all other person. In determining 
the rules or other actions to take under the subsection, the SEC is 
also directed to take into consideration, among other factors, private 
sector systems for the collection and distribution of transaction 
information on corporate debt securities. Finally, the bill provides 
for a study by the General Accounting Office of measures needed to 
further improve price transparency.
  I support this initiative because I believe that bond investors 
deserve to get full access to the type of market information that will 
better enable them to determine whether they are getting the best price 
for their buy and sell orders. We recognize that Chairman Levitt has 
already taken some preliminary steps to move the industry forward in 
this area, and that as a result of his leadership, the NASD is 
currently considering rule changes which would create transparency and 
audit trail systems for the corporate bond market. In addition, we also 
understand that the bond dealers have also stepped in with a plan to 
make certain market information available, and we welcome that action.

[[Page H4137]]

  I would like to focus on the relationship on that initiative and this 
legislation, to ensure that the legislative history of this bill 
properly reflects the factors that went into consideration of its 
provisions. During the Subcommittee of Finance and Hazardous Materials 
hearing on H.R. 1400, I had an opportunity to ask SEC Chairman Levitt 
about several aspects of the bond dealers' initiative. His responses 
indicated that while the private sector initiative might be useful to 
investors, it also had some very significant limitations. For example, 
Chairman Levitt indicated that the scope of the private sector 
initiative was limited to investment grade debt, so that all the non-
investment grade wouldn't even be covered. Chairman Levitt further 
indicated that the industry initiative relies entirely on voluntary 
participation. As a result, he indicated, if an interdealer broker 
doesn't volunteer to join the system, its trades wouldn't be displayed. 
In addition, Chairman Levitt testified that direct dealer-to-dealer or 
dealer-to-customer trades that don't use an interdealer broker wouldn't 
be recorded through the voluntary initiative. Moreover, the initiative 
would provide only for hourly dissemination of data, which Chairman 
Levitt agreed could prove pretty stale in today's fast moving markets. 
Finally, Chairman Levitt indicated that the SEC and the NASD need 
additional information about what is going on in the corporate bond 
market to perform their surveillance missions ``comprehensively and 
accurately.''
  I mention this testimony because I believe that it is essential that 
the SEC and the NASD, as they consider how to implement the 
Congressional direction contained in H.R. 1400, must never lose sight 
of the fact that the current voluntary industry initiatives, while 
useful and welcome, have their limitations. That is precisely why we 
gave the SEC the authority to act in a comprehensive fashion, 
consistent with the public interest and the protection of investors. 
And while we in Congress recognize these private sector initiatives and 
welcome them, we nonetheless are passing this legislation today because 
we are also aware of the gaps in those initiatives and the need to 
assure that appropriate action is taken by the SEC and to NASD to 
assure that any transparency system established for the corporate bond 
market is comprehensive in scope, is not riddled with loopholes, 
appropriately serves the needs of investors, and allows the SEC and the 
NASD to carry out their important market surveillance and enforcement 
missions.
  I believe the legislation we are considering today does this. It will 
underscore the determination of the Congress that effective and 
comprehensive action will be taken in this area. I urge passage of the 
legislation.
  I urge my colleagues to support this bill as it moves through the 
legislative process.
  Mr. DINGELL. Mr. Speaker, earlier today during floor debate on H.R. 
1400, the Bond Price Competition Improvement Act of 1999, I became 
aware of the intention of the Majority to insert in the Record as an 
extension of remarks ``legislative history'' that the Minority had not 
been afforded an opportunity to review. We were subsequently informed 
by Majority staff off the Floor that they had agreed to insert in the 
Record verbatim language that had been submitted by representatives of 
the Bond Market Association (BMA). I have serious problems with this 
sneaky attempt to affect the carefully-crafted bipartisan agreement on 
this bill. I have been supplied a copy of the BMA language and will 
review it carefully. After an initial reading, I have concluded that 
parts of it contain factual errors and I will be putting a statement in 
the Record over the next day or so to point out and correct these 
problems. In the meantime, I wish to express the well-established legal 
norm that the Courts, in interpreting this statute, should be governed 
by the plain meaning of the legislative language and the intent 
expressed in the Committee's report and not on late-crafted statements 
presented by lobby groups to only the majority and not cleared by the 
minority or discussed with the minority in proper fashion.
  Legislative history is the work of the Congress, in its official 
pronouncements or sometimes the remarks of its Members in debate. It is 
not the unscreened remarks of lobbyists submitted in self-serving and 
irregular fashion.
  Mr. TOWNS. Mr. Speaker, I rise in support of the bill, HR 1400, the 
Bond Price Competition Improvement Act of 1999, and I urge its adoption 
by the members of the whole House.
  I would like to thank Chairman Bliley of the full Committee on 
Commerce and Ranking member of the full Committee, Congressman John 
Dingell of Michigan, Subcommittee on Finance and Hazardous Materials 
Chairman Oxley for their work and leadership on this legislation.
  Chairman Bliley issued a ``challenge to the bond industry to clean up 
their act on the importance of the right to know'', or expect the 
Congress to introduce legislation in the 106th Congress as he promised. 
I want to point out that Chairman Bliley was true to his word. I want 
to commend the Committee leadership for all of the effort and work done 
with the Democrats of the committee to make this bill a bipartisan 
success.
  The H.R. 1400, requires the industry to inform the investing public 
of the needed information to make sound judgement, while investing in 
the Bond Market with reliable, accurate transaction information and 
sale reporting.
  The bond markets plays an important role in my home state of New York 
and the entire U.S. economy. I am aware of the concerns of the industry 
with regards to the issue of transparency. However, the SEC will do a 
great job for the industry and U.S. economy.
  In closing, I wish to thank Chairman Bliley and the Ranking Member of 
the full Committee on Commerce Mr. Dingell and Chairman Oxley and the 
members of the subcommittee for their support.
  Mr. DINGELL. Mr. Speaker, I yield back the balance of my time.
  Mr. BLILEY. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Virginia (Mr. Bliley) that the House suspend the rules 
and pass the bill, H.R. 1400, as amended.
  The question was taken.
  Mr. BLILEY. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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