U.S. GOVERNMENT PRINTING OFFICE

62–974CC WASHINGTON : 2000

DECIMAL CONVERSION 2000: ARE THE

MARKETS READY?

HEARING

BEFORE THE

SUBCOMMITTEE ON

FINANCE AND HAZARDOUS MATERIALS

OF THE

COMMITTEE ON COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

MARCH 1, 2000

Serial No. 106–113

Printed for the use of the Committee on Commerce

(

COMMITTEE ON COMMERCE

TOM BLILEY, Virginia, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

MICHAEL G. OXLEY, Ohio

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

Vice Chairman

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

BRIAN P. BILBRAY, California

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

TOM A. COBURN, Oklahoma

RICK LAZIO, New York

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

RON KLINK, Pennsylvania

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

JAMES E. DERDERIAN, Chief of Staff

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON FINANCE AND HAZARDOUS MATERIALS

MICHAEL G. OXLEY, Ohio, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

Vice Chairman

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

STEVE LARGENT, Oklahoma

BRIAN P. BILBRAY, California

GREG GANSKE, Iowa

RICK LAZIO, New York

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ROBERT L. EHRLICH, Jr., Maryland

TOM BLILEY, Virginia,

(Ex Officio)

EDOLPHUS TOWNS, New York

PETER DEUTSCH, Florida

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

FRANK PALLONE, Jr., New Jersey

BOBBY L. RUSH, Illinois

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

C O N T E N T S

Page

Testimony of:

D’Agostino, Davi M., Acting Associate Director for Financial Institutions

and Markets Issues, General Government Division; accompanied by

Cody J. Goebel, Associate Director for Financial Institutions and Markets Issues; and Jean-Paul Reveyoso, Senior Evaluator for Financial

Institutions and Markets Issues, General Accounting Office .................... 4

Material submitted for the record by:

Berkeley, Alfred R., letter dated March 31, 2000, to Hon. John D. Dingell,

enclosing response for the record ................................................................ 65

Brodsky, William J., letter dated March 30, 2000, to Hon. John D. Dingell, enclosing response for the record ........................................................ 80

DeFoe, Philip D., letter dated April 10, 2000, to Hon. John D. Dingell,

enclosing response for the record ................................................................ 84

Dingell, Hon. John D., a Representative in Congress from the State

of Michigan:

Letter dated March 2, 2000, to Hon. Michael G. Oxley ......................... 59

Letter dated March 2, 2000, to Alfred R. Berkeley, requesting response for the record ............................................................................. 60

Letter dated March 2, 2000, to William J. Brodsky, requesting response for the record ............................................................................. 62

Letter dated March 2, 2000, to Philip D. DeFoe, requesting response

for the record .......................................................................................... 62

Letter dated March 2, 2000, to Meyer S. Frucher, requesting response for the record ............................................................................. 62

Letter dated March 2, 2000, to Salvatore F. Sodano, requesting response for the record ............................................................................. 62

Letter dated March 2, 2000, to David Krell, requesting response

for the record .......................................................................................... 62

Krell, David, letter dated March 30, 2000, to Hon. John D. Dingell,

enclosing response for the record ................................................................ 96

Sodano, Salvatore F., letter dated March 31, 2000, to Hon. John D.

Dingell, enclosing response for the record .................................................. 91

(III)

(1)

DECIMAL CONVERSION 2000: ARE THE

MARKETS READY?

WEDNESDAY, MARCH 1, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON COMMERCE,

SUBCOMMITTEE ON FINANCE AND HAZARDOUS MATERIALS,

Washington, DC.

The subcommittee met, pursuant to notice at 10 a.m., in room

2322, Rayburn House Office Building, Hon. Michael G. Oxley

(chairman) presiding.

Members present: Representatives Oxley, Shimkus, Wilson,

Fossella, Ehrlich, Towns, Engel, Luther, Capps, and Markey.

Staff present: David Cavicke, majority counsel; Linda Dallas

Rich, majority counsel; Brian McCullough, majority professional

staff; Robert Simison, legislative clerk; Consuela Washington, minority counsel.

Mr. OXLEY. The subcommittee will come to order. The Chair will

recognize himself for an opening statement.

Three years ago this committee led the effort to get the securities

markets to convert from fractions to decimals. It was an important

change. I wanted to do this for three reasons. One, I believe the

free market, not the Government should determine stock prices;

two, decimals would make the markets more accessible because

they are easier to understand than fractions; and, three, decimals

would promote the competitiveness of the U.S. stock markets because the rest of the world is already trading in decimals.

After we reported legislation the exchanges agreed that they

would convert to decimals. We agreed to let the markets convert

after their Y2K efforts. Now that the Y2K computer crunch has

come and gone, mercifully, we thought it a good time to see how

the markets are doing on decimal conversion.

Based on my recent visit to New York with our colleague Vito

Fossella, and my review of the GAO testimony, the answer is, we’re

in pretty good shape. The markets are on schedule to convert this

July. Initially there will be a spread of a nickel for most stocks.

After we have had decimal trading for about 6 months, we anticipate that there will be no mandated minimum increment and we

will have full free market pricing in decimals.

I understand that some firms in the options exchanges may experience some difficulties because of increased trading and message

traffic that decimals will bring. We are phasing in decimals by providing for the nickel increments in an attempt to alleviate those

problems.

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Additionally, I’m open to other solutions that will help the options exchanges to get through this transition. Decimals was a good

bipartisan achievement of which we can all be proud. I appreciate

the work that the GAO has done, in monitoring decimal conversion

for us and look forward to the GAO’s testimony.

And with that the Chair yields back and is now pleased to recognize the ranking member, the gentleman from New York, Mr.

Towns.

Mr. TOWNS. Thank you very much, Mr. Chairman.

In the 105th Congress you proposed a bill that was so simple it

was monumental. Your bill H.R. 1053 required our markets to join

the rest of the world and price stocks in decimals rather than in

fractions. After our passing the bill out of subcommittee, the market participants agreed that it was time to enter the 21st Century

by converting to decimals.

Now we are on the verge of reaching our goal; the markets were

able to successfully navigate Y2K and they are now poised to conquer the next important task, converting from fractions to dollars

and cents. While I’m anxious to see decimal conversion, I am a little concerned about some details. Fortunately my concern arises

from one of the benefits that will occur in the market once it converts from fractions.

Due to the increase of ‘‘traffic’’ that is bound to occur with

decimalization, I’m concerned about whether or not there is enough

capacity in our trading system to handle the new flow of information being created by shrinking bid and offer quotes. It is vital to

ensure that our system has the ability to handle this conversion.

I hope that the testimony from the General Accounting Office will

be able to alleviate any concerns that I have in this area.

I would like to applaud the industry who have worked to ensure

that our capital markets will be ready to trade in decimals by July.

Their steadfast commitment on this issue will help solidify that our

markets remain the envy of the world and easier for every American to understand.

I would also like to congratulate you, Mr. Chairman, for your

leadership on this issue. It’s been a very important victory for

American investors in our Nation’s capital markets. I thank the

GAO for their testimony today and look forward to hearing just

how ready our markets are for decimal conversion.

Thank you very much, Mr. Chairman, again for having this hearing, and I yield back.

Mr. OXLEY. Thank you.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. TOM BLILEY, CHAIRMAN, COMMITTEE ON COMMERCE

During the 105th Congress, Finance and Hazardous Materials Subcommittee

Chairman Mike Oxley proposed a very good idea—H.R. 1053, the Common Cents

Stock Pricing Act of 1997. His bill would have required our nation’s exchanges to

price stock in dollars and cents, rather than in government set fractions.

I was an original co-sponsor of H.R. 1053. I agree with Chairman Oxley that pricing stocks in decimals will benefit American investors and our capital markets. Listing stock in decimals will make the ticker on the bottom of CNBC easier to understand for every American. It will also make our markets more competitive by allowing the market to determine the buy and sell price, rather than a government mandated spread.

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Today I am pleased to see that decimal pricing is just around the corner. The Securities and Exchange Commission and the industry have worked together to ensure

that our capital markets will be trading stocks in decimals, rather than fractions,

by July of this year. We are here today to hear from the General Accounting Office

about the progress that has been made towards this goal.

I congratulate Chairman Oxley, and Telecommunications, Trade, and Consumer

Protection Ranking Member Ed Markey for their hard work which has led to an important victory for American investors and all participants in our nation’s capital

markets.

I also thank the GAO for their review of the industry preparedness, and look forward to their testimony today.

PREPARED STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MASSACHUSETTS

Thank you, Mr. Chairman.

I would like to begin by commending you for calling today’s hearing and for your

persistent leadership over the last two years in pushing our nation’s stock markets

to move away from trading in fractions and towards trading in dollars and cents.

This is an important pro-consumer initiative that will make our markets more efficient and competitive and save investors billions of dollars in lower trading costs.

Three years ago this month, I joined with you, with Chairman Bliley, and several

other Members of the Committee in introducing H.R. 1053, the ‘‘Common Cents

Stock Pricing Act of 1997.’’ We introduced this legislation to correct an absurd

anomaly in our nation’s stock and options markets. More than two centuries after

traders meet under the Buttonwood tree in lower Manhattan to form the New York

Stock Exchange, stocks were still trading in increments of an eighth of a dollar—

or 121⁄2 cents. Some financial historians attribute this arcane practice to the time

when the Spanish dollar was a widely used currency in America. These Spanish dollars routinely were cut up into ‘‘bits’’ or ‘‘pieces of eight.’’ Others suggest that the

eighth could also be derived from the old ‘‘New York dollar,’’ a regional currency

used during the early years of the Republic.

Regardless of its origin, 200 years later, the rest of the America had long since

moved on to buying and selling goods and services using dollars and cents. Clearly,

it was time for the securities industry to catch up.

Despite the protests of some in the industry that the issue was too complex, that

we needed more hearings, that we’d destroy the profitability of the brokerage industry, this Subcommittee moved forward to approve our bill and direct the SEC to

mandate a move to decimal pricing. And once we acted, the markets responded. The

New York Stock Exchange, the NASDAQ, and the regional exchanges announced

that they would immediately move from eighths to 16ths in preparation for a move

to decimals in the summer of 2000. In response to this welcome and forward looking

change of heart on the part of the securities industry, we decided to withhold further action on H.R. 1057 and closely monitor industry progress towards meeting the

goal.

As part of the Subcommittee’s ongoing oversight efforts, I joined with you and

Chairman Bliley last year to ask the General Accounting Office to monitor what actions were being undertaken by the SEC, the exchanges, and Wall Street securities

firms to make decimal pricing a reality. Today, we will be hearing from GAO on

their findings and recommendations. The good news is that progress is being made.

The bad news is that a number of challenges still remain and some in the industry

may be dragging their feet. We will hear that the primary challenge is the systems

capacity of the computers and telecommunications systems used to transact trading,

and that these challenges are particularly acute for the options exchanges. We will

also hear that concerns about antitrust issues may have delayed efforts to develop

market standards and exchange rules relating to decimal trading.

Based on my review of GAO’s testimony, I am convinced that it is possible for

the industry to meet the deadlines for an orderly transition to decimals—if the industry has the willpower to do so. The SEC needs to be vigilant in pressing all market participants forward to decimals, and be willing to let market forces—rather

than artificial exchange rules—set the minimum price increment for stocks. I continue to hear disturbing rumors that some in the industry might want to delay the

move to decimals, or permanently lock in a nickel trading increment for stocks. This

concerns me. The industry has now had three years to get ready. It’s time for industry to do their bit, get off the dime, and give stock investors the opportunity to profit

from spreads that range down to a penny.

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Thanks again, Mr. Chairman, for calling today’s hearing. I look forward to hearing the testimony.

Mr. OXLEY. If there are no further openings statements then let

me turn now to our distinguished witness, she is Ms. Davi M.

D’Agostino, Acting Associate Director for Financial Institutions and

Markets issues with GAO in the General Government Division. Ms.

D’Agostino thank you for being with us today. And if you will,

would you identify and introduce your cohorts here at the table.

Ms. D’AGOSTINO. Yes, I’d be happy to. And thank you for inviting

us.

This is Mr. Jean-Paul Reveyoso, Mr. Cody Goebel, and Mr. Keith

Rhodes, our chief scientist.

Mr. OXLEY. Thank you. And you may proceed.

STATEMENT OF DAVI M. D’AGOSTINO, ACTING ASSOCIATE DIRECTOR FOR FINANCIAL INSTITUTIONS AND MARKETS

ISSUES, GENERAL GOVERNMENT DIVISION; ACCOMPANIED

BY CODY J. GOEBEL, ASSOCIATE DIRECTOR FOR FINANCIAL

INSTITUTIONS AND MARKETS ISSUES; AND JEAN-PAUL

REVEYOSO, SENIOR EVALUATOR FOR FINANCIAL INSTITUTIONS AND MARKETS ISSUES, GENERAL ACCOUNTING OFFICE

Ms. D’AGOSTINO. Okay. Good morning, everyone.

You asked us here this morning to discuss GAO’s observations on

the securities industry’s progress toward implementing decimal

trading. As you know, GAO has bee monitoring this issue at your

request and testified on the actions needed to convert to decimals

nearly 2 years ago.

May I submit my full statement for the record and summarize

my remarks.

Mr. OXLEY. Without objection.

Ms. D’AGOSTINO. Okay. Thank you.

I’m going to focus my remarks today on three key areas. First

I will discuss the progress made to date for converting to decimals.

Second, I’ll highlight some of the challenges that lie ahead for the

U.S. securities industry to successfully trade at decimal prices. And

third, I’ll briefly cover some of the areas where we plan to focus

our future efforts at your request and monitoring the industry.

In 1998 testimony before this subcommittee GAO recommended

that the Chairman of Securities and Exchange Commission or the

SEC ensure decimal pricing got implemented in a timely manner

after the industry prepared for the year 2000 date change. Most

importantly, we recommended that SEC ensure that the industry

establish definitive timeframes for implementing decimal trading

and assess the impact of decimal trading on the industry’s processing and communication systems capacities.

SEC and the industry have taken actions to ensure that the markets begin decimal pricing in 2000. SEC has monitored the industry efforts coordinated by the Securities Industry Association, the

SIA, to develop a plan, a schedule and standards for decimal pricing. SEC also issued two orders directing the industry participants

to work jointly on these tasks. Importantly, SEC’s most recent

order issued on January 28, directs the stock and options and exVerDate 11-MAY-2000 13:53 Sep 30, 2000 Jkt 062974 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 E:\HEARINGS\62974 pfrm03 PsN: 62974
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changes and the NASD to coordinate on a plan to begin decimal

trading, as you said, by July 3, 2000.

Also very importantly, SIA did commission a study of decimals

impact on trading and quotation volumes. And the industry has

now scheduled three industry-wide tests of decimal trading in

April, May and June of this year. Details of the industry’s plan are

in a state of flux right now and things may change, but the illustration on your left shows some of the more detailed recent thinking on the phase schedule for implementing decimals.

The industry plans a first phase to start in July 2000 as called

for in the SEC order. And during that first month a small number

of stocks, about 30, as discussed earlier this month at the SIA will

be switched from fractions to decimal pricing in no greater than

nickel increments.

A second phase would then begin in which all stocks would be

switched to decimals. At the same time the industry would pilot

some number of stocks to be traded in penny increments.

After January 2001, the final phase would begin in which individual markets would seek SEC approval for the specific increments in which they intend to quote their decimal prices. This

phase is expected to end March 3, 2001.

While these SEC and securities industry efforts and activities

represent progress in preparing for trading in decimals, some key

challenges in our view remain ahead for success. Possibly one of

the most serious challenges facing the industry is the systems capacity demands that Mr. Towns mentioned of decimal trading and

quoting as projected by an industry study.

A private firm, SRI Consulting, did this study for the industry

and its most recently updated projections show substantial increases in message traffic can be expected. The most striking increases in message traffic in a decimal/penny trading environment

are projected in the options markets and the Nasdaq. The illustration board on your right shows the SRI projection that the options

peak message traffic could increase over 3,000 percent from December 1998 levels by December 2001 if trading is in penny increments.

They also projected that Nasdaq’s peak message traffic could increase by 700 percent in the same period if trading is in pennies.

It’s important to note that SRI’s projections take into account

much more than just switching to decimal pricing. They also take

into account recent record volumes in trading and increased competition among the options exchanges.

Now, both the Options Price Reporting Authority or the OPRA

and the Nasdaq are already having difficulty meeting message traffic demands with current capacity.

OPRA plans to increase its capacity by the end of the year 2000,

but that increased capacity will still be less than one-third of what

SRI projects as needed to quote in penny minimum price variations, MPV. Even if OPRA could meet the needed capacity, the

price changes would occur so quickly that human traders watching

the computer screens might not be able to keep up. As a result

OPRA is also taking steps to reduce quotation message traffic such

as setting internal priorities on its own quote and trade reports.

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Other proposals are to discontinue price quotes for options with

low trading volumes and establish minimum increments of five or

ten cents for options quotations. In any case, because of potential

market implications of these steps the SEC will have to review the

proposals and approve any needed changes to rules. The Nasdaq

has told SEC that they would not be ready to fully deal with their

own lower projections of message traffic volumes until the first

quarter of 2001. Under its current plans, Nasdaq will not be prepared to deal with message traffic volumes projected by SRI.

In addition, because of capacity issues and readiness issues,

Nasdaq will not be able to participate in the first two tests scheduled for April and May this year, and instead they plan to join the

June 2000 test.

Beyond the critical capacity challenge, industry participants need

to work closely together in several areas to successfully convert to

decimal trading in a timely manner. For example, industry must

cooperate to finalize standards for market operations and practices.

However, cooperation and progress in developing market standards

has been hampered by antitrust concerns. Despite SEC and Justice

Department efforts to mitigate these concerns, industry meetings

on decimal-related market standards were not proceeding because

of an ongoing antitrust investigation of the options markets and

pending lawsuits.

However, the January 28 SEC order, that I mentioned earlier,

clearly states that industry cooperation in discussing developing

and implementing decimal trading is imperative and in the public

interest. And this order is expected to remove any further industry

unwillingness to cooperate on decimals because of antitrust concerns.

Other challenges remaining for the industry include assessing

and proposing revised exchange and market rules as may be needed to accommodate decimal trading and readying the systems of

the exchanges, broker-dealers, the vendors, and others for decimal

prices.

SEC has been encouraging the industry to address the needed

rule changes and has been also examining the readiness of various

firms’ systems for dealing with decimals.

Now, as part of our continuing efforts to monitor the industry’s

progress at your request, we plan to stay on top of a number of different aspects of their efforts. We want to continue to focus on the

approval process for market rule changes, the regulators’ readiness

assessments of broker-dealer systems to handle decimals, and the

results of the tests conducted among the exchanges and the member firms.

In addition, we want to look at what the various industry committees are doing on market standards and implementation procedures.

Mr. Chairman and members of the subcommittee that concludes

my summary and we would be happy the answer any questions you

have at this time.

[The prepared statement of Davi M. D’Agostino follows:]

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Mr. OXLEY. Thank you very much, Ms. D’Agostino and the Chair

would recognize himself for 5 minutes for questions.

Addressing the challenges that you pointed out, I take it that the

clearly overriding challenge is on the capacity issue; is that correct?

Ms. D’AGOSTINO. That’s our assessment, yes. That seems to be

the most difficult challenge ahead, I think.

Mr. OXLEY. Now, there have been some, including myself, that

have tried to draw a similarity between the conversion to Y2K and

conversion to decimals. And I know the GAO had been involved—

maybe not you personally, but obviously in that issue. Are there

some parallels here, are some of the fears that were there with

Y2K that proved not to be the case also perhaps the same kind of

fears that are addressed with the conversion to decimals?

Ms. D’AGOSTINO. I think it’s a little bit of a different problem because it mixes the actual physical change to decimal pricing which

isn’t all that difficult a problem with the record volumes that the

industry is experiencing even without decimals and that compounded with the expected increases in trading from moving to

decimals as the spreads narrow. So its capacity.

Mr. OXLEY. Now the demonstration you have in front of us here

indicating the phases of converting to decimals, this is the industry

draft as opposed to what the SEC had proposed; is that correct?

Ms. D’AGOSTINO. It’s actually right in alignment with what the

SEC order lays out. The question is, what happens in the middle

there? The beginning date is the same, and I think the end date

is the same, the question is, how long it takes to actually convert,

how long the pilot is, and the increments at which each of the markets and which stocks would trade. And I think the order gives the

industry that wiggle room in the middle to do what it thinks is

prudent.

Mr. OXLEY. And as I understand it from the SEC, based on a

meeting we had with Mr. Fossella last week, in New York, that the

SEC is also still seeking comment and suggestions that they appear to be flexible in trying to make this work to everybody’s satisfaction to get to the goal, but to get to the goal the right way.

The capacity issue even if we didn’t have decimals would be, according to your testimony, a problem anyway; is that correct?

Ms. D’AGOSTINO. Right now, yes, that’s true, Mr. Chairman.

Mr. OXLEY. And is this a—aside from what’s going on out there,

is this basically a technological problem? The capacity issue in and

of itself appears to be a challenge technically; is that correct?

Ms. D’AGOSTINO. Yes, it is. In fact, Mr. Rhodes, would you like

to respond to that?

Mr. OXLEY. Would you identify yourself, again, for the record,

please?

Mr. RHODES. My name is Keith Rhodes and I’m the Chief Scientist of the General Accounting Office. And, yes, it is, it’s a technical issue in that if you look at how the message traffic is being

moved, what you are trying to do is take a ten-inch fire hose and

hook it up to a soda straw. And what you have to do is make certain that the soda straw is as large as the ten-inch fire hose. And

whether the stock market or whether the markets in general go to

decimals, as we’ve seen, there are already capacity problems that

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exist and these will just be compounded. But it is purely a technology problem.

Mr. OXLEY. Ms. D’Agostino, could you give us an idea as to who

you talk to, market participants and the like, not specifically individuals, but I mean, in your study who did you talk to and was in

fact the capacity issue the No. 1 concern at least in the markets?

Ms. D’AGOSTINO. The team has basically attended or sat in on

otherwise telephonically every single SIA meeting that’s occurred

on this matter, and has also been in contact with the exchanges

and Nasdaq. They’ve gotten some information from Nasdaq that indicates and actually even raised our concerns about the capacity

issue to some extent very recently. The options markets have

raised this concern in OPRA to us, I mean, in front of us and it’s

been an issue all along the way in the discussions at SIA.

Mr. OXLEY. Thank you. My time has expired, let me now recognize the ranking member, the gentleman from New York.

Mr. TOWNS. Thank you very much, Mr. Chairman. Your testimony indicates that the OPRA system for disseminating options

trade and price quote messages has a current capacity of 3,000

messages per second. And that OPRA officials intend to increase

the capacity to 12,000 messages per second by the end of the year.

Ms. D’AGOSTINO. Right.

Mr. TOWNS. Your testimony goes on to say, ‘‘however, this additional capacity will not be adequate to accommodate the SRI projections’’ for quotation traffic. The options markets have been taking

a number of steps and propose to take a number of steps to reduce

traffic, but they also are not enough and will have an adverse effect

on the transparency of our options market.

I am concerned that we have a problem—well, a disaster, actually, in the making. What does GAO recommend that SEC and the

options markets can do to head off this serious problem as I see

it?

Ms. D’AGOSTINO. Well, Mr. Towns, we actually just received a

copy of the proposal that OPRA submitted to the SEC. I think SEC

is just starting to take a look at it themselves. This proposal lays

out a whole number of options of opportunities or ideas to reduce

the message traffic volume. Some of these ideas are ideas that are

clearly not going to have a bad impact on transparency. For example, if they delist inactive options, that’s not going to hurt transparency.

Some of the other ones, however, might cause concern about

transparency and that’s why SEC, I think is going to take a really

hard look at each one of the strategies that OPRA has proposed

and consider it in terms of what might be needed in terms of rule

changes down the road if they do approve the strategy.

Mr. TOWNS. Mr. Chairman, I would like to request that GAO

submit that for the record.

Mr. OXLEY. Without objection.

Mr. TOWNS. Thank you very much.

[The information referred to follows:]

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Mr. TOWNS. Is there a commercially available system that can

handle the options volume anticipated under decimal trading?

Ms. D’AGOSTINO. Keith?

Mr. RHODES. The standard systems that are being used, yes, it’s

not a matter of a system has to be invented to handle this. It’s a

matter of taking existing systems, and in the discussions that we’ve

had, it’s a matter of adding additional processors and additional

computer systems in place and additional capacity in terms of communications, new switches and things like that. Nothing has to be

invented to make this increased capacity. It’s a matter of something has to be bought, has to be put i place, and it has to be tested. So there’s no—it’s not that you can go to an off-the-shelf system

that says, here’s a computer that will handle 32,000 options of

32,000 messages per second for options traffic at its ultimate peak,

it’s a matter of going in and taking several computers or several

processors and putting them together and getting multiples of faster switched in place. So there’s nothing that has to be invented to

solve this problem, it’s a matter of taking existing technology and

putting it in place.

Mr. TOWNS. So we have to be careful about these timetables?

Mr. RHODES. Yes, we do.

Mr. TOWNS. As you know, the SEC recently approved the application of the International Stock Exchange to operate as the first

electronic options exchange. Does the SRI study include its volume

projections? Would its operation further raise capacity concerns or

not?

Mr. RHODES. I don’t believe that the SRI numbers that we include in our testimony include the ISC projections. But the numbers that OPRA has been working with that are very similar to the

same level that SRI is projecting do include the impact of the ISC

with an additional buffer that they always try to build in to have

some excess capacity. But from what we could see, the numbers

were very comparable.

Mr. TOWNS. Do you want to add something to that? No.

All right. Let me thank you very much, Mr. Chairman. I think

that it’s important that we continue this dialog because I have

some reservations, I must admit, you know, in fact, I guess a better

term, I’m a little nervous about it because there’s still a lot of uncertainties. And I think that we need to be able to come up with

some answers to some of these questions. And on that note I yield

back.

Mr. OXLEY. The gentleman yields back. Let me inform the ranking member that this is a first of probably a series of hearings that

we’ll have on this important issue. We wanted to set the stage with

the GAO report and we appreciate their testimony and the information that they’re giving the committee. This is of utmost importance for the markets and we want to make certain that everything

works smoothly. And this is, again, the first step in that effort.

Mr. TOWNS. That calms me a little. That calms me down a little

bit. Thank you, Mr. Chairman.

Mr. OXLEY. And the gentle lady from Mexico.

Ms. WILSON. Thank you, Mr. Chairman. I’m glad that the ranking member is feeling comfortable.

Mr. OXLEY. He’s chilling.

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Ms. WILSON. Mr. Chairman, I really just had a number of kind

of initial questions, and I have met with some of the folks who are

running the markets and I’m very glad to see this change to decimals. I don’t 6/18ths or 6/56ths and those kinds of things and I was

interested to see your projected increases in volume.

I understand that there’s also some research going on, and I

don’t know if you’re familiar with it, but it’s really kind of chaos

theory research that has less to do with volume than it does with

change of behavior. And I see Mr. Rhodes nodding his head, and

I wonder if you could talk a little bit about what some of that modeling is telling us about how behavior might change in the stock

market—and it’s less relevant or probably less significant when

they go to dimes or nickels, but there’s some interesting questions

about when they go to pennies. And I wonder if you could share

what you know?

Mr. RHODES. If you’re referring to the work out of the Santa Fe

Institute? Right. The idea is that you would take the spread and

you establish what are called ‘‘strange attractors’’ inside the structure of message traffic and show that there are two directions that

the volume can go. One is that you have tremendous peaks, and

then there are also views that the market volume will actually rise

higher or the volume—the domestic traffic volume will rise higher

than even the SRI projections. So the concern there is that if you

follow not just historical data and not just estimates on the load,

but you look at how people operate and decisions that people make

and the kinds of decisions that they collect to, then you get this—

you get these series of spikes and it’s not that overall you have

32,000 messages per second, it’s that at any given point in time you

can have hundreds of thousands of messages at a peak and 32,000

becomes sort of a gradual curve.

And, in a way, that follows some of the discussion that we heard

with the broker dealers because there were discussions about, well,

you know, nobody will trade at a nickel. You know, everything will

stay at a nickel and no one will go lower. And then there were

other traders who said, a nickel won’t last till lunchtime. So from

the Santa Fe perspective, they’re figuring out how honest and true

and reliable a nickel would be versus a penny. And some of their

theories are that it will go to pennies immediately. And, therefore,

the volume would rise tremendously immediately.

Ms. WILSON. Is it a question of just volume or does behavior

change too? I mean, for example, how does that affect—I don’t

know if I’ve got the right question or not——

Mr. GOEBEL. One of the things that the SRI study did when it

was estimating what the impact of nickels was, they could draw on

historical data because we’ve had experience in the U.S. markets

with the move from 8ths to 16ths, but the move from there down

to pennies was basically unprecedented for our markets and literally for markets around the world even in other exchanges. Overseas they trade usually in higher increments than pennies. So what

they did to try to estimate how behavior—trading behavior would

change was they went to all of the range of various market participants—dealers, upstairs traders, mutual fund, trading desk managers, that kind of thing—to try to find out what those people

would do in a penny environment.

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And in general the expectation is that whereas in the current environment where someone may offer, say, 5,000 shares to trade at

a nickel, now if there’s more price points, they might offer a thousand at a penny, 2,000 at three cents, so the volume that previously traded at one price might be spread over a number of price

points. And that’s what creates this additional quotation volume

and additional trading. And that experience is borne out on the

markets, for instance, Toronto.

Ms. WILSON. Have they asked questions in these same kind of

studies and groups in the different players about whether behavior

is likely to change at a point of crisis or at a point of rapid change

in the stock market, or is that just really a volume question?

Mr. GOEBEL. Yeah, I don’t believe the SRI study took into account analysis sort of market events occurring. And I think they—

as a matter of fact, they even qualified that their day may not necessarily speak to what could occur in situations like that.

Ms. WILSON. Okay. Thank you very much. Thank you, Mr. Chairman.

Mr. OXLEY. That time is expired. We turn to the gentle lady from

California, Ms. Capps.

Ms. CAPPS. Thank you, Mr. Chairman. I’m very pleased that you

called this hearing today, because obviously this is a very important issue. And I appreciate the testimony that you have given, Ms.

D’Agostino, and for your colleagues being here, as well updating us

on the markets’ conversion to decimals. Ensuring that our stock

markets are able to handle a decimal conversion efficiently and

smoothly is of great concern to all Americans, whether or not they

realize it. Once done, of course, the goal is going to be terrific, saving consumers billions of dollars, increasing liquidity in the markets, encouraging investments. This is all to the good.

I’m still—I share Mr. Towns’ nervousness, I guess. I’m still concerned about the problems that you’ve pointed out and I appreciate

that you’ve addressed with the previous questioner the studies

themselves and the kind of confidence that GAO has in the estimates that have been given, really, by the industry itself.

If I could bring up one other issue for your comment—the average daily trading volume on Nasdaq has increased 61 percent over

the last year and that due to that Nasdaq is experiencing processing strains. How does this strain manifest itself? Is this something that is generally appreciated and perceived by the trading

public?

Mr. GOEBEL. Yeah, we didn’t do a lot of research on exactly how

those things were playing out for Nasdaq. From what we understand some of their internal systems may be experiencing queuing

beyond those of the other systems, but they provided us with some

information indicating what plans they intend to take to address

the individual systems that as a group make up their entire sort

of trading infrastructure. And in some cases it includes adding additional message switches and things like that to take those bottlenecks out of the various components.

Ms. CAPPS. So they already have a system in place? For as the

smaller parts of this come to their attention that they can pull into

place?

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Mr. GOEBEL. From their response, they’re attempting to increase

capacities and processing capabilities in all the various parts, but

as a whole, they still face a challenge in meeting some of the estimates that we discuss in our testimony——

Ms. CAPPS. I see.

Mr. GOEBEL. [continuing] because trading volumes have been so

high lately that they’ll just continue to go up further.

Ms. CAPPS. Does an investor perceive this, or what’s their reaction, then—the public?

Mr. GOEBEL. It’s probably not something that investors are individually aware of unless they experience just slowness in getting

an order executed.

Ms. CAPPS. I see.

Mr. GOEBEL. So it’s sort of that behind-the-scenes effect.

Ms. CAPPS. Okay. So it’s being handled, at least to a degree that

you feel somewhat comfortable with. Of course, this is the current

status, not what we’re anticipating?

Mr. GOEBEL. Yes, I mean, I guess as Davi pointed out, we know

they’re taking steps, but there still remains a gap in meeting the

kinds of projections that are expected to arise in the next couple

of years.

Ms. CAPPS. And then one sort of related issue which is troubling

to me is the fact that Nasdaq will not be participating in the first

two industry-wide tests, which are scheduled I believe for April and

May, and that they haven’t factored into their planning the increased estimates from SRI. Are you concerned about this and is

one test run in June going to be enough for this huge issue with

Nasdaq in your opinion?

Ms. D’AGOSTINO. That’s a very good question. We haven’t even

thought about whether or not one test would be adequate. But we

can say that actually the June test date was added for the Nasdaq

because it wouldn’t be able to make the two that were originally

scheduled. And actually over the period of doing this work we were

initially very highly concerned about the risk posed to the options,

and now in recent weeks with what we’ve learned about Nasdaq’s

capacity and their plans, we’re more concerned about the

Nasdaq——

Ms. CAPPS. Well, what happened——

Ms. D’AGOSTINO. [continuing] for the longer hall without taking

some serious due diligence and action to enhance their capacity.

Ms. CAPPS. Yes, well, have you developed scenarios for a response, say, should the test not be what you want to see in June?

I mean, the results could be all over the map, right?

Ms. D’AGOSTINO. They could be.

Mr. GOEBEL. It might be worth pointing out that the tests that

the industry has designed, the three tests that Nasdaq will participate in the June one are essentially designed to test the processing

changes, can they actually accurately trade in decimals, and they

don’t include a capacity element. So it’s very expected that the

processing changes that the exchanges and Nasdaq have made will

likely work out. They’re going to run scripted trades and things to

make sure that the messages that are appropriate to send come

back and forth.

54

The testing of capacity will more or less come out of the pilot

that they run during the second phase of implementation where

they’re going to take a selection of hopefully representative securities—stocks and options—and see how they actually trade, what

kind of volumes are experienced in those securities during that

pilot, and that will really give them some indication of the actual

impact of decimals on capacities of systems.

Ms. CAPPS. I guess I would say, I hope we can stay in touch with

you on this issue.

Mr. OXLEY. They’re our lifeline, we’ll keep communication open.

Ms. CAPPS. Thank you very much.

Mr. OXLEY. The gentle lady’s time is expired.

The gentleman from Illinois, Mr. Shimkus.

Mr. SHIMKUS. Thank you, Mr. Chairman. Mr. Chairman, I would

like to yield back my time and listen to the next question if someone else has one before I ask.

Mr. OXLEY. Okay. I owe you one.

Mr. SHIMKUS. You owe me more than one.

Mr. OXLEY. The gentleman from New York, Mr. Engel.

Mr. ENGEL. Thank you, Mr. Chairman. I too have a lot of trepidation about this. In fact, when the committee was first looking at

this, I was cautioning and saying, why do we not let the market

regulate itself. And then I said I thought I sounded too much like

a republican.

Mr. OXLEY. Fat chance.

Mr. ENGEL. Don’t worry, Mr. Chairman, you were at the stock

exchange that is week, but I was there a few hours after you, so

I got the full report.

We know that the timeframe is troubling. I wish you would just

talk about that a little bit. The questions here have been—people

have asked about the increase in trade and quotation traffic,

there’s a fear that the computer capability won’t be able to cope

with it. I thought we were rushing into this, can you just talk a

little bit about what you’ve seen and your impressions of the computer capability and the timeframe and some of the fears that you

mention in this report? Wouldn’t we be better off to just kind of

slow this down a little bit?

Ms. D’AGOSTINO. Well, I think that industry is putting together

a plan that is very well thought out and involves phasing in to

allow for time to the members who aren’t ready to catch up. But

it will require them to due diligence and upgrade the systems that

need upgrading to meet the scheduled date. It’s not clear that adding more months to the schedule is necessarily going to solve the

capacity issue. What will solve the capacity issue is investing in capacity upgrades.

Mr. ENGEL. Well, for instance, the question Ms. Capps asked

about Nasdaq, you answered Nasdaq couldn’t make the first two,

so——

Ms. D’AGOSTINO. Right.

Mr. ENGEL. [continuing] really only having one, and you were

unsure about whether or not that would be adequate. If we had

more time and perhaps there could be more than one, wouldn’t that

just be better.

55

Ms. D’AGOSTINO. Yes, they certainly could schedule additional

tests including capacity tests which was an idea that we sort of

shared amongst ourselves, but didn’t fully develop to be honest

with you. Even during the phase-in period to March 2001. There

are a lot of things that can be done concurrently during this schedule and since the participants seem to have differing states of readiness in terms of capacity, I mean, that’s really incumbent on them

to bring themselves up to speed for the schedule.

Mr. ENGEL. Let me ask you this, a public/private partnership

was created between the Securities Industry Association and the

Securities and Exchange Commission to help implement the conversion to decimals. Can you comment on how that partnership has

been functioning as we’re moving toward implementation?

Ms. D’AGOSTINO. SEC has been monitoring and even maybe participating in a lot of the SIA—well, actually all of the SIA committee meetings. They’ve been helpful, like, for example, in the SRI

study. They provided assistance in that regard. They’ve really been

staying on top of this and I think working closely with all of the

players to try to make sure the solutions that they come to are collaborative as opposed to directive from the SEC to the industry.

Mr. GOEBEL. It’s probably worth pointing out that the SRI gained

a lot of experience from spearheading the year 2000 efforts for the

industry because it was one of the things that definitely affected

every participant in the securities markets and they established a

committee structure and timeframes and testing schedules that obviously worked very well for Y2K. They’ve in essence transferred

that sort of thinking and infrastructure to the decimals issue and

it seems to have helped it move along as fast as it has. And SEC

has been working and interacting with all these players throughout. So, it appears to be successful.

Mr. ENGEL. If you see the testimony and some of the trepidation

that some of us had in previous committee hearings it was the Y2K

problem was foremost in our minds in terms of worrying about

that, and on top of that worrying about decimalization. Obviously

we still have a long way to go.

I want to also thank the Chairman for these hearings and I look

forward to continuing to ask these questions because, you know,

again, we do have concerns. Obviously I represent New York and

it’s a very important industry to our City, and to our State and the

country, and I just worry that we may be rushing too quickly into

this.

Mr. TOWNS. Would the gentleman yield?

Mr. ENGEL. Yes, I would certainly yield.

Mr. TOWNS. I would like to associate myself with that part of

your question.

Mr. OXLEY. I would say to my good friends from New York, I

think it’s probably in the water up there that you’re nervous about

anything anyway. And we’ll deal with that as time goes by.

The gentleman from Maryland.

Mr. EHRLICH. I apologize for the lateness—my lateness. I am

particularly interested in cost conversion compared to investor savings, projections, numbers, I’m sure you all have talked about this,

but for my edification, with apologies to room, could I hear a quick

synopsis with respect to that issue?

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Ms. D’AGOSTINO. Are you asking—I just want to clarify, are you

asking what this effort is going to cost the industry——

Mr. EHRLICH. Yes.

Ms. D’AGOSTINO. [continuing] versus what the expected savings

to investors?

Mr. EHRLICH. Yes, ma’am.

Ms. D’AGOSTINO. Okay. Basically the only cost estimates we’ve

seen is a final draft study by the Tower Group that was done for

the SIA, and they estimate that decimals will cost the industry

$907 million—I’m sorry, yes, million dollars. And it’s a one-time

cost.

Mr. EHRLICH. Right.

Ms. D’AGOSTINO. Some of the studies that we’ve seen, and they have a range of estimates going from $300 million up to $2 plus

billion and there are a lot of, you know, questions about some of

those estimates. But in any case, these are annual savings expected to accrue to investors from moving to decimals. So it’s a one-time sunk cost of $907 million against annual sav- ings of anywhere from $300 million to $2 plus billion.

Mr. EHRLICH. On the savings side, what accounts for the wild

disparities in the numbers?

Ms. D’AGOSTINO. They include and exclude various factors. For

example, some of the studies might not be accounting for the fact

that a lot of trades aren’t made on spreads and various other

things. But that’s basically——

Mr. EHRLICH. Thank you. I yield back, Mr. Chairman.

Mr. OXLEY. The gentleman yields back.

The gentleman from Minnesota, Mr. Luther.

Mr. LUTHER. Thank you, Mr. Chairman. Just one quick question.

One of the areas where there’s been some concern on behalf of consumers is this whole area of principal trades where underwriters

are making markets themselves and the profits that are involved

in that. How will this impact? What impact will this have in that

area of principal trades?

Mr. GOEBEL. In our previous testimony last year, we did speak

with all the folks we tried to talk to about the impact on dealers

and we also tried to look at what impact it had had on dealers and

principal traders in the other markets. And I think what came out

of that was that it was a mixed effect. As spreads decline, they may

actually make less in trading profits, but there are generally more

trades that occur and the data that was available at that time

showed that it was a neutral impact on trading profits. For example, in Toronto, there was no change in the profits of the dealers.

Some of the other work we did found that some market makers

withdrew from making markets and securities for economic reasons, but Nasdaq reported to us after the moving sixteenths that

reduced spread similarly, additional market makers entered the

market and they saw no net effect as a result. So it seems to be

a mixed unclear impact.

Mr. LUTHER. Yield back.

Mr. OXLEY. The gentleman yields back. The Chair is now pleased

to recognize one of the leaders in this effort and another nervous

New Yorker, a gentleman from Staten Island.

Mr. FOSSELLA. I’m calm, Mr. Chairman.

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Thank you, Mr. Chairman, I’ll be very brief. I know there’s been

a lot of attention on the options market and there seems to be a

sort of geometric problem associated with the increase in the number, at least in capacity, but what about the equities markets, No.

1; to what degree is there a problem there? And second, there

seems to be a level of concern with the current conversion to decimal trading, at least as the time tables allow the number of—do

you have any other suggestions or solutions to address that concern

that you’ve raised, and others here have raised?

Ms. D’AGOSTINO. I guess, let me start with the first part of your

question. And how are the equities markets bearing or how do they

look right now at this snapshot? Right now the New York Stock

Exchange, for example, appears to be less of a risk toward successfully handling decimals trading by 2001 based on the SRI projections. But the Nasdaq, on the other hand, does not pose such a low

risk. The updated estimates from the SRI projections have caused

additional concern on the part of the Nasdaq based on our discussions just 2 days ago. So that’s where we think we see some risk

on being able to handle the capacity demands posed by this move.

But, again, I think we also said earlier that they’re having trouble processing their current demands without decimal trading. So,

there are things that the Nasdaq are going to have to do to ready

itself for decimals and also prepare itself for the increased volumes

they’re likely to experience in the coming months without decimals.

Mr. FOSSELLA. Thanks. But, if I may, there is a timetable set for

the conversion to decimals. There seems to be a risk associated

with that. I don’t know to what degree you’re posing there’s a risk.

Are there any—if you had your druthers at this point, what would

you recommend with respect to the current conversion to decimals

timetable?

Ms. D’AGOSTINO. We don’t have any issues with the current timetable. To be honest with you, I think it was set jointly with the industry. I mean, the industry basically came up with this timetable.

And to the extent that different market participants are at different states of readiness, I think that the schedule should suggest

to the participants what they need to do in the coming months to

ready themselves.

Mr. FOSSELLA. Is that possible? Can everybody step up to the

plate in your estimate? In your opinion can everybody step up to

the plate given the current timetable?

Mr. GOEBEL. The timetable that we reflect in the chart is already

a different timetable than just several months ago. Originally some

of the later phases were going to start as soon as October for unrestricted trading in decimals. So there’s already been an adjustment

and some additional time added because of the developing capacity

concerns particularly on the Nasdaq which is, you know, setting

record volumes almost daily.

The schedule also embodies various points where they’re going to

be assessing what’s going on after the initial trading in nickels, the

pilot for pennies will also provide data that will allow the SEC and

the industry participants to formulate the plan for the next step,

I think. And in January they’re—the SEC order directs the markets to either jointly submit a proposal for what the MPV should

be for the market, or allow the individual exchanges to set that.

58

But I’m sure they’ll take that into account with what their capacities are at that point.

Mr. FOSSELLA. I’ll conclude, Mr. Chairman, thank you.

Mr. OXLEY. The gentleman yields back.

Mr. SHIMKUS. Mr. Chairman, if I may?

Mr. OXLEY. The gentleman from Illinois.

Mr. SHIMKUS. Just briefly. I’m really excited about this. I think

that the players who might be lagging behind had better catch up

or they’ll lose their business base. I am excited about these projections of increase, I’m excited about the smaller margin for the traders, and more involvement by the consumer. But I understand the

concerns, we want the system to succeed and I can appreciate that.

The only question I have is—and I apologize too, I was in a meeting up here. Mr. Rhodes’ name is not on this witness list, can you

tell me who are you representing and why are you at this table?

Mr. RHODES. I’m with the General Accounting Office.

Mr. SHIMKUS. Okay. You’re just——

Mr. RHODES. I’m their chief scientist.

Mr. SHIMKUS. Okay. Thank you very much. That’s all I have, Mr.

Chairman.

Mr. OXLEY. Thank you. And the gentleman yields back.

Let me indicate to the members that this is an historic occasion

in that the markets are going to decimals. We will now join the

rest of the world in decimals, in large part because of what this

committee was able to do, and we stand ready to work with the

GAO and with the SEC and all interested parties to make certain

that this transition, just like the transition in the Y2K is seamless

and reasonably painless.

I think the gentleman from Illinois pointed out some of the real

benefits here of going to decimals. Obviously the markets at the

end of the day will be able to handle this kind of capacity and it

will be of good news for them because that’s a lot of traffic and ultimately that’s a lot of money. At the same time the consumer is

going to benefit by the narrower spreads and by functionally illiterate people like myself who don’t understand fractions to better

understand the market and I think have more confidence in the

marketplace as well. So at the end of the day working with the

SEC, with GAO, and with everybody involved, I would say to my

friends from New York, that this will be a very historic occasion

and one I think we’ll look back on with a great deal of pride in

changing how these markets work.

So we look forward to working with all of you and we will, as

I indicated earlier, have another hearing, at least one other hearing

as we move toward that July date of converting to decimals for the

first time in our history.

The Chair would ask unanimous consent that all members’ opening statements be made part of the record, and so ordered. And

with that, the committee stands adjourned.

[Whereupon, at 10:58 a.m., the subcommittee was adjourned.]

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