[House Hearing, 106 Congress]
[From the U.S. Government Printing Office]




                               before the

                            SUBCOMMITTEE ON

                                 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

62-974 CC                   WASHINGTON : 2000

                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    TOM SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   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     EDOLPHUS TOWNS, New York
  Vice Chairman                      PETER DEUTSCH, Florida
PAUL E. GILLMOR, Ohio                BART STUPAK, Michigan
JAMES C. GREENWOOD, Pennsylvania     ELIOT L. ENGEL, New York
CHRISTOPHER COX, California          DIANA DeGETTE, Colorado
STEVE LARGENT, Oklahoma              THOMAS M. BARRETT, Wisconsin
BRIAN P. BILBRAY, California         BILL LUTHER, Minnesota
GREG GANSKE, Iowa                    LOIS CAPPS, California
RICK LAZIO, New York                 EDWARD J. MARKEY, Massachusetts
JOHN SHIMKUS, Illinois               RALPH M. HALL, Texas
HEATHER WILSON, New Mexico           FRANK PALLONE, Jr., New Jersey
JOHN B. SHADEGG, Arizona             BOBBY L. RUSH, Illinois
VITO FOSSELLA, New York              JOHN D. DINGELL, Michigan,
ROY BLUNT, Missouri                    (Ex Officio)
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)


                            C O N T E N T S


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. 
    DeFoe, Philip D., letter dated April 10, 2000, to Hon. John 
    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, 
        Letter dated March 2, 2000, to William J. Brodsky, 
        Letter dated March 2, 2000, to Philip D. DeFoe, 
        Letter dated March 2, 2000, to Meyer S. Frucher, 
        Letter dated March 2, 2000, to Salvatore F. Sodano, 
        Letter dated March 2, 2000, to David Krell, requesting 
    Krell, David, letter dated March 30, 2000, to Hon. John D. 
    Sodano, Salvatore F., letter dated March 31, 2000, to Hon. 





                        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 
    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.
    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 
    And with that the Chair yields back and is now pleased to 
recognize the ranking member, the gentleman from New York, Mr. 
    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 
     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 
12\1/2\ 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 
    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.
    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.


    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 exchanges 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.
    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 
    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 
    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 
    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 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 
    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 
    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 
    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.
    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.
    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. 
    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 
    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?
    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 
    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 
    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.
    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 
    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, 
    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.
    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 
    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 
    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?
    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 
    So it's a one-time sunk cost of $907 million against annual 
savings 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.
    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. 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.]
    [Additional material submitted for the record follows:]

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