August 20, 1998

The Honorable Michael G. Oxley
Chairman
Subcommittee on Finance and Hazardous Materials
Committee on Commerce
2125 Rayburn House Office Building
Washington, D.C. 20515

Dear Mike:

I have been informed recently by Republican Committee staff of tentative plans to hold a Finance Subcommittee hearing on or about September 29 on bond market transparency. I am writing to express my strongest support for such a hearing.

Two weeks ago I asked the Securities and Exchange Commission to conduct a comprehensive review of the state of price transparency in our fixed income markets and to submit a report to Congress (enclosure). As you know, The Bond Market Association (the trade association that represents securities firms and banks that underwrite, trade and sell debt securities both domestically and internationally) has claimed credit for blocking a proposed Republican amendment to H.R. 1689 aimed at improving market information with respect to debt securities, and is actively lobbying the Senate to strike the important customer fee disclosure provision from H.R. 10 (enclosures). I must admit to being deeply puzzled by this opposition to providing investors with information that by any measure is material to their investment decisions and is not burdensome to provide.

The answer may lie in part in last week's Wall Street Journal article reporting on the recent study by two finance professors who have found that the scarcity of bond pricing information is leading to higher costs for investors (enclosure). I hope that we will be able to review the Warga-Hong study and question its authors as part of your planned hearing. There seem to be eerie parallels to the landmark 1994 paper by professors Christie and Schultz, that found that Nasdaq Stock Market dealers were avoiding odd-eighth quotes for stocks as a way to boost their spreads, and thus their profits at the expense of investors, and that triggered Justice Department and SEC investigations.

I appreciate what you are trying to do and I will support your efforts to address this matter for the protection of investors and to maintain the integrity and efficiency of this important segment of our markets.

Sincerely,

JOHN D. DINGELL
RANKING MEMBER

Enclosures

cc: The Honorable Tom Bliley
The Honorable Thomas J. Manton

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