WASHINGTON -- The House Energy and Commerce Committee yesterday quickly approved a bill to strengthen federal oversight and regulation of the government securities market.
The bill, which is opposed by the Treasury Department and the Federal Reserve, passed by voice vote with no dissent and now goes before the full House. No time has been set for a vote by the House.
A less sweeping measure preferred by many market participants has already cleared the Senate.
The House panel's bill was originally approved in April by the energy committee's telecommunications and finance subcommittee, chaired by Rep. Edward Markey, D-Mass., and would extend the Treasury's existing rulemaking authority over the government market until Oct 1, 1997.
The bill would strengthen market surveillance by giving the Treasury authority to write rules requiring all firms with large positions in the cash, when-issued, and refinancing markets to report their positions to regulators.
It would also allow the National Association of Securities Dealers to write sales practice rules for members who are active in the government securities market.
But the measure also contains more controversial provisions that would give the Securities and Exchange Commission broad powers to oversee the market in response to the Salomon Brothers Inc. bidding abuses that recently led the commission to impose fines and sanctions of $290 million.
It would give the SEC authority to prescribe rules for dealers and brokers to maintain records of executed trades for use in federal law enforcement, and would require firms to set up written policies and procedures aimed at preventing fraud.
The measure would also grant the SEC backstop authority to provide information on prices to the market -- the controversial price transparency provision -- in the event federal authorities determine GOVPX and other private information services fail to do the job.
Micah Green, executed director of the Public Securities Association, said his organization will continue to press for a bill that is more to the industry's liking. The PSA favors the Senate version of the legislation, which requires only an 18-month study of price transparency.
The Energy and Commerce Committee bill "still has its shortcomings," Mr. Green said, and he called the provision giving the SEC authority over price transparency "still very broad."
Treasury and Fed officials last week urged the committee's chairman, John Dingell, D-Mich., not to adopt the bill. They said the measure is overly restrictive, and they warned it could hamper market liquidity and force the govenment to pay more for borrowing in Treasury auctions.