House Finance Subcommittee Holds Hearing on Financial Databases

(July 1, 1999) The House Commerce Committee's Subcommittee on Finance held a hearing on Wednesday, June 30 on HR 1858, the Consumer and Investor Access to Information Act. The Judiciary Committee has already passed its own database protection bill, HR 354.

Related Pages

Summary of Database Protection Bills.
HR 1858 IH (Commerce Committee).
HR 354 IH (Judiciary Committee).
Opening Statement of Rep. Oxley.

HR 1858 IH and HR 354 are competing bills which both deal with protecting databases from piracy. HR 1858, which is sponsored by members of the Commerce Committee, basically provides that databases will remain legally unprotected, with the one exception of real time stock market data.

The hearing before the Commerce Committee's Subcommittee on Finance dealt solely with Title II of the bill, which deals with this real time market data. This is the stock price information developed and then sold by exchanges, such as the New York Stock Exchange. The NYSE then sells this real time data to brokerages and others. This is a major source of revenue for the exchanges. Currently, there is no law preventing the piracy of this data.

After 15 minutes, this data is not longer considered "real time." With the growth of online brokerages, and individuals making their own investment decisions, access to this data is becoming increasingly important.

On June15 , the Telecommunications Subcommittee held a hearing on the rest of the bill.

The other bill, HR 354, the Collections of Information Antipiracy Act, creates a new Lanham Act type protection for those who develop databases. It is sponsored by members of the Judiciary Committee. Indeed, it was approved by that Committee on May 25.

Rep. Oxley

Rep. Mike Oxley (R-OH), the Chairman of the Finance Subcommittee, presided at the hearing. He is also a cosponsor of the bill. He said in his opening statement that "On-line investing has empowered investors and given them greater personal control over their finances. Only a few years ago, information that investors can get today at the click of a mouse was available only to professionals like brokers and institutions. As a result of not only on-line brokerages, but also the development of numerous on-line sites that provide financial information to consumers, average investors have ready access to information that is vital to their financial well-being."

Rep. Oxley stated that "HR 1858 is designed to preserve that access. And the central component of the information that investors need is the price of what they are buying or selling - namely stock prices."

More specifically, HR 1858 amends the Securities Exchange Act of 1934 to provide a civil tort remedy for misappropriation of real time market data. 

It provides that "any person who obtains directly or indirectly from a market information processor real-time market information, and directly or indirectly sells, distributes or redistributes, or otherwise disseminates such real-time market information, without the authorization of the market information processor, shall be liable to that market information processor ..."

It further provides that "Any person who is injured by a violation [of this prohibition] may bring a civil action for such a violation in an appropriate United States district court ..." The remedies available include injunctive relief, monetary damages, and disgorgement of profits.

The Commerce Committee is displaying a high level of unity and support for the Commerce Committee bill. Most of the leadership is cosponsoring the bill. After two hearings, while some members have not endorsed the bill, none have openly opposed it.

Rep. Edolphus Towns (D-NY), the ranking minority member of the Subcommittee, has not been active in the past on electronic commerce issues. Yet he is a cosponsor of the bill. At Wednesday's hearing he aligned himself with Rep. Oxley. Rep. Towns is a liberal Democrat from Brooklyn. Rep. Oxley is a conservative Republican from western Ohio. Rep. Towns joked at the outset: "The only time I will ever do this, I would like to associate myself with your remarks."

Rep. Tom Bliley (R-VA), the Chairman of the Commerce Committee, was not present for the hearing, but nevertheless released a statement. He is the lead sponsor of HR 1858. "More and more investors have adopted a self-directed approach to investing, doing so through online brokers. The ease of access to information, as well as the quality and quantity of that information, has allowed them to become better educated investors. The efficiencies of technology have flowed down to the average investor with tangible benefits, as evidenced by the low cost of trading commissions today. But the most notable benefit is the access to real time market information that was previously only available to market professionals."

Rep. Bliley continued, "H.R. 1858 protects the conduits of this vital information -- namely the exchanges and other disseminators of stock prices -- by providing a new federal remedy against pirates and hackers who undermine the integrity and value of the databases they publish."

What They Said
Statements of Witnesses

(Links to HTML documents in
Commerce Committee web site)

Annette Nazareth, SEC
Michael Hogan, DLJdirect
Joe Ricketts, Ameritrade
Stuart Bell, Bloomberg
Carrie Dwyer, Charles Schwab
Dean Furbush, NASD
Richard Bernard, NYSE

The Subcommittee heard from seven witnesses. First, Annette Nazareth, of the Securities and Exchange Commission, testified that the SEC supports the bill.

Currently, the SEC has regulatory authority regarding market data. It can ensure reasonable and non-discriminatory access, but not regulate prices. HR 1858 would not change the role of the SEC. Also, in response to questions from the subcommittee, all of the witnesses opposed any price regulation.

Richard Bernard, EVP and General Counsel of the New York Stock Exchange, also testified in support of the bill. "The Exchange's product is real-time market information. In 1998, revenues from market data contributed $112 million to Exchange revenues, an amount that represents 15% of the Exchange's total revenues. In 1998, NYSE spent $202 million on systems to support the production and distribution of market data. ..."

He continued that "The information superhighway could provide enterprising swindlers with a new forum for fraud. Given that Federal securities laws are silent on the data piracy, H.R. 1858 provides the framework for the development of a weapon for the private sector to fight piracy."

Michael Hogan, SVP and General Counsel of DLJdirect, also testified in favor of the bill. he stated that "...information is an essential part of our service. And "real-time" quote information is its most central component. An online investor, whether considering an investment, logging in to monitor an account balance, or checking on a news story, wants to know the price of the stock in question at that moment in time."

Representatives from online brokerages Charles Schwab and Ameritrade also testified. 

Rep. Ed

Rep. Ed Markey (D-MA) addressed the competition between the Commerce Committee and the Judiciary Committee on database protection legislation.

"The discussion that we are having really emanates from these different perspectives which are created by the historical bifurcation of jurisdictions. The Judiciary Committee looks at issues through the copyright perspective, and they are very strongly protective of that perspective. We look at all of these issues, understandably, from the perspective of the telecommunications revolution -- this effort spanning a number of technologies that are created -- that the entrepreneurial activity that we try to generate as a result of that revolution."

"Now, at a certain point in time there is a convergence. And, the balance that we are going to have to strike here is one that pays due respect to each one of those perspectives of trying to cure, move in the direction that ensures this rapid expansion of innovation in the technology sector."

Financial Disclosure by Rep. Bilbray

Rep. Brian Bilbray disclosed at the hearing this his 12 year old daughter makes investment decisions for the Bilbray family. After listening to a witness explain the meaning of "real time," he stated: "I'll let my daughter know that. This information is really for our 12 year old sitting in San Diego, who does all the investments for the family, I want you to know, for the last two years. And frankly, we don't argue with success, Mr. Chairman. If she can continue to make what she has been making for the family, she's going to continue for a long time."

"The Committee is going to have to work something out here ultimately with the Judiciary Committee," said Rep. Markey.

The hearing on HR 1858 was held at the same time as another hearing. The Telecommunications Subcommittee held a hearing two floors below on reauthorization of the Public Broadcasting Corp. Several Representatives who are members of both subcommittees attended the PBC hearing, and then came to the later part of the hearing on HR 1858.

The members of the Subcommittee who participated in all or part of the hearing on HR 1858 included, Thomas Barrett (D-WI), Brian Bilbray (R-CA), Lois Capps (D-CA), Diane DeGette (D-CO), Elliot Engel (D-NY), Vito Fossella (R-NY), Bill Luther (D-MN), Ed Markey (D-MA), Mike Oxley (R-OH), John Shimkus (R-IL), and Edolphus Towns (D-NY).