We wish to comment on the reporting of odd-lot transactions for the
assessment of Section 31 fees, regardless of whether such reporting is
done manually or otherwise.
Nowhere in the various statements and proposals concerned with these
matters have we seen any data, or even estimates, of the actual amount
of money involved in relation to the costs incurred in collecting it.
Given the small size of these transactions and the low percentage level
of the fees, it seems possible to us that (at least in the case of
odd-lot trades) the amount of revenue generated may be exceeded by the
cost of reporting and collecting it. For a trade of 50 shares at, say,
$15 per share, the fee is less than 2 cents. For small firms like ours,
where a given month might see only one or two odd-lot trades, we see see
no way that our data could be reported and processed -- manually or
automatically -- for less than that amount, and therefore believe that
the reporting of such trades simply imposes excess costs on the
industry, or at least on small firms like ours, without any offsetting
net benefit to the public.
Even for larger firms and across the industry, we question whether the
total fee revenue on odd-lot transactions would leave a net 'profit' in
the form of regulatory revenue after the costs of the required
reporting, monitoring, and processing systems were paid for. Perhaps we
are wrong, but the various Notices to Members on this subject, even
those requesting comments, have not supplied any data or estimates to
help us evaluate the proposals.
We respectfully suggest that a volume threshold be set such that those
small firms who rarely have such reportable odd-lot trades are not
burdened with participation in a reporting system, whether manual or
otherwise. Absent such a threshold, the costs of collecting and
reporting our data will certainly exceed the regulatory revenue
generated, which makes no sense on any level at all.