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SAM RAYBURN, Texas, Chairman
GEORGE HUDDLESTON, Alabama

JOHN G. COOPER, Ohio
CLARENCE F. LEA, California

CARL E. MAPES, Michigan
ROBERT CROSSER, Ohio

CHARLES A. WOLVERTON, New Jersey
PARKER CORNING, New York

JAMES WOLFENDEN, Pennsylvania JACOB L. MILLIGAN, Missouri

PEHR G. HOLMES, Massachusetts
ALFRED L. BULWINKLE, North Carolina SCHUYLER MERRITT, Connecticut
VIRGIL CHAPMAN, Kentucky

B, CARROLL REECE, Tennessee
PAUL H. MALONEY, Louisiana

JAMES W. WADSWORTH, JR., New York
WILLIAM P. COLE, JR., Maryland
SAMUEL B. PETTENGILL, Indiana
EDWARD A. KELLY, Illinois
E. W. MARLAND, Oklahoma
EDWARD A. KENNEY, New Jersey
GEORGE G. SADOWSKI, Michigan
JOSEPH P. MONAGHAN, Montana
FRANCIS T. MALONEY, Connecticut

ELTON J. LAYTON, Clerk

NATIONAL SECURITIES EXCHANGES-H.R. 7852

WEDNESDAY, FEBRUARY 14, 1934

HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C. The committee met, pursuant to call, at 10 a.m. in the committee room, New House Office Building, Hon. Sam Rayburn (chairman) presiding

The CHAIRMAN. The committee will come to order.

The committee is called together to consider H.R. 7852, for at least a degree of control of stock exchanges.

For quite a while there has been a sentiment throughout the country, among very well informed people, that some degree of regulation should be enacted. The President of the United States has sent a message to Congress calling attention to this need, and a bill has been introduced to serve as a basis for consideration of the committee.

We have Commissioner Landis, of the Federal Trade Commission, here who will be the first witness.

Mr. Landis has been professor of legislation at Harvard Law School, has published numerous articles dealing with constitutional law and legal aspects of financial transactions; has served as special adviser to the Federal Trade Commission in setting up its administration of the Securities Act of 1933; and is now commissioner in charge of the Securities Division.

Commissioner Landis' statement will deal, I think, with the powers of Congress to do this thing and then some general principles with reference to the subject. After that we will have witnesses who are proponents of the bill, who will come along and discuss the bill in detail, taking it up section by section, and at that time the committee can ask such questions as they desire. Mr. Landis does not object to questions, but I thought it might be a better idea to let him proceed a while without interruption and then submit himself to examination,

(H.R. 7852, 73d Cong., 2d sess.) A BILL To provide for the registration of national securities exchanges operating in interstate and foreign

commerce and through the mails and to prevent inequitable and unfair practices on such exchanges, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SHORT TITLE

SECTION 1. This Act may be cited as the "National Securities Exchange Act of 1934."

REGULATION OF EXCHANGES USING THE CHANNELS OF INTERSTATE COMMERCE AND

MAILS NECESSARY IN THE PUBLIC INTEREST

SEC. 2. Transactions in securities as commonly conducted upon securities exchanges by means of the mails or instrumentalities of transportation or communication in interstate commerce are affected with a national public interest.

merce.

Such transactions are carried on in large volume by the public generally and by persons engaged in the business of dealing in securities in interstate commerce. The prices established and offered in such transactions are generally quoted and disseminated throughout the United States and foreign countries as a basis for determining and establishing prices at which securities are bought and sold by investors in interstate commerce and in the several States and as a basis for establishing and determining the value of securities for the purpose of calculating the amount of taxes owing to the United States and the several States by owners, buyers, and sellers of securities. Such transactions involve the use of credit and affect the financing of trade, industry, and transportation in interstate com

Such transactions give rise at times to a large volume of speculation in securities, a considerable proportion of which originates outside the States in which the exchanges are located. At times the prices of securities on such exchanges are susceptible to manipulation and control and the dissemination of such prices gives rise to excessive speculation. By reason of such manipulation and control and excessive speculation, sudden and unreasonable fluctuations in the prices of securities on such exchanges occur. Such sudden and unreasonable fluctuations in prices coupled with excessive speculation and manipulation cause alternately unreasonable expansion and unreasonable contraction of the volume of credit available for trade, transportation, and industry in interstate commerce and divert credits available from their proper channels. Such unreasonable fluctuations hinder the proper appraisal of the value of securities by investors in interstate commerce and in the several States and the fair calculation of taxes owing to the United States and the several States by owners, buyers, and sellers of securities. Such unreasonable fluctuations constitute an obstruction to and a burden upon interstate commerce and upon the national banking and Federal Reserve System. Transactions in securities upon exchanges create a flow of securities in interstate commerce to and from the places where such exchanges are located. The national credit and the safety and stability of investment are intimately related to and affected by the prices for which securities are sold and offered for sale upon exchanges. National emergencies, which produce widespread unemployment and the dislocation of trade, transportation, and industry and which burden interstate commerce and adversely affect the public welfare are precipitated, intensified, and prolonged by manipulation and control of prices and excessive speculation on exchanges. Regulation of transactions in securities conducted upon exchanges by means or instrumentalities of transportation and communication in interstate commerce or of the mails is imperative in the public interest for the protection of interstate commerce, and the national banking and Federal Reserve System.

DEFINITIONS

Sec. 3. When used in this Act, unless the context otherwise requires

1. The term "exchange" means any board, market place, exchange, chamber of commerce, or association, whether organized or unorganized, however managed or conducted, and whether incorporated or unincorporated, where, or by means of any facility of which, contracts or offers for the purchase or sale of securities or other transactions in such securities are made; and includes the members of an exchange.

2. The phrase "facility of an exchange" includes its premises, tangible or intangible property, whether on the premises or not, any right to the use of such premises or property or any service thereof, including, among other things, any system of communication to or from the exchange, by ticker or otherwise, maintained by or with the consent of the exchange, and any right of the exchange to the use of any property or service.

3. The term “member" means any person who is permitted or has a right to use in person any facility of an exchange, for the purpose of making offers or contracts for the purchase or sale of any security thereon, or any firm of which a member is a partner.

4. The term “broker" means any person engaged in a business of effecting transactions in securities for the account of others.

5. The term “dealer" means any person engaged in a business of buying and selling securities for his own account, through a broker or otherwise.

6. The term "specialist” means any person who specializes in the execution of orders in respect of any security or securities on an exchange and who commonly receives from other members of the exchange orders for execution in respect of such security or securities.

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