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Congress Urged To Give Markets A Chance To Reform Themselves

February 4, 1988

WASHINGTON (AP) _ The heads of four major stock and futures exchanges said Thursday that Congress should give the markets a chance to reform themselves before imposing any new regulatory structure.

Executives from the American Stock Exchange, National Association of Securities Dealers, Chicago Mercantile Exchange and Chicago Board of Trade agreed that market officials and federal regulators ought to do a better job of coordinating policy.

But they asked the Senate Banking Committee to hold off before tinkering with the apportionment of power among federal agencies.

″Increased regulatory coordination among markets is clearly needed and can be delivered within the existing regulatory framework,″ said Joseph R. Hardiman, president of the National Association of Securities Dealers, which runs the over-the-counter stock market.

The Securities and Exchange Commission regulates stock and stock options trading, the Commodity Futures Trading Commission oversees futures trading and the Federal Reserve Board sets margins - or borrowing limits - on buying stocks.

The SEC is pushing to expand its authority over futures markets and the CFTC is resisting that. Meanwhile, a presidential task force that investigated the Oct. 19 stock crash wants the Federal Reserve Board to coordinate financial market policy.

″We must .. fully revisit the regulatory scheme,″ said Kenneth R. Liebler, president of the American Stock Exchange, who, of the witnesses Thursday, called most strongly for change.

However, he said Congress should give the financial markets three to six months to agree on necessary measures.

″If that fails, then Congress ought to make clear that a single regulator, either the Fed or the SEC, ... should be chosen,″ he said.

The heads of the two futures exchanges, meanwhile, said flatly that Congress need do little in response to the crash beyond prodding the exchanges to work together.

″The expertise to achieve better coordination among the markets lies within the markets themselves,″ said Leo Melamed, chairman of the executive committee of the Chicago Mercantile Exchange. He recommended creation of a private-sector coordinating group with representatives from the exchanges and regulatory agencies.

Karsten Mahlmann, chairman of the Chicago Board of Trade, said formal SEC- CFTC cooperation procedures should be adopted, but said he saw no need to make the Federal Reserve overseer of the two other agencies.

″In our judgment, such a system of coordination would be more effective than the creation of a superagency structure,″ he said.

However, Sen. William Proxmire, D-Wis., chairman of the banking committee, said it sometimes takes federal agencies months to decide on a course of action and said that would not work in a crisis.

″Isn’t desirable at some point to have some way of resolving differences?″ he asked.

John Phelan, chairman of the New York Stock Exchange, is scheduled testify Friday, wrapping up four days of hearings. Earlier, the panel heard from Nicholas F. Brady, head of the presidential task force; Federal Reserve Chairman Alan Greenspan, SEC Chairman David S. Ruder and acting CFTC Chairman Kalo A. Hineman.

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