NEW YORK (AP) _ Reports of the individual investor's disappearance from the stock market in recent years have been greatly exaggerated, a Wall Street trade group says.

According to data compiled for the first time by the Securities Industry Association, ''retail'' customers of brokerage firms accounted for 37.8 percent of trading activity on the New York Stock Exchange in May and June.

At the American Stock Exchange, individuals did 64.9 percent of the public trading in May, and 59.5 percent in June.

Much has been said and written over the past two decades about the rise to dominance in the marketplace of investing institutions like pension funds, insurance companies, mutual funds and other pools of money managed by full- time professionals.

As block trades of 10,000 shares or more came to make up more than half of all activity at the NYSE, the institutions' increasing importance was underscored.

In fact, it has been widely assumed on Wall Street that individual investors have shared very little in the bounties of the bull market over the past three years. ''It's all institutional,'' said one mutual fund manager in a casual conversation the other day.

So the SIA's figures are striking. ''It surprised me in the beginning,'' acknowledged Jeffrey Schaefer, the association's director of research. ''The relative impact of individual participation is more than some people thought.''

Detailed information on the activity of individual and institutional investors has been sketchy in the past. The SIA said it was able to get better data on institutional trading as a result of recently adopted rules covering the processing of the institutions' transactions. It plans to report the ''Investor Index'' readings regularly.

Past efforts to estimate the role of institutions and individuals in the market have generally relied on the size of reported transactions. Whoever is doing the estimating might, for example, arbitrarily ascribe all trades of less than 1,000 to individuals, and those of 1,000 or more to institutions.

In a report on its work, the SIA said the accuracy of those estimates is ''highly questionable for several reasons.''

An NYSE survey in 1980 found that slightly more than half of individuals' trading came in transactions of more than 900 shares, the SIA said. In addition, almost 11 percent of institutional volume came in trades of 900 shares or less.

Participants in the exchange marketplaces actually make up three groups. Aside from the ''public'' sector that includes both individuals and institutions, there are exchange members trading with their own money. These members report their activity to the exchanges.

The SIA's figures show the following breakdowns:

On the NYSE, May volume was 46.4 percent institutional, 28.3 percent retail, and 25.3 percent member activity. June was 46 percent institutional, 28 percent retail, and 26.1 percent member activity (the extra 0.1 percent evidently due to rounding).

On the Amex, May volume was 28.4 percent institutional, 52.5 percent retail, and 19.1 percent member activity. June was 33.1 percent institutional, 48.6 percent retail, and 19 percent member activity.