Exchanges urged to ease rules, increase flexibility

April 12, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK -- Flickering screens on around the clock rather than hoarse shouts from the pits during daylight hours is the future for the securities business, and all stock exchanges must accept it if they are to survive, the head of the National Association of Securities Dealers said yesterday.

Joseph Hardiman, former chief operating officer of Alex. Brown & Sons and a Baltimore resident, made his comments to the financial press here in response to assertions by William Donaldson, chief executive of the still-dominant but fading New York Stock Exchange, that new forms of trading had "fractionalized" the securities markets, at great cost to the country in terms of oversight and fairness.

Unlike the computerized market that Mr. Hardiman heads, known as the NASDAQ, the older New York Stock Exchange continues to be based on a single trading floor with computers acting only to assist an individual who conducts a continuous auction.

"As much as you'd like to have it [a centralized market], you won't get it," said Mr. Hardiman. "I think what Bill [Mr. Donaldson] was suggesting was 'protect me from the competition.' "

Mr. Hardiman's enthusiasm for competition comes as the NASDAQ, the nation's primary over-the-counter market, for the first time has been more active for two consecutive weeks than the New York Stock Exchange, an institution that until recently unequivocally dominated global equity trading.

Shares of small company stocks,the backbone of the NASDAQ market, have surged 50 percent in price since October and 30 percent since the beginning of the year. Trading volume is ahead of its 1987 peak level, averaging about 161 million shares a day.

The surge is the result of the return of the individual investor, Mr. Hardiman said.

In addition to asserting the inevitable rise of a technology-based market, Mr. Hardiman echoed comments made in recent weeks by Mr. Donaldson and American Stock Exchange President James Jones that U.S. security regulations must be made flexible enough to permit trading of major international companies, many of which are excluded from domestic markets because of strict accounting and disclosure rules.

Already, the NASD is preparing to launch a United Kingdom-based international version of its U.S. systems.

Mr. Hardiman said he expects the system to be approved by regulators by June.

In a few years, he said, 18- to 20-hour trading days will be the norm, with most of the activity occurring in the country with the best systems and regulatory environments. While the necessary evolution could take place in the United States, he said, it may not.

"It is possible for the star of all the U.S. markets to fade . . . if progressive rules and regulations do not allow our markets to compete fairly for international issues and order flow," he said.

Mr. Hardiman added that activity in the NASDAQ system would gravitate to the location that was more amenable.

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