The Securities and Exchange Commission should regulate both stocks and futures trading to help restore investor confidence lost after last year's stock market crash, Congress was told last week.
The Securities Industry Association (SIA) and Shearson Lehman Hutton Inc. made the recommendations at a House Telecommunications and Finance subcommittee hearing on stock market reforms."The securities markets and securities-related futures markets are so interrelated that they should be regulated by one regulator. This should be accomplished by transfering to the SEC jurisdiction over the securities-related portion of the futures markets," said the SIA, the trade association for the securities industry.
The Commodity Futures Trading Commission now has jurisdiction over futures trading.
Shearson Lehman President Jeffery Lane made a similar suggestion to give the SEC jurisdiction over stocks, stock options and stock index futures and said strong action was needed to restore investor confidence shattered by last October's 500-point drop in the Dow Jones Industrial Average.
"The events of October have been likened to a heart attack that delivered a clear warning. It gave us a grace period to find the correct diagnosis and prescribe the right medicine. If our diagnosis is too narrow, the prescription will be incomplete at best," Lane said.
Some stock market experts have blamed sharp swings in the securities averages on computer-based trading programs which take advantage of differences between stock prices and the prices of stock futures to make quick profits.
Subcommittee chairman Edward Markey said volatility must be controlled before individual investors will feel confident about returning to the stock market following a 140-point market drop on Jan. 8 and a 101-point decline on April 14.
"Not until we treat the root causes of market volatility, rather than the symptoms, will the individual investor feel it is safe to return to the market," said Markey, a Massachusetts Democrat