In his nearly 30 years in the securities business, Raymond A. Mason says he never has seen investors as upset as they are now.

"I can never remember a period when people would stop me on the street," as they have recently, "or brokers would call me saying, `What can we do?"' says Mason, chief executive of Legg Mason Wood Walker Inc., a Baltimore-based investment house and regional stock brokerage.What makes Mason's clients and brokers so anxious? The recent volatility in the market. One-day movements of 40 or 50 points in the Dow Jones industrial average, once seen as extraordinary, have become commonplace. The market this year already has seen two days when the Dow plunged more than 100 points.

Particularly troubling was Friday, Jan. 8, when the widely followed index fell 140 points in an afternoon selloff for no apparent reason. Unlike the April 14 drop of 101 points, which was attributed to disappointing figures on the trade deficit, the January drop came on a quiet day when there was very little news.

Brokerage houses across the board have been hurt by the investor skittishness, with many reporting declines in first-quarter commission revenue. But particularly hard hit have been regional firms whose bread and butter is retail sales of securities, unlike diversified investment houses whose losses in commission revenue may have been offset by gains in other areas such as arbitrage or investment banking.

Brokerage managers blame the loss of investor confidence on volatility. Many of them see program trading, through which Wall Street investment houses dump vast amounts of stock all at once, as the primary cause of that volatility.

"The public feels the odds of the game have been changed," Mason says. "They feel it's totally out of their control, that they're playing in a casino." Earnings at his firm dropped 37 percent in the first quarter, to $1.89 million.

At the center of the controversy is a raging debate over the impact on the stock market of trading in futures contracts that are based on an index of stock prices.

Through a practice known as index arbitrage, investment houses can profit on the occasional spreads between the value of the futures and that of the underlying stocks by buying the futures and simultaneously selling the stocks, or vice versa, driving the price of the stocks down or up.

Computer programs have been developed to trigger such trades automatically. The New York Stock Exchange has asked its member firms to curb the use of computers to execute buy and sell orders when the Dow moves more than 50 points in a day, but many analysts say that does little to reduce volatility because floor traders continue to deliver the sell orders by hand.

Stung by criticism of the practice, five major Wall Street firms announced last week they plan to curb their use of program trading. Industry officials say it will be some time before investor reaction to the move can be judged, but they are hopeful it will help restore confidence.

Proponents of the strategy argue it makes the market more efficient, since futures prices send a signal to the stock market as to which way the prices of stocks are heading. They say such programs attract more capital to the markets and enhance their liquidity.

But detractors of the programs say they are undermining public confidence in the markets by making individual investors think the markets are rigged to benefit the large institutions executing the programs.

"People are saying, `I'm not going to buy stocks because the chances are good I could lose my shirt in the next 20 days," says Hugh Johnson of First Albany Corp. in Albany, N.Y.

First Albany derives about 80 percent of its revenue from retail brokerage commissions, Johnson says. As a result, revenue in the first quarter fell 26 percent from a year earlier, to $14.18 million, while earnings dropped to $391,000 from $1.47 million a year ago.

"Our clients are very, very turned off about the volatility in the market," says Thomas Herzig of P.R. Herzig Co. in New York. "They don't want to be at the mercy of the professionals."

Many of his clients have decided to sell stocks to lessen their exposure to the market, even though some of the stocks they are selling are relatively cheap, Herzig says. "We advise people to hold onto their stocks, but there's a lot of anxiety out there," he says. "Program trading just makes it worse."

Brokers who urge their clients to hold onto stocks for the long term and ignore day-to-day swings in the market are finding it harder to persuade investors to stick to that discipline when intra-day swings are so large, says Stephen Chapman-Schroeder of Wheat, First Securities Inc., a regional firm based in Richmond, Va.

"The average person in the street feels there's less ability to impact the market as an individual investor," Chapman-Schroeder says. "There's no question there's been a slowdown in (stock commission) revenue across the board."

Brokers are meeting the challenge by "staying in close touch with their customers and presenting more conservative investment advice," says John Bachmann, chief executive of Edward D. Jones and Co. of St. Louis and chairman of the Securities Industry Association.

Rather than push primarily stocks, brokers are tending to recommend alternatives such as bonds, mutual funds or certificates of deposit, Jones says. Certificates of deposit can be purchased directly from a bank without paying a commission to a broker, but brokers can help clients find higher yields from out-of-town banks to help justify the commission.

Jones, who testified before the Senate and House banking committees in April on the volatility problem, says the solution lies in bringing regulation of stock futures contracts under the jurisdiction of the federal Securities and Exchange Commission. Currently the index futures are regulated by the Commodity Futures Trading Commission, which oversees all futures trading and is strongly resisting any change in that arrangement.

Acknowledging that his proposal is considered "politically impracticable," Jones insists the stock and futures markets "are in reality a single market. Accordingly, we believe that unified regulation is the correct course of action."

Jones also recommends the Federal Reserve Board be given authority to set margin requirements, or the amount an investor must put down. Margin requirements are lower for futures than for stocks, raising concerns that speculative investors can manipulate the futures market with a smaller amount of cash.