The chairman of the New York and American Stock Exchange told a congressional hearing yesterday they oppose the removal of off-board trading restrictions and support the establishment of a national securities market system based on the existing exchanges.

Amex chairman Paul Kolton told members of the House Interstate and Foreign Commerce subcommittee that removal of off-board restraints would significantly undermine the auction market process. He warned that it would "impact adversely" on investors and could make it impossible to create the national market system manadated by Congress in the Securities Acts amendments of 1975.

The Securities and Exchange Commission has tentatively set Jan. 1 as the deadline for removal by the exchanges of all remaining off-board trading restrictions. Earlier this month, 19 major brokerage firms petitioned the SEC to retain the rules which prohibit member firms from making markets in listed stocks away from any exchange floor.

Kolton said, "If the commission in effect withdraws its support for the concept of an auction market system, this constitutes a major change in national policy - a step which we do no believe Congress intended in the 1975 legislation."

He said the removal of all restraints is, in effect, a signal to member firms to prepare for the transition to dealer markets.

"We believe that such a drastic measure has the potential for cripling the auction market system and, rather than foster the completion of a national market system, may instead make it impossible to achieve," Kolton said.

William M. Batten, NYSE chairman, said the initiation of off-board trading in tandem with existing exchanges could lead to "possible conflicts of interest" and "problems of disclosure, surveillance and protection."

"For example, what prices are to be disclosed? How are dealers' in-house trades to be surveyed and what assurances will exist that trades are being reported promptly on the consolidated tape and in the sequence in which they were executed by the individual dealer offices?" he asked.

Batten said a computerized market-to-market network would have sufficient built-in safeguards to prevent abuses in trades on exchage linked to a national securities system.

He called for the organization of an intermarket association comprising representatives of the various exchanges and completion of detailed plans fortheir intermarket communications links.