The announcement by the Securities and Exchange Commission on Tuesday of a major investigation of the options markets appeared to have little noticeable effect on business yesterday.
Trading volume was high on the Chicago Board Options Exchange, the major trading center, though prices were sharply lower, reflecting the drop in stock prices.
Most brokers were philosophical about the announcement of the SEC probe, noting that it formalized what was first made public last July.
As Gerald Goldsmith, senior vice president of E.F. Hutton in New York, put it: "The SEC just changed from suit to a tuxedo."
In its Tuesday announcement, the commission said it was looking into possible "manipulative and deceptive practices" in the trading and selling of options.
Among the areas being probed:
Manipulation of the prices of an underlying security "for the purpose of pegging or depressing the value of its related option."
Lapses in surveillance and other regulatory programs by options exchanges to detect and deter questionable practices.
The SEC continued the freeze initiated last July, on expanding options classes offered by the five exchanges. It also will not act on applications by the New York Stock Exchange and the National Association of Securities Dealers to begin option trading operations until it completes its investigation.
In San Francisco, Frederick Gans, a vice president of Smith Barney Harris Upham & Co., echoed others in the options business when he said": "I personally was happy to see the thing come to a head. I got very little reaction from my clients."
Apparently, the SEC decided to formalize its investigation after it was pressed - and threatened with legal action - by the Midwest Stock Exchange.
Others voiced the hope that the SEC would perform its investigation quickly and let the options industry continue on its fantastic expansion.