The Securities and Exchange Commission said yesterday that the 18-month freeze on options trading could be lifted within six months if the securities industry takes certain remedial steps.

On Feb. 15, an SEC staff report cited mounting charges of fraud and manipulation in stock option trading and called for tougher regulation of the fast-growing iptions market.

In accordance with the 800-page staff report, the commission placed the burden of reform on the securities industry -- the exchanges and the National Association of Securities Dealers.

"If necessary, the commission is prepared to act on its own initiative to implement the recommendations of the (staff) options study," the SEC said in a release issued yesterday.

An option is a contract to buy or sell a certain stock within a specific period of time, regardless of whether the price of that stock moves up or down in that period.

Even with the freeze, the options market has experienced tremendous growth. For example, when the Chicago Board Options Exchange first began trading options in 1973, daily trading volume was 6,500 contracts, but average daily volume last month on the CBOE was 151,000. This volume can be expected to increase markedly once the freeze is lifted.

One reason stock options are so popular is that they require a smaller capital investment than an outright purchase of stock. Also, brokerage commissions are lower.

The SEC calls for the self-regulatory organizations to work together to develop uniform rules for trading options.

The SEC asks the self-regulators to submit within 90 days plans for curbing sales abuses. The staff report cited numerous sales abuses such as a case in which stock options were sold to a "mentally unstable" person and several instances in which contracts were sold to customers who did not speak English.

The SEC calls on the industry to administer examinations to options salespersons to make sure they understand what they are selling.

The staff report said: "Often, inadequately trained registered representatives recommended options strategies to their customers which it is doubtful that the salesmen, much less the customer, understood."