The game of Wall Street will be played a little differently this year.
A few of the rules have already been changed as the result of the worst collapse in the history of the stock and commodity markets, but Congress has yet to draft -- let alone debate at appropriate length -- any major legislative remedies for whatever ails the markets.
The most important immediate changes are likely to come as a result of new game plans being developed by individual and institutional investors, who are abandoning tactics that proved especially vulnerable to what Wall Streeters call "downside risk."
All but extinct is the computerized trading practice known as portfolio insurance, which was supposed to automatically buckle the seat belts when a collapse was impending. Because portfolio insurance provided far less protection than expected, the big institutional investors who used it have largely stopped.
Portfolio insurance required selling stock index futures contracts when stock prices started to fall. Profits on the futures were supposed to offset losses on the stock portfolio, but on Black Monday prices fell so fast that no one would buy the futures.
Knowing that portfolio insurance won't work when it is needed most, institutional investors are being forced to change their tactics. Without insurance against a drop in the market, they may put less money into stocks and that alone could have a negative impact on stock prices.
As institutions abandon portfolio insurance, they will become less of a factor in stock index futures, which could impact the way that market behaves, perhaps reducing volatility.
Critics of portfolio insurance say its demise is an example of how markets correct their own problems without new government regulation.
Also cited as an example of successful self-regulation in the wake of the Oct. 19 collapse are changes in the rules of the stock index futures already implemented by the Chicago Mercantile Exchange, which handles about three-quarters of the index futures trading.
Stock index futures are contracts to buy or sell imaginary baskets of stocks for delivery at some future date.
The exchange has more than doubled the margin, or down payment, needed to play the market, requiring a minimum investment of $20,000 to buy a contract for a basket of stocks represented by the Standard & Poors 500 Stock Index, which closely mirrors broad stock market trends.
The higher margins probably will discourage some investors from trading index futures and should protect those who continue to participate in that market against losses by making more cash available to cover the debts of those who lose money.
Many brokerage houses have also tightened their internal rules on customers who trade index futures and options, further discouraging small investors from taking big risks in those markets.
By raising margins on its own, the CME has partially preempted critics such as former attorney General Nicholas deB. Katzenbach, who studied the relationship between the futures and stock markets for the New York Stock Exchange.
Katzenbach's report last week recommended raising margin requirements on index futures, but stopped short of endorsing other proposals to have margins set by the Federal Reserve Board. Bills to let the Federal Reserve set margins on index futures have been introduced in the House by Rep. Jim Leach (R-Iowa) and in the Senate by Sen. John Heinz (R-Pa.).
Katzenbach dismissed another step taken by the CME -- setting daily limits on changes in the price of stock index futures.
"We cannot see how such limits will solve the problems we believe exist," his report said. "They may represent well-intentioned efforts to reduce volatility and perhaps can partially succeed, but do not go to the heart of the problem" of linkages between the Chicago and New York financial markets.
Mercantile Exchange officials have suggested limiting daily price swings in the stock market, but that is one of many regulatory proposals that are going to have to be debated widely before being adopted and are not likely to change the way the market works this year.
The most significant regulatory change under discussion calls for giving the Securities and Exchange Commission responsibility for stock index futures that are now regulated by the Commodity Futures Trading Commission.
The options on the table include simply shifting all index futures to the SEC, creating some sort of joint or interagency oversight group for stock index investments or simply merging the SEC and CFTC into a single market regulatory agency.
Though the SEC has a reputation as a tougher regulator than the CFTC, shifting jurisdiction for index futures would do more than just change the name on the badges of stock index futures police.
Historically, securities laws have provided protections for small investors that are not included in federal commodity laws.
Stockbrokers, for example, are required by the SEC's "suitability rule" to recommend investments that are appropriate for clients, steering them away from risky business if they cannot afford to lose money. Commodity brokers have no such legal obligation to turn customers away from such volatile investments as stock index futures.
Other regulatory responses to the stock market crash are expected to be made in the next few months, as the various Black Monday studies are completed.
Though the margin-setting measures are the only ones introduced in Congress so far, other changes in the federal rules of the markets are probably inevitable.
"I can't believe everybody is going to walk away from it and say nothing needs to be done," says former SEC member A.A. Sommer Jr., who is working on a report for the National Association of Securities Dealers.
"There were enough problems that emerged and were seen so that Congress and the SEC and the self-regulators are going to pursue it."