NEW YORK, JAN. 6 -- In its final report, the presidential commission studying the stock market's October collapse has stopped short of urging any major restructuring of the markets or regulatory agencies, recommending instead relatively mild changes intended to improve coordination among the exchanges and with regulators, sources say.
The Task Force on Market Mechanisms, which is due to report its findings Friday, says, among scores of other recommendations, that policy makers should consider turning over regulation of financial futures to the Securities and Exchange Commission from the Commodities Futures Trading Commission, which now regulates them. It also recommends that policy makers consider creating a "super-committee," with representatives from Wall Street and government, to oversee operation of the markets, according to people familiar with the document.
Despite earlier speculation, the panel does not urge an increase in capital requirements for specialists, the exchange-floor functionaries who oversee and take part in the trading of individual stocks. Trading in some stocks ground to a halt during the market collapse when some specialists ran out of capital they needed to fulfill their role as buyers of last resort.
The report also does not recommend mandatory daily limits on price swings in stock index futures or in stocks; nor, despite speculation, does it urge a merger of the SEC and the CFTC, the two federal agencies that are the primary regulators of the financial markets.
The report, prepared in a 10-week period, "doesn't strongly recommend this or that but evaluates the merits of lots of different ideas," said a person familiar with the group's conclusions. "Nobody's going to see it and say, 'Wow! I can't believe they did that.'"
The five member commission was led by Nicholas F. Brady, who is chairman of the Wall Street firm of Dillon, Read & Co. and a former U.S. senator.
The group, whose 25-member staff included academics, traders and other market professionals, was appointed by President Reagan in the panicky first days after the Oct. 19 collapse, when the Dow Jones industrial average lost 508 points. But while the collapse brought criticism of the specialist system, computerized "program trading" and other perceived market weaknesses, the relative stability of the market since then has led many to believe that major changes are not in order.
"Some of the urgency seems to have gone out of this," said A.A. Sommer, a Washington securities lawyer and former SEC commissioner. "The Dow's over 2000, and, to a lot of people, it looks like the market system held up fairly well under tremendous strain."
Since the market collapse, some have argued that specialist companies need to be required to have more capital -- perhaps in the form of guaranteed credit lines -- to maintain their ability to buy stocks in the face of sharp selling. Some have suggested that New York Stock Exchange members might contribute to a financial pool for such emergencies.
But the panel chose not to recommend new rules after hearing testimony from specialists and others that no reasonable amount of capital could have restrained the tide of sell orders on Oct. 19.
"It would be like trying to stop a fighter plane with a tennis racket," said a source. "We can't ask the specialists to go on kamikaze missions."
While there are mandatory limits on daily price swings for other commodities, market professionals warned the Brady commission that setting such limits on financial futures would only drive trading to foreign markets.