The Securities and Exchange Commission staff yesterday recommended numerous stock market reforms intended to diminish the wild price swings of last October that have been blamed for harming investor confidence.

The recommendations, contained in a study of the October market collapse by the agency's division of market regulation, were derived from an analysis of recent market events. SEC officials emphasized that the analysis and proposed reforms were the work of agency staff members and did not have the official support of the commission.

SEC Chairman David Ruder is scheduled to testify this morning before the Senate Banking Committee, where he may offer further insight into official commission policy on key issues. In the past, Ruder has said wild price swings may seriously damage the confidence of individual investors. He also has suggested that individuals were treated poorly by major brokerage firms in October.

"We have adopted the fundamental assumption that extreme price volatility, such as occurred during the market break, is undesirable," the SEC study said. "We believe substantially increased price volatility could, in the long run, impact the ability of U.S. corporations to raise capital efficiently through the sale of {stock}."

On the fundamental question of why the October collapse occurred, the SEC study was noncommittal.

"We may never know what precise combination of investor psychology, economic developments and trading technologies caused the events of October," the study said.

Nevertheless, the study went on to cite factors that unfavorably affected investor perceptions before the record 508-point plunge in the Dow Jones industrial average on Oct. 19. Among these factors, the study said, were a weak dollar relative to other currencies, a House Ways and Means bill that would have eliminated tax benefits in many corporate takeovers, rising interest rates, persistent budget and trade deficits and general concern about the overvaluation of stocks.

On Oct. 19, the initial collapse was the result of heavy selling by large institutional investors, the study said, adding that various "program trading" strategies involving the stock and futures markets "were a significant factor in accelerating and exacerbating the declines."

During certain times on Oct. 19, computer-directed trading strategies employed by large institutions accounted for 30 percent to 68 percent of trading in a large group of stocks listed on the New York Stock Exchange, the study said. Such trading also had a "significant indirect impact" on the markets "in the form of negative market psychology."

In the final hour of trading Oct. 19, "panic" selling in a broad range of stocks, coupled with a complete absence of buyers except at "distress" levels, caused a "free fall" in stock prices, the study said.

Among the proposed reforms in the SEC study were recommendations to:

Raise the minimum financial requirements {margins} for investors trading stock options and stock index futures contracts to cut down on extremely large individual positions and dampen excessive speculation.

Create a new contract to be traded on the floor of the NYSE that would represent the Standard & Poor's 500 average. This could diminish the wild price swings that occur when large investors buy or sell the 500 individual stocks that make up the average at the same time they buy or sell related stock index futures contracts.

Change stock index futures contract settlement from "cash" to actual share settlement. This could diminish volatility, but opposition to this proposal has been voiced in the past by the Chicago futures exchanges, which claim such a move could add to trading difficulties.

Alter trading hours so options and futures trading in advance of morning stock trading does not add to price swings and confuse investors.

Explore the need for new rules governing "short sales," which could further restrict the ability to sell borrowed shares, options and futures in anticipation of a market decline.

Develop a system for recording large, computer-directed "program trades" to aid in monitoring market performance and evaluating the need for possible changes.

Raise minimum financial requirements for specialists on the floor of the New York Stock Exchange and the American Stock Exchange, who are responsible for keeping markets orderly by buying when the public is selling and selling when the public is buying. Take rights to trade certain stocks away from the specialist firms that performed poorly in October and require specialist firms to keep a line of credit with a bank or face higher capital requirements.

Review capital requirements for brokerage firms and encourage these firms to develop numerous lending relationships with a diverse group of banks.

Review the level of NYSE personnel and facilities needed to maintain accurate reporting on trades and quotes during high-volume sessions.

Review automated trading systems at the NYSE and regional stock exchanges to determine if they are adequate on high-volume days.

Review the performance of "market makers," who are required to bid on stocks in the over-the-counter market; possibly include size of potential trades along with price quotes in automated OTC trading system and take other steps to prevent a repeat of poor October order handling.

Process trades more rapidly on the NYSE, American Stock Exchange and OTC market.

Emphasize greater international cooperation because of the global nature of stock market collapse.