The stock market, long a familiar place for individual investors, has become a bewildering arena of unprecedented risk because of the power of a handful of large, institutional investment firms, a presidential commission concluded last week.

That sense of individual vulnerability hangs over the stock market today, following a steep drop in stock prices last Friday attributed to selling by institutional investors. To some market participants, Friday's market plunge sounded like a troubling echo of last October, when a sharp decline in stock prices on Friday, Oct. 16, set the stage for the following Monday's 508-point drop in the Dow Jones Industrial Average.

In today's trading on the Tokyo Stock Exchange, the market shed 294.13 points with the Nikkei Stock Average closing at 22,578.43.

In Hong Kong, the Hang Seng index, Hong Kong's leading stock indicator, lost 72.61 points, or 3 percent of its value, to reach 2,388.06 in the first 15 minutes of trading.

"Our little clients are calling in and saying they are scared to death of another 300- to 400-point drop in the stock market," said David Doyal, an analyst with Intercal Securities. "What all of us are really scared of is what program trading can do to the stock market on Monday. Everybody is going to be breathlessly waiting to see what will happen."

Dillon Read investment banker Nicholas F. Brady, who headed the presidential commission that examined the October collapse, was more optimistic.

"I don't see a repeat on the Friday-to-Monday kind of action we had on the 19th of October," Brady said on NBC's "Meet the Press."

But New York Stock Exchange Chairman John J. Phelan Jr. warned on the news show that another broad market collapse could occur at some point. "I'm not confident it won't happen again."

The Brady commission attributed the fury of the 508-point plunge on Oct. 19 to the actions of a few major firms, whose actions have made markets much more vulnerable to huge swings in stock prices.

"I think the fact that a handful of large investors can have this kind of effect on the markets is unsettling," Brady said. "The public has to look at it and say to themselves, 'This is a strange performance going on and what chance do I have?'"

The greatly increased volatility of stock prices was demonstrated last Friday when computer-directed selling by large investment firms helped push the Dow Jones industrial average down 140.59 points, or nearly 7 percent. The decline -- the third-biggest daily point loss ever for the blue-chip average on the New York Stock Exchange -- appeared to have little or nothing to do with individual investors or their confidence in the future of the market and the nation's economy.

Phelan said he, too, was concerned about the ability of the institutional investors to trigger huge swings in daily stock prices. "If in fact 12 to 15 institutions can do that {drive a collapse}, what happens if 25 or 30 decide to do that? I don't think we can rest assured that we have everything in place that will protect the public."

The Brady commission did not name the institutional investors it cited for the heavy selling, having promised anonymity in return for their cooperation. The commission report said one major mutual fund group accounted for $500 million in sales, or about 25 percent of the total NYSE selling during the first half hour of Oct. 19. Previous press reports have identified Fidelity Investments, a Boston-based mutual fund manager, and a San Francisco division of Wells Fargo Bank as heavy sellers on Oct. 19.

The conclusion of the Brady report was that stocks, stock options and futures traded on separate exchanges have become so closely linked they should be viewed as "one market" and regulated on key issues by one agency, probably the Federal Reserve Board. Those key issues would include trading halts and minimum financial requirements, or margins, for purchasing stocks and futures.

However, the White House has distanced itself from the report and, barring another market collapse, congressional sources do not expect swift action on its recommendations.

Just as the report analyzed the unifying ties among separate exchanges and financial instruments, an analysis of the separate sections of the report itself yields a single theme: A stock market once regarded by individual investors as a stable place to invest in the future of American business has come to resemble the more speculative futures and commodity markets.

And on the worst day in its history last October, the stock market was driven down by a strikingly small number of large institutional investors, such as pension funds, a factor that illustrates "the vulnerability of the financial system and the need for remedial action," the report said.

An old saying among individual investors is that the stock market is a market of stocks, meaning that profits and losses are determined by the performance of individual stocks, rather than the overall market. But the increasing use of futures in stock trading strategies by institutional investors is obscuring the distinction between individual stocks and the market as a whole, according to the Brady report.

"Underlying many of these strategies is the ability to use stock index futures to trade the entire 'stock market' as if it were a single commodity," the report said. "Futures contracts make it possible to do this quickly, efficiently and cheaply. However, to the extent they do this, traders and investors treat the stock market as if it were a single commodity rather than a collection of individual stocks."

Another favorite saying among individual investors, "Buy low, sell high," has for years reflected the desire of individuals to profit by being sensitive to the price of individual shares. But according to the Brady report, strategies employed by aggressive institutional investors in and around October's market collapse involved "selling without primary regard to price."

A decade ago, trading in the Chicago futures markets did not exert direct influence over stock prices in New York. The futures markets were dominated by trading in precious metals and traditional commodities, such as grain futures.

But in the 1980s, futures markets, led by the Chicago Mercantile Exchange, received approval to begin trading futures contracts tied to broad stock market averages, such as the Standard & Poor's 500. Large institutional investors developed computer-directed "program trading" strategies involving these new stock index futures.

What became increasingly clear to some financial experts after the new futures were introduced was that profits could be made by capitalizing on the gaps in price between stock index futures contracts, such as the Standard & Poor's 500, and the 500 individual stocks that make up the average. In addition, lower financial requirements in the futures markets encouraged institutional investors who owned stocks to sell futures, rather than stocks, to preserve profits in a declining market.

Futures trading has become so popular that the value of stocks represented by the futures traded on the Chicago Mercantile Exchange each day averages about twice the value of the actual stocks traded on the New York Stock Exchange, the report said.

"As with people in a theater when someone yells 'Fire!,' these sellers all ran for the exit in October, but it was large enough to accommodate only a few," the Brady report said.

The small investor who owns individual stocks is affected by the psychological blows to market confidence caused by extreme price movements. In addition, because the program trading strategies sometimes involve simultaneously purchasing massive quantities of futures contracts and selling hundreds of individual stocks, individual stocks can be depressed.

The institutional investor employing these strategies has no interest in the prices of individual shares, only in the overall arithmetical relationship between the broad stock averages and the futures. As a result, stocks that are in the averages, and that includes all of the biggest companies traded on the New York Stock Exchange, gyrate wildly, as they did last October and last Friday, without regard for the prospects of individual companies or industries.

Selling pressure from this activity on Oct. 19, when the market plunged, and on Oct. 20, when the financial system nearly ground to a halt, was generated by a small number of institutional investors and money managers, the report said. The result was chaos when the stock and futures markets traded independently as both went into a free fall.

"A number of failures of the one market system contributed to the violent break of the separate market segments in October and pushed the country to the brink of the financial system's limits," the report said. "When our markets fluctuate 50, 60, 70 points, that is no longer a rational market," said American Stock Exchange Chairman Arthur Levitt Jr. "That is frightening public customers. I think there is a tremendous nervousness out there."