Evening star., 1934-02-03
EXCHANGE LAWS
WIDELY DISCUSSED
Three Chief 0bjectives Are
Outlined in Roper Report
to President.
BY EDWARD c. STONE.

BY EDWARD c. STONE.
The Roper report to President
Roosevelt relative to possible Federal
regulation OF stock eXchanges-a re-
port which has caused large amount
of discussion this week in the local
financial distriCt-says that the gen.
eral objectives Of regulating exchanges
are three:
l. The specific practices of the
market must be made reliable and
clean, no matter what point of view
is adopted with regard to the larger
questions; and
2. So far as possible, the aim
should be to try to create a condi-
ton in which fluctuations in secur-
ity values more nearly approximate
fluctuations in the position OF the
enterprise itself and of general eco
nomic conditions-that is, tend to
represent what is going on in the
business and in our economic life
rather than mere speculative or
technical conditions in the market
and
3. The steady accumulation over
q period of time of information which
will afford a better basis for deter
mining whether as wide and as dam
gerous machinery as now exists is
really necessary to secure hquidity
Of security values.
This last question involves the broad
problem as to whether llquidlty.
through the mechanism of stock
markets should be encouraged or dis
couraged.
Methods of Regulation.
The committee believes that the
maio problem involved in any con-
sideration of proposed Stock Exchange
regulation relates to the methods and
mechanism through which the pro-
posed regulation is to be applied The
committee believes that the most prac-
tical solution from a long-range view
point, assuming such legislation to be
desirable, is to enact measure which
will provide system embodying the
minimum of specific regulatory provi-
sions in the statute itself and the
maximum of discretionary powers of
regulation in an administrative
agency.
The committee believes that at this
time a mechanism ought to be set up
which is:
(a) Capable of collecting necessary
information: and
(b) Capable of being used to carry
out a policy as it shall be developed
and
(c) Flexible enough to permit
meeting of situations. both specific
and general as they shall have been
fully disclosed and developed.
Requirements for Licenses.
In the event Federal license
should be required of all exchanges, as
proposed, there would be attached to
the license as a condition of issue
and continued enjoyment the follow
ing requirements
That all exchanges desiring Fed
eral license must adopt and submit
to the proposed Stock Exchange Au-
thority, for its approval rules de-
signed to comply with the regulatory
requirements outlined by the proposed
statute and with such rules and reg
ulations as may be promulgated by
the proposed Stock Exchange Author
ity hereunder"
The Roper report has much to say
about pool operations and attacks
wash sales" and matched orders"
Margin trading is one of the chief
topics discussed. while the specialists
receive broad criticism. The commit
tee devotes the final part of the re-
port to short selling, reaching these
conclusions:
No satisfactory studies are avail
able on the results of short selling
as to whether it accelerates the de-
cline or whether short covering
acts as stabilizing influence on the
down side of The market. 1t seems
clear that odd-lot operators could not
continue to function apart from short
selling. Whether the abuses of the
practice outweigh its merits is still
matter of opinion.
Your committee, therefore, recon-
mends that no curb be placed on
short selling as such, but that the
Stock Exchange Authority be given
power to require exchanges by ap-
propriate rules and regulations to pre-
vent abuses of short selling"
Gold Is Conference Topic.
The trustees policy with respect to
obligations payable in gold and the
duty of trustees in investing trust
funds in the present monetary situ-
alton will be the leading topics dis
cussed at the opening session of the
Midwinter trust conference in New
York February 13 to IS. 1t is eX-
pected that Washington bankers will
make better attendance record at
this meeting than at the recent re-
gional savings conference.
Among the speakers particularly
well known in Washington will be
Henry Bruere, president of the Bow
cry Savings Bank who will discuss
life Insurance Reserves as Reser-
voirs of Credit" Greetings will be
presented from Francis NJ. Law. pres
ident of the American Bankers As
sociation
j. w. Allison, trust officer, First e.
Merchants National Bank of Rich
mond, is to conduct one of the TO-
runs and Gilbert T. Stephenson of
Wilmington, Del, who addressed the
fiduciaries' seation of the District
Bankers Association two years ago, is
on the list of speakers.
An unusually large number of Chi
cago bankers are on the program, the
conference not being confined to the
Eastern States.
Temporary Insurance Urged.
Legislation affecting the Federal
Deposit Insurance Corporation is be-