Evening star., 1938-05-23
EXCHANGE FACES
ADDED CHANGES
History. Making Reforms
Expected in Drive for
Harmony.
BY the Assoc. ved Press.

NEW YORK, May 23.-Preoccupy-
ing the attention Of many Wall
Streeters Is a search for road map
to the broad and open highway that
lies ahead" mentioned by Chairman
Douglas Of the S. E. G. in his "har-
mony" speech at the festive good will
gathering of the Washington and
Wall Street clans last week.
That the new era"-as it was fire.
quently proclaimed around the banquet
board Friday night - holds many
history-making changes for the
brokerage community is taken for
granted.
In fact, the move for reorganizing
the administrative set-up of the ex-
change to facilitate closer co-opera-
ton with Washington was championed
by some reform advocates in prepara-
tion for execution of uncompleted por-
tions of the Federal regulatory pro-
gram. Outstanding is the proposed
revamping of floor trading practices.
More than two years ago a S. E. c.
report recommended segregation of
members into brokers and dealers,
with brokers TO be allowed to trade
on their own account, while dealers
would be restricted to executing orders
for others. Major steps in that uirec-
ton remain to be worked out.
Committee at Work.
The Committee on Stock Exchange
Reorganization itself, in drafting the
report for the exchange administra-
ton now going into action, made
various suggestions for study to re-
orient the exchange to the shifting
times.
Outstanding among suggestions en-
anating from the brokerake COM
munity is whether the big board
should reduce its membership to
spread the remaining business more
thickly, create associate memberships
to bring in business from banks and
from over-the-counter markets, broad
en- the stock and bond lists and per-
mits unlisted trading.
Most Of these problems would re-
quire great deal of study. But
once professional executive head has
been chosen and the streamlined, lib
eralized administration gets its bear
ings, the new regime is expected to
come to grips with proposals simmer
ing in the background.
Urges Big Depository.
Chairman Douglas himself imme-
diately put before the new order at
Broad and Wall streets, where the
exchanges makes hub for the money
district, proposal for an institution
which alone would stand as land
mark to the great changes the flnan-
cial community has witnessed the last
few years.
His suggestion for a combination
Stock Exchange bank and trust COM
pany. to centralize handling of Sc
curities and safeguarding Of cash
funds Of brokers and their customers,
evoked images in the minds Of Wall
Streeters of a giant institution, rival
ing the exchange itself in the magni-
tude of its activities. Brokers for
years have mulled over the notion
Of central depository, modelled after
centralized handling Of securities in
Europe. It never crystallized in def
mite form.
Douglas developed the idea and
sketched it in broad strokes as fol-
lows:
1T would not operate for its own
account, nor would it engage in q
commercial banking business. The
usual functions with respect to pur-
chases and sales Of securities would
be carried on by brokers, Just as is
the case today.
Would Act As Cashier.
But brokers who had the benefit
of the services of this institution would
be relieved of many of their present
functions. For instance, the trust
company would act as cashier for
brokers, receive from and make pay
mentS to customers for securities
bought and sold, transfer, receive and
deliver customers securities upon
instruction of the brokers, and as re-
spects margin transactions act for
brokers not only in relation to their
customers. but in relation to the banks
as well. Clearances would be readily
and conveniently handled"
What appealed to many brokers
was the chance Of effecting substan-
tial savings in overhead expenses grow
ing out Of bookkeeping and handling
OF securities Others, unenthusiastic
about the idea, wondered whether it
would curtail brokerage profits in the
long run by preventing the mingling
of customers securities and the use