Evening star., 1941-01-21
Exchange Contends
Existence al Stake
In Trading Rule
Opposes S. {. c. Order
For End Of Multiple
Dealings Ban
HR CENT
cApAciN
By the Associated Press.

Counsel for the New York Stock
Exchange charged today that its
existence would be jeopardized by
compliance with q Securities Com
mission demand to rescind its pro-
hibition against multiple trading.
Making his opening statement in
a hearing called by the S. E. c.,
Timothy PfeifYer said that the asso-
cations rule merely imposed upon
its members the uniform standards
Of conduct without which there
would inevitably ensue degen-
Grafton OF the quality Of the serv-
ices performed and eventually the
very existence of the exchange
would be jeopardized."
Involved in the proceeding is q
ruling that a member Of the New
York Exchange who also is q men,
Der of 4 regional exchange may not
trade for his own account on the
regional exchange in stocks which
are listed on the New York EX-
change.
Issue on July IL.
This ruling was issued July IL, but
its effectiveness was delayed several
times while the S. E. c. made in
formal requests for reconsideration
Finally. the commission made a for
NAL demand on December 20 and
ordered the hearing when 1t was re-
fused
This action is the first step of its
kind taken by the S. z. C. under its
authority to regulate securities ex-
changes conferred by the Securities
and Exchange Act Of 1884.
The New York rule has been
criticized by a number OF regional
exchanges and at least two of these
charged that it would threaten their
existence. The S. E. C. canvassed
all exchanges outside OF New York
for their views and then began its
action under Section 19 CB), which
authorizes it to order an exchange
to alter or rescind rules when deemed
to be in the public interest.
Pfeiffer said that the primary OBJ
ject of the exchange in furnishing
an auction market for the public
would be frustrated by abandon
ment of the rule and that the i'm
mediate effect would be to afford
a special privilege to small
minority of the membership of the
New York Stock Exchange not
available to the vast majority"
Deterioration Feared.
1t Is inevitable, he added, that
other members would seek compen-
sating avoidance of the prohibition,
and the ultimate effect would be
deterioration of the whole fabric
upon which the New York Stock
Exchange now rests"
He said that he could not con-
ceive that the protection OF in
vestors in any part OF the country
will be diminished by enforcement
OF the rule or enhanced by the an
nulment Of the rule by this COM
mission" He added:
Plainly neither fair dealing in Sc
curities traded in on the New York
Stock Exchange nor the fair ad-
ministration of that exchange is in
volved."
Foreshadowing a legal test of the
commisSion's powers in event of an
adverse finding. Pfeiffer demanded
that the S. E. C. specify which Of u
phrases was the basis for its action
and argued that if the phrase pro
lection Of investors" as used in Sec
ton IL (b) did not have definite
limitation it was unconstitutional.
Commissioner Robert E. Healy,
presiding in the absence Of Chair
man Jerome Frank. rejected Pfeif-
fer's demand that S. E. c. counsel
specify the phrase under which it
was acting. explaining that he and
his colleagues regarded it as mot
appropriate at this time"
After hearing Pfeiffer's statement.
Commissioners Healy, Sumner T..
Pike and Edward C. Eicher turned
the hearing over to a trial exam
iner. Henry w. Fits.
John E. Yerxa, president of the
Boston Stock Exchange, was called
to the stand as the first Of long
series Of representatives Of the re-
gional securities markets.
Questioned by Gerhard A. Gesell,
commission counsel. Yerxa discussed
the operations Of the 106-year -old
exchange, explaining that approx
mately IS per cent Of the trading on
its floor involved securities listed
both on the Boston and New York
boards.
He said that the volume of trad
ing had declined to 4.396,270 shares
Of stock and $l.603,633 worth of
bonds last year, compared with TO-
95S.826 shares and $5,571 900 Of bonds