Regulators, Exchange Chiefs Meet : Unusual Private Talks Aim at Heading Off Another Crash

U.S. regulators and stock and futures exchange leaders have launched an unprecedented series of private meetings to discuss how to prevent another stock market crash, government sources said Thursday.

The meetings mark an unusual degree of coordination among regulators and exchanges and could reflect their willingness to respond to calls from Congress and a presidential task force for a more unified regulatory structure.

Securities and Exchange Commission Chairman David S. Ruder, Commodity Futures Trading Commission acting Chairman Kalo Hineman, New York Stock Exchange Chairman John J. Phelan and Chicago Mercantile Exchange executive committee Chairman Leo Melamed met earlier this week in Ruder’s office, SEC officials said.

The four men met to “discuss areas of mutual concern” and intend to hold more meetings, an SEC spokesman said. The spokesman would not say if the meeting this week was the first in the series or when they would meet next.

A CFTC official said the talks this week were part of an “ongoing dialogue” between Ruder and Hineman that predated last October’s stock market crash.

A congressional official said Ruder and Hineman were interested in determining the kind of “formal structure” that might be created to improve communication between the agencies.

It could not be determined whether representatives from any other federal agencies participated in the meeting.

Comptroller General Charles Bowsher last month urged the SEC, CFTC, the Federal Reserve and other agencies to meet and draw up a contingency plan spelling out how they would respond to another stock market crash.

Senate Banking Committee Chairman William Proxmire (D-Wis.) has given government regulatory agencies until March 4 to report back to Congress on progress in bringing about reforms.

President Reagan’s task force on the stock market crash, headed by Wall Street financier Nicholas Brady, recommended that one agency, perhaps the Fed, should coordinate systems for clearing trades and “circuit-breakers” such as price limits and trading halts. But the Fed has balked at assuming such broad powers.

Ruder has urged lawmakers to give his agency power to override the CFTC in intermarket matters such as trading halts and preventing price manipulation.

Ruder said the SEC is “the agency most capable of exercising overall regulatory power.” But Hineman opposes giving the SEC such powers.

The SEC regulates stocks and options on stocks, while the CFTC has jurisdiction over futures and options on futures.

Asked why the CME’s Melamed was invited to the meeting and not officials from other futures exchanges that trade stock index futures or options contracts, the SEC spokesman said it was Hineman’s decision.

Six U.S. futures exchanges are authorized to trade futures on stock indexes. The CME’s Standard & Poor’s 500-stock index futures contract is the most widely traded, followed by contracts at the New York Futures Exchange, the Chicago Board of Trade and the Kansas City Board of Trade.

U.S. futures exchanges have been scrutinized since stock and futures prices plunged Oct. 19.

Critics of computerized program trading, which permits rapid shifting of assets in and out of stock and stock index futures markets, claim it exacerbated the drop in prices.

But Chicago futures leaders have criticized the NYSE for being unable to handle the onslaught of sell orders Oct. 19.