SEC Defends Its Report on 1989 Stock Market Slide

The government’s top securities regulator Thursday defended a study of last October’s stock market dive against a bitter critique by the rival Commodity Futures Trading Commission.

“We stand by our report and every word in it,” Securities and Exchange Commission Chairman Richard C. Breeden told a small group of reporters in his office.

Breeden said the CFTC’s study of the 1989 market mini-crash had serious methodological defects. He likened the report to saying “except for the period of time between 7 a.m. and noon, Pearl Harbor day was a good day.”

Breeden’s sharp comments came in response to a published report of the critique by CFTC Chairman Wendy Gramm.

In a letter to the chairman of a House subcommittee that oversees the CFTC, Gramm called the SEC study “misleading,” “imprecise” and “contradictory.”

The SEC regulates stocks, bonds and the exchanges that trade them. The CFTC oversees the futures markets. The two have been locked in a war of words over which agency has jurisdiction over financial products that share aspects of both securities and futures contracts.

Both regulatory agencies studied causes of the 190-point drop in the Dow Jones industrial index Oct. 13, which occurred shortly after UAL Corp. announced that a leveraged buyout had fallen through.

The CFTC concluded last month that index arbitrage--a computerized program trading strategy blamed by many for exacerbating the 1987 stock market crash--was not a major factor in the 1989 stock slide. It also found no evidence of manipulation in the stock-index futures market.