Some OTC Stocks to Trade on Exchanges : * Securities: The Midwest, American and Philadelphia exchanges in early 1992 will carry 100 issues now electronically traded. Competition could rise sharply.

In a step toward integrating the nation’s financial markets, some stocks traded in the electronic over-the-counter market will be bought and sold on three stock exchanges beginning in early 1992.

The National Assn. of Securities Dealers is completing work on a system for cross-market trading, nearly six years after federal regulators ordered the OTC market to make its stocks available on exchanges.

The development is significant because it could sharply increase competition between the two dominant forms of buying and selling stocks: the NASD’s Automated Quotation system and the traditional stock exchange floors.

“Sure there’s a competitive concern,” said Frank Wilson, general counsel for the Washington-based NASD. “When you have a new player in your market it’s a question of whether you’re going to lose market share.”

In the first stages of the new system, which NASD and exchange officials expect to begin in the first quarter of 1992, up to 100 over-the-counter stocks will trade on the Midwest, American and Philadelphia stock exchanges.

The New York Stock Exchange doesn’t plan to participate.

The system follows an American Stock Exchange announcement last week that it plans to create a separate market to trade stocks of emerging companies, another direct challenge to the over-the-counter market of about 2,000 company stocks.

A system for trading OTC stocks on exchanges was first ordered by the Securities and Exchange Commission in October, 1985, as a way to balance trading opportunities. The exchanges have battled the NASD over the details since.

Securities listed on exchanges have been traded in the over-the-counter market since 1977, but until the SEC’s order exchanges were shut out of the market for OTC stocks. The Midwest Stock Exchange launched a pilot program in mid-1987 to trade OTC issues, but it’s been limited by slow negotiations with the NASD.

“They’ve been encroaching into the listed markets for years, and they’re trying to hold everybody off from getting into their markets,” Roger Hendrick, a vice president at the Midwest exchange in Chicago, said Tuesday.

The main difference in the trading systems is that OTC orders to buy and sell stocks are placed through dealers who communicate via computers. On an exchange floor, trades are conducted face to face in auction style.

Over-the-counter market proponents maintain that the small or growing companies traded on NASDAQ often need multiple dealers to stimulate investor activity, more opportunities than are available on exchange floors.

Exchange officials counter that the NASD simply fears losing market share, and that investors can benefit from taking their orders to a place where they can get a better price based on demand.

The main argument over the plan has been how stock price quotes and trades will be identified. The exchanges wanted their over-the-counter quotations listed separately from those of NASDAQ dealers, so investors could tell whether an exchange is offering a better deal on a stock than an NASD dealer.

The Midwest pilot program does not include such a distinction. The Philadelphia and American exchanges refused to participate until such a differentiation was made.