WASHINGTON -- When the Securities and Exchang Commission last attempted a major reform of the stock market, the New York Stock Exchange was still displaying stock prices on wooden blocks that had to be adjusted by hand to reflect market movements.
In the intervening 20 years, the NYSE has computerized, allowing it to handle its increased daily volume. Meanwhile, there have been unexpected developments, such as the over-the-counter Nasdaq system that links traders by computer, and new, unregulated financial instruments such as derivatives.
Now, as the SEC prepares a new study -- Market 2000 -- to set the course of U.S. markets for the coming decades, it must decide whether to respond to these new challenges through more regulation.
"Our regulatory system is clearly evolutionary. But we aren't trying to pick a winner between one market and another. We want to set a level playing field," said SEC Commissioner J. Carter Beese, who opposes intense regulation.
But he may not reflect the commission's future direction. The five-member commission has one vacancy, which President Clinton can fill immediately, and Chairman Richard C. Breeden, a Republican, is due to step down next month. This could leave Mr. Beese as the commission's lone Republican -- the other members are a Democrat and an independent.
Still, no one knows what philosophy Mr. Clinton's appointees will espouse, or whether they will want to redraft the Market 2000 study to more tightly regulate computer trading and derivatives.
Also controversial could be a move to combine the SEC with the Commodities Futures Trading Commission.
After the 1987 stock market crash, a government report called for the two to be merged to save money and to cover "black holes," such as derivatives, that neither body regulates.