A struggle beyond the raging bull; Broker: James W. Brinkley is seeking to increase American brokerages' share of the global market.


James W. Brinkley couldn't look calmer. Dressed in a blue pinstriped suit, crisp white shirt and red silk tie, he gazes at the morning fog outside his office window on the 35th floor of the Legg Mason Inc. tower.

Then he observes: There's a freight train barreling straight toward the brokerage industry, and at stake is global dominance. Will it be by U.S. brokerage houses and stock exchanges, or those run by the Japanese, Germans, British and French?

"The real issue here is to increase our global market share," said Brinkley, president of Legg Mason Wood Walker Inc., the brokerage subsidiary of Legg Mason. "We have got to do the job to keep what we have. We have got to do the job to build what we have. This is one [issue] we have got to react to immediately."

Brinkley, who took over this month as chairman of the Securities Industry Association, the powerful trade group that represents hundreds of brokerage houses, will have to confront that and other issues in the coming months.

He comes into the position as the bull market, the longest in history, continues its spellbinding run amid investors' unbridled confidence that stocks are the best place to put one's money.

"The last 10 years have been absolutely unlike any in the stock and bond market," Brinkley said in an interview yesterday.

"With the economy right now, we have never had a better picture globally than we have today."

But Brinkley is concerned about how U.S. brokerage houses and major stock exchanges -- the New York Stock Exchange and the Nasdaq Stock Market Inc. -- will fare as competition for overseas customers intensifies. He wants to make sure that they can expand in Europe and Asia without too many regulatory hurdles.

"I want our firms to be able to do business in foreign countries on an equal footing," he said. "That is a way of increasing your market, a way of getting new clients, a way of tapping into new growth. You just can't sit back and lose market share."

The securities industry is certain to become more competitive since President Clinton signed a bill this month repealing the Glass-Steagall Act of 1933. The move makes it easier for brokerages, banks and insurance companies to get into each others' businesses.

"You will have more worldwide consolidation," Brinkley said. "Some of the international insurance companies will become players where they weren't before. The international banks will become more active. As soon as you have a consolidation and the size of things start changing, then other people have to make a move. Certainly, this will create more consolidation on a global basis."

At the same time, technology has given exchanges the ability to offer electronic trading 24 hours a day, a phenomenon that could dramatically change the industry.

"You pick the place," he said. "They can start an electronic market and start gaining market share 24 hours a day."

Other issues Brinkley plans to address include reducing the time investors have to settle, or pay for the stocks they buy.

Brokerage houses allow investors up to three days to pay for a stock they purchase, but firms are moving to cut it to one day -- and possibly the same day -- Brinkley said.

Reducing the time that investors have to pay for their purchases is a way for the industry to protect itself, especially when dealing with institutional investors who buy thousands of shares of stock at a time.

"You want to get the payment where people will not renege on their trades," he said.

Brinkley said he will push to list stocks in decimals instead of fractions to make the day's closing prices easier to understand for investors. It sounds like a simple change, but it will require brokerage houses to spend millions of dollars programming computers so they can make the conversion smoothly.

"This is expensive, but I think it makes sense. Long term, it is hard to justify staying with eighths and quarters," he said. "In a global market, you have got to keep moving forward to the standard unit of measure."

At 62, Brinkley, who is fit and trim, could easily keep busy running Legg Mason's brokerage operations. The chairman's job at the SIA, which is rotated annually among members, will require him to address Congress on important issues, aid in the industry's lobbying effort and make speeches before industry groups.

But Brinkley believes that the travel, the meetings and the speeches are well worth the effort because he has a debt to pay.

"I have been blessed," he said. "For 37 years, I have been grateful for being in this business. I think there is a time when you give back. I think doing what is right for the public and for the industry is important."

Pub Date: 11/25/99

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