Traders' Last Stand

The New York Stock Exchange discreetly raised its voice last week in defense of another of its old and vanishing institutions --floor trading. Reason: the Securities and Exchange Commission was getting ready to put floor traders out of business.

As defined by SEC, "floor trading is buying or selling by a member for his own account which is initiated by the member while he is physically on the exchange floor." But no matter how defined, SEC has never liked it, refuses to concede that floor traders' deals often tend to smooth out violent price swings. As far back as June 1936, SEC threatened complete suppression of floor trading, later relented. Last week the Commission announced that it was readying a rule to prohibit floor trading altogether.

SEC pegged its latest attack to a report of its investigation of last summer's flurry in low priced stocks like Graham-Paige Motor Corp. (TIME, Aug. 21, 1944). Said SEC: "At times floor traders were the proximate cause . . . in the sense that a spark in a powder magazine is the proximate cause of the explosion."

While recognizing that rumors from Detroit sharpened public interest in Graham-Paige, the SEC report charged first responsibility to the floor trader. "Floor traders and specialists would buy heavily and concertedly; the public would follow . . . and the professionals would sell their stock . . . at the increased prices."

SEC's brusque summary brought a pained letter of protest from Stock Exchange President Emil Schram. He reminded the Commission that the Exchange had been studying the floor-trading problem along with SEC, asked for a full hearing from the four Commissioners at which the Exchange could offer less drastic cures.

Then he sent two Exchange officials to SEC headquarters to open negotiations, while Wall Street gloomily pondered a $4,000 drop in the price of a Stock Exchange seat. Said brokers: the floor traders are selling.

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