Attack on the Snarl

The New York Stock Exchange last week phased into operation a sophisticated computerized system that it hopes will eventually eliminate much of the physical handling of stock certificates. Once in full swing, the scheme should go a long way toward reducing the glut of paper work now snarling Wall Street.

Called the Central Certificate Service, the $8,000,000-a-year system will act as a clearinghouse for transactions involving stocks held in "Street name" --those that investors leave with their brokers rather than hold in their own names. Although no more than 15% of all stock certificates are kept in Street name, these account for 70% of all Big Board trading. Under the new arrangement, they will no longer have to be counted, sorted and delivered by hand, but will be held by the exchange.

By mid-June, the 125 participating brokerage firms will be called on to deposit with the C.C.S. their Street-name certificates in all Big Board stocks beginning with the letters A through C. Shares in the rest of the stocks will be deposited in alphabetical order by the end of the year. Utilizing three IBM 360 computers and employing 500 office workers, the C.C.S. will handle transactions in much the same way that banks clear checks. When stock is traded, its computers will debit the account of the firm doing the selling, credit the account of the buyer. Transfers will thus be recorded as bookkeeping entries, with no certificates actually changing hands.

The C.C.S. is expected to be expanded to handle American Stock Exchange transactions next year, over-the-counter dealings after that. Securities men, meanwhile, are hopeful that the brokers will eventually be able to obtain bank loans on the securities, even though the stock certificates that bankers ordinarily demand as collateral are held by the C.C.S. Instead of the stock itself, the banks would accept C.C.S.-issued "warehouse certificates." Until some such arrangement is worked out, however, the brokerage firms will simply have to withdraw some of their certificates to use as collateral.

The system, says New York Stock Exchange Executive Vice President R. John Cunningham, 41, the man responsible for getting it under way, "relieves brokers of the burden of storing, checking and accounting for stock." Nonetheless, the upsurge in trading--volume on the Big Board is averaging a hectic 12,479,000 shares a day in 1968--means that the C.C.S. alone will probably not be enough even after it is in full operation. So acute is Wall Street's paper deluge that the Big Board has been forced to impose restrictions, including bans on registration of new securities salesmen, on a number of member brokerage houses. Last week, in a letter to all member firms, the exchange warned that more such restrictions will be necessary unless they beef up their back-office clerical help to cope with the soaring volume.

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