The `Big Board' Moves Securely Into Its Third Century

THE officials of the New York Stock Exchange are moving into the exchange's third century with a sense of confident celebration - and not a few nervous glances toward Tokyo and the Japanese stock market, which has been on a pell-mell course downward this year.

On May 17, the Big Board celebrates its bicentennial. NYSE officials have more technological and financial clout under their command than exchange officials could even have dreamed about back in 1792: Corporate listings on the Big Board are up; off-hour (late-afternoon) trading is under way; market-surveillance systems to prevent securities fraud have been expanded; high-speed technologies allow for split-second trading with minimum of errors; customer service has been improved; costs have been reduced.

And while critics grumble that the NYSE is not adapting to change fast enough to keep pace with overseas and domestic competitors, officials can point to one undisputed factor to prove that they remain at the forefront of financial advance: The American stock market - with trading more often than not flowing through the corridors of the Big Board - continues to inch upward, with the Dow Jones industrial average now in the 3,300-point range, close to its all-time high of 3,366.50 points recorded April 16 this year.

In terms of market performance, the Big Board and the Tokyo Stock Exchange "couldn't look more different" than has been the case in recent weeks, says Merton Miller, a professor of finance at the University of Chicago.

Despite a modest correction in early April, stocks on the Big Board have generally continued to climb in value; in Tokyo, by contrast, the Nikkei index of 225 stocks fell to its lowest level in five years earlier this spring. Since the end of 1989, the Nikkei Index has plummeted about 55 percent.

Not that traders in New York have been pleased at Tokyo's problems. The US and Japanese economies have become too intertwined for any sense of glee here about Tokyo's market difficulties. But what has clearly impressed US stock- market technicians is that Japan's financial difficulties so far have not produced any substantial linkage between the Japanese and US stock markets, particularly at the Big Board.

From relatively modest beginnings, the NYSE has become the dominant trading market in the US and one of the premier exchange systems in the world. Some 1,905 companies, the pillars of US industry and commerce, are listed on the Big Board, according to Ray Pellecchia, an exchange spokesman. Approximately 110 of the companies are overseas firms, including nine companies that trade on the Tokyo stock market.

Earlier this year, NYSE chairman William Donaldson called the Big Board "the centerpiece of a global securities market." Mr. Donaldson envisions ultimately making the NYSE a truly global electronic trading center for investors - a far cry from the days of the first cumbersome trading tickers that clattered off trading price quotations back in 1867.

The Big Board has taken a number of steps in recent years to modernize trading, including its establishment of late-afternoon trading, as a forerunner to eventual 24-hour trading; opening a London office to help European companies list on the Big Board; introducing a high-speed automated system that can handle a volume of up to 800 million shares on a trading day; and coordinating trading procedures with the other exchanges to prevent abuses that contributed to the market crash of October 1987. A main re form following the 1987 downturn involved installing "circuit breakers" to curb trading during volatile periods.

Still, some critics wonder if Big Board officials are moving fast enough to adapt to change - or to fully prevent another US market crash. "Just getting the upstairs elevator on the exchange's Broad Street entrance can take 10 minutes," Dr. Miller says with a laugh.

Overseas competition is formidable. Big Board officials still largely represent white-male, country-club America, at a time when hundreds of thousands of new immigrants are making the US a truly global society and women are moving into corporate board rooms. Within the US, the NYSE must compete with aggressive regional exchanges, such as Chicago, Philadelphia, and Los Angeles, not to mention NYSE main domestic rivals, the American Stock Exchange and NASDAQ's over-the-counter trading system.

Marshall Blume, a professor of finance at the Wharton School of the University of Pennsylvania, says the Big Board's main challenge is one of governance - that the NYSE has not yet come up with an effective strategy to stem increasing loses in retail and institutional trading.