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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: bobby beara who wrote (45544)	4/10/2000 5:35:00 PM
From: Benkea	Read Replies (3) \| Respond to of 99985

biz.yahoo.com Monday April 10, 5:27 pm Eastern Time NASD seeks to raise margin-debt levels NEW YORK, April 10 (Reuters) - The National Association of Securities Dealers (NASD), which owns the Nasdaq market, wants to make it more difficult for its membership firms to lend investors money to invest ``on margin,' an NASD board member said. Boosting margin-debt levels would force NASD firms to make investors put up more money when they buy stocks on credit and use assets in their brokerage accounts to back up the loan. The NASD, however, wants its leading rival, the New York Stock Exchange, to push through similar changes, a move the NYSE is unwilling to make at this point. Nonetheless, the NASD board, which meets on May 24-25, is expected to discuss the issue further. The board discussed margin-debt levels at a March 30 meeting but took no action. ``If things tank, then all of us are responsible,' said LaRae Bakerink, an NASD board member and chief compliance office at Pacific American Securities LLC in San Diego, Calif. If the NASD boosted its margin-level requirements, it would not do much good because many NASD member firms, especially the larger nationwide brokerages, are members of the NYSE, NASD chief spokesman Andrew MacMillan said Monday. NASD broker-dealer firms would just use the NYSE's margin-debt requirements, putting NASD firms who are not members of the NYSE at a disadvantage, MacMillan said. The Nasdaq is faced with more of a problem that the NYSE because it is home to the bulk of the nation's new technology stocks, which tend to experience more dramatic price movements than NYSE stocks. ``I am not going to react to that,' said NYSE spokesman Raymond Pellecchia, when asked to respond to the Nasdaq's appeal for support in the matter. The NYSE has found no reason why it should rejigger the margin-debt level requirements, MacMillan said. The NYSE and the NASD only control the so-called maintenance margin-debt level, the amount of assets that an investor must retain in an ongoing margin account. The Federal Reserve sets the initial national margin requirements at 50 percent. For example, if an investor wants to buy $2,000 worth of stocks, she would have to put up $1,000 of her own money. After that, the NYSE and NASD require a maintenance margin debt level of 25 percent. If the value of the account falls below 25 percent, the investor will have to sell stock to make good on a margin call. If thousands of investors are forced to make margin calls, it can accelerate a market downslide. Fed Chairman Alan Greenspan, however, has made it clear that the central bank does not plan to increase initial margin-debt levels. The Fed last tinkered with margin-debt levels in 1974. The central bank has had the power to set margin-debt levels since the 1930s because economists once considered them an effective tool with which to curb market speculation. These days, the Federal Reserve sees margin-debt levels as as ineffective because because many other sources of credit are open to investors via credit cards and home equity loans. Boosting initial margin-debt levels would only punish smaller retail investors, who don't have the same broad access to capital as larger firms have. The NASD and the NYSE last November put in a request to the SEC to require specific margin-debt levels for day traders, investors who move in and out of several different stocks in a day to reap quick profits. The idea was to make it more difficult for the most rapid-traders to take large risks in more volatile stocks.