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The hardest hit of all last week were Wall Street's specialist firms, the traders who are charged with maintaining orderly markets. That task requires them to purchase stocks when there are no other buyers and to make sales when other sellers disappear. Until last week, a total of 52 specialist firms worked on the floor of the New York Stock Exchange; each handled the shares of 20 to 30 specified Big Board companies. On Black Monday, the specialists grimly fulfilled their responsibilities, buying millions of shares as prices plunged all around them. Their losses could amount to as much as $750 million. The shock was too much for A.B. Tompane & Co., a 60-year-old specialist company that survived the 1929 Crash and traded in USX Corp. and Royal Dutch/ Shell Group, among other stocks. Last week Tompane sold out to Merrill Lynch for an undisclosed sum. Also merged out of existence was W. Damm M. Frank & Co., an American Stock Exchange specialist that traded in 30 Amex stocks before the crash. The firm was acquired by Bear, Stearns. That could be only the beginning. Says Samuel Liss, an analyst at Salomon: "We are going to see more specialist firms merging with better-capitalized parents."
Securities firms outside Wall Street also felt mortal pain. In Grand Rapids, H.B. Shaine & Co., a regional brokerage with 107 employees, wound up in a merger after Monday's debacle pushed it into bankruptcy. The 4,500 accounts of the New York Stock Exchange member were taken over by Rodman & Renshaw, a Chicago firm.
In the weeks and months ahead, Wall Street's high-to-higher-flying style may be further crimped by additional Government regulation. David Ruder, chairman of the Securities and Exchange Commission, ordered the SEC staff to consider immediately ways to limit future mammoth market swings. Edward Markey, the Democratic chairman of the House Telecommunications and Finance Subcommittee, has called for hearings into the role of computerized trading programs that dump securities when the market falls.
Yet amid all the gloom, some firms found a few rays of hope glimmering for the future. Shearson reported opening a record 9,000 new customer accounts in one day last week. "We think this was a flight to quality," said Shearson Chairman Peter Cohen. "People are feeling that it's probably better to be housed in big firms rather than smaller ones." Whatever the reason, the new business was balm to the brokerage that announced last month it was firing 150 workers in its London offices and cutting back its trading of municipal bonds.
On one issue there was near unanimity. "There will be more layoffs," said Perrin Long, an analyst at Lipper Analytical Services, which studies securities firms. "The brokerages could run much leaner than they are now." Concurred Jack Barbanel, senior vice president of Gruntal & Co.: "The message is clear -- Wall Street is tightening its hatches." Long predicts that as many as 24,000 securities-industry employees will lose their jobs over the next twelve to 18 months -- and even that, he believes, is not enough. If Wall Street hopes to stay profitable in the troubled times ahead, Long thinks a safer number of layoffs would be 42,000.