Stock Exchange

an association organized to provide a market for bonds and stocks. The leading stock exchanges of Europe are the London Exchange, the Paris Bourse, and the Berlin Borse. There are many others, as at Vienna, Hamburg, Frankfort, Manchester, Glasgow, etc. In this country there are exchanges at New York, Philadelphia, Boston, Chicago, Pittsburg, Baltimore, Cleveland, Cincinnati, Detroit, New Orleans, Denver, Indianapolis, San Francisco, Washington, Kansas City, Los Angeles, Providence, and Richmond. There are also exchanges at Toronto and Montreal in Canada.

So far as the volume of business goes, the New York Stock Exchange is not only the largest on this side of the Atlantic but the largest in the world. The sales of stocks amount to $15,000,000,000, and of bonds to $1,000,000,000 annually. This exchange may be described as typical. It has grown rapidly. As early as 1752 a few business men used to meet informally under a tree on Wall Street near Pearl. In 1792 an association was formed to maintain a uniform rate of commission. The present exchange was organized in 1817. It occupies a building of its own on Broad Street.

The exchange is no place for a poor man. The membership of the New York Exchange is limited to 1,100. Vacancies may occur through death, bankruptcy, resignation, or expulsion. A seat may be sold like any other piece of personal property. Membership is known as a "seat upon exchange." Between 1885 and 1910 the price of a seat has varied from $34,000 to $81,000, with one drop in 1896 to $13,000. The prospective member must be a citizen of legal age, he must secure the approval of two-thirds of the members of the committee on membership, and is required to pay an initiation fee of $1,000. Members who buy and sell for others are known as brokers. Those who trade on their own account may be termed operators, but there is comparatively little business done at first hand. Large traders prefer to deal under cover of a broker. The charge for selling or buying is known as brokerage or commission. A uniform rate is prescribed. The commission for buying or selling 100 shares of the par value of $10,000 for an outsider is $12.50. The charge for performing the same service for a member whose name is withheld is one-fourth that amount. A member trading for a member whose name is given up charges but $2 per $10,000. Bankers seek membership to cut down the cost of brokerage. Brokers accept orders from any responsible parties. They are in business for that purpose. Business is done on the floor of the exchange in an informal way. There is a chairman, but his duties are confined to declaring the exchange open and to making announcements, such as the insolvency or the death of a member or a call for a business meeting. Members are admitted every business day at 9:30 A.M., Trading begins at 10 o'clock; 3 P.M., or on Saturday 12 M., is the closing hour. There are several "posts" or boards on which the prices and transfers of the more active stocks are posted by an attendant. Business is done chiefly in front of the posts. Prices are made in fluctuations of one-eighth of one per cent. If a broker hears no reply to his offer of Rock Island Preferred 483/8, he may call again at 48 1/4, amounting to a drop of $12.50 per $10,000, but he must drop by the prescribed fluctuation, one notch at a time. A hundred telephones keep the brokers in communication with their employers. Competent clerks keep track of the market, and a telegraphic service records significant transactions in some 1,800 city offices. Each of these offices receives this information through a telegraph instrument known as a "ticker." Each ticker prints the information on a ribbon of paper that passes through the device and falls into a basket beneath. By reading his "tape," a banker can note the fluctuations of the market and telephone orders to his broker accordingly. No stocks are actually exchanged on the floor. The brokers make note of trades on pads of paper, and telephone the transactions to their respective offices. Actual delivery must be made by 2:15 P.M. of the day following, or the delinquent is dishonored and his seat may be declared vacant. The buying broker must be prepared to pay or go into bankruptcy.

A committee on the stock list decides what stocks may be placed on the exchange list. These stocks are looked up with care and are such as the brokers are willing to accept as securities for loans. Members are forbidden to sell unlisted stocks on change, nor are they allowed to trade in listed stocks except on the floor of the exchange. This latter rule is aimed to prevent large transfers without the knowledge of the financial world. The trading that is carried on in unlisted stocks and by brokers who are not members of the exchange is said to be transacted on the "curb," a term applied to an unorganized market near the stock exchange.

A large part of the sales on exchange are purely speculative, mere stock gambling. The selling brokers actually sell and deliver. The buying brokers actually buy and pay, but the stocks are deposited with a banker to secure a loan. The speculating purchaser is required to put up such a part of the purchase price as may be agreed upon. If the stock goes down in value, the buyer is required to put up more money or else his stock is sold. If the stock in question goes up the purchaser may order his broker to sell and remit the profit. It may be stated as a rule that outside parties who do not want the stocks and bonds for an actual investment should let the stock market severely alone. Otherwise their small earnings and savings are absorbed quickly by the broker who is in business for that purpose.

The New York Exchange is modeled largely on the London Exchange. The Paris Bourse consists of seventy members approved by the French minister of finance. Each member is held financially responsible, not only for his own transaction, but for the transactions of the other sixty-nine members. The members are brokers only. They are forbidden to buy or sell on their own account. They settle once every two weeks instead of the next day. There is also a Paris "curb," the transactions of which surpass those of the Bourse in volume. The Bourse circle is known as the parquet by way of distinction. The Berlin Exchange or Borse is democratic. Any one may buy or sell on payment of a small fee.