There were Exchanges in London in the sixteenth century. Merchants from Lombardy had given their name to a street, and had flourished so well that they had branched out in the business of money-changing—that is, of exchanging worn, abrased and clipped coins, foreign and domestic, for those of standard weight and fineness. As trade increased and the first faint signs of progress in the matter of wealth began to develop, it was seen that this business of exchanging money was sufficiently2 important to warrant royal recognition; accordingly there was created the office of Royal Exchanger, and the person entrusted3 with this office was given the privilege of exchanging coins in the manner described. Smaller offices for the purpose were farmed out in other English towns, and each place where the business was carried on thus came to be known as “The Exchange,” a name that was ultimately applied4 to324 any covered place where merchants met to buy and sell commodities.
After the money-changers came the money-lenders—Jews, more Lombards, and finally the Guild5 of Goldsmiths. The last named, having long practised the business of money-lending, finally became money-borrowers, issuing receipts for these borrowings known as Goldsmiths’ Notes—the earliest form of English bank-notes—and the first step in the convenient process of translating capital, and debt, and credit, into bits of interest-bearing paper.102 This was the state of English finance until 1694, when the Bank of England was founded, and stocks and shares came into being since the bank was a joint-stock affair. That the invention of stock certificates was a popular one, and that the authorities and the public seized upon it as a convenient means of directing capital into new and hitherto untried forms of enterprise is seen by the rapidity with which fresh undertakings6 were put forth7. In 1698 the New East India Company loaned its325 capital to the government; by 1711 there was a funded debt of ￡11,750,000 in the shape of bank stock, East India stock, and annuities8. There was also the famous South Sea Company, to be followed ten years later by a reorganization of the company with its first subscription9 of a million in ￡100 stock at ￡300, and a second and third subscription of larger magnitude, each accompanied by prodigious10 promises, and each snapped up with avidity by a public saturated11 with the new and hazardous12 pastime of speculation13.
“All distinction of party, religion, sex, character, and circumstance,” writes Smollett, the historian of the time, “were swallowed up in this universal concern. Exchange Alley14 was filled with a strange concourse of statesmen and clergymen, churchmen and dissenters15, Whigs and Tories, physicians, lawyers, tradesmen, and even with multitudes of females. All other professions and employments were utterly16 neglected; and the people’s attention wholly engrossed17 by this and other chimerical18 schemes, which were known by the denomination19 of bubbles. New companies started up every day, under the countenance21 of the prime nobility. The Prince of Wales was constituted governor of the Welsh Copper22 Company; the Duke of Chandos appeared at the head of the York Buildings Company; the Duke of Bridgewater326 formed a third, for building houses in London and Westminster. About a hundred such schemes were projected and put in execution, to the ruin of many thousands. The sums proposed to be raised by these expedients23 amounted to three hundred millions sterling25, which exceeded the value of all the lands in England. The nation was so intoxicated26 with the spirit of adventure that people became a prey27 to the grossest delusion28. An obscure projector29 pretending to have formed a very advantageous30 scheme, which, however, he did not explain, published proposals for a subscription in which he promised that in one month the particulars of his project should be disclosed. In the meantime he declared that every person paying two guineas should be entitled to a subscription for ￡100, which would produce that sum yearly. In the forenoon this adventurer received a thousand of these subscriptions31; and in the evening set out for another kingdom.”
No sooner were there bits of paper to deal in than jobbers32 or brokers34 sprang up to handle them, and by natural gregarious36 processes these dealers37 gathered in one spot. Thus competition was stimulated38 and active markets created. The rotunda39 of the bank and the Royal Exchange were their first haunts, indeed until Archbishop Laud40 drove them out they were to be found bargaining327 on the wide floors of St. Paul’s Cathedral. As the business expanded they took to the neighboring streets and coffee houses, and so Change Alley, Jonathan’s Coffee House, Cornhill, Lombard Street and Sweeting’s Alley became their familiar retreats. Old Jonathan’s burned down in 1748 and New Jonathan’s in Threadneedle Street succeeded it. Here, in July, 1773, “the brokers and others at New Jonathan’s came to a resolution that, instead of its being called New Jonathan’s, it should be called ‘The Stock Exchange,’ which is to be wrote over the door.” Thus while business in the public funds was still conducted on a large scale at the bank, and dealings in foreign securities still centred at the Royal Exchange, London may be said to have had a Stock Exchange in the modern sense from that day in 1773 when the name was “wrote over the door” at New Jonathan’s.103
We have authority for the early history of the London Stock Exchange in a report made in 1877 by the officials of the institution to the Royal Commission. From this report it appears that328 the Stock Exchange at New Jonathan’s in 1773 “afforded a ready market for the operations of the bankers, merchants, and capitalists connected with the floating of the numerous loans raised at that period for the service of the State.” The members or frequenters paid a subscription of sixpence to defray expenses, drew up rules, and placed its control in the hands of a “Committee for General Purposes.” The functions of this committee were then, as now, “judicial as regards the settlement of disputed bargains, and administrative42 as regards rules for the general conduct of business and for the liquidation43 of defaulter’s accounts.” The earliest minutes on record are dated December, 1798.
War loans and a national debt increasing by leaps and bounds, with consequent activity in consols, was the principal source of business in those early days, and as these increased, so also the savings44 of the public and a new national spirit led to a steady growth in the business of dealing41 in securities. The dim receding45 voice of those early days still echoes in Capel Court through the medium of two holidays—May 1st and November 1st. More than a century ago these days marked the closing of the Bank of England’s books for the transfer of consols, and as consols were the only things then traded in,329 there was nothing for stockbrokers47 to do on those occasions; hence they took a holiday. And they still close the Exchange on these days—an eloquent48 instance of the Englishman’s adherence49 to tradition.
By 1801 there was not room enough in the old building, and, moreover, the report says: “It became apparent that the indiscriminate admission of the public was calculated to expose the dealers to the loss of valuable property.” Accordingly a group of Stock Exchange men acquired a site in Capel Court, close to the bank, raised a capital of ￡20,000 in four hundred shares of ￡50 each, and in May, 1801, laid the foundation of what has become through numerous additions the London Stock Exchange of to-day. The building was opened in March, 1802, with a list of five hundred subscribers, and the deed of settlement (March 27, 1802), vested the management in a committee of thirty members, chosen annually51 by ballot52, with nine trustees and managers, separate from the committee, to have charge of the treasury53 and represent the proprietors55. Although the rules and regulations have been amended56 and enlarged from time to time to meet new conditions, the constitution of the London Stock Exchange remains57 substantially unaltered.
As it stands to-day, there are nine managers330 who represent the shareholders59 or proprietors, and thirty committeemen, who look after the administration of the Exchange and the well-being61 of the members. The managers are elected in threes for terms of five years by the votes of the shareholders. They fix the admission fees, appoint almost all the officials, and look after the building and the property in general, while the thirty committeemen enforce the rules and regulations, adjudicate differences, and regulate the admission of securities. They are elected every year by the members, and they choose from their number a chairman and vice-chairman. In March of each year, before retiring from office, the committee elects all the old Stock Exchange members who wish to be re-elected, membership on the London Exchange being granted for one year only. Any member may object to the re-election of any other member, but this is a very unusual incident.
“The great principle upon which the committee acts,” says Mr. Francis W. Hirst, “and to which most of its regulations are directed, is the inviolability of contracts. It has power to suspend or expel any member for violating its rules, or for non-compliance with its decisions, or for dishonorable conduct. A member of the London Stock Exchange is prohibited331 from advertising62 or from sending circulars to any but his own clients. He is also forbidden to belong to any other Stock Exchange, or ‘bucket-shop,’ or other competing institution. New members are now compelled to become proprietors by acquiring at least one Stock Exchange share, paying a heavy entrance fee and an annual subscription of forty guineas. Yet the precautions against impecuniosity63 are inadequate64. Defaults are far too common.”104
In such a dual65 form of control as that of these managers and committeemen it is obvious that causes of friction66 must of necessity arise from time to time, and that jarring and discord67 are inevitable68. The owners or proprietors are, of course, a minority of the members, and their decisions on matters that come before them are necessarily biased70 in favor of a course that will increase the dividends72 on their shares. Naturally they would favor a practically unlimited73 membership, since the dividends are largely acquired from this source.
The plan of compelling each new member to become a shareholder58 or proprietor54 was devised332 to meet this difficulty, and in a measure it has succeeded. “Within the course of the next half century,” says the Quarterly Review, “it is pretty certain that the Stock Exchange, as a company, will belong to the members, of whom each will have a stake in the enterprise; and that happy consummation, when it arrives, will put an end to a good many minor69 problems which still harass74 the House in its workings, and possibly check those bolder plans for reform which are advocated by many of the members.”105 The difficulties arising from these causes had their origin, as we have seen, as far back as the year 1801, when the new building was erected75. As only the wealthier members of the association had provided the capital for the Capel Court structure, in order to protect their investment, they demanded control of its financial affairs; thus the Stock Exchange thenceforth consisted of two distinct bodies, proprietors and subscribers.
While there is but one way by which a man may become a member of the New York Stock Exchange, in the London Exchange there are various ways. The most direct way, and the easiest but most expensive way, is to pay an entrance fee of 500 guineas, and find three members who will stand surety for four years for the333 sum of ￡500 each, this ￡500 being forfeited76 to the estate if the member is “hammered”—i. e., if he fails during the period. The candidate must in addition buy three Stock Exchange shares, the price of which at present is about ￡190 each.106 He must also purchase from a retiring member a nomination20, which can be bought at present for ￡40, although they have sold as high as ￡700. Candidates who wish to join the Exchange under easier conditions may have their entrance fees reduced to 250 guineas if they have served for four years in the Stock Exchange as a clerk; and for these candidates concessions79 are also made in respect to sureties, of which they need provide but two, and to shares, of which they are required to buy but one instead of three. The committee is also empowered to elect each year a few candidates without nomination.
This is a rather curious practice which requires a word of explanation. In England, as elsewhere, there is a latent objection to monopolies of all forms, and the foresighted governors of the Exchange, with an eye to the possibility of difficulties that might be raised against their institution at some time in the future on the ground of monopoly, hit upon this expedient24 as a precautionary measure. Should such objection be raised,334 the governors have only to admit a few more members without nomination. The door is thus thrown open; and there is no de facto monopoly. It is very simple and very ingenious.
In all these cases the annual subscription, or dues, is the same. These, which were originally 10 guineas, then 20 and 30, are now 40 for all new members, while old members pay, of course, the subscription prevailing80 at the time of their election. As a condition precedent81 to election, a candidate must present himself before the committee with his sureties, and each of them must give satisfactory answers to the questions put to him.
From this it will be seen that a man who wants to become a member of the London Stock Exchange without first serving an apprenticeship82 of four years as clerk must pay for his entrance fee 500 guineas, his shares ￡570, his nomination ￡40, and his annual dues 40 guineas, or a total of about ￡1150, of which ￡570, the price of his shares, yields him a return in Stock Exchange dividends. These shares are, of course, excellent investments, and the managers may be relied upon to see to it that their value is not impaired83. During the first seventy-five years of its existence Stock Exchange shares paid an average dividend71 of 20 per cent.; for the last completed year the dividend was 100 per cent. No one person may335 hold more than 200 shares, and holders60 must be members of the Exchange in all cases except those where representatives of proprietors acquired their shares before December 31, 1875. When a proprietor dies, his shares must be sold to a member within twelve months. The membership is not limited, strictly84 speaking, and whereas in 1802 there were 500 members, in 1845 there were 800, in 1877, 2000, and in 1910, 5019.
I say the membership is not limited, but when the time arrives, as it probably will within this generation, that the 20,000 shares are divided at the ratio of three shares for each member, 6666 members will then own all the shares and the membership will be full. Hence there is, in a way, a limit to the total membership.
One important respect in which the London Stock Exchange differs from all others—American, Continental85, or Provincial86—is the division of its members into two classes, jobbers and brokers, a division that appears to be as old as the Exchange itself. As to which of these classes it is better to belong there are differences of opinion, but the wise men in the business seem to be a unit in recommending a few years’ experience as a broker35 to be followed by the business of the jobber33. The broker, under the London system, deals with the outside public and acts merely as336 agent between the public and the jobber, with whom he trades on the floor of the Exchange. The jobber, on his part, is not allowed to deal with the public at all, but must confine his activities to the brokers and to his fellow jobbers. “Thus the broker,” as Mr. Hirst puts it, “feeds the jobber much as the solicitor87 feeds the barrister,” or, continuing the metaphor88, we may say that like the barrister the jobber gets the cause célêbre and all the great prizes, and like the solicitor the broker hunts up the business and must be content with small returns. The broker works for his commission; the jobber for what he can get out of the trade in the way of a profit.
The system in vogue89 in the New York Stock Exchange would seem to possess many advantages over this curious division of functions between the two classes. Here, as every one knows, brokers are not restricted in their operations; the field is alike open to all members, and the market is not limited by placing it in the hands of any one man or any group of men. On the London Exchange the attempt to define strict dividing lines between brokers and jobbers has not been successful; for years there has been a strong undercurrent of resentment90 between them because of acts which each regards as encroachments by the other upon its especial domain91.
337 The quarrel reached an acute stage in the paralysis92 that hit the Stock Exchange after the South African war; there were too many members and too little business. Brokers took it upon themselves to make prices and to deal directly with other brokers and with outsiders, disregarding the jobbers altogether; and jobbers in turn sought in self-defence to establish connections of their own, outside the Stock Exchange, and with non-members. Both parties have violated the spirit, if not the letter of the Stock Exchange rules, and even at the present time, when much stricter rules have been passed defining the limitations of each division, the same unfortunate feeling of resentment is heard daily. Violations93 of the rule, however technical, are bound to create friction, and friction among the members of a Stock Exchange is not a good thing for the members nor for the business. Fortunately, there is nothing of that sort in the New York Exchange.
In active securities where there are very many transactions, Mr. Hirst is disposed to think that the separate existence of jobbers makes for a free market and close prices the very essence of an Exchange’s functions. This may be true, since the jobber is a host in himself, specialist, speculator, trader and jobber—all in one. Where there is a free market, the presence of such a participant338 undoubtedly94 adds to it, as any one knows who has dealt with him in lots of from 5,000 to 10,000 shares, at a difference of only a sixteenth. Such a market is a close market in excelsis. But in the New York Stock Exchange the same result is obtained far more openly and above-board by the presence in all active securities of a host of such jobbers—brokers, traders, specialists, and speculators—each actively95 bidding and offering by voice and gesture, and without collusion, and each thereby96 contributing to the making of the freest possible market and the closest possible price. In New York no middleman stands between the public and the market.
It is a fact recognized by all economists97 that the larger the number of dealers and the freer the competitive bidding, the more accurate the resultant price and the nearer its approach to true value; hence it would seem to follow that in this highly desirable attainment99 the New York system is superior to that of London. The same comment applies to the market for inactive securities. In London, notwithstanding the quotations101 printed in the Official List, the public has no assurance that jobbers can be found to deal at those prices, or at prices approaching them. “And when there is a slump103 in the market and a rush of selling orders with no support,” as Mr. Hirst candidly339 admits, “as happened in rubber shares in the months of June and July, 1910, the jobbers are apt to be away at lunch all day, and the brokers have to report to their clients that they simply cannot find a purchaser.”107
Such things do not happen in the New York Exchange, for when there is a slump in any group of shares, instantly there gathers a number of individuals who are there for the very purpose of making a market. It may be a “soft” market, with wide fluctuations105, but it is a market for all that, and the timely absence at an all-day luncheon106 of any one man or any group of men cannot possibly affect it. There have been occasions on the New York Stock Exchange, no doubt, where a broker with a “hurry” order in a very inactive security has not found a market awaiting him, but there are various ways by which he may seek the desired market and ultimately he is sure to find it. In any case such an incident is the exception that proves the rule that a free market, affording all the advantages which excellent markets possess, is nowhere to be found more easily and more quickly than on the floor of the New York Stock Exchange. “American securities,” says the Paris correspondent of the Journal of Commerce340 in his cabled despatches of October 23, 1912—referring to the Balkan crisis in that city—“may with complete conservatism be regarded as having received a splendid advertisement in the French market by reason of their recent remarkable108 instantaneous conversion109 into cash.”
In the course of many years of active experience as broker, trader, and speculator, I do not now recall an instance in which I was unable to find a market on the New York Exchange for any security, however inactive, which I wished to buy or sell. If the specialist in this particular stock cannot satisfy me with his quotation102, there are always room traders to whom I may submit my offer; there are also arbitrageurs, wire houses, and banking110 houses interested in this particular security. Somewhere among all these agencies the New York broker must inevitably111 find or create a market. But I fancy he would have a sorry time of it were he restricted, under the rules, to dealing with a jobber who “is apt to be away at lunch all day,” when trouble comes and risks are involved.
Such a system, it would seem, is all very well for the jobber, but quite unfair to the outsider and to the conscientious112 broker who is striving all the while to protect the interests of the public341 and maintain the welfare of the Exchange. Indeed, as it works out in London, the broker has all the worst of it in many ways. Even though the jobber “runs a book,” as the phrase is, his work is done at 4 P.M.—when the market closes—and if he is not doing a large business he may then follow his inclinations113. Unless his business involves dealing in South Africans or Americans, his work is substantially completed with the official closing of the Exchange. But the broker, on the other hand, enjoys no such freedom. After the closing he must go to his office—for in the nature of things he must have one—and there he will find correspondence awaiting him, orders to be executed in the “Street markets,” and telephone messages to send to his customers. The mere77 fact that a London broker must use the London telephone is in itself a curse, for nowhere under the canopy114 is there a telephone service so dreadful and so exasperating115.
Even in the ebb-tide of a dwindling116 summer business the London broker, who cannot begin his day’s correspondence until four, finds it difficult to leave his office until an hour long after his American colleague has played his eighteen holes or dressed for dinner. Aside from the horrors of the telephone service, this is due in a measure to the fact that they have no ticker in342 London and the mechanical efficiency with which this machine faithfully records all over America each fluctuation104 of the market, finds no counterpart in England. The broker in London has therefore to perform, in a measure, the work of the ticker in New York. Perhaps I should not say they have no tickers in London. In point of fact there is such an instrument, identical with our own, which four or five times a day, at stated intervals117, reels off with mechanical monotony a list of quotations in certain active securities—the same group every day. They are limited in number, almost nobody looks at them, and many really enterprising houses do not install them at all.
Worst of all, the London broker until very recently was not properly paid for his work; he was not protected by a rigorous commission law, as we are in the New York Exchange. In New York a broker charges ? per cent. commission on the par1 value of every hundred shares in which he deals for a non-member, each way, and the rules of the Exchange compel him to collect it in all cases. The slightest departure from this rule, however technical it may be, is severely118 punished, and no statute119 of limitations or other expedient will save him from the consequences of it. Thus all the brokers are insured343 an equal footing; competition for business is prevented, and the public which the Exchange seeks to serve is assured of equally fair dealing in every quarter. So rigorously is this rule enforced that the large and important branch of the Exchange’s business which has to do with joint-account trading between New York and foreign centres has recently been seriously restricted because, in the judgment120 of the governors, it involved an infraction121 of this important commission law.
On May 22nd of this year (1912) the London Stock Exchange put into effect an official scale of commissions, which was designed to remedy the unfortunate conditions that had prevailed, and this scale is now enforced. It provides for a charge of ? per cent. on British government securities, Indian government stocks and foreign government bonds; ? per cent. on certain other special cases, ? in railroad ordinary and deferred122 ordinary stocks at prices of ￡50 or under, and a sliding scale on shares transferable by deed, ranging from commissions of 1?d. per share to 2s. 6d. per share. On American shares the commission to be charged is 6d. per share on a price of $25 or under, 9d. on prices from $25 to $50, 1s. on prices from $50 to $100, 1s. 6d. on prices from $100 to $150; and 2s. on prices over $200.
344 In many other transactions the commission to be charged is left to the discretion123 of the broker who may, if he is doing a large business with a client in high-priced and low-priced shares on which the official scale of commission varies, arrange to charge ? on all transactions, regardless of the rules. Whatever the London broker may lose in the quality of his commissions as compared with the New York broker appears, however, to be compensated124 by their quantity. A firm of jobbers of my acquaintance once handled in a single day 262,000 shares of “Americans” alone, and when it is borne in mind that this was but one of perhaps 150 firms doing a similar business, an idea may be gained as to how London brokers and jobbers contrive125 to keep the wolf from the door.
The system of settlements twice a month as employed in London is another method quite different from that employed in New York, and one, too, that seems to suffer by comparison with our system. On the New York Stock Exchange everything is settled on the day following the transaction. Each broker and each customer knows just where he stands, and every trade is settled in full when the next day ends. Tell an English broker that on a single day our Clearing-House settled and balanced transactions in more345 than 3,000,000 shares of an approximate value of 50,000,000 sterling and he gasps126. He says that such a thing would be impossible in London, and he is right, it would be impossible indeed. Clearings in London vastly exceed ours, but they do not occur daily; indeed our system would not do at all in a centre that transacts127, as London does, a large international business in which transfers must be sent hourly to Egypt and India and to all quarters of the globe. Daily clearings in such circumstances would be very troublesome and vexatious.
The New York system, however, makes failures and defaults commendably128 rare, while the London system, by postponing129 the day of reckoning, actually invites over-extensions in speculation leading to failures that could not possibly occur here. To make this point clear to the layman130 it may be said concisely131 that the man who settles daily is in a safer position both toward himself and his creditors132 than is the man who postpones134 his settlement. The daily settlement protects the public, as well, by putting limits on speculative135 commitments. These matters are self-evident.
A gentleman who was for many years identified with a London firm of jobbers, and who is now a member of the New York Stock Exchange and, therefore, quite familiar with the different methods346 employed in these Exchanges, tells me that the London system of brokers and jobbers, commission laws, and fortnightly settlements, is the best possible system for the London Exchange, while the very different methods employed in New York seem to him to be the best that can be devised for the New York Exchange. This may be true, since conditions governing the two markets are widely different. In New York the whole system is cash; in London, credit. Here brokers may accept business with considerable freedom, knowing that but a single day elapses before the reckoning; in London brokers exercise greater caution because they must trust their clients until settlement day.
Another point of difference between the methods of the two Exchanges lies in the phlegmatic136 deliberation of the Englishman. Here in New York there is a slap dash, touch-and-go system that is greatly facilitated by the use of the telephone and the private telegraph lines; a single commission house has 10,000 miles of leased lines. In London, where telephones and private lines are but sparingly used by brokers and clients, a broker often finds on his desk in the morning three or four hundred letters and telegrams. The care and attention required to handle an enormous lot of orders given in this deliberate manner is something with347 which New York stockbrokers are quite unfamiliar137; indeed it may be doubted if they could meet such an emergency with their present facilities.
Publicity138, as we are learning in the New York Stock Exchange, is a prime requisite139 of the business, and the advantages that thus accrue140 through the use of the ticker and the published summary of each transaction in the day’s work cannot be overestimated141 in its importance to the public and to the banks. In London, where a jobber may buy or sell large quantities of securities, the business is done quietly. Outside of the active participants in a transaction, nobody is permitted to know anything about it. There is no ticker service worthy142 of the name, nor is there a list of transactions published at the end of the day.
This, it seems obvious, would not do at all in America. We have here not only the ticker-tape, which prints an almost instantaneous report of prices all over the country, together with the volume of business done at those prices, but there are similar reports of the day’s business printed in all the morning and evening papers—one of the last-named going so far as to reproduce on its financial page a copy of the day’s tape from beginning to end. All the newspapers, moreover, print opening, high, low, and closing prices,348 together with the bid and offered price of each security at the market’s close.
In the course of the two days in which these lines are written, for example, 257,000 shares of Reading Railroad stock have changed hands within a range of 1? per cent. The public is enabled, through the medium of the news-ticker, to learn who the buyers and sellers were that engaged in these transactions; the tape shows the specific volume of business done at each fraction, the various news agencies contain all the information and gossip that throws any light on the matter, and the financial columns of the morning and evening newspapers comment freely for the public benefit.
The total amount of information that is thus laid before the public is as complete and as instructive as could be desired, and yet in London and on the Continent such information is never published, although the two leading financial newspapers in London, because of the immense field covered, actually publish a mass of miscellaneous news and gossip that exceeds any similar American effort. They make it pay, too; dividends declared by these newspapers are altogether unapproached by the American financial press. The essential information lacking, however, is the number of shares dealt in, and at what349 prices; even if they had a thoroughly143 good ticker system I doubt if this information could be recorded, because the volume of business done is too great. It is encouraging in this connection to note that so eminent144 an economist98 as M. Leroy-Beaulieu frankly145 concedes our superiority in these matters over the practice of the foreign Exchanges and urges their immediate146 adoption147 abroad.108
The second serious objection that may fairly be lodged148 against the London system applies, as I have said, to the increased inducements offered to foolhardy and reckless speculation by the plan of deferred settlements. Whether members of the various Stock Exchanges in the world’s capitals like it or not, they must recognize the fact that there are evils in speculation just as there are benefits, and that these evils are becoming a subject of increasing comment. The recent attempt to repress speculation in Germany and the conditions which led to the appointment of the Hughes Committee in New York are signs of an aroused public sentiment that cannot be ignored.
With these examples before them, members of Exchanges everywhere must realize that if it lies within their power to discountenance and350 discourage foolhardy ventures into speculation by persons ill-equipped to undertake them it is their plain duty to do so. The London Stock Exchange’s system of fortnightly settlements clearly does not aim at this highly desirable object as well as the method of daily settlements employed in New York, for it requires no student to see that by postponing the settlement risks will be incurred149 that would be impossible if a reckoning were called for each day. Moreover, the fact that there are ten failures on the London Stock Exchange to one in New York furnishes ample proof that the precautionary restriction150 imposed by daily settlements is quite as important to the welfare of brokers as it is to the protection of the public.
As a matter of fact, failures of brokerage houses are peculiarly abhorrent151 to every one concerned. In the Paris Bourse a broker must give security at $50,000, and his bankruptcy152 in all cases is considered a fraudulent one, rendering153 him liable to arrest. The French Agents de Change enjoy an absolute government monopoly, and naturally in the circumstances they are held to the strictest accountability; but aside from that a tendency is plainly discernible nowadays in all large financial centres to demand of stockbrokers on the Exchange a rigid154 adherence to such business351 methods as will prevent bankruptcies155 of dealers to whom the public entrusts156 its money.
The danger of the London fortnightly settlement system lies not in the deferred delivery of securities, but in the fortnightly settlement of “differences.” A London broker may be actually bankrupt, yet if he is desperate or unscrupulous, knowing that his differences will not have to be settled for a fortnight, he may plunge157 into speculative risks fraught158 with the utmost danger. If the market goes his way he is saved; if it goes against him, he is still no more than bankrupt. But in his fall, as a result of this dishonest venture, he may conceivably ruin many others, and a chain of disasters may follow his excesses. It should be said in this connection that London jobbers and brokers keep a sharp watch on each other; it is extraordinary how quickly the news gets about if this man or that is over-extended. Again, either broker or jobber may discriminate50 in his dealings, taking care to avoid those against whom there is a suspicion.
Notwithstanding the points of merit in the New York system, at some time in the future when local Stock Exchange business has expanded to proportions approaching those of the London Exchange, modifications159 must be made. If banks and brokerage houses are given a week or ten days352 to settle transactions, everybody will have a tolerably clear idea of what money will be required, and lenders will be enabled to make provision. London passed through the 1907 panic, under this arrangement, with a maximum rate of 7 per cent., while we in New York would have been glad to pay 200 per cent., and this, despite our deplorable currency system, could not have occurred had there been ample time for the banks to make preparations.
From these observations it may be suggested that perhaps the time will come when the governors of the New York Stock Exchange may find it necessary to put in force a combination of daily settlement of differences, such as we have at present, with a periodical delivery of stock such as they have in London. Transactions for cash need not be affected160 by this arrangement, nor would the public lose any of the protection it now enjoys. In any case, if such a plan resulted in minimizing those violent fluctuations in our call-money market which have so long afflicted161 us, it would prove a permanent blessing162.
As there is no currency system anywhere in the civilized163 world so crude and inadequate as that of the United States, it is unnecessary to say that London jobbers and brokers experience none of353 the difficulties with money markets that occur periodically on this side. The carry-over on the other side of the water is frequently a matter involving immense sums of money, but rates fluctuate normally and are in large measures governed by automatic processes both simple and sane164. Perhaps the less said about similar conditions here the better. The spectacle presented by strong and solvent165 houses ransacking166 the street for funds secured by prime collateral167 and bidding 25, 50, and even 100 per cent. for accommodation—something that has occurred within the last decade and may conceivably occur again—is one upon which the candid78 American observer does not care to dwell; such a man may well look with longing168 and envy to London, where capital, credit, and currency are so firmly established that the Bank of England dominates and controls all the money markets and gold movements of the world, lending freely at home and abroad whenever funds are needed, and acting169 as a civilizing170 force in supplying with British funds the commercial needs of all new countries.
In this connection we may point out the method of borrowing from the banks the funds required to carry speculative commitments in London. It was formerly171 the practice for the banks to lend large sums to brokers, who employed the money354 inside the house in carrying over the accounts of their clients. This class of business is still large, but nowadays clients are not always satisfied to borrow through brokers, and not infrequently they go direct to the banks and borrow from them. This has the effect of disguising the real character of the business. To all appearances the securities have been bought and paid for, and the trade seems to be an investment, but the client has, as a matter of fact, “pawned” the security with a bank.
This practice is inconvenient172 in a way, because where the jobbers in important markets formerly compared notes at each settlement and were thus enabled to form a pretty good idea of the condition of the speculative account, it is less easy to do so nowadays, when so many clients carry on their own borrowing. A similar tendency on the part of the public is noticeable in New York, although, of course, the daily settlement on this side obviates173 the necessity for arriving at conclusions in advance as to the requirements of funds.
A word should be said about the methods of London stockbrokers in carrying stocks for their customers, because this also is quite different from the practice in New York. Here the strongest houses rarely loan stocks, unless attracted by355 unusual rates of interest; in London it is the common practice of even the best houses to carry-over, or as we term it, loan, a great part of the commitments entered into during the account. One reason for this is that in London customers buy their stocks outright174 more frequently than is done here. Scalping small profits is not practised on anything like the New York scale. Most of the stocks dealt in do not pass from hand to hand like American stocks, but must have a transfer form with the name and address of the buyer and seller attached to the certificate. There is also a government stamp-tax of ? per cent. on the money involved, which tax must be paid by the buyer when the stock is transferred to him. When the buyer sells this stock he may not have immediate use for the proceeds, and so, instead of delivering the stock standing100 in his name, he instructs his broker to borrow it from account to account, thus receiving interest on his money. The tax is a heavy one—figured in American money it amounts to $50 per hundred shares at par—and the Englishman very naturally resorts to methods such as these to recoup at least a part of it.
Again, from the stockbroker’s point of view, if he buys securities on margin175 for a customer, he (the broker) must either carry them with the356 jobber or with another broker, or he will have to pay the government tax himself. Naturally he hastens to loan them, because, should the client sell the securities in the course of the next account when they would have to be delivered, the broker would lose the tax. He avoids this loss by instructing a jobber to contango or carry-over the securities until the following account day. On the other hand, if the broker is certain that his client has purchased his securities for a long pull on a margin basis, he will often pay for the stock himself, transfer it to his own name, and willingly submit to the government tax, knowing that he can recover the outlay176 from the handsome rate of interest charged the client.
Another vital point of difference between the London and the New York Stock Exchange lies in the nature and volume of the business done. Americans are prone177 to think of their foremost Exchange as one which, in the volume and extent of its transactions, compares favorably with the great Bourses of the world; they like to think of New York as the financial centre of the universe, and they paint rosy178 pictures of America as a great creditor133 nation. But they err107 in each of these ambitious dreams. The New York Stock Exchange, with all its magnitude, cannot compare357 with its London prototype; New York is by no means the financial centre of the world, and America is not a creditor, but a debtor179 nation.
Perhaps in time America’s relationship to England and to the rest of the world may change in these matters—certainly its increase in per capita wealth and real property is such as to justify180 the hope—but at present the day when we may speak of American financial supremacy181 seems a long way off. We have not yet forgotten, for example, the panic of 1907, and our helpless situation as revealed by our demand for gold, nor are we likely soon to forget the funds that were then promptly182 supplied us by London without any dangerous depletion183 of the Bank of England’s reserve. So smoothly184, so automatically are these large affairs conducted by the Bank that the outflow of gold to New York found a prompt response in the inflow from twenty-four countries, including the Colonies. Within six weeks after the American drain began, the bank’s stock of bullion185 actually exceeded its original store. Small wonder that Englishmen are proud of their bank; and that London should have become the world’s centre for the investment of capital and the diffusion186 of credit.
The New York Stock Exchange business differs radically187 from that of all other great Exchanges358 in the one respect that its dealings are practically confined to home corporations, whereas the Bourses in Paris and Berlin, and more particularly the Stock Exchange in London, embrace in their daily lists securities representing many different countries all over the world. Here we have Canadian Pacific Railway shares, and various Mexican Railway securities, together with some issues of Japanese and German bonds, London Underground Railway bonds, and a few others. But these, with the exception of Canadians, are dealt in sparingly and with a rather nominal188 market. Our list of securities is composed almost entirely189 of home rails and industrials companies, representing, to be sure, an enormous total of capital investment and signifying the tremendous growth of a comparatively new country backed by the energies of a thrifty190 and enterprising people, but compared with the London Stock Exchange’s Daily Official List ours is meagre in the extreme.
The London Daily List covers sixteen pages as large as our daily newspapers, each page printed closely in small type, and containing the names, amounts, interest dates, rates of dividend, and occasional quotations of approximately 4700 different listed securities. This long list, moreover, contains the names only of the securities359 that have received an official settlement and an official quotation as well. There are certainly as many more securities dealt in that have not received an official quotation and hence are not permitted to appear in the List, so that the total number of different securities represented on the London Exchange in one or both of these ways probably exceeds 9000, half of them occupying a position somewhat similar to the Unlisted Department which once had a place on the New York Stock Exchange, but which is now abolished.
It is the largest and most varied191 list of securities in the world. The price of a single copy is sixpence; it is published by the trustees and managers, under the authority of the committee. Not the least interesting feature of the List is its continued expansion in the last half-century. Up to the year 1867 one page sufficed, then four till 1889, eight till 1900, twelve till 1902, and sixteen thereafter, this expansion closely following the nominal value of the securities quoted, which were ￡5,480,000,000 in 1885 and ￡10,200,000,000 in 1909. The latter figure is about equal to the combined nominal capital value of the securities quoted on the Paris Bourse and the New York Stock Exchange. In 1907 the total number of bonds then listed on the New York Stock Exchange was 1100, and the total number of stocks360 502, these together representing a total par value of $21,079,620,430. In 1912 this total amounted to 1,028 bonds and 555 stocks, with an aggregate192 par value of $26,243,291,803.
The London List is conveniently divided into thirty-eight different classes, among them British Funds, Corporation and County Stocks of the United Kingdom, Public Boards, Colonial and Provincial Government Securities, Indian and Colonial and Provincial Government Securities, Indian and Colonial Corporation Stocks, Foreign Corporation Stocks and Bonds, Ordinary Shares and Stocks of English Railways, Railways leased at fixed193 rentals194, Railway Debenture195 Stocks and Guaranteed Stocks and Shares, together with preference shares, Indian Railways, Indian Native Raj and Zemindary loans, Railways in British possessions, American Railroad Stocks and Bonds, Securities of Foreign Railways, Banks and Discount Companies, Breweries196 and Distilleries, Canals and Docks, Miscellaneous Commercial and Industrial Companies, Electric Lighting197 and Power Companies, Financial, Land, and Investment Companies, Financial Trusts, Gas Companies, Insurance Companies, Iron, Coal, and Steel Companies, Mines, Nitrates, Shipping198, Tea, Coffee and Rubber, Telegraphs and Telephones, Tramways and Omnibus, and Water Works. Of361 these the Commercial and Industrial Companies List is by far the largest, covering three pages.
A cursory199 glance over this really formidable Official List brings forcibly to mind London’s supreme200 position as banker, broker, and clearing house for the wide world, while it emphasizes the constantly increasing overflow201 of British capital into channels that make for enterprise and development even in the most remote quarters of the globe. Here we find set forth Ceylon, Fiji, Tasmania, and Cape46 of Good Hope debentures203; Stocks of Saskatchewan, Antigua, Johannesburg and the Straits Settlements; Harbor Board Mortgages of Oamaru and Wanganui; Rangoon Sterling Loans; Municipal Stocks of Pernambuco; Budapest, St. Louis, Tokio, Lima and Aarhus; Ecuador salt bonds and bonds of the Grand Duchy of Finland; securities of the Greek Piraeus Larissa Railway, Honduras 10 per cent. loans, loans of Liberia, Persia and Siam, and certificates of the Venezuela Diplomatic Debt. There are securities of the Ionian Bank, the Natal204 Bank and the Bank of Abyssinia. The Terra del Fuego Development Company is represented, and likewise Amazon Telegraphs, Malacca Rubbers, Singapore Electrics, Rangoon Tramways, Montevideo Water Works, and Sao Paulo Match Factories. Soda205 and newspapers, theatres and sawmills, hotels362 and clothiers, sponges and molasses, soaps and cereals, these are some of the items that catch the eye as one glances over the List. What would be found there if all the securities admitted to the House were published in the List may be left to conjecture206; and what will this eloquent array of enterprise in figures look like a century hence, if the List continues its present rate of growth?
As Great Britain is a country where there is never any difficulty about raising capital for the creation or extension of any business which offers a reasonable probability of large profits, it is natural that new countries where capital is scarce and credit scarcer should turn to London. Thus governments, municipalities, company promoters and manufacturers from all over the world are constantly making application for funds with which to supply their needs. Greek railways, Abyssinian banks, Ceylon tea and Malay rubbers hasten to register themselves at the world’s centre of capital and offer their shares to a public whose taste for all kinds of world-wide industrial and commercial ventures seems never likely to be satiated, since the really good and profitable home enterprises are seldom open to public subscription. The insiders in those bonanzas207 naturally keep their treasures to themselves and their friends, unless after a time the concern363 is turned into a limited liability company with good-will as a conspicuous208 asset and over-capitalization as the dominating motive209; then, as elsewhere, the market is invited to assist. But that is another story.
What is of especial interest to a Wall Street man who looks over the enormous list of London’s Stock Exchange securities is the function and method of the Listing Committee that has to pass on all these concerns before admitting them to the House. In New York the Stock Exchange’s “Committee on Stock List” insists that the applicant210 company must be able to show at least one year’s earnings211—a most important condition. In London somewhat different conditions prevail. The committee looks into the bona fides of an applicant company and makes inquiries212 concerning the people behind it, but it does not require that it shall have done business for at least a year and show a year’s earnings, because if that were insisted upon as a condition precedent, the banks would not finance it, nor the public support it. They have no “curb market” in London where a new company may pass through a seasoning213 or preparatory period while awaiting admission to the Stock Exchange, and as a settlement day with Stock Exchange authority is rigorously insisted upon364 by those who provide the funds, it follows that companies must be admitted at least to “official settlement” privileges as soon as they are organized.
One point upon which the London Exchange authorities lay great weight in the admission of new securities, consists in obtaining assurances that a sufficient number of shares has been allotted214 to the public before admission is granted. This is a thoroughly wise precaution, designed to prevent corners and, as far as possible, improper215 manipulation. Another very interesting, and I may say, a very wise precautionary measure of the London method of listing, is the prohibition216 placed upon vendor’s shares—a plan that might well be adopted in New York. In London, for example, a vendor—i. e., a seller of the property—who receives shares in consideration of the sale, cannot have his shares listed until six months have elapsed after shares of the company have been offered to the public. The protection afforded the public by this plan is obvious, and requires no further comment.109
365 If the London share certificates required, as in New York, only a simple endorsement217 for transfer, much of the annoyance218 and confusion that sometimes takes place would be avoided. The market for mining shares, for example, had until 1888 only a very small place in the London Stock Exchange, but the discovery of gold in the Witwatersrand changed all that, and by 1894 the number of brokers engaged in handling mining shares actually exceeded those in any other department. It was found necessary to provide a special day—one day before the regular settlement commenced—for carrying over bargains in mines, but owing to the fact that mining shares, like nearly all securities in London, were “registered” and not “to bearer,” the clearing house was taxed beyond its powers by the immense volume of work thrown upon it, and once or twice it broke down completely.
An extraordinary number of small investors219 bought fractional shares; the offices of the companies were not prepared for the rush and could not handle the large carry-over, hence for a time the “Kaffir Circus,” as the speculative mania202 of the day was called, promised to embarrass seriously the whole Exchange machinery220. All this could have been avoided by making the shares “to bearer.” Yet366 the London authorities feel—and not without reason when we consider the volume of their business and the remoteness of their clientele in many instances—that bearer certificates are not safe, and that what is lost in the time spent in transferring certificates is amply compensated in the resultant security against fraud and forgery221.
It is interesting to note in connection with the enormous business done on the London Exchange—a business which makes New York’s high totals seem insignificant—on what a vast scale London’s exports of capital are conducted. This may properly be noticed here, since these capital exports have great economic significance and bear close relationship to the transactions on the Stock Exchange; indeed were it not for the work done by the Exchange in providing markets and settlements and all the details of the security business, it is fair to say there could be no such public issues of capital. In 1910, for example, new capital expenditures222 amounted to the extraordinary figure of ￡267,439,000, of which ￡60,296,500 was expended224 in the United Kingdom, ￡92,378,100 in the various British possessions, and ￡114,764,500 in foreign countries. Of the grand total ￡49,974,000 went into foreign railways, ￡10,096,000 into Indian and Colonial railways, ￡35,631,600 into Colonial government loans, ￡18,431,000 into foreign367 government loans, ￡18,343,100 into explorations, and ￡19,143,800 into rubber.110 The year 1910 was, of course, a year of great prosperity in England, and it was a year made famous by speculative activity in various directions, especially in rubber, so that the totals given above are larger than they had ever been before. But the point for us in America to bear in mind in considering these figures is their immense significance as showing England’s complete supremacy in capital, credit, and the art of banking.
The immense number of securities dealt in, coupled with the speculative propensities225 of the people and the ramifications226 of British finance, naturally go to make that Exchange a peculiarly sensitive and vulnerable spot, and the American visitor may well wonder what would happen there if the ancient bogy of war between England and any other first-rate power should some day become a reality. War is, as every one knows, the greatest destroyer of capital. England’s little Transvaal war cost $1,000,000 a day, and by the Chancellor227 of the Exchequer’s report resulted in a total expenditure223 of $1,085,000,000. The war between Russia and Japan cost upward of $3,000,000 daily and $2,000,000,000 all told. What a great368 war would cost England if that country were to cross swords with one of the powers may be conjectured228; what would happen in the Stock Exchange taxes the imagination.
In the month in which these lines are written the London Stock Exchange and all the continental Bourses are having their periodic scare over a war in the Balkans. British consols have fallen almost seven points from the high price of the year; French rentes seven, German 3s. six, and Russian 4s. seven.111 These are very severe declines for government securities of that class, and if they can fall abruptly229 over difficulties in the Balkans, what would happen were these countries themselves involved in war with foemen of their own class? Russian consolidated230 4s. fell eleven points and Japanese 5s. twelve in the first month of the Manchurian war, and in our war with Spain, Spanish 4s. fell from 61 to 29?. If such things can happen to government securities, what would happen to all the 9000 odd industrial and kindred securities dealt in on the London Exchange should England take up the sword with, let us say, Germany? We are not left to conjecture on this point, for in the week that has just witnessed369 the Balkan scare there have been some really tremendous slumps231 in securities—collapses out of proportion, it would seem at this distance, to the magnitude of the political issues threatened.
In Paris, for example, there has just been witnessed a two-day break of 185 points in Sosnoviche Collieries, a one-day break of 165 points in Bakou Naphtha, a decline within a few hours of 115 points in Russian Naphtha and overwhelming breaks of from 50 to 150 francs in Paris Light and Transport shares, Rio Tintos, and Electrics. No such demoralization has been seen in any foreign financial market within twenty-five years. This slump was no doubt due in large part to a top-heavy speculative position and to consequent financial congestion233, but it was the Balkan war-cloud that caused the real difficulty none the less, and it supplies an outsider with an idea of what may happen in a real emergency.
Foreigners are prone to speak of Yankee speculation as foolhardy and reckless, as no doubt it is at times, but never in American history has there been a panic with anything like the severe declines, in so brief a period, as those just recorded. For that matter, we in America have never experienced a boom in any sense commensurate with London’s rubber boom of 1909–10, nor a collapse232 as sudden and as thoroughly deserved as that370 which followed it. Again, London’s Kaffir Circus of 1894–5, and the furious speculation in Panama shares in Paris in the early nineties, have had no parallel in American stock markets. This is only another way of saying that the speculative mania which seizes upon nations at periodic intervals is not a matter of latitude234 and longitude235 in any sense.112
In trying to picture what would happen in the London Stock market should such a war as that which Englishmen are always discussing really occur, we must take into account not only the mass of securities that would be directly affected, but also the great burden borne by London banks and bankers in security issues all over the world. On another page we have seen that London’s capital expenditures on new issues in various quarters of the globe in a single year exceeded ￡267,000,000; in the quarter just closed (September, 1912), these disbursements ran ￡25,000,000 above the previous year.
That they will continue so to increase is open to no doubt as long as England’s abstention from war is assured; but if there should arise even the371 possibility of war, it would result in an embarrassment236 of credit with terribly serious results, such as have never been dreamed of in the world’s history. The many years of peace between the great powers, the many new countries that have been opened to commercial development, and the countless237 new fields of industrial endeavor that have come into being while this peace has lasted, have served to create a British credit situation huge and complicated beyond all precedent. Any serious interruption or derangement238 of so vast a system would find a very different situation from that which existed on the Continent in 1870. It would be appalling239.
And yet, ere we go too far afield in search of the shivers, the observer must bear in mind that this great credit system of which London is the banker and clearing house, in reality knits together in its international web all the great powers, and binds240 them so closely together as to guarantee, in some measure, the preservation241 of peace. That peace hath her victories, and that the creation of wealth through industrial pursuits may serve in this way to prevent armed strife—these are, after all, encouraging indications quite as strong as treaties. To-day the bankers of London and Paris are the war lords of creation. Both these centres loan money, on early maturing372 bills, to all the world. Stop London’s discounts through an outbreak of war, and gold would pour into that centre at the rate of $200,000,000 a month. “It might be possible to starve her population,” says a recent writer, “but no combination of the Powers could bankrupt London. In the event of war Paris could bankrupt Germany in a week. No war could disturb the credit of the Bank of France; but the German Reichsbank would inevitably go down in the smash. All Germany’s capital is in her own shop. She is doing a great business, and, quite properly, a great part of it on borrowed money. But if her loans were called, she must put up the shutters242.”113
Let us now observe the London broker at his work. The Stock Exchange, as has been described, settles nearly all of its transactions twice a month, upon officially appointed “account days,” which fall about the middle and the end of every month. Smith, a broker, receives an order to buy, let us say, 500 East Rands, and goes to a jobber who makes a specialty243 of that department. The jobber, Jones, is a wise man and a clever trader, who knows all there is to know about supply and demand and regulation of prices to meet them, otherwise he would soon be out of business. Smith does not tell him what he proposes373 to do, but asks for a price, which in normal markets Jones quotes at 3? to 3-9/16, this being the method of implying, in pounds sterling, that he is prepared to buy at 70s., or to sell at 71s. 3d. The broker will probably say that the price is too wide, whereupon Jones quotes a figure “close to close,” reducing the quotation 1/64 each way, at which figure the transaction is closed.114 Smith enters in his book that he has bought of Jones 500 East Rands at the price stated, and Jones, that he has sold at this price to Smith. The customer is then advised of the transaction, and next day he receives his stamped contract, with details covering the cost of the shares together with brokerage and other expenses, if any, and informing him of the date of the next account day, when payment will fall due.
Beneath the main floor of the Exchange is the settling room, and here the clerks of broker and jobber check the transaction that has taken place. Two days before the account the name of the person for whom the East Rands were bought is written on a ticket—hence “ticket day”—and handed to the Stock Exchange Clearing House, which, after the manner of the Stock Exchange Clearing House in New York,374 eliminates all the intermediaries through whose hands the shares may have passed ad interim244, and puts the selling broker into direct communication, by passing him the ticket, with the broker of the buyer. This done, the seller receives the ticket with the buyer’s name on it, and prepares a transfer deed as the law requires.115 Had the client bought the shares of an American railway instead of East Rands, the procedure following the purchase would have been somewhat different, because American shares bear a form of transfer on the back which requires the signature of the seller only, and which becomes, by reason of this fact, almost as readily negotiable as bank-notes.
In London consols can be dealt in in this way, but the customary form of conveyance245 of the funds, and of Indian and Colonial stocks, consists of a brief transfer on the books of the bank acting as agent for the particular issue. Thus the Bank of England keeps the books for consols and India government stocks, and sellers or their attorneys must attend personally at the bank and sign the transfer. The bank insists that every seller must be identified by a member of the Stock Exchange, whose signature must be registered there, and it places full responsibility upon375 these members for correct identifications. This was long a sore point with the Stock Exchange, and it was fought to a finish in the courts, but the Bank won “in a walk.”
The transaction just cited in the case of East Rands is based on the supposition that the original buyer proposed to “take up,” or pay for his shares in full. If he is merely a speculator, hoping to sell at a profit before the settling day and pocket the difference, a somewhat different procedure is involved, especially if at the approach of settling day the hoped-for rise has not appeared. In that case he asks his broker to “carry-over,” “contango,” or “give on,” the shares he has bought, and the broker, to whom this is an hourly occurrence, naturally has at his finger tips ample facilities for doing what is required.
Going to the jobber, he says he wants to “give on” five hundred East Rands. The jobber says he will “take them in,” which means that he will lend the money until next following settlement, charging interest at, say, 5 per cent., while the broker in turn charges his client 5? per cent. and takes the interest difference as compensation for the service. The buyer’s speculation is thus extended to the next settlement, and the statement given him shows that he has been376 debited246 with the interest upon the “making-up price,” at which the transaction is arranged. The rate of interest is called the “contango,” and “contango days” are the two days during the settlement when these arrangements are in effect:116
“The Stock Exchange has witnessed many periods of wild excitement and speculation, reminding one of the famous South Sea Bubble—perhaps the most remarkable “boom” on record—the story of which, however, has been so often and so vividly247 told by Smollett and later writers that we need only refer to it here. Just before the middle of the last century came the great railway boom. It began about 1834, and within one year more than six hundred propositions for railway lines in the United Kingdom were placed before the public, the nominal capital required being over 600,000,000 pounds sterling. Panic, of course, followed the boom; and, as an example of the rapidity with which prices moved, it may be mentioned that the Great Western Railway stock rose to 236 in 1845, and fell back to 55? within three years, while Midland stock rose to 183 and fell to 64. After the railway boom and panic came several banking crises, of which the worst were those identified with the names of Overend, Gurney, & Co. in 1866, and of Baring Brothers in 1890. For five years after the latter, the Stock Exchange lay fallow, with business and credit worn to a shadow. Then came the famous Kaffir boom, of which it may be said377 that Cecil Rhodes stood out as the colossus. The madness of that boom has rarely been equaled, even in the history of the Yankee market. It makes one hot even on a cold day to think of the time when, as a clerk, one tore off coat, waistcoat, collar, and tie in order to run the faster in the settling room beneath the Stock Exchange, “passing names” (as it is technically248 called) in connection with that gamble. A Rugby football scrum was child’s play to the continued struggles; and, after the most violent excitement had subsided249, there were always fights to be settled before one went upstairs to work the whole night through.
“A period of collapse followed this episode. After various minor upheavals250 there came in 1910 the rubber boom, which, perhaps with the Kaffir Gamble, more nearly recalls the excitement of 1720 than any other. The rubber boom had not, indeed, the same noble backing which the South Sea Company boasted; but clergymen and ladies were prominent operators as ‘bulls,’ ‘stags,’ or both.”117
The thought will no doubt occur to an American who reads these pages, whether the day will come when American banking will extend, as in England, to every quarter of the globe, and whether the New York Exchange, like its London prototype, will become a centre of the world’s commercial activities. This is a far cry, of course, and the answer will not be known in our generation. But it may be said without fear of contradiction378 that when a great nation like ours, in which the spirit of enterprise is manifest, has reached the point where its own domain has been developed, when it has perfected a sound banking and currency system, when it has recovered its lost shipping and mastered those economic lessons that the future has in store, it may confidently be expected to push out into new lands and supply their demands for capital.
Already we have in America a world’s storehouse of necessary commodities, with wealth and intelligence that increases by leaps and bounds. No nation stands a better chance of escaping the horrors of war and its ruinous losses. China remains a fertile field for commercial endeavor in the years to come, and our neighbors on the south may one day know us more intimately. The retrospective eye, surveying commercial and financial America in the sixties and contrasting it with America of to-day, sees clearly that progress has been made, and looks beyond toward progress to come. In any case civilization must advance and trade expand, and American energy must advance and expand with them. I wish I might visit Wall Street and the Stock Exchange a century hence.
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sufficiently
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entrusted
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applied
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guild
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undertakings
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forth
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annuities
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| n.养老金；年金( annuity的名词复数 )；（每年的）养老金；年金保险；年金保险投资 | |
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subscription
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prodigious
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saturated
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hazardous
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13
speculation
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| n.思索，沉思；猜测；投机 | |
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14
alley
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| n.小巷，胡同；小径，小路 | |
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15
dissenters
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| n.持异议者，持不同意见者( dissenter的名词复数 ) | |
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16
utterly
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| adv.完全地，绝对地 | |
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17
engrossed
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| adj.全神贯注的 | |
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18
chimerical
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| adj.荒诞不经的，梦幻的 | |
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19
denomination
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| n.命名，取名，(度量衡、货币等的)单位 | |
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20
nomination
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| n.提名，任命，提名权 | |
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21
countenance
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| n.脸色，面容；面部表情；vt.支持，赞同 | |
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22
copper
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| n.铜；铜币；铜器；adj.铜(制)的；(紫)铜色的 | |
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23
expedients
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| n.应急有效的，权宜之计的( expedient的名词复数 ) | |
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24
expedient
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| adj.有用的，有利的；n.紧急的办法，权宜之计 | |
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25
sterling
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| adj.英币的(纯粹的，货真价实的)；n.英国货币(英镑) | |
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26
intoxicated
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| 喝醉的，极其兴奋的 | |
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27
prey
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| n.被掠食者，牺牲者，掠食；v.捕食，掠夺，折磨 | |
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28
delusion
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| n.谬见，欺骗，幻觉，迷惑 | |
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29
projector
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| n.投影机，放映机，幻灯机 | |
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30
advantageous
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| adj.有利的；有帮助的 | |
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31
subscriptions
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| n.（报刊等的）订阅费( subscription的名词复数 )；捐款；（俱乐部的）会员费；捐助 | |
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32
jobbers
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| n.做零活的人( jobber的名词复数 )；营私舞弊者；股票经纪人；证券交易商 | |
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33
jobber
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| n.批发商；(股票买卖)经纪人；做零工的人 | |
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34
brokers
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| n.（股票、外币等）经纪人( broker的名词复数 )；中间人；代理商；（订合同的）中人v.做掮客（或中人等）( broker的第三人称单数 )；作为权力经纪人进行谈判；以中间人等身份安排… | |
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35
broker
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| n.中间人，经纪人；v.作为中间人来安排 | |
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36
gregarious
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| adj.群居的，喜好群居的 | |
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37
dealers
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| n.商人( dealer的名词复数 )；贩毒者；毒品贩子；发牌者 | |
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38
stimulated
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| a.刺激的 | |
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39
rotunda
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| n.圆形建筑物；圆厅 | |
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40
laud
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| n.颂歌；v.赞美 | |
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41
dealing
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| n.经商方法，待人态度 | |
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42
administrative
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| adj.行政的，管理的 | |
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43
liquidation
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| n.清算，停止营业 | |
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44
savings
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| n.存款，储蓄 | |
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45
receding
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| v.逐渐远离( recede的现在分词 )；向后倾斜；自原处后退或避开别人的注视；尤指问题 | |
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46
cape
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| n.海角，岬；披肩，短披风 | |
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47
stockbrokers
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| n.股票经纪人( stockbroker的名词复数 ) | |
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48
eloquent
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| adj.雄辩的，口才流利的；明白显示出的 | |
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49
adherence
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| n.信奉，依附，坚持，固着 | |
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50
discriminate
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| v.区别，辨别，区分；有区别地对待 | |
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51
annually
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| adv.一年一次，每年 | |
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52
ballot
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| n.（不记名）投票，投票总数，投票权；vi.投票 | |
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53
treasury
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| n.宝库；国库，金库；文库 | |
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54
proprietor
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| n.所有人；业主；经营者 | |
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55
proprietors
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| n.所有人，业主( proprietor的名词复数 ) | |
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56
Amended
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| adj. 修正的 动词amend的过去式和过去分词 | |
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57
remains
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| n.剩余物，残留物；遗体，遗迹 | |
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58
shareholder
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| n.股东，股票持有人 | |
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59
shareholders
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| n.股东( shareholder的名词复数 ) | |
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60
holders
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| 支持物( holder的名词复数 )； 持有者； （支票等）持有人； 支托（或握持）…之物 | |
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61
well-being
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| n.安康，安乐，幸福 | |
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62
advertising
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| n.广告业；广告活动 a.广告的；广告业务的 | |
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63
impecuniosity
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| n.（经常）没有钱，身无分文，贫穷 | |
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64
inadequate
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| adj.(for,to)不充足的，不适当的 | |
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65
dual
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| adj.双的；二重的，二元的 | |
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66
friction
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| n.摩擦，摩擦力 | |
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67
discord
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| n.不和，意见不合，争论，（音乐）不和谐 | |
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68
inevitable
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| adj.不可避免的，必然发生的 | |
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69
minor
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| adj.较小(少)的，较次要的；n.辅修学科；vi.辅修 | |
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70
biased
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| a.有偏见的 | |
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71
dividend
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| n.红利，股息；回报，效益 | |
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72
dividends
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| 红利( dividend的名词复数 )； 股息； 被除数； （足球彩票的）彩金 | |
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73
unlimited
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| adj.无限的，不受控制的，无条件的 | |
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74
harass
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| vt.使烦恼，折磨，骚扰 | |
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75
ERECTED
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| adj. 直立的，竖立的，笔直的 vt. 使 ... 直立，建立 | |
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76
forfeited
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| （因违反协议、犯规、受罚等）丧失，失去( forfeit的过去式和过去分词 ) | |
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77
mere
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| adj.纯粹的；仅仅，只不过 | |
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78
candid
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| adj.公正的，正直的；坦率的 | |
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79
concessions
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| n.（尤指由政府或雇主给予的）特许权( concession的名词复数 )；承认；减价；（在某地的）特许经营权 | |
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80
prevailing
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|
| adj.盛行的；占优势的；主要的 | |
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81
precedent
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| n.先例，前例；惯例；adj.在前的，在先的 | |
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82
apprenticeship
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| n.学徒身份；学徒期 | |
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83
impaired
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|
| adj.受损的；出毛病的；有（身体或智力）缺陷的v.损害，削弱( impair的过去式和过去分词 ) | |
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84
strictly
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|
| adv.严厉地，严格地；严密地 | |
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85
continental
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|
| adj.大陆的，大陆性的，欧洲大陆的 | |
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86
provincial
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| adj.省的，地方的；n．外省人，乡下人 | |
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87
solicitor
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| n.初级律师，事务律师 | |
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88
metaphor
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| n.隐喻，暗喻 | |
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89
Vogue
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| n.时髦，时尚；adj.流行的 | |
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90
resentment
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| n.怨愤，忿恨 | |
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91
domain
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| n.(活动等)领域，范围；领地，势力范围 | |
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92
paralysis
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| n.麻痹(症)；瘫痪(症) | |
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93
violations
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| 违反( violation的名词复数 )； 冒犯； 违反（行为、事例）； 强奸 | |
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94
undoubtedly
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| adv.确实地，无疑地 | |
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95
actively
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| adv.积极地，勤奋地 | |
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96
thereby
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| adv.因此，从而 | |
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97
economists
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|
| n.经济学家，经济专家( economist的名词复数 ) | |
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98
economist
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| n.经济学家，经济专家，节俭的人 | |
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99
attainment
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| n.达到，到达；［常pl.］成就，造诣 | |
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100
standing
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| n.持续，地位；adj.永久的，不动的，直立的，不流动的 | |
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101
quotations
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| n.引用( quotation的名词复数 )；[商业]行情（报告）；（货物或股票的）市价；时价 | |
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102
quotation
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| n.引文，引语，语录；报价，牌价，行情 | |
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103
slump
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| n.暴跌，意气消沉，（土地）下沉；vi.猛然掉落，坍塌，大幅度下跌 | |
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104
fluctuation
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| n.(物价的)波动，涨落；周期性变动；脉动 | |
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105
fluctuations
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| 波动，涨落，起伏( fluctuation的名词复数 ) | |
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106
luncheon
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| n.午宴，午餐，便宴 | |
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107
err
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| vi.犯错误，出差错 | |
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108
remarkable
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| adj.显著的，异常的，非凡的，值得注意的 | |
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109
conversion
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| n.转化，转换，转变 | |
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110
banking
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| n.银行业，银行学，金融业 | |
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111
inevitably
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| adv.不可避免地；必然发生地 | |
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112
conscientious
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| adj.审慎正直的，认真的，本着良心的 | |
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113
inclinations
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| 倾向( inclination的名词复数 )； 倾斜； 爱好； 斜坡 | |
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114
canopy
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| n.天篷，遮篷 | |
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115
exasperating
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| adj. 激怒的 动词exasperate的现在分词形式 | |
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116
dwindling
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| adj.逐渐减少的v.逐渐变少或变小( dwindle的现在分词 ) | |
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117
intervals
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| n.[军事]间隔( interval的名词复数 )；间隔时间；[数学]区间；（戏剧、电影或音乐会的）幕间休息 | |
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118
severely
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| adv.严格地；严厉地；非常恶劣地 | |
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119
statute
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| n.成文法，法令，法规；章程，规则，条例 | |
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120
judgment
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| n.审判；判断力，识别力，看法，意见 | |
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121
infraction
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| n.违反；违法 | |
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122
deferred
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| adj.延期的，缓召的v.拖延，延缓，推迟( defer的过去式和过去分词 )；服从某人的意愿，遵从 | |
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123
discretion
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| n.谨慎；随意处理 | |
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124
compensated
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| 补偿，报酬( compensate的过去式和过去分词 )； 给（某人）赔偿（或赔款） | |
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125
contrive
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| vt.谋划，策划；设法做到；设计，想出 | |
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126
gasps
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| v.喘气( gasp的第三人称单数 )；喘息；倒抽气；很想要 | |
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127
transacts
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| v.办理（业务等）( transact的第三人称单数 )；交易，谈判 | |
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128
commendably
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| 很好地 | |
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129
postponing
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| v.延期，推迟( postpone的现在分词 ) | |
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130
layman
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| n.俗人，门外汉，凡人 | |
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131
concisely
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| adv.简明地 | |
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132
creditors
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| n.债权人，债主( creditor的名词复数 ) | |
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133
creditor
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| n.债仅人，债主，贷方 | |
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134
postpones
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| v.延期，推迟( postpone的第三人称单数 ) | |
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135
speculative
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| adj.思索性的，暝想性的，推理的 | |
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136
phlegmatic
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| adj.冷静的，冷淡的，冷漠的，无活力的 | |
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137
unfamiliar
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| adj.陌生的，不熟悉的 | |
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138
publicity
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| n.众所周知，闻名；宣传，广告 | |
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139
requisite
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| adj.需要的，必不可少的；n.必需品 | |
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140
accrue
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| v.(利息等)增大，增多 | |
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141
overestimated
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| 对（数量）估计过高，对…作过高的评价( overestimate的过去式和过去分词 ) | |
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142
worthy
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| adj.(of)值得的，配得上的；有价值的 | |
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143
thoroughly
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| adv.完全地，彻底地，十足地 | |
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144
eminent
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| adj.显赫的，杰出的，有名的，优良的 | |
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145
frankly
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| adv.坦白地，直率地；坦率地说 | |
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146
immediate
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| adj.立即的；直接的，最接近的；紧靠的 | |
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147
adoption
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| n.采用，采纳，通过；收养 | |
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148
lodged
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| v.存放( lodge的过去式和过去分词 )；暂住；埋入；（权利、权威等）归属 | |
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149
incurred
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| [医]招致的，遭受的； incur的过去式 | |
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150
restriction
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| n.限制，约束 | |
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151
abhorrent
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| adj.可恶的，可恨的，讨厌的 | |
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152
bankruptcy
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| n.破产；无偿付能力 | |
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153
rendering
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| n.表现，描写 | |
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154
rigid
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| adj.严格的，死板的；刚硬的，僵硬的 | |
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155
bankruptcies
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| n.破产( bankruptcy的名词复数 )；倒闭；彻底失败；（名誉等的）完全丧失 | |
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156
entrusts
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| v.委托，托付( entrust的第三人称单数 ) | |
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157
plunge
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| v.跳入，(使)投入，(使)陷入；猛冲 | |
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158
fraught
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| adj.充满…的，伴有(危险等)的；忧虑的 | |
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159
modifications
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| n.缓和( modification的名词复数 )；限制；更改；改变 | |
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160
affected
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| adj.不自然的，假装的 | |
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161
afflicted
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| 使受痛苦，折磨( afflict的过去式和过去分词 ) | |
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162
blessing
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| n.祈神赐福；祷告；祝福，祝愿 | |
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163
civilized
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| a.有教养的，文雅的 | |
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164
sane
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| adj.心智健全的，神志清醒的，明智的，稳健的 | |
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165
solvent
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| n.溶剂；adj.有偿付能力的 | |
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166
ransacking
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| v.彻底搜查( ransack的现在分词 )；抢劫，掠夺 | |
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167
collateral
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| adj.平行的；旁系的；n.担保品 | |
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168
longing
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| n.（for）渴望 | |
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169
acting
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| n.演戏，行为，假装；adj.代理的，临时的，演出用的 | |
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170
civilizing
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| v.使文明，使开化( civilize的现在分词 ) | |
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171
formerly
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| adv.从前，以前 | |
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172
inconvenient
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| adj.不方便的，令人感到麻烦的 | |
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173
obviates
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| v.避免，消除（贫困、不方便等）( obviate的第三人称单数 ) | |
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174
outright
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| adv.坦率地；彻底地；立即；adj.无疑的；彻底的 | |
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175
margin
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| n.页边空白；差额；余地，余裕；边，边缘 | |
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176
outlay
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| n.费用，经费，支出；v.花费 | |
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177
prone
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| adj.(to)易于…的，很可能…的；俯卧的 | |
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178
rosy
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| adj.美好的，乐观的，玫瑰色的 | |
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179
debtor
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| n.借方，债务人 | |
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180
justify
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| vt.证明…正当(或有理)，为…辩护 | |
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181
supremacy
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| n.至上；至高权力 | |
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182
promptly
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| adv.及时地，敏捷地 | |
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183
depletion
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| n.耗尽，枯竭 | |
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184
smoothly
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| adv.平滑地，顺利地，流利地，流畅地 | |
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185
bullion
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| n.金条，银条 | |
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186
diffusion
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| n.流布；普及；散漫 | |
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187
radically
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| ad.根本地，本质地 | |
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188
nominal
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| adj.名义上的；(金额、租金)微不足道的 | |
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189
entirely
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| ad.全部地，完整地；完全地，彻底地 | |
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190
thrifty
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| adj.节俭的；兴旺的；健壮的 | |
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191
varied
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| adj.多样的，多变化的 | |
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192
aggregate
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| adj.总计的，集合的；n.总数；v.合计；集合 | |
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193
fixed
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| adj.固定的，不变的，准备好的；(计算机)固定的 | |
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194
rentals
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| n.租费，租金额( rental的名词复数 ) | |
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195
debenture
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| n.债券；信用债券；（海关）退税凭单 | |
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196
breweries
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| 酿造厂，啤酒厂( brewery的名词复数 ) | |
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197
lighting
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| n.照明，光线的明暗，舞台灯光 | |
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198
shipping
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| n.船运（发货，运输，乘船） | |
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199
cursory
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| adj.粗略的；草率的；匆促的 | |
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200
supreme
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| adj.极度的，最重要的；至高的，最高的 | |
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201
overflow
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| v.(使)外溢，(使)溢出；溢出，流出，漫出 | |
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202
mania
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| n.疯狂；躁狂症，狂热，癖好 | |
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203
debentures
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| n.公司债券( debenture的名词复数 ) | |
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204
natal
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| adj.出生的，先天的 | |
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205
soda
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| n.苏打水；汽水 | |
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206
conjecture
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| n./v.推测，猜测 | |
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207
bonanzas
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| n.（突然的）财源( bonanza的名词复数 )；意想不到的幸运；富矿脉；大矿囊 | |
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208
conspicuous
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| adj.明眼的，惹人注目的；炫耀的，摆阔气的 | |
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209
motive
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| n.动机，目的；adv.发动的，运动的 | |
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210
applicant
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| n.申请人，求职者，请求者 | |
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211
earnings
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| n.工资收人；利润，利益，所得 | |
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212
inquiries
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| n.调查( inquiry的名词复数 )；疑问；探究；打听 | |
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213
seasoning
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| n.调味；调味料；增添趣味之物 | |
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214
allotted
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| 分配，拨给，摊派( allot的过去式和过去分词 ) | |
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215
improper
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| adj.不适当的，不合适的，不正确的，不合礼仪的 | |
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216
prohibition
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| n.禁止；禁令，禁律 | |
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217
endorsement
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| n.背书；赞成，认可，担保；签(注)，批注 | |
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218
annoyance
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| n.恼怒，生气，烦恼 | |
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219
investors
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| n.投资者，出资者( investor的名词复数 ) | |
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220
machinery
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| n.(总称)机械，机器；机构 | |
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221
forgery
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| n.伪造的文件等，赝品，伪造（行为） | |
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222
expenditures
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| n.花费( expenditure的名词复数 )；使用；（尤指金钱的）支出额；（精力、时间、材料等的）耗费 | |
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223
expenditure
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| n.(时间、劳力、金钱等)支出；使用，消耗 | |
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224
expended
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| v.花费( expend的过去式和过去分词 )；使用（钱等）做某事；用光；耗尽 | |
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225
propensities
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| n.倾向，习性( propensity的名词复数 ) | |
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226
ramifications
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| n.结果，后果( ramification的名词复数 ) | |
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227
chancellor
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| n.(英)大臣；法官；(德、奥)总理；大学校长 | |
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228
conjectured
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| 推测，猜测，猜想( conjecture的过去式和过去分词 ) | |
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229
abruptly
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| adv.突然地，出其不意地 | |
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230
consolidated
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| a.联合的 | |
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231
slumps
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| 萧条期( slump的名词复数 )； （个人、球队等的）低潮状态； （销售量、价格、价值等的）骤降； 猛跌 | |
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232
collapse
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| vi.累倒；昏倒；倒塌；塌陷 | |
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233
congestion
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| n.阻塞，消化不良 | |
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234
latitude
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| n.纬度，行动或言论的自由(范围)，(pl.)地区 | |
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235
longitude
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| n.经线，经度 | |
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236
embarrassment
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| n.尴尬；使人为难的人(事物)；障碍；窘迫 | |
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237
countless
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| adj.无数的，多得不计其数的 | |
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238
derangement
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| n.精神错乱 | |
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239
appalling
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| adj.骇人听闻的，令人震惊的，可怕的 | |
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240
binds
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| v.约束( bind的第三人称单数 )；装订；捆绑；（用长布条）缠绕 | |
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241
preservation
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| n.保护，维护，保存，保留，保持 | |
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242
shutters
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| 百叶窗( shutter的名词复数 )； （照相机的）快门 | |
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243
specialty
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| n.(speciality)特性，特质；专业，专长 | |
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244
interim
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| adj.暂时的，临时的；n.间歇，过渡期间 | |
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245
conveyance
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| n.(不动产等的)转让，让与；转让证书；传送；运送；表达；（正）运输工具 | |
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246
debited
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| v.记入（账户）的借方( debit的过去式和过去分词 ) | |
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247
vividly
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| adv.清楚地，鲜明地，生动地 | |
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248
technically
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| adv.专门地，技术上地 | |
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249
subsided
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| v.（土地）下陷（因在地下采矿）( subside的过去式和过去分词 )；减弱；下降至较低或正常水平；一下子坐在椅子等上 | |
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250
upheavals
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| 突然的巨变( upheaval的名词复数 )； 大动荡； 大变动； 胀起 | |
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