On the Stock Exchange practice of making a market, a couple of important judgments were delivered in 1892. In the course of one of them Mr. Justice Wright remarked that "if persons for their own purposes of speculation create an artificial price in the market by transactions which are not real, but are made at a nominal premium merely for the purpose of inducing the public to take shares, they are guilty of as gross a fraud as has ever been committed and of a fraud that can be criminally brought home to them."
In 1895, during a notable boom in South African mining shares, there occurred what was known as the Battle of Throgmorton Street--between members of the Stock Exchange and the police. Members had to appear day after day on a charge of obstruction before the magistrate, who suggested that when the Stock Exchange was closed they might, instead of obstructing the thoroughfare, arrange to use the Royal Exchange. Far more serious strife, again closely connected with South African affairs, arose in the closing days of the year, when the Jameson Raid into Boer territory was followed by a severe slump in prices. The political tension of which this raid was an outcome ultimately developed into the Transvaal War, which resulted in a long period of Stock Exchange stagnation and depression. In 1896, and again in 1897, the 2-3/4 per cent. Consols touched practically 114, the highest price ever recorded. The heavy Government borrowing in connection with the war, and the reduction of the rate of interest to 2-1/2 per cent., have since reduced the price to below 73. But in spite of the stagnation and depression, the prosperity of the Stock Exchange continued to increase. Owing to the pressure upon its space, the offices of its Share and Loan Department, an important department of administration, had to be removed from the Stock Exchange building altogether, about the time when, in 1901, the Stock Exchange was celebrating its centenary.
During the past decade there have been far-reaching changes in the constitution and practice of the institution. With the object of gradually abolishing the dual control of members and proprietors, a rule requiring new members to purchase one or more shares was enacted; a long-standing bone of contention between jobbers and brokers was removed by rules more clearly defining and separating their functions; and the vexed question of brokers' commissions has led at last to the establishment of a minimum scale, with the object of preventing under-cutting by competitive firms. The long period of stagnation and depression was broken by the great rubber share boom of the spring of 1910, when business reached proportions never before witnessed in the history of the Stock Exchange.
CHAPTER XV A BROKER'S DAY
Having mastered roughly some of the mysteries and technicalities of the Stock Exchange, we are now able to follow a broker through an average day of his life with some interest. The broker's office-boy sighs wearily to himself when he hears clerks in other walks of life dilating upon the easy hours enjoyed by the Stock Exchange and its employees. It is true that the office-boy does not have to reach his sphere of labour early enough to sweep out the place and dust the desks; that is all done for him; but he is supposed to be on the spot by about half-past nine. Until ten he is pretty well lord of the office, for the Stock Exchange clerks, as a rule, have a very easy time as regards hours. They need rarely get to town much before ten o'clock, except the youngest of the juniors, and the first personage of importance to arrive is he upon whom falls the duty of glancing through the correspondence. Of course, it all depends upon the size of the office, just as it does in other businesses, how this branch of work is organised. In the case of a big firm the letters are carefully sorted, and each department has its proportion handed over, one dealing with transfers, another with dividends, and so forth. But a smaller office may be more representative of the general run of Stock Exchange work, and in such a one the correspondence comes into the scope of the chief clerk if the partners are not energetic enough to deal with it themselves.
By half-past ten the work of the day is mapped out, the bargains of the previous day are in the checking book all ready for the unauthorised clerk to check, the transfers are being prepared for delivery or registration, the transfer receipts are run through to see what certificates are ready for collection, and a multitude of details get put into train for attention. At twenty minutes to eleven the unauthorised clerk, who has probably been reading the newspaper, declares that he will be shut out of the Settling Room and flies away to check his bargains, while the partners begin to arrive on the scene.
Before the official hour of commencing business in the Stock Exchange has been duly announced by the old policemen's rattles sprung by the House waiters at a quarter to eleven o'clock, opening prices are already coming in from the markets, through the House clerks and the tape. The American quotations are, as a rule, more or less a matter of guesswork, and are based on the New York closing prices cabled from the other side; Home Railway lists are practically the same as those of the previous evening, and mining shares usually open as they were in the Street dealings of the night before. Thus it is on normal, ordinary days, but taking the House as a whole, there is generally some early change in the prices of some particular market caused by news contained in the morning papers. Perhaps the indefatigable locusts have been taking one of their excursion trips on one of the Argentine Rails, which causes the stocks in that section to droop; or perhaps a bumper traffic makes Grand Trunk securities advance in value; or it may be that a Mining Company has declared an unexpected dividend after hours on the preceding day, and the quotation for the shares is thereby affected. Each little detail of this description becomes magnified as the opening feature of each particular market, and the various items of news are telephoned or telegraphed to such clients as are interested in the stock itself, or in others of a similar group that may become affected by the information.
The first half-hour of the day, according to tradition, should be the busiest, because of the execution of orders that have come through the post; but if markets are moving sharply, the volume of business advances with the sun, as the changes become known all over London, the Provinces, Greater Britain, and the Continent. The swing of work is fairly under way soon after eleven o'clock. The office-boys and commissionaires are pursuing the tranquil round of transfer and certificate work; the unauthorised clerks are busily wiring long strings of prices by code to brokers and clients who are not on the spot; and the authorised clerks are engaged in the execution of orders, what time the partners interview clients in the office or attend to the more important business in the House themselves.
When the times are very slack and there is nothing to do, the broker's chief occupation consists in "having a look round," which means that he explores the markets with a view to working up business in unexpected quarters, and having a series of chats with as many of his old friends as he may happen to meet. The only important duty of a dull day is luncheon, which may possibly include fifty up at billiards. When the Central London Railway was first opened, a fashion set in of lunching in the West End, but the novelty quickly palled, and now the City clubs and restaurants are as full as ever of Stock Exchange members, who find that they meet more of their clients there than they did in the West, and are able to gather information, views, and hints which frequently turn out to be of value. Moreover, the broker is near his office in the event of an important client calling to see him, and altogether it is more convenient to be close at hand than in the faraway West End.
The afternoon passes quickly, or seems to do so, from the fact that the Stock Exchange closes promptly at four o'clock. One of the most remarkable developments of recent years in the Stock Exchange system is the extension of private telephones, and these wires play a most important part in the broker's life of the present day, especially during the afternoon. Not that the wires are entirely confined to brokers, but they, of course, have far more use for them than jobbers, who, dealing in one class of stocks and shares, can appeal to a much more limited circle. The broker's necessities in this direction are bounded only by his clients and their importance. Numbers of flourishing firms owe no small part of their success in business life to their enterprise in the direction of private telephone wires to individual clients, and the great landlords in the neighbourhood of the House have been quick to seize the opportunity which presents itself for getting big rents for small premises. The Stock Exchange Managers themselves are well to the front in the arena of competition, and between £100 and £200 a year is demanded for the rent of one small room and telephone close to Capel Court. By this means a broker and his client are in constant touch with one another--much more so than would be the case if the general telephone alone had to be relied upon--and a fair proportion of the day is spent by the broker and his staff in reporting fluctuations to clients and receiving their instructions. After luncheon, a client, so it is said, feels more tolerant, more disposed to increase his price if the shares he wants to buy are not obtainable at his original limit, more disposed to accept a fraction less if his first selling order should have proved at an impracticably high price.
But the great event of the afternoon is the reception of opening prices from the New York Stock Exchange. In comparison with these, the Paris quotations that arrive about noon are uninteresting, and the American Market grows into a surging crowd between three o'clock and a quarter-past. It is often remarked upon as singular that no official prices are sent over from Wall Street; the arbitrage firms who deal between London and New York alone know the prices cabled across, but by their offering or bidding for shares it is obvious whether Wall Street opens in good humour or bad. By rapid degrees the American fluctuations become generally circulated; the market seems to be full of the little pink slips that come flying in at the hands of boys and clerks stationed in a line that stretches from the offices of the cable companies outside the House to the very heart of the Yankee Market in the Stock Exchange. Again the telephone and telegraph come into requisition, and the House usually finishes up, unless there is really nothing doing, in a state of more or less mild excitement. For one thing the markets are decidedly crowded, everyone making a solemn point of being in at the close, and for another, the brokers are engaged in a tour of the various departments to make finally certain that they have overlooked no order on their books which could be done, and to hear reports from the jobbers in regard to limits that have been left during the earlier part of the day. At four o'clock, at a signal from the main door of the Kaffir Circus, a number of the waiters stand up with a loud shout of "Close!" and the Stock Exchange doors are then open for exit only. Under no consideration can a member or clerk re-enter when once the stentorian "Close" has rung through the markets, and the cry is caught up by the small fry in the street, who are waiting with their masters' hats and umbrellas; so that the whole neighbourhood of Throgmorton Street knows when four o'clock has come.
A cup of refreshment, and the broker hurries again to his office. A clerk is left in the Street to report any vagrant movements which may occur in the after-hours markets of mining shares or American Rails, but the head goes back to attend to the correspondence. Herein lies one great advantage possessed by the jobber over the broker; the former has perhaps one letter to write, or possibly two; not often more, unless he does a large shunting business with the country--taking advantage of fractional differences of quotation which prevail in the provinces as compared with London. But the broker finds himself confronted with a shoal of letters, letters on every subject conceivably connected with finance, besides a good many that are not. Some of the answers have, of course, been dictated and written earlier in the day, but a good proportion cannot be dealt with until the markets are over, and the movements of the past six hours probably call for written comment to clients who are interested in the various sections. Moreover, the movements outside in the Street markets are possibly tending towards the execution of fresh orders, so that altogether the post can with difficulty be despatched on the sunny side of five o'clock even in quiet times, and when business is active the hour may be considerably later. The chief clerks are quite competent to deal with the finalities of the correspondence, so that the heads of the firm need rarely stay to the bitter end. Last of all come the batches of printed price lists, which a good many brokers are in the habit of circulating amongst their clients. Some firms not only issue, but print their own lists; at least one complete set of printing machinery can be seen at work in the basement of a broker's office.
Two or three late nights each fortnight are regarded as being all in the settlement's work. The eve of each Pay day finds most offices employed upon the details of transfer preparation, while many brokers have a preliminary balance sheet struck of the account's work, and this also falls to the share of what is called the Name or Ticket day. The actual Pay day spells a sharp and shorter burst of activity. The office is carpeted with bonds, embroidered with transfers, and effervescing with cheques, not to mention such details as piles of sandwiches, trays of ginger and other beer bottles, and similar refreshment for the sustenance of those who have no time to spare for regular meals. Room, too, must be reserved for the venerable lady client who wants to sell a small amount of Consols for cash at the busiest time of the day, and who looks so pathetically indignant upon being told that the transfer will not be ready for an hour. But the day spins along at a great pace, and everyone is thankful when the last batch of cheques goes into the Bank upon the stroke of four o'clock. Echoes of the settlement haunt the day following, and if the Pay day chances to fall on a Friday, there is flying round to be done in order to clear the decks for Sunday. Provided that the office is not too large a one, the number of duties that call for attention is varied enough to make a day in a broker's office much less monotonous than it is in so many other City spheres.
CHAPTER XVI FROM A SOCIAL POINT OF VIEW
Other publications besides those mentioned in a previous chapter frequently emanate from the Stock Exchange, but these are not, as a rule, of an official character, nor even of a business character. The members at times lay down their dealing books and pencils to turn to literature of a more generally popular order. They have produced many a book, mainly in the cause of charity. Such, for instance, is "The House Annual," recently inaugurated. This is a sumptuously produced volume of light stories, sketches, and articles, handsomely illustrated. It is edited by a member of the Stock Exchange, and many of the contributions are made by members, although its tasteful pages are not closed against the work of eminent writers and artists outside the House. It is sold in the Stock Exchange at Christmas time to provide poor children with dinners. A most remarkable volume, or rather, couple of volumes, produced entirely by members of the Stock Exchange unassisted, issued for the same branch of charity, were entitled "The House on Sport." The first contained articles on home sports, all written by members of the Stock Exchange, and yet all written by authorities who would be acknowledged as such throughout the world. Cricket by Mr. Gregor MacGregor, boxing by Mr. B. J. Angle, golf by Mr. Mure Fergusson, cycling by Mr. George Lacy Hillier, rowing by Mr. F. I. Pitman and Mr. S. D. Muttlebury, sculling by Mr. Guy Nickalls, and so on with no fewer than forty branches of sport. Such a volume might have been considered sufficient to indicate the sporting proclivities of the Stock Exchange, but it was followed a year afterwards by another compiled in the same way with the same objects, containing articles on sport abroad--lion, elephant, and rhinoceros shooting, big horn hunting in the Canadian Rockies, wild sheep hunting on the borders of the Sahara--all the articles contributed from personal experience by members of the Stock Exchange.
The institution undoubtedly possesses the distinction of being the most athletic body of business men in the whole world--when it walks it sets the world a-walking. It holds its own small race meeting every year, furnishes county cricket captains, international football players, and so on.
It is doubtful, however, whether the members enjoy these organised forms of sport more than they enjoy the impromptu games within the walls of the House itself on slack afternoons, with all the practical jokes which are found for idle hands to do. Cricket with walking-sticks and paper balls, football with a tall hat, a lighted newspaper under the seat of a dozing jobber, sweepstakes and raffles, a labelled back--all these things are common enough. Sometimes the spirit of play is closely linked with the spirit of business; when, for instance, a susceptible member is induced by his conspiring friends to deal in Chartered Second Debentures, or some other stock which does not exist, only to find, when he has made something like a fortune or half ruined himself, that all bargains are of necessity off. The Stock Exchange has many fixed holidays during the year--they include not only all the Bank Holidays, but also the first days of January, May, and November--and some unfixed holidays on summer Saturdays, but the members do not await official leave to play.
The institution has its own Orchestral and Choral Society of about 200 members, which has been established twenty years, gives a series of subscription concerts each season, and is quite an acknowledged factor in the musical world. There is an Art Society, also a Christian Association, with a roll of members comprising some 250 names; and in the Christian attribute of charity the members of the Stock Exchange as a body are ever to the fore. Beginning at home, there is a Benevolent Fund as old as the Stock Exchange itself, for the benefit of members who fall upon troublous times. It has a capital of nearly a quarter of a million sterling, and an annual income which, although it varies in accordance with the prosperity of the times, has recently been over £20,000. There is also a Stock Exchange Clerks' Provident Fund that has been in existence about forty years, its income of about £2,000 a year comprising the subscriptions of those clerks who are members of the fund, and donations and subscriptions by members of the Stock Exchange. There are about 1,500 members, and grants are made from the fund in out-of-employment cases, in cases of illness and of death, and when there are any special calls.
But the charity of the Stock Exchange by no means ends at home. To use words recently written by a Lord Mayor of London, "the spirit of loyalty and patriotism which has ever characterised the members of the House is especially exhibited in practical and overflowing sympathy in times of distress and anxiety." Those words were written in acknowledgment of the receipt of a sum of nearly £35,000, which the members of the Stock Exchange had subscribed to the Mansion House Fund for the relief of the widows and orphans and other sufferers by the Transvaal War. They had subscribed over £20,000 to the Transvaal Refugees' Fund, and gave not only of their money but of their blood in the cause. One member returned from the field with the Victoria Cross. The Stock Exchange supports its own hospital wards, its own lifeboats, its boys' home, and so on.
Except in the vague idea of the puritanical faddist, the Stock Exchange is an institution as lovable as it is fascinating. It may be, and often is, the cause of ruin to those who abuse its facilities--to those who are gamblers rather than either investors or speculators. It is quite easy to draw the line between the three classes of business, or rather, the two classes of business and the one class of folly. The investor lends his money on perfectly safe security to the aid of commerce and industry, expecting a comparatively small return, but that a safe one. By so doing he is encouraged in thrift, whilst commerce and industry enjoys the benefit of the capital, and the Stock Exchange is the medium of it all. The speculator, less conservative, risks money, the loss of which he is perfectly well able to afford, in the furtherance of experiments in commerce and industry, be it the trial of a patent or the opening up of a mine. He expects a big return should the experiment prove successful, but is prepared to face the loss should it turn out otherwise. He hopes to enrich himself, and without his aid commerce and industry would make none of those rapid strides which are for the welfare of the world, for speculation is the handmaid of enterprise. The gambler, frequently usurping the name of speculator and thus bringing legitimate speculation into ill-odour, risks money which he cannot afford to lose, staking all in an inordinate desire for riches. Although the line between speculation, which is perfectly legitimate, and mere gambling can easily be drawn, it must be drawn by each individual for himself. A perfectly legitimate speculation for a rich man might be an act of folly for a man of moderate means. Between risking money which can easily be afforded in a project well studied and thought out, however uncertain, and risking money which cannot be afforded in a project of which nothing is known, on the chance that some extraneous circumstance may arise to multiply its value, there is a wide gulf fixed. The gamblers it is from whom are drawn the operators and dabblers who play with the Stock Exchange as they would with a pack of cards, or with the chances of the race-course, to their own loss and to the profit of insiders who, whenever they are called upon to play such a game, always show in the long-run that they know most of it. It is the Stock Exchange gambler rather than the investor, or the speculator who moves legitimately within his means, who may rejoice in the boom with its roaring business and rising prices, but who forms the real element of danger in a slump with its sudden depreciation, and who frequently turns the slump into a crisis, and eventually into a panic. These panics are less frequently with us than they were, less widespread and less disastrous in their effects, thanks to the rapid dissemination of true news, and to the highly organised state to which the machinery of finance has attained; but they will ever recur to provide a wholesome check to those who are tempted to go beyond their depth, allowing legitimate speculation to deteriorate into mere gambling. The Stock Exchange offers facilities for such gambling, just as food offers facilities for over-eating; yet food is not only a good thing, but a necessity, and so is the Stock Exchange.
INDEX
Advertisement by members, 42 outside brokers, 43
Allotment, dealings before, 98-100 Royal Commission on, 133, 137
American prices, 156
Apprenticeship of members, 18-19 Royal Commission on, 127-8
Arbitrage firms, 156
Architecture of the House, 7
Art Society, 164
Athletics, 162-3
Backwardation, 69
Badges for clerks, 25
Banging the market, 71
Bank of England, Stock Exchange in, 43, 142-3
Bankruptcy of members, 102-3
Bank shares, dealing in, 145
Baring crisis, 147
Bar of the house, 9
Battle of Throgmorton Street, 148
Bearer bonds, 88
Bearer securities, settlement in, 61
Bears, 65-71 definition, 67 cornered, 71 covering, 71 raid, 71 their effect, 70
Benevolent Fund, 164
Boom, 167
Brokerage, 39-41, 49-50 Royal Commission on, 132
Brokers, 32-44 advertising by, 42 commission. _See_ Brokerage duties of, 150-60 licensing of, 136, 139, 146-7 list of, 43 outside, 43-4, 121 price lists of, 119 underwriting by, 41-2 and jobbers, disputes between, 36-7 firms acting as both, 37
Bucket shops, 121
Bulls, 65-71 campaign, 70
Bulls, definition, 67 stale, 71 their effect, 70
"Burdett's Official Intelligence," 146
Business, how it is transacted, 45 done, record of, 117-18
Buying in, 61 manager, 30
Capel Court, 6 Stock Exchange established in, 141-2
Capital, organisation of, 3-4 of the Stock Exchange, 13
Carry-over, 51 process of, 67-9
Certification of transfers, 54
Change Alley, Stock Exchange in, 65, 139, 140-2
Charity, 161-2, 164-5
Checking bargains, 48, 151 room, 8
Christian Association, 164
Clearing house. _See_ Settlement Department
Clerks, 23-5 provident fund, 164
Closing time, 119, 157
Commission. _See_ Brokerage
Committee, the, 26-31 election, 26 meetings, 28 powers, 27-8 qualification, 27 Royal Commission on, 126-7
Companies Acts, 145 Committee on, 146
Consols, put option on, 73-4 put and call on, 76-7 transfer of, 85-7
Consol settlement, 56
Contango day, 57 rate, 68-9
Continuation. _See_ Carry-over
Contract note, 48-9
Cost of the House, 13
Coupons, 88
Covering by bears, 71
Cumulative preference shares, 93
Debenture stocks, 91-3
Debentures of the Stock Exchange, 14
Defaulter, 60, 101-8, 131 assistance forbidden to, 101 declaring a, 102 and clients, 103-6 readmission of, 106-8, 131
Deferred ordinary shares, 94-6
Definitions of the Stock Exchange, 1
Differences, speculation for, 50 payment of, 60
Directory of members, 124
Discount, 115
Dividends paid by the Stock Exchange, 16-17
Drawings of the interior, 8
Dual control of the Stock Exchange, 30 Royal Commission on, 126
Employees, dealing for, 50-51
Entrance fee for members, 21, 25 authorised clerks, 23 unauthorised clerks, 24
Establishment of the Stock Exchange, 141-2
Exchange Telegraph Company, 121-2
Ex dividend, 115-16 rights, new, all, 117
Expulsion, 28
Failures. _See_ Defaulter
Fixed charge stocks, 92
Foreign Loan Exchange, 142
Foreign Loans Committee, 146
Foreigners, exclusion of, 18
Founders' shares, 96-8
Gambling, speculation, and investment, 130, 165-8
Garraway's Coffee-house, 139
Gorgonzola Hall, 7
Guarantors for new members, 20
Hall of Commerce, 144
Hammering, 102
Hammer price, 103
History: a sketch, 138-49
Holidays, 29, 163
"House Annual, The," 161
"House on Sport, The," 162
Incorporation proposal, 135-7
Inscribed stocks, 85-7
Interior of the House, 7-13
Jobbers, 32-44 as specialists, 34-5 abolition question, 129
Jobber's turn, 47
Jonathan's Coffee-house, 140-41
King's visit, 8, 146
Lame Duck, 65, 71
Leeman's Act, 145
Library of financial documents, 123-4
Literature, 161-2
Making a market, 113 Mr. Justice Wright on, 148
Making a price, 44
Making-up day, 57 price, 67-8
Managers, the, 14
Markets in the House, 9-12
Marking prices, 48
Members, 18-25 admission, 20-21 apprenticeship as clerks, 18-19, 25 directory of, 124
Membership restrictions, 18-19, 22
Mining Contango day, 57
Name day, 51, 57
National Debt, 138
New House, the, 146
Official Assignees, 102, 104, 106
"Official Intelligence," 123
"Official Intelligence," predecessors, 146
Official List, 29, 109-10 growth, 5 magnitude, 34 marking prices for, 48 quotation in, 110-15 Royal Commission on, 133-5, 137
Options, 72-83 call, 72, 74 day-to-day, 79 effect on the market of, 83 operating on, 80-83 prices for, 77-9 put, 72-4 put and call, 73, 75-7
Orchestral and Choral Society, 164
Ordinary shares, 94
Overend-Gurney crash, 145
Panics, 144
Par, 115
Partnership prohibition, 33
Photographs of the interior, 8
Play in the House, 163
Population of the House, 18
Practical jokes, 163
Preference shares, 94
Preferred ordinary shares, 94-6
Premium, 115
Prices, double, 45-6 marking, 48 wide, 46-7
Price lists and records, 109-24 brokers', 120
Proprietors, the, 13
Prospectuses, 112-15
Provident Fund, 164
Public admission question, 131-2
Quotations. _See_ Prices
"Railway Intelligence," 146
Railway mania, 144
Registered securities, 87
Rigging the market, 70
Royal Commission, 125-37
Royal Exchange as the Stock Exchange, 138
Rules, 27-8, 142
Scrip, 100 settlement in, 62
Secretary of the Stock Exchange, 15
Secretary to the Committee, 30
Selling out, 51-2, 61
Settlement, the, 56-64 office work of the, 159-60 special, 62, 98
Settlement department, 58-60 establishment of, 145 manager, 30 Royal Commission on, 129
Settling room, 8 clerks, 24
Share, definition of, 1-2, 84 certificate, 53-5
Share and loan department, 54 manager, 30 removal, 149
Shares of the Stock Exchange, 16
Shorter's Court, 119-20
Situation of the house, 6-7
Slump, 167
South Sea House as the Stock Exchange, 139
Speculative business restrictions, 50-51 made illegal, 140
Sport, 162
Stags, 66-7
Stamp duties, 49
Stock, definition of, 1-2, 84 certificate, 53-5 inscribed, 85-7
Strangers in the House, 8
Street markets, 119-20 battle of the, 148