If the new member chooses, he may become what is known as a “two-dollar broker,” with a roving commission, executing orders for members in any part of the room at $2 per hundred shares. The “two-dollar man,” as he is termed, is a hard worker above his fellows. He labors for a minimum wage; he must work every day or forego his revenues, for he cannot delegate his orders to any one else and receive a commission for these vicarious services. He takes big risks, because he has many orders from many different houses; the least inattention means loss. I have known one of these two-dollar men to lose $10,000 on a mistake on a 500-share order from which his commission was but $10. He is supposed to be a mine of information concerning floor gossip; his value to the houses that employ him lies quite as much in his ability as a newsgatherer as in his skill as a broker. He is on the jump every minute. The one redeeming feature of his business is that he has no office responsibilities, and none of the burdensome--and sometimes painful--duties that attend the stockbroker’s relations to his clients.
There are perhaps fifty “odd-lot” brokers on the floor, and a member may, if he pleases, take up this branch of the business. It has to do with the buying and selling of fractional lots of securities, on which no commission is charged because the peculiar nature of this business enables the broker to trade against his commitments as they arise, and thus obtain compensation for his services in the resultant profit. In a small way the odd-lot broker, like the specialist, resembles the London jobber. One of the houses that confines its operations to this “odd-lot” business has nine partners, seven of whom are members of the Exchange; another has seven partners with six board-members. The fact that two such houses should have a million dollars invested in memberships, to say nothing of the large sums employed as capital, speaks eloquently for the volume of business they are called upon to handle.
This business, which includes fractional lots of securities from one to a hundred shares, is one of the most important on the floor, since it represents, very largely, the purchases and sales of an army of small investors all over the world. To such customers, very properly, the Stock Exchange gives the best it has, safeguarding their interests with quite as much care as it bestows on the greatest of market operators. The handling of all the odd-lot orders that accumulate in a busy day, the skill required in the office-machinery, the vigilance of the floor expert, and the foresight necessary to conduct the trading operations of the firm make this a most fascinating business.
Another field to which a member may turn is that which has to do with transactions in bonds. The “bond-crowd,” as it is called, makes its headquarters on a platform under the east gallery. There are about fifty of these “bond-men,” and the compensation paid them for their service is the same as that paid on stocks, ten thousand dollars in bonds being reckoned equivalent to 100 shares. As there are twice as many bonds as stocks listed on the Exchange, one would think a larger number of brokers than this little coterie would be required to handle the transactions, but, despite this disparity in the relative size of the lists, it so happens that very many of the listed bond issues are rarely dealt in, and hence there is no surplus business. Moreover, brokers from all parts of the room are constantly executing their own bond orders without having recourse to the assistance of brokers who make this department a specialty.
Still another opportunity presents itself in the business of arbitraging. The arbitrageurs stick closely to the rail along the south wall, where there are pneumatic tubes connecting with the cable offices downstairs. Their business is one that calls for the utmost speed, since it involves taking advantage of fractional differences that arise from time to time in the prices of stocks that are listed on foreign Bourses as well as on the New York Stock Exchange. Thus Canadian Pacific may sell at 270 in London and at the same time at 269½ in New York, and as an excellent cable service keeps pace with these fractional differences, the arbitrageur may buy in New York and sell in London and receive a confirmation, all within three minutes.[96]
Because of its complexity and its risks, arbitraging is not a business that appeals to beginners on the floor. One must have reliable colleagues on the foreign Exchanges who are constantly watchful and alert, and who are moreover possessed of sufficient capital to finance large transactions. In addition, there are labyrinthine difficulties to surmount in the way of commissions, interest charges, insurance of securities in transit, fluctuations in the money markets abroad and at home, cable tolls, letters of confirmation, rates of foreign exchange, settlement days, contangoes, and many other matters. Unless a man has had a long experience in the difficult art of arbitraging, he had better shun it or prepare for trouble.
Finally, in determining what branch of the Stock Exchange business he will undertake, a member must consider that numerous and shifty contingent known as “floor traders.” These gentlemen afford an interesting study. They do not accept orders; each man is in business for himself. They entertain no illusions, and they recognize no alliances with each other. Each one follows his own inclinations, and does not permit himself to be moved by tips, or rumors, or gossip, or sentiment. He scoffs brazenly at all forms of “inside information.” His power of observation is keen, and his habit of analysis and deduction is wonderfully developed. In the surging crowd around an active stock he sees things with microscopic eye, and acts with surprising promptness; once his conclusions are reached, speed and agility are relied upon to do the rest. Age cannot wither, nor custom stale, his infinite variety. He is a bull one minute, and a bear the next. He is intent, resourceful, suspicious, vigilant, and ubiquitous. He asks no quarter, and gives none. Now he is sphinx-like, deaf, inscrutable and impenetrable; now exploding with the frenzy of battle. You may stand and chat with him, and he may seem to listen to you. In reality he does not hear you at all. His roving eye is elsewhere, his mind is intent on other things. In the middle of a sentence he may leave you abruptly and go tearing from crowd to crowd like a thing possessed, the incarnation of energy.
Visitors in the gallery who look down upon the scene on the floor in active markets, when all the Stock Exchange elements just described are striving at their utmost, come away in wonderment. The scene is one they do not understand. Such tumult is foreign to anything in their experience, and in their failure to recognize the economic forces at work in the animated panorama before their eyes they are prone to form superficial and erroneous opinions. The disorderly nature of the work seems to impress the visitor forcibly, yet the Stock Exchange is perfectly orderly; transactions involving millions come and go without the slightest friction. Nothing could work more smoothly.
It does not occur to the uninstructed spectator that mighty forces are here at work in establishing values; that the object of the Stock Exchange is to safeguard investors; that it is the one unobstructed channel through which capital may flow from sources where it is least needed into those where it may be most beneficially employed. The casual onlooker often gives no thought to the high standard of commercial honor that is maintained here; he does not realize that his own affairs, whatever they may be, would face a serious situation were this very important part of the modern mechanism of business to suffer interruption. And so it sometimes happens, in his hazy and nebulous impressions of the Stock Exchange as gathered from the visitors’ gallery, that this man’s mind is fertile ground for the seed which may be sowed there by every genteel humbug, demagogue, or quack whom he chances to meet.
It may be admitted freely that the facilities afforded by Stock Exchanges, like all other great public utilities, are sometimes foolishly or dishonestly abused, but by no stretch of the imagination can such abuses attain to the mischief done by those who would deceive people into the belief that the Stock Exchange, because it deals with large affairs in a large way, has some improper quality about it. Many minds, many hands, and many hours of patient labor have been bestowed on the making of the chronometer which is a vital part of a great ship; yet a child may “put it out of business,” and destroy the ship’s company.
That these observations apply to the New York Stock Exchange need not be elaborated when we consider that one third of our nation’s wealth is represented by its securities; that there are two million owners of them; and that, through the widespread publicity of Stock Exchange quotations the world over, all these owners are given gratis the epitomized judgment of experts as to the value of those securities each day and their prospective value in the future.[97]
The Stock Exchange is open for business from 10 A.M., to 3 P.M., and on Saturdays from 10 to 12 noon. The broker reaches his office between 9 and 9:30 A.M., looks over his correspondence, makes a mental note of the general status of the firm’s affairs, glances at the morning’s news that is rapidly reeling off the ticker, reads the prices cabled over from the London Stock Exchange which has been in session four hours, and thus in a general way acquaints himself with what may be expected at the opening of the New York market. The two-dollar broker and the specialist do not concern themselves greatly with such matters, and frequently they go directly to the floor without stopping at their offices.
By 9:45 A.M. the Board is beginning to present a scene of animation. Of the 1100 members not more than 600 are in attendance, and often not more than 400; indeed, there are members who have never once entered the room. But the attendance is increased by the presence of some 230 pages in uniform, wearing five-year service stripes, of which the sleeve of the superintendent is adorned with eight; 30 telegraph operators, whose business it is to hurry from place to place gathering quotations as they occur, and sending them out over the ticker, and by 550 telephone clerks who occupy the long booths on the west wall, where private lines connect members with their offices.
These clerks are not permitted to go on the floor. Their employers, who rent the telephones from the Exchange, pay $50 annually to the institution as a fee for each clerk. As their duties are extremely important, involving the transmission by ’phone of orders and reports that often run into millions, it will be seen that this small army of private line operators is of necessity highly trained. An instant’s relaxation or inattention, or a failure to transmit promptly and correctly the verbal messages entrusted to them, may conceivably lead to confusion and losses of great importance.
At each of the sixteen posts in the room, from twenty to forty stocks are situated, and another group covers the north wall. Once a position is assigned to any security by the committee in charge, it is seldom moved elsewhere, and thus, although there are nearly six hundred different issues of securities, the broker soon learns the location of each one and turns automatically in that direction when an order reaches him. At each of the posts, and along the north wall, the specialists in these various groups of stocks are at work before the opening of the market, entering the day’s orders in their books, some with the rapid energy that betokens an active opening, others with an indifference that spells dulness in their particular line.
At Post 4, in the northeast corner, there is also an ante-market gathering, for this is the spot where stocks and money are borrowed and loaned. This “loan crowd,” as it is called, was formerly the gathering to which one turned to gauge the market position of the bear party, since the borrowing of stocks by “shorts,” as done here, furnished an index of the strength or weakness of that interesting element. But of late it has lost its ancient prestige as a guide in such matters, because in order to hide the information sought, borrowing of stocks on a large scale is now done privately. This “crowd” has been the scene of some tremendous excitement, as in the Northern Pacific corner of May 9, 1901, when the price soared to $1000 per share and the shorts were trapped, and on that day in October, 1907, when money, after loaning at 125 per cent., was not to be had, for a time, at any price, although brokers with the best collateral would have paid 200 or 300 per cent. for accommodation, and ruin stared every one in the face.
As the hour of ten draws near, activities increase. On the south wall the arbitrageurs are busy deciphering their code messages and distributing orders, many hundred telephone bells are ringing in the long booths where clerks are hastily writing their messages; crowds of visitors gather in the gallery, while beneath it the bond-brokers prepare for their labors; indicator boards on the north and south walls, like great kaleidoscopes, display and hide their number with the same electric suddenness that seems to characterize everything and everybody--then bang! the gong rings, the chairman’s gavel falls, and another day begins. Yesterday is embalmed with the Pharaohs; they never speak here of what _has_ happened, but only of what _will_ happen--and this is a new day.
Naturally, certain securities are more active than others, and here there are the largest crowds. As the limits surrounding the trading-posts are but vaguely defined, one crowd will sometimes get mixed up with another, whereupon confusion results, and good-natured if earnest appeals are heard to “get out,” and “get over.” Into one of these struggling masses a broker with an order or a trader with an inspiration literally hurls himself; each sound in the jargon of voices, which means only Bedlam and Babel to the visitor, is to him perfectly understood. He may be pushed this way and that, or tossed aside, or hidden altogether by bigger men who surround him, yet he has no difficulty in determining the price and in doing what he came there to do; all this with surprising celerity and accuracy. The business done, he hastens to his telephone, makes his report, and is ready for the next order. The manner in which some of these transactions take place between brokers has long been a subject of praise. A word, or a nod, or an upraised finger, or a tap on the arm, and hundreds of thousands of dollars change hands without a scrap of writing or a witness. A magazine writer thus describes it:
One pastime of the American public is the manly sport of throwing mud. A shovelful of scandalous mud--a clean white target, and many a reputable and disreputable citizen is having the time of his life. We bespatter our philanthropists, our statesmen, merchants, lawyers, and divines. We vilify our art, our architecture (I take a hand in that sometimes myself), our literature, or anything else about which some one has spoken a good word.
One of the time-honored institutions of our land--one which has never ceased to be the centre of abuse--is the New York Stock Exchange. Here conspiracies are organized for robbing the poor and grinding the rich; so despicable and damnable that Society is appalled. Here plots are hatched which will eventually destroy the nation, and here the Gold Barons defraud the innocent and the unwary, by stock issues based solely on hot air and diluted water. Here Senators are made, Congressmen debauched, and judges instructed--even plans consummated for the seduction and capture of the Supreme Court. All this is true--absolutely true--you have only to read the daily papers to be convinced of it.
There is one thing, however, which you will not find in the daily papers. It is not sufficiently interesting to the average reader who needs his hourly thrill; and this one thing is the unimpeachable, clear, limpid honesty of its members.
When you buy a house even if both parties sign, the agreement is worthless unless you put up one American dollar and get the other fellow’s receipt for it in writing. If you buy a horse or a cow, or anything else of value, the same precaution is necessary. So too if you sign a will. Your own word is not good enough. You must get two others to sign with you before the Surrogate is satisfied.
None of this in the Stock Exchange. A wink, or two fingers held up, is enough. Often in the thick of the fight when the floor of the Exchange is a howling mob, when frenzied brokers shout themselves hoarse and stocks are going up and down by leaps and bounds, and ruin or fortune is measured by minutes, the lifting of a man’s hand over the heads of the crowd is all that binds the bargain.
What may have happened in the half hour’s interim, before the buyer and seller can compare and confirm, makes no difference in the bargain. It may be ruin--possibly is--to one or the other, but there is no crawling--no equivocation--no saying you didn’t understand, or “I was waving to the man behind you.” Just this plain, straight, unvarnished truth, “Yes, that’s right--send it in.”
If it be ruin, the loser empties out on the table everything he has in his pockets; everything he has in his bank; all his houses, lots, and securities--often his wife’s jewels, and pays 30, 40, or 70 per cent., as the case may be.
What he has saved from the wreck are his integrity and his good name. In this salvage lies the respect with which his fellows hold him.
Every hand is now held out. He has stood the test, he has made good. Let him have swerved by a hair’s breadth and his career in the Street would have been ended.[98]
Of course mistakes and misunderstandings do sometimes occur, and these are the banes of the broker’s life. He will lose $500 with equanimity on a personal venture, but he will howl in distress over a loss of $25 on a mistake, and apply to himself a lurid mosaic of epithets because of it. The one merely shows bad judgment and is one of the little amenities; the other he feels is stupidity. At such times the stockbroker adopts Talleyrand’s bold hyperbole when he heard of the death of the Duc d’Enghien, “It is worse than a crime; it is a blunder.”
When a “mix-up” occurs in a crowd, as when four or five men make claim to having supplied a bid simultaneously, everybody produces a coin and “matches” on the instant. It is a case of “odd man wins,” and no time to lose. The market may be active and differences of seconds may spell losses of thousands. In less time than it takes to tell it, everything is adjusted and forgotten. But sometimes a mistake occurs which is not discovered by either party until after the market has closed. A man may think he sold 500 shares, for example, whereas the buyer has only 400 on his book. In a case of this sort, the discrepancy is covered “at the market” next morning and the loss or profit is divided. Differences between members are seldom irreconcilable, and when they assume serious proportions any third man will act as arbiter and speedily settle them. It is a significant fact that the Committee of Governors selected to arbitrate disputes is rarely called upon. Rarely, too, is there acrimony or hard feeling. The use of epithets is forbidden; to call a man a liar means prompt suspension. And so they live on raw nerves, with incidents occurring daily that add to the strain, yet ever with good-humored acquiescence toward whatever fortune deals out to them, and with generous camaraderie one to another.
As the day advances on ’Change, news and gossip and rumors of all kinds pour in, and to these the active broker must devote a large part of his time. It is astonishing to what extent the public, or that part of it that lingers in brokerage offices, calls for news from the floor. The demand is insatiable. “What do you see over there?” “Who is buying Steel?” “Who is selling Union?” “What’s the news in Copper?” “What do you think of the market?” These are the messages that come over the wires all day long, not merely from the New York offices, but from Montreal, Boston, Chicago, St. Louis, and many other points. And no matter how busy the floor broker may be, time must be found, somehow, to reply to every question as best he may, for at the other end of the line there is a customer waiting to hear from him.
Just why this customer yearns for news from the floor has always been a mystery to me. What does he expect to learn? What value attaches to a list of names of brokers who buy or sell Steel, when everybody knows that really important principals in these matters invariably hide their hands? All the significant news of the day is printed on the news tickers and reaches the customer’s eye before the broker or the floor knows anything about it, yet never an hour passes but he is importuned to “say something” about what is happening on ’Change, although half the time nothing whatever is happening. The climax of this sort of thing is reached when the floor man is asked to predict the future course of the market, a request that reaches him a dozen times a day. Now, in the name of common sense, what does he know about whether the market is going up or down? How can a man who is swimming with the current tell how fast he is going? If he were a seer who could foretell such things he would have all the money in Wall Street, in which case he wouldn’t remain a broker very long.
Just watch him; he is as busy as a man can be; his hands are full of orders, his head is occupied with many anxieties, his eye is on the indicator board, or scanning the room; arms and legs are working as fast as nature will permit; he must concentrate at all times. His ears ring with the strife of the room; all sorts of rumors, many of them ridiculous, are hastily whispered to him; “boos” and groans from the bears, shrieks and yells from the bulls--this is the sort of thing he hears all the day long. How can he form an opinion when thus distracted? He stands too close to the picture; he lacks perspective. What such a man thinks of the market isn’t worth anything; indeed, he does not “think” at all except about executing his orders, and heaven knows that is enough to engross him.
Answering all the questions that come to him over the wires is the hardest task, and the most distasteful thing the floor man is called on to do. He knows that he doesn’t know anything; from his point of view no information is better than misinformation. He feels with Josh Billings, “It’s a mitey site better not 2 no so mutch than 2 no so mutch that ain’t so,” but nevertheless he must continue to express views and theories and opinions and predictions, whether he likes it or not. Some of his oracular utterances are illuminating. “Market is going down,” he replies, “because there are more sellers than buyers.” Inexorable logic.
There was old Y----, who used to talk to his customers sitting near his office window, which faced Battery Park. He was a shifty professor of finance who never was known to hold the same opinion of the stock market two days running. “This market,” he said one day, “is going away up, crops are good, money is easy, railroads are rolling in wealth, and--look over there”--pointing to a line of immigrants walking through the park from the landing place--“the brawn and sinew of old Europe coming over here to develop our resources.” The very next day the market had what is called a “healthy reaction.” Quite unmindful of his consoling prophecies of yesterday, old Y---- looked at the tape and said, “This market is going away down. Crops are poor, money is tight, railroads are in a bad way, and--look over there”--pointing to another procession of immigrants--“the scum of Europe coming over here to rob our American laborers.”
If that portion of the public which buys and sells stocks often has its little joke at the expense of brokers, so also brokers in their turn frequently have cause to laugh at their clients. “Cheer up,” was the message sent over the wire by a hopeful broker to a despondent client; “cheer up, the market can only go two ways.” “Yes,” was the reply, “but it has so damn many ways of going those two ways.” During the rubber boom of 1910 on the London Stock Exchange, a broker wired to a client in Ireland, “Rise in bank rate considered likely,” to which he received a prompt reply, “Buy me five hundred.” A telegram came over a private line one day last summer from a customer in Montreal. It was a deadly dull period, when, owing to the indifference of the public, stockbrokers were not making expenses. “What are you chaps doing over there?” said the telegram. “Why don’t you start something?” to which the floor member replied, “Read St. Luke 7:32.”[99] This must have been the same member who, when customers were few and far between, hastily ’phoned his office partner, “Put all our customers into copper,” to which his partner replied with grim resignation, “He won’t be down to-day.”
When the gong rings at three, the day’s work on ’Change is at an end, and the shouting and the tumult dies. It is then 8 P.M. in London, and there in the Street hard by the Exchange, even at that ungodly hour, brokers and jobbers in the “Yankee” market are still at work in all kinds of weather. “The American market,” says the (London) _Quarterly Review_, “continues, as a rule, to deal up to 8 P.M. (5 P.M. on Saturdays), when the cable offices on this side close down. Up to that time wires are coming in continually from New York with orders and prices; and a man would be ill advised to undertake jobbing in the American market unless he has a splendid constitution and lives within easy reach of town. Every year the Yankee market levies a death-tax upon its members through the medium of pneumonia and other complaints brought on by long exposure in the Street after official hours; and very little is done to provide these late dealers with adequate accommodations or shelter.”[100]
Before leaving the Board after the official close, the broker will stop for a moment at the loan crowd to borrow or lend his stocks, after which he spends a half hour or so in his office, going over the events of the day with his partners and customers, and familiarizing himself with the day’s doings. The specialists, floor traders, and two-dollar men, many of whom have no partners and no office staff, will go directly home, loitering perhaps for a late luncheon, or something stronger, at the club upstairs, or at a famous café across New Street. When times are brisk it is not an uncommon thing for partners to remain at their offices until a late hour, and clerks are often on duty until the small hours of the morning, spending what is left of the night at a nearby hotel in order to save time.
Holidays are not numerous on the Stock Exchange, being limited to the days set apart by law, and to very rare occasions in dull times when by petition of a majority of the members a Saturday half holiday is granted by the governors. It is felt, very properly, that special holidays should be granted but rarely, because the intimate relationship of the banks to brokerage houses is such that whenever the banks are doing business large borrowers should always be prepared to meet calls that may be made upon them. On the London Exchange, what with bank holidays and the festival seasons of the Church of England, the stockbroker has many more holidays than his American colleague.
Life on the Stock Exchange is by no means unpleasant. It is not the idle pastime that many writers picture it, with easy hours and long intervals for luncheon, nor is it the depressing and nerve-destroying centre that many of the members would have us believe. One may certainly linger over the midday meal for hours--for that matter one may absent one’s self altogether--and conversely, one may worry and fret over the day’s vexations until life becomes unpleasant for him and for every one near him. But by far the larger number find their work as congenial as earning the daily bread may be, and vastly more diverting than many of the sedentary occupations in other lines of business. Elsewhere I have said that the long periods of dulness on the floor constitute the most serious obstacle the broker has to meet. Accustomed to physical activity and with a mind inured to occupation, he chafes under a stagnation that is foreign to his habits and desires, until worry--the disease of the age--claims him for its own. Almost every broker’s wife knows what I mean. It becomes a habit with such a man; unconsciously he grows “bearish” on his business, on himself, and on his associates, and at such times he is an awful bore.