1 
 
 \ 
 
The S 
 
 TOCK EXCHANGES 
 
 OF 
 
 London, Paris, and New York 
 
 A COMPARISON ' 
 
 GEORGE RUTLEDGE GIBSON 
 
 ^A OF TSB^ ^S 
 
 'ITHI7EESIT7: 
 
 NEW YORK & LONDON 
 
 G. P. PUTNAM'S SONS 
 
 3% luucherbochcr IJrcss 
 1889 
 
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 &*& 
 
 Liq^Srt 
 
 COPYRIGHT BY 
 
 GEORGE RUTLEDGE GIBSON 
 
 1888 
 
 Press of 
 
 G. P. Putnam's Sons 
 
 New York 
 
The warlike power of every country depends 
 on their Three per Cents. If Caesar were to re- 
 appear upon earth Wettenhall's (Stock Ex- 
 change) List would be more important than his 
 Commentaries ; Rothschild would open and shut 
 the temple of Janus ; Thomas Baring, or Bates, 
 would probably command the Tenth Legion, 
 and the soldiers would march to battle with 
 loud cries of Scrip and Omnium reduced, Con- 
 sols and Caesar. Sydney Smith. 
 
CONTENTS. 
 
 CHAPTER PAGBT 
 
 I. The Stock Exchange as a Factor in 
 
 Political Economy i 
 
 II. Speculation 6 
 
 III. London The Origin of the Public Debt 
 
 and the Stock Exchange . . .15 
 IV. London The Modern Stock Exchange, 22 
 V. London The Modern Stock Exchange 
 
 {Continued} 29 
 
 VI. London Trading " for the Account " 
 and Clearing House for Shares in 
 the Stock Exchange . . . -37 
 VII. Paris The Bourse: Its Origin and 
 
 Growth 50 
 
 VIII. Paris The Bourse Parquet and Cou- 
 lisse 58 
 
 IX. New York Early History of the Stock 
 
 Exchange 67 
 
 X. New York The Stock Exchange of 
 
 To-Day 73 
 
 XI. New York The Commanding Influence 
 
 of the Stock Exchange . . .85 
 XII. Technical Terms of Stock Exchanges, 95 
 XIII. New York The Consolidated Stock 
 and Petroleum Exchange : Its Ori- 
 gin and Growth 107 
 
 XIV. New York Methods of Business on 
 
 the Consolidated Exchange . .114 
 XV. The So-Called Bucket-Shops . .120 
 
 V 
 
LIST OF ILLUSTRATIONS. 
 
 Bank of England .... Fro?itispiece 
 Stock Exchange of London. Capel Court . 24 
 Stock Exchange of London. Shorter's Court, 30 
 Stock Exchange of London. Interior . 42 
 
 The Paris Bourse 58 
 
 The New York Stock Exchange. Broad 
 
 Street 74 
 
 The New York Consolidated Exchange. 
 
 Broadway . . . .- . .108 
 
 Note. The publishers beg to state that they made an effort to 
 secure from the authorities of the Stock Exchange of London per- 
 mission to have made a photograph of the interior of the building. 
 This permission was, however, refused, and they have therefore 
 been compelled to use for their illustration an old print, the only 
 view now extant, and which fortunately represents very nearly the 
 appearance of the interior to-day. 
 
r *f* OF THE x 
 
 CHAPTER I. 
 
 THE STOCK EXCHANGE AS A FACTOR EST POLITICAL 
 ECONOMY. 
 
 WORKS on history and political economy- 
 are singularly deficient in the treatment 
 of Stock-Exchange business, and in fact com- 
 pletely ignore its important relations to the 
 financial mechanism. Literary publications rarely 
 enter into the consideration of this topic, which 
 is foreign to the thoughts and classical educa- 
 tion of most authors. Financial journals address 
 their articles to the relatively narrow circle 
 which is familiar with stock-markets and finan- 
 cial affairs. It therefore happens that the 
 Stock Exchange, which is a most potent factor 
 in the financial world, and one which power- 
 fully affects wide interests, is imperfectly under- 
 stood. Doubt] ess there are many persons who 
 regard the Stock Exchange merely as a noisy 
 congregation of brokers who gamble in the 
 securities of governments and joint-stock com- 
 
2 The Stock Exchange as a 
 
 panies, under the guise of legitimate business. 
 Deeper insight into the functions, practices, and 
 character of the Stock Exchanges in the three 
 great cities of London, Paris, and New York 
 may induce a broader and happier conception 
 of their dignity and utility. 
 
 It would not be hazarding much to say that 
 those who teachl political economy in our 
 schools, or write treatises on it for publication, 
 are seldom familiar with the operations of Stock 
 Exchanges. It follows that, in discussing and 
 wrangling over the question of the evils or 
 advantages of an adverse " balance of trade " 
 between nations, they are likely to consult 
 chiefly the statistics of imports and exports of 
 commodities, merchandise, and specie, without 
 trying to trace the more elusive but very 
 palpable movement of financial securities. The 
 Stock Exchange is the deus ex machina in the 
 drama of commerce. 
 
 During the first eight months of 1888, to 
 illustrate, the balance of trade, commercially, 
 was ninety-two million dollars against the 
 United States, but during that time we ex- 
 ported only about twenty-two millions in 
 specie, leaving seventy millions unaccounted 
 for. We should have been compelled to ship 
 
Factor in Political Economy. 3 
 
 this seventy millions in specie to settle the 
 international account had not foreign capital 
 purchased liberally of our railway bonds and 
 stocks. The balance of trade is nominally 
 always against England, but instead of losing 
 wealth, as the figures might suggest, that 
 country is constantly growing richer by returns 
 on investments made long ago wherever com- 
 merce thrives. Unless the ebb and flow of secu- 
 rities between great financial centres be studied 
 and traced, the figures of international trade bal- 
 ances may be misconstrued or, indeed, wholly 
 misunderstood. Political economy has at best, 
 hardly established itself on the safe basis of an 
 incontrovertible science, and it cannot afford to 
 omit the facts and figures of Stock Exchanges 
 in making up its conclusions as to balances of 
 trade, interest on capital, and the production and 
 distribution of wealth. 
 
 As will be more fully brought out later, the 
 Exchanges of the world are instruments of 
 enormous economic value in subdividing capital 
 and directing its employment in the great works 
 of commerce and industry. 
 
 The United States has been a vast and pro- 
 lific field for foreign capital, and English so- 
 licitude for and interest in American affairs 
 
L 
 
 4 The Stock Exchange as a 
 
 centres in the Stock Exchange of New York. 
 The American visiting Great Britain, on his 
 arrival at Queenstown or Southampton, eagerly 
 seizes the latest paper to see what has trans- 
 pired at home since he sailed on his voyage 
 thither. He finds, perchance, a brief paragraph 
 or two about a national political convention, a 
 strike among railway employes, or a severe 
 storm, with no news of American society, art, 
 or literature. There is one thing, however, 
 which he sees spread out in satisfactory 
 detail, and that is the market reports, especially 
 the quotations of railway securities. That is 
 what most interests our British cousins in 
 their "kin beyond the sea." 
 
 Per contra, when the Wall-Street man goes 
 down to his office his first inquiry is for the two- 
 o'clock prices on the Stock Exchange of London, 
 which, owing to the difference in time of five 
 hours, are received before ten o'clock in New 
 York. 
 
 The quotations of American stocks, with the 
 accompanying price of Consols and the Bank 
 of England rate, inform him of the temper of 
 European capital and the status of politics, 
 commerce, and credit abroad as translated into 
 figures by the keenest financiers, besides serving 
 
Factor hi Political Economy. 5 
 
 as a guide to his judgment of values here. The 
 largest private banking institutions in London, 
 Paris, Berlin, Vienna, and New York, combine 
 the functions of banking and brokerage in such 
 intimate relations that it is hard to say where 
 the one begins and the other ends. Between the 
 extremes of a deposit, discount and exchange 
 business, and that of buying and selling bonds 
 and shares on the Stock Exchanges of the world 
 on commission, they negotiate loans for govern- 
 ments and corporations, reorganize properties, 
 convert them from private into joint stock own- 
 ership, and are intermediaries in all the great 
 movements of capital from one country to 
 another. The community of financial interest 
 between Great Britain and the United States, 
 in particular, is one of the most effective agents 
 for the promotion of peace and good-will be- 
 tween the nations. 
 
 The electric current which courses along- the 
 Atlantic cable binds Capel Court and Wall 
 Street into the brotherhood of capital as well 
 as of kindred and speech. 
 
CHAPTER II. 
 
 SPECULATION. 
 
 DURING the past century panics have 
 recurred in cycles of about ten years, 
 and many superficial observers attribute them 
 wholly to unhealthy speculation or gambling, 
 and condemn Stock Exchanges as breeding- 
 places of disaster. 
 
 Now, this word " speculation " has a bad 
 name, and it may be worth while to see what 
 it really implies or describes. Evidences of 
 public debt, and the shares, bonds, and deben- 
 tures of incorporated or chartered companies are 
 easily transferred, are actively dealt in on the 
 Exchanges and frequently are footballs for 
 speculation, especially before their values are 
 well established. Risk and uncertainty are the 
 two qualities essential to speculative transac- 
 tions, and just so fast and so far as they are 
 eliminated, just so fast and so far they cease to 
 invite speculation. All must alike deplore the 
 frequent instances where the haste to get rich in 
 
Speculation. 7 
 
 speculative markets has involved innocent per- 
 sons in loss and ruin, or tempted men to betray 
 their trusts. But " the evil is passing and the 
 good remains." 
 
 While panics have injured the pride and 
 purse of individuals, and for the moment pros- 
 trated the energies of the industrial world, they 
 have not arrested the progress of material civil- 
 ization, but, indeed, seem, in a measure, to be 
 merely an outgrowth from it. The extension of 
 the credit system, which is one of the refine- 
 ments of modern commerce; the introduction 
 of labor-saving machinery, which rapidly dis- 
 places labor and deranges values, are two of the 
 potent causes of commercial crises. The subdi- 
 vision of the title of ownership of such great 
 engines of progress as manufacturing, shipping, 
 mining, banking, trading, telephone, telegraph, 
 cable, water, and gas companies, is indispensable 
 to their organization and operation. The for- 
 tune of no individual would be ample to set 
 these forces into motion on a gigantic scale. As 
 an illustration, the small streams of isolated and 
 unused capital which trickle into the savings- 
 banks of California, are returned in the waters 
 of an irrigating canal which wash out the aurif- 
 erous gravel or convert into gardens the sandy 
 
8 Speculation. 
 
 desert. The Stock Exchanges of the world offer a 
 standing reward to men of talent and ingenuity 
 everywhere, to discover new opportunities and 
 to suggest untried experiments for the employ- 
 ment of capital, with a prospect of more than 
 an investor's rate of interest. 
 
 Not long ago steam was applied to locomotion 
 by land and sea, and electricity to the transmis- 
 sion of thought and speech. Their introduction 
 was an experiment ; they were at first a specu- 
 lation, and not an investment. Speculation is 
 truly the handmaid of enterprise, and the two 
 are so closely associated that one cannot be cur- 
 tailed without crippling the other. 
 
 The person who buys more shares than his 
 capital will permit him to pay for, is derisively 
 called a " speculator." But does this act essen- 
 tially differ from the practices of what, by com- 
 mon consent, are called legitimate commercial un- 
 dertakings ? The merchant buys in advance of 
 his immediate wants and in excess of them and 
 of his capital. The real-estate owner pledges his 
 property to procure money to improve it or 
 to buy more, expecting to sell at a profit. But 
 the critic here says : " On the Stock Exchange 
 speculators go so far as to sell what they do 
 not possess," or in Stock-Exchange parlance 
 
Speculation. 9 
 
 they " go short." But how about the contrac- 
 tor who agrees to build a house before he owns 
 a plank, or brick, or nail ; or who agrees to build 
 a railway before he buys a cross-tie, a rail, or 
 a shovel ? How about the manufacturer who 
 sells his sheetings and his steel rails, before the 
 cotton is grown or the ore extracted from the 
 mine ? Even China, our commercial antipodes, 
 sells its products to us ahead of their pro- 
 duction. The fact is, that the element of specula- 
 tion constantly comes more prominently into the 
 plans of the whole mercantile world. Those 
 who produce or buy only what they need from 
 day to day, jog along as did the canal boats and 
 stage coaches of our ancestors. The great man- 
 ufacturers and merchants of to-day must cast 
 the horoscope of coming conditions and read its 
 prophecy aright or be overcome by more presci- 
 ent rivals. They must anticipate and discount 
 the future, and become speculators in the high- 
 est acceptation of the word. 
 
 As the current of progress rolls on, innocent 
 persons are occasionally caught in the eddies, 
 and others are engulfed in the whirlpool rapids 
 of speculation ; but the stream of prosperity 
 flows steadily on. 
 
 As steam is explosive, electricity deadly; as 
 
io Speculation. 
 
 tuberculosis lurks iu milk, typhoid fever in 
 water, and trichinae in meat, so the stock-market 
 is full of manholes and pitfalls. It is equally- 
 true that statistics disclose the lamentable fact 
 that 95 per cent, of all business men fail at 
 some period of their lives. All kinds of grist 
 come to the mill, and since it requires an infal- 
 lible judgment invariably to detect the chaff of 
 fraud and folly, all classes are alike exposed to 
 peril in business. Financial storms may mani- 
 fest themselves with a greater cyclonic fury 
 within the precincts of the Stock Exchange, but 
 they are equally destructive in commercial and 
 industrial circles. Bonds and shares are the 
 most mercurial and sensitive forms which capi- 
 tal assumes, but as a sudden wave of heat 
 registers its arrival more quickly on a bulb of 
 mercury than on a bar of iron, so the former more 
 quickly recovers its normal temperature. It is 
 so with Stock-Exchange markets, which are first 
 to feel a financial barometic depression, but like- 
 wise the first to record a better atmosphere, 
 while real estate, for instance, is the last to de- 
 tect, as well as the last to recover. 
 
 The Stock Exchange and banks of the large 
 cities are closely allied, and together constitute 
 the money-market. Banks cluster about the 
 
Speculation. 1 1 
 
 Stock Exchange, for bonds and shares are among 
 the most desirable collateral securities for loans, 
 and the testimony of bankers would easily be 
 that losses from this source show a much smaller 
 percentage than in commercial paper. 
 
 The value of shares is distinctly enhanced by 
 " listing " them, as Wall Street would say, or by 
 "granting a quotation," in the language of 
 Capel Court. With law supreme, paper titles 
 to property are as secure as its personal posses- 
 sion, and when these shares become publicly 
 known in an open market, the value which they 
 there acquire may be regarded as the judgment 
 of the best intelligence concerning them. If 
 there is merit, it becomes known to more people 
 with capital than if the property be merely held 
 in private ownership, or dealt in outside the Ex- 
 change. Thus we see that a railway, a brewery, 
 a bank, a piece of land, or a mine is mobilized, 
 so to speak, and acquires greater negotiability on 
 its introduction to an Exchange, the arena of 
 speculation. The banker will loan more money 
 on it, and more people will buy in it, because 
 there is always a ready market in case they 
 wish to change that investment. Here is where 
 the Stock Exchange does a good service to capi- 
 tal, and this is why its existence is a constant 
 
1 2 Speculation. 
 
 incentive to promoters, inventors, and men of 
 original and progressive ideas. 
 
 Every occurrence in the commercial world is 
 communicated to its nerve-centres the Stock 
 Exchanges, where the importance or bearings 
 of the event are at once estimated. In earlier 
 days, carrier-pigeons, or private expresses in 
 post haste brought to the stock-market the 
 news which now is borne by the electric 
 telegraph. Brokers and speculators vie with 
 each other for the fastest means of procuring 
 and transmitting information. Representatives 
 of brokers, in times of critical interest, follow 
 armies in the field, shadow diplomats, sit in legis- 
 lative halls, visit mines, workshops, and farms, 
 each eager to procure advance informatiou. A 
 silver bill in Washington, a railway strike in the 
 Northwest, a war of rates between trunk lines, 
 yellow fever in Florida, a bank failure in San 
 Francisco, a revolution in Mexico, floods in 
 Hungary, a drought in India, a panic in Buenos 
 Ayres, an advance in the Bank-of-England 
 rate, a peaceful speech by the Prime-Minister, a 
 riot in the streets of Paris, an inflammatory 
 article in a St. Petersburgh paper, the death of 
 an Emperor in Germany, the imposition of a new 
 tariff in Austria, the success of a large loan in 
 
Speculation. 1 3 
 
 Amsterdam, and so on ad infinitum; all are 
 noted in the Exchanges of the world, and some 
 interests are correspondingly influenced upon re- 
 ceipt of the news. There are three news agencies 
 in New York whose duties are to collect and 
 distribute just such information as this, and 
 brokers before whom it is laid are at once com- 
 pelled to estimate its correctness and value and 
 apply it instantly to the stock-market. Kapidity 
 of reasoning and quickness of decision are the 
 two qualities most essential to the stock-broker 
 and stock-operator. 
 
 Many leading brokers, particularly in Amer- 
 ica, issue a printed daily, weekly, or monthly 
 resume of the shifting phases of the market, 
 discussing its underlying conditions, as well as 
 surface indications. These letters go to their 
 clients, who are thus informed of the conclusions 
 of observers, who in their interest are seeking 
 to discover the hidden springs which move 
 prices and values. These productions are as 
 broad in their grasp as those of financial jour- 
 nalistic writers, and they have perhaps the ad- 
 vantage of being written by men who are in 
 close and constant touch with affairs. Narrow- 
 ness of view there may be by those who frequent 
 the Stock Exchange, but the broad horizon 
 
1 4 Speculation. 
 
 which knows not the boundaries of race, em- 
 pire, or religion, must be swept by the vision 
 of those who would succeed there in a large 
 way. 
 
CHAPTER III. 
 
 LONDON THE ORIGIN OF THE PUBLIC DEBT AND 
 
 THE STOCK EXCHANGE. 
 
 LONDON, which holds the purse-strings of 
 the world, is, of course, the seat of its 
 most powerful Stock Exchange. While its begin- 
 nings are misty they are not remote, for only 
 well inside of two hundred years have there 
 been any opportunities for the exercise of a 
 stock-broker's vocation. 
 
 William III. was the founder of the English 
 debt, of the Bank of England (1694), and of 
 national fiscal honor. Charles I. had seized the 
 gold deposited in the Mint. Charles II. had 
 closed the Exchequer, confiscating one million 
 three hundred thousand pounds sterling, and as 
 Hallam says, " The nation had sunk to the 
 nadir of its prosperity." William acknowl- 
 edged the debt so infamously incurred and 
 repudiated by his predecessors, and thereafter 
 paid an annual interest upon it. While the 
 government was thus learning the secret of ex- 
 
 15 
 
1 6 The Origin of the Public Debt 
 
 tracting money from the people by lawful 
 methods, and sowing the seed of the great har- 
 vest of modern national debt, merchants were 
 discovering the advantages of exclusive charters 
 for commercial enterprises. By purchase or by 
 royal favor the East India, the Hudson Bay, 
 and other companies established themselves in 
 monopolies in the 17th century, and became 
 the forerunners of that host of trading com- 
 panies which pushed English commerce into the 
 remotest corners of the globe. With the estab- 
 lishment of the public debt and national integ- 
 rity, and the successful introduction of these 
 great commercial organizations, the stock-broker 
 makes his first appearance on the stage of Eng- 
 lish history. 
 
 There follows a period between 1716 and 
 1720 when England and France became a prey 
 to a speculative mania, which is unexampled in 
 financial history. The celebrated Mississippi 
 scheme in France and the South Sea Bubble in 
 England were the most extraordinary delusions 
 that credulous cupidity ever produced. The 
 imagination of all classes from lords to lackeys 
 was captivated by a financial necromancy as ex- 
 travagant as the professed magic of the philoso- 
 pher's stone. " A uri sacra fames, 11 the accursed 
 
And the Stock Exchange. 1 7 
 
 thirst for gold, is a passion of the race and has 
 been inseparable from human life in all its vary- 
 ing phases of intelligence. The dreams of ava- 
 rice made a slave of the intelligence and judg- 
 ment of men, and the shares of bubble compa- 
 nies rose with fatal celerity to a fatal height. 
 When the rude awakening came the whole 
 financial fabric crumbled in one common ruin. 
 But the infatuation of the people and its sad 
 denouement taught a lesson to the commercial 
 world which thereafter led to greater prudence 
 and exacter methods. Business is not a mathe- 
 matical science, but experience teaches lessons 
 in finance as in every thing else. 
 
 Parliament in 1720 passed an act prohibiting 
 the formation of companies except by special 
 charter, and this law was not repealed until 
 1826. 
 
 Stock-brokers and Stock Exchanges, as we 
 know them to-day, are very different from their 
 prototypes two hundred years ago, but all pro- 
 fessions have alike emerged from the crudities 
 and imperfections of an earlier time. The 
 Royal Exchange, which was erected during the 
 reign of Elizabeth, as a meeting-place for mer- 
 chants, was the original rendezvous of the first 
 stock-brokers. After a few years, or in 1698, 
 
1 8 The Origin of the Public Debt 
 
 the dealers in shares abandoned the Royal Ex- 
 change and took up their abode in Change 
 Alley, a locality which they made famous. In 
 those days coffee-houses were the trysting- 
 places for social, political, and financial coteries, 
 and Jonathan's and Garraways' in Change Alley 
 became the home of the stock-brokers. In 1701 
 they were not esteemed as the most useful mem- 
 bers of the community, as may be inferred from 
 the criticism of a contemporary writer. He 
 said : " They can ruin men silently, undermine 
 and impoverish, fiddle them out of their money 
 by the strange, unheard-of engines of interest, 
 discount, transfers, tallies, debentures, shares, 
 projects, and the devil and all of figures and hard 
 names." Thomas Guy, the founder of Guy's 
 Hospital, was one of those who amassed a for- 
 tune in the transactions which are thus so ve- 
 hemently condemned. 
 
 The records of the Stock Exchange now in 
 its archives do not go back of 1798, but it 
 appears from outside sources that in Change 
 Alley there was no organization, it being merely 
 a common meeting-place without any restric- 
 tions or limitations whatever. About 1773 the 
 scene shifted to the The Stock Exchange Coffee- 
 House, Threadneedle Street, where a sixpence 
 
And the Stock Exchange. 1 9 
 
 was charged for admission, though the Bank of 
 England set aside the rotunda of the Bank for 
 dealings in shares, debentures, and public funds, 
 where a large traffic, for a time, was carried on. 
 
 During the latter part of the eighteenth, and 
 the early part of the nineteenth centuries, the 
 public debt was swollen by the American and 
 Napoleonic wars, and the subsidies paid so 
 freely by Pitt to foreign states. In 1775, at the 
 commencement of the American Revolution, the 
 British debt was 126,842,811, and in 1815, at 
 the end of the French and American wars, the 
 debt stood at 861,039,049. The price of Con- 
 sols fluctuated violently in those days, rising 
 from 57 in 1784 to 97 in 1792, declining to 47 
 in 1798. In 1802 they were 79, in 1803 50J, 
 etc. From 1797 to 1819 specie payments were 
 suspended, which added an element of specula- 
 tion to business of all descriptions. In 1816, 
 Bank-of-England notes showed as much as 16f 
 per cent, discount, in gold. The increasing debt 
 and wide variations in its market value naturally 
 brought profit to brokers, whose business it was 
 to buy and sell the public funds ; besides, war 
 always opens speculative opportunities. There- 
 fore it is not surprising to learn that under this 
 stimulus the Stock Exchange of London reached 
 
 \ 
 
20 The Origin of the Public Debt 
 
 such a state of prosperity, and importance as to 
 justify a new building. On May 18, 1801, the 
 corner-stone of its present structure was laid in 
 Capel Court, and in March, 1802, the Exchange, 
 which then numbered 500 members, occupied its 
 new quarters. 
 
 In the early part of the century Nathan 
 Mayer Rothschild was one of the giants " on 
 'Change," and it was there he achieved his 
 greatest triumphs after establishing the London 
 house of Rothschild. 
 
 In those days the funds were subject to 
 violent fluctuations, and the issue of peace or 
 war, victory or defeat, was the decisive in- 
 fluence on values. This was before the era of 
 telegraph and steam or the present systematic 
 development of the postal and express service. 
 Enterprise then involved personal fatigue and 
 often heavy expense, but it was in this that lay 
 much of Rothschild's success. One signal in- 
 stance of this was his own personal journey to 
 the field of Waterloo, where he felt the stakes 
 were too great to justify his reliance on agents 
 or couriers. He witnessed this battle of the 
 Titans, saw that Napoleon was defeated, that 
 the Allies had won, and instantly made his 
 way to Brussels, thence by carriage to Ostend ; 
 
And the Stock Exchange, 2 1 
 
 by bribing a hardy seaman with two thousand 
 francs he secured a private passage to Dover in 
 the midst of a tempest, and thence rode on to 
 London, where, the following morning, looking 
 most dejected, he stationed himself in his favor- 
 ite place in the Stock Exchange. Brokers known 
 often to represent him were open sellers of the 
 funds, whilst he quietly bought heavily through 
 others. He finally gave out the news, beating 
 the government expresses and the speculative 
 world, and amassed a handsome fortune out of 
 this grand coup. 
 
 The annals of the Stock Exchange in those 
 days are meagre, but they show that operators 
 were exposed to hoaxes and canards of every 
 description. False rumors are now often put 
 into circulation to affect values, but the rapid 
 means of communication in our time permit an 
 immediate refutation and hence forbid serious 
 injury.* 
 
CHAPTEE IV. 
 
 LONDON THE MODEKN STOCK EXCHANGE. 
 
 AFTER the return of the disbanded armies 
 of Europe to the pursuits of civil life, at 
 the end of the Napoleonic wars, there was a re- 
 vival of industry that amounted to its creation. 
 The age of steam, electricity, and mechanical 
 invention had dawned, and "swords were beaten 
 into ploughshares, and knives into pruning- 
 hooks." Projects for the acquisition of wealth 
 multiplied, but so many of them were visionary 
 and impracticable that in 1826 a day of reckon- 
 ing came. The panic of that year only cleared 
 the decks for action, however, and it was not 
 long before a fresh industrial movement was 
 under way. This in its turn was arrested in 
 1836 in England, and in 1837 in the United 
 States, only to be shortly renewed on an in- 
 creasing scale. Ten years later the most re- 
 markable period of speculative industrial enter- 
 prise of the century reached its climax in Eng- 
 land, in what was commonly known as " the 
 
 22 
 
The Modern Stock Exchange. 23 
 
 railway mania of 1845." The sums authorized to 
 be expended by Acts of Parliament on railway 
 enterprises were : in 1843, 3,861,285 ; in 1844, 
 17,870,361; in 1845, 60,824,088; in 1846, 
 160,026,224; in 1847, 40,397,395 ; in 1848, 
 14,620,471; in 1849, 3,155,332, or over 
 300,000,000 (say $1,500,000,000) in seven 
 years. 1 Prior to 1844 one tenth of the esti- 
 mated cost of a railway had to be deposited 
 before the bill for its promotion could pass, 
 but in that year this deposit was reduced to 
 one twentieth. 
 
 At this juncture occurred the triumph of 
 Cobden's principles, the conversion of the great 
 Tory minister, Sir Robert Peel, the abolition 
 of the Corn Laws, the Irish famine, succeeded 
 by a panic in the spring of 1847. There 
 had been a great drain of gold to purchase 
 food supplies abroad, and the want of currency 
 was so great that advances could not be ob- 
 tained even on silver bullion. By some the 
 crisis was attributed to the Bank Restriction 
 Act of 1844, which prevented the Bank of Eng- 
 land, with 9,000,000 in its vaults, from furnish- 
 ing relief. In October, 1847, the operation of 
 this act was suspended, and confidence was im- 
 
 1 Francis's History of the Bank of England. 
 
24 London. 
 
 mediately restored. The speculative railway 
 mania was responsible for some of the financial 
 distress, but by no means for all of it. Next 
 follows the panic of 1857, when specie pay- 
 ments in the United States and the Bank Act 
 in England were suspended. In 1861 the 
 United States was plunged into the great war 
 of secession, causing another suspension of specie 
 payments, but no general bankruptcy. In 1866 
 there occurred in England one of the worst 
 panics of modern times, it being essentially a 
 credit panic, as distinguished from the mercan- 
 tile crises of 1847 and 1857. The rapid growth 
 of the " limited-liability " companies under the 
 laws of 1862 and previous years are charged 
 with much of the mischief of this collapse. 
 Great houses like Overend & Gurney, Morton, 
 Peto, & Co., went down with a crash. The fall of 
 securities on the Stock Exchange of London, as 
 given on high authority, was one hundred million 
 pounds sterling, and relief did not come until the 
 Bank Act was again suspended. In 1873 the fail- 
 ure of Jay Cooke & Co., attended by widespread 
 ruin in financial and industrial circles in America, 
 and the panic in the spring of 1884, precipitated 
 by the failure of the Marine Bank of New York 
 City, are fresh in public memory, and need not 
 be recounted. 
 
STOCK EXCHANGE OF LONDON. CAPEL COURT, 
 

 ?-<v>fi 
 
The Modern Stock Exchange. 25 
 
 These vicissitudes, and that host of unnamed 
 events in England and abroad which have 
 marked the growth of wealth during the 
 past fifty years, greatly augmented speculative 
 opportunities and expanded the volume of 
 transactions to enormous proportions. 
 
 To-day the interests of the Stock Exchange 
 are more varied and cosmopolitan than that of 
 any other set of men in the world. If it has 
 not bought and sold the earth, the title-deeds 
 which have passed through its hands represent 
 an empire of wealth, over which Croesus would 
 be too poor to preside. 
 
 The Bank of England is the apex of a vast 
 pyramid of share capital, resting upon the 
 broad basis of the world's commerce, and almost 
 every atom of the mass is weighed, assayed, and 
 a valuation stamped upon it by the Stock Ex- 
 change of London. The immense tide of traffic 
 that beats up against the Bank of England, the 
 Royal Exchange, and the Stock Exchange is 
 but emblematic of England's commercial power. 
 An observer has said that the sidewalks in that 
 vicinity are " islands of retreat from the mael- 
 strom of vehicles " which crowd this the busiest 
 spot on the globe. The Bank, which covers an 
 entire block and an area of three acres, in most 
 part is only two stories in height, but in appear- 
 
26 London. 
 
 ance it is the most substantial banking struc- 
 ture in any city, indeed a veritable fortification 
 or Gibraltar of security. The Capel Court 
 entrance to the Stock Exchange looks out upon 
 the eastern front of the Bank, on Bartholomew 
 Lane, but the other entrances on Throgmorton 
 Street and Old Broad Street are more thronged. 
 The Stock Exchange is not one of the " sights " of 
 London, as its exterior is inconsequential and al- 
 most undistinguishable from contiguous build- 
 ings, and its interior is not open to public view. 
 Unlike the Bourse in Paris, and the Stock Ex- 
 change in New York, there is no gallery for spec- 
 tators. The building was wholly rebuilt in 1 853, 
 and has expanded to meet the increasing demands 
 upon it, but with no well-defined architectural 
 purpose, so that its blind passage-ways, wind- 
 ing stair-cases, and narrow closed doorways 
 make it something of a puzzle to a stranger. 
 The main room is octagonal in form, about 68 
 feet in diameter, with an iron and glass dome 
 110 feet in height from the floor to the top 
 of the cupola. Its quarters are cramped, and 
 it strikes an American that they ought 
 to tear down the entire structure and erect 
 one commensurate with the dignity and 
 present requirements of the institution. There 
 
The Modern Stock Exchange. 2 7 
 
 are, however, two obstacles to this : first, 
 English preference for dinginess and the respec- 
 tability of age, rather than spick-and-span archi- 
 tecture ; and second, the nature of the owner- 
 ship of the building. It belongs to a proprie- 
 tary company, and not to the " House," as the 
 general membership of the Exchange is denom- 
 inated. Though only recently so, no one can 
 be a shareholder in the company unless he be a 
 member of the Exchange, but a person may be 
 a member of the Exchange and not be a share- 
 holder. The interests may not exactly conflict, 
 but they are, to say the least, not identical, and 
 it is a question if they be equitable. The an- 
 nual dues of members range between twenty 
 and thirty guineas, depending on the date of 
 their admission ; and the entrance fees of new 
 members vary from .315 for an outsider to 
 131 5s. for those who have been clerks for 
 four years. These payments all go to the pro- 
 prietary company as a rental. This does not 
 quite describe the fact, for the proprietary com- 
 pany appoint and pay all officials in charge of 
 the building, and superintend it. This property 
 is mortgaged to the extent of 240,000, bearing 
 four-per-cent. interest, and the public may hold 
 these debentures. The capital of the company 
 
28 London. 
 
 is 20,000 shares paid up <12 each, and in the 
 year 1886-7 they paid a dividend of <4 lbs., or 
 nearly 40 per cent, on the amount paid up. 
 The entire property is now worth over five 
 millions of dollars. The shares are owned by 
 about one thousand persons, some of whom ac- 
 quired them before the present restriction, 
 which prevents persons not members of the 
 Stock Exchange from becoming shareholders, 
 was adopted. 
 
CHAPTER V. 
 
 LONDON THE MODEKN STOCK EXCHANGE. 
 
 {Continued) 
 
 THE present membership of " The Stock 
 Exchange of London " (its proper title) 
 is about 2,850, which is double the number 
 (1,433) in 1870. If the interests of share- 
 holders and subscribers could in some way be 
 amalgamated it would give a value to member- 
 ship which would afford security to that extent 
 to engagements between members, besides in- 
 suring a greater community of interest and 
 more solidarity to the institution. There is 
 no limit to membership, which may rise or fall, 
 accordingly as business is found profitable or 
 otherwise. In the Bourse at Paris and in the 
 Exchanges of New York, memberships are fixed 
 in number, and a candidate must procure a 
 " seat ,J by purchase and transfer from a retir- 
 ing member before he can be elected. In Lon- 
 don, on the contrary, the applicant addresses the 
 Secretary, announcing his wish to be admitted a 
 
 29 
 
30 London, 
 
 member of the Stock Exchange for the year, 
 commencing on the 25th of March, 18 , upon 
 the terms of, and under and subject in all re- 
 spects to the Rules and Regulations, etc. He 
 further states : " I am a British subject and of 
 age ; I am (married or single) ; my residence is 
 
 ; my office is ; my bankers are ; 
 
 I am not engaged in any business except such 
 as is transacted at the Stock Exchange, nor am 
 I a clerk in any public or private establishment 
 unconnected with the Stock Exchange, nor a 
 member of or subscriber to any other institu- 
 tion in which dealings in stocks or shares are 
 carried on." Accompanying this is a document 
 
 which reads : " We recommend Mr. as a 
 
 fit person to be admitted a member of the 
 Stock Exchange ; and in case he shall be pub- 
 licly declared a defaulter within four years from 
 the date of his admission we, each of us, hereby 
 engage to pay his creditors, upon application, 
 the sum of five hundred pounds, to be applied 
 in discharge of the said defaulter's debts in the 
 Stock Exchange." This must be signed by 
 three sponsors who have themselves been mem- 
 bers for four years. Assuming them to be 
 good, all those having dealings with the new 
 member during the ensuing four years have 
 
STOCK EXCHANGE OF LONDON. SHORTER S COURT. 
 (Where American stocks are dealt in M after hours.") 
 
^A*" OF THK^<$5 
 
 [UWBXtSITTJ 
 
The Modern Stock Exchange. 3 1 
 
 an aggregate security of fifteen hundred pounds, 
 but thereafter no security whatever, on account 
 of his membership. If the applicant has for 
 four years been a clerk in the Stock Exchange 
 only two recommenders are required, to the ex- 
 tent of three hundred pounds each. No appli- 
 cant is admissible if he be engaged as principal 
 or clerk in anv business other than that of the 
 Stock Exchange, or if his wife be engaged in 
 business. He must have been a citizen of Great 
 Britain, either native or naturalized, for two 
 years. The Committee of General Purposes, 
 consisting of thirty members, is elected annually, 
 and they elect from amongst themselves a 
 Chairman, and Deputy-Chairman, and from the 
 list of Stock-Exchange members they select a 
 Secretary. Francis Levien, Esq., has for many 
 years occupied this post with singular ability 
 and fidelity. He is the repository of all the 
 traditions, customs, practices, precedents, of the 
 written and unwritten law and history of the 
 Stock Exchange of London, in the same sense 
 that Geo. W. Ely, Esq., Secretary of the New 
 York Stock Exchange, and Charles G. Wilson, 
 President of the Consolidated Stock Exchange 
 of New York, are the authority on all such 
 questions in New York. It usually happens 
 
32 London. 
 
 that every large institution annually returns to 
 office some one who is regarded as an encyclo- 
 paedia of general information on its affairs. 
 
 The " Committee for General Purposes " in the 
 Stock Exchange of London annually re-elect 
 the entire list of members, unless for good cause 
 some one or more should fail to pass. This 
 feature is peculiar, but cannot be too strongly 
 commended. It is a power subject, of course, to 
 abuse by a member of the Committee exercising 
 his influence to defeat a perfectly worthy candi- 
 date, but happily the malice of individuals does 
 not often prevail. High character and inflexible 
 rectitude among members is necessary to inspire 
 and merit public confidence, and they are also 
 indispensable in the inter-relations of members. 
 It must be remembered that enormous transac- 
 tions in all Exchanges are entered into in the 
 most hurried manner, frequently closed by a 
 nod or gesticulation, without written contract, 
 witnesses, notarial acknowledgement, or calm 
 comparison, and in the din and confusion of ex- 
 cited markets. Transactions are based absolute- 
 ly on the confidence of man in man, and the 
 power of discipline possessed by this London 
 Committee is salutary, even though necessity 
 seldom requires its exercise. There is a provision 
 
The Modern Stock Exchange, 33 
 
 in the Stock Exchange of London, which is simi- 
 lar to the Bourse in Paris, but quite unlike the 
 Exchanges in New York, whereby authorized 
 clerks may be admitted, with power to deal and 
 bind their principals, and unauthorized clerks, 
 with merely the privilege of assisting their em- 
 ployers. A list of clerks is posted with the 
 names of their employers, and this can be re- 
 ferred to at pleasure. There are also a number 
 of members of the Exchange who are employed 
 as clerks by other members, but so long as they 
 are in the service of their fellow-members they 
 are prohibited from doing any business in their 
 own name or account. 
 
 One of the marked peculiarities of the Stock 
 Exchange of London is the distinction between 
 those who act as agents for the public, and 
 who are technically called " brokers," and 
 those who do business on their own account, 
 and are described as " dealers " or " jobbers." 
 It is estimated that about one third of the 
 entire membership are brokers, one third 
 dealers, and one third clerks to other members. 
 The custom of the Exchange forbids any 
 member from acting in the double capacity of 
 broker and jobber, and prohibits partnerships 
 between the two classes, and also with any person 
 
34 London, 
 
 not a member of the Exchange. In the Bourse at 
 Paris, all agents de Change are strictly forbidden 
 to trade on their own account. In the Stock 
 Exchanges of New York there is a large class of 
 members who operate for their own account. 
 They are called " room-traders " or " scalpers," 
 whose profits or losses consist in quick turns 
 made during the day, the interest that they have 
 overnight, or over Sunday, being usually very 
 small. They endeavor to detect the momentary 
 influences and run of orders " going short " or 
 " buying long " without reference to what they 
 may think the ultimate course of prices will be. 
 In New York, room- traders sometimes have 
 orders to execute for friends, though they do 
 not court that kind of business. Commission 
 brokers in New York may occasionally trade on 
 their own account, no regulations preventing it, 
 and all members alike join in the groups as- 
 signed to different active stocks in making a 
 market by open bids and offers. 
 
 In the Stock Exchange of London, however, 
 " dealers " are by custom required to make a 
 price at which they will buy and another at 
 which they will sell, so that if a broker there 
 receives a commission from his client to buy 
 Lake Shore shares, for instance, he asks a 
 
The Modern Stock Exchange. 35 
 
 dealer for the quotation. If he replies 96-96J-, 
 that means that he will pay 96 or sell at 96J 
 to the extent of one hundred shares, which is 
 the rule in American shares. In British rail- 
 ways ten shares is the unit, and it may here 
 be said that all shares to be a proper de- 
 livery in London must be in ten-share certifi- 
 cates. The bulk of the business is done in this 
 way, and brokers as a rule buy from and sell to 
 dealers of established reputation rather than 
 with each other. This does not permit the free 
 market we have in New York, nor the same 
 closeness of price that is made here, where 
 stocks can frequently be bought and sold in 
 large amounts at the same price. Here a record 
 is kept of the transactions, the stock list each 
 day, showing pretty closely the number of 
 shares traded in. In London and Paris these 
 lists do not indicate the volume of business, 
 merely giving quotations as they may be marked 
 by brokers, on a public bulletin hanging in the 
 Exchange, and consequently not accurate indices 
 of the course and scope of the market. In both 
 those markets, particularly in London, there is a 
 secrecy and a disposition to conceal operations, 
 which is a striking contrast with the frank and 
 public manner of conducting the business in the 
 
36 London. 
 
 United States. Why members of the Stock 
 Exchange should not be merged into a homo- 
 geneous mass, and why their operations should 
 not be conducted on the principle of an auction, 
 are not apparent to an American. 
 
 The Bourse in Paris and the Stock Exchange 
 in London have a horror of printer's ink and pub- 
 licity, which expresses itself in their rule forbid- 
 ding members to advertise. The result of this is 
 that irregular brokers and what in this country 
 are called " bucket shops " advertise and no doubt 
 secure commissions that would go to members 
 of the Stock Exchange if they were permitted 
 to solicit business. Prior to 1886 the City of 
 London required all brokers to take out a 
 license, and the result was persons outside of the 
 Stock Exchange posed before the public as 
 licensed brokers. The semi-official endorsement 
 of the Corporation of London proved to be mis- 
 leading to the public, and the law was repealed. 
 The Secretary of the Stock Exchange publishes 
 a notice in the daily papers warning the public 
 that members of the Exchange are not allowed 
 to advertise. 
 
CHAPTER VI. 
 
 LONDON TRADING " FOR THE ACCOUNT" AND 
 
 CLEARING HOUSE FOR SHARES IN THE STOCK 
 EXCHANGE. 
 
 BEFORE any scrip, shares, bonds, or de- 
 bentures of any description can be quoted 
 in the official lists, or be in any manner recog- 
 nized by the Exchange, application must be 
 made in behalf of such issues, and the proper 
 committee will require full information as to 
 the bona-Me character of the enterprise; that 
 it is of sufficient magnitude to warrant dealings, 
 that two thirds of the whole nominal capital 
 have been applied for and unconditionally al- 
 lotted to the public ; that its issues are legal in 
 form and authority, etc. It is apropos to re- 
 mark that Stock Exchanges guard the public, 
 in so far as they are able, in declining to admit 
 to quotations the questionable enterprises of 
 " shady " promoters, but they do not in any 
 manner thereby indicate any opinion, personal 
 or official, as to the value of such issues, or 
 
 37 
 
38 London. 
 
 their real genuineness or soundness. That is 
 entirely beyond their province, and persons 
 buying issues that have been " listed " should 
 scrutinize the property and investigate the 
 value for themselves. Caveat emptor. The 
 immense number of shares, stocks, bonds, de- 
 bentures, etc., that are dealt in on the Stock 
 Exchange in London, as may be surmised, ne- 
 cessitates a systematic division of the scant 
 space in the Board Room. A portion of " the 
 floor " is given up to Consols, bank shares, 
 Indian securities, one to home railways, one to 
 the funds of foreign states ; a department, and a 
 large one, to American railways, etc. The sec- 
 tion of the floor assigned to these various inter- 
 ests are again subdivided into groups varying in 
 size with the activity and popularity of the dif- 
 ferent securities. 
 
 When a member wishes to obtain what he 
 purchases without delay, he stipulates at the 
 moment of negotiation that it is to be a cash 
 transaction, otherwise he would not receive 
 the certificates of ownership until the next 
 " settling day." These settling days are once 
 a month, in Consols, and twice a month, 
 about the middle and end, in all other securi- 
 ties. Practically, trading "for the account," as 
 
Trading "for the Account y 39 
 
 this is called, is the mode in which nearly all 
 the business is done, and under it purchases 
 carry no interest during the current account, at 
 the end of which the buyer receives the securities 
 due hirn. If, before that day arrives, however, he 
 should re-sell the same securities, there should 
 in that case be no necessity for him to receive 
 them from the person who sold to him, for him, 
 in turn, to deliver to the person to whom he 
 had sold. That would be superfluous labor 
 and risk, and that he avoids by the intervention 
 of a Clearing-House arrangement, which elimi- 
 nates himself from the transaction by directing 
 the ultimate seller to deliver to the ultimate 
 buyer, the middle man receiving any difference 
 in his favor, or paying any that is against him. 
 This end is accomplished to some extent by 
 passing around for endorsement a ticket, which 
 is made to do duty as a settling agent, but the 
 Clearing House is now as fixed and popular a 
 factor in the Stock Exchange of London as 
 among the banks of London and all other cities, 
 in " clearing " or settling their differences. Many 
 people have an idea that a Clearing House, by 
 some necromantic power, transforms the ordinary 
 business of the Exchanges into a speculative 
 character. It does economize book-keeping, 
 
40 London. 
 
 money, capital, risk of banks, and avoids the 
 daily passing of stocks backward and forward 
 through the streets like a shuttle, and perhaps 
 the relief of the business from such burdens 
 may promote activity and willingness to trade. 
 But it is precisely as legitimate for brokers to 
 adopt the economical agency of the Clearing 
 House as for banks, who no longer cart their 
 specie from one office to another. There are in 
 London, for instance, twenty-seven banks be- 
 longing to the Bankers' Clearing House, and all 
 other bankers in London and throughout Eng- 
 land keep accounts with them. The Clearing- 
 House banks all keep accounts in the Bank of 
 England, and in the clearing of any day, debtor 
 banks give their checks on the Bank of Eng- 
 land, which the creditor banks deposit there, 
 and thus not a sovereign passes, though, to illus- 
 trate, in the week ending July 4, 1888, 188,- 
 000,000 (nearly $950,000,000) were thus 
 cleared. The principle of a Clearing House in 
 its simplest form is where two men who are 
 mutually indebted, instead of paying each debt 
 in full, should " pair oif," as far as the debts per- 
 mit, the larger debtor then paying the excess. 
 This same principle extends into international 
 transactions, and the United States and England, 
 
Trading ' 'for the Account. " 41 
 
 instead of each shipping gold on all purchases in 
 the other country, only do so to the extent of the 
 balance of trade. When a dozen nations are trad- 
 ing together the Exchanges between them be- 
 come more complex, but otherwise do not differ. 
 It is with transactions between members of 
 Stock Exchanges identically the same as be- 
 tween merchants of nations engaged in interna- 
 tional commercial intercourse. Though this 
 mode of settlement now obtains in English and 
 Continental Exchanges, the Consolidated Ex- 
 change of New York, with a plan similar, but 
 in some respects preferable, is the only Stock 
 Exchange in the New World that adopts "trad- 
 ing for the account" with a Clearing House. 
 The Stock Exchange of Philadelphia delivers 
 stocks daily through the intervention of a 
 Clearing House. In the Stock Exchange of 
 London inactive securities, which are rarely 
 dealt in, are not cleared, the list covering only 
 such as are largely bought and sold. 
 
 All members of the Exchange are not neces- 
 sarily registered in the Clearing House, and 
 their participation in its operations is not com- 
 pulsory. The Clearing House is of relatively 
 recent origin in its application to stocks, in 
 London, and at first some of the larger houses 
 
42 London. 
 
 opposed its introduction as it to some degree 
 destroyed their advantages over smaller brokers 
 and dealers. They have, however, gradually 
 come to acknowledge its vast superiority over 
 the old system, and now the great bulk of 
 the business goes through this mode of settle- 
 ment. Members are gradually coming in, and 
 the indications are that within a short time 
 the entire membership will employ the Clearing 
 House, which is conducted by the Exchange 
 as a part of its official machinery. When 
 the end of the fortnightly period arrives, three 
 days are allowed to complete the settlement. 
 The first is " Contango day," on which brokers 
 and dealers balance their accounts to see what 
 they have to deliver and what to receive as the 
 net result of their operations for the preceding 
 two weeks. Those who are " bull " of a certain 
 stock must be prepared to receive the actual 
 certificates upon the third day, which is called 
 " settling day," the intervening one being known 
 as " ticket day." The " bull " (French, Jiaussier) 
 must have the funds to pay for the securities, or 
 he must borrow the money almost invariably 
 on a pledge of collaterals from bankers or 
 money-lenders, or he must arrange with the 
 seller, the "bear" (French, baissier), or some 
 
STOCK EXCHANGE OF LONDON INTERIOR. 
 
Z^ OF' THE ^3 
 
 [MIVEKSIT 
 
Trading " for the Account." 43 
 
 one else in the Exchange to have the stock car- 
 ried over till the end of the next fortnightly 
 period. If he pays for this extension, it is 
 called a " contango " (French, report), which with 
 us would be called interest or " carrying charge." 
 If the seller is operating for " short " account, 
 and finds it difficult to procure certificates to 
 make the delivery, the buyer, to whom he owes 
 stock, may only consent to forego for the next 
 two weeks his right to receive it, for a consider- 
 ation. The sum thus paid by the seller to 
 defer the delivery is called " backwardation " 
 (French, deport), which with us would be called 
 a "premium." When the contract stands over 
 till the next settlement without any interest or 
 other charges either way, it is said to be " flat." 
 All persons having arranged for the continuation 
 into the next account of such contracts as are 
 not to be settled by an actual delivery of the 
 securities, and all offsetting contracts having 
 been eliminated by the machinery of the Clear- 
 ing House, "tickets" are exchanged between 
 those members who have actual certificates 
 to deliver, and on the third, or " settle- 
 ment" day, these certificates are passed 
 from the sellers to the buyers. Meanwhile 
 trading goes on in the Exchange for the current 
 
44 London, 
 
 account which in turn has its transactions sub- 
 jected to the same process. No fixed commis- 
 sion is charged, but one eighth per cent, to buy 
 and the same to sell is customary. Active 
 speculative accounts when opened and closed 
 during a fortnightly period are sometimes un- 
 dertaken by responsible houses for one sixteenth 
 each way. There is no place in the world where 
 personal honor and credit, without security, go 
 so far as in this Exchange. Contracts entered 
 into " for the account " (French a terme) re- 
 main open until the date of the next settlement, 
 and though a broker may have coming to him 
 at that time an immense number of shares and 
 bonds bought at lower prices, he has no power 
 before that date to call upon the sellers to give 
 any security whatever for the faithful perform- 
 ance of their contracts. A dealer might make 
 engagements far beyond his ability, trusting 
 that at the settlement period, or before, he 
 might be able to repurchase stocks which he 
 had sold short, or to sell stocks which he had 
 bought, without disastrous loss, and if the mar- 
 ket went against him he would meanwhile not 
 be compelled to disclose his inability to make 
 good the difference. An American cannot but 
 regard this as an undue and unnecessary expan- 
 
 i/ 
 
Trading "for the Account!' 45 
 
 sion of the credit system, and far inferior to the 
 American plan in time contracts. The latter 
 gives either party the right to demand a mutual 
 deposit in any Trust Company (bank) of unex- 
 ceptionable standing, or with the chairman of 
 the Exchange, of ten per cent, of the amount 
 involved in the open contract. This removes 
 from American business an element of risk 
 inherent in the English system. Americans 
 have no conception of what " credit v means, 
 for it is hedged about here by conditions and 
 limitations unknown to brokers in London 
 and Paris. The custom in London is to accept 
 an uncertified check for securities passing be- 
 tween members of the Exchange ; indeed the 
 practice of certifying checks there is unknown. 
 A member can, by giving proper notice, demand 
 the actual cash, but that is only resorted to in 
 desperate cases. In New York the common 
 practice, especially in times of any uneasiness, 
 of exacting a certified check, which is a check 
 marked good by the bank on which it is drawn, 
 for all sums of any magnitude, in lieu of the 
 certificates or bonds delivered to the buyer, 
 reduces the risk to a minimum, and is prefer- 
 able to the English system, which all the 
 way through is one of exceptional confidence. 
 
46 London. 
 
 No doubt the custom of granting credit there 
 leads to a closer scrutiny of character, and as an 
 aid to the proper estimate of the real status of 
 a member is the rule forbidding him and his 
 wife from being engaged in any other kind of 
 business. 
 
 In this connection, however, it is proper to 
 remark that banking in the United States is, in 
 some respects, more hazardous than in England. 
 Outside of the risk of loss through an over-cer- 
 tification of checks (as we spell the word) is the 
 peril from irregular, forged, or fraudulent en- 
 dorsements on checks payable " to order." The 
 banker here is ultimately responsible, and is 
 often mulcted when he has exercised all the 
 care and caution consistent with the practical 
 conduct of business. In England cheques (as 
 they spell the word) payable " to order " are 
 similar in effect to those payable " to bearer " in 
 the United States. Bankers there are protected 
 by the Bills of Exchange Act of 1 882, which 
 provides that 
 
 " When a bill, payable to order on demand, is drawn 
 on a banker, and the banker on whom it is drawn pays 
 the bill in good faith, and in the ordinary course of busi- 
 ness, it is not incumbent on him to show that the endorse- 
 ment of the payee or any subsequent endorsement was 
 made by or under the authority of the person whose 
 
Trading "for the Account? 47 
 
 endorsement it purports to be, and the banker is deemed 
 to have paid the bill in due course, although such en- 
 dorsement has been forged or made without authority." 
 
 " Crossed cheques," as they are termed, in 
 England are more nearly like our checks paya- 
 ble " to order." The " Crossed Cheques Act " 
 of 1876 x describes this form of draft upon a 
 bank as follows : 
 
 " Where a cheque bears across its face an addition of 
 the words ' and company,' or any abbreviation thereof 
 between two parallel transverse lines, or of two parallel 
 transverse lines simply, and either with or without the 
 words ' not negotiable,' that addition shall be deemed a 
 crossing and the cheque shall be deemed to be crossed 
 generally. Where a cheque bears across its face an addi- 
 tion of the name of a banker, either with or without the 
 words ' not negotiable,' that addition shall be deemed a 
 crossing and the cheque shall be deemed to be crossed 
 specially, and to be crossed to that banker. Where a 
 cheque is uncrossed, a lawful holder may cross it gener- 
 ally or specially. Where a cheque is crossed generally 
 the banker on whom it is drawn shall not pay it other- 
 , wise than to a banker. Where a cheque is crossed 
 specially, the banker on whom it is drawn shall not pay 
 it otherwise than to the banker to whom it is crossed, or 
 to his agent for collection. Any banker paying a cheque 
 crossed generally otherwise than to a banker, or a cheque 
 crossed specially otherwise than to the banker to whom 
 the same shall be crossed, or his agent for collection, 
 being a banker, shall be liable to the true owner of the 
 1 39 and 40, Victoria. 
 
48 London. 
 
 cheque for any loss he may sustain owing to the cheque 
 having been so paid." 
 
 The object of crossing checks of course is to 
 guard against their payment to improper per- 
 sons, and if relief shall ultimately be given 
 to American bankers from the hardships often 
 incidental to the responsibilities which our laws 
 fix upon them, some modification of the English 
 idea may be introduced here. As stock-brokers 
 often combine the function of banking and bro- 
 kerage a consideration of the difference between 
 the British and American banking systems in this 
 respect, is not inappropriate. 
 
 The Stock Exchange of London, like those 
 of New York, is a voluntary association, and 
 it is governed by its own rules and regulations, 
 in so far as they do not conflict with the law of 
 the land. The Special Committee of the House 
 of Commons, " On Loans to Foreign States," 
 which made a voluminous report on the meth- 
 ods employed in introducing new loans on the 
 British market, said with reference to the or- 
 ganization of the Stock Exchange, that " such a 
 body can hardly be interfered with by Parlia- 
 ment without losing that freedom of self-gov- 
 ernment which is the very life and soul of the 
 institution." The chairman of this committee 
 was Mr. Lowe, a former Chancellor of the Ex- 
 
Trading "for the Account l " 49 
 
 chequer, and among its members were the Solici- 
 tor-General. Sir Henry James, Sir Charles Rus- 
 sell, Mr. (now Sir) John Puleston, and men of 
 that stamp. The Royal Commission to investi- 
 gate the working of the Stock Exchange in 
 1877 advocated its incorporation "for the pur- 
 pose of strengthening its hands and increasing 
 its efficiency in the future." Though the re- 
 port was signed by the whole Committee, which 
 was composed of Lords Penzance and Black- 
 burn, Baron Rothschild, H. H. Gibbs, previously 
 Governor of the Bank of England, and others 
 of equal distinction, a large minority signed it 
 with a reservation as to this recommendation. 
 They all agreed that "any external control 
 which might be introduced by such a change, 
 should be exercised with sparing hand. The 
 existing body of rules and regulations have 
 been formed with much care, and are the result 
 of long experience, and the vigilant attention of 
 a body of persons intimately acquainted with the 
 needs and exigencies of the community for whom 
 they have legislated. Any attempt to reduce 
 these rules to the limits of the ordinary law of 
 the land, or to abolish all checks and safeguards 
 not to be found in that law would, in our opin- 
 ion, be detrimental to the honest and efficient 
 conduct of business." 
 
CHAPTER VII. 
 
 uese; its origin and growth. 
 
 IT is tantalizing to an inquirer into the early 
 history of financial and commercial insti- 
 tutions in France, even more than in England, 
 to discover how little their origin is noted by 
 contemporary chroniclers. History is rather a 
 record of war and politics than of the victories 
 of peace and industry. We learn that merchants 
 assembled in Paris five hundred years ago, but 
 this fact is mainly preserved by the name of the 
 Bridge by the side of which they met the 
 Pont-au-change. Finally, in 1724, the business 
 of stock brokerage had risen to such a dignity, 
 owing to the enormous speculations in the Mis- 
 sissippi Company's shares, that the Bourse was 
 legalized and assigned to the Hotel de Nevers, 
 between Rue Yivienne and Rue Richelieu. On 
 October 25, 1726, by an order of the Council of 
 State, an official distinction was made between 
 brokers in stocks and in merchandise. In 1786 
 that portion of the law of 1724 which granted 
 
 50 
 
The Bourse, 5 1 
 
 the right to sixty persons to do the business of 
 stock-brokers without payment to the state was 
 repealed, and sixty officers (or brokers) were ap- 
 pointed for life upon the payment of a sum of 
 money to the state. The Revolution swept 
 away this monopoly in the law of 1791 ; but 
 four years later, the free exercise of the right 
 to do business as a stock-broker was prohibited, 
 and twenty-five brokers were established. In 
 1801 the number was limited to eighty, but in 
 1816 it was again reduced to sixty, and this 
 limitation as to number of official brokers ex- 
 ists to-day. M. Alph. Courtois, Fils, 1 says that 
 in 1801 the security deposited with the govern- 
 ment by each of the sixty Agents de Change 
 was 60,000 francs, increased in 1805 to 100,000, 
 in 1816 to 125,000, and finally, by the Imperial 
 Decree of October 1, 1862, the sum was fixed 
 at 250,000 francs for the Paris Bourse, 40,000 
 for Lyons, 30,000 for Marseilles, Bordeaux, etc. 
 This last act still remains in force, and each of 
 the sixty Agents de Change in Paris has lodged 
 with the Minister of Finance 250,000 francs, 
 which is liable for his obligations in the event 
 of his default. He receives 3 per cent, from 
 the government for his deposit, and while the 
 
 1 Operations de Bourse et de Change. 
 
5 2 Paris. 
 
 public have security iu this pledge, it is not 
 hazarding much to say that the government 
 farmed out the exclusive rights in perpetuity 
 to sixty persons as officially recognized brokers 
 in Paris, in consideration of this deposit ! It 
 was impecuniosity and not statesmanship that 
 devised the plan, and several times " raised the 
 stakes." 
 
 The number of legally recognized brokers be- 
 ing limited, ,and the power to nominate a suc- 
 cessor inhering in the office, it follows that the 
 privilege of membership in this select body be- 
 came very valuable. M. Courtois states that 
 before the Revolution memberships commanded 
 no price, that afterwards a sale was made at 
 30,000 francs, and that before 1830 they had 
 increased to 850,000 francs. After the Revolu- 
 tion of July they fell to 250,000, rising to 950,000 
 francs before 1848. The Revolution in that 
 year depreciated the value of memberships to 
 400,000 francs, but at present they command 
 about 2,000,000 francs (or say $400,000). 
 
 A " seat " in the Parquet can only be obtained 
 by purchase, and as many as twelve persons 
 may be partners in its ownership, though it must 
 be placed in the name, and under the control of 
 some one of its proprietors, who alone has the 
 
The Bourse. 
 
 53 
 
 right to do business in the Bourse, and who 
 must own outright at least one fourth of the 
 membership. He must not only be elected by 
 his fellows after making the purchase of the 
 seat, but his election must be confirmed by the 
 Minister of Finance, who nominates him as one 
 of the official agents, before he can exercise the 
 duties of his office as broker. Members must 
 furnish the Syndic annually with a list of their 
 employes, stating what salaries they receive, 
 and also permit the public exhibit of the names 
 and interests of any partners they may have. 
 The silent partners are personally liable for all 
 the obligations incurred by the active partner 
 while acting in his capacity as A gent de Change. 
 No one can become an Agent de Change who 
 is not a Frenchman, at least twenty-five years 
 of age, recommended by several bankers and 
 commercial houses. He is forbidden to spec- 
 ulate or do business on his own account. 
 He must keep his books on the double-entry 
 plan, after a model furnished by the Syndical 
 Board, and he cannot bring an action in the 
 courts without its authority. If he should be 
 obliged to leave business, even temporarily, he 
 must notify the Syndic of the fact, and who his 
 representative will be during his absence. 
 
54 Paris. 
 
 With all the financial interests that are focused 
 in the Bourse it is physically impossible for sixty 
 persons to properly perform the functions de- 
 volving upon them. Moreover, to confer upon 
 any body, however large, such autocratic power 
 and privilege, would be regarded in this country 
 as an abuse of constitutional right, and an act in 
 restraint of trade. 
 
 The exclusive rights given to the Agents de 
 Change led to the gradual growth of a body 
 of unlicensed brokers called Coulissiers, who 
 form what is still known as the Coulisse, as dis- 
 tinguished from the Parquet, the name given to 
 the body of Agents de Change. The Coulisse 
 began to crystallize at the end of the Napo- 
 leonic wars, and at first it confined its operations 
 to French rentes. 
 
 The railway fever, beginning about 1836 and 
 continuing ten years, was felt in France pretty 
 much as in England, and in the latter part of 
 that decade the shares of railway companies 
 were literally spawned. From 1844 to 1847 
 the share capital of railway companies formed 
 in France is estimated to have been over one 
 thousand million francs (say $200,000,000). 
 Forty years ago this sum looked much more 
 formidable than at present, for since that time 
 
The Bourse. 55 
 
 the floating capital of the world has been vastly 
 augmented. Investments in railway securities, 
 which were then experimental, are now the ac- 
 cepted outlet for the surplus capital of all com- 
 mercial communities. There was naturally, at 
 that period, an immense overflow of speculative 
 business in these issues, and through it the Cou- 
 lisse grew rapidly into a commanding position. 
 Their number was unlimited and embraced, as 
 at present, bankers, speculators, brokers, and in- 
 vestors, who either did not have the means, or 
 could not gain admission into the restricted mem- 
 bership of the Parquet, as sixty places could not 
 possibly accommodate the number of persons 
 who wished to engage in this business. Finally 
 the Coulisse had so poached upon the pre- 
 serves of the Parquet that the latter body de- 
 termined to assert their legal prerogatives, and 
 in 1859 they brought suit against the Coulis- 
 siers. Twenty-six of the latter were fined 10,500 
 francs each for usurping functions exclusively 
 belonging to the Agents de Change, and for the 
 time being the Coulisse was dispersed. 
 
 Article 76 of the Commercial Code describes 
 the privilege of the Parquet as follows : " The 
 Agents de Change, constituted in the manner 
 prescribed by law, alone have the right to nego- 
 
% 6 Paris. 
 
 3 
 
 tiate public and other securities that may be 
 quoted in the stock list, or to negotiate for 
 account of others, drafts or bills or any other 
 commercial paper, and to fix the rates therefor." 
 This latter function has been allowed to lapse, 
 and Agents de Change as a matter of fact 
 never negotiate bills of exchange or commer- 
 cial paper. 
 
 When the Parquet had thus asserted their 
 monopoly they adopted a policy of semi-expan- 
 sion by permitting authorized clerks to make 
 contracts in cash in contra-distinction to trans- 
 actions "on account," which latter in Paris, as 
 in London, constitute the bulk of the business 
 of the Parquet. Finally, however, the Coulisse 
 reconstructed itself and the two divisions of 
 the Bourse now dwell together in apparent 
 harmony. The fact is, the Parquet feel that 
 their tenure, like that of the House of Lords 
 in England, is not so secure that they can af- 
 ford to arrogate all the rights legally conceded 
 to them. They feel bound to preserve their 
 credit intact and to keep it above suspicion, for 
 fear of losing their vested privileges. This was 
 exhibited by their conduct during the great 
 Krach in 1881, when the Union Generale failed. 
 The Parquet had subscribed for shares in a new 
 
The Bourse. 57 
 
 issue of stock by this institution, and had in 
 turn sold considerable of it for future delivery 
 to members of the Coulisse. Meanwhile the 
 company suspended, and owing to irregulari- 
 ties in the issue the Coulisse declined to accept 
 the stock tendered to them. The matter was 
 carried to the courts, and the Coulisse won, in- 
 volving the Parquet in immense losses, which 
 almost bankrupted them. But they stood hero- 
 ically together in mutual support, borrowed 
 large sums of money upon the joint credit of 
 the membership, maintained unsullied the credit 
 of their organization, and doubtless thereby pre- 
 vented an abrogation of their rights, which 
 naturally might have followed any general 
 insolvency. 
 
> 
 
 CHAPTER VIII. 
 
 PARIS THE BOURSE PARQUET AND COULISSE. 
 
 THE Bourse occupies a stately building of 
 free-stone, which, with its noble Corinth- 
 ian columns and air of classic grace, might easily 
 be mistaken for a church, public hall, or palace, 
 and, indeed, its designation is the " Palais de 
 la Bourse." When the city of Paris was con- 
 structing (1808-26) this temple of Mammon 
 the grants were insufficient to secure its prompt 
 completion, and the Compagnie des Agents de 
 Change contributed voluntarily some two or 
 three millions of francs towards its cost, and, in 
 consequence of this act, a ministerial order was 
 issued by the Treasury giving the Compagnie 
 the free use of the building without charge. 
 The spot where it is located is known as the 
 " Place de la Bourse," and faces Bue Vivienne. 
 The grand hall of the Bourse is open, airy, and 
 capacious, and in every way a credit to the in- 
 stitution. Singularly enough, the Frenchmen, 
 in spite of their reputed admiration for the fair 
 
 58 
 
rxP^Q9 THE 
 
 fgSlVBRSITTJ 
 
The Bourse. 59 
 
 sex, admit no women or children to the gallery. 
 New York brokers, with their gallantry, would 
 feel as if much of their sweetness were " lost on 
 desert air " if they could not now and then pose 
 to curious and surprised feminine visitors in 
 the gallery. A Frenchman is as . nervous as an 
 electric eel, and the stock-market operates upon 
 him like a voltaic pile. In a placid market he 
 is like a jumping- jack ; in a panic he deports 
 himself like a victim of St. Vitus's dance. 
 During the forenoon the Bourse is quite de- 
 serted, but at twelve o'clock, if one approaches 
 it, he sees excited groups occupying every inch 
 of space under the splendid portico, or peristyle. 
 These are members of the Coulisse, and here is 
 where they transact all their business in the day- 
 time, except in French rentes, which, by courtesy 
 of the Parquet, takes place in a corner of the main 
 hall. When the observer mingles in the throng 
 in this outer mart of the Coulisse he sees one 
 group trading in Italian Funds, another in Rus- 
 sian, still another in Egyptian, again another in 
 Panama Canal shares, and so on. These trans- 
 actions are all for " the account," which means 
 that, at the end of the month, when the " settle- 
 ment day " arrives, the buyers will receive any 
 stock due them, except French rentes, which are 
 
60 Paris. 
 
 seldom delivered by the Coulisse, and contracts 
 in which practically continue indefinitely, in 
 most cases differences only being settled. 
 
 In the Parquet the settlement day in French 
 rentes is also at the end of the month, but in 
 other public funds, and in " values " (valeurs), 
 as the French term commercial securities, the 
 settlements are fortnightly, as in London. In 
 both Parquet and Coulisse a clearing house per- 
 forms functions similar to that in the Stock 
 Exchange in. London and the Consolidated Ex- 
 change of New York. In the Parquet the com- 
 missions are fixed at about \ per cent, each way, 
 by the Chambre Syndicate, composed of a Syn- 
 dic and six members, who constitute the govern- 
 ing body. The Coulissiers have no commission 
 law, but usually charge about -Jg- per cent, or 
 half the rate charged by the Agents de Change, 
 and they, too, are governed by a Syndical Board. 
 
 The Coulisse skim along on the surface of 
 speculation, caring little for investment business, 
 in which indeed they are handicapped by the 
 rule of the French Treasury, the Bank of 
 France, Credit Foncier, French railway com- 
 panies, etc., which will not recognize any trans- 
 fers of their registered or inscribed shares, ex- 
 cept when contersigned by an Agent de Change. 
 
The Bourse, 61 
 
 This is one of the perquisites of the monopoly 
 enjoyed by the Parquet, but when necessary the 
 Coulisse can always obtain this service by pay- 
 ing one of the agents his commission. As a rule, 
 however, it may be said that the business of the 
 Coulisse is chiefly speculative, and notwithstand- 
 ing the fact that it is outside of government 
 concessions, with seats of no value, because not 
 limited in number and not transferable, it 
 does almost as much business as the Parquet, 
 and at times more. The big speculation in cop- 
 per a year ago, for instance, was in the Coulisse, 
 and there alone Panama Canal shares are dealt 
 in. In the winter it pays the Credit Lyonnais 
 fifty thousand francs for a large hall, where it 
 holds evening sessions, known as the " Petite 
 Bourse." 
 
 The Agents de Change stand around a circular 
 railing (technically, corbeille), which in the Ex- 
 changes of this country is called either a " ring " 
 or " the pit." Its diameter is small enough to 
 permit each member to hear his vis-a-vis. Two 
 small lings or spaces (petites corbeilles) are con- 
 tiguous to the circle occupied by the select 
 sixty. In one of the former, sixty clerks, one 
 for each member, are engaged in making cash 
 transactions on behalf of the Agents, and in the 
 
62 Paris. 
 
 other the same number of clerks are occupied 
 exclusively with transactions in the French 
 funds "for the account" (negotiations a terme 
 sur la rente). A third enclosure is set aside 
 for persons who solicit business for the Agents. 
 They are called remisiers, which might be ren- 
 dered into the American equivalent of " drum- 
 mers." The Coulissiers have no such a barrier 
 as the corbeille, and consequently they form 
 into a compact mass in each group, which 
 makes the transaction of their business more 
 laborious. 
 
 As previously said, dealings begin on the 
 outer edge of the Bourse at 12 o'clock by the 
 Coulissiers. At 12.30 the sixty Agents de 
 Change assemble and continue dealing until 3 
 o'clock; whereas the Coulisse remains in ses- 
 sion until 4 o'clock, not counting their nocturnal 
 meetings. In Berlin the Boerse opens at 12, 
 closing at 2.30 o'clock ; in Vienna it is open from 
 10 to 11 and 12 to 1.45. Americans start ear- 
 lier in the day (10 a.m.) than any other brokers, 
 except the Viennese, and have a longer session 
 (closing at 3) than any except the English. 
 Each country, of course, has its own national 
 holidays, in addition to those recognized every- 
 where, such as Christmas and New Year's. The 
 
The Bourse. 63 
 
 Parquet have an organization that perhaps more 
 nearly resembles an unlimited partnership than 
 any other Exchange. Their membership is so 
 small that it is almost like a happy family, and 
 their rules go so far as to provide that only one 
 of their number may occupy offices in any given 
 building, and in case of his removal none of his 
 colleagues can open in that building within two 
 years. 
 
 This leads to one of the peculiarities of Paris, 
 which is the absence of any financial quarter. 
 In London and New York brokers' offices and 
 banks surround the Stock Exchanges, giving a 
 distinct character to that part of these cities, so 
 that the phrases " Lombard Street " and " Wall 
 Street " imply banking and brokerage interests. 
 In Paris, however, the " Place de la Bourse " is 
 close to small and inferior shops, and nothing 
 in its environment in any manner suggests the 
 nature of the business transacted within its pur- 
 lieus. Banking and brokerage houses are scat- 
 tered all over Paris, but nowhere do they attract 
 attention, because of their isolation. With all 
 the speculative instincts of the Frenchman, with 
 his love of excitement, his constitutional fond- 
 ness for change in political life, his unceasing 
 search for novelties, it is remarkable that deal- 
 
64 * Paris, 
 
 ings in American shares have never been success- 
 fully inaugurated there. Why the Bourse should 
 maintain an active speculation in Russian, Turk- 
 ish, and Egyptian funds, at the same time utterly 
 neglecting American government bonds and 
 railway shares, is a mystery. Some Parisians 
 buy and sell " Americans," but they do so 
 chiefly through London. The French people 
 do not migrate much, and outside of the old 
 " stand-bys " in foreign public funds and foreign 
 enterprises managed by Frenchmen, their capi- 
 tal is equally domestic in its tastes. They will 
 put money freely into a speculative experiment 
 like the Panama Canal, because the rich profits 
 arising from the investment in Suez inspire un- 
 limited faith in their industrial Napoleon, De 
 Lesseps, while they ignore the enormous specu- 
 lative opportunities upon much safer founda- 
 tions in the United States. Well-informed 
 American engineers do not believe that the 
 Panama enterprise can be successfully com- 
 pleted by the present company, and its possible 
 bankruptcy may not only involve a serious 
 financial crisis, but may also unsettle the foun- 
 dations of the French Republic itself. The 
 shares and debentures of the Panama Canal are 
 held by retail shopkeepers, peasants, servants, 
 
The Bourse. 65 
 
 and people of small means, and are avoided by 
 capitalists, bankers, and shrewd speculators. 
 De Lesseps has always appealed to the former 
 classes, and as they were the principal sub- 
 scribers and beneficiaries of the Suez invest- 
 ment, he now relies wholly upon them to 
 enable him to complete his present undertak- 
 ing. 
 
 Though the credit of France was so reduced in 
 1797 that 5 per cent, rentes sold as low as 6^^-, 
 and not higher than 36 T y ir in that year ; though 
 from 1816 to 1869 there was an annual deficit; 
 though to-day its debt is the largest of any nation ; 
 and though it has passed through more inter- 
 nal vicissitudes than any other European com- 
 mercial nation, it has never repudiated its 
 obligations. In 1871, when France lay prostrate 
 beneath the conqueror's heel and an indemnity 
 of five milliards ($1,000,000,000) was required, 
 the francs fairly leaped from the pockets of the 
 loyal, frugal people, and the loan was sub- 
 scribed for several times over. While the 
 French are volcanic in their character and 
 sometimes deluge their land with the lava and 
 ashes of internecine war and external violence, 
 they soon clear away the debris and go to 
 work. They excel all nationalities in the arts 
 
 ^>^ OF THE 
 
 USIVERSIT 
 
66 Paris. 
 
 of painting, design, cookery, and dress, and the 
 world pays them a willing money tribute. 
 
 The Bank of France is the keystone of the arch 
 of the public credit of that country, and it is one 
 of the best managed financial institutions in any 
 country. It has the sole right to issue currency, 
 which it may do up to $700,000,000 value, stated 
 in American money. In general the banking 
 and credit system is less developed in France 
 than in any other country of equal civilization, 
 and the percentage of cash payments there is 
 infinitely greater than elsewhere. Notwith- 
 standing this, the Bourse is one of the finest 
 examples of a perfected credit system to be 
 found anywhere. In this respect it is superior 
 to its commercial surroundings, but in its re- 
 stricted membership and quasi-relations to the 
 government it is sadly behind the times. 
 
CHAPTER IX. 
 
 NEW YORK EAELY HISTORY OF THE STOCK EX- 
 CHANGE. 
 
 TURNING now to America, it must be 
 conceded that it was born of a specu- 
 lative undertaking. The voyage of Columbus, 
 over a mysterious and trackless ocean, was the 
 boldest experiment, and in its results the most 
 colossal speculation in the annals of human 
 enterprise. In the language of the Exchange, 
 Ferdinand and Isabella " put up as margin " the 
 cost of fitting out the expedition, and their 
 profit was the western hemisphere. The paral- 
 lel goes further in this, that like many specu- 
 lators they finally lost what they had gained. 
 For the first one hundred and fifty years after 
 its discovery the territory now known as the 
 United States was hardly visited by Europeans, 
 and the next one hundred and fifty years were 
 dedicated to the establishment of a fringe of 
 colonies along the Atlantic coast, and their final 
 separation from parental authority. When the 
 
 67 
 
68 New York. 
 
 Revolutionary War ended, commerce was in its 
 infancy and capital scarce. After the battles of 
 New Orleans and Waterloo the spirit of com- 
 mercial and industrial life succeeded political 
 and military ambition, and at this period in 
 both Europe and America was inaugurated the 
 era of the peaceful conquests of money and 
 labor. The constructive idea supplanted the 
 destructive. 
 
 Exchanges do not spring like Minerva from 
 the brain of Jupiter, into full-fledged existence, 
 but are the product of gradual evolution. 
 
 Though the New York Stock Exchange 
 traces the germs of its existence to 1792, when 
 twenty-four persons who called themselves 
 " Brokers for the Purchase and Sale of Public 
 Stock" signed a paper agreeing to charge not 
 less than \ of one per cent, commission on 
 such transactions, the real foundation of the 
 v present organization was not laid until 1817. 
 In 1792 the public debt of the United States 
 was only $17,993,000, whereas in 1816 it had 
 mounted to $108,510,000, its highest sum prior 
 to 1862. The year in which the Stock Ex- 
 change was ushered into existence as a regu- 
 larly organized body with " a local habitation 
 and a name" coincided with the maximum 
 
 / 
 
Early History of the Stock Exchange, 69 
 
 of public debt. Business was confined chiefly 
 y^to private partnerships, and that, too, on a 
 small scale, and hence the occupation of stock- - 
 brokers in those days was dependent almost 
 wholly upon the volume of the national debt, * 
 except in so far as they might be employed in 
 commercial paper, in bills of exchange, and the 
 conversion of paper money into specie or the 
 reverse. The public debt was gradually re- 
 duced, until 1835, when the President of the 
 United States announced in his annual message 
 that " all the remains of the public debt have 
 been redeemed or money has been placed on de- 
 posit for this purpose." The rapid extinction of 
 the public debt would likewise have almost extin- 
 guished the stock-brokerage fraternity had not 
 the issue of stocks and bonds for railroad con- 
 struction come along opportunely at this junc- 
 ture, to furnish a worthy substitute for govern- 
 ment bonds. 
 
 The " magnificent distances " in our coun- 
 try, and its boundless resources, opened a vista 
 to the speculator which is not likely to occur 
 again in the history of mankind. There lay 
 on our Western border prairies and valleys as 
 fair as the Garden of Hesperides and almost 
 as primitive as the Garden of Eden. Beyond 
 
jo New York. 
 
 lay the mountains, locking in their stony em- 
 brace treasures richer than those of the island 
 of Monte Cristo, and on the Pacific coast ran 
 the Pactolian rivers of California. The specu- 
 lator surveyed the scene, cast its tempting linea- 
 ments on the screen of the money market, and 
 immediately speculative dollars chased each 
 other in a race across the continent. The iron- 
 horse invaded the wilderness, performing for the 
 Great West what the " wooden horse " did for 
 Troy, it admitted the people who conquered 
 the country. The railroad pioneered the way 
 for population, not waiting for traffic, but antici- 
 pating its creation. In fact, capital discounted 
 the future, and speculation, rather than invest- 
 ment, hastened the phenomenal development on 
 the ever-retreating frontier. 
 
 The discovery of gold in California, supple- 
 mented by Australian gold and Nevada silver, 
 enormously augmented the world's stock of bul- 
 lion, stimulated the channels of trade throughout 
 Christendom, and gave a new impulse to specula- 
 tion. The panics of 1837, 1857, and 1873 momen- 
 tarily inflicted great injury on private interests, 
 but did not permanently retard the accumulation 
 of wealth. As the country grew richer the pro- 
 portion of floating to fixed capital increased, in- 
 volving a corresponding enlargement of the vol- 
 
Early History of the Stock Exchange, J i 
 
 ume of Stock-Exchange business. The Civil 
 War, with the vast expansion of national debt, 
 the suspension of specie payments, and introduc- 
 tion of a depreciated paper currency, all served 
 to increase the fuel and fan the flame of specula- 
 tion. The public debt amounted in 1866 to over 
 $2,776,000,000, now reduced to $1,727,000,000, 
 which is diminished almost every day by bond 
 purchases. After the war railroad construction 
 proceeded at an increasing rate, and the capital 
 to-day actually invested in railroad property in 
 the United States is estimated at about $8,000,- 
 000,000. 
 
 Up to 1856 the laws did not protect stock- 
 brokers in the right to recover money due from 
 clients, but gradually legislation is emancipating 
 itself from the narrow prejudices and antiquated 
 precedents that used to put the stock-broker on 
 a par with a " three-card monte " player. The 
 statutes of the various States of the Union dif- 
 fer, of course, in their treatment of Stock-Ex- 
 change transactions but Legislatures and courts 
 are coming each year to more clearly recognize 
 the fact that buying and selling stocks and bonds 
 on margin, for long or short account is as legiti- 
 mate as buying or selling potatoes on credit. 
 The absurdity that " a margin " given to a 
 broker on a purchase of stocks implies gambling 
 
72 New York. 
 
 in a sense different from the margin of security 
 given by the buyer of a house to the money- 
 lender who loans upon his real estate, is dawn- 
 ing upon the intelligence of men who are sensi- 
 ble enough to be independent of the precedents 
 of forms of jurisprudence which condemned 
 witches. The broker now stands on a plane of 
 legal and social equality with bankers, lawyers, 
 and merchants, as the usefulness of his vocation 
 justifies. Lawyers can afford to sympathize 
 with the early status of brokers, because in the 
 period following the Revolution in Massachu- 
 setts, for instance, as McMaster says 1 the feel- 
 ing ran so high against the legal profession that 
 lawyers " were denounced as banditti, as blood- 
 suckers, as pickpockets, as wind-bags, as smooth- 
 tongued rogues." Bankers will understand it, 
 for in 1799, when there were only two banks in 
 New York City, one of which was a branch of 
 the Bank of the United States, the sentiment 
 was so hostile to banking that Aaron Burr was 
 only able to procure a charter for the Manhat- 
 tan Company by subterfuge. Its banking privi- 
 lege was concealed in an Act which ostensibly 
 authorized the formation of a company to fur- 
 nish the city with water. 
 
 J " History of the People of the United States." 
 
CHAPTER X. 
 
 NEW YOEK THE STOCK EXCHANGE OF TO-DAY. 
 
 THE war and the expanding railway system 
 developed the Stock Exchange, bring- 
 ing it into a national and international promi- 
 nence that it had never before enjoyed. The 
 growth of this institution into its present com- 
 manding position has been within twenty-five 
 years. 
 
 Up to 1865 the Stock Exchange was a 
 nomad. From the button-wood tree in Wall 
 Street in 1792 and the Tontine Coffee-House, 
 on the corner of Wall and Water Streets to 47 
 Wall Street, thence to the corner of Wall and 
 William in 1827, to Beaver Street in 1854, the 
 Exchange finally made its way to its present 
 habitat in 1865. 
 
 The building has since been several times en- 
 larged, but it is not yet up to the requirements 
 of an institution of its varied and enormous in- 
 terests. It faces on New Street and Broad, 
 with a wing on Wall Street. The main Board 
 
 73 
 
74 New York. 
 
 Room is 141 feet by 145 in the widest and 
 longest parts, with a ceiling varying from 62 to 
 80 feet in height, a gallery for spectators being 
 located on the north and south side of the main 
 hall, which has an area of 13,700 square feet. 
 
 The number of members has several times 
 been extended, until it reached its present limit 
 of 1,099, at an increasing cost of initiation, rising 
 from $25.00 in 1823 to an average of $13,000, 
 at which forty "seats" sold, in 1879. The 
 present value of membership, or " seats " in 
 Wall-Street vernacular, is about $25,000, which 
 is $7,500 less than the price they sold at six 
 years ago. " Seats " now can only be obtained 
 by purchase from retiring members, as the Ex- 
 change has none for sale, and therefore their 
 value fluctuates with the demand and supply. 
 
 There is a life insurance of $10,000 attached 
 to each membership, and the insurance system 
 is on the mutual plan of an assessment for 
 each death. This has served as a model for 
 other Exchanges which have adopted the 
 same principle, but it is not a natural function 
 and is in a measure inequitable. No person 
 with any pronounced physical disability can 
 become a member, which often works an in- 
 justice both to the applicant and the Exchange, 
 
THE NEW YORK STOCK EXCHANGE, BROAD STREET. 
 
&p" OF THB 
 
 [WVEESI 
 
The Stock Exchange of To- Day. 75 
 
 as the man might be a very valuable acquisi- 
 tion from a business, if not from an insurance, 
 point of view. This restriction subordinates 
 considerations of finance to those of health, 
 which is essentially wrong. Besides, within the 
 limit of age permissible a young man pays 
 equally as much as the older man, which is con- 
 trary to the law governing life-insurance poli- 
 cies. Those who wish to provide for their fam- 
 ilies could do so through the regular channels 
 of life-insurance companies. The ten thousand 
 dollars payable upon the death of a member do 
 not go to his creditors, if he have any, but to 
 such a beneficiary as he may select or may be 
 in the line of direct inheritance. It would be 
 more within the province of an Exchange to 
 accumulate a reserve fund by contributions pro- 
 portionate to transactions, to insure against 
 losses from failures in the Exchange. The 
 principal objections to this would be that such 
 a tax would disclose the volume of each per- 
 son's business, and that it would tend to the 
 indulgence of weak brokers. There is no 
 more reason why an Exchange should insure 
 lives than why it should furnish coal to its 
 members. 
 
 In 1864 the Gold Exchange was organized, and 
 
j6 New York. 
 
 from that time till the famous Black Friday in 
 1869 an immense speculation in gold was con- 
 ducted; but the blowing and bursting of the 
 bubble in that year destroyed outside specula- 
 tion in gold. As the approaching resumption 
 of specie payment robbed gold of its premium, 
 the old Gold Room closed up in 1877, and 
 its members went into the Srock Exchange, car- 
 rying with them the remnants of their business. 
 The mania for speculation at this time in stocks 
 and gold was so strong that business began on 
 the curbstone just after breakfast, continuing 
 " after hours " until dark, to be resumed again 
 up-town in the Fifth Avenue Hotel at night. 
 This irregular trading grew to be such an evil 
 that it was finally suppressed by the down-town 
 Exchanges. 
 
 In 1863 an opposition Stock Exchange, called 
 the "Open Board of Brokers," arose and by 
 popular methods and tireless energy it grew 
 into a position of equality with the old body. 
 
 Henry Clews, in his recent work on " Twenty- 
 Eight Years in Wall Street," thus alludes to 
 the opposition " Open Board of Brokers " : 
 
 " The membership began to increase rapidly, 
 and business accumulated so fast, that the Board 
 was soon enabled to take more capacious accom- 
 
The Stock Exchange of To- Day, 77 
 
 modations on Broad Street, contiguous to the 
 Stock Exchange. In this menacing attitude the 
 new Board began to make serious inroads ou the 
 business of the old one, almost one half of 
 which it had acquired by the year 1869, when 
 the old Board called a truce. It was seen by 
 the judicious members of the Board that the 
 competition was likely to work the ruin of 
 both, and amicable negotiations were begun, 
 which culminated in consolidation." When these 
 conflicting institutions were united and the brains 
 and capital of the street were concentrated in the 
 reconstructed Stock Exchange, business grew to 
 proportions hardly dreamed of previously. 
 
 Business in the Stock Exchange used to be 
 conducted by congregating the members several 
 times a day in the presence of the Chairman, 
 who "called" one stock after another "on the 
 list," and all those wishing to tracLe would do so 
 on these " calls." Finally the business began to 
 overflow into the intervals between the " calls," 
 and this tendency to a continuous market be- 
 ' came so pronounced that in 1875 the Stock 
 Exchange abandoned u calls " on active stocks, 
 only continuing those in bonds and unlisted 
 securities, which, however, are more a matter of 
 form than substance. The great bulk of the 
 
J 8 Nezv York. 
 
 transactions are made as orders come into the 
 market, without reference to the time of their 
 receipt. In the Consolidated Exchange, business 
 in stocks is conducted in precisely the same way. 
 It has one "call" in miscellaneous and three 
 " calls " in mining stocks, but they only cover a 
 small portion of the business done in these 
 specialties. The petroleum market in the Con- 
 solidated Exchange was for a time the largest in 
 the country. It now does twice as much in this 
 commodity as the Stock Exchange, but since the 
 successful introduction of railway stocks into 
 the Consolidated its members have lost so much 
 interest in the petroleum market that it has 
 become a " side-show." Pittsburgh, which is 
 near the newer petroleum fields of Pennsyl- 
 vania, at this writing is leading the New York, 
 Oil City, and Bradford Exchanges in the magni- 
 tude of its operations in this commodity. 
 
 The Government of the Stock Exchange is 
 vested in the President and Treasurer of the 
 Exchange and a Governing Committee of forty 
 members, who are divided into four classes. 
 The first class hold office for one year, the 
 second for two years, the third for three 
 years, and the fourth for four years, so that 
 rotation in office is secured by an annual elec- 
 
The Stock Exchange of To-Day. 79 
 
 tion of ten members to the fourth class and 
 to fill any vacancy in the other classes. The 
 President, Treasurer, Secretary, Chairman, and 
 Vice-Chairman of the Exchange are elected 
 annually. The President's office is one of 
 honor without emolument. His duties are 
 not onerous, and are chiefly to preside over the 
 deliberations of the general committee. He has 
 power to call special meetings and ad interim 
 to appoint special committees, but he cannot 
 nominate the standing committees, who are ap- 
 pointed by the Governing Committee itself. 
 The hard work of the Exchange is done by the 
 Secretary, who is not only Secretary of the 
 Exchange at large, but of all sub-committees. 
 An immense amount of work of a complex 
 character passes through his office, which is like 
 the counting-rooms of a commercial establish- 
 ment, and it is but proper that he should be, as 
 he is, well paid for it. The incumbent, Mr. 
 Ely, is a man of great force and excellent ability, 
 and necessarily himself a member of the Ex- 
 change. The Secretary for General Purposes of 
 the Stock Exchange of London is, in the same 
 way, the factotum of that institution. 
 
 The rate of commissions and the mode of 
 closing out defaulted contracts between mem- 
 
80 New York. 
 
 bers, the arbitration of disputes, the expulsion 
 or suspension of offenders, are provided for by 
 the rules of the association. 
 
 Before any securities can be admitted " to the 
 list," the companies issuing them must conform 
 to the conditions as to titles, form of certificates, 
 etc., imposed by the Exchange. The Exchange 
 in no way becomes responsible, however, for 
 the real value of the properties. An " un- 
 listed " department is also legalized with less 
 restrictions than surround the regular list. 
 
 Purchases in the New York Stock Exchange 
 are usually made " regular way," which is always 
 understood, unless otherwise stipulated at the 
 time a bid or offer is made. This means that 
 the stock or bonds so purchased are delivera- 
 ble to the buyer between 10 and 2.15 o'clock 
 the next day. Since the Saturday-Half -Holi- 
 day law went into force in New York State, 
 obliging the Exchanges to close up at midday, 
 the Stock Exchange decided that the two hours 
 of Saturday's business were too short to permit 
 the delivery of Fridays sales, and hence all the 
 business transacted on Friday and Saturday, ex- 
 cept when for " cash," goes over till Monday. 
 
 Since an open offer to buy or sell means 
 "regular way," a broker to "get the floor" 
 
The Stock Exchange of To -Day. 81 
 
 (which is a right of precedence over his fellow- 
 brokers) can offer his stock "buyer 3," or bid 
 *' seller 3." To sell stock " buyer 3 " is to give 
 the buyer the privilege of taking it on the day 
 of purchase, or any one of the three following 
 days, without interest ; and likewise to sell it 
 " seller 3 " gives to the seller the privilege of 
 delivering it on the day of purchase, or any one 
 of the three following days, without interest. 
 " Buyer 3 " is a shade lower and " seller 3 " a 
 shade higher than " regular way " when the 
 market is in a normal condition. If there is a 
 great scarcity of stock, " seller 3 " is lower, be- 
 cause the seller prefers to postpone the delivery, 
 and consequently may be willing to sell it less 
 than " regular way " to get the benefit of the 
 postponed delivery ; and so " buyer 3 " may be 
 higher when stock is scarce, because the buyer 
 secures the right to procure the certificates on 
 the day of purchase. These conditions are, 
 however, exceptional. When certificates are very 
 scarce for delivery, and it is difficult to rely 
 upon borrowing them, a broker operating for a 
 fall in values may sell " seller 10 " (days), " sel- 
 ler 30," or " seller 60," which is the limit of 
 time contracts. Stock may be delivered at the 
 option of the seller on them at any time, after 
 
82 New York, 
 
 one day's notice to buyer within the time 
 they run. When money is dear, or buyers 
 are not in funds to purchase for prompt deliv- 
 ery, they occasionally buy "buyer 10" (days), 
 " buyer 30," or " buyer 60." Such contracts 
 give the buyer the right to demand the stock at 
 any time within the period fixed in the contract, 
 upon one day's notice. All time contracts for 
 more than three days carry interest at the rate 
 of 6 per cent., to be paid by the buyer. 
 
 The Stock Exchange of New York excels 
 others in the accuracy of collecting full reports 
 of transactions and rapidity in transmitting 
 them to the public. Yankee ingenuity devised 
 an instrument called the " ticker," which auto- 
 matically prints abbreviated names of stocks, 
 with their prices, on a narrow ribbon of paper, 
 and the speed with which they are collected and 
 published is a marvel. The quotations are ob- 
 tained by employes of the Exchange, usually 
 boys or young men, who stand in the various 
 groups noting all transactions, which are imme- 
 diately reported to telegraph offices on the floor. 
 They are disseminated instantly by two compa- 
 nies, the Gold and Stock Telegraph Compa- 
 ny, and the Commercial Telegram Company, 
 which together let about one thousand instru- 
 
The Stock Exchange of To- Day, 83 
 
 ments in New York City, at the rate of ten dollars 
 per month. The former company was the original 
 one, and it came into existence in 1867, but the 
 clumsy instrument of that day has been super- 
 seded by various improvements until now per- 
 fection has been attained. This company is an 
 adjunct of the Western Union, and the Com- 
 mercial Telegram Company is a younger rival. 
 Both pay a handsome sum annually to the Ex- 
 change for the privilege of distributing the 
 quotations. The Stock Quotation Company 
 performs the same service with equal success 
 for the Consolidated Exchange of New York. 
 Not only is the "ticker" service better here 
 than in London, but the American plan is 
 far superior to the English in furnishing first 
 over these instruments, and later in the printed 
 stock lists, the actual number of all shares and 
 bonds dealt in, with their prices. A stock 
 ticker in London gives such bidding and asking 
 prices as may be obtained by the representa- 
 tives of the Exchange Telegraph Company on the 
 floor, but since the custom does not prevail there 
 to make open bids and oifers, a large part of the 
 quiet business between brokers and dealers es- 
 capes the observation of the persons engaged in 
 collecting quotations. American dealers hover 
 
84 New York. 
 
 over, and intently watch the " ticker " as it rap- 
 idly unwinds the tangled web of financial fate. 
 They are therefore amazed to think how it can be 
 possible that immense speculations are carried 
 on in Paris without a " ticker," though such is the 
 case. Some years ago an attempt was made to 
 introduce the system there, but the electricians 
 in charge were inefficient, and the service was 
 so bad that it was finally abandoned. The offi- 
 ces of the Agents de Change and Coulissiers are 
 scattered throughout the city, and messengers 
 and telephones are the media through which 
 fluctuations are made known. 
 
CHAPTEE XL 
 
 NEW YOEK THE COMMANDING INFLUENCE OF THE 
 
 STOCK EXCHANGE. 
 
 THE flood-tide of speculation was in the 
 years 1879-81, when business was much 
 larger than at any time since, except during the 
 " flurry " in December, 1886 when over a million 
 shares changed hands in one day. The total 
 number of shares dealt in on the Stock Ex- 
 change in 1881 was 117,078,167, against 85,- 
 821,027 in 1887. In the earlier year London 
 was nothing like so large a factor as recently, 
 and the business then originated almost ex- 
 clusively here. 
 
 u There were giants in those days " W. H. 
 Vanderbilt, Gould, Keene, Woerrishoifer, D. P. 
 Morgan, C. J. Osborn, Henry K Smith, D. O. 
 Mills, "Joe" Mills, W. K. Travers, C. P. Hunt- 
 ington, Addison Cammack, and others. 
 
 Gould now is almost entirely out of general 
 speculation, and devotes himself to the manage- 
 ment of the group of properties bearing his 
 generic name ; the younger Vanderbilts are com- 
 
 85 
 
86 New York, 
 
 fortable in their fortunes, with only a moderate 
 speculative disposition ; D. O. Mills is largely 
 out of the speculative " swim " ; D. P. Morgan, 
 "Joe" Mills, Woerrishoffer, Osborn, Travers, 
 and W. H. Vanderbilt are dead ; Keene and H. 
 N. Smith have lost their money, and at present 
 there is a hiatus in the line of succession of 
 heavy operators and manipulators. 
 
 J. Pierpont Morgan, of Messrs. Drexel, Mor- 
 gan, & Co., is a great negotiator, with a more 
 powerful command of capital than any other 
 man in America. He makes important deals 
 but is not a manipulator who distributes large 
 speculative orders to swell the volume of busi- 
 ness. The so-called " Ohio crowd," composed 
 of such men as General Samuel Thomas, Calvin 
 S. Brice, J. G. Moore, Jay O. Moss, J. II. Inman, 
 and their Southern following, are equipped for 
 speculative leadership if they care to exercise 
 their talents. The " Rockefeller crowd " with 
 Standard Oil money are valuable mainstays to the 
 market when bargains are really offering. They 
 are among the most solidly and commercially 
 successful men who ever entered Wall Street. 
 George J. Gould and " Eddie " Gould, as he is 
 familiarly called, sons of Jay Gould, will inherit 
 capital and a taste for speculation, but it usually 
 
Commanding Influence of the Stock Exchange, Sy 
 
 happens that the boldest and most influential 
 operators are those who have risen by their own 
 individual exertions. The " Chicago crowd," 
 with Philip D. Armour, Norman B. Ream, and 
 N. S. Jones as leaders, divide their attention be- 
 tween breadstuffs and provisions in Chicago 
 and railway stocks in New York. They are par- 
 ticularly accustomed to speculation in what are 
 called the " Granger stocks," concerning which 
 they have excellent means of information. They 
 are dashing operators, and often attract a fol- 
 lowing by radical expressions of opinion. They 
 are optimists and pessimists by turn, and really 
 are very able and successful operators. B. P. 
 Hutchinson, of Chicago, the king of Western 
 speculators, has so far not undertaken any bold 
 operations in stocks. Addison Cammack is the 
 " Ursa Major " of the stock-market. He is not 
 so powerful a factor as when his boon-com- 
 panion, Woerrishoffer, led the way in campaigns 
 that eclipsed any previous " bear " operations 
 known in Wall Street. Mr. Cammack does not 
 attempt to propagate his views, seeking rather 
 to discover the moment for a natural reaction in 
 a rising market for the purpose of attacking it 
 by heavy "short" sales. If he mistakes the 
 temper of speculation he is not apt to fight it. 
 
88 New York. 
 
 Since it is easier to excite hopeful rather than 
 despondent anticipations of the course of prices, 
 it is much easier for a "bull" than a "bear" 
 leader to inspire public support. The "bear" 
 in some quarters is looked upon as a wrecker of 
 other people's properties, which may sometimes 
 be partially true if he resort to wicked false- 
 hoods concerning them. But merely to detect 
 the shadows which financial events cast before 
 and operate upon this judgment is not essentially 
 an injustice to any man. The " bull " may 
 exaggerate the facts relating to a property in a 
 manner equally as inimical to the public as the 
 "bear" who predicts disaster. Predictions of 
 trouble to come may avert its occurrence by 
 timely warning. 
 
 There are a number of men in Wall Street, 
 such as T. W. Pearsall, S. V. White, Russell Sage, 
 W. E. Connor, A. E. Bateman, Frank Work, 
 Brayton Ives, and Henry Villard, who are 
 widely known in connection with its affairs. 
 The Stock Exchange has a score of room- 
 traders who, in the absence of any pronounced 
 movement, can swing the pendulum of prices 
 between the extremes of moderate weakness and 
 moderate strength ; but the great movements 
 ever rest on intrinsic conditions, to which all 
 
Commanding Influence of the Stock Exchange. 89 
 
 alike must bend, and which the most remarkably 
 successful men are the first to discern and press 
 upon public attention. Great leaders will not 
 resist the current, but go with it, pulling others 
 along by force of their intellect and courage, 
 allied, perhaps, with a personal magnetism 
 which attaches men to their cause. The mass 
 of securities has become so great that it takes 
 an enormous influence or capital to do more 
 than make an eddy in the stream of speculation, 
 but young men with ability, ambition, and fresh 
 blood are coming to the front and in time will 
 no doubt supply the places left vacant by 
 former Titanic operators. 
 
 The Stock Exchange to-day is the fore- 
 most exchange in the United States in point 
 of wealth, ability, and extended connections. 
 All the great banking houses aod railroad stock 
 operators are allied to it, and though some 
 of its members are merely rich men's sons, and 
 others are rather unprogressive, it is composed 
 of men of the highest order of intelligence, 
 sagacity, and integrity. Its members embrace 
 some of the most gifted men in letters, politics, 
 and society in this country. Wall Street men 
 are proverbially generous, quick-witted, and 
 liberal. They are not narrow-minded, and the 
 
90 New York, 
 
 mental vision of those who are successful ex- 
 tends to the remotest ends of the earth. They 
 maintain the highest standard of honor, and 
 agreements made between themselves in the 
 confusing bedlam of excited markets are as 
 faithfully observed as if surrounded by all the 
 safeguards of written contracts. 
 
 There are, no doubt, in Wall Street, as else- 
 where, many men whose smartness is but another 
 name for rascality, and others whose saintliness 
 cloaks contemptible hypocrisy, but when in 
 their dealings they betray these vices they are 
 branded with obloquy and driven from the 
 street by the pressure of outraged opinion. The 
 race for wealth is a fierce one, rivalry is intense, 
 and the keenest minds in the country compete 
 for the prizes, but the honest intention of ful- 
 filling all contracts is the sine qua non of tolera- 
 tion in the financial tournament. 
 
 Though the trade of Wall Street is in money, 
 it is very rarely seen there, as checks, bills of 
 exchange, and credits perform all the functions 
 of the real article. It is only in times of dis- 
 trust that massive vaults fly open to expose 
 their treasures of specie and currency : otherwise 
 money in Wall Street is like faith, "the sub- 
 stance of things hoped for and the evidence of 
 things not seen." 
 
Commanding Influence of the Stock Exchange, 9 1 
 
 During the Civil War Wall-Street men were 
 noted for their patriotism, and when Secretary 
 Chase was in sore straits for funds to conduct 
 the war at a very critical period, bankers and 
 brokers in New York took the then discredited 
 bonds of the government, and by their confi- 
 dence set an example to capital, at home and 
 abroad, that enabled the Treasury to market 
 bonds which hitherto had no credit. All 
 honor, then, to the Associated Banks and to the 
 Stock Exchange of New York for their timely 
 aid and assistance during the darkest days of 
 the Rebellion ! 
 
 Stock-Exchange men and bankers, as the rep- 
 resentatives of values in all sections of the 
 country, must necessarily take a deep interest in 
 the prosperity and harmony of all. Those peo- 
 ple who suspect the motives of Wall Street, es- 
 pecially when financial legislation is proposed, 
 are victims of a silly prejudice. Finance is not 
 a fixed science in all its aspects, but experience 
 has taught many lessons which should be 
 heeded to avoid unfortunate results, and those 
 who study the phenomena of financial laws 
 and customs should be accorded a friendly 
 hearing by law-makers. The silver question, 
 for instance, has within it the germs of se- 
 rious mischief. The coinage of, say seventy- 
 
92 New York. 
 
 five cents' worth of silver bullion into what the 
 fiat of law pronounces to be the equivalent of 
 a given number of grains of gold which pass 
 current throughout the world for one hundred 
 cents, is an arbitrary exercise of legislative 
 authority which is harmless just so long as the 
 equality of these two kinds of specie is not 
 brought to a test. So far the government, 
 while reserving the right to pay its obligations 
 in silver, has maintained gold redemption. If 
 any thing should occur, however, to cause a 
 drain of gold from this country, which specu- 
 lators 'might artificially intensify, and the 
 Treasury should voluntarily or compulsorily 
 exercise its option of paying in silver, and if 
 that silver, by reason of a scarcity of gold, 
 were not exchangeable for it in the open money 
 market on equal terms by its recipient, who 
 had drawn it from the Treasury for export pur- 
 poses, the country would at that moment be 
 precipitated into a panic. Gresham's law is in- 
 exorable, "a poorer drives out a better cur- 
 rency." On such topics as this the Stock 
 Exchange and banking interests of the country 
 should be listened to with a respect due to their 
 knowledge and experience. 
 
 The Stock Exchange of New York up to the 
 
Commanding Influence of the Stock Exchange. 93 
 
 present time has been essentially an American 
 institution, for the securities dealt in are almost 
 wholly domestic. Compared with the great for- 
 eign Exchanges it is provincial, but this naturally 
 arises from the unexampled opportunities in this 
 country for the employment of capital. When 
 we have opened our mines, completely grid- 
 ironed our territory with railways, brought all 
 our farming lands under cultivation, and fully 
 equipped our manufacturing industries, Amer- 
 ican capital will then migrate to foreign parts, 
 and our Stock Exchanges will become a ready 
 market for the shares, stocks, and debentures of 
 remote regions. Money is becoming redundant 
 in New York, and frequently, and for long 
 periods, our interest rate is lower than in 
 European centres, while the credit of our gov- 
 ernment is so high that the net interest obtain- 
 able on United States bonds is now lower 
 than on British Consols or French rentes. 
 
 It will not be too much of a stretch of the 
 imagination to conceive of the New York Stock 
 Exchange dealing in the bonds of: foreign gov- 
 ernments before many years. In another direc- 
 tion its scope should expand, namely, in the 
 shares of industrial enterprises. Hitherto the 
 shares of transporting companies have occupied 
 
94 New York. 
 
 the field to the practical exclusion of those of 
 manufacturing and producing companies. Here 
 is a wide field for future growth. The American 
 who contemplates his country's capacity to pro- 
 duce can hardly fail to anticipate that its 
 triumphs in material greatness will eclipse the 
 highest achievements of England, which is now 
 the workshop, the banker, and the Clearing 
 House for the world. There are more plums 
 in the American than in the proverbially rich 
 English pudding. 
 
CHAPTER XII. 
 
 TECHNICAL TERMS OF STOCK EXCHANGES. 
 
 EVERY vocation has its characteristic 
 words, phrases, and slang which dic- 
 tionaries do not clearly define, and Wall Street 
 business is no exception to the rule. 
 
 In the United States a " bull " is one who 
 expects prices to go higher, and a " bear " is one 
 who expects them to go lower. With us a 
 " bull " or a " bear " may be so only in opinion, 
 whence the adjectives " bullish " and " bearish " ; 
 vvhereas in England, when it is said that a per- 
 son is a " bull of " a certain security, it implies 
 that he owns it, or is "long of n it, in Wall-Street 
 parlance. So when he is operating for a fall in 
 prices, he is said to be a " bear of " the market, 
 which with us is equivalent to the phrase, 
 " short of " it. To buy one stock and sell 
 another with the expectation that the one 
 bought will advance and the one sold will de- 
 cline, is a u hedge." The broker's charge for his 
 services is called a " commission," which in the 
 
 95 
 
96 Technical Terms of Stock Exchanges, 
 
 New York Stock Exchange is one eighth of one 
 per cent, each way on the par value of the se- 
 curity purchased or sold. A bid or an offer of 
 securities in the New York Stock Exchange, 
 when the amount wanted is not stated to the 
 contrary, means one hundred shares of stock, or 
 ten bonds of $1,000 each par value. 
 
 A " point " means one dollar on one hundred, 
 or one per cent, on the par value of a stock or 
 bond. This word sometimes also means a hint 
 or a word of advice to buy or to sell a certain 
 security, otherwise expressed by the word " tip." 
 
 " Stock privileges,", as they are termed, are 
 extensively dealt in abroad, and, previous to 
 the "Wall-Street panic of 1884, a great many 
 of them were issued here. They proved to 
 be an expensive luxury to their makers at 
 that time, and were, moreover, discredited by 
 the failure of one of the largest issuers of 
 them. They are now far less popular and 
 common, but something will always be done 
 in them. They are commonly known as " puts 
 and calls." A " put " is an agreement in 
 the form of a written or a printed contract 
 filled out to suit the case, whereby the 
 signer of it agrees to accept upon one day's 
 notice, except on the day of expiration, a certain 
 
Technical Terms of Stock Exchanges, 97 
 
 number of shares of a given stock at a stipu- 
 lated price. A "call" is the reverse of the 
 " put," giving its owner the right to demand the 
 stock under the same conditions. A " spread " 
 is a combination of the two. A " straddle " is 
 when the holder has the privilege of either 
 " putting " or " calling " the stock, at the same 
 price. This kind of business may be used as a 
 means of speculation by persons of slender 
 means who are willing to pay a few hundred 
 dollars to some operator for the privilege of de- 
 livering a certain number of shares of stock at a 
 price below the current market, or for the privi- 
 lege of demanding the stock within a certain 
 period at a price above that prevailing at the 
 time. A " put " may also serve as an insurance 
 to an investor against a radical decline in the 
 value of stocks he owns, or a " call " may be 
 purchased by a man of means whose property 
 is not immediately available, but who may de- 
 sire to be placed in a position to procure the 
 shares at the " call " price, if they are not below 
 that in the open market when he comes into funds. 
 If, at the expiration of the time fixed in these 
 privileges, there is no profit apparent to the 
 purchaser of them, he simply allows them to 
 lapse. The marche a prime, or market in " puts " 
 
 & 0? THE *** 
 
 
98 Technical Terms of Stock Exchanges, 
 
 and u calls," is larger in Paris than elsewhere, and 
 at the settlement period a time is set aside for 
 holders to elect whether they will exercise the 
 options which they have purchased. In fact, 
 the proceedings of the Agents de Change are 
 arrested for five minutes at that period for the 
 reponse des primes. 
 
 A " margin " is the money placed by a client, 
 the principal, in the hands of the broker, his 
 agent, as a guaranty against loss to the broker. 
 This is necessary, for a broker who goes into 
 any of the Exchanges does not " give up " his 
 principal's name, unless that principal happens 
 to be a member of the same Exchange, and 
 wishes it done. It therefore follows that 
 neither of two brokers making a trade can be 
 relieved from the fulfilment of the contract be- 
 cause his client failed to protect him. Thus, 
 while commission brokers are really agents for 
 others, in the Exchange they stand in the 
 mutual relationship of principals to each other. 
 The margin not only is necessary as a protection 
 to them that their principals will not saddle 
 losses upon them by being unable or indisposed 
 to make good any differences incurred by 
 the brokers on their account, but it is also 
 necessary to assist the brokers in carrying 
 
Technical Terms of Stock Exchanges. 99 
 
 stocks purchased. A margin is merely a partial 
 payment, but a broker buying stock for a client 
 on margin is compelled to wholly pay for the 
 stock. If he lack funds to pay for this stock 
 out of his own pocket he can borrow money 
 from banks or money-lenders, pledging the stock 
 as collateral security. Usually, however, he 
 cannot obtain over 80 per cent, of its value 
 from the money-lenders, so that if he has only a 
 10-per-cent. margin from his client, he must 
 furnish the other 10 per cent, out of his own 
 means. In Wall Street, brokers, as a rule, exact 
 margins, which the English call " cover," at the 
 time an order is received or executed ; whereas, 
 in London, this custom is less observed, and the 
 element of credit enters more largely into their 
 mode of conducting the business. Where the 
 credit of the client in London is established, his 
 broker does not, ordinarily, call on him for any 
 cash until the arrival of the next "settlement 
 day." 
 
 A " bear " who sells a stock " short " must de- 
 liver it to the buyer. In order that he may do 
 so he must borrow the certificates from some 
 holder, giving to the holder in exchange for the 
 certificates their money value as indicated by the 
 current quotations, to be returned upon the re- 
 
ioo Technical Terms of Stock Exchanges. 
 
 delivery of the certificates. The object of the 
 holder loaning his stock to the borrower is either 
 to save some interest, or save putting up large 
 margins on the stock with a money-lender. 
 " Bears " rely on their ability always to procure 
 certificates for delivery against their "short" 
 sales, but it sometimes happens that so many 
 actual owners demand their certificates simul- 
 taneously that the "bears" are only able to 
 obtain the continued use of the certificates by 
 paying a considerable bonus to the real owner. 
 This is a " squeeze." 
 
 There have been in Wall Street several noted 
 instances where a person or a clique purchased 
 and contracted to receive more shares in a given 
 company than were outstanding. When this 
 concentrated interest suddenly called on the 
 " shorts " to return the borrowed certificates, the 
 peril of their position was disclosed, and they 
 found themselves at the mercy of the rightful 
 owners of the stock, who were able, arbitrarily, 
 to fix a price at which the li shorts " might buy 
 certificates necessary to make their deliveries. 
 This is a " corner." Happily it is of rare oc- 
 currence, and experience has demonstrated that 
 it usually results to the ultimate disadvantage 
 of those who engineered it. The reason for this 
 
Technical Terms of Stock Exchanges, 101 
 
 is that any stock which invites a large " short " 
 interest is generally not of the most valuable 
 character, and the fact that it has just been " cor- 
 nered," and is all owned by a set of speculators, 
 causes dealers to avoid it. Thus the origina- 
 tors of the " corner " have left upon their hands 
 a lot of non- marketable stock. 
 
 A " syndicate " is a party of capitalists who 
 unite their means to accomplish some financial 
 object, such as the purchase of a property, a 
 public loan, an issue of bonds or stocks, the 
 reorganization of a company, consolidation of 
 interests, etc. 
 
 A " pool," in the vocabulary of the Exchange, 
 is similar to a syndicate, in so far as it means 
 placing the funds of individuals in a common 
 undertaking for a common purpose, but it flavors 
 more of the speculative idea. A " pool " is 
 usually an agreement among a coterie of opera- 
 tors to buy or sell a certain security and manip- 
 ulate it. It may be either a bull or bear pool. 
 A " bob-tailed pool " is a small one, by which a 
 few operators, acting in concert, but with little 
 cash, try to make a turn in the market. A 
 " blind pool " is one in which the capital con- 
 tributed is put in by different persons, to be 
 managed by one who buys and sells at his own 
 
102 Technical Terms of Stock Exchanges. 
 
 pleasure, without consultation with or giving 
 information to his associates in interest. 
 
 A " boom," and a " panic " are the Scylla and 
 Charybdis of speculation. The former is an 
 expansion of credit and an inflation of value to 
 an inordinate degree. Visionary schemes are 
 floated during such periods of fictitious pros- 
 perity. This high tension of speculation is of- 
 ten followed by a " panic " in stocks, which is 
 an unreasonable fright among speculators and 
 investors, leading to precipitate sales and a 
 general collapse of credit and values. It is 
 usually followed by a period of dulness and 
 depression. 
 
 A "flurry" is a diminutive panic or a specu- 
 lative gust that upsets prices for the moment, in 
 some isolated market, or a single species of 
 property, but does not extend to general values. 
 Being sporadic it soon passes away without 
 widespread damage. 
 
 " Kite-flying " is to do business on an unsafe 
 principle and without adequate capital, while 
 " ballooning " is to inflate prices to the propor- 
 tions of a bubble or a point of insecurity. 
 
 A " flyer " is a small speculative venture 
 made, often as much for amusement as for 
 profit, by a person not accustomed to speculate 
 
Technical Terms of Stock Exchanges. 103 
 
 much, who wishes to make a quick turn in the 
 market. 
 
 A " lamb " is a person without financial in- 
 formation or knowledge of the ways of the 
 Street, and therefore a ready victim of news- 
 paper points and hearsay gossip about the 
 market. He is, in the characteristic speech of a 
 mining camp, what would be called a "tender- 
 foot." 
 
 A " new Tennessee " is the name applied to 
 a new member, who is usually hazed by his 
 fellow-members when he first ventures in the 
 Board Room. Occasionally a stranger eludes 
 the door-keeper and finds his way on the floor, 
 from which he is usually hustled out in a very 
 unceremonious, though good-natured, manner. 
 
 A "room trader" is a member of the Ex- 
 change who trades on his own account, either 
 on a large or small scale. He is not an in- 
 vestor, but a speculator, who may operate for a 
 fractional profit or loss, or may let his profits or 
 losses run for several points. He necessarily 
 possesses the faculty of getting in and out of 
 the market suddenly, and of changing his views 
 with great celerity. To succeed he must be 
 gifted with the ability to catch the momentary 
 drift of sentiment and values. 
 
104 Technical Terms of Stock Exchanges. 
 
 A "scalper" is a species of "room trader," 
 who will either sell at the offering price or buy 
 at the bidding price, with the intention of un- 
 doing the transaction or closing out at a very 
 small loss or profit. He is not supposed to have 
 any opinions as to what the future course of 
 prices will be, and rarely ever goes home at 
 night with any interest in the market. 
 
 The rules of the Exchanges of New York 
 forbid trading after the Exchanges close, but in 
 times of great financial excitement business over- 
 flows into the streets and hotel lobbies and is 
 called trading " on the curb." In the Stock Ex- 
 change of London many brokers in American 
 shares congregate in an open area to deal in 
 " Americans " after the official close, often until 
 as late as 7 or 8 o'clock in the evening, or as 
 long as prices come in from New York. Those 
 who are not members of any regular Exchange 
 and make a business of selling "puts" and 
 "calls," or unlisted securities, on the street, are 
 called " curbstone brokers." 
 
 When a security is dealt in on two or more 
 Exchanges, a class of brokers devote themselves 
 to a business called " arbitrage," which is buy- 
 ing in one market and selling in another when 
 variations permit it to be done with a chance of 
 
Technical Terms of Stock Exchanges. 105 
 
 profit. This levels prices and establishes a parity 
 of values between distant markets. These per- 
 sons are called " arbitrageurs," a word invented 
 for brokers' use by adding a German termina- 
 tion to the French word arbitrage. 
 
 A "wash" sale is a fictitious transaction 
 made by two members of an Exchange, acting 
 in collusion, for the purpose of swelling the vol- 
 ume of apparent business in a security, or by 
 " washing " it up or down in the absence of any 
 outside orders, to give a false impression of its 
 strength or weakness. Members engaged in this 
 reprehensible practice are subject to suspension. 
 When a manipulator wishes to attract atten- 
 tion to a certain stock he often resorts to what 
 are known as "Cross orders." This means a 
 distribution of both buying and selling orders, 
 in such a way that prices shall be either worked 
 up or down without the manipulator losing or 
 accumulating much of the security in question. 
 It is a legitimate and bolder way of accomplish- 
 ing what is undertaken by brokers who make 
 " wash " sales. 
 
 Stocks sell " dividend on " between the time 
 the dividend is declared and the day the books 
 of the company close for transfer; after that 
 they sell "ex-dividend," which means that the 
 
106 Technical Terms of Stock Exchanges. 
 
 dividend does not go to the buyer. When a 
 company's directors meet at the time a dividend 
 is declarable, and they decide not to declare it, 
 the company is said to " pass the dividend." 
 
 A " stop order " is an order given to buy or 
 sell at the best price possible after a security 
 reaches a certain price, either up or down as the 
 case may be. It is usually given to stop a loss, 
 whence its name ; but it sometimes is used for 
 the purpose of following up one's position in 
 the market on a plan of averaging. An " open 
 order " is good till countermanded, but in com- 
 mon usage is written " G. T. C," which is as 
 well understood as the abbreviations " C. O. D." 
 
CHAPTER XIII. 
 
 NEW YOEK THE CONSOLIDATED STOCK AND 
 
 PETROLEUM EXCHANGE ITS ORIGIN AND 
 
 GROWTH. 
 
 SAN FRANCISCO twelve to fifteen years 
 ago was the scene of a remarkable mining 
 speculation, which centred in the Stock Ex- 
 change of that city. Memberships in that in- 
 stitution at one time commanded about $40,000, 
 and the public at large were crazed with the 
 mania to buy mining shares. The extraordinary 
 deposit of gold and silver in the Comstock lode, 
 under Virginia City, Nevada, opened the eyes 
 and stimulated the avarice of people who, as we 
 have seen, are all alike in the passion for acquir- 
 ing sudden wealth. The echo of this Western 
 excitement was heard in the East, and the New 
 York Mining Stock Exchange, with an initial 
 membership of twenty-five men, was established 
 in 1875. Upon the discovery of the treasures 
 of Leadville and other Colorado districts, an- 
 other Exchange, called the American Mining 
 
 107 
 
io8 New York. 
 
 Stock Exchange, was organized in 1880 
 by Californians, who found the interest of 
 the public, in San Francisco, waning with the 
 decadence of the Comstock. The New York 
 Mining Stock Exchange grew in numbers and 
 influence, being largely composed of members of 
 the New York Stock Exchange, and the rivalry 
 between it and the American Exchange was 
 finally ended in 1880 by the dissolution of the 
 latter, and the transfer of its principal remain- 
 ing members into the New York Mining Stock 
 Exchange. 
 
 Mining speculation in New York for a few 
 years was active, and a very large proportion of 
 business men were in some way interested in 
 mining properties, but in the majority of in- 
 stances the results were unsatisfactory, if not 
 disastrous. The rapid decline in the popularity 
 of mining stocks rendered it necessary for this 
 Exchange to discover some new branch of busi- 
 ness to occupy the energy and capital of its 
 members. This was found in petroleum, which 
 commodity possessed a great many elements to 
 commend it to the favor of a speculative con- 
 stituency. The old Petroleum Exchange, organ- 
 ized in 1877, in very humble quarters, increased 
 its membership to six hundred, moving into 
 
THE NEW YORK CONSOLIDATED STOCK EXCHANGE. BROADWAY. 
 
Y ^ OF THR^^ 
 
 ;UFI7BRSIT7] 
 
The Consolidated Exchange. 1 09 
 
 more imposing rooms ; a new Petroleum Ex- 
 change, partly a secession from the old, was 
 created with a membership of five hundred, 
 under the name of the National Petroleum Ex- 
 change; and about simultaneously with this, 
 dealings in petroleum were inaugurated on the 
 Mining Exchange, which then had four hun- 
 dred and seventy members. Here we have by 
 the year 1882 three Exchanges, relying chiefly 
 for the employment of their members on pe- 
 troleum speculation, which was manifestly an 
 abnormal and transitory condition. Finally the 
 National Exchange was consolidated with the 
 Mining Exchange in June, 1883 ; in November 
 one hundred picked men from an " Open Board " 
 of brokers were attached, and in 1885 the joint 
 organization absorbed the Petroleum Exchange. 
 
 The fusion of these various interests, with 
 some additional issues of memberships, into one 
 institution, then and since known as the Consoli- 
 dated Stock and Petroleum Exchange, was like 
 the union of disjointed railway lines into a 
 single and compact system. 
 
 Prior to the final consolidation, the New 
 York Petroleum Exchange and Stock Board and 
 the New York Mining Stock and National Petro- 
 leum Exchange, as they were then called, had 
 
1 1 o New York, 
 
 each undertaken to deal in the same railway- 
 stocks which were bought and sold on the New 
 York Stock Exchange. This decision natu- 
 rally led to action by the Stock Exchange pro- 
 hibiting its members from remaining in and 
 aiding and abetting either of these aspirants. 
 When the consolidation was perfected, and the 
 membership of 2,403, its present number, got 
 into working order, a gradual growth in the 
 volume of its transactions in railway shares 
 began, which has continued to the present 
 time. 
 
 Not satisfied with its inadequate quarters in 
 Nos. 60 and 62 Broadway, the Exchange re- 
 solved to erect a new and commodious structure, 
 having funds in its treasury ample to pay for it 
 outright. Its present splendid building was 
 begun in May, 1887, and completed in May, 
 1888. It covers 58, 60, and 62 Broadway, facing 
 on Broadway, New Street, and Exchange Place. 
 The Board Room is 132 feet in length and 90 
 feet in breadth in the longest and widest parts. 
 The floor area is about 11,000 square feet, and 
 better lighted and aired than the Stock Ex- 
 change. 
 
 While out of its own building, in a half -base- 
 ment, dingy and cramped, it passed its critical 
 
The Consolidated Exchange. 1 1 1 
 
 stage, when its surroundings lent neither credit 
 nor dignity to its reputation. During all 
 this time it was sustained by an esprit du 
 corps that has welded it together in the bonds 
 of common interest. It stands with reference 
 to the New York Stock Exchange somewhat in 
 the same relations that the Coulisse does to the 
 Parquet in the Paris Bourse. Both maintain 
 parallel markets, with high-priced memberships 
 in one against low-priced or no-priced seats in 
 the other. Commissions in the Coulisse of 
 Paris and in the Consolidated in New York 
 are likewise customarily only half those in the 
 older institutions. 
 
 Young men with limited capital, but with 
 active habits, are common both to the Coulisse 
 and the Consolidated. Both are more given to 
 speculative shares than to investment securities, 
 and both trade " for the account," with Clearing- 
 House arrangements and deliveries of only the 
 balance of stocks after the period of counter- 
 transactions, which covers one week in New 
 York and two weeks in Paris. As compared 
 with transactions in other kinds of business, a 
 delivery of securities on the day following their 
 purchase, is needlessly hurried. The Consoli- 
 dated Exchange compromised between the plan 
 
1 1 2 New York. 
 
 of daily deliveries on the other American Ex- 
 changes and the fortnightly deliveries in the 
 European markets. The Consolidated Exchange 
 has a limited and incomplete bond market ; its 
 business chiefly runs into speculative railway 
 shares, petroleum, and mining stocks. Its suc- 
 cess in establishing an ample market in railway 
 shares may be measured by the fact that the 
 volume of its transactions in some active stocks 
 equals and occasionally exceeds those of the 
 Stock Exchange, and its aggregate sales of the 
 entire list are from fifty to sixty per cent, as 
 large. The business in stocks on the Consoli- 
 dated Exchange is from two to three times the 
 proportions of the combined transactions of the 
 Boston, Philadelphia, and Baltimore Stock Ex- 
 changes. 
 
 It is true that it is not so independent and 
 original a market as the Stock Exchange of 
 New York, and also that it is influenced by 
 the operations of the latter, which really fix 
 the value of railroad property in the United 
 States. 
 
 The characteristics of the Consolidated which 
 have aided its growth are free trade in commis- 
 sions, trading "for the account," a Clearing 
 House, open relations with the public, who can 
 
The Consolidated Exchange. 113 
 
 get nearer to their brokers than in any other 
 Exchange, and admirable management. 
 
 The Consolidated Exchange confers large 
 authority upon its President, who receives a 
 salary. Mr. Wilson, who has occupied this post 
 for several years, has contributed largely to the 
 success of the institution by prudent, diplomatic, 
 and energetic action. A Governing Committee 
 of forty-two corresponds to such bodies in all 
 other Exchanges. 
 
 The Consolidated Exchange has a large 
 Gratuity Fund, and it pays eight thousand 
 dollars upon the death of each member, the 
 money being obtained by a per capita assess- 
 ment of four dollars. 
 
CHAPTER XIV. 
 
 NEW YORK METHODS OF BUSINESS ON THE CON- 
 SOLIDATED EXCHANGE. 
 
 THE London and Paris stock Clearing-House 
 system, as we have seen, is a distinct 
 economy of capital and labor, but it has, in the 
 eyes of American brokers, a fatal defect, pointed 
 out in Chapter VII., viz., the inability to pair 
 off and close outstanding contracts and call for 
 margins to protect them prior to the day of 
 monthly or fortnightly settlement. 
 
 The Consolidated Exchange of New York 
 boasts, with reason, of employing a superior 
 system. Under the Consolidated plan, transac- 
 tions made through the week must be closed on 
 the Monday following, when a delivery is made 
 to a broker of all stocks bought by him during 
 the preceding week over and above all his sales 
 of the same stock. While, in London, all his 
 transactions would remain open for the entire 
 " account " period, in the Consolidated Exchange, 
 in New York, only such go over to the Monday 
 
 114 
 
Methods of Business on the Consolidated. 1 1 5 
 
 settlement as have not been eliminated by 
 counter transactions. The latter are paired off 
 each day upon payment or receipt of the differ- 
 ence through the Clearing House on the follow- 
 ing day. To illustrate : suppose a broker, on a 
 Wednesday, should buy five hundred shares of 
 Lake Shore at 104 and sell five hundred at 105, 
 thus making five hundred dollars, he would put 
 in the Clearing House that evening a sheet 
 giving in detail the number of shares, prices, 
 amount carried out, and names of brokers to 
 whom he had sold and from whom he had 
 bought, bringing down on this sheet figures 
 showing shares even and dollars, five hundred, 
 to his credit. This sheet, combined with all 
 the other sheets in the hands of the Clearing- 
 House clerks, enables them to bring together 
 the ultimate buyers and sellers of that stock 
 on that day, and out of some of them to receive 
 the five hundred dollars made by this specu- 
 lation. The Fourth National Bank of New 
 York, which is the custodian of the money 
 during the morning of clearance, will then pay 
 to the broker five hundred dollars, which the 
 Clearing House will certify is due him upon a 
 balancing of that day's business. 
 
 Here we see the economy of avoiding the re- 
 
n6 New York. 
 
 ceipt of the five hundred shares which, per- 
 chance, he bought from five different brokers, 
 involving, as it would, five checks of $10,400 
 each on his bank, and the delivery of the same 
 shares to the five buyers, which would require 
 five checks of $10,500 each from them. The 
 Clearing House eliminates all this expense, 
 trouble, and risk, and saves the bank from 
 over-certification, and the expense of entering in 
 their books the deposits and numerous checks. 
 
 If the broker had bought one hundred ad- 
 ditional shares Lake Shore at 104, of which he 
 remained " long," intending to take up the cer- 
 tificate the next Monday, he would have put in 
 his sheet showing the above, and also that one 
 hundred shares of Lake Shore were due to him 
 at the common settling price fixed by the Clear- 
 ing House for that stock on that day. If this 
 price happened to be 104, he would receive from 
 the Clearing House on the following morning an 
 order on the Fourth National Bank for five 
 hundred dollars, his profit on the purchase and 
 sale first above referred to. He would not get 
 the stock, of course, until the following Mon- 
 day, but meantime some one would necessarily 
 be apparently short of the one hundred shares, 
 and the Clearing House would furnish him the 
 
Methods of Business on the Consolidated. 1 1 7 
 
 name of some such person, unless he had him- 
 self found some one on the other side of the 
 market to whom he had loaned it. 
 
 Provision is made that either has the privi- 
 lege of calling up ten per cent, margin, with 
 thirty minutes' grace to procure it, and with the 
 penalty, in the default of the deposit of the re- 
 quired funds with the chairman of the Exchange 
 or some trust company, of the defaulter being 
 closed out " under the rule." This is the buy- 
 ing in of short stock or selling out of long stock 
 by the chairman, who assembles the members 
 present, selling at the highest bid or buying at 
 the lowest offer, the number of shares in ques- 
 tion. The person who supplies the chairman 
 with the stock or takes it from him puts himself 
 in place of the defaulter, at the difference in 
 price. The defaulter is allowed twenty-four 
 hours to meet his obligations, and failure to 
 settle within that time involves his suspension. 
 If he settles his debt later he must apply for re- 
 election upon presenting proof of the discharge 
 of his debt. If he fail to pay within a year his 
 membership is sold, and its proceeds are applied- 
 pro rata among his creditors on the Exchange. 
 The law cannot compel a division of the pro- 
 ceeds of his membership among outside creditors, 
 
1 1 8 New York. 
 
 until his debts within the Exchange are all 
 satisfied. 
 
 This latter process of calling for margins and 
 closing out defaulters is identical with the rule 
 on the New York Stock Exchange. 
 
 A year ago or more the New York Stock 
 Exchange introduced a Clearing House and a 
 system of trading " for the account/' but as it 
 was not compulsory, and as it was impracticable 
 to conduct cash and time trading on terms of 
 equality, and as it did not receive generous sup- 
 port, it was shortly abandoned. Whether it 
 adopts the time-contract principle, which, with 
 the limitation of only a week's duration, per- 
 mits traders to " turn around " in the market 
 without tying up stocks too long, it is not 
 hazarding much to say that the Stock Ex- 
 change is very sure finally to use the machinery 
 of a Clearing House for daily settlements in ac- 
 tive stocks. The one argument urged against it 
 is that the operations of large houses might be 
 disclosed to the Clearing House, but this is not 
 tenable. What is openly done by their repre- 
 sentatives on "the floor" is observed, and it 
 would not betray the origin of such orders 
 any more if their representatives cleared the 
 stocks through a Clearing House, than if set- 
 
Methods of Business on the Consolidated, 1 1 9 
 
 tied by them as at present by private manual 
 delivery. 
 
 " The proof of the pudding is in the eating," 
 and the London, Paris, and all the Continental 
 Exchanges use the Clearing-House machinery 
 and trading " for the account." One step in the 
 direction indicated is the agreement entered 
 into among about forty prominent houses of 
 the New York Stock Exchange to clear all 
 their transactions with each other through the 
 Manhattan Trust Company. This principle is 
 bound to prevail. 
 
CHAPTER XV. 
 
 THE SO-CALLED BUCKET-SHOPS. 
 
 THE Stock and all other Exchanges of this 
 country have a parasite in the so-called 
 " bucket-shop " which covers the land with a 
 speculative mildew. It has discredited the 
 legitimate business of regularly constituted Ex- 
 changes in the eyes of people, especially in the 
 smaller communities, who form their ideas of 
 real market-places from the character of these 
 gambling houses. No doubt many an innocent 
 critic inveighs against Exchanges and their 
 members, because he imagines the "bucket-shop" 
 is a section of the Exchange, and a miniature 
 brokerage office. This parasite is indigenous 
 to the United States, and happily its ravages 
 abroad are relatively light. 
 
 A broker, it matters not whether in stocks, 
 grain, cotton, real estate, insurance, or shipping, 
 is an agent. His interest and that of his 
 principal are identical. In a Stock Exchange, 
 for example, he meets other brokers, and 
 
 1 20 
 
Bucket- Shops. 121 
 
 through the collision of orders and opinions, 
 arising from operations of speculators and in- 
 vestors, news and events, sympathy with the 
 dealings in other Exchanges, etc., a series of 
 prices is established. These quotations go to the 
 " bucket-shop " keeper, who exhibits them to his 
 speculative visitors. In effect he says to them: 
 " The markets in the various Exchanges are in 
 progress ; they will fluctuate. If you wish to 
 wager that they wiH go up, name the amount of 
 money you will bet on this, and I will take it, 
 limiting your possible loss to that sum. If you 
 wish to do the reverse I am likewise willing. 
 Put up the stakes with me, and give me a com- 
 mission on the bet, and we will await the result." 
 Here his interest is diametrically opposed to 
 that of the " customer " and if he should happen 
 to be a man of easy morals, the quotations and 
 information furnished might be qualified to 
 suit the case. 
 
 Betting on what the price of a stock will 
 be when the persons making the bet do noth- 
 ing except to guess what others through their 
 negotiations will make it, is as unadulterated 
 gambling as betting on which horse will win 
 a race. When a client buys a stock through a 
 broker, thinking that it will advance, as when 
 
1 2 2 Bucket- Shops, 
 
 he buys a cargo of flour because lie thinks the 
 wheat crop is short and that it will go higher, 
 he takes his position commercially in the mar- 
 ket, contributing by the act of his purchase to 
 bring about the very result expected. He re- 
 lieves somebody of the stock or the flour. When, 
 however, he, as a third person, merely puts up 
 his money on what other persons, solely and 
 without his intervention in the article dealt in, 
 will do, he is as far outside the pale of com- 
 merce as if he bets on the throw of dice. The Ex- 
 changes have tried to suppress " bucket-shops " 
 by appeals to law and legislation, but, by some 
 strange obliquity of mental vision, those who 
 alone can give relief do not seem to see the 
 vicious nature of this financial pest. There is 
 hardly a town in the land but what has, or has 
 had, a shop of this description. They are finan- 
 cial nomads, changing their firm names and 
 habitat to suit their pecuniary exigencies. They 
 belong to no association, are accountable to no 
 authority, and the sums they owe confiding cus- 
 tomers are generally too small to justify an 
 appeal to law ; besides, many patrons would not 
 like to advertise their dealings. 
 
 The " bucket-shop " keeper exhibits to his 
 visitors the current quotations of some regu- 
 
Bucket- Shops. 1 2 3 
 
 larly conducted Exchange, and if the patron of 
 the shop thinks that the members of that Ex- 
 change will buy enough Western Union, for in- 
 stance, to advance its price, he deposits, we will 
 say, ten dollars with the cashier of the " bucket- 
 shop," and " buys " ten shares of Western Union 
 at 85 from its keeper, who stands ready either to 
 buy or sell, on the latest quotations, at the pleas- 
 ure of the patron. Here a margin of one per 
 cent, is put up, and unless otherwise stipulated, 
 if the stock in the market on which they are 
 betting goes down to 84J or 84-J- (depending on 
 the " commission " charged), the patron's mar- 
 gin is exhausted and the game closed. 
 
 Sometimes, if the standing of the patron is 
 known, the " bucket-shop " keeper will let the 
 loss run against the customer a point or so more, 
 upon an agreement by the patron to " protect " 
 the trade. If the market goes in his favor, he 
 can " close out " the contracts when he chooses, 
 and then the " bucket-shop " will owe him the 
 margin originally deposited and the profit made. 
 
 There are thousands of these " bucket-shops " 
 in the country, and many of them are in small 
 towns where there is no legitimate speculative 
 or investment business in stocks, and where no 
 legitimate broker could bring quotations and 
 
124 Bucket- Shops. 
 
 thrive. In these places " bucket-shops " furnish 
 the excitement and diversion of gaming houses 
 in the larger cities, which would not be tolerated 
 in smaller communities. 
 
 The keeper of them could not afford to hire 
 a special wire to procure quotations from a dis- 
 tant Exchange, and he probably might not dare 
 to assume the risks of " taking the trades " of 
 his patrons. Bolder and more enterprising men 
 often lease private wires between the larger 
 cities, sub-let loops to way places, forward quo- 
 tations over them, and in return expect the " or- 
 ders " picked up by these retail offices. Some 
 of these larger " bucket-shop " concerns are be- 
 lieved to have made money, partly by profits on 
 leased wires, partly on commissions charged, and 
 largely on the fact that the majority of small 
 and poorly informed speculators lose money, 
 which of course is a net gain to the " bucket- 
 shop." It is betting against the " bank." 
 
 Unsophisticated " lambs " are usually willing 
 to accept small profits, and let their losses run 
 as long as they have ready money to protect 
 their position, and it is this unfortunate method 
 of speculation which enriches the "bucket- 
 shop." 
 
 It cannot be expected that " bucket-shop " 
 
Bucket- Shops, 125 
 
 keepers will give their patrons any valuable or 
 disinterested information or advice, for the two 
 parties stand in opposition to each other. 
 
 It is also believed that the larger " bucket- 
 shops " sometimes employ brokers on the regu- 
 lar Exchanges to make sudden raids or rallies in 
 certain stocks, at opportune times, to obliterate 
 the margins of their patrons. 
 
 A " bucket-shop " business is a poor counter- 
 feit of real Stock Exchange business, and it 
 ought to be suppressed, as it is not conducted 
 on legitimate commercial principles. It is a 
 cancerous growth on a healthy body. 
 
 'V** of ras*"**^ 
 
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