LIBRARY 
 
 UNIVERSITY OF CALIFORNIA, 
 
 Class 
 
61ST CONGRESS ) OTPTVTATI? /DOCUMENT 
 
 2d Session / SENATE j No. 573 
 
 NATIONAL MONETARY COMMISSION 
 
 The History and Methods of 
 the Paris Bourse 
 
 BY 
 
 E. VIDAL 
 
 Washington : Government Printing Office : 1910 
 
NATIONAL MONETARY COMMISSION. 
 
 NELSON W. ALDRICH, Rhode Island, Chairman. 
 
 EDWARD B. VREELAND, New York, Vice -Chair man. 
 
 JULIUS C. BURROWS, Michigan. JOHN W. WEEKS, Massachusetts. 
 
 EUGENE HALE, Maine. ROBERT W. BONYNGE, Colorado. 
 
 PHILANDER C. KNOX, Pennsylvania. SYLVESTER C. SMITH, California. 
 
 THEODORE E. BURTON, Ohio. LEMUEL P. PADGETT, Tennessee. 
 
 HENRY M. TELLER, Colorado. GEORGE F. BURGESS, Texas. 
 
 HERNANDO D. MONEY, Mississippi. ARSENE P. Pujo, Louisiana. 
 
 JOSEPH W. BAILEY, Texas. ARTHUR B. SHELTON, Secretary, 
 
 A. PIATT ANDREW, Special Assistant to Commission. 
 
TABLE OF CONTENTS. 
 
 BOOK I. 
 
 Page. 
 
 GENERALITIES _ - 3 
 
 BOOK II. 
 
 THE BOURSE. THE TRADERS. THE OPERATIONS ._ 21 
 
 First Division: Bourses. Merchandise brokers. Stock- 
 brokers. Curb brokers. Securities 23 
 
 Second Division: The operations for cash 33 
 
 Third Division: Operations for future delivery 45 
 
 Fourth Division: On Exchange. Concerning the negotiation 
 
 of bills of exchange and precious metals 76 
 
 Fifth Division: Bourses in the Departments 85 
 
 BOOK HI. 
 
 JUDICIAL CONSIDERATIONS ON THE MONOPOLY OF STOCKBROKERS. 89 
 
 BOOK IV. 
 
 HISTORICAL AND ECONOMIC CONSIDER ATIONS in 
 
 First Division: The exchange market. Origin of public credit. 114 
 
 Second Division 124 
 
 Third Division: The Council's decisions of 1724 to 1788. The 
 
 financial market on the eve of the revolution 142 
 
 Fourth Division: The financial market during the revolution 148 
 
 Fifth Division: The nineteenth century 162 
 
 212709 
 
Of THE 
 
 ( UNIVERSITY | 
 
 ILIF< 
 
 THE HISTORY AND METHODS OF 
 THE PARIS BOURSE. 
 
 By E. VIDAL. 
 
 BOOK I. Generalities. 
 
 Page. 
 
 1. Transferable securities are products of industry, subject to the 
 
 general conditions of the production and exchange of wealth. 3-5 
 
 2. What is meant by a financial market? 5 
 
 3. Difference between fairs, markets, and the Bourse. Merchandise 
 
 brokers and stockbrokers (courtiers et agents de change) 5-6 
 
 4. The Bourse is a public place, a public mart. Commerce in 
 
 France is free, but in the right belonging to the authorities to 
 keep order in a public place originated the right to regulate 
 the Bourse. Under the old regime, the selling of the right to 
 work was mainly the cause of the establishment of merchan- 
 dise brokers and stockbrokers 6-9 
 
 5. The revolutionary period. The freedom of the market. Stock- 
 
 jobbing (agiotage} and its causes 9-16 
 
 6. Laws now governing the French financial market 16-17 
 
 7. Brief considerations on the "reorganization" of the French 
 
 market, effected in 1898 17-18 
 
 8. The grounds for the present organization have disappeared, 
 
 but the organization remains 1 8-20 
 
 (i) The author of the present work deems it necessary, 
 first of all, to connect the study of a financial market with 
 that of the totality of elements belonging to the field of 
 political economy. 
 
 Are the emission of fiduciary values and the trading 
 therein special phenomena? Or are they, on the con- 
 trary, subject to the general conditions of the production 
 and exchange of wealth? 
 
 Beyond a doubt, fiduciary values, more generally known 
 in France as ualeurs mobilieres, i. e., transferable secu- 
 
National Monetary Commission 
 
 ities, a are wealth created by man's industry, and circu- 
 lating by virtue of the general causes which create and 
 dominate commerce. 
 
 The producer extracts the raw material or transforms 
 it, in order to render it suitable to the requirements of the 
 consumers; the tradesman conveys the manufactured 
 product, or, as merchant, as commission agent, as broker, 
 or even as money lender, causes it to circulate. In the 
 same way there are producers, traders, and consumers of 
 transferable securities. 
 
 The producers of transferable securities are the financiers, 
 who negotiate with borrowing governments or with repre- 
 sentatives of provinces or cities desirous of borrowing. 
 They decide upon the rates of interest, the conditions of 
 sinking funds, and the maturity of the coupons. They 
 prepare and arrange the emissions; they do the same for 
 borrowing stock companies. Often, they even create 
 these stock companies; they lay down their by-laws, and 
 they secure for them the executive and professional staffs. 
 They have as auxiliaries the guaranty syndicates and the 
 bankers genuine dealers in transferable securities, who 
 buy and sell for their own account. Dealers are likewise 
 those auxiliaries of commerce who are represented by the 
 
 a Article 516 of the Code civil: "All wealth (biens} is either transfer- 
 able or intransferable." 
 
 ART. 529. Transferable are, by the determination of the law, bonds and 
 shares which represent monetary claims or movable effects; the shares or 
 interests in financial, commercial, or industrial companies, even when the 
 real estate used in these undertakings belongs to the companies. These 
 shares or interests are deemed transferable with regard only to each partner, 
 as long as the company exists. Perpetual or life annuities paid by the 
 state or by individuals are also deemed transferable wealth according to law. 
 
History and Methods of the Paris Bourse 
 
 brokers and commission merchants in securities, and who 
 trade for account of third parties in the public marts. 
 
 The capitalists, and even the speculators, are the con- 
 sumers of transferable securities. Thus we see producers, 
 dealers, and consumers in the domain of transferable 
 securities, just as may be seen producers, dealers, and 
 consumers in any other field of commodities. 
 
 (2) By a financial market, in the widest sense of the 
 word, is meant the totality of elements, either universal 
 or regional, which cooperate in the issuing and circulating 
 of transferable securities. 
 
 In a limited sense, we understand by a financial market 
 the public place in a city where dealings in securities are 
 carried on the public place specially set apart for these 
 dealings. That public place is the Bourse. 
 
 Thus, the Bourse is a public place. This fact should be 
 constantly borne in mind. Only thus is it possible thor- 
 oughly to understand not only its history but also, in cer- 
 tain cases, aggregate of regulations and laws which control 
 its workings. 
 
 (3) Bourses differ from fairs and markets in that, ac- 
 cording to the accepted usage on the bourses, articles need 
 not be exhibited to the buyer at the time the contract is 
 made, whereas the customary procedure at fairs and mar- 
 kets is different. 
 
 The bourses themselves are divided into commercial 
 exchanges proper (bourses de commerce), where merchan- 
 dise is dealt in such as wheat, flour, spirits, sugar, etc. 
 
 "Thaller, Droit Commercial, 26. ed. No. 824. Lyon-Caen et Renault, 
 Traite de Droit Commercial, T I, Nos. 20 and 328. 
 
National Monetary Commission 
 
 and stock exchanges (bourses des valeurs) , where securities 
 are dealt in. 
 
 On the commercial exchanges the brokers formerly 
 traded in merchandise, coins, bills of exchange, and deeds, 
 which are in some way the predecessors of modern securi- 
 ties. The commission agents operating on the bourses 
 were called brokers in exchange, provisions, and merchan- 
 dise (les courretiers de change, denrees et marchandises) . 
 Thus, a decree of Charles IX, of June, 1572, is called, "A 
 decree concerning brokers in exchange and provisions, as 
 well as cloths, silk, woolens, linens, leather, and other 
 kinds of merchandise, wines, wheat and other grains, 
 horses and all other kinds of cattle." It is only since the 
 year 1639 that the functions of stockbrokers and merchan- 
 dise brokers seem to have been separated. 6 Indeed, a 
 decree of the King's council of April 2, 1639, gives to the 
 brokers in exchange the name of agents de change (stock- 
 brokers). 6 
 
 As we stated, it is the fact that the Bourse is a public 
 place which has determined its regulation. It is now 
 important to enlarge upon this statement. 
 
 (4) In France commerce is unfettered, and yet the 
 administration of stock exchanges is so overridden with 
 regulations as to constitute, in that regard, an exception, 
 a considerable derogation from common law. 
 
 Article 7 of the law of March 17, 1791, says: "Every 
 one shall be free to carry on such business, or to practise 
 such profession, as he may see fit, subject, however, to 
 such police regulations as have been or may be made." 
 
 a Manuel des Agents de Change, p. 7. 
 
 & Lyons-Caen & Renault, Traite de Droit Commercial, T. IV, No. 872. 
 
 c Manuel des agents de change, p. 15. 
 
History and Methods of the Paris Bourse 
 
 On September 17, 1807, Regnaud de St. Jean d'Angely, 
 when he tendered the draft of commercial law establish- 
 ing a Code, expressed himself as follows: 
 
 "At the beginning of Book I and under the title of 
 'General Provisions,' the drafters had laid down rules, 
 some of which are purely theoretical and superfluous. 
 Some others have been found more fit to belong elsewhere. 
 Thus, for instance, we have not thought it necessary to state 
 that in France everyone had the right to trade * * * ." 
 
 Thus no one disputes that the principle of freedom of 
 trade remains to-day one of the rights of man (except in 
 the politico-economical school which causes personal rights 
 to be swallowed up by common rights). The principle 
 of freedom of trade is a positive right, and is, in some way, 
 confirmed by our constitutional laws. Indeed, one may 
 read in the preliminary draft of the constitutional laws of 
 1875 the following sentence, characteristic of M. Lepere's 
 style: "We have enacted a series of constitutional pro- 
 visions, without endeavoring to promulgate principles any 
 more than to formulate philosophical statements. Our 
 principles are known. They are the principles of 176*9, 
 which all succeeding governments have recognized. ' ' b 
 
 However, notwithstanding the principle of freedom of 
 trade, the French financial market is not free. The pro- 
 fession of stockbroker (agent de change) is, as will be seen, 
 a monopoly. It is not a State monopoly, like that of 
 the sale of tobacco, gunpowder, matches, or of carrying 
 
 a Expos6 des Motifs du Code de Commerce. Corps Legislatif. iSep- 
 tembre, 1807, Archives Parlementaires, 1807. 
 
 & Session of February 17, 1875. Annales de I'Assemblee Nationale, T. 
 XXXVI, p. 619. The principle of freedom of trade, started in 1791, 
 belongs to the principle of freedom to work proclaimed in 1789. (Ducrocq) 
 Droit Administratif, T. Ill, p. 574. 
 
 7 
 
National Monetary Commission 
 
 the mails ; it is a monopoly held by certain persons for 
 their own benefit. It is a question of a private monopoly 
 intrusted to individuals. 
 
 What is the origin of this phenomenon? Why this ex- 
 ception? We have found this question quite brilliantly 
 elucidated in the pleadings of an eminent barrister, Dean 
 du Buit, during a famous financial lawsuit. 
 
 "The Bourse," said he, "is a public mart where bills 
 and securities are purchased, just as fairs are public marts 
 where grain and cattle and all kinds of merchandise are 
 purchased. These public marts, these bourses, are always 
 spontaneously and gradually formed, by one and the same 
 process either in answer to requirements, or through 
 habits, or by the cooperation of populations. 
 
 "There is, for instance, in a given place, a center for 
 gatherings, and, by and by, as it becomes known that 
 purchasers will be found there, everyone brings to this 
 center what he has to sell. Customs and regulations are 
 also spontaneously here established. The way to buy, or 
 to sell, is learned; and thus is formed what commercial 
 laws designate as local usage (V usage de la place) . 
 
 "Finally, the market is established; it develops, and, 
 as is necessarily the case with all that is human, abuses 
 gradually make their appearance. These abuses become 
 glaring; stockjobbing sets in; quarrels, brawls, and dis- 
 orders take place; and the central power investigates. 
 
 "The authorities interfere and take the market in hand. 
 There are abuses, they say; we are going to correct them; 
 
 In the matter of the People and the Association of Stockbrokers v. 
 Messrs, de Buzelet & Perriere. Tribunal de la Seine 22 Femier 1907. 
 Compte rendu de la Cote de la Bourse et de la Banque du 24 Fewier, 1907. 
 
History and Methods of the Paris Bourse 
 
 there are fraudulent middlemen we shall replace them 
 by middlemen whom we ourselves shall appoint. We shall 
 make regulations; they will be carried out in the market; 
 and thus we shall fix as a regulation that when a party 
 desires to enter the market to dispose of securities, instead 
 of trusting himself to one of these intermeddlesome mid- 
 dlemen, who bring business into disrepute, he will ad- 
 dress himself to the middlemen whom we shall appoint. 
 Through them alone he will be bound to trade." 
 
 Thus spoke Maitre du Buit; and it can not be denied 
 that it is from the police authority that the power of regu- 
 lating the Bourse as a public place originates. But the 
 authorities have found some advantage in the exercise of 
 that power of regulation. Under the old regime the Gov- 
 ernment considered itself as the master of persons, as the 
 owner of their right to work. Accordingly, it sold it to 
 them. It often occurred that it bestowed monopoly and 
 privilege on certain people who bought their benefits. The 
 traffic in charges, employments, offices, which was the 
 plague of the old regime, was practised also on the pro- 
 fessions of merchandise broker and of stockbroker. 
 
 The monopoly of agents de change, in reality, was pur- 
 chased from the Government under the old regime. 
 
 (5) The revolution takes place. 
 
 The law of March 17, 1791, which suppressed offices, 
 charters, and wardenships of trade companies, also abol- 
 ished the monopoly of the agents de change, which had 
 been established by a series of successive royal decrees 
 from 1724 to 1788 decrees by which the privileges of 
 monopoly had been by turns bestowed, modified, with- 
 drawn, restored, or confirmed. 
 
National M on et ar y Commission 
 
 But the disturbances at home and abroad at the time of 
 the French Revolution, and the financial policy which, in 
 the domain of private property, manifested itself in the 
 suppression of stock companies, and, in the domain of 
 public credit, assumed the form of the emission of assig- 
 nats, forced loans, and bankruptcy all this caused a 
 terrible repercussion on the financial markets. 
 
 When the Bourse was closed for the first time (from 
 June 27, 1793, to April 25, 1795) and stock companies 
 were suppressed, rentes disappeared from the market. 6 
 It was not rentes and shares of stock companies that 
 attracted speculation, and for very good reasons. In- 
 stead, people dabbled in metals and in bills of exchange, 
 owing to two causes : The decline in the value of assignats, 
 and the scarcity of metallic currency. 
 
 It could not be otherwise. The phenomenon was 
 inevitable, and so it actually took place. Let us ex- 
 plain it. 
 
 If you piace in a safe 1,000 francs in napoleons, > and 
 if you cause these 50 pieces of 20 francs each to be repre- 
 sented by i ,000 sheets of paper, these i ,000 sheets of paper 
 will theoretically, and yet quite accurately, be worth i 
 franc each. If, instead of 1,000 sheets, 2,000 sheets are 
 issued, the value will normally have to fall to 50 centimes. 
 If 4,000 are issued, the value will fall to 25 centimes, and 
 so on. It may happen that the party who emits them 
 (especially if it be the Government) should become indig- 
 nant because of the decline, and, in its ignorance, assign 
 the reasons for the decline to stockjobbing. But, whatever 
 
 a Decree of August 24, 1793. 
 
 b Because interest was paid in paper which was gradually shrinking in 
 value. 
 
 10 
 
History and Methods of the Paris Bourse 
 
 it may do, the paper will always tend to be worth 
 exactly that which it represents. If the Government 
 threatens those it holds responsible for the decline with 
 the worst punishments the carcan, the pillory, death 
 even it will be all in vain; the paper money will tend 
 to be worth only that which it represents. Perhaps 
 the paper may fall even below its intrinsic value, owing 
 to the endeavors of the issuing party to boost it; but 
 it will not really be the merchants who have caused the 
 paper to fall, nor even those in whose hands the paper is 
 found. The author of the phenomenon is the very party 
 issuing the paper. 
 
 The scarcity of metal currency is a corollary to the 
 decline of the paper. When paper declines, those who 
 have gold do not care to exchange it for paper steadily 
 depreciating in their hands. In consequence, they de- 
 mand for a little gold a great deal of paper. Paper 
 declines, gold rises. 
 
 Finally, when a country is in the throes of a revolution, 
 home production of produce and of the most ordinary 
 objects of utility diminishes for the very reason of the 
 existing troubles. What is wanting, must be drawn from 
 abroad; but how should payment be made for it? In 
 gold, in coin used abroad that is to say, in foreign bills 
 of exchange. This is a new reason for the rise in gold and 
 for a rise in the rates of foreign exchange which represents 
 gold. These grounds for a rise will be still greater when 
 the country is at war with one or several foreign nations. 
 
 Such is, in some way, the physiology of the double 
 economic movement the decline of paper, and the rise 
 of metal. The speculations of the revolutionary times did 
 
National Monetary Commission 
 
 not cause the decline of paper, nor the rise of metal; they 
 merely gave expression to the double phenomenon. 
 
 On this occasion the complete history of the French 
 Revolution can not be given; the domestic strife, the riots, 
 the famines, the wars of the Republic at its birth, need not 
 again be narrated. But what is very well known is that, 
 after a first issue of assignats for 400,000,000 French 
 livres, in pursuance of the decree of December 19, 1790, 
 other issues followed and successively brought up to 
 45,000,000,000 livres the amount of assignats issued. And 
 the first form of the double phenomenon made its appear- 
 ance the decline of paper. 
 
 The rise in metallic currency followed, aggravated by 
 the state of war between France and nearly the whole of 
 Europe combined. Famines occurred, and the Convention 
 authorized the supreme executive councils in the Depart- 
 ments to fix the maximum prices. Thereupon the mer- 
 chants ceased to sell, and the manufacturers to produce, as 
 the maximum had taken no account of the cost price. 
 Stockjobbing assumed fabulous proportions. In order to 
 procure food, people disposed of their belongings. The 
 possessor of gold and silver or of bills of exchange dictated 
 the prices. 
 
 The convention took alarm at the rise of the metallic 
 currency that accompanied the decline of the assignats a 
 rise still more aggravating the situation at home and the 
 
 a Rambaud. Histoire de la Civilisation Contemporaine en France, p. 291. 
 See also in the Magistral of M. Emile Levasseur, L' 'Histoire des classes 
 ouvrieres depuis 1789 a 1870 (T. I, Ch. Les Assignats), the verification of 
 the repercussions caused by the decline of assignats. In 1795 a bushel of 
 potatoes was worth 200 livres in assignats; i pound of butter, 560 livres; 
 a new coat, 15,000 livres; and a "clean" hat, 500 livres (p. 224). 
 
 12 
 
History and Methods of the Paris Bourse 
 
 wars abroad. The convention attributed the rise of the 
 metal to stockjobbing, which, it should be borne in mind, 
 had thrown off all restraint. Thus, two laws were pro- 
 mulgated the law of 1 8 Fructidor, year III (April 30, 
 1795), forbidding the selling of gold and silver anywhere 
 save on the Bourse, and that of 28 Vendemiaire, year IV 
 (October 20, 1 795) , on the regulations of the Bourse. 
 
 The law of 18 Fructidor, year III, provided the follow- 
 ing in article i : 
 
 " ARTICLE i . It is forbidden to anyone in Paris or in all 
 commercial cities where there is a bourse, to sell gold or 
 silver, either coined, or in bars or ingots, or manufactured; 
 or to make trades having these metals for basis, in public 
 places or premises other than the Bourse. All offenders 
 shall be sentenced to two years' imprisonment, to be ex- 
 posed to public view, with a sign board on the chest bear- 
 ing the word 'agioteur ' (stockjobber) , and by the same 
 process all his property shall be confiscated for the bene- 
 fit of the Republic." 
 
 As to the law of 28 Vendemiaire, year IV, on bourse 
 regulation, it contained the following provisions: 
 
 " ART. 6. The committees of public safety and of finance 
 shall appoint, within twenty-four hours, 25 stockbrokers; 
 20 of them shall be assigned to banking operations and 
 negotiations in foreign bills in Paris ; the remaining 5 shall 
 be assigned to the purchase and sale of coined metal, and 
 gold and silver bullion ; all of them shall be called ' agents 
 de change' (stockbrokers). 
 
 "ART. 7. They shall be invested with a commission, 
 which shall be delivered to them at once by the committees 
 
National Monetary Commission 
 
 of public safety and of finance, for the exclusive exercise 
 of the functions which are conferred upon them." 
 
 Thus the law of 28 Vendemiaire, year IV, reestablished 
 the stockbrokers, suppressed in 1791, as merchants vested 
 with a monopoly. The law reestablishes their power only 
 with regard to dealing in bullion and foreign bills. 
 
 Concerning bullion, article 13 of Chapter I stated: 
 
 "No statement concerning the sale or purchase of bul- 
 lion shall be admitted in court except when made by the 
 5 appointed stockbrokers (Aucune declaration . . . 
 ne sera recu en justice que celle des cinq agents choisis 
 . . .), and no bargain shall be considered valid unless 
 transacted through their agency." 
 
 Concerning the negotiating of bills of exchange, article 8 
 of Chapter II stated: 
 
 "No statement concerning the negotiation of bills of 
 exchange, notes, or other commercial instruments shall be 
 admitted in court except when made by the 20 appointed 
 brokers, and no bargain shall be considered valid, unless 
 transacted through their agency." 
 
 It is, therefore, quite evident that the lawmaker of 
 Venddmiaire, year IV, was not guided by any respect for the 
 principle of freedom of trade; that there existed at that 
 time no principle but that of public safety. The life, the 
 liberty, and the property of citizens, were of little moment. 
 When the law of 28 Vendemiaire, year IV, was promulgated, 
 the amount of assignats outstanding was 1 7,879, 337> 8 98 
 French livres, and the total number issued during the last 
 three months was for the amount of 5,541,194,037 livres. a 
 
 a J. M. Fachan, Historique de la Rente Franqaise et des valeurs du Tresor, 
 p. 107. 
 
History and Methods of the Paris Bourse 
 
 The assignat of i livre had declined during these three 
 months from 0.304 to 0.136. A forced loan without 
 interest had been levied on "the rich, the selfish, and the 
 indifferent." 6 Terrible famines had afflicted the country 
 and provoked bloody insurrections (12 Germinal, year III, 
 i Prairial, year III, 13 Vendemiaire, year IV). England 
 had determined to fight France in every way; she did not 
 limit herself to merely organizing the Quiberon expedition. 
 The Marquis de Puysage had convinced Pitt of the advan- 
 tages to be derived from flooding French territory with coun- 
 terfeit assignats which the best engravers of Holland were 
 to manufacture with such consummate skill that " Cambon 
 himself would have accepted them." c A first issue of 
 these counterfeit assignats had taken place, and from 
 Berne 3,000,000,000 livres of these had been let loose. c 
 Meanwhile, on the 13 Fructidor, year III, a law which we 
 have already mentioned forbade the sale of gold and silver 
 elsewhere than on the Bourse, and almost immediately 
 after that, on the 28 Vendemiaire, year IV, another law on 
 bourse regulation declared valid, as far as bullion and 
 foreign bills of exchange were concerned, only such trades 
 as were made through a stockbroker. d 
 
 Let us now resume our account: 
 
 It is a settled fact that in France commerce is free. 
 
 This, however, does not apply to matters of brokerage 
 in securities, under the old law, the old monarchical 
 regime, because the Government considers itself entitled 
 
 a Ibid, p. 108. 
 & Ibid, pp. in and 115. 
 
 c Michelet, Hisloire du XI X e siecle. Directoire in the chapter Quiberon. 
 & See further Ch. Gomel, Histoire financiere de la Legislative et de la Con- 
 vention, Vol. II, Chap. II. 
 
National M on et ar y Commission 
 
 to dominate the public place where the Bourse is kept, and 
 to sell the right to work. That state of things ceased with 
 the revolution. 
 
 During the revolutionary period speculation was turned 
 to bullion and bills of exchange. 
 
 The convention then reestablished the monopoly of 
 stockbrokers, which had not long ago been suppressed, 
 because it ascribed the responsibility for the occurrences 
 to speculation. The monopoly was applied to bullion 
 and bills of exchange only. 
 
 (6) The laws which have in some way reconstituted the 
 legal prerogatives of bourse operations are: The law of 
 28 Ventose, year IX; the decree of 27 Prairial, year X, 
 and the Code de commerce, in 1807 ; the first two provisions 
 under the Consulate, the third under the Empire. 
 
 To-day they still govern the matters forming the subject 
 of the present work. 
 
 The law of 28 Ventose, year IX, and the Code de com- 
 merce of 1807 conferred on stockbrokers a monopoly of 
 trade in government and other securities susceptible of 
 being quoted. 
 
 By the law of April 28, 1816, stockbrokers, as well as 
 notaries, barristers practising before the Cour de cassa- 
 tion (highest court of appeal in France), lawyers, court 
 clerks, bailiffs (huissiers officials who protest bills, notes, 
 etc.), merchandise brokers, and appraisers, acquire the 
 right to introduce their successors, in consideration of 
 additional surety bonds aggregating about 40,000,000 
 francs for the totality of these ministerial offices. As 
 to the stockbrokers, their bond, which had then been 
 100,000 francs, was increased to 125,000 francs. The 
 
 16 
 
History and Methods of the Paris Bourse 
 
 interest on all these bonds was reduced from 5 per cent 
 to 4 per cent. 
 
 The stockbrokers become by that fact the owners of 
 their offices. The right to introduce a successor to the 
 Government is sold by the holder when he withdraws 
 from business. It is only thus that a stockbroker may 
 sell his office. 
 
 The law of 1816 has always been severely criticised. 
 The State can give back freedom to the trade in secu- 
 rities only by purchasing the commissions or indemnifying 
 the holders of these commissions. Well, as time goes on, 
 securities become more and more numerous, and conse- 
 quently the commissions of stockbrokers must become 
 more and more valuable. Moreover, the more the State's 
 budgets tend to become complicated and to increase, the 
 less easy it becomes, in consequence, for the French Gov- 
 ernment to place the financial market on a footing con- 
 sistent with the principle of freedom of trade. 
 
 Thus the Bourse in France rests legally on the basis of 
 these old laws of the years IX and 1807. 
 
 (7) Several attempts have beeji made to modify the 
 legal status of the Bourse, but they have failed for sundry 
 reasons. The last attempt took place in 1897. Two 
 Senators, MM. Trarieux and Boulanger, presented the draft 
 of a law which caused a discussion of the finance law of 1 898. 
 During this discussion a question was raised relating to 
 the mode of collecting the tax on bourse operations, in 
 answer to which the Government declared, that, taking 
 for a basis the laws then in force, it would modify the 
 status of the financial market simply through decrees. 
 
National Monetary Commission 
 
 Indeed, on June 29, 1898, the Minister issued three 
 decrees, which, respectively, increased the number of 
 stockbrokers in Paris from 60 to 70, fixed a new table of 
 brokerage, and modified some articles in the decree of 
 October 7, 1870, concerning the number of members of 
 the Chambre Syndicate and concerning the time allowance 
 for settlements. The most striking modification was the 
 new provision of article 55 of the decree of October 7, 1890, 
 which created what has been called the Solidarity, of 
 Stockbrokers. 
 
 The totality of these measures received the name 
 "Reorganisation du Marche Financier" (reorganization of 
 the financial market), an incorrect designation, since 
 these decrees have brought no modifying element in the 
 bases of the bourse organization, as the present organiza- 
 tion is no other than that of the year IX. But the use of 
 these terms aimed to cut short all endeavor toward a new 
 organization, and to suggest to public opinion the consid- 
 eration that it would be unwise to demand new reforms 
 when a reorganization had but recently been effected. 
 
 (8) It behooves us finally to call attention to one of the 
 most singular phenomena connected with the age of the 
 provisions governing the bourse. 
 
 None of the reasons which influenced the establishment 
 of the monopoly of stockbrokers exists to-day. No doubt, 
 other grounds have arisen to warrant their preservation, 
 but none the less singular is the phenomenon presented 
 by an institution outliving all the considerations which 
 determined its establishment. 
 
 Indeed, in the year IX, in the year X, and in 1807, a 
 fundamental consideration quickened the legislator the 
 
 18 
 
History and Methods of the Paris Bourse 
 
 discredit fastened upon speculation. Operations for future 
 delivery were considered, if not as tabooed, at least as 
 having become impossible. 
 
 Thus it was that the broker was enjoined to have in his 
 hands at the moment of the trade both the securities of 
 the seller and the money of the buyer. (Art. 13 of the 
 decree of 27 Prairial, year X.) Finally, speculations were 
 directed toward bills of exchange and government securi- 
 ties; and, because it was considered necessary for the 
 economic welfare that official intermediaries be appointed 
 for the negotiation of bills of exchange, bullion, and gov- 
 ernment securities, article' 76 of the Code de commerce 
 declared that the stockbrokers (agents de change) alone 
 could trade for account of others in bills of exchange, 
 or transact dealings in bullion brokerage and French 
 government securities. The official quoting of foreign 
 securities remained forbidden, in pursuance of the Council's 
 decree of August 7, 1785. 
 
 At present the prohibition restraining a stockbroker 
 from giving his services to short sellers has entirely disap- 
 peared. It was abolished by the law of March 28, 1885, 
 concerning contracts for future delivery. That same 
 law declared these kinds of contracts legal, even when 
 settled by paying the difference. On the other hand, 
 stockbrokers no longer negotiate a single bill of exchange. 
 The bullion brokerage, which could be concurrently carried 
 on by stockbrokers (agents de change) and merchandise 
 brokers (courtiers), either class by itself having the right 
 to trade, is free since 1866. 
 
 Further, as to government securities, and with especial 
 reference to French rentes, which represent government 
 
National Monetary Commission 
 
 securities par excellence, it remains to be said that free 
 trading in them is tolerated, although not legally recog- 
 nized, as will be seen later. Finally, it should be noticed 
 that a royal ordinance of November 23, 1823, abolished 
 the interdiction to quote foreign securities. 
 
 The monopoly of stockbrokers has, therefore, lost all its 
 grounds for subsisting. 
 
 Nevertheless, it still exists in law, and is, moreover, 
 sustained by it more strongly than ever. 
 
 This is a consideration which will acquire its full value 
 when the subject of the present work shall have been 
 treated in full. 
 
 20 
 
BOOK II. The Bourse The traders The operations. 
 
 FIRST DIVISION. Bourses Merchandise brokers Stockbrokers Curb 
 brokers Securities. 
 
 1. Commercial exchanges (Bourses de commerce} Stock exchanges Page. 
 
 (Bourses des valeurs} 23 
 
 2. The brokers on the commercial bourses Stockbrokers (agents de 
 
 change} are the traders on the Bourse des -valeurs 23-24 
 
 3. The functions of the stockbrokers 24-25 
 
 4. The curb brokers (coulissiers} 25-28 
 
 5. The exchange brokers (courtiers de change} 28 
 
 6. Which are the securities traded in on the Bourse Government 
 
 loans Certificates of private enterprises Certificates for 
 stocks and bonds fully paid in and partially paid in 29-30 
 
 7. Certificates for stocks and bonds registered, registered as to 
 
 principal only, " to bearer" Transfer and its mechanism, con- 
 version of certificates "to bearer" into registered certificates, 
 and vice versa 30-32 
 
 SECOND DIVISION. The operations for cash. 
 
 8. Operations for cash (Operations au comptant} 33 
 
 9. Orders at a fixed price (a cours fixe}, at best (au mieux), at the 
 
 average rate (au cours moyen}, on the floor (au Parquet}- 33~34 
 
 10. How orders for cash are given on the Coulisse (au marche en 
 
 Banque} ._. 35 
 
 n. What amounts can be traded in for cash? How long are orders 
 
 in force? 35~3 6 
 
 12. The quotation list, official quotation list, curb quotation list 
 
 (cote en Banque} 37~3^ 
 
 13. Settlement of operations for cash Irregular, counterfeit, lost, 
 
 stolen certificates 38-39 
 
 14. Concerning interest accrued on certificates traded in 39 
 
 15. Certificates must be in order as regards stamps and taxes 39 
 
 16. Expenses Concerning brokerage with the stockbrokers (on the 
 
 parquet) , with the bankers (en coulisse) 40 
 
 17. The tax on bourse operations Receipt stamp Fee for record- 
 
 ing on the statements the numbers of the certificates pur- 
 chased 40-41 
 
 18. Transfer and transmission fees 41 
 
 21 
 
National Monetary Commission 
 
 Page. 
 
 1 9 . Delays in delivering registered certificates. _ 42 
 
 20. On the right of "execution" (buying-in, or selling-out) 42-43 
 
 21. Delays in delivering certificates "to bearer," on the right of " exe- 
 
 cution." 43-44 
 
 22. On deliveries and "execution" on the "Coulisse" 44~45 
 
 THIRD DIVISION. Operations for future delivery (a terme). 
 
 23. Operations for future delivery Definition Taking up secu- 
 
 rities Delivering securities Differences 45 -47 
 
 24. Reports (loans for " carrying-over " operations) 47~49 
 
 25. Operations in certificates "when issued" 49 
 
 26. Options 49-5 1 
 
 27. Single options 5 I- 54 
 
 28. Option against non-option 54~55 
 
 29. Non-option against option 55-56 
 
 30. Option against option 56-57 
 
 31. Usefulness of combinations above described 57~58 
 
 32. Put and call (stellage) 59-62 
 
 33. Settlements Option declarations The clearing system 62-63 
 
 34. Mechanism of the clearing system The making-up price (clear- 
 
 ing price) 63-66 
 
 35. Some practical remarks Nature of bourse orders 66-67 
 
 36. How long do orders remain in force? 67 
 
 37. Covers 68 
 
 38. On the amounts that may be dealt in 68 
 
 39. Discounting privilege (faculte" d'escompte) 69 
 
 40. Small options 69 
 
 41. What the quotation list shows 69-70 
 
 42. Fortnightly and monthly settlements 70-7 2 
 
 43. State of securities delivered on settlement days 72 
 
 44. Defaulting of brokers or of customers 7 2-74 
 
 45. Expenses Transfers Brokerages 74-76 
 
 FOURTH DIVISION. On Exchange Concerning the negotiation of bills of 
 exchange and precious metals. 
 
 46. Generalities 76 
 
 47. Mission of the bill of exchange; its value as commercial currency. 76-77 
 
 48. Exchange fluctuations " Gold point " 1 77~78 
 
 49. How the bill of exchange is made negotiable 78-79 
 
 50. Exchange quotations 79-80 
 
 51. "Short paper" and "long paper" 80-81 
 
 52. Special functions of the "long paper;" its " pensioning " 81-82 
 
 53. Different methods of quoting; units quoted 82-83 
 
 22 
 
History and Methods of the Paris Bourse 
 
 Page. 
 
 54. How quotations are fixed 83 
 
 55. How exchange is negotiated 83-85 
 
 56. Dealings in precious metals 85 
 
 FIFTH DIVISION. Bourses in the Departments. 
 
 57. Generalities 85-86 
 
 58. Bourses " a parquet," and bourses without " parquet" 86-88 
 
 FIRST DIVISION. Bourses. Brokers, stockbrokers (agents de change), curb 
 brokers (coulissiers) . Kinds of securities dealt in. 
 
 (1) The Bourse is a public market for merchandise and 
 securities. It is the meeting place for those having to 
 deal in merchandise or securities, either for their own 
 account or for the account of their constituents. In the 
 case of merchandise proper wheat, flour, spirits, etc. 
 the bourse is usually called Bourse de Commerce (a commer- 
 cial bourse) . In the case of securities the bourse is called 
 Bourse des Valeurs (a stock exchange) . 
 
 The operators on the Bourse de Commerce are merchan- 
 dise brokers (courtiers en marchandises) . The profession 
 of merchandise broker is free, but this has not always 
 been the case. It was a monopoly under the old regime. 
 It was made free in 1791, monopolized again in the 
 year IX of the Republic that is, at the time when the law- 
 makers established commercial exchanges (28 Ventdse), 
 as well as the institution of stockbrokers then freed 
 again by the law of July 18, 1866. 
 
 (2) The operators on the Bourse des Valeurs are stock- 
 brokers (agents de change) , whose profession is monopolized. 
 It was monopolized under the old regime, like the profes- 
 sion of merchandise broker, with which it was long con- 
 founded. It was made free by the law of March 17, 1791, 
 
National Monetary Commission 
 
 and monopolized again by the law of 28 Vent6se, year IX. 
 But while, in 1866, the law again freed merchandise 
 brokerage, the profession of stockbroker remained a 
 monopoly. It is so still. 
 
 (3) The stockbrokers (agents de change} are not the 
 only ones to operate on the Bourse as brokers, as will be 
 seen later. The following, however, are the prerogatives 
 of the stockbrokers : 
 
 1. As brokers they have the exclusive right to trade in 
 government or other securities susceptible of being quoted. 
 (Art. 76 of the Code de commerce). a 
 
 2. As brokers, they have also the exclusive right to 
 negotiate bills of exchange, notes, and all commercial in- 
 struments. (Art. 76 of the Code de commerce.) 
 
 3. To verify the quotations of these securities. (Art. 
 76 of the Code de commerce.) 
 
 4. Before the law of July 18, 1866, they divided with 
 the merchandise brokers (courtiers) the privilege of deal- 
 ing in metals. Brokerage as regards mechandise having 
 become free, the privilege of the stockbrokers disappeared 
 on that account. But they alone have the right to verify 
 the quotations of metals. (Art. 76 of the Code de com- 
 merce.) 
 
 5. The stockbrokers give the necessary certificates for 
 transfers of rentes, on the terms provided for by the 
 
 It should be borne in mind that stockbrokers are not permitted to reveal 
 the names of their customers. (Art. 19, decree of 27 Prairial, year X.) 
 Therefore, in contradistinction to the merchandise broker proper, who 
 places the parties in personal contact and then withdraws, the stockbroker 
 bririgs them into relation, but hides their identity. The stockbroker is, 
 therefore, to be more accurate, a commission agent. According to article 
 94 of the. Code de commerce, a commission agent is a party who binds himself 
 in his own name between the parties. 
 
 24 
 
History and Methods of the Paris Bourse 
 
 decree of 27 Prairial, year X, royal ordinance of April 14, 
 1819, and the decrees of July 12, 1883, and June 10, 1884. 
 (Decree of October 7, 1890, art. 76.) 
 
 6. They are intrusted with the publication of the Official 
 Bulletin of Oppositions to the Negotiation of Securities 
 "to Bearer." (Law of June, 1872, art. n.) 
 
 7. They may be commissioned by the courts to nego- 
 tiate securities especially, pledged securities. Art. 93 of 
 the Code de commerce; art. 70 of the decree of October 7, 
 1890.) 
 
 8. They may be commissioned by the courts to dis- 
 pose of tne property of minors within the terms pre- 
 scribed by the law of February 27, 1880. 
 
 The stockbrokers in Paris number 70. (Later we shall 
 speak of stockbrokers in the provinces.) 
 
 They form an association, and a part of them, chosen 
 by ballot, form the syndical chamber, composed of a syn- 
 dic and eight members, and intrusted with the carrying 
 out of disciplinary measures, along with all general matters 
 concerning the collective welfare of the corporation. The 
 stockbrokers are named by decree of the President of the 
 Republic; they are placed under the disciplinary rule of 
 the Minister of Finance. (The stockbrokers in the Depart- 
 ments (provinces) are in some cases under the Minister of 
 Finance, and in others under the Minister of Commerce.) 
 
 (4) Stockbrokers alone have the right, according to 
 
 o By this law, the dispossessed owners of lost or stolen certificates are 
 given the means of obtaining duplicates of the same after a certain delay. 
 They must declare their protest against (faire opposition} the negotiation 
 of their certificates, and publish a note to that effect in the "Bulletin 
 ojficiel des Oppositions." All negotiations made in disregard of this publi- 
 cation are rejected, without affecting the protesting party. (See note to 
 No. 13.) Translator. 
 
National Monetary Commission 
 
 law, to trade in government and other securities suscep- 
 tible of being quoted. It is understood, however, that 
 securities which have not been explicitly admitted on the 
 official quotation list, either because the stockbrokers did 
 not care to adopt them, or because the securities did not 
 fulfiH the required statutory conditions, may, nevertheless, 
 be dealt in outside the Bourse. 
 
 There exist for this purpose free intermediaries, called 
 bankers (oftener "coulissiers" curb brokers), who deal 
 on the bankers' market (marche en banque), known as the 
 "coulisse," in securities called bank securities, or curb 
 securities (valeurs en banque ou vdleurs de coulisse) . 
 
 Frequently, one may hear on the Bourse these two 
 words pronounced in opposition to one another: the 
 Parquet (the floor) , the Coulisse (the curb) . By Parquet 
 is meant the stockbrokers' market, on account of the 
 parquet floor on which they stand. The Coulisse (equiva- 
 lent to the New York curb) is thus called, owing to the 
 fact that formerly the bankers congregated in a narrow 
 passageway called La Coulisse. 
 
 The number of curb brokers (coulissiers) is not limited. 
 Anyone can become a curb broker who wishes to estab- 
 lish himself as such, to employ sufficient capital for meet- 
 ing the requirements of the business, to pay the license, 
 and to style himself banker. But a certain number of the 
 bankers club together, form a syndicate, agree upon com- 
 mon rules, and elect a syndical chamber authorized to 
 see to it that the professional discipline is lived up to. 
 Thus there are three categories outside of which, we must 
 
 a Decision of the Cour de cassation of July i, 1885. Recueil de Sirey, 
 1885, i. 257. 
 
 26 
 
History and Methods of the Paris Bourse 
 
 again repeat, the profession remains free. They are the 
 syndicate of bankers dealing in securities for cash (Syn- 
 dicat des Banquiers en valeurs au comptant), the syndicate 
 of bankers dealing in securities for future delivery 
 (Syndicat des Banquiers en valeurs a terme], and the curb 
 for French rentes (la Coulisse des rentes francaises). 
 
 It should be noted that, although, according to law, 
 dealings in French rentes are the prerogative of the 
 monopoly of stockbrokers, and any intrusion into the 
 business reserved for them is an offense punishable by 
 fine, nevertheless curb brokers are tolerated as dealers in 
 French rentes, alongside of the stockbrokers thus becom- 
 ing their powerful competitors. No suit is brought against 
 them for interfering with the business of the stock- 
 brokers, but their operations are not valid in court. For 
 that reason the curb for rentes does not take the name of 
 
 a Article 8 of the law of 28 Ventose, year IX. The penalty is very 
 severe. It is a fine which amounts to not less than one-twelfth of the 
 amount of the surety bond, and not more than one-sixth. Which is the 
 bond that shall be taken as a basis? Shall it be the one of the year IX 
 (60,000 francs)? Is it the present bond (250,000 francs)? The Cour de 
 cassation took as a basis the bond at the time the offense was committed. 
 (Aug. 28, 1857, S 1857-1879; Jan. 14, 1860, S 1860, i, 481, Trib. correc- 
 tionnel de Lyon; Mar. 12, 1906, Journal I' Information of May 9, 1906.) 
 That decision is sustained by M. Boistel (Droit Commercial, p. 431) and by 
 M. Ruben de Couder. (Dictionnaire de Droit Commercial, V. Agent de 
 Change, 112.) But it is sharply criticized by most authors (Buchere 
 Traite des Operations de Bourse No. 114, Lyon, Caen & Renault, Traite de 
 Droit Commercial, vol. IV, No. 904; Mollot, Bourses de Commerce, No. 15, 
 Dalloz, Rep. V, Bourse 164; Rolland de Villargues, Rep. du Notariat, v. 
 Bourses de Commerce; Albert Broussois, Du Mono pole des Agents de Change 
 et de sa Suppression, p. 88). No extenuating circumstances are allowed 
 when there is interference with the functions of a stockbroker. (Tribunal 
 correctionnel Seine, June 24, 1859; and on appeal, Paris, August 2, 1859, 
 S 1860, i, 481); Mollot, Bourses de Commerce, No. 16. Ruben de Couder. 
 Dictionnaire de Droit Commercial, No. 115. Buchere, Traite des Opera- 
 tions de Bourse, No. 119. 
 
National Monetary Commission 
 
 Syndicate. Indeed, professional syndicates are recog- 
 nized by law, and may bring actions and sue in court. It 
 is not possible, therefore, to recognize under the name 
 of syndicates associations of persons carrying on an un- 
 lawful business. The toleration enjoyed by the curb 
 market in rentes originates from the consideration that 
 the credit of the State is benefited if dealings in rentes are 
 as free and extended as possible, in spite of the fact that 
 the law intrusts the stockbrokers alone with the transac- 
 tions in government securities. 
 
 (5) Finally, another category of bankers busies itself 
 with dealings in bills of exchange and treasury bonds. 
 The law likewise reserves for the stockbrokers the nego- 
 tiation of these instruments, but, owing to the expansion 
 of securities, and owing to the fact that the negotiation 
 of commercial bills of exchange is little remunerative, the 
 stockbrokers relinquish that part of their prerogatives to 
 free commerce. They never negotiate a bill of exchange; 
 they merely receive the list of quotations prepared by the 
 bankers and insert it in their official list. The free 
 dealers of this last category are called bankers and ex- 
 change brokers (courtiers de change). The word " coulis- 
 sier" is never used to designate them. 
 
 Let us mention that these bankers traders in bills of 
 exchange sometimes indorse the bill of exchange which 
 is the object of the operation; they then negotiate the 
 bill of exchange through themselves and for themselves, 
 becoming parties to the contract. When they only 
 transfer it to the buyer without indorsing it, they posi- 
 tively act as brokers, dealing for account of others. 
 
History and Methods of the Paris Bourse 
 
 (6) We shall now briefly review the nature of the 
 securities negotiated by stockbrokers and curb brokers. 
 
 We shall look into the mechanism of operations for cash, 
 and the mechanism of operations for future delivery. 
 Comparing the two, we shall see the differences in the 
 manner they are traded in, either on the Parquet (stock- 
 brokers' market) or on the Coulisse (bankers' market), in 
 the manner of quoting, and in the modes of settlement; 
 and, finally, we shall look into the dealings in bills of 
 exchange. 
 
 The operations on the Bourse are purchases and sales. 
 They bear upon : i , the certificates of loans of states, cities, 
 counties (departements) , and territories of foreign coun- 
 tries having an organization distinct from the state, such 
 as provinces and states united by federal bonds; 2, the 
 certificates of private or public enterprises constituted as 
 stock companies that is, the shares of companies called 
 shares of common stock, shares of preferred stock, dividend 
 shares, profit shares, or founders' shares (parts de fon- 
 dateur), and the certificates of indebtedness bonds, 
 debentures, etc. The rules for operations are, some of 
 them general ones, referring to the ordinary commercial 
 conditions; the others are of a special character, relating 
 to the traffic in securities on the Bourse. We shall take as 
 a guide the rules of the Paris financial market. 
 
 Certificates are either fully paid in or partially paid in. 
 They are fully paid in when the owner, whether he be the 
 original subscriber or the assignee, has no further assess- 
 ment to make on the certificate. For instance, one share 
 of 100 francs of a company is said to be fully paid in, when 
 the 100 francs of money it represents in the stated capital 
 
National Monetary Commission 
 
 have been paid in full. The certificates are partially paid 
 in, when there remain one or more assessments to be made, 
 before the certificate is fully paid in. For instance, one 
 share of 100 francs is "25 francs paid in. " That means 
 that there remains a sum of 75 francs due on that certifi- 
 cate, to be effected in one or more payments. 
 
 (7) Securities are issued registered, mixed (registered as 
 to principal only), or " to bearer." 
 
 The registered certificate (litre nominatif) bears the 
 name of its owner, and the interest or dividends are pay- 
 able on presentation of the certificate itself. The mixed 
 certificate (litre mixte) is different from the preceding one 
 in that the coupons for interest and dividends may be 
 cut off from the certificate, and are payable to bearer. 
 The certificate "to bearer" (au porteur) does not bear 
 the name of the owner; the holder is supposed to be the 
 owner, and the coupons are, as in the preceding case, pay- 
 able to the party presenting them. 
 
 The delivery to the purchaser of registered or mixed 
 certificates can be considered good delivery only when the 
 latter has been entered as titulary on the registers of the 
 debtor concern, and when a new certificate has been issued 
 in pursuance of that operation. That operation is called 
 transfer. 
 
 There are three kinds of transfers the transfer "reel," 
 the transfer " d'ordre, " and the transfer " de garantie. " 
 
 The actual (reel) transfer is effected by means of a request 
 of the titulary of the registered certificate, addressed to the 
 debtor concern, aiming at the cancellation of the existing 
 certificate and at the creation of a new one in the name of 
 a third party. The transfer is a deed in itself; it may be 
 
History and Methods of the Paris Bourse 
 
 the consequence either of a gift or of a sale. It is subject 
 to a tax of 0.75 per cent. 
 
 The transfer "d'ordre" or " de forme" has for its object 
 any alteration in the wording of the registration of a cer- 
 tificate, resulting from a deed different from the transfer 
 declaration whether the title remains vested in the 
 name of the same titulary, with a modification of his 
 social state, or it is transferred to a new titulary (deed of 
 gift, income granted by deed before a notary). 
 
 These transfers are free of tax, because they are made 
 in pursuance of deeds, which are themselves free of tax, 
 or of deeds for which the tax has been paid. 
 
 Transfer "d'ordre" also applies to an operation now 
 obsolete, the object of which was to safeguard profes- 
 sional secrecy by the stockbrokers (agents de change) ; the 
 stockbroker signed a first transfer in the name of his 
 fellow-broker, the buyer, who effected the transfer in the 
 name of his customer; the intermediate transfer is called 
 transfer "d'ordre" and is free of tax. 
 
 This latter transfer, like the transfer "reel," has become 
 very rare, stockbrokers making a practice of delivering to 
 one another only certificates " to bearer." (Droit de 1890, 
 art. 47.) 
 
 The purpose of the transfer " de garantie" (provided for 
 by art. 91 of the Code de commerce) is to establish the 
 pledge of certificates the transmission of which is effected 
 by a transfer on the books of the company; it is free of 
 tax, because it does not carry with it a change of owner- 
 ship. 
 
 Conversion is the act of causing a registered or mixed 
 certificate to be transformed into a certificate " to bearer," 
 
 90312 io 3 31 
 
National M on et ar y Commission 
 
 or a certificate "to bearer" into a registered or mixed 
 certificate. 
 
 The transfer following a transaction is effected as fol- 
 lows: The seller signs a transfer blank, by which he 
 requires the company whose certificate is being sold (be 
 it a government or private corporation) to transfer his 
 status of bondholder or shareholder to the purchaser. 
 On the other hand, the purchaser signs another sheet, 
 called transfer acceptance blank. The seller then hands in 
 at the public or private counter (i) his transfer blank, 
 (2) the certificate, and (3) the transfer acceptance blank. 
 When the operation is closed by the entries made within 
 the debtor establishment, the transfer has been exe- 
 cuted. A new certificate, bearing the name and profes- 
 sion of the purchaser, is handed to him. Usually it is 
 the intermediary of the seller (stockbroker or banker) 
 who demands the transfer in the name of his customer. 
 Many corporations will not effect transfers, unless a 
 stockbroker (agent de change) guarantees the signatures, 
 even when the sale has been effected without the help of 
 a stockbroker. Especially, so far as transfers of regis- 
 tered certificates of French rentes are concerned, the 
 signature of a stockbroker is always required. 
 
 A certificate " to bearer " is delivered to the purchaser by 
 merely being handed over to him. Article 2279 of the 
 Code civil says: "With regard to chattels, possession 
 is as good as title." These words mean that the holding 
 of a certificate of personal property leaves it for granted 
 that the holder is the owner thereof. The simple handing 
 over of a certificate ' ' to bearer ' ' transfers the ownership 
 thereof. 
 
History and Methods of the Paris Bourse 
 
 SECOND DIVISION. Operations for cash (operations au comptant). 
 
 (8) Bourse operations are made for cash or for future 
 delivery (au comptant ou a terme). The operation for 
 cash is an operation to be settled immediately or after a 
 very short delay certificate against cash, cash against 
 certificate. The operation for future delivery (operation 
 a terme) is to be settled within a period fixed in advance. 
 We shall first consider operations for cash. 
 
 It is very easy to understand the mechanism of opera- 
 tions, if we follow in their logical order the successive stages 
 of execution. How is a bourse order given? Let us follow 
 that order to the market and let us see how it will be exe- 
 cuted. When executed, how will it be checked by the 
 party who gave it; how will the operation be settled; 
 what expenses are to be borne by the party who gave the 
 order; the delays it shall be subjected to; what are the 
 means of recourse in case of delay or default of the party 
 who received the order; for what is the party who gives 
 an order liable, when he infringes the essential conditions of 
 the contract? To all these questions the following expla- 
 nations will give an answer, showing at the same time the 
 workings of the financial market. 
 
 (9) Orders are given to stockbrokers either at a fixed 
 price (a cours fixe) , or at best (au mieux) , or at the average 
 price (au cours moyen) . Instance of an order at fixed price: 
 "Please buy i bond of the Credit Fonder 1895 at 465 
 francs;" or "Please sell 3 shares of the Edison Company 
 at 1,100 francs;" or "Please buy 3 francs French Rente 
 Z%% at 98 francs." 
 
 An order at best shall be worded in the same way; but 
 no price shall be fixed, because the stockbroker will buy 
 
 33 
 
National Monetary Commission 
 
 or sell at the price at which he will be able to buy or to 
 sell. For an order at the average price, the indication of 
 price shall be replaced by the words " cours moyen " (aver- 
 age price), or simply by the letters "c. m." 
 
 "Cours moyen" (average price) is a price halfway be- 
 tween the highest and the lowest prices quoted. "Avant 
 bourse" (before the opening) , that is to say, before the 
 opening of the session, the stockbrokers and their clerks 
 meet in a special room. Some offer, and others ask for, 
 securities at the average price. Neither know what the 
 price will be; that will be decided during the session. 
 When an offer and a demand coincide, the transaction is 
 closed. Only the price is missing. A ring of the bell an- 
 nounces the opening of the bourse session; the stock- 
 brokers and their clerks leave the special room and pro- 
 ceed to the public hall around the railed inclosures. 
 The session begins. As the dealers execute orders, they 
 give the prices to a marker, whose entries will serve to 
 make up the quotation list. The quotation list having 
 been made up, the parties who have traded on the basis of 
 the average rate, will be able to ascertain that average, by 
 merely taking the highest and the lowest rates. 
 
 If only one price is quoted, that single price shall take 
 the place of the average price. 
 
 If there are no quotations, the operations are considered 
 as "non faites" (not executed). 
 
 It may happen that an order given at the average rate 
 is not executed. The stockbroker (agent de change) may 
 have been unable to find a counterpart. The party giving 
 the order can make no claim on that account. 
 
 34 
 
History and Methods of the Paris Bourse 
 
 (10) In the bankers' market, that is to say, "en cou- 
 lisse" (on the curb), orders are received either at fixed 
 prices or at best. The bankers do not trade on the basis 
 of average price. The party giving an order and the 
 banker may, however, contract that a certain operation 
 shall be executed at the average rate; but in such cases 
 the banker will have contracted a personal obligation, and 
 the operation contracted with his client will be distinct 
 from the one closed in the public market. a 
 
 (n) Later, when we turn to transactions for future de- 
 livery (operations a terme) , we shall see that such transac- 
 tions can not be made for less than 25 shares or for less 
 than a certain number of francs of government rentes. 
 But it should be borne in mind that for cash the minimum 
 to be traded in is one unit; that is to say, one share, one 
 bond, one debenture, etc. Some bonds, especially the 
 bonds of the city of Paris or of the Credit Fonder (Mort- 
 gage-loan Society), are divided into quarters and into 
 fifths. Then such portions bear the name "quarter of a 
 bond," "fifth of a bond." 
 
 Orders remain in force according to agreement between 
 the parties. An order may be given, good for the day's 
 session, or until canceled that is to say, up to the time 
 jvhen the party giving the order shall have expressed the 
 
 a The stockbroker (agent de change) can not personally make a contract 
 with his customer. Article 85 of the Code de commerce forbids him dealing 
 for his own account. The result is, with a bourse order in hand, he can not 
 enter into a private agreement with the party giving the order concerning 
 the execution of same. However, article 85 of the Code de commerce was 
 especially intended for the stockbroker; the banker (curb broker) may enter 
 into a personal agreement and act for himself. In practice, when he per- 
 sonally becomes a party to the contract, he must notify his client of the 
 fact. In certain cases the personal intervention of the broker is the result 
 of circumstances. 
 
 35 
 
National Monetary Commission 
 
 desire to withdraw it, if it has not been filled. However, 
 to avoid errors, stockbrokers and bankers often stipulate 
 that, unless notified to the contrary, every order is con- 
 sidered as remaining in force until canceled. But even 
 orders, good until canceled, can not remain in force for an 
 unlimited period. Therefore, it is often understood that 
 if an order, good until canceled, has not been executed 
 during the first week, it shall be considered as canceled, so 
 that, within each banking house or each stockbroker's 
 office, new orders are issued every Monday. This con- 
 dition is often mentioned on the printed forms of stock- 
 brokers and bankers, who thus protect themselves against 
 any eventuality. 
 
 When, after the closing of the Bourse, the stockbrokers 
 and bankers return to their respective offices, they start 
 checking. They sort out the trades they have made 
 with their colleagues, and send to one another confirma- 
 tions of the closed transactions, in order to avoid all 
 possible errors. It is very apparent that during the 
 scramble and noise errors may occur. One has bought 
 instead of selling, another has bought or sold too much. 
 It happens, also, that a figure has not been correctly under- 
 stood, or erroneously entered on the blotter. In short, 
 operations having been verbally contracted on the Bourse, 
 it is necessary that this fiduciary process be replaced by 
 a safer one. The checking includes, also, the entering on 
 the books, of the transactions effected, as well as of the 
 names of the parties who had given the orders, and for 
 whose account they were executed. Notice thereof is at 
 once sent to them. 
 
History and Methods of the Paris Bourse 
 
 (12) The party who gave the order, can control the 
 notice he receives by means of the quotation list. He 
 must be advised of the execution of his orders at quota- 
 tions within the limits of published prices. No doubt, 
 in some cases he may rightfully claim more favorable 
 prices than those reported to him, although the prices at 
 which his orders were executed have actually prevailed. 
 In such a case, his representative has been disloyal. It 
 may be realized that in that line of reasoning it is impos- 
 sible to foresee the nature of the discussions that may 
 ensue. The party who gave the order, will then apply 
 for redress to the Syndical Chambers of stockbrokers or 
 bankers (aux chambres syndicates des agents de change 
 ou banquiers), and, if need be, to the courts. The fact 
 remains that in most cases the controlling means is fur- 
 nished by the quotation list. 
 
 The prices of securities listed by the stockbrokers, 
 (agents de change) are published on a sheet called "Cote 
 Officielle" (official price list). 
 
 The prices of curb securities (Les cours des valeurs de 
 coulisse), listed by the "Syndicat des Banquiers au comp- 
 tant" (syndicate of bankers trading for cash), are pub- 
 lished in a special list called "Cote du Syndicat des Ban- 
 quiers en valeurs au comptant" (price list of the syndicate 
 of bankers trading in securities for cash) . 
 
 The prices of curb securities which are not listed by 
 any syndicate, and which are traded in owing to the 
 natural phenomenon of offers and bids for securities 
 tending to concur to the same place, are recorded on free 
 quotation lists. These last, besides, publish the quota- 
 tions of all other securities; those of the official market, 
 
 37 
 
National M on et ar y Commission 
 
 and those of the curb syndicates. The best known are 
 " Le cours de la Banque et de la Bourse (cote Des fosses) " 
 and "La cote de la Bourse et de la Banque (cote Vidal)." 
 
 On the official list of the stockbrokers (Cote Officielle 
 des agents de change) the prices are given in the order of 
 transactions. The "Cote du Syndicat des Banquiers en 
 -valeurs au comptant" gives only the lowest and highest 
 quotations. The free quotation lists, however, give also 
 the closing prices of the curb securities. 
 
 (13) When a stockbroker or banker, buying for account 
 of a party who gave an order, has received the securities, 
 the settlement is effected when he has delivered them and 
 received the cash. The same applies to the stockbroker 
 or banker selling, in his intercourse with the party who 
 gave the order. 
 
 The securities must be " good delivery," free of all oppo- 
 sition to their negotiation, and with the interest agreed 
 upon. 
 
 The stockbroker or the banker who should happen to 
 deliver counterfeit securities, or lost or stolen securities, 
 with an opposition existing to their being negotiated, 
 would find himself exposed to have his deliveries refused, 
 or sentenced to deliver securities of good delivery and free 
 from defects. By application of the same principle, the 
 
 a The owner deprived of his securities "to bearer" has the right to make 
 opposition to their being negotiated, and to the interest and dividends and 
 principal demandable being paid, by means of a special process provided 
 for by the laws of June 15, 1872, and February 8, 1902. He thus puts 
 himself in a position to obtain duplicates of his securities after a certain 
 time. Unfortunately, this sort of proceeding does not apply to securities 
 dealt in abroad. It would be desirable that an International Congress 
 should prepare a similar clearing in every country, and thus insure the safe- 
 guarding of owners against the loss and theft of securities "to bearer." 
 
History and Methods of the Paris Bourse 
 
 stockbroker or banker is not allowed to deliver bonds 
 drawn for redemption or subject to certain conditions. 
 
 (14) The "jouissance" (interest accrued) is the right 
 to the interest or the dividends. It starts from the date of 
 the last payment. Instance: On October 19, 1908, French 
 rentes 3 per cent were quoted for cash 95.40 francs, jouis- 
 sance October, 1908. These last words mean that the 
 purchaser is entitled to the interest coupon following the 
 one of October, 1908. This latter one has been cut by 
 the owner, who had the benefit of his property. 
 
 For shares of corporations, the coupons are numbered. 
 They are traded in, for instance, ' 'ex-coupon" 6 or 7, which 
 means that the purchaser shall only be entitled to the 
 dividend coupons subsequent to coupon 6 or coupon y. 6 
 
 Securities which are irregular as to the interest accrued, 
 may be rejected. However, within the month preceding 
 maturity, if the owner has detached the coupon, he may 
 sell and make a good delivery, but the purchaser will 
 deduct the amount of the missing coupon when settling. 
 This option applies only to French securities. 
 
 (15) Finally, securities dealt in are supposed to be in 
 order with the internal revenue concerning the payment 
 of stamp taxes to which securities are subjected. 
 
 a To avoid all trouble in this regard, the transactions in securities subject 
 to drawings are made on the stock exchange "ex droit" (minus the right) to 
 the advantage obtained by the drawing, a few days before it takes place 
 (art. 45 of the regulations of stockbrokers of Jan. 30, 1899); five days 
 before, for bonds "to bearer," and seven days before, for registered bonds. 
 
 6 On the Paris Bourse the coupons of French rentes are considered as 
 detached fifteen days before their maturity. French rentes 3 per cent 
 certificates are provided with coupons maturing January i, April i, July i, 
 and October i. They are dealt in "interest accrued from January, begin- 
 ning from the preceding December 16; interest accrued from April, begin- 
 ning from the preceding March 16; interest accrued from July, beginning 
 from the preceding June 16, and interest accrued from October, beginning 
 
 from the preceding September 16 " 
 
 
 
 39 
 
National Monetary Commission 
 
 (16) The expenses to be borne by the party who gives 
 the orders, are the brokerage, the duty on bourse oper- 
 ations, the receipt stamp, and, in some cases, the fee for 
 entering the numbers of certificates on the statement ; also 
 the transfer fee on registered certificates. 
 
 The brokerage (courtage) of stockbrokers (agents de 
 change) is o.io per cent of the net amount of the trans- 
 action, with a minimum of 0.50 francs on each statement. 
 The fee is raised to 0.25 per cent of the amount on transac- 
 tions resulting from matters in litigation. These rates are 
 binding on all stockbrokers. 
 
 The rates of brokerage on the Coulisse are unrestricted. 
 However, in most cases, there is a charge of 25 centimes 
 for certificates worth less than 250 francs and of o.io per 
 cent for certificates worth more than that. The minimum 
 charge is 50 centimes. 
 
 Two orders executed at the same session, one for a 
 purchase and one for a sale, occasion but one brokerage 
 (what is called the "franco''). The brokerage is figured 
 on the transactions either on the side of sales or on the side 
 of purchases whichever gives rise to the larger fee. 
 
 But in order to obtain "franco," the transactions must 
 have taken place in the same market. In other words, 
 there is no "franco" between securities dealt in by the 
 stockbrokers and securities dealt in by the bankers. 
 
 (17) The tax on bourse operations is, for each party to 
 the contract, 5 centimes per 1,000 francs, or fractions 
 thereof; that tax is reduced to one-quarter (0.0125 francs 
 per fraction of i ,000 francs) on all transactions in French 
 rentes. (Law of Apr. 28, 1893, and Dec. 31, 1907.) 
 
 a They have been fixed by a ministerial decree of July 22, 1901. 
 
 * 
 
 40 
 
History and Methods of the Paris Bourse 
 
 Statements containing receipts for securities or receipts 
 for money, are subject to the special receipt stamp of 10 
 centimes, established by the law of August 23, 1871. 
 
 Any purchaser of securities may require his stock- 
 broker to enter the numbers on tfie delivery statement. 
 This record is subject to a fee of 5 centimes for each cer- 
 tificate. (Art. 13 of the law of June 15, 1872, and art. n 
 of the law of Apr. 10, 1873.) 
 
 (18) The transfer of a registered or mixed certificate, 
 and the conversion of either into a certificate " to bearer," 
 are subject to a special tax called " droit de transmission " 
 (transfer tax) . 
 
 That tax is 0.75 per cent net that is to say, exempting 
 income of later maturity. (Laws of June 13, 1857, June 
 16, 1871, June 23, 1872, and Dec. 26, 1908.) 
 
 The transfer tax is borne by the purchaser. It is col- 
 lected by the corporation for account of the treasury 
 (pour le compte du Tresor) at the time the transfer is 
 made. Disbursed by the banker or stockbroker, for 
 account of the purchaser, it must be reimbursed at once 
 by the latter. 
 
 Transfers of French rentes, resulting from sales, are 
 free of the 75-centime (0.75 per cent) tax. a 
 
 a There is a transfer tax on securities " to bearer." That transfer tax is 
 paid by the corporations and various establishments; but these have re- 
 course against the holders of their securities at the time the interest and divi- 
 dends are paid. That fee is 25 centimes per 100 francs (0.25 per cent) with- 
 out extra tithes (secondary fees). (Art. 3 of the law of June 29, 1872, and of 
 Dec. 26, 1908.) It is a yearly and obligatory tax, figured on the capital of 
 all securities, appraised on their average price during the preceding year, or, 
 for want of a rate, by appraising according to the rules provided by article 
 1 6 of the law of 22 Frimaire, year VII. There is no transfer charge on 
 certificates " to bearer" of French and foreign rentes. The conversion of 
 certificates " to bearer" into registered certificates is free of taxes, according 
 to the law of December 26, 1908. 
 
 41 
 
National Monetary Commission 
 
 (19) The time for delivery differs in the cases of reg- 
 istered certificates or certificates "to bearer." 
 
 Registered certificates that have been purchased must 
 be at the disposal of the party who gave the order, the 
 very next day after tTiey have been received at the office 
 of the stockbroker. If, after the twentieth session follow- 
 ing the one when the transaction was effected, the securi- 
 ties have not been handed to the party who gave the 
 order, the latter may call upon the stockbroker to fulfill 
 the contract, and give notice of said notification to the 
 Syndical Chamber of Stockbrokers (Chambre syndicate des 
 agents de change) , which shall take the necessary measures 
 to insure the carrying out of the contract, at the risk of 
 the stockbroker. In Paris the Syndical Chamber can not 
 decline to effect that execution (then it is said that the 
 stockbroker is "executed") even if the syndical chamber 
 has to bear the consequences. 
 
 (20) The stockbroker, buying, who has not received the 
 securities from his fellow-member, selling, may, at the 
 fifteenth session following the session at which the trans- 
 action took place, disclose said fellow-member, seller, and 
 call upon the Syndical Chamber of Stockbrokers to pur- 
 chase ("buy in") the securities for account of said seller, 
 and at the risk of the latter. 
 
 The proceeds from sales of registered securities must be 
 placed at the disposal of the party who gives the order, 
 on the day following the completion of the transfer. 
 Having waited until after the twentieth session follow- 
 ing the transaction, the party who gives the order to sell, 
 may have recourse to the same measures which, we saw, 
 the purchaser may resort to that is to say, cause the 
 
History and Methods of the Paris Bourse 
 
 "execution" of the stockbroker. On his side, the stock- 
 broker, selling, may, at the fifteenth session following the 
 one of the transaction, demand the "execution" of his 
 fellow-member through the Syndical Chamber. 
 
 The above-mentioned delays are increased by eight days 
 for securities, the transfers of which are subject to the 
 approval of the boards of directors. 
 
 (21) Securities "to bearer" must be placed at the dis- 
 posal of the buyers, on the very day following the delivery 
 effected by the sellers. In their intercourse between them- 
 selves, the stockbrokers must deliver securities before the 
 tenth session following the transaction. After that time 
 they must exact the "buying in " for account of the stock- 
 broker, seller, through their Syndical Chamber. On his 
 side, the party who gave the order, may, after the fifteenth 
 session following the one of the transaction, and after 
 having called upon the stockbroker to effect delivery, 
 give notice of this call to the Syndical Chamber of Stock- 
 brokers, within twenty-four hours of the same, but must 
 not use legal formalities. The Syndical Chamber will 
 take the necessary steps, and, if need be, it will itself 
 insure the proper execution of the contract. (Art. 55 of 
 decree of June 29, 1898.) 
 
 The proceeds from sales must be at the disposal of the 
 party who gave the order, two days after the securities 
 have been handed to the stockbroker. It should also 
 be noted that .the stockbroker, selling, when dealing with 
 a fellow-member who does not accept delivery, may en- 
 force purchase through the Syndical Chamber for account 
 of his fellow-member, buying, after the tenth session fol- 
 lowing the transaction. The party giving an order of 
 
 43 
 
National M o n et ar y Commission 
 
 sale, who has not received a settlement after the fifteenth 
 session, may apply to the Syndical Chamber of Stock- 
 brokers, as has been said concerning the party giving 
 purchasing orders. 
 
 (22) Dealings on the curb are not subject to the same 
 delay in respect to deliveries. In theory, we may con- 
 ceive that a buyer or seller for cash may exact the delivery 
 of his securities or payment immediately after the trans- 
 action, provided he can on the spot fulfill the obligations 
 of the purchaser or seller, which consist in paying the 
 purchase money or delivering the securities sold, as the 
 case may be; however, a certain delay is unavoidable on 
 account of the banker, who acts as an intermediary, and 
 who is, in fact, himself subjected to delays. The Asso- 
 ciated Bankers of the City of Paris (Les Banquiers Syn- 
 diques du marche de Paris), united in a professional 
 syndicate within the provisions of the law of May 21, 
 1884, established the rule that securities "to bearer" 
 must be delivered by the seller before the seventh session 
 following the transaction. After that delay the buyer 
 may make a demand on the seller by registered letter, at 
 the same time notifying the Syndical Chamber of that 
 syndicate. The latter effects the " buying in " for account 
 of the defaulter at the tenth session following the day 
 when it will have received the advice. 
 
 The party giving an order may also be "executed." 
 A stockbroker is not bound to accept an order if, previ- 
 ous to all trading, he has not received the securities to be 
 disposed of, or the funds intended to settle for the 
 amount. But he may have been led to grant credit to 
 the party giving the order. In such a case, if, after 
 
 44 
 
History and Methods of the Paris Bourse 
 
 notice by registered mail, the party who gave the order; 
 has not, within three days from the time the letter was 
 sent, come up with the securities or the cash, the " buying 
 in" of the securities sold, or the "selling out" of the 
 securities purchased, may be proceeded with immediately. 
 
 THIRD DIVISION. Operations for future delivery (a terme). 
 
 (23) An operation for future delivery is one engaging 
 the parties from the day of the contract, but the execution 
 of which is put off to a maturity fixed in advance. For 
 instance: Peter buys on the ist of the month 100 shares 
 for the 1 5th of the current month at 100 francs. 6 On the 
 1 5th of the month, date of maturity that is, the day of 
 settlement the winding up of the operation will take 
 place. Peter must accept delivery of the stock and pay 
 the price 10,000 francs. c 
 
 On the other hand, if he has sold 100 shares at 100 
 francs, he will have to deliver on settling day that is, on 
 the 1 5th of the month 100 shares, and receive iv.,ooo 
 francs. d 
 
 Hence, the first settlement following operations for 
 future delivery is the taking up of securities bought by 
 the purchaser, and the delivery of securities sold by the 
 seller. 
 
 It may happen that the purchaser for future delivery 
 does not wish to take up the securities purchased. In 
 such a case, he will resell them for the same maturity, 
 and these two operations will show a difference, which, 
 
 a Art 1 185 of the Code civil. 
 
 & In the instances mentioned no account is taken of taxes or brokerages; 
 this is done for the sake of simplicity. 
 c Art 1650 of the Code civil. 
 d Article 1603 of the Code civil. 
 
 45 
 
National Monetary Commission 
 
 according to circumstances, will cause him to be debtor 
 or creditor. 
 
 Instance: Peter, buyer of 100 shares at 100 francs, 
 resells them at no: Debtor of 10,000 francs, creditor of 
 n,ooo, he retires with a balance in his favor of 1,000 
 francs. 
 
 On the other hand, if he has resold with a loss, for 
 instance at 90 francs, then, being a debtor of 10,000 
 francs and a creditor of 9,000 francs, he retires with a 
 balance against him of i ,000 francs. 
 
 To purchase with a view of reselling at a higher price, 
 is called to speculate for a rise (tire a la hausse). 
 
 To speculate for a fall (Hre a la baisse) is to make the 
 reverse operation, that is, to sell first with the hope of 
 buying in later at a lower price. Let us take up the 
 various instances, by illustrating them with the account- 
 ing which results from these transactions, in order to 
 comprehend better their working. 
 
 When Peter has bought with the intention to resell, and 
 then has resold, or when he has sold with the intention 
 to repurchase, and then has repurchased, the result on 
 
 Some people experience difficulty in understanding the "short" sale 
 (vente & dtcouvert) which is the original transaction of speculation for a fall. 
 It is often considered as illegitimate. The following anecdote will explain 
 and justify it. 
 
 "M Boscary de Villeplaine, deputy syndic of the association of stock- 
 brokers, was conversing with Napoleon regarding the discussion in the 
 council of state of article 422 of the Penal Code (now repealed) ' Your 
 Majesty,' said M, Boscary de Villeplaine, ' when my water carrier is at the 
 door, would he be guilty of stellionate (selling property one does not own or 
 selling the same property to two different parties) if he sold me two casks 
 of water instead of only one, which he has? ' ' Certainly not, because he is 
 always sure of finding in the river what he lacks.' ' Well, Your Majesty, 
 there is on the Bourse a river of rentes.'" (Memorial of the stockbrokers 
 addressed to the Minister of Finance, 1843, p. 44, footnote.) 
 
 46 
 
History and Methods of the Paris Bourse 
 
 striking a balance will show- him creditor or debtor, 
 owing to the balancing of his debit with his credit. 
 
 Instance : Settling account of Peter, who had purchased 
 100 shares at 100 francs, which he resold at no francs: 
 
 Dr. Cr. 
 
 Francs. Francs. 
 
 ioo shares at ioo francs 10,000 100 shares at no francs n,ooo 
 
 Credit balance.. .__ 1,000 
 
 11,000 11,000 
 
 Profit, 1,000 francs. 
 
 (24) Operations for future delivery give rise to ''re- 
 ports " ( " carrying-over ' ' operations, ' ' continuations ") . 
 It is in place here succinctly to explain their object and 
 mechanism. 
 
 Object. Let us suppose, in the instance above men- 
 tioned, that Peter, buyer for the i5th instant of ioo 
 shares at ioo francs, wishes, when the i5th arrives, to 
 extend his maturity until the 3oth of the month. 
 
 Mechanism. On that same day, the isth instant, he 
 will resell the securities at a special price, called " cours de 
 compensation" (making-up price or clearing price 6 ), and 
 will rebuy, at the same time, for the end-of-the-month 
 maturity at the same making-up price, increased by an 
 amount called " prix du report" (cost of carrying over, 
 ''contango")- Let us suppose that no francs is the 
 making-up price, and that the cost of carrying over is i 
 franc. You find below the transaction on two accounts. 
 
 Let us first give the first account. 
 
 o Articles 1289 and 1290 of the Code civil. 
 
 & The clearing price is an accounting process with a view to unifying 
 "carrying-over" operations. It is fixed by an agreement in the public 
 market. The syndical chambers fixes that rate. 
 
 47 
 
National Monetary Commissio 
 
 n 
 
 Peter, his settlement account for the i5th instant: 
 
 Dr. Cr. 
 
 Francs. Francs. 
 
 i oo shares at i oo francs 10, ooo 100 shares at no francs 
 
 Credit balance 1,000 (clearing price) 11,000 
 
 1 1 , ooo 1 1 , ooo 
 
 Profit, i, ooo francs. 
 
 Now, this is the second account for the end of the month. 
 Peter, his settlement account for the end of the month : 
 
 Dr. Cr. 
 
 Francs. Francs. 
 
 i oo shares at n i francs (i i o Sales None. 
 
 francs plus i) 11,100 
 
 The two accounts are thus established: One, which in- 
 cludes a settled transaction, showing the operator as 
 creditor or debtor, as the case may be, for an amount to 
 collect or to pay; the other, showing a new operation, 
 which, at the following settlement, will be the object of a 
 liquidation that is to say, another winding up, either by 
 taking up or reselling the securities, or by a new "report " 
 (continuation). The continuation has, therefore, the 
 same result as a renewal of maturity. 
 
 Capitalists wishing to make temporary investments put 
 their money out in "reports" (loans for carrying over, 
 investments in continuations) . On settling day they pur- 
 chase, on the stock exchange, securities from buyers 
 who desire to prolong their operations; they resell them 
 to the same parties for the next maturity at the clearing 
 price increased by the price of carrying over (contango). 
 
 On settling day these operations are easy, owing to the 
 abundance of funds available for continuations (capitaux 
 reporteurs). If there is no superabundance of funds, and 
 if the engagements for a rise (engagements h la hausse) 
 are not very numerous, continuations are cheap. 
 
 4 8 
 
History and Methods of the Paris Bourse 
 
 If money is plentiful and purchases are few, continua- 
 tions are at par. 
 
 In case securities are wanting in comparison with the 
 money available, the sellers will pay a premium in order 
 not to make deliveries; this is called "deport" (back- 
 wardation) . 
 
 For instance: Peter, seller of 100 shares at 100, finds 
 himself unable to effect a delivery. He will pay, for 
 instance, i franc per share for "deport'' (backwardation), 
 and his settling account will carry a repurchase at the 
 clearing price (cours de compensation). His account at 
 the following maturity will carry a sale at the clearing 
 price, less i franc. 
 
 (25) Some operations for future delivery (a terme) are 
 contracted for uncertain dates, though the maturity is 
 foreseen. Such are transactions in securities ' ' a remission" 
 ("when issued"). Speculators undertake to deliver an 
 issue of securities in perspective when they are issued. 
 Hence, operations "a remission" are transactions sub- 
 ject to settlement at a time when certain formalities will 
 have been accomplished, and in a place where the delivery 
 of the securities will be actually possible. 
 
 Some emissions of securities are subject to reductions in 
 the allotments when the subscription lists are closed. 
 That phenomenon gives rise to special operations called 
 "ventes de resultats" (sales of percentage of securities 
 obtained, or sale of allotments). One can sell, or pur- 
 chase, the results of subscriptions for 3,000 francs rentes, 
 for instance, or 100 shares, etc. 
 
 (26) Among operations for future delivery there are 
 special ones called " operations a prime " (options). These 
 
 49 
 
National Monetary Commission 
 
 are purchases concerning which the purchaser reserves 
 for himself the right to abandon the trade, in considera- 
 tion of a certain sum fixed in advance. For instance, 
 Peter buys for the i5th instant 100 shares at 120 francs 
 "dont" 5 francs. a The transaction is entered as 120/5. 
 At a time fixed during the settling operations, called 
 "reponse des primes" (option declaration) this is the 
 session preceding the day devoted to "contango" opera- 
 tions (reports) Peter must announce whether he will take 
 up the stock at 120, or whether he abandons the trade, 
 by giving up 5 francs for each share to the seller. 
 
 As a rule, the prices for transactions in options are as 
 much higher as the premium to be forfeited is smaller. 
 Instance: A stock is worth 100 on the average. Let us 
 suppose the rate is 120 francs " dont "5; then we can take 
 the rate as 125 francs "dont" 2.50; also we can take it as 
 127 francs "dont" i. 
 
 There is no absolute rule for these differences, the 
 same as there is no absolute rule for prices in a general 
 way. Offers and bids cause the variations. 
 
 The maturity also plays a part in the option prices. 
 Thus a transaction in options maturing in a month or six 
 weeks or two months costs more than an option at a 
 nearer date. 
 
 It is thought that transactions in options have been 
 carried on in France from the time of a special operation 
 made by George Law in 1718, in order to make an impres- 
 sion on people, and foster purchases of shares in his bank. 
 
 a The expression "dont" serves to indicate the sum to be forfeited. It 
 implies the undertaking thus expressed. Peter buys securities at 120 
 francs, "dont" (of which) he shall forfeit 5 francs if he does not take up the 
 securities. 
 
History and Methods of the Paris Bourse 
 
 He bought 200 shares deliverable in six months for an 
 amount greater by 40,000 livres than the price they were 
 worth then (300 livres) it being understood that if, after 
 six months, the shares were not worth 500 livres, he would 
 forfeit the 40,000 livres to his seller. This was a real 
 option transaction, and by entering upon such a contract, 
 Law confirmed his faith in the rise of his shares. Numer- 
 ous purchases by the public then took place. (See 
 Edmond Guillard, Operations de Bourse, p. 24.) 
 
 (27) Option transactions give rise to manifold combi- 
 nations at the pleasure of the operator. We shall name 
 the principal ones: [a] "operations a primes isolees" 
 4 (plain options); [b] "operations a prime contre ferme" 
 (operations of "option against non-option") ; [c] "opera- 
 tions ferme contre prime" ( " non-option against option") ; 
 [d] operations a prime contre prime" ("option against 
 option "). 
 
 [a] Plain options. The plain option (operation a prime 
 
 isolee) is the option transaction in its simplest form. 
 Thus a capitalist or a speculator wants to buy stocks, but 
 fears a decline, and prefers, in case the fall should be too 
 severe, to reserve for himself the right to forego the trade, 
 in return for a small sum. He will purchase, as we saw 
 in the above instance, by supposition, at 120/5. 
 
 By keeping to that supposition, the following will 
 happen: Just as it may be to the advantage of that pur- 
 chaser to forego his trade at the cost of 5 francs for each 
 share, so, on the other hand, his advantage may demand 
 that he. carry out his contract. In the latter case, as 
 already stated, his transaction will be a fixed transaction 
 (operation ferme) . 
 
National Monetary Commission 
 
 Below you will find two instances illustrated by an 
 account. 
 
 Instance of a transaction when the option is abandoned. 
 The rate at the option declaration having been, let us 
 suppose, 1 1 4 francs : 
 
 Peter, his settling account on the i5th instant. 
 
 Dr. 
 
 Francs. 
 
 Cr. 
 
 Francs. 
 
 Sales Nil. 
 
 Balance due 500 
 
 i oo shares at 120/5 Nil. 
 
 Option abandoned 500 
 
 Loss, 500 francs. 
 
 On the other hand, if we take for granted that the quo- 
 tation at the option declaration was such that Peter found 
 it advantageous tp carry out the transaction, he becomes 
 a non-optional buyer. Naturally, he may take up his 
 securities, resell them, or have them carried over this 
 goes without saying. Having, indeed, become fixed, the 
 transaction will be governed by the general principles 
 enumerated above for fixed transactions. Such is the 
 second case. Let us dwell upon it one moment more, in 
 order to see the effect that a subsequent fixed sale will 
 have on an account. 
 
 If we suppose the transaction on option carried out and 
 wound up by a sale at a price which we will suppose to be 
 130 francs, a Peter's account will be made out as follows: 
 
 Peter, his settling account on the i5th instant. 
 
 Dr. 
 
 Francs. 
 
 100 shares at 120/5 12,000 
 
 Credit balance _ . i , ooo 
 
 Profit, 1,000 francs. 
 
 13,000 
 
 Cr. 
 
 Francs. 
 
 100 shares at 130 13,000 
 
 13,000 
 
 The price of 130 is hypothetical. Let us remark that, provided the 
 price is above 115, our option purchaser finds his advantage in selling, even 
 if the price is below 120, and he, consequently, sells at a loss. 
 
 52 
 
History and Methods of the Paris Bourse 
 
 Thus, during the half month, the option operator has 
 had the opportunity to sell non-op tionally (ferme), if 
 events led to an advantageous transaction. 
 
 The above transaction illustrates a fixed sale taking 
 place after a purchase on option. But, instead of a fixed 
 sale, a sale on option may be made. In that case, the 
 transaction becomes a combination of option against 
 option, which we shall investigate later in the combi- 
 nation [d]. 
 
 We shall now proceed with the investigation of sale on 
 simple option. 
 
 It has been said that " option" is a purchase which the 
 purchaser could abandon. The case can not be reversed. 
 The seller on option can not waive the contract; he is 
 bound to the buyer. 
 
 The sale on " simple option" is suitable to the holder 
 of securities who, in order to sell better, desires to take 
 advantage of the difference existing between the rates of 
 fixed transactions and the rates for options. For instance: 
 A security is quoted "ferme" (without option) 100, the 
 price of options is 120/5. Peter sells 100 shares at 120/5. 
 If the purchase is taken up by the buyer, Peter has indeed 
 sold profitably, since he sold his securities at 120, while 
 they were worth 100 "ferme." If the purchase is aban- 
 doned, Peter keeps his securities, but the 500 francs pre- 
 mium which he collects, reduce, relieve, allay the loss 
 which he experiences on the securities he owns. 
 
 Options therefore are not, as superficial minds formerly 
 stated, a gambling operation. 
 
 The gambler is bold. On the other hand, the one who 
 guards himself when he buys, the one who limits his loss 
 
 53 
 
National Monetary Commission 
 
 beforehand, like the one who, when selling, insures himself 
 against danger, manages his property and acts cautiously. 
 
 (28) [b] Transactions at "option against non-option'' 
 (prime contre ferme) We saw in the preceding instance 
 a purchaser of options who made a fixed sale some time 
 after his purchase. The combination, linked in some way, 
 may be planned and carried out within a very short time, 
 the same day, almost at the same moment. The operator 
 devises the transactions simultaneously. 
 
 Let us imagine, therefore, that Peter buys 100 shares 
 for the 1 5th instant at 120/5, and that simultaneously he 
 makes a fixed sale at 100 francs. 
 
 Peter has at once registered a paper loss the differ- 
 ence between 120 and 100, that is to say, 20 francs per 
 share. But if a heavy decline occurs, and if the purchase 
 on option is abandoned on the day of option declarations, 
 Peter will find himself in the position of a speculator for a 
 fall (bear) , who sees the expected phenomenon happening, 
 and who has limited his possible loss in case of a rise. 
 
 Below you will find the supposed outcome of the exer- 
 cising and of the abandoning of the purchased option. 
 
 L,et us take for granted that, on the day of option 
 declaration, the option is exercised. The statement ap-. 
 pears as follows: 
 
 Peter, his settling account on the i5th instant. 
 
 Dr. 
 
 Purchases. Francs. 
 
 100 shares at 1 20/5 12, ooo 
 
 12,000 
 
 Cr. 
 
 Sales. Francs. 
 
 100 shares at 100 10,000 
 
 Debit balance 2,000 
 
 12,000 
 
 Loss, 2,000 francs. 
 
 54 
 
History and Methods of the Paris Bourse 
 
 On the other hand, the decline may have occurred to 
 such an extent that Peter found it advantageous to 
 abandon his trade at 120/5, and to repurchase "ferme" 
 (non-optionally) ; let us then imagine a rate of re- 
 purchase of 80 francs, for instance. The account of 
 Peter will be as follows: 
 
 Peter, his settling account on the i5th instant. 
 
 Dr. 
 
 Purchases. Francs. 
 
 ioo shares at 1 20/5 Nil. 
 
 Option abandoned 500 
 
 ioo shares at 80 8,000 
 
 Credit balance 1,500 
 
 10, ooo 
 
 Cr. 
 
 Sales. Francs, 
 
 ioo shares at ioo 10,000 
 
 10,000 
 
 Profit, 1,500 francs. 
 
 The combination of " option against non-option" with 
 regard to the speculator for a fall (bear) is based on a desire 
 to limit his loss by insuring him against a rise, without limit- 
 ing his profit. For the holder of securities, the combi- 
 nation permits the party who sold, and may be led to regret 
 his sale on account of a very high ulterior rise, to accept a 
 loss, but to keep his securities in order to sell them more 
 advantageously, if the opportunity presents itself. 
 
 (29) [c] The operation " non-option against option " (ferme 
 contre prime) This operation tends to cover and to limit 
 the risk of a fixed purchase. 
 
 A non-optional purchaser is indeed exposed to a decline 
 without limit. Peter bought ioo shares at ioo francs 
 for 10,000 francs. If his shares decline to 90, 80, 70, etc., 
 he loses on them i ,000, 2,000, 3,000 francs. 
 
 In order to diminish his possible loss, or because he 
 estimates that the rise, if it occurs, is not likely to amount 
 
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National Monetary Commission 
 
 to much, our non-optional purchaser, who may have 
 bought 100 shares at 100 francs, will, let us say, sell on 
 option 100 shares at 120/5. His account, in case the 
 option is exercised, will then be as follows: 
 Peter, his settling account for i5th instant: 
 
 Dr. 
 
 Purchases. Francs. 
 
 ioo shares at ioo 10,000 
 
 Credit balance 2,000 
 
 12,000 
 
 Cr. 
 
 Sales. Francs, 
 
 ioo shares at 120/5 12,000 
 
 12,000 
 
 Profit, 2,000 francs. 
 
 On the other hand, if the option were abandoned, Peter 
 would face a fixed purchase; and if he should wind it up 
 later by means of a sale at 90 francs, for instance, the 
 account would appear as follows: 
 
 Peter, his settling account on the 15th instant: 
 
 Dr. Cr. 
 
 Purchases. Francs. Sales. Francs 
 
 ioo shares at ioo 10,000 ioo shares at 120/5 Nil. 
 
 Option abandoned 500 
 
 ioo shares at 90 9,000 
 
 Debit balance 500 
 
 10, ooo 
 
 10, ooo 
 
 I/oss, 500 francs. 
 
 Peter has, therefore, diminished his loss by 500 francs. 
 Indeed, if he had purchased non-optionally at ioo francs, 
 without protecting himself by an option, he would have 
 lost i, ooo francs when he resold 'at 90. On the contrary, 
 having protected himself by the sale of a call, he saved 
 500 francs on the loss he experienced. 
 
 (30) [d] Operations in "option against -option" (prime 
 contre prime) If the fact is borne in mind that quotations 
 for transactions in options are as much higher as the costs 
 of the options are smaller, that difference of prices may be 
 utilized through a combination. 
 
 56 
 
History and Methods of the Paris Bourse 
 
 Let us, therefore, imagine that a purchaser of 100 
 shares at 120/5 f r the i5th instant resells them at 
 125/2.50 for the same date, and let us see how the 
 account will show, in case the options are exercised, and 
 in case they are abandoned. 
 
 If the options are exercised, the account is as follows: 
 Peter, his settling account for the i5th instant: 
 
 Dr. 
 
 Purchases. Francs. 
 
 100 shares at 1 20/5 12, ooo 
 
 Credit balance 500 
 
 12,500 
 
 Cr. 
 
 Sales. Francs. 
 
 100 shares at 125 12,500 
 
 12,500 
 
 Profit, 500 francs. 
 
 If the options are abandoned, the account is as follows: 
 Peter, his settling account for the i5th instant: 
 
 Dr. 
 
 Purchases. 
 
 100 shares at 120/5. 
 Option abandoned _ 
 
 Francs. 
 Nil. 
 500 
 
 500 
 
 Cr. 
 Sales. 
 ioo shares at 125/2.50. 
 
 Option abandoned 
 
 Debit balance _ _ 
 
 Francs. 
 Nil. 
 250 
 250 
 
 500 
 
 Loss , 250 francs. 
 
 This combination tends to limit either the profit or 
 the loss. 
 
 It may happen that one option will be abandoned 
 and the other taken up. For instance, the rate at the 
 option declaration is 121 francs. The "call" he pur- 
 chased will be exercised, while the "call" he sold will be 
 abandoned. In this case, Peter becomes the non-optional 
 purchaser of ioo shares at 120 francs, and his purchase 
 price is lowered by the amount of the premium he has 
 received. 
 
 (31) Therefore: [i] The "plain option" (b, prime 
 isolee) suits the purchaser wishing to limit his loss, % as 
 
 57 
 
National Monetary Commission 
 
 well as the capitalist, the holder of securities, who, by 
 becoming a seller of options, wishes to lessen the lower 
 value he may have to stand. 
 
 [2] The operation of "option against non-option" 
 (prime contre ferme) suits the capitalist, the holder of 
 securities, who, having sold them, resolves to pay a 
 difference in order to sell more advantageously at a later 
 date. It suits also the "short seller" who wishes to 
 secure himself against an excessive rise. It limits his 
 loss without limiting his possible profit. 
 
 [3] The operation " non-option against option" (ferme 
 contre prime) suits the purchaser who wishes to reduce 
 his possible loss. It fixes the profit without limiting 
 the loss, but lessens the latter by the amount of the 
 premium. 
 
 Finally, [4] the operation of "option against option" 
 (prime contre prime) suits the speculator wishing to limit 
 both the eventual profit and the eventual loss. 
 
 No doubt, there are other combinations, such as the 
 fixed sale of a certain amount against a purchase on option 
 for double the quantity (operation called h cheval, "strad- 
 dle") ; such are purchases and sales of options at different 
 dates, notably "the scale " (I'echelle), an operation through 
 which a purchaser sells an option for the present account, 
 and at the same time buys another option for the follow- 
 ing account. All these combinations are the result of 
 reflection and are suggested by events. 
 
 There is, however, one special operation in options which 
 is of interest namely, the "stellage" (spread); we intend 
 to describe and explain its working, although it is but 
 little used. 
 
History and Methods of the Paris Bourse 
 
 (32) The "stellage" is an operation through which a 
 party, called buyer of the "stellage" (spread), must at a 
 certain date declare whether he is buyer or seller of a 
 certain amount of stocks, as against another party to the 
 contract, called seller of the "stellage." This operation is 
 but the synthesis of two supposititious operations, which 
 present themselves, in the case of the purchaser of the 
 "stellage," as a purchase on option of a certain amount of 
 securities against a non-optional sale of half that amount, 
 and, in the case of the seller of the "stellage," on the con- 
 trary, as a sale on option of a certain amount of securities 
 against a non-optional purchase of half that amount. 
 
 For instance, a stock is quoted for the account of the 
 1 5th, 100 francs, while the option at 5 francs ("dont" 5 
 francs) for the same maturity is quoted 1 20. If Peter pur- 
 chases the " call" of 100 shares at 120/5 against the non- 
 optional sale of 50 shares at 100 francs, he would, in 
 case he decided to exercise his right at the time of option 
 declaration, appear as a purchaser at a cost price which 
 would be 140 francs. But in case he should abandon the 
 option, the selling price, lessened by the premium of 5 
 francs per share abandoned on the side of the purchaser, 
 would amount to 90 francs. 
 
 Indeed, let us imagine an account in which Peter is 
 buyer of 100 shares at 120/5, an d seller of 50 shares at 
 100. He exercises the option, and in the result he becomes 
 a buyer of 50 shares. In figures, he comes out a debtor 
 for 7,000 francs. The 50 shares cost him, therefore, 140 
 francs each (7,000 : 50 = 140). 
 
 If he abandons the option, he comes out as a seller of 
 50 shares. The price of his sale (5,000 francs) is lessened 
 
 59 
 
National Monetary Commission 
 
 by the amount of the premium of 500 francs he owes. He 
 will therefore be a seller at 90 francs (4,500 : 50 = 90). 
 
 If, now, instead of buying the " call "of 100 shares 120/5 
 against the non-optional (ferme) sale of 50 shares at 100, 
 Peter buys a "stellage" (spread) at a price expressed as 
 follows: 140/90, he will have the privilege of becoming 
 a purchaser of a number of shares at 140 francs; but at 
 the latest, on the day of option declaration, he will have 
 to declare himself either purchaser or seller. 
 
 In case of a great advance or heavy decline, Peter, as 
 buyer of ' ' put ' ' and ' ' call , ' ' is sure of a profit . At the price 
 of 140 francs and above, he becomes buyer he " calls." At 
 the price of 90 francs and below, he becomes seller he 
 "puts." 
 
 But let quotations stand still, the variations remaining 
 at a figure between 140 francs and 90 francs, and Peter 
 will be loser. That loss, however, in the present case 
 would be, at most, 25 francs per share. The loss, indeed, 
 can not exceed for each share one-half of the difference 
 between the figures of the ' ' put ' ' and ' ' call " ( 1 40 90 = 50 ; 
 50:2 = 25). 
 
 Indeed, if on the day of option declaration 90 is quoted, 
 Peter, who is bound to declare himself, will certainly not 
 "call" at 140 for stock which he can resell only at about 
 90. He will declare himself seller, and the rates at the 
 declaration will leave him neither gainer nor loser. 
 Seller at 90, buyer at 90, his account balances, without 
 gain or loss. 
 
 60 
 
History and Methods of the Paris Bourse 
 
 But if the price is 91 francs, he will declare himself seller 
 and 
 
 will lose i franc on each share; 
 
 if 92 francs, he will lose 2 francs on each share; 
 
 if 93 francs, he will lose 3 francs on each share; 
 
 if 94 francs, he will lose 4 francs on each share; 
 
 if 95 francs, he will lose 5 francs on each share; 
 
 and so on. As the price at the declaration of options rises 
 
 above 90 francs, Peter will find it to his interest to "put" 
 
 at that price rather than "call," and yet he will be loser. 
 
 Thus, at a price at the option declaration of 115, Peter, 
 
 declaring himself seller at 90, will lose a difference of 25 
 
 francs on each share. 
 
 However, it should be noted that when the price at 
 option declaration is 115 francs, Peter might just as well 
 declare himself purchaser at 140 francs as seller at 90 
 francs. Indeed, if he becomes purchaser at 140 and he 
 resells at the price of the option declaration, 115, he will 
 lose 25 francs on each share, as in the other case. 
 
 Above 1 1 5 francs it will be to Peter's advantage not to 
 exercise the "put," but to "call;" that is, to purchase 
 rather than sell. 
 
 Indeed, if the quotation is 1 16 francs, then, by becoming 
 purchaser at 140, 
 
 he will lose 24 francs on each share; 
 if 117, he will lose 23 francs on each share; 
 if 1 1 8, he will lose 22 francs on each share; 
 if 119, he will lose 21 francs on each share; 
 if 1 20, he will lose 20 francs on each share. 
 
 61 
 
National Monetary Commission 
 
 The nearer the rate of the option declaration rises 
 toward 140, the less will the loss become. At 140, Peter 
 will experience no loss; above that rate, profit will begin. 
 
 Thus the two ends of a "stellage" (put and call) pre- 
 sent an ascending and descending scale of losses, the 
 apex of which will be the average rate between the two 
 extreme limits. That average rate will determine the 
 maximum loss to which the buyer of a "stellage" may be 
 subjected. 
 
 It remains for us to look into the position of Paul, seller 
 of the "stellage. " 
 
 At every intermediate rate, between 140 and 90, he 
 will have a profit in the same proportion as Peter will 
 experience a loss. But, in case of a considerable rise or 
 fall, his loss is limited only by the limit of the fluctua- 
 tions. Above 140, he runs the risk of being called upon 
 to take up delivery at that price; he is also exposed, if the 
 shares fall below 90, to have to deliver them at that price. 
 Peter, buyer of the "spread," has in his favor the big 
 bourse fluctuations, and against him their slight varia- 
 tions, while Paul, seller of the "spread," has in his favor 
 the comparative stagnation of prices, and against him the 
 great fluctuations. 
 
 (33) How are the accounts liquidated? To liquidate 
 is to audit, to settle. The purchaser who exercises his 
 "call" liquidates through the "call." 
 
 In the same way for the seller who "puts." 
 
 The purchaser who has resold, has liquidated his trans- 
 action. But that operation, like the one of the seller 
 
 a Yves Guyot & Raffalovitch, " Dictionnaire du Commerce, de I' Industrie 
 et de la Banque," under the word "stellage," by Emmanuel Vidal. 
 
 62 
 
History and Methods of the Paris Bourse 
 
 who rebuys, only shows liquidation when the accounts 
 have been established. The same applies to the party 
 who loans money for the account, and the party who 
 borrows for the account. 
 
 Parties dealing between themselves on the Bourse 
 stockbrokers between themselves, bankers between them- 
 selves fix a time, called "declaration of options," when 
 they declare what they decide to do. One day later the 
 liquidation proper begins. 
 
 Purchasers who do not care to exercise their "call," 
 resell or have their purchases carried over until the 
 next settlement; sellers who do not wish to deliver, rebuy 
 or carry over. 
 
 After that, in a common office, the work of central 
 liquidation begins. 
 
 (34) To understand the machinery, it is proper to recall 
 that the " making-up " price is a price fixed by agreement, 
 intended to facilitate deliveries and settlement on the 
 bourses and markets. 
 
 With this in mind, we shall suppose five people Peter, 
 Paul, Jack, Will, and Ernst, operating on a hypothetical 
 market. 
 
 Peter sold on the Bourse 100 shares to Paul, at 100 
 francs that is to say, for 10,000 francs Paul resold 
 them to Jack at 101, for 10,100 francs; Jack resold them 
 to Will at 102, for 10,200 francs; Will resold them 
 to Ernst at 103, for 10,300 francs. What happens at 
 maturity in case there is no clearing? 
 
 Peter delivers the 100 shares to Paul, the latter paying 
 him 10,000 francs. Paul, holding these 100 shares, 
 brings them to Jack, who pays for them 10,100 francs; 
 
 90312 10 '5 63 
 
National Monetary Commission 
 
 Jack calls on Will, hands him the 100 shares, and collects 
 10,200 francs; finally, Will betakes himself to Ernst, 
 who disburses 10,300 francs and keeps the securities. 
 
 This causes considerable disturbance to many people, 
 numerous bookings, carrying around of funds and carry- 
 ing around of securities. 
 
 The clearing system, otherwise called the central liqui- 
 dation service, has for its object the obviating of all 
 these disadvantages. 
 
 It works as follows: Peter, Paul, Jack, Will, and Ernst 
 are requested by the chief of the common service called 
 central liquidation, to settle all their engagements at a 
 rate called clearing price (cours de compensation} , fixed, let 
 us say, at 101.50. 
 
 Thanks to this service there will be no successive deliv- 
 eries of securities to Paul, Jack, and Will. The delivery 
 of securities will be made from Peter to Ernst exclusively, 
 passing by Paul, Jack, and Will. 
 
 The liquidation then centralizes the deliveries of secu- 
 rities between sellers and purchasers. Moreover, it can 
 also collect differences due from the debtors, and pay the 
 creditors, while attending to the handling of the securities. 
 
 The account of each party results as follows: Peter 
 sold 100 shares to Paul, and delivers them to Ernst on 
 the indications of the central liquidation, at the clear- 
 ing price, 101.50. He is credited with 10,000 francs, 
 selling price to Paul, and debited with 10,150 francs, 
 "making-up " price giving a balance of 150 francs to his 
 debit. 
 
 6 4 
 
History and Methods of the Paris Bourse 
 
 The accounts of Paul, Jack, and Will, will be as follows: 
 
 Paul's account. 
 
 Dr. 
 
 Francs. 
 
 Purchased of Peter at ioo__ 10, ooo 
 Cleared at 101.50 10,150 
 
 20, 105 
 
 Cr. 
 
 Francs. 
 
 Cleared at 101.50 10, 150 
 
 Sold to Jack at 10 1 10, 100 
 
 Result: A balance in favor of Paul of 100 francs." 
 
 Jack's account. 
 
 Dr. 
 
 Francs. 
 
 Purchased of Paul atioi__ 10,100 
 Cleared at 101.50 10,150 
 
 20, 250 
 
 Cr. 
 
 20, 250 
 
 Francs. 
 
 Cleared at 101.50 10,150 
 
 Sold to Will at 102 ib, 200 
 
 Result: A balance in favor of Jack of 100 francs. 
 Will's account. 
 
 Dr. 
 
 Francs. 
 
 Purchased of Jack at 102 __ 10, 200 
 Cleared at 101.50 10,150 
 
 20,350 
 
 Cr. 
 
 20, 350 
 
 Francs. 
 
 Cleared at 101.50 10, 150 
 
 Sold to Ernst at 103 10, 300 
 
 20, 450 
 
 Result: A balance in favor of Will of 100 francs. 
 
 Finally, Ernst disburses 10,150 when taking up the 
 securities of Peter. 
 
 He bought from Will at 103, owing 10,300 francs, and 
 the clearing takes place at 101.50, totaling 10,150 francs. 
 He, therefore, still owes 1 50 francs on the purchase price. 
 
 a The two clearings at 101.50 appear in the account. As they are even 
 in the debit and the credit, they could, they even ought, for the sake of good 
 accounting, be taken off the account; but we let them remain, in order to 
 show all that happens within the central liquidation office. Paul has 
 purchased securities for a sum of 10,000 francs, which he owes; he de- 
 livers the securities to the central liquidation and receives 10,150 francs. 
 He is credited for it. He sold the shares at 101, for 10,100 francs. He 
 purchases them at the central liquidation at the clearing price, and pays 
 over 10, 150. He is debited for it. The same applies to the other accounts. 
 
National Monetary Commission 
 
 Hence, the situation in the central liquidation office will 
 appear as follows: 
 
 DEBTORS. 
 
 Peter, 
 Ernst. 
 
 Francs. 
 -- 150 
 -- 150 
 
 CREDITORS. 
 
 Francs. 
 
 Paul 100 
 
 Jack ioo 
 
 Will.. . ioo 
 
 300 300 
 
 With the 300 francs which Peter and Ernst pay, the 
 central liquidation office pays Paul, Jack, and Will. 
 
 The clearing price has, therefore, served the following 
 purposes: (i) To facilitate, through the central liquida- 
 tion, deliveries between dealers in a public market; 
 (2) to permit this central service to fulfill the functions 
 of collector and distributer of money. 
 
 The clearing prices are also used for the "carrying- 
 over" operations through loans to the next settlement 
 (reports) ; they also facilitate operations of parties giving 
 orders through different houses. 
 
 On the Paris Bourse the clearing price is fixed on the 
 settling day by the syndic of the stockbrokers (syndic des 
 agents de change) for securities officially quoted; and by 
 a member on duty in the Syndical Chamber of Bankers 
 dealing in securities for future delivery, for securities in 
 the open market. 
 
 (35) In order to give the above remarks a practical 
 import, it is necessary to follow the transactions from the 
 standpoint of the party who gave the orders. 
 
 How are orders given? How long do they remain in 
 force? How can they be controlled by the quotation 
 list? On what conditions are orders given in most 
 cases? How can certain special orders in small options 
 
 66 
 
History and Methods of the Paris Bourse 
 
 be followed up ? Which are the settling days ? What ex- 
 penses is the party who gives orders subjected to? What 
 happens in case of default, either on the part of the party 
 receiving orders or the party giving orders? 
 
 For securities negotiated in the official market, pur- 
 chases and sales may be effected either at the opening 
 price or the closing price, at a fixed price or at best. 
 Trading at the average rate, like trading for cash, is not 
 done without previous special arrangements. 
 
 But just as in the trading for cash stockbrokers oper- 
 ate before the opening of the session at the average rate 
 that is to say, at a rate unknown at the moment they afe 
 dealing, but which will be determined by the quotations 
 entered on the quotation list in exactly the same way 
 these ministerial officeholders deal for the account, on the 
 basis of the opening price, before it becomes known. 
 Later, when business opens, the first price entered on 
 the official list will determine the price they traded at. 
 This mode of procedure is not practised in the bankers' 
 market (Coulisse). 
 
 In the Coulisse orders are given at a fixed price or at 
 best (an mieux) . One may also indicate the moment when 
 his order is to be executed that is to say, at the opening 
 of the session or at the closing of the session. 
 
 (36) According to agreement, orders remain in force for 
 the day, for a week, or until the next settlement, inclusive. 
 It is customary for stockbrokers and bankers to state in 
 their letters of advice that orders "< revocation" (good 
 until canceled, "g. t. c.") remain in force for the week, 
 and must be renewed on the following Monday, for want 
 of which they will be considered as lapsed. 
 
National Monetary Commission 
 
 (37) In many cases the accepting of orders is subor- 
 dinate to the deposit of cover (couverture) . 
 
 The cover is a sum deposited by the buyer as an 
 anticipated payment for the taking up of securities 
 to be bought, or for the difference which may occur by a 
 resale, or deposited by the seller to safeguard his delivery 
 or pay the difference in case of repurchase. When it is 
 deposited in the shape of securities ''to bearer" (au por- 
 teur), the party giving the order must, when he deposits 
 the securities, sign an order for the sale of same, should 
 it be necessary. 
 
 The stockbroker or banker may reserve for himself the 
 right to demand additional cover (margin) , in case events 
 should render the original amount insufficient, and, for 
 want of this being furnished, the right to close out the 
 undertaken transaction for the account. But for this 
 purpose a distinct stipulation is necessary. 
 
 Especially in purchases on option (a prime) , the interme- 
 diary has the right to exact that an additional cover be 
 handed to him on the day of option declaration (au jour 
 de la reponse), for the event in which the option should 
 be exercised and the purchase declared a fixed bargain, 
 and that, for want of that request being met by the 
 party giving the order, the transaction be closed out at 
 the expiration of the time allowed him for that purpose. 
 
 (38) The minimum quantity allowable for transactions 
 for future delivery is determined by the kind of rente. 
 Thus, for rentes 3 per cent it is 3,000 francs rentes, or 
 one-half, say 1,500 francs; for rentes 4 per cent, 4,000 
 francs rentes, or one-half, etc. For other securities the 
 minimum quantity is 25 units, shares or bonds. 
 
 68 
 
History and Methods of the Paris Bourse 
 
 
 
 (39) The purchaser for the account has the privilege 
 of demanding delivery before maturity by tendering the 
 money. This is what is called " faculte d'escompte" 
 (privilege of discounting). But it should be noted that 
 the same does not occur when the seller has paid "deport " 
 (a premium on borrowed stock) at the last liquidation ; 
 that is, has paid a certain sum (backwardation) freeing 
 him from immediate delivery by putting off its maturity 
 for a future date. (See No. 24.) 
 
 (40) On the curb for rentes (coulisse des rentes) options 
 are frequently dealt in at 10 centimes for each 3 francs 
 rentes and at 5 centimes for each 3 francs rentes for the 
 next day; that is to say, by risking 50 francs for each 
 purchase of 1,500 francs 3 per cent rentes when oper- 
 ating "dont" 10 centimes, and 25 francs for 1,500 francs 
 rentes 3 per cent when operating "dont" 5 centimes. 
 These operations are commonly spoken of as " dont deux 
 sous pour demain" (option 2 centimes till to-morrow), 
 "dont un sou pour demain" (option i centime till to- 
 morrow) . The option declaration takes place at 2 o'clock. 
 
 (41) The Official Quotation List of the Stockbrokers 
 (la Cote officielle des agents de change) establishes only 
 four quotations for transactions for future delivery 
 (le terme) : The opening (le premier) , the highest (le plus 
 haut), the lowest (le plus has), the last (le dernier); but, 
 nevertheless, business is done at intermediate rates (a des 
 cours intermediates) . 
 
 The prices of options (les cours des primes) appear in 
 the columns reserved for the prices of fixed bargains (cours 
 du ferme) , and below these prices ; but their appearing in 
 this or that column does not indicate at what moment 
 
 69 
 
National Monetary Commission 
 
 
 
 they are dealt in. The bank (curb) quotations (les cotes 
 en banque) give the quotations for the fixed bargains in 
 the following order: Opening, lowest, highest, last (debut, 
 plus bas, plus haut, dernier). Dealings are also made at 
 intermediary rates. For options two prices are published, 
 the lowest and the highest, without indicating the time in 
 either case. 
 
 (42) In the Paris market operations for future delivery 
 are made either for the semimonthly (h quinzaine) or the 
 monthly settlement (a fin de mois). 
 
 On the stockbrokers' market (au marche des agents de 
 change) they deal for the semimonthly settlement, except 
 in French rentes and in shares of the Credit Fonder (a 
 French national mortgage loan society, see 72 of Book 
 IV. Translator), of the Banque de France, and of the 
 railroads, which are dealt in for the end-of-the-month 
 settlement. Options are dealt in for semimonthly or 
 monthly settlement, and in extreme cases for the third 
 liquidation. For securities subject to a single monthly 
 liquidation the maturity of options can not extend be- 
 yond the second liquidation. Often dealings are made 
 in options at 10 centimes per. 3 -franc rentes for the next 
 day (say, 50 francs for i,5oo-franc rentes, the minimum 
 of transaction), but no options at 5 centimes, as on the 
 Coulisse. The option declaration for the morrow is 
 effected on the day indicated at 2 p. m. 
 
 In the bankers' market (au marche en banque), i. e., on 
 the Coulisse, all transactions for future delivery (opera- 
 tions a terme) are made for maturity at the end of the 
 month (a Vecheance de fin de mois) . Options are dealt in 
 for one, two, or three months. The latter case rarely 
 
 70 
 
History and Methods of the Paris Bourse 
 
 occurs. The small operations in options on the coulisse 
 des rentes have been mentioned above. (See No. 40.) 
 
 Following is the order of the fortnightly settlement 
 (la liquidation de quinzaine) : 
 
 On the 1 4th (or the i3th, if the i4th is a holiday) option 
 declaration takes place at 1.30 p.m. The i5th (or the 
 day following, if the i5th is a holiday) is for liquidation of 
 operations. The next day, for making up and forwarding 
 accounts. On the day following the debtors must settle. 
 Two days later the creditors' accounts are paid. 
 
 The end-of-the-month (ultimo) liquidation is carried on 
 as follows: 
 
 The day before the last day of the month (or two days 
 before in case of a holiday) option declaration takes place 
 at 1.30 p. m. The last day of the month (or, if that is a 
 holiday, the first session of the following month) is set 
 for liquidation, sales, purchases, and carrying-over opera- 
 tions, or continuations (reports). The following day, for 
 making up and forwarding accounts. The day after, for 
 payment of debtor accounts. Two days later, for pay- 
 ment of creditor accounts. 
 
 It should be noted that, while the option declaration 
 preceding liquidation is effected at 1.30, the declaration 
 of options for the next day takes place at 2 p. m. How- 
 ever, on the day of option declaration preceding liquida- 
 tion the declaration takes place at 1.30 for all options 
 given for that maturity, including those made the day 
 before. 
 
 On the day of liquidation some trades are made for the 
 running account (en liquidation courante) and some for the 
 next account (pour la liquidation prochaine) ; the rates for 
 
National Monetary Commission 
 
 transactions made for the next account include the cost 
 of carrying over. The party giving an order must there- 
 fore specify whether his order, given on settling day, shall 
 be executed for the running account or for the next ac- 
 count. In the absence of precise instructions the order is 
 executed for the running account. 
 
 (43) As far as possible, parties giving orders must see 
 that their instructions for the liquidation be received 
 before the "jour des reports " (contango day) . "Reports " 
 (continuations) being transacted on the last bourse day 
 of the month, the instructions referred to must be 
 received on that day before noon at the latest. It is 
 better by far that they be given the day preceding. In 
 case of deliveries of securities, they must reach the inter- 
 mediary agent, at the latest, at the fourth session of the 
 following month. All cases for the account, buying or 
 selling, for which instructions (to take up or carry over 
 purchases, to deliver or carry over sales, or to clear) are 
 not received before the bourse opening on the morning of 
 the "jour des reports" (contango day), may be officially 
 extended until the next liquidation. 
 
 The remarks we made as to the condition of securities 
 to be delivered, when we spoke of operations for cash, are, 
 of course, also applicable to operations for future deliv- 
 ery. We shall now show what happens in case of default 
 on the part of an intermediary or of a party giving orders. 
 Then we shall speak of expenses occasioned by operations 
 for future delivery. 
 
 (44) In case of default of an intermediary, the syn- 
 dical chamber of the corporation or syndicate to which 
 he belongs immediately takes the measures rendered 
 
 72 
 
History and Methods of the Paris Bourse 
 
 necessary by the circumstances. It purchases back the 
 securities he sold, it resells the securities he purchased, 
 and the creditors can then enter their claims against cash 
 assets. This is called "execution" (buying-in or selling- 
 out). The parties having given orders, on finding them- 
 selves thus liquidated, must file their claims. 
 
 The party who gives orders, when he defaults in his 
 engagements, may also be "executed" (execute). The 
 effect of failure on a business man is loss of the advan- 
 tages of dealing for the account. The same thing hap- 
 pens if, owing to any act of his, he reduces the guarantees 
 given to his intermediary, or, likewise, if he declares 
 himself insolvent, and so demands his own "execution." 
 However, the delay which a speculator makes in settling 
 his "liquidation" account (compte de liquidation the 
 account to be settled on liquidation days) does not, in 
 principle, cause him the loss of the advantage of future 
 delivery; but if on the last day of "liquidation" a specu- 
 lator whose transactions had been carried over has not 
 settled his account, the stockbroker has the right to 
 liquidate his affairs. After that date the stockbroker no 
 longer has the right to proceed to "execution," unless he 
 has notified the giver of the order that he would carry him 
 over only in case he was ready to settle within a given 
 time. 
 
 While the right of "execution" during the liquidation 
 is granted to the stockbroker (agent de change) by 
 article 69 of the decree of October 7, 1870, that right is 
 denied to the curb broker (coulissier). But nothing 
 prevents the banker from making an express agreement 
 with his client to carry his stocks over only on condition 
 
 73 
 
National Monetary Commission 
 
 of immediate settlement of the "liquidation" account of 
 previous transactions. 
 
 (45) Expenses for transferring registered certificates 
 taken up during the settling days are borne by the pur- 
 chasers. As explained, when speaking of operations for 
 cash, they amount to 0.75 per cent of the amount of the 
 trade. 
 
 Transactions are subject to brokerage or commission 
 charge, a table of which follows. The present rate of 
 brokerage of Paris stockbrokers dates from July 22, 1901 ; 
 it was decreed by the Minister of Finance, under whose 
 direction are the stockbrokers trading on bourses pro- 
 vided with "parquets." The rates are as follows: 
 
 French rentes 
 
 Funds of foreign countries dealt in, 
 amounts of principal or in rentes. 
 
 Shares and bonds: 
 
 For shares and bonds when 
 their price is below 250 
 francs. 
 
 For shares and bonds when 
 their price is between 250 
 and 500 francs. 
 
 For shares and bonds when 
 their price is above 500 
 francs. 
 
 Operations in "Reports" (continua- 
 tions) in French rentes. 
 
 12.50 francs for 1,500 francs. Rente 
 3 per cent perpetual or amor- 
 tisable. 
 
 25 francs for the smallest denomi- 
 nation negotiable for future de- 
 livery, and so on in the same pro- 
 portion. 
 
 25 centimes for each share or bond. 
 
 50 centimes for each share or bond. 
 
 One-tenth per cent of the amount 
 of the bill. 
 
 12.50 francs for 1,500 francs of 3 
 per cent rente, perpetual or amor- 
 tisable, and for 1,750 francs of 
 rente 3^2 per cent. 
 
 74 
 
History and Methods of the Paris Bourse 
 
 On all other securities: 
 
 For securities subject to bi- 
 monthly settlement. 
 
 For securities subject to month- 
 ly settlement. I 
 
 An exception made for foreign 
 securities, the price of which 
 is above 60 francs. 
 
 For the smallest amount dealt 
 in for future delivery on for- 
 eign securities. 
 
 For securities, the price of 
 which is less than 200 francs. 
 
 For securities worth from 200 
 to 400 francs. 
 
 For securities worth above 400 
 francs. 
 
 One-twentieth per cent of the 
 amount of the bill. 
 
 One-twelfth per cent of the amount 
 of the bill. 
 
 15 centimes for the smallest denomi- 
 nation negotiable for future de- 
 livery, and so on in the same 
 proportion. 
 
 25 centimes. 
 
 25 centimes per certificate. 
 50 centimes per certificate. 
 
 One-eighth per cent (12.5 centimes 
 per 100 francs) on the amount of 
 the bill. 
 
 The above prices apply to all certifications of signatures 
 given by stockbrokers, even when not attached to a 
 purchase or a sale. 
 
 For securities not fully paid in, the fees given above 
 are figured only on the net amount of the bill, after 
 deduction of the part not yet paid in. 
 
 Two transactions during the same session, one purchase 
 and one sale, are subject to a commission, calculated 
 only upon the item giving the larger figure. The ' ' franco, ' ' 
 however, does not apply in the case where one transaction 
 is for cash and the other for future delivery. 
 
 On the Coulisse (marche en banque) , the usual commis- 
 sions are as follows: For French rentes: 12.50 for each 
 1,500 francs of 3 per cent rentes. 
 
 For the smallest amount negotiable for future delivery 
 in foreign state securities, 25 francs. 
 
 For securities the price of which is below 50 francs, 25 
 centimes per certificate 
 
 75 
 
National M o n et ar y Commission 
 
 For securities the price of which is between 50 and 400 
 francs, 50 centimes per certificate. 
 
 For securities the price of which is above 400 francs, 
 one-eighth per cent (12.5 centimes per 100 francs) of the 
 amount of the bill. 
 
 The commission is reduced by one-half for abandoned 
 options "dont" 10 centimes (of which 10 centimes shall 
 be forfeited) on French rentes. 
 
 Continuations are subject to full commissions, and not 
 to the special rates of commissions for continuations on 
 the Parquet. 
 
 FOURTH DIVISION. Exchange Concerning the negotiation of bills of ex- 
 change and precious metals. 
 
 (46) Article 76 gives to stockbrokers the privilege of 
 alone negotiating bills of exchange for account of others. 
 For a long time the stockbrokers have given up that pre- 
 rogative, and, in fact, they do not negotiate a single bill 
 of exchange; that branch of business is carried on, unre- 
 stricted, by a group of special brokers, whose transactions 
 fix the rates, the stockbrokers intervening only to give 
 them the official trade-mark. 
 
 It is proper to investigate that business: we should 
 indicate in a few words what is the bill of exchange; and, 
 because it is treated like a commodity, subject to the 
 fluctuations of bids and offers, we should ascertain what 
 useful purposes have been served by its transformation 
 into a thing fungible to the highest degree. 
 
 (47) We need not study here the exchange contract 
 from a theoretical standpoint. It will suffice for us to say 
 that, created for the settlement of private claims, the 
 bill of exchange in its circulation becomes endowed with 
 
 76 
 
History and Methods of the Paris Bourse 
 
 the functions of insuring international settlements without 
 regard to persons. Hence, there results the more or less 
 active quest for that money, giving rise to the advance 
 or decline in its purchase price, within limits which we 
 shall have to determine. 
 
 How does the letter of exchange, originating in private 
 relations, turn out to be an object of trade? 
 
 Let us suppose that Peter, of Paris, is indebted to Louis, 
 of London. Is he going to settle in metallic currency or 
 bank notes, by taking upon himself the heavy cost of 
 freight and insurance? It is simpler to purchase a bill of 
 exchange, drawn, for instance, by Paul, in Paris, on 
 Lucien, in London. He will indorse it to Louis, who will 
 collect it from Lucien, so that, simultaneously, and with- 
 out the transmission of metallic currency, Peter will have 
 settled with Louis, and Lucien with Paul. 
 
 Let us note that in Paris both Peter and Paul will have 
 found profit in the transaction the one by paying his 
 debt, the other by collecting his claim without the trans- 
 fer of metallic currency. 
 
 Therefore, the seller and purchaser of bills of exchange 
 find it advantageous to meet. It is then the business of 
 the broker to make their offers and bids coincide. 
 
 (48) The debates on offers and bids fix the quota- 
 tions^ If Paris has made large purchases in London, 
 and London, on the contrary, is but slightly indebted to 
 Paris, bills of exchange on London will be high; in the 
 opposite case, they will be freely offered, and their price 
 will fall. But whether rising or falling, exchange rates 
 have a limit; when rising, it is the point where the debtor 
 would find it more profitable to insure payment in cash 
 
 77 
 
National Monetary Commission 
 
 than to buy paper at too high a price; when falling, it is 
 the point where the creditor, rather than sell his paper at 
 a low price, would find it advantageous to effect the col- 
 lection in his debtor's home country; in both cases, that 
 limit is what is called the "gold point" "export" point 
 of metallic currency in the first case, and "import" point 
 in the second. 
 
 (49) Such are the principles which govern the rates of 
 exchange. We leave aside considerations having refer- 
 ence to the relations between exchange quotations and 
 the general economic condition or the monetary condition 
 of any given country. 
 
 Having established the principles, we shall ask our- 
 selves only one question: How can securities, which 
 differ from one another either by the signatures bringing 
 them into existence, or by the interval between the 
 moment of the negotiation and the time of payment, be 
 brought to a common trading basis; or in other words, 
 how can the bills be measured in terms of each other, 
 how are the exchange quotations made? 
 
 What is purchased by the party who becomes possessed 
 of a bill of exchange? He purchases the right to collect 
 the face value of the bill, but only after a certain time. 
 Besides, it should be noticed that the certainty of payment 
 is subject to the solvency of the vouching signatures. 
 
 Hence, these two consequences, the second of which has 
 but a theoretical value: (i) The purchaser, in considera- 
 tion of the discount up to the time of collection, will be 
 entitled to an allowance on the face value; (2) two bills 
 drawn for the same face value, and payable within the 
 same length of time, should be quoted at two different 
 
 78 
 
History and Methods of the Paris Bourse 
 
 rates, in accordance with the rating of the signatures. 
 We shall see that, in fact, this second consequence does 
 not occur on the Paris market. 
 
 (50) These remarks permit us to explain the exchange 
 quotations as published by the Union des Banquiers. 
 
 Below you will find the quotation list of October 17, 
 1908: 
 
 
 Check payments, 
 short paper. 
 
 Three months' 
 paper. 
 
 Discount 
 abroad. 
 
 
 25/8 to 25/1 1 
 
 25/io54 to 25/1354 
 
 Per cent. 
 254 
 
 Germany 
 
 I22j^tOI23 
 
 I22^g tO 123^ 
 
 
 
 99 54 to 99 s /& 
 
 99 s /% to 99 54 
 
 
 Spain 
 
 446 to 45 1 
 
 444 to 449 
 
 454 
 
 Holland ... -. 
 
 207^1 to 208^ 
 
 208 to 208 54 
 
 3 
 
 Italy 
 
 QQ-JA to 99f 
 
 99^4 to 100 
 
 
 New York 
 
 51354 to 51634 
 
 51254 to 515x4 
 
 6 
 
 Portugal _- 
 
 451 to 461 
 
 449 to 459 
 
 6 
 
 St. Petersburg 
 
 263 y& to 265 y& 
 
 262 54 to 264 54 
 
 5% 
 
 Switzerland 
 
 99y to 99xs- - 
 
 99 !/% to TOO 
 
 354 
 
 Vienna 
 
 IO 4i 9 s to io4ff 
 
 104^ to io4y| 
 
 
 Discount street rates: 
 Paris 
 
 
 
 25^ 
 
 London 
 
 
 
 i 7 A 
 
 Brussels 
 
 
 
 2 1 A 
 
 Bank of France discount 
 
 
 
 3 
 
 Interest on advances 
 
 
 
 354 
 
 Treasury bonds: 
 One to three months 
 
 
 
 I 
 
 Three months to one yea 
 
 r 
 
 
 i54 
 
 
 
 
 
 The rates are fixed for sight a exchange that is to say, 
 as if the payment was demandable immediately; but on 
 
 a The quotation at sight has been in use since May i, 1907; previously, 
 a difference was made as to whether bills were negotiated at sight or at three 
 months. In the first instance, an allowance was made, as nowadays, to 
 the benefit of J:he purchaser, for the time that he might have to wait; in 
 the second case, on the contrary, the rates having been established by 
 figuring on the delay of three months, if the time to run until maturity was 
 less, it was the seller who got the benefit of the discount for the difference; 
 in the first case the rate was given less discount, and in the second case the 
 rate was given with discount. 
 
 90312 i 
 
 79 
 
National Monetary Commission 
 
 these rates the purchaser is allowed for each bill, on 
 account of the time he has to wait, a deduction of interest 
 for the time the bill has to run, in accordance with the 
 rate of discount ruling in the country where the payment 
 is to be effected; that rate is given for each place in the 
 column on the right. 
 
 One can see that the rates given swing between two 
 extreme limits; for instance, three months' paper on 
 lyondon is quoted between 25.10^ and 25.13^ per pound 
 sterling. These indications do not correspond, as the 
 rates given for bourse securities do, to rates actually 
 traded on during the session, but to extreme limits, 
 between which the average rate is fixed. Some authors 
 state also that quotations vary between these limits, 
 according to the status of the signatures; but, in fact, on 
 the Paris market, dealings are made as if all signatures 
 were equally good. 
 
 (51) The exchange quotation list comprises two divi- 
 sions, under two series of different rates; one devoted to 
 "short paper," the other to "long paper." 
 
 "Short paper" is paper payable within one month; 
 ' ' long paper ' ' is paper which has more than one month to run. 
 
 Given that a deduction of interest is made on the ex- 
 change rate of every bill according to the time elapsing 
 until its payment, it would appear that a single quotation 
 would be sufficient, since the delay is compensated for, day 
 by day, by a reduction in price. However, the necessity 
 for double quotation is caused by a real duality of markets 
 for "long paper" and for "short paper." 
 
 From an economic standpoint, indeed, these two cate- 
 gories of bills do not play the same part. The function 
 
 80 
 
History and Methods of the Paris Bourse 
 
 of the " short paper " is restricted to that of an instrument 
 of payment; its value is, therefore, solely regulated by 
 local conditions. 
 
 When, on balance, Paris is London's debtor, paper on 
 London is sought; if, on the contrary, London is shown 
 to be a debtor, the rates on London will fall. In the first 
 case the exchange is said to be unfavorable; in the second 
 case it is called favorable. 
 
 (52) Offers and bids for " long paper ' ' are influenced, not 
 only by local conditions, but also by other causes. 
 
 First of all, there are purchasers who buy paper as an 
 investment. "The rate of interest is, therefore, their 
 chief concern. The rise of the discount rate on one place, 
 above the rates prevailing on the other places of the 
 same order, will instigate a more active demand for long 
 bills, and will tend to cause the price to rise." a Espe- 
 cially, railroad companies often invest their idle funds in 
 purchases of bills of exchange. 
 
 Secondly, " long paper " comprises a speculative element 
 which is missing in the " short paper "; that element is the 
 profit which the purchaser may realize by getting his 
 paper discounted privately at a rate lower than the offi- 
 cial rate prevailing in the country where the payment is 
 to be effected. That is, there will be a profit which will 
 amount to the difference between the discount deduced 
 by inference from the exchange rate (official discount), 
 and the actual discount at which he will have the bill 
 discounted privately; the profit will naturally be greater 
 as the maturity is further removed. 
 
 a See article on Exchange, by M. Aug. Arnaune", in the Dictionnaire 
 d'Economie Politique of L6on Say. 
 
 81 
 
National Monetary Commission 
 
 Guided by the same considerations, bankers often 
 undertake what is called the "pensioning" ("mise en 
 pension") of " long paper." For instance, they buy ex- 
 change on London at 2>i and then "pension" it until 
 maturity in one of the large banks, which retains 2 per 
 cent. They get the benefit of one-eighth, which is the 
 difference between the rate of discount applied in the 
 market and the " pension" rate. As to the large banks 
 where paper is " pensioned," if they do not take it for their 
 own account, it is because they may have reasons for por- 
 tioning out their risks and for scattering the responsi- 
 bility, in consideration of a trifling difference. More- 
 over, they have the advantage of not running any risk 
 as to exchange. The bills are not indorsed to them; 
 they hold them on deposit and surrender them at matu- 
 rity to the depositor, who undertakes the collection or 
 negotiation. 
 
 Thus, "short bills" and "long bills" are two distinct 
 kinds of merchandise, answering different requirements, 
 the prices of which vary under distinct influences ; hence 
 the two series of quotations. 
 
 (53) We shall have done with these short notices on 
 the exchange quotations, after saying that in Paris they 
 quote " I'incertain" that is to say, they quote in na- 
 tional money the rate of a fixed quantity of foreign money. 
 This is the general rule, and among foreign cities there are 
 but London and St. Petersburg where the "certain" is 
 quoted that is to say, where the price of a fixed sum in 
 national money is quoted in foreign money. 
 
 Except London, for which the price quoted is that of 
 the pound sterling, and Spain, where the quotation price 
 
 82 
 
History and Methods of the Paris Bourse 
 
 of 500 pesetas is given, the Paris market quotes the price 
 of 100 units of foreign money 100 florins for Holland, 
 100 marks for Germany, 100 crowns for Vienna, 100 
 rubles for St. Petersburg, 100 dollars for New York, and 
 loo francs for Belgium, Switzerland, or Italy. 
 
 (54) Each day the quotation list, decided upon by a 
 committee of bankers and brokers, is transmitted to the 
 Association of Stockbrokers (Compagnie des Agents de 
 Change) , who publish it below the Official Quotation List. 
 
 Indeed, as we stated in the beginning, the stock brokers 
 (agents de change) have not only long ago given up their 
 monopoly in this sphere, but do not negotiate bills of 
 exchange even in competition with the free merchandise 
 brokers (courtiers). The negotiations are made on the 
 bourse for securities (bourse des valeurs), either directly 
 between bankers or through the mediation of exchange 
 brokers (courtiers de change). 
 
 (55) How are the transactions carried out? 
 
 Every day at bourse time the brokers and representa- 
 tives of bankers gather in a hall specially reserved for 
 them. Transactions which could not be settled in private, 
 are brought out before the gathering (rather restricted, 
 however), where quotations are established by auction, 
 just as before the large crowds of the market in securities. 
 
 Merchandise brokers selling paper may mention the 
 name of their principal, or, if the latter considers it to his 
 advantage not to disclose himself, they do not divulge his 
 name to their purchaser until after the meeting. Here, 
 again, a difficulty would present itself concerning the 
 specification of the thing sold, if custom did not solve it 
 in a general way; indeed, it may happen that such and 
 
National M on et ar y Commission 
 
 such a house has always declined the acceptance, or now 
 declines the further acceptance, of this or that signature, 
 which it does not trust, or of which kind it has already a 
 sufficient number on hand; but then, either the broker 
 knows beforehand that his paper will not be taken by this 
 or that fellow-broker who is a buyer, or, if the trade is 
 concluded and the paper not taken, the matter is settled 
 through a fellow-broker by means of the "passage de 
 noms" (passing of names) . 
 
 Generally, the broker deals for his own account, and 
 then settles with his client at the average rate, taking his 
 profit in the rate; certain houses, however, content them- 
 selves with closing the transaction at the actual rate, 
 reserving for themselves a brokerage, which, while not 
 officially fixed, is nevertheless established by custom (for 
 instance, one-half to one-fourth centime for exchange on 
 London; one-sixteenth to one thirty-second centime for 
 exchange on Berlin) . 
 
 In his intercourse with his fellow-dealers the broker 
 binds himself only to deliver the paper; if his principal 
 does not deliver it, he must procure it, losing perhaps the 
 difference in price. But he is not responsible for pay- 
 ment at maturity, as he has not indorsed the paper. 
 The loss falls on the principal who agreed to take the 
 signature. 
 
 Exchange business is acquainted with "short" sales. 
 One can sell i ,000 pounds sterling at such and such a rate, 
 deliverable in eight days; he has then eight days within 
 which to procure the paper. Transactions for future 
 delivery are made for rather short periods eight, fifteen 
 
History and Methods of the Paris Bourse 
 
 days. Transactions are sometimes made for a longer 
 period, but rarely for three months. 
 
 Contracts are always followed by deliveries. Con- 
 tracts to be settled by payment of differences are not 
 customary. 
 
 (56) Gold and silver are dealt in in bars i ,000 fine that 
 is to say, absolutely free of any alloy. 
 
 Gold. Prices are quoted on so much per i ,000 premium 
 or loss, and are based on the value in money of a kilogram 
 of gold, after deducting coinage charges, say net 3.437 
 francs for i kilogram. 
 
 Silver. Since January 2, 1901, prices are given in 
 francs; this means that the official quotation list ex- 
 presses in francs and centimes the cost of the kilogram 
 silver fine. 
 
 FIFTH DIVISION. Bourses in the departments. 
 
 (57) In examining the bourse system, one has chiefly 
 almost exclusively in mind what relates to the Paris 
 Bourse. However, the French financial market also com- 
 prises provincial bourses, the importance of which has 
 greatly diminished as business centered on the Paris 
 market, but whose activity is still maintained by trans- 
 actions in local securities. 
 
 The monopolizing of business by the Paris market has 
 given rise to recriminations, which have been taken up 
 by the newspapers. Sundry remedies have been recom- 
 mended for the purpose of giving a new lease of life to 
 provincial bourses, which complain of painfully vegetat- 
 ing. It is not this phase of the question which we have 
 to pass upon here, we desire only to indicate in a general 
 
National Monetary Commission 
 
 way some of the interior regulations by which these 
 bourses differ from the Paris institution. 
 
 (58) Provincial bourses are divided into two categories : 
 The bourses with " parquets " (bourses a parquet), and the 
 bourses having no ' ' parquet ' ' (bourses sans parquet) . ' ' Par- 
 quet " means a slightly raised floor surrounded by railings 
 and reserved for the stockbrokers, which permits the 
 public to find them and keeps them isolated while they 
 trade. 
 
 The provincial bourses provided with a "parquet" are 
 those of Lyon, Bordeaux, Marseille, Nantes, Toulouse, 
 and Lille. The Nice "parquet" was done away with in 
 1887. According to the terms of article 14 of the decree 
 of 1890, bourses comprising at least six offices may by 
 decree, and after fulfilling certain formalities, be provided 
 with a "parquet." At present Dunkirk is, in fact, the 
 only place which has more than 6 stockbrokers and is 
 not provided with a "parquet;" it is true that the n 
 agents who trade there, are, at the same time, insurance 
 brokers and ship-brokers-interpreters (courtiers interpretes 
 et conducteurs de namres) . 
 
 The differences between bourses "a parquet" and 
 the bourses without a "parquet" are not important. 
 First of all, in the first category, stockbrokers depend 
 upon the Minister of Finance (decree of July 2, 1862), 
 while in the second category they depend upon the Minis- 
 ter of Commerce (or upon the Minister of Colonies when 
 they carry on business in a French possession). (See 
 ordinance of July 3, 1816, and April 6, 1834.) 
 
 In the "parquet" bourses a syndical chamber must 
 be elected each year, the number of members varies, 
 
 86 
 
History and Methods of the Paris Bourse 
 
 according to the number of members in the corporation. 
 (Art. 17 of decree of 1890, modified by decree of June 29, 
 1898.) 
 
 In the bourses without a "parquet," the general meet- 
 ing of stockbrokers and the tribunal of commerce exercise 
 the same corporate privileges which, in the "parquet 
 bourses," are exercised by the syndical chamber (intro- 
 duction of successors, honorary memberships, etc.). 
 
 It is questionable whether the consent given by a syn- 
 dical chamber to the nomination of an unworthy stock- 
 broker may entail its responsibility toward wronged third 
 parties. It is clear that the same question does not exist 
 with regard to the general assemblies which in the 
 bourses without "parquet" fulfill both functions. But 
 as far as syndical chambers are concerned, the question 
 does not seem to us to be definitely settled in the matter of 
 responsibility. a 
 
 Syndical chambers have, in addition, disciplinary 
 powers. All syndical chambers, since the decree of 1890, 
 have the power to impose penalties. Before that decree 
 only the syndical chamber of Paris had that power 
 conferred upon it by an ordinance of May 29, 1816. 
 
 According to the terms of article 23 of the decree of 
 1890, the penalties which may be pronounced by the syn- 
 dical chamber are disapprobation, censure, and interdic- 
 tion to enter the Bourse for one month. It expressed 
 ks opinion on graver penalties (suspension and revocation) . 
 
 From the standpoint of discipline, the stockbrokers of 
 bourses without a "parquet " are placed under the authority 
 of the mixed syndical chambers, ?:<tablished in accordance 
 
 a Lyon, Caen & Renault. Traite de droit commercial, vol. 4, No. 883. 
 
 87 
 
National Monetary Commission 
 
 with the decree of January 5, 1867, and which are the 
 same as those for insurance brokers, and for ship-brokers- 
 interpreters. 
 
 Let us add that in all corporations having a syndical 
 chamber there is established a common fund, the man- 
 agement of which is intrusted to the syndical chamber. 
 (Decree of October 7, 1890, art. 26.) 
 
 We may mention also that in the " parquet bourses" 
 the decree of October i, 1862, adds to the qualifications 
 demanded from candidates for the office of stockbroker, 
 that they produce a certificate of fitness and respecta- 
 bility signed by the heads of several banking or commer- 
 cial houses. 
 
 Finally, several decrees have conferred on stockbrokers 
 acting on "parquet bourses" the right to certify the 
 transfers of registered certificates of rentes of the 
 sundry types made payable in the treasury office of the 
 department where they do business, provided these trans- 
 fers are for other registered certificates. (See especially 
 for the rente 3 per cent the decree of May 28, 1896.) A 
 decree of December 24, 1896, has extended their sphere 
 to all registered rentes, without distinction, and whatever 
 may be the department in which the arrears are ordered 
 to be paid. 
 
BOOK III. Judicial considerations on the monopoly of 
 
 stockbrokers. 
 
 Page. 
 
 1. What is meant by bourse transactions? -The advantage of 
 
 making a distinction between private transactions in secu- 
 rities among individuals, and bourse transactions proper _ _ 89-90 
 
 2. Bourse transactions are mostly orders executed in a market. 90-91 
 
 3. Commercial bourses Unattached brokers Bourses for secu- 
 
 rities Privileged stockbrokers Why that difference? 9J-9 2 
 
 4. Stockbrokers are intermediaries, bound to secrecy, not allowed 
 
 to operate for their own account They are commission 
 
 agents (commissionnaires) 9 2 ~93 
 
 5. Is it necessary, even on the Bourse, to resort to an inter- 
 
 mediary? The Report of Alexandre to the Tribunate, in 
 
 year IX.. 93-94 
 
 6. Article 76 of the Code de commerce : 94~95 
 
 7. What transactions are referred to in article 76? 95-96 
 
 8. Why the words "for account of others" in reference to nego- 
 
 tiations of bills of exchange? 96-97 
 
 9. What is meant by " effets publics " (Government securities)?. 97-98 
 
 10. What is meant by "other securities susceptible of being 
 
 quoted ?" 98-101 
 
 11. Do the securities mentioned in the second part of the official 
 
 quotation list come within the prerogatives of stockbrokers? 101 
 
 12. Securities not susceptible of being quoted may be freely 
 
 dealt in by unattached intermediaries, as well as by stock- 
 brokers 101-102 
 
 13. First penalty for violation of the monopoly, operations void. 102-105 
 
 14. Second penalty for violation of the monopoly, fine in police 
 
 court, without prejudice to damages 105-109 
 
 15. Third penalty for violation of the monopoly, internal revenue 
 
 fine 109-1 10 
 
 1 6. Concerning brokerage for transactions in metals no 
 
 (i) By the words "bourse transactions" are meant 
 transactions in a public market. 
 
 When a party enters a money changer's office and pur- 
 chases from him or sells to him for cash or future deliv- 
 ery one or more shares or bonds, he does not exactly 
 conclude a bourse transaction, but a transaction in 
 bourse securities. 
 
 8 9 
 
National Monetary Commission 
 
 On the other hand, if he gives a bourse order, which the 
 receiver of the order will carry or cause to be carried to 
 the market, the execution of that order is a bourse 
 operation. 
 
 If a banker, to replenish his stock, goes to the Bourse 
 and purchases this or that quantity of securities for cash or 
 for future delivery, non-optionally or by means of options; 
 if a speculator, noticing a difference in price of a certain 
 security in a foreign market and on the French market, 
 undertakes an arbitrage by buying and selling alter- 
 nately in one and in the other, or vice versa these are 
 bourse transactions. 
 
 Often, however, in the ordinary business conversation, 
 we call bourse operations not only those effected on the 
 Bourse itself, but those that bear upon bourse securities. 
 It is not a rare thing to hear people who have purchased 
 securities in an office and resold them there, declare 
 that they have made bourse transactions. It is because 
 the object of the contract is confused with the premises 
 where the transactions are effected. It is therefore the 
 duty of those who are called upon to arbitrate difficul- 
 ties arising from transactions in securities, to ascertain 
 whether the transactions were trades made privately, out- 
 side the Bourse, or were transactions in a public market. 
 
 In private trades the contracting parties are bound by 
 their agreements. In bourse transactions the laws and 
 bourse customs govern the transactions and their cus- 
 tomers. 
 
 (2) The first way to transact business in securities is 
 the one which presents itself naturally to the mind: it is 
 the direct trade, privately concluded; it is the one that 
 
 90 
 
History and Methods of the Paris Bourse 
 
 has for a main condition the relation between buyer and 
 seller, who know each other. 
 
 Peter enters Paul's banking house; he purchases 10, 
 20, 100 shares or bonds. This is the direct trade, pri- 
 vately concluded. 
 
 But if Peter has given an order to Paul, if Paul, who 
 receives the order, transfers it to the Bourse, where it is 
 carried out apparently for him, but in reality for his client, 
 Peter that has been a commission trade. Most of the 
 bourse transactions are commission trades. 
 
 (3) Bourse transactions are, therefore, such transac- 
 tions as are carried out on all public markets in all kinds 
 of merchandise. Indeed, in every market they trade for 
 cash and for future delivery, non-optionally and on options, 
 and we see there buyers who declare themselves ready 
 to take up merchandise, sellers who declare themselves 
 ready to deliver, purchasers who resell, sellers who buy 
 back, buyers who borrow for the account, and sellers who 
 carry over the execution of their contract until the next 
 settlement. 
 
 Whether it be a question of securities or merchandise, 
 the mechanism of transactions is the same. Only the 
 organization of the markets differs in the two cases. 
 While, in the case of merchandise, brokers enjoy no 
 privileges whatever, the stockbrokers, who are commis- 
 sion agents operating on the Bourse for securities, enjoy 
 a monopoly. They alone may negotiate government 
 securities and other securities susceptible of being quoted. 
 
 Merchandise bourses differ from bourses for securities, 
 not only by the nature of the articles dealt in, but also by 
 the fact that the carrying on of the commission business 
 is untrammeled in the former and is not in the latter. 
 
 91 
 
National Monetary Commission 
 
 There existed, indeed, a monopoly of commercial 
 brokers, which had been established for merchandise, 
 prior to the Revolution, at the same time as the privilege 
 of the stockbrokers, and which, together with the latter, 
 had been suppressed in 1791 and reestablished in year 
 IX of the Revolution. But the commercial brokers' 
 privilege was suppressed by the law of July 12, 1866. a 
 
 Whatever may be the strength of the reasons broached 
 for or against the discrimination, the monopoly of stock- 
 brokers still exists, in law and in fact. We should now 
 investigate its nature, its scope, and the laws protecting it. 
 
 (4) Stockbrokers are intermediary agents. 
 
 Article 74 of the Code de commerce expressly ascribes 
 to them that character: "The law," says the article 
 
 MM. Lyon, Caen & Renault, in their treatise " Droit Commercial," 
 Tome IV, note under No. 1035, ca ^ attention to the fact that in 1866 
 nobody demanded the suppression of the stockbrokers' monopoly. Sundry 
 reasons were advanced in favor of its preservation. Their part is not 
 limited to negotiating stock-exchange securities; they certify to the identity 
 of persons and the correctness of signatures for the transfer of government 
 and other securities; they are necessarily depositaries of large sums and 
 numerous securities for a certain length of time; everyday they verify the 
 prices of securities and especially government securities. Thanks to the 
 monopoly of stockbrokers, the Treasury can enjoy a perfect safety for trans- 
 fers where its responsibility is drawn upon; transactions are effected with 
 great rapidity; and the interests of inexperienced persons who have 
 to deliver securities and money are protected. Such is the summary 
 of the reasons given by the Government in the explanatory statement of 
 the law of July 18, 1866 (V. J. Bozerian, De I' Institution des agents de 
 change}. MM. Lyon, Caen & Renault answer: "The arguments advanced 
 in favor of the stockbrokers' monopoly are not conclusive. The mediation 
 for the negotiation of securities has in itself no official character. Besides, 
 it could be imagined that freedom prevailed in this matter, and that, 
 without any monopoly, measures could be taken for the verifying of 
 quotations and avoiding the most serious abuses. Moreover, there are 
 numerous States where there is no monopoly, either for brokerage in mer- 
 chandise, insurance, or freight, or for the mediation in the matter of 
 negotiating securities, and yet the freedom does not appear to give rise to 
 complaints." 
 
 92 
 
History and Methods of the Paris Bourse 
 
 referred to, "takes cognizance of intermediary agents, 
 * * * the stockbrokers." 
 
 They must keep secret the name of parties for whom 
 they operate. The obligation of secrecy is imposed upon 
 them by article 19 of the decree of 27 Prairial, year X. 
 
 They are not permitted to operate for their own account. 
 Article 85 of the Code de commerce forbids it to them. 
 The result is that apparently they deal under their own 
 name, and in reality for account of their customers. 
 
 If one stops to think for a moment of the nature of 
 a transaction of a qualified intermediary, who is not 
 permitted to reveal the name of his principal and 
 not allowed to deal for his own account, he will easily 
 recognize that the transaction presents all the signs 
 of commission. Article 94 of the Code de commerce, more- 
 over, says expressly : ' ' The commission agent (commission- 
 naire) is one who acts in his own name, or under a firm 
 name, for account of a principal." 
 
 (5) The law says (art. 74 of the Code de commerce) 
 that it takes cognizance of intermediary agents. 
 
 But is one really bound to engage an intermediary 
 when he wishes to transact bourse operations, even on the 
 Bourse ? 
 
 No; the law has never said that. 
 
 Everyone is free to buy, even on the Bourse, for his 
 own account. 
 
 Thus it was that Tribun Alexandre, who in the year IX 
 was reporter of the law of 28 Ventose, said in his report:" 
 "No doubt, nothing prevents two citizens, who trust 
 each other, from making contracts between themselves, 
 
 a Archives Parlementaires, pp. 608 to 610. 
 
National Monetary Commission 
 
 and without intermediary, concerning a matter mutually 
 satisfactory. But it would show a poor knowledge of the 
 spirit of what we call business, to infer from that fact 
 that stockbrokers are useless. It happens frequently that 
 he who, for private reasons, or owing to necessity, deter- 
 mines upon selling the security or the merchandise he 
 owns, does not want to be known, and that the one who 
 has funds for investment, does not wish to be known 
 either. From that results the necessity of an interme- 
 diary to facilitate the sale to one and the purchase to the 
 other." 
 
 The law forces no one to apply to a stockbroker. But 
 any banker, any receiver of orders, who has obtained a 
 bourse order or instructions to carry out a commission, 
 must apply to a stockbroker, since only a stockbroker 
 can seek a purchaser for his seller and a seller for his 
 purchaser. 
 
 The stockbroker has a privilege of monopoly as " com- 
 missionnaire ' ' (commission agent) . No one can exercise 
 the functions of " commit sionnaire " on the Bourse or out- 
 side the Bourse except the stockbrokers. 
 
 (6) The extent of the monopoly is fixed by article 76 
 of the Code de commerce. . It is of moment to recall to 
 mind the full text thereof: 
 
 "The stockbrokers, organized in the manner prescribed 
 by law, have alone the right to negotiate government secu- 
 rities and other securities susceptible of being quoted; to 
 negotiate for account of others bills of exchange, notes, 
 and all other commercial instruments; and to verify the 
 quotations thereof. 
 
 94 
 
History and Methods of the Paris Bourse 
 
 " Concurrently with merchandise brokers, the stock- 
 brokers may attend to negotiations and brokerage for 
 sales or purchases of metals. They alone have* the right 
 to verify the quotations thereof." 
 
 The Code de commerce dates from 1807. 
 
 In reality, it is not that text which gives the stock- 
 brokers their privilege. 
 
 The text which gives that privilege is a prior one, 
 articles 6 and 7 of the law of 28 Ventose, year IX (19 
 March, 1801), thus expressed: 
 
 "ART. 6. In all cities where there is a Bourse, there 
 shall be stockbrokers and commercial brokers appointed 
 by the Government. 
 
 "ART. 7. These stockbrokers and commercial brokers, 
 who shall have been appointed by virtue of the preceding 
 article, shall alone have the right to exercise the profession, 
 to verify the quotations of exchange, the quotations of 
 government securities, merchandise, gold and silver bul- 
 lion, and to testify before courts and arbiters to the truth 
 and to the quotations of negotiations, sales, or purchases." 
 
 When the Code de commerce was compiled, the atten- 
 tion of the lawmaker was not occupied with the idea of 
 expanding the functions of the stockbrokers, but only 
 with the idea of specifying them. 
 
 (7) ''Stockbrokers alone have the right to make nego- 
 tiations," says the Code de commerce. 
 
 What negotiations are meant? Evidently, negotiations 
 of intermediaries and commission agents, since the law 
 has qualified stockbrokers as intermediaries, and has 
 made it their duty to transact business apparently for 
 themselves and in reality for their customers. 
 
 90312 10 7 95 
 
National Monetary Commission 
 
 In other words, the lawmaker gives to the stockbrokers 
 the monopoly of the negotiations he intrusts them with. 
 He did riot wish to say that every commercial transaction 
 in securities should be made through a stockbroker. He 
 wanted to say that, having created intermediaries who 
 alone have the power to act as such, negotiations of 
 mediation should be exclusively reserved for them. 
 
 (8) While carefully reading article 76 of the Code de com- 
 merce, one becomes aware of a difference in the wording 
 relative to the negotiation of government and other 
 securities, on the one hand, and negotiations of bills of 
 exchange, notes, and commercial instruments, on the other. 
 
 Article 76 of the Code de commerce says, indeed, that 
 stockbrokers alone have the right to make negotiations in 
 government and other securities susceptible of being 
 quoted, and to make, for account of others, negotiations 
 in bills of exchange, notes, and commercial instruments. 
 
 Why these words for account of others? 
 
 A suspicion crosses one's mind. Why has the lawmaker 
 taken the trouble to say that the stockbroker, so far as 
 bills of exchange, notes, and commercial instruments are 
 concerned, acts for account of others, and did not say that 
 for other securities? Is it with a view to lay down the 
 rule implicitly that for the other securities he alone may 
 make all negotiations, and that, consequently, private 
 individuals can not act for their own account? 
 
 This would be making a big mistake. The lawmaker 
 never enjoined, and never would enjoin, upon anyone to 
 have recourse to an intermediary could not have wanted 
 to do so by means of a mere difference in wording, by some 
 sort of subterfuge. 
 
History and Methods of the Paris Bourse 
 
 Moreover, this difference in wording may be rationally ex- 
 plained. In the matter of bills of exchange there can be 
 no secrecy. The indorser of a bill of exchange will neces- 
 sarily be known to the purchaser. In consequence, the 
 stockbroker, not being able to indorse the bill of exchange 
 himself, since he could not be responsible if unpaid, is 
 bound to make the name of the seller known to the pur- 
 chaser. a The negotiation, therefore, in itself already 
 carries with it the pointing out of the party for whose 
 account it is made. 
 
 Consequently, there is no cause to dwell upon the argu- 
 ment drawn from the words " for account of others " with 
 a view to maintain that the cooperation of a stockbroker 
 is always necessary for the purchase or the sale of 
 securities. 
 
 But the stockbroker has a monopoly of operations 
 belonging to an intermediary, and it remains true that 
 most transactions in bourse securities (excluding those 
 made over the counters of money changers and bankers 
 in their offices) are made under the commission system 
 and imply the resorting to an intermediary, and, conse- 
 quently, must be made through stockbrokers. 
 
 (9) However, is it necessary to employ a stockbroker for 
 the negotiation of all transferable securities, whatever they 
 may be ? 
 
 a According to the terms of article 10 of the decree of 27 Prairial, year X, 
 the stockbroker can not indorse a bill of exchange. According to the terms 
 of article 25 of the decree of 27 Prairial, year X, the negotiation of a bill 
 of exchange makes its examination a necessity. Therefore the stockbroker 
 states for whose account he is trading. 
 
 It should be recalled that in practice stockbrokers never negotiate bills 
 of exchange. 
 
 97 
 
National Monetary Commission 
 
 No ; article 76 of the Code de commerce includes within the 
 privilege only government and other securities susceptible of 
 being quoted. 
 
 What is meant by " effets publics" (government securi- 
 ties) ? There is no legal definition as to what securities 
 may be thus termed. We can only refer to authors. We 
 refer to Volume IV of the Traite de Droit Commercial of 
 MM. Lyon-Caen & Renault. 
 
 "In the category of 'effets publics,'" they say, "are 
 reckoned the securities issued by the duly constituted 
 authorities (especially the rentes of the French Govern- 
 ment or of foreign Governments, securities issued by the 
 departments or townships, French Treasury bonds, which 
 form the floating debt, etc.), or issued by permission of 
 the authorities (shares and bonds of railroad companies, 
 shares and bonds of corporations created with the author- 
 ity of the Government by virtue of article 37 of the Code 
 de commerce) . On the other hand, similar securities issued 
 by private corporations, not subject to preliminary author- 
 ization, are not "effets publics." 
 
 (10) What is meant by the words "and others sus- 
 ceptible of being quoted?" 
 
 The words "and others susceptible of being quoted," 
 which appear in article 76 of the Code de commerce, have 
 given rise to several interpretations. 
 
 No. 890. MM. Lyon-Caen & Renault themselves call attention in a 
 footnote to the fact that their solution is in accordance with the one given 
 by Mollot (Bourses de Commerce, Nos. 123 et seq.); Buchere (Traite de 
 Valeurs Mobilieres, No. 68) ; Bozerian (La Bourse et ses Operations, Nos. 45 
 and 412); Ruben de Couder (Dictionnaire de Droit Commercial, under the 
 words "agents de change," Nos. 91 and 92); and Pour V Ancien Droit, 
 Nowveau Denisart, under "effets publics." 
 
History and Methods of the Paris Bourse 
 
 According to some authors these words apply to all 
 securities which, owing to their intrinsic nature, are, at any 
 moment, without distinction whatsoever, qualified to be 
 quoted on the bourse list. According to other authors 6 
 we should estimate the prominence attached to any given 
 securities, and consider as susceptible of being quoted only 
 those which, by their importance and their great number, 
 would be likely to attain a wide circulation, leaving out 
 negotiable values that are little known in the market and 
 have no pretension to being quoted. 
 
 Finally, a third system highly praised by MM. Lyon-Caen 
 & Renault in their "Precis de Droit Commercial," and 
 given up by them in their " Manuel " and in their " Traite" 
 decided that those securities were not susceptible of 
 being quoted which, either on account of their intrinsic 
 nature or on account of any legal or reglementary inter- 
 diction, can not be admitted on the official list. 
 
 The court of cassation (Cour de cassation} , by means of 
 three decisions, of July i, 1885 (S. 1885, i. 257, D. P. 
 1885, i. 386), February 10, 1886 (Dr. fin. 1888, p. 222), 
 and March 9, 1886 (S. 1886, i. 222, D. P. 1886, i. 266), 
 has sanctioned a fourth system, including in the expres- 
 sion " securities susceptible of being quoted" only those 
 which were declared qualified to be placed on the bourse 
 quotation list by the Syndical Chamber of Stockbrokers 
 that is to say, which fulfill the conditions exacted for that 
 purpose, without, however, the necessity of discriminating 
 whether they have actually been quoted or not. The 
 
 a Mollot, Bourse de Commerce, No. 123; Badorride, Bourses de Commerce, 
 Nos. 204 et seq. 
 
 6 Boistel. Precis de Droit Commercial No. 683. Buchere, Traite des 
 Operations de Bourse, No. 140; Labbe\ Note, Sirey, 1881, I. 289. 
 
 99 
 
National Monetary Commission 
 
 words " securities susceptible of being quoted" are there- 
 fore synonymous with the words "securities admitted on 
 the quotation list. ' ' This interpretation has reconciled the 
 authors. a 
 
 Hence, by " securities susceptible of being quoted," 
 are meant securities which have been acknowledged by 
 the stockbrokers as qualified to be placed on the official 
 quotation list of the bourse. 
 
 Furthermore, we must also take into account that there 
 are two categories of securities which can not be quoted 
 those against which there is a permanent prohibition, 
 resulting from a statutory text, and those which lie under 
 a temporary restriction by the Minister of Finance. 
 
 A decree of December 3, . 1893, prohibits the official 
 quotation of shares of foreign corporations, the par value 
 of which is not on a plane with the par value of shares 
 sanctioned by French law. 
 
 Now, the law of August i, 1893, on stock companies, 
 directs that the par value of shares shall be 100 francs 
 minimum. For companies having a capital of less than 
 20,000 francs, the par value of shares must be 25 francs 
 minimum. 
 
 Article 5 of the decree of February 6, 1880, empowers 
 the Minister of Finance to prohibit the official quoting of 
 a foreign security. 
 
 We shall now sum up the results obtained relative to 
 this special point. Excepting securities against which 
 there is an interdiction either general, through the decree 
 of December 3, 1893, or special, through the Minister of 
 Finance securities susceptible of being quoted are those 
 
 <*T. i, No. 1481. 
 
 100 
 
History and Methods of the Paris Bourse 
 
 which stockbrokers have decided to carry on their list, 
 called the "Cote Officielle" (Official Quotation List). 
 
 Consequently, every time a syndical chamber of stock- 
 brokers (une chambre syndicate d agents de change) admits 
 a security on its official quotation list, the chamber itself 
 proclaims for the benefit of its members the exclusive 
 right to negotiate the same. 
 
 (n) Stockbrokers have the privilege of carrying cer- 
 tain securities in a special place on their list, called the 
 "non-official part" (partie nonofficielle) . (Decree of Oct. 
 7, 1890, art. 20.) They can not carry, in that part, 
 securities which they have been prohibited from quoting 
 for the reasons mentioned above. They enter thereon 
 securities comparatively rarely dealt in. It would be 
 more correct to say that that portion of the quotation 
 list is not permanent. The securities admitted on that 
 part of the quotation list are subject to the privilege of 
 the stockbrokers. 
 
 (12) As the privilege of stockbrokers applies only to 
 government and other securities susceptible of being 
 quoted, all other securities may be freely negotiated by 
 unattached intermediaries. 6 These are the coulissiers 
 (curb brokers). 
 
 a Trib. correctionnel de Lyon, 12 mars, 1906. Journal I' Information of 
 March 9, 1906. 
 
 & Regarding the right to use agents other than stockbrokers for un- 
 listed securities or securities not susceptible of being listed, the following 
 authorities may be referred to: Trib. civ.: Seine, 23 April, 1898 (Journal le 
 Droit, of 6 Oct., 1898); Paris, 21 Oct., 1900 (Pand, fr., 1901, 2.209); Paris, 
 24 Oct., 1900 (Le Droit, of i Dec., 1900); Paris, 19 Jan., 1901 (Gazette du 
 Palais, 7 June, 1901); Paris, 28 March, 1901 (Gaz. des Trib. of 14 Sept., 
 1901); Trib. corr. Marseille, of 29 June, 1903 (Rec. Marseille, 1903, 
 1.328); Cour de Paris, 7 Feb., 1906 (Cote de la Bourse et de la Banque, 
 21 Sept., 1906). 
 
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National Monetary Commission 
 
 But the stockbrokers can also negotiate securities 
 which they have not the. right to quote. a However, 
 they have no privilege, as stated above. 
 
 (13) The penalty for transactions made in violation of 
 the monopoly of the stockbrokers may be threefold: It 
 is, first of all, the nullity of the transactions. It has been 
 invariably imposed by the courts (notably, the deci- 
 sions of the Cour de cassation, Ch. crim., Jan. 19, 1860, 
 and Feb. 21, 1868; Chambre des requites, Feb. 28, 1881; 
 Chambre civile, Apr. 22 and June 29, 1885; cassation, 
 Feb. 8, 1888 and 1892, Feb. 22, 1897). b 
 
 In spite of the weight which decisions of the court of 
 cassation (Cour de cassation) carry, the nullity is not ad- 
 mitted by all theorists. 
 
 The nullity of transactions is very debatable. No 
 passage of law pronounces the nullity. However, the de- 
 cree of 27 Prairial, year X, is framed as follows: " In con- 
 formity with art. 7 of the law of 28 Ventose, year IX, all 
 negotiations made through unqualified intermediaries are 
 declared void." In conformity with article 7 of the law 
 of 28 Ventose, year IX * * *. By referring to the law 
 
 a Lyon, 2 May, 1888 (Droit Financier, 1888, p. 264); Trib. civ.: Seine, 
 18 June, 1899 (Journal la Loi, of 31 July, 1899); Lyon, 27 March, 1902 
 (Gazette Palais, 1902, 1.715); Lyon, June 22, 1902 (Dr. Fn., 1902, p. 
 422); Trib. corr.: Seine, 8 June, 1904, p. 342. (See also Cote de la 
 Bourse et de la Banque, of 21 Sept., 1906.) 
 
 & Recueil de Sirey : 
 
 1860. 
 1868. 
 1881. 
 1885. 
 1885. 
 1888. 
 1892. 
 1897. 
 
 .481 
 . 1 68 
 
 . 289 
 . 250 
 
 273 
 .312 
 
 294 
 .185 
 
 102 
 
History and Methods of the Paris Bourse 
 
 of Ventose, not a word is found therein permitting one to 
 say that operations are void. 
 
 M. A. Wahl a thinks that there may be doubt as to 
 nullity. '"We admit," he says, "that the natural sanc- 
 tion of a prohibitory law is the nullity of deeds infringing 
 upon it, but only when no other penalty for its transgres- 
 sion exists; here, however, criminal actions are sufficient 
 protection for the stockbrokers." 
 
 MM. Baudry-Lacantinerie and Wahl b are of the opinion, 
 that it is untrue that every interdiction of public interest 
 is sanctioned by nullity. "On the contrary, it is certain 
 that, in general, nullity is not inflicted on an infraction to 
 a monopoly." The case is different when a solemn con- 
 tract is exacted in order to safeguard the free consent of 
 the contracting parties as, for instance, a donation or a 
 marriage contract. But the monopoly of stockbrokers 
 has been established only for effecting transactions; the 
 consent of parties remains uncontrolled even when they 
 apply to other agents than stockbrokers. The only right 
 that is ignored is the privilege of the stockbrokers. Well, 
 for this the penal restraint suffices. "No one has even 
 thought of asserting that an auction sale of chattels, 
 made without employing an auctioneer, would be void." 
 
 Are the former Council decrees of September 24, 1724 
 (art. 1 8), and November 26, 1781 (art. 13), to be antago- 
 nized? MM. Baudry-Lacantinerie and Wahl call atten- 
 tion to the fact that these decrees were repealed by the 
 law of March 17, 1791, which abolished the monopoly of 
 
 a Traiti theorique et pratique des Titres au Porteur franqais et etrangers, 
 1891, T. 2, 969. 
 
 b Traite theorique et pratique de Droit Civil. Du Mandat. No. 423. 
 
 T03 
 
National Monetary Commission 
 
 the stockbrokers. Article 2 of the law of September 15, 
 1807, has, moreover, repealed "all ancient laws regard- 
 ing commercial matters, on which the Code de commerce 
 had been legislating." Besides, the law of 1886 on time- 
 bargains has particularly repealed the council decrees of 
 1724, notwithstanding the previous repeal, because the 
 administration of justice persisted in applying it. And 
 that repeal applies not only to the provisions coming 
 under the law of 1885, but to the entire decision. The 
 authors, therefore, decide against nullity. 
 
 M. Daniel de Folleville a and M. Salzedo b claim that 
 negotiation is not subject to nullity. 
 
 MM. Lyon-Caen and Renault c admit nullity. These 
 authors maintain that the ancient laws, so far as an 
 infringement upon the monopoly is concerned, may have 
 survived, because article 2 of the law of September 15, 
 1807, repeals only the laws regarding matters on which 
 the Code de commerce legislates. Well, the Code de com- 
 merce is not treating of infringements on the monopoly. 
 Besides, MM. Lyon-Caen and Renault call attention to 
 the fact that the reasoning they dispute, would lead to an 
 inadmissible conclusion; that is to say, that there is no 
 penalty for unwarrantable interference. 
 
 But it may be objected, it seems to us, that, the interfer- 
 ence with the functions of stockbrokers being an offense 
 and, as such, punishable it is not correct to state that 
 interference is bereft of penalty. The law of 28 Ventose, 
 year IX, of which Chapter V of the Code de commerce 
 
 a De la Possession des Titres au Porteur. No. 295. 
 
 6 La Coulisse et la Jurisprudence, p. 89. 
 
 c Traite de Droit Commercial. T. IV, note under No, 906. 
 
 104 
 
History and Methods of the Paris Bourse 
 
 is the successor, erects infraction into a misdemeanor. 
 Hence the former provisions of 1724 and 1781 appear 
 as having possibly been repealed by the law of September 
 15, 1807. 
 
 Therefore, it appears to us inadmissible that transactions 
 effected through unqualified intermediaries should be void. 
 Consequently, a customer could ratify transactions made 
 without the cooperation of a stockbroker, and the en- 
 gagements undertaken in regard of these transactions 
 would be valid. But this solution is purely theoretical, 
 since the administration of justice, as we stated, declares 
 void all transactions made by intermediaries other than 
 stockbrokers, when the negotiations refer to securities 
 with regard to which the stockbrokers have reserved the 
 privilege for themselves, by listing them on the official 
 quotation list. 
 
 (14) We come to the second sanction of the monopoly 
 of stockbrokers. Those who practise the profession of 
 stockbrokers or meddle with the privilege reserved for 
 these ministerial appointees, are liable to a fine in a 
 police court, without prejudice, of course, to damages 
 due to the stockbrokers. 
 
 This fine may be not more than one-sixth of the stock- 
 broker's bond and not less than one-twelfth. 
 
 Article 8 of the law of 28 Ventose, year IX, says: 
 
 "It is forbidden to all individuals other than those 
 appointed by the Government, to fulfill the functions of 
 stockbrokers and merchandise brokers, under penalty of 
 a fine, which shall not exceed one-sixth of the stock- 
 broker's bond, nor be less than one-twelfth. 
 
 105 
 
National Monetary Commission 
 
 "The fine shall be imposed by an inferior court by way 
 of correction, enforceable by arrest, and the money shall 
 be applied to the foundlings' fund." 
 
 What does the unwarrantable interference with the 
 functions of stockbrokers consist of? 
 
 It consists of acts belonging to these functions ; that is 
 to say, of acts of mediation. 
 
 Hence, the acting as intermediary between purchasers 
 and sellers, as a commission agent would do, is that which 
 constitutes the offense. 
 
 This, moreover, was expressly stated in a decision of the 
 Cour de cassation, rendered in a lawsuit brought against 
 26 coulissiers (curb brokers) in 1859. The decision says: 
 
 "Whereas acting as intermediary, in consideration of a 
 commission or brokerage, between sellers and purchasers 
 of government securities and other securities susceptible of 
 being quoted, or, which is the same thing, bringing together 
 sellers and purchasers, preparing and carrying out the 
 formalities tending to the effecting of the purchases and 
 sales, constitutes making negotiations in these government 
 and other securities. * * *" a 
 
 We should mention, however, that a suit for unwar- 
 rantable interference was recently brought against some 
 bankers for effecting private dealings direct operations 
 without intermediary. 
 
 These transactions are positively lawful. But it is self- 
 understood that the stockbrokers ardently wish this were 
 not the case. 
 
 a Cour de cassation. Jan. 19, 1860. Sirey, 1860. i. 481. Also, Cham- 
 bre criminelle. Feb. 21, 1868. Dalloz, 1881. i. 9. 
 
 106 
 
History and Methods of the Paris Bourse 
 
 The decision of the First Correctional Chamber of the 
 Seine Court (Tribunal de la Seine) on April n, 1907, pro- 
 claimed that article 76 of the Code de commerce estab- 
 lishes the privilege of commission agents for the benefit 
 of the stockbrokers; that freedom of trade is one of the 
 essential principles of our modern law; that the general 
 provisions governing sales, which form the matter of 
 chapter 6, book 3, of the Code civil, contain no restrict- 
 ing disposition concerning the purchase and sale of 
 securities; that direct transactions in securities quoted 
 or not quoted are therefore lawful, without distinction as 
 to whether the purchases and sales are for cash or for the 
 account, fixed or on option, refer to securities in specie or 
 in genere, or whether the seller is or is riot the owner at the 
 time of the contract. 
 
 However, the court established the fact that the bankers 
 had made sales and purchases for clients-purchasers and 
 clients-sellers at the same price. Therefore there was un- 
 warrantable interference, since it was a case of agency. 
 The prosecuted bankers were fined 25,000 francs. 
 
 When the case came before the Cour d'appel (court of 
 appeals) , the prosecuted bankers offered to prove that the 
 inferior court had made no audit or verification, and that 
 they had never matched sales with purchases and pur- 
 chases with sales. 
 
 Were the proofs missing? The court of appeals, by its 
 decision of April 9, 1908, sentenced the appellants with- 
 out citing any case of agency. The decisions mainly rested 
 on the fact that article 76 of the Code de commerce provides 
 differently for transactions in government and other securi- 
 ties, on the one hand, and transactions in bills of exchange, 
 
 107 
 
National Monetary Commission 
 
 on the other, in making in the first case the mediation 
 of a stockbroker always necessary, while not so in the 
 second; that this difference of treatment results from the 
 words "for account of others" inserted in article 76 con- 
 cerning bills of exchange. Finally, according to the Cour 
 d'appel, the direct transaction is one where the owner of 
 the securities delivers them to the purchaser. But a sale 
 in which the seller does not hold the securities, can not 
 be direct; the mediation of a stockbroker is necessary for 
 the sale. 
 
 These views have stirred up very violent criticisms. 
 An offense that is, a punishable act can not be con- 
 strued, a monopoly can not be granted an excessive 
 range, by forbidding direct transactions, and even pun- 
 ishing them and this by reason of a difference in word- 
 ing, which, moreover, is readily explained by the different 
 way of negotiating securities of different character. (See 
 above, No. 8.) 
 
 As to the prohibition forbidding the seller who is short 
 in securities to sell by himself or to undertake to make 
 deliveries without the agency of a stockbroker it rests 
 on no law and is purely arbitrary. After all, it is rather 
 the mediation which constitutes the unwarranted interfer- 
 ence. 
 
 The decisions of the Cour d'appel are, at the present 
 time, before the Cour de cassation. 
 
 Is the fine imposed by the law of the year IX to be 
 calculated on the security bond of the year IX or of the 
 
 a VideDalloz, 1908, 1-153, f r the text of the decision, and a very im- 
 portant critical note by M. Percero, professor at the Faculti de Droit in 
 the University of Dijon. 
 
 108 
 
History and Methods of the Paris Bourse 
 
 time when the offense was committed? The Cour de cassa- 
 tion in 1860 took as a basis the security bond at the time 
 when the offense was perpetrated. This solution, sup- 
 ported by M. Boistel a and by M. Ruben de Couder, is 
 violently criticised by others, like MM. Buchere, Mollot, 
 Lyon-Caen and Renault. 6 
 
 There are no extenuating circumstances when it comes 
 to unwarrantable interference with the offices of stock- 
 brokers. 
 
 (15) Finally, we reach the third penalty imposed by the 
 law upon infringements on the monopoly of stockbrokers, 
 namely, the internal-revenue fine. The law of April 13, 
 1898 (art. 14), does not allow the payment of the tax on 
 bourse transactions in securities mentioned on the official 
 list of stockbrokers, to be made to the internal-revenue 
 office by anyone except the stockbrokers. The result is 
 that when a banker, who is bound to keep a register for 
 the payment of the tax, enters thereon a transaction 
 reserved for the stockbroker, and pays the amount of 
 the tax to the administration, his acts constitute a viola- 
 tion of the internal-revenue law, punishable by a fine of 
 100 to 5,000 francs according to article 32 of the law of 
 April 28, 1893. 
 
 The monopoly of stockbrokers is thus protected by a 
 triple wall (i) the nullity of transactions; (2) a fine in a 
 police court; (3) an internal-revenue fine, the latter 
 
 a Boistel, Droit Commercial, p. 431. 
 
 b Buchere, Traite des Operations de Bourse, No. 1 14. Mollot, Bourse de 
 Commerce, No. 15. Lyon-Caen et Renault, Traite de Droit Commercial, 
 T. IV, No. 904. 
 
 c C 'our de Paris, Aug. 2, 1859. Sirey, 1860, i. 481. Mollot, Bourse de 
 Commerce, No. 16. Ruben de Couder, Dictionnaire de Droit Commercial, 
 under "Agent de Change," No. 15. 
 
 109 
 
National Monetary Commission 
 
 imposed by administrative proceedings; that is, without 
 trial. 
 
 According to the terms of the instructions No. 2956, 
 issued by the general direction of the registry office, that 
 provision does not refer to direct transactions. 
 
 But the administration of the registry office regards as 
 direct transactions only those which are made for money, 
 securities against cash. That solution is quite vulnerable. 
 
 (16) We shall close the inquiry into the extent of the 
 stockbrokers' monopoly by a special consideration of 
 metal transactions. 
 
 Article 76 of the Code de commerce divides the monop- 
 oly of such transactions between the merchandise brokers 
 and the stockbrokers. 
 
 Now, in 1866 (see above, No. 3) the functions of mer- 
 chandise brokers had left the range of monopoly. The 
 trade is free. The result is that transactions in metals 
 are free. 
 
 However, the stockbrokers alone have the right to 
 certify the quotations. 
 
BOOK IV. Historical and economic considerations. 
 
 FIRST DIVISION. The exchange market Origin of public credit. 
 
 Page. 
 
 1 . The financial market in antiquity 1 14-1 15 
 
 2. In the Middle Ages. In 1304. The exchange market at the 
 
 Grand Pont. Money changers, jewelers, bird dealers 115-117 
 
 3. The first bourses 117-118 
 
 4. The sundry sites of the Paris Bourse from 1304 to the pres- 
 
 ent time 118-119 
 
 5. How corporations were established 1 19-1 20 
 
 6. Edict of 1572. Brokerage raised to the dignity of office 120121 
 
 7. Edict of 1595. No one obliged to engage the services of a. 
 
 broker ^ 12 i-i 22 
 
 8. Edict of 1598. The office of broker subjected to taxation 122 
 
 9. Decision of the King's council of 1638. The brokers are called 
 
 "agents de change" 122-123 
 
 10. In 1705. The loan notes. Securities on the Bourse must be 
 
 negotiated by the " agents de change" 1 23-1 24 
 
 SECOND DIVISION. 
 
 11. General observations on public credit under the old regime. _ 124-125 
 
 12. Philip the Fair and his successors. The Superintendents 
 
 Enguerrand de Marigny, Jacques Coeur, and Semblancay__ 125-128 
 
 13. Francis I. The rentes of the Hotel de Ville 128 
 
 14. The successors of Francis I, Henry IV, and Sully. LouisXIII. 128-129 
 
 15. Louis XIV and Fouquet 129-131 
 
 1 6. Colbert. The chamber of justice. Colbert's "Terror" 131 
 
 17. The successors of Colbert. The lotteries. The tontine 131-132 
 
 1 8. Creation of offices. Pontchartrain. Samuel Bernard 132-133 
 
 19. The stock companies 133-135 
 
 20. Companies under Louis XIII 135-136 
 
 2 1 . Companies under Louis XI V __ 136-138 
 
 22. Under the regency. Law. The Bourse in the rue Quincam- 
 
 poix 138-140 
 
 23. After the system's downfall. In 1724. The Bourse is trans- 
 
 ferred to rue Vivienne 140-142 
 
 THIRD DIVISION. The Council's decisions of 1724 to 1788 The financial 
 market on the eve of the revolution. 
 
 24. The Council's decision of 1724. Its aim. Decision of 1726. _ 142-143 
 
 25. Council's decision of 1733 143 
 
 26. Council's decision of August, 1785 143-144 
 
 27. Council's decision of March, 1786 144 
 
 28. Council's decision of July 14, 1787 144 
 
 90312 10 8 iii 
 
National Monetary Commission 
 
 Page. 
 
 29. Council's decision of June 10, 1 788 144-145 
 
 30. Securities on the eve of the revolution 145 
 
 31. A glance at the condition of public finances under Louis XVI . 
 
 Agiotage (stockjobbing) 145-147 
 
 FOURTH DIVISION. The financial market during the revolution. 
 
 32. Suppression of offices. Suppression of " agents de change" 148-149 
 
 33. Mistake frequently made concerning the results of the financial 
 
 market's independence. To it is ascribed the stockjobbing 
 
 that took place at the time of the revolution 149 
 
 34. The real cause of stockjobbing during revolutionary times. 
 
 Physiology of stockjobbing 149-151 
 
 35. Condition of the public debt in 1789 _. 151-152 
 
 36. Creation of assignats. Economic disturbances caused by their 
 
 decline. The reason for the decline 152-153 
 
 37. Closing of the Bourse 153-154 
 
 38. Stockjobbing outburst. There is no more Bourse 154 
 
 39. Draconian measures. The rise in prices 154-155 
 
 40. The Bourse reopens. Law of the 13 Fructidor, year III. The 
 
 assignat keeps on declining 155 
 
 41. The law of 28 Vendemiaire, year IV, on the bourse regulation. 156-157 
 
 42 . Considerations on what occasioned these two laws 157 
 
 43. Forty-five billions of assignats. The territorial drafts. The 
 
 rise of gold 158-159 
 
 44. The great ledger of the public debt 159 
 
 45. Bankruptcy threatens 159 
 
 46. Bankruptcy 159-161 
 
 47. The law of the 28 Ventose, year IX 161 
 
 48. The decree of 27 Prairial, year X 161-162 
 
 49. Dealing for future delivery not forbidden to private individuals. 162 
 
 50. The bourse quotation list in 1800 162 
 
 FIFTH DIVISION. The nineteenth century. 
 
 51. Three kinds of events constitute the history of the financial 
 
 market: Expansion of public and private credit. Develop- 
 ment of dealings for future delivery and their being recog- 
 nized as legal. The struggle of the " Parquet " against the 
 "Coulisse" 162-163 
 
 52. Public credit develops transferable securities. Transferable 
 
 securities develop public credit 163-164 
 
 53. Condition of securities at the end of the nineteenth century. _ 164-169 
 
 54. The evolution of credit and the public debt 1 69-1 70 
 
 55. The financial trouble at the time of the bankruptcy until 1801- 
 
 Foundation of the Bank of France 170 
 
 56. The perpetual debt, from 18 Brumaire, year VIII, to the begin- 
 
 ning of 1909 171 
 
 57. The rente certificate made popular 171-172 
 
 112 
 
History and Methods of the Paris Bourse 
 
 Page. 
 
 58. The emission proceedings. Loans placed by contracts 172-174 
 
 59. Loans of departments and of municipalities 174 
 
 60. Loans of colonies and protectorates 174-175 
 
 61. Stocks of foreign governments 175-176 
 
 62. Insurance stocks 176-177 
 
 63. Railroads, and first speculation in railroad shares 177-178 
 
 64. The Revolution of 1848, and a great tumble in railroad shares. _ 178 
 
 65. From 1852 until the agreements of 1883 178-179 
 
 66. The agreements of 1883. The Government guarantees divi- 
 
 dends to shareholders 179 
 
 67. Railroads of local interest 180 
 
 68. Foreign railroads and the French financial market 180-181 
 
 69. Lump statistics of railway securities 181 
 
 70. Creation of sundry companies from 1822 until 1852 181-182 
 
 7 1 . The Comptoir d'Escompte de Paris 182-184 
 
 72. The Credit Fonder. The Credit Agricole 184-186 
 
 73. The Credit Mobilier 187 
 
 74. Other credit companies 187-188 
 
 75. The part played by the Bank of France in the movement of 
 
 securities 188 
 
 76. The downfall of the Union Generate 189-191 
 
 77. Present preponderance of a few large banks 191-192 
 
 78. The financial institutions and the securities circulating in 
 
 France in 1908 192-193 
 
 79. The part of the financial market in the circulation of securi- 
 
 ties. _ . 193-194 
 
 80. The French financial market has fulfilled its mission, but it 
 
 has only been able to do so by ridding itself of the shackles 
 fastened on it by the laws of the year IX. The "Coulisse's" 
 rivalry gives to the market the necessary freedom 194-196 
 
 81. In i8i6the "agents de change" become owners of their offices. 196-198 
 
 82. Ordinance of November 23, 1823 198 
 
 83. In 1862 the "agents de change" are authorized to take 
 
 special partners 198 
 
 84. The law on transactions for future delivery. Its economic 
 
 importance 1 98-201 
 
 85. The first consul and Count Mollien 201-204 
 
 86. The bourses and dealings for future delivery under the First 
 
 Empire. The Code de commerce of 1 807 204-206 
 
 87. The Forbin-Janson lawsuit. The Parere (merchants' petition) 
 
 of 1824 206-209 
 
 88. In 1833. The Harle proposition. Speech of Garnier Pages. 209-210 
 
 89. The Parere of 1842 210-211 
 
 90. In 1867 211 
 
 91. After the downfall of the " Union Generate" Public opinion 
 
 is stirred up. The Paris Chamber of Commerce passes a 
 resolution , 211-213 
 
 "3 
 
National Monetary Commission 
 
 Page. 
 
 92. In the Chamber. M. Alfred Naquet. M.Lagrange. A special 
 
 commission is appointed. M. Lyon-Caen 213 
 
 93. The law of March 28, 1885 213-215 
 
 94. The quarrel between the " Parquet" and the "Coulisse." The 
 
 origin .__ 215-217 
 
 95. Under the First Empire 217-218 
 
 96. Under the Restoration. Under the July Monarchy 218 
 
 97. The lawsuit of 1859 218-220 
 
 98. The "Coulisse" reappears.- 220 
 
 99. After the war of 1870. Quieter times on the Bourse 220-224 
 
 100. Contentions start afresh in the market in 1892 224-225 
 
 101. In 1893. The tax on bourse transactions. M. Tirard' s plan. 225-228 
 
 102. Adopted in the Chamber, the Tirard plan is thrown out in the 
 
 Senate. The system is adopted 228-230 
 
 103. The Transvaal gold mines on the Paris Bourse 230-233 
 
 104. The "agents de change" act. They endeavor to profit by the 
 
 movement. The Graux proposition and the 25 franc shares. 233-235 
 
 105. The Lacombe and Fleury-Ravarin amendments. Return to 
 
 the Tirard system 235-237 
 
 106. Reorganization of 1898 237-240 
 
 107. Unusual circumstances under which the discussion was started 
 
 in Parliament. The bill taken away from the Senate. The 
 arguments brought to the rostrum. Reorganization and 
 the Dreyfus affair 240-245 
 
 108. The attitudeof the "Coulisse" 245-247 
 
 109. The professional syndicates of the " Coulisse" 247-249 
 
 1 10. Strange position of the curb brokers (coidissiers) 249 
 
 in. The strengthening of monopoly not equitable from the stand- 
 point of public rights 249-254 
 
 112. Neither from the economic point of view. The advantages 
 
 of monopoly. Public credit. The quotation list and 
 private credit. Joint liability of intermediaries 254-268 
 
 113. The reorganization of 1 898 made light of the State's interests. 268-270 
 
 114. The arrangement of 1901 270-274 
 
 115. Final considerations __ 274-276 
 
 FIRST DIVISION. The exchange market Origin of public credit. 
 
 (i) The history of the French financial market is closely 
 connected with the history of commerce. From a more 
 particular point of view, it is closely connected with the 
 history of corporations, as well as with that of public 
 credit. 
 
 Very little information can be found in the works of 
 
 114 
 
History and Methods of the Paris Bourse 
 
 the ancients, concerning the organization of commercial 
 bourses (bourses de commerce) and the transactions there 
 carried on. A kind of public market existed in Rome 
 during the Consulship of Appius Claudius and Publius 
 Servilius that is to say, five hundred years before Christ. 
 It was called the Collegium mercatorum (assembly of 
 merchants) . 
 
 (2) Up till the Middle Ages, trading on the fairs affected 
 only wares. The payments, however, which the sales 
 necessitated involved transactions in exchange. To the 
 fairs of Brie and Champagne, to the fairs of Lyon, Beau- 
 caire, and Montpellier, there thronged a multitude of 
 foreign traders, who sold wares, or bought wares in order 
 to resell them in their own countries. There one would 
 see Italian, German, Brabantine, Spanish, Portuguese, 
 Barbarian, and even Egyptian traders and in an un- 
 broken line there stood " the money changers, whose tables 
 glittered with gold and silver coins and with money from 
 every country." b 
 
 a M. Edmond Guillard (Les Banquiers atheniens et romains, trapezites et 
 argentarii, Paris 1875, Guillaumin) explains that some freed Greek slaves 
 were the first ones at Rome to carry on the banking business and to prac- 
 tise money changing. He points out that the argentarii (bankers) were 
 doing business at the beginning of the eleventh century before Christ. In- 
 dependently of the offices which they had inside their establishments, they 
 occupied branch offices (tabernaz) on the forum, where they could be found 
 every day at a specified hour. It was the hour which the merchants, the 
 manufacturers, and the capitalists of Rome also chose for assembling. 
 Two centuries later, when the riches of the world became concentrated in 
 Rome, the bustle which this kind of bourse presents is so great that the 
 author compares the scene in the forum with that in La rue Quincampoix 
 in Paris at the beginning of the eighteenth century. 
 
 Plautus (Truculentus, Act i, scene i) alludes to the crowd of merchants 
 and bankers in the public square, among whom there mingled also the 
 courtesans. 
 
 & See Amans Alexis Monteil, Histoire des FranQais des Divers Etats, vol. i. 
 The Epistles of Brother Jehan, Franciscan friar, to Brother Andr6, friar of 
 Toulouse, Epistle CXXI V : The fair of Montrichard. 
 
 "5 
 
National Monetary Commission 
 
 In the commercial towns, operations of exchange as an 
 established function that is to say, outside of those which 
 took place at the fairs could, in fact, be executed only 
 in a specified place. An Ordinance of King Louis VII, 
 dated 1141, the original of which seems to be lost, had 
 assigned the Grand Pont of Paris to the business of ex- 
 change, and made it an offense to practise it elsewhere. 
 But the text of the ordinance of 1304, issued under Philip 
 the Fair, and having almost the same purpose, has been 
 preserved. The specified place has since then borne 
 the name Pont-au-Change. b As early as 1423 those who 
 
 Philippus Deo gratia Francorum rex: notum facimus universis tam 
 proesentibus quam futuris, quod nos ad ea, que pro bono communi utilius 
 expedire videntur aciem considerationis dirigere, et propter hoc eorum qui 
 facto cambii Parisiensis ingruunt statum et usum in melius ordinare stu- 
 dentes, duximus ordinandum. Quod cambium Parisiense erit et tenebitur 
 super nostrum magnum pontem solummodo, a parte gravie, inter ecclesiam 
 beati Leofredi et majorem archam, sive deffectum ipsius Pontis, pro ut Hac- 
 tenus ante corruptionem ponds, ejusdem quondam lapidei extitit consuetum. 
 Item quod nulli omnico liceat alibi, quam in loco illo cambiare, seu cambium 
 tenere Parisus, aut infra banleucam, et quod si contra hujusmodi ordina- 
 tionem nostram secus fieri contingat in posterum, et reperiri, pecunia seu 
 resilla quoe alibi quam in loco ad hoc per nos ordinato, cambiare fuerit, 
 vel ad cambiandum fuerit ordinata nobis cedet penitus in commissum. 
 Item, quod si per aliquem habentem sedem seu locum in cambio praedicto 
 commissum hujusmodo, delatum fuerit volumus, et ne frusta se in hoc 
 laboresse doleat, ei concedilus, quod cum pecunia, seu res ilia per gentes 
 nostras fuerit tanquam comissa judicata nobisque applicata, quatuor par- 
 tibus illius pro jure nostro retentis, ipse habeat quartam partem residuam 
 sibi pro salario et labore suo, per gentes easdem de speciali gratia libe- 
 randum. Quod ut firmum permaneat in futurum, salvo in omnibus jure 
 nostro et etiam alieno, presentibus litterio fecimus nostrum apponi sigillum. 
 Actum Parisiensus anno domini millesmo trecentesimo quarto mense Feb- 
 ruarii. (De Lauriere. Ordonnances des Rois de France. Imprimerie 
 Roy ale 1723, Tome i Page 426). 
 
 & There were two Grands Fonts, one which had become the Pont au 
 Change, the other, the Pont Notre Dame. The latter was in fact the Pont des 
 Planches du Mibray (Bridge of Boards of Mibray). (See: de Menorval. 
 Paris depuis ses origines jusqu'a nos jours, t. i, p. 241. A. Robida. Paris 
 A Travers L'Histoire, p. 678.) The Grand Pont, built of wood ages ago, 
 and several times burned or carried away by the streams, became loaded 
 with houses around the eleventh century. The wheels of mills revolved 
 beneath its arches. To the millers' houses were added goldsmith shops. 
 
 116 
 
History and Methods of the Paris Bourse 
 
 were engaged in money-changing carried on their business 
 with permission of the King. 
 
 (3) It is at Bruges that the Bourse was for the first time 
 called by that name. a In Holland bourses were estab- 
 lished at a very early date. So far as this country is 
 concerned, a long debt of gratitude is due to the Jews for 
 these useful institutions; the persecutions, furthermore, 
 which these courageous and untiring merchants experi- 
 enced in Spain after the expulsion of the Moors, were the 
 cause for their establishment in the Netherlands. 
 
 The Bourse of London, the establishment of which came 
 after the foundation of the Bank of England, was likewise 
 instituted by these bold merchants who came to Great 
 Britain in the retinue of William of Nassau. 
 
 In France the first bourses to be legally instituted were 
 established, first at Lyon, then at Toulouse, in July, 1549, 
 under Henry II, then at Rouen, around 1565, and, later, 
 at Bordeaux, in February, 1771, under Charles IX. The 
 names by which these meeting places were known varied 
 considerably. At Rouen the market place was called 
 
 Only one arch was used by passing boats. It was considered the property 
 of the Hanse des Marchands (Merchants' League). This bridge, assigned 
 to the use of the exchange merchants was also the bridge of the bird 
 sellers (Pont des Oiseliers). The bird merchants had obtained the privi- 
 lege of setting up there and of hanging their cages beneath the awnings 
 of the exchange shops, provided they furnished birds which were to be 
 released, as a manifestation of rejoicing, whenever a king or a queen passed 
 by. This privilege was the cause of frequent quarrels between the ex- 
 change merchants and the bird merchants, and sometimes of truly mock- 
 heroic brawls. Thus we see the origin not only of the name Pont au Change 
 but also of quai des Orfevres (Goldsmiths' wharf) and of rue des Lombards 
 (Pawnbrokers' street) names of localities near by. As for the bird sellers, 
 one may still see them, especially in these sections, plying their trade on 
 the wharves of the Seine, even as late as the twentieth century. 
 
 a It seems that at Bruges the merchants would come together in the 
 house of one of their number, known as van der Burse. According to 
 others, the house where the meeting took place had three purses (bourses) 
 carved on its gable (Lyon-Caen et Renault. Traite de Droit Commercial, 
 t. IV, No. 859). 
 
 117 
 
National Monetary Commission 
 
 Convention. a At Lyon, at Antwerp, and in other towns 
 the market place was called change (exchange) , estrade, 
 loge, college, or bourse. A number of cities actually have 
 each a rue de la Loge (market street) , the name coming 
 from the fact that the street led to the market place. 
 
 (4) The Bourse of Paris existed fully complete, as we 
 have seen it, as early as in the reign of Philip the Fair 
 (February, 1304); it was situated, as we have said, on 
 Pont au Change (Exchange Bridge), called at that time 
 the Grand Pont (Great Bridge) , near the Greve, between 
 the great arch and the church of Saint-Leufroy. At a 
 later date, it was transferred to the large court of the 
 Palais de Justice, beneath the Galerie Dauphine (Dauphin 
 balcony), near the prison; thence it was moved to the 
 famous street, rue Quincampoix, afterwards to the Place 
 Vendome, then to the rue Louis-le-Grand, and then to 
 the Hotel de Soissons (to-day the Bourse de Commerce), 
 where it was situated when it was closed by the decree 
 of the King's Council, October 25, 1720. 
 
 September 24, 1724, another decree of the King's Council 
 legally instituted the Bourse and assigned to it, as an 
 habitation, the Hotel de Nevers (at present the Bibliotheque 
 Nationale). It was situated there till June 27, 1793, 
 the day of its closing. It was reestablished on May 
 10, 1795, in the Louvre (on the ground floor beneath the 
 Galerie d'Apollon old apartments of Anne of Austria, 
 and at present the Musee des Antiques). But during the 
 interval (from 1793 to 1795) some rather heavy specula- 
 tions in coin and assignats ^were carried through in the 
 
 From the Latin cum venire, since it is used of persons assembling and 
 coming together from various places. 
 
 118 
 
History and Methods of the Paris Bourse 
 
 
 
 Palais Royal, in the place called le Perron; that is to say, 
 where rue Vivienne begins. 
 
 Closed on the 9th of September, 1795, the Bourse was 
 opened again January 12, 1796, and established in VEglise 
 des Petits-Peres. On October 7, 1807, it was transferred 
 to the Palais Royal in the balcony called de Virginie; 
 thence, on March 23, 1818, it was moved to the grounds 
 of the convent of the Filles Saint-Thomas, on the site 
 at present occupied by the Chambre de Commerce and by 
 the buildings adjacent to the place occupied by the Bourse. 
 The entrance was through rue Feydeau, facing rue de 
 Montmorency. 
 
 A shed, floored with boards badly joined together, 
 served as a meeting place for closing speculations which 
 resulted from the financial contrivances of the Government 
 of Louis XVIII. Finally, on November 6, 1826, the 
 building at present known as the Palais de la Bourse was 
 inaugurated. The edifice was enlarged in 1901, and the 
 new premises were opened to the public in 1903. 
 
 (5) The economic history of our country shows to a 
 marked degree the influence of the perpetual struggle of 
 the guilds, whether it was against individuals who were 
 trespassing on their privileges, or against other guilds 
 who were in competition with them. This constant 
 struggle was the inevitable effect of the organization of 
 labor under the old regime. The organization of labor, 
 in its turn, corresponded to the general conditions of the 
 period. "Each province or even each canton produced 
 almost all the things necessary for its own consumption. 
 The fields furnished agricultural products, the producers 
 of which themselves consumed the largest share; the 
 
 119 
 
National Monetary Commission 
 
 
 
 industries which supplied materials for clothing, housing, 
 and the manufacture of arms and utensils, concentrated 
 in towns and cities which in most cases were fortified. 
 The natural hindrances of distance to which was added 
 the lack of security, in thus restricting the markets, lim- 
 ited them to local producers only. For that reason there 
 resulted a kind of organization of industry which is found 
 in the oldest societies, in Egypt, in Chaldea, and in India, 
 and which has existed up to modern times the organiza- 
 tion by guilds or by closed castes. 
 
 "The serfs or subjects of a seigniory, who had acquired 
 the knowledge of a trade, obtained from their lords the 
 right of plying that trade for their own benefit. Thrown 
 together in the same neighborhood, in the same section, 
 in the same street, where they were soon forced into 
 competition, it did not take them long to learn that they 
 would find it to their advantage to combine, in order to 
 make themselves the masters of prices; for thus they 
 might raise them to a point far above the one to which 
 they were compelled by competition to reduce them." 
 
 Such is, in short, the genesis of guilds. 
 
 (6) An edict of, June, 1572 (under Charles IX), raises to 
 office "all brokers (courtiers) who at the present time are 
 carrying on the business of brokerage, whether it be in 
 exchange and money; or in silks, woolens, linens, hides, 
 and other kinds of merchandise; or in wines, corn, and 
 all other kinds of grain; or in horses and all other cattle; 
 provided that the brokers take out, in two months from 
 the date of the edict, letters of commission (lettres de 
 provisions) . ' ' 
 
 a G. de Molinari. Questions economiqites, 1906, Guillaumin tditeur, p. 
 233 et 234. 
 
 120 
 
History and Methods of the Paris Bourse 
 
 This edict of 1572 shows us how the brokerage of 
 exchange, practised simultaneously with the brokerage 
 of merchandise, came to be recognized as a commission, 
 that is to say, a public service. There were in France 
 during this period commissions of justice, of finance, and 
 of war; the practice of purchasing commissions began 
 under Charles VIII, and was continued by his successors. 
 
 (7) Although the brokers had certain privileges, religious 
 dissensions and wars were not over favorable to the prac- 
 tice of this profession, nor to the respect for the preroga- 
 tives granted to those who pursued it. Accordingly, in 
 1595, Henry IV renewed the edict of Charles IX. 
 
 The edict of April 15, 1595, prohibits any person, at 
 the risk of corporal punishment, of being charged with 
 forgery, and of being compelled to pay 1,500 livres, from 
 performing the services of exchange broker (agent de 
 change) or merchandise broker (courtier), before having 
 taken letters of commission from the King. The edict 
 ends thus: 
 
 "It is not to be understood, however, that anyone is 
 compelled to employ the said brokers for the aforemen- 
 tioned transactions, if it does not seem best to him to 
 do so." 
 
 Thus a principle was formulated which people expressed 
 in the following saying: " Ne prend courtier, qui ne veut" 
 (He who does not desire, needs no broker to hire). 
 
 The broker (courtier) was a man who ran (courait) , who 
 sought a seller for a purchaser, or a purchaser for a seller. 
 When the first laws of their profession were being formu- 
 lated the idea did not occur to anyone to compel sellers 
 
National Monetary Commission 
 
 or buyers, who were in a position to transact their own 
 affairs, to have recourse to an unnecessary intermediary. 
 
 But it happens, that the question of commissions was 
 of minor importance, as compared with the question of 
 money. In other words, when the King created commis- 
 sions, he made them yield revenue. This system was in 
 vogue under Francis I, and was extended more and more 
 under the reigns of his successors. We see what is, per- 
 haps, its extreme development under Louis XIV. 
 
 Now, every corporation which pays, demands favors. 
 Often when the King needs money, he alters the statutes 
 of a corporation, takes away some rights formerly granted, 
 in order to sell them again, or gives to it some new ones 
 for ready cash. From that time on, it will be seen, the 
 brokers benefit from extensions and redemptions of privi- 
 lege, corresponding to profitable financial transactions on 
 the part of the royal exchequer. 
 
 (8) A decree of the King's Council of May 17, 1598, 
 explicitly subordinates to the exchequer the brokers of 
 exchange, of money, of cloths, of silk, of woolens, of 
 leather, and of other kinds of merchandise. 
 
 (9) It is in 1638 that, by a decree of the Council of the 
 King, the name " agents de change et de banque " (commis- 
 sioners of exchange and of banking) was given to the 
 exchange brokers) . 
 
 " This denomination, for which the Government man- 
 aged to be well paid, did not deprive them, however, of 
 the right to sell merchandise. The separation of duties 
 was effected a good deal later. b 
 
 a Manuel des agents de change, page 17, note 2. 
 
 &By the decree of the King's Council, October 25, 1720. 
 
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History and Methods of the Paris Bourse 
 
 At that time the agents de change numbered thirty. 
 An edict of February, 1645, created six new official 
 brokers, in consideration of ready cash. 
 
 (10) Up to that time the exchange broker had dealt only 
 in precious metals, foreign gold pieces, commercial bills, 
 and merchandise. But in 1705 a decree of the King's 
 Council made much of their prerogative as negotiators of 
 certificates of loans made jointly by companies. 
 
 The edict of 1705, under Louis XIV, was issued in one 
 of the most unfortunate periods in the history of French 
 institutions. It is known that, after Colbert, the King's 
 extravagances and the wars placed the exchequer in such 
 a bad plight that 40,000 offices were sold from 1691 to 
 1709. This is a period notorious for the creation of the 
 most ludicrous offices that can be imagined. 
 
 By this edict, the King, after having concluded that the 
 present offices were rather cheap, suppressed all the 
 offices of exchange brokers, bank brokers, and merchan- 
 dise brokers that had been created all over the Kingdom. 
 A financial reimbursement, to be sure, was promised them; 
 but it was only a promise, and was never fulfilled. At 
 the same time that the King decided upon the abolition, 
 he announced the creation of 116 new offices of agents 
 de change, 20 of which were for Paris and the others for the 
 rest of France. 
 
 "We wish," says the decree, "that all certificates of 
 loans contracted jointly by companies should be nego- 
 tiated through the agency of the said stockbrokers and 
 signed by one of them, who shall certify that the signatures 
 are valid, in default of which we prohibit all judges from 
 granting judgment against those who have signed them, in 
 case, at maturity of said bills, payment is defaulted." 
 
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National Monetary Commission 
 
 It is seen that the agency of the stockbrokers (agents de 
 change) is obligatory in 1705. 
 
 It appears evident that the maxim, Ne prend courtier 
 qui ne vent, has been broken. Negotiators are obliged to 
 have recourse to a stockbroker. 
 
 This great favor granted to stockbrokers is explained 
 by the financial scheme which the King is now hatching. 
 The old stockbrokers will be reimbursed later, but in the 
 meantime one must allure other brokers, or persuade the 
 old ones to pay new sums of money. 
 
 The decree of 1705 said: "We wish that all certificates 
 of loans made by companies * * * . " Those were the 
 first obligations. 
 
 What in fact were these borrowing companies? It is 
 important to know this, for the history of brokers and of 
 the bourses is inseparable from the history of public and 
 private credit. 
 
 SECOND DIVISION. General observations on public credit under the old 
 
 regime. 
 
 (i i) Public credit must be considered under two denomi- 
 nations: Public credit properly so called, made up of loan 
 securities of the Government or of artificial persons ema- 
 nating from the Government, and the credit of private 
 institutions, in the form of securities issued to the public 
 by special companies. 
 
 The early kings obtained their ordinary subsidies 
 through taxes, the enumeration of which, and the ex- 
 planation of how they were levied and administered, 
 would take us beyond the scope of our subject. 
 
 But the extraordinary resources of the early kings were 
 obtained by processes which in no way show nay, far 
 
 124 
 
History and Methods of the Paris Bourse 
 
 from it the voluntary consent of those who supplied 
 them. Public credit was brought into being by the ex- 
 tortion of the Prince. The King occasionally would ask for 
 assistance from his faithful subjects, and whether one was 
 willing or not, one certainly had to help the King. Now 
 and then (under various pretexts) , the King would resort 
 to profitable confiscations, as for instance, to the recoinage 
 of money, or even its debasement, to the sale of offices 
 and of titles of nobility, and, as a last resort, to borrowing. 
 
 To the "system" of the sale of offices there was added, 
 in a similar way, the loan-raising, which the authorities 
 awarded in lump to the farmers of the revenue (traitants) . 
 This process was in vogue especially in the seventeenth 
 century. The contractors became rich, but their profits 
 were merely the consequence of the financial regime which 
 resorted to their cooperation. Their risks were very great, 
 for, from time to time, there were some awful and noisy 
 law suits which would succeed in making them disgorge. 
 Richelieu, in his political Testament, speaks of the restitu- 
 tions which each court of justice effected to the advantage 
 of the exchequer, as of a normal and regular resource. 
 
 The insecurity of the public credit, the serious troubles 
 due to the distress of the royal exchequer, the empirical 
 and often spoliating methods by which it was sought to 
 remedy these troubles, contributed to the list of causes of 
 the French Revolution. Moreover, they were not among 
 the least potent. 
 
 (12) We shall pass over Dagobert and his finance min- 
 ister, St. Eloi; wg shall likewise pass over their successors, 
 in order to make special mention of Philip the Fair, the 
 maker of bad money. 
 
 125 
 
National Monetary Commission 
 
 Philip the Fair established an unusual tax of one denier 
 on the sale of all goods. People called this tax the Maltote, 
 the bad tax (from the Latin male, bad, and toller e, to tax) . 
 Jews, Lombards, and Templars suffered from his exac- 
 tions. His methods have remained famous. a His suc- 
 cessors imitated him, and from time to time they con- 
 demned their superintendents. Thus died Enguerrand de 
 Marigny, & Ge*rard de la Guette, Pierre Remy, Jean de 
 Montaigu, Pierre des Essarts, in order that the King 
 might lay hold of their fortunes which they acquired more 
 or less regularly during the exercise of their public func- 
 tions. King Charles VII, who was as much a maker of 
 bad money as was Philip the Fair, imprisoned his Minister 
 of Finance, Jacques Coeur c and Francois I had Superin- 
 tendent Semblancay hanged. 
 
 "Vide, Ch. Gomel. Les causes financieres de la Revolution franfaise, 
 Paris, 1842. 
 
 & Marigny, chamberlain and treasurer to Philip the Fair, had doubtless 
 drawn up or inspired the splendid ordinance enfranchising the serfs, in 
 which are found those beautiful words a daring declaration of war to the 
 lords: " Inasmuch as every human being is free by natural right, and inasmuch 
 as this liberty is blotted out by abhorrent servitude, to such an extent that 
 living men and women are treated as if dead, and at the end of their dreary 
 and wretched lives can neither dispose of nor bequeath the goods which God 
 has granted them during their life in this world, . . ." This was a chal- 
 lenge. He paid for it with his life. Accused of the most diverse crimes 
 of having embezzled the exchequer, of having stolen 30,000 livres from 
 the pope's deniers, of having had his statue placed in the palace near 
 those of the kings, and, to cap the climax, of being devoted to witchcraft 
 he was dragged from the dungeons of the Louvre to those of the Temple, 
 then to those of Vincennes, and condemned, without having been given a 
 hearing, and hanged at Montfaucon, on the gallows for thieves, on the Wed- 
 nesday, Eve of Ascension, of 1315. 
 
 c Jacques Coeur, born at Bourges about 1400, was a prominent merchant. 
 Minister of Finance to Charles VII, he was the King's creditor, which 
 resulted in his downfall. Confined in Beaucaire, lie succeeded in running 
 away, and enlisted in the service of Pope Calixtus III. In the history of the 
 city of Montpellier by Charles d'Aigrefeuille, Doctor of Theology, Canon in 
 
 126 
 
History and Methods of the Paris Bourse 
 
 We know the lines of Clement Marot: 
 
 "Lorsque a Maillard juge d'enfer, menait 
 A Montfaucon Semblancay 1'ame rendre, 
 
 A votre avis, lequel des deux tenait 
 
 Meilleur maintien? Pour vous le faire entendre, 
 Maillard semblait homme que mort va prendre, 
 
 Et Semblancay fut si ferme vieillard 
 Que Ton cuidait partout qu'il menait pendre 
 
 A Montfaucon le Lieutenant Maillard." 
 
 the Cathedral of St. Pierre (Montpellier MDCCXXXVII, at the printing 
 house of Jean Martel, royal printer), the following statements are found: 
 " Opportunity was taken of every public office which he had held to accuse 
 him of various frauds; it was said that as chancellor of the exchequer he 
 had committed many embezzlements in Languedoc. It was claimed that, 
 as director of the mint, he was guilty of having coined silver pieces known 
 as Gros de Jacques Coeur, on which he made exorbitant profits, and, because 
 he conducted a large business in the East, he was accused of having made 
 transportations of gold and silver to places outside of the kingdom and of 
 having furnished arms to the Turks in Alexandria. Here, also (so the state- 
 ment goes), one of his galleys, called the St. Denis, took on board a Saracen 
 child who wished to become a Christian; and the Patron, Michalet, a dyer, 
 brought it to Montpellier, whence Jacques Coeur, from fear that his galleys 
 would suffer as a consequence, had the child brought back to Turkey and 
 returned to its master, where it again renounced its faith. 
 
 " Upon these accusations he was arrested at Taillebourg, transferred from 
 there to Montils les Tours, where he was condemned to pay, as a fine, 
 100,000 crowns to the people .whom he had oppressed, and 300,000 to the 
 King; the penalty of death was changed to that of a public apology, and of 
 imprisonment until the entire payment of the aforesaid sums would be 
 made; after this he was to be banished from the kingdom, declared unfit 
 to hold any public office, and all his property was to be confiscated. 
 
 "The years 1454 and 1455 contain nothing of note to our city of Mont- 
 pellier; but in the following year, 1456, King Charles VII made an extraordi- 
 nary gift to the merchants of this city, by granting them the lodge which 
 Jacques Coeur had caused to be built there, at the cost of 1,869 Hvres 13 
 sous and 4 deniers. This piece of work is still perfect, as if it has just come 
 out from the hand of the maker, without a single stone having been changed. 
 Ornaments were not spared there; and the chemists who wrote so much 
 about the wonders of the philosopher's stone took advantage of the puz- 
 zling figures which are to be seen there to persuade us that Jacques Coeur 
 knew the secret of making gold." 
 
 There is still at Montpellier a street by the name of "jue de la Loge." 
 
 When Maillard, Judge of Hell, conducted Semblancay to Montfaucon 
 to take his soul, which of the two, in your opinion, carried himself the bet- 
 
 9 127 
 
National Monetary Commission 
 
 Jacques Cceur and Semblancay promoted the sciences 
 and deserve the gratitude of the poets, as later Fouquet 
 deserved the gratitude of the good La Fontaine. 
 
 (13) Francois I is considered to be the originator of our 
 system of the public debt. It is to him that the creation 
 of the perpetual rente dates back. 6 
 
 These are the rentes de VHotel de Ville (rentes of the 
 town hall). 
 
 (14) Under Francois II, under Charles IX, and under 
 Henry III, the religious wars, the dissipations of the 
 court, and the squanderings of the courtesans almost 
 each year necessitated the establishment of rentes, the 
 rate of which varied from the "denier twelve" to the 
 "denier seventeen" (du denier douze au denier dix-sepf). d 
 
 At the begining of the reign of Henry IV the debt was 
 enormous. Agriculture and commerce had been ruined 
 by the religious wars. Out of 150,000,000 livres in taxes, 
 there hardly came in 30,000,000 livres, and after the 
 wretched administration of Superintendent d'O, who died 
 in 1594, the King asked for Sully 's assistance; the debt 
 which at the beginning of his reign had reached 337,620,252 
 livres, was reduced by more than 100,000,000 livres. 
 
 ter? So as to inform you, Maillard looked as one whom death is going to 
 take, and Semblanc ay was so strong an old man that it was everywhere 
 thought that he was going to hang at Montfaucon Lieutenant Maillard. 
 
 a See in the works of La Fontaine, L'legie aux Nymphes de Vaux. 
 
 & Edict of October 10, 1522. 
 
 c Le"on Say. Dictionnaire des Finances, at the word " Dette Publique" 
 by MM. E. de Bray and Alfred Neymarck. 
 
 <*The expression "denier douze" signifies that for every twelve deniers 
 borrowed, the borrower will give as interest one denier. A loan " au 
 denier douze" is then a loan at 8.33 per cent. A loan "au denier dix-sept" 
 is a loan at 5.883 per cent. A loan " au denier vingt" is a loan at 5 per cent. 
 
 128 
 
History and Methods of the Paris Bourse 
 
 Under Louis XIII, not only were the efforts of Richelieu 
 inadequate to reduce the debt, but his struggles with 
 foreign countries and the Protestants considerably in- 
 creased it. a 
 
 (15) Under Louis XIV, up to the time of Colbert, public 
 credit continued to be in a bad condition. After the 
 disgrace of Fouquet, Colbert tried by several means to 
 restore it, only a few of which will be mentioned. 
 
 Nicolas Fouquet, born 1605, after having bought the 
 office of attorney-general at the Parlement de Paris (a 
 higher court of justice), obtained the superintendence of 
 the finances, thanks to Mazarin to whom he had remained 
 faithful during the Fronde. The treasury was empty, and 
 the duties of the superintendent became encumbered with 
 those of the trouveur d' argent (money finder). 6 The loans 
 were so onerous that an issue in 1658 of 400,000 livres of 
 rentes, representing a loan of 7,200,000 livres, brought 
 back an actual return of i ,200,000 livres, on which the cost 
 of administration was 400,000 livres. If it is true that 
 Fouquet was rich prior to his term of office, then it is cer- 
 tainly true that he became fabulously rich while in office. 
 
 Louis XIV paid Fouquet the remarkable honor of ac- 
 cepting an invitation to the Chateau de Vaux, a splendid 
 palace, costing, according to Voltaire 18,000,000 livres. 
 Innumerable invitations, says Voltaire, were sent out to 
 all parts of France and Europe, and, on August 17, 1661, 
 thousands of splendid carriages swarmed the road from 
 Paris to Melun. The King, the Queen mother, Monsieur 
 and Madame, and the entire court were not so much 
 
 a Leon Say. Dictionnaire des Finances, under the word " Dette Pu- 
 blique." 
 
 & Lavisse, Histoire de France, t. 7, p. 80. 
 
 129 
 
National Monetary Commission 
 
 dazzled as shocked by this fabulous fete, which surpassed 
 a hundredfold what the Sovereign himself could at that 
 time have given. All the details contributed to this 
 feeling: the comedy Les Fdcheux, improvised by Moliere 
 on a signal from the castle keeper, and presented in the 
 park at the lower end of the alley of firs; the gardens, 
 the waters, the ballet, the fireworks, the statues, the bronze 
 figures, the furniture, the scenic effects, and the supper 
 service of massive gold. The Queen mother could hardly 
 restrain her son from having the Superintendent arrested 
 on that very night, in the very place which, by itself, 
 was evidence of his embezzlements. 
 
 Eighteen days had hardly elapsed, when, as soon as 
 the King was on his way to Nantes in order there to inspect 
 the States of Brittany, Fouquet was arrested, September 
 5, in coming out from the Council sitting, by d'Artagnan, 
 captain of the musketeers. He was brought to the castle 
 at Angers, then in turn to Amboise, Vincennes, Moret, 
 and lastly to the Bastille, where he was immured June 
 1 8, 1663. Fouquet, in spite of his protests, was tried, 
 not by the Parlement de Paris, but by a special court of 
 justice (Chambre de justice), instituted by an edict of 1661 ; 
 it assembled at the arsenal, and was composed of Sequier, 
 the chancellor, de Lamoignon, the first president, and of 
 twenty-two members chosen from every Parlement (higher 
 court) in the kingdom. Nine voted in favor of death, 
 and thirteen for exile and confiscation of property; the 
 King, who felt much provoked, increased the penalty to 
 life imprisonment. Sentence was pronounced December 
 20, 1664, and three days later the unfortunate Fouquet, 
 atoning for his malversations ''which had been nothing 
 
 130 
 
History and Methods of the Paris Bourse 
 
 more than pomp and generosity, " departed for the fortress 
 de Pignerol, where he arrived January 10, 1665, and where 
 he was destined to die March 23, 1680, after fifteen years 
 of strict captivity. 
 
 (16) The Chambre de justice which had heard and con- 
 demned Fouquet, tried more than five hundred cases for 
 embezzlement. They examined, going back to 1635, 
 every loan transacted, and reduced the interest on each. 
 Public credit suffered considerably as a consequence; but 
 this consideration did not in the least restrain Colbert, 
 who was thoroughly convinced that there was absolutely 
 no occasion for borrowing. Frauds in connection with 
 the taxes were mercilessly followed up. " Forty thousand 
 treacherous nobles deposit at the treasury taxes which 
 they have unlawfully evaded. The prisons are overflowing 
 with farmers of the revenue, and the most guilty ones are 
 being hanged ; others have been freed only upon payment 
 of a large ransom. This period is known under the name 
 Terreur de Colbert."* 
 
 In four years Colbert raised the net revenue from about 
 22,000,000 to almost 37,000,000 livres. But the lavishness 
 of his master, the King, very soon put to naught the 
 results of the wise financial policy of Colbert. 
 
 (17) It is, of course, known that after the death of Colbert 
 (1688), the superintendency went over to Claude I^e 
 Peletier, who, in turn, was succeeded by Pontchartrain. 
 The latter with great difficulty began some operations 
 for credit, the most important of which were issues of 
 rentes. But credit was dead. There was, so to speak, 
 
 a De Me"norval, Paris depuis ses origines jusqu'a nos jours, 3* partie, p. 339. 
 b J. M. Fachan, Historique de la Rente franqaise, p. 32. 
 
National Monetary Commission 
 
 no public market for royal securities. They were reputed 
 to be intransferable, and it was not considered legitimate 
 that the security be negotiated for less than its face value. 
 It was only some time later, at the beginning of the eight- 
 eenth century, that transactions in royal bonds began to 
 take place on the bourse. 
 
 The decline of public credit gave rise to the utilization 
 of special methods for stimulating it. In 1689, Pontchar- 
 train resorted to an issue of tontine life annuities, aggre- 
 gating 1,400,000 livres. The operation succeeded and 
 was successfully resorted to again in 1696. 
 
 Simultaneously with the issue of the tontines (from the 
 name of their inventor, the Italian financier Tonti) , issues 
 of lotteries were brought into fashion in France by Italian 
 financiers who had come over in the retinue of Catherine 
 de Medicis. It is under Louis XIV that they appear in 
 all kinds of forms benefit lotteries, special and commer- 
 cial lotteries, charity lotteries, government lotteries, etc. 
 
 (18) It was quite necessary, besides, to resort to sales 
 of offices, and it is during the reign of Louis XIV that the 
 most peculiar offices are created. "Sir," said Pontchar- 
 train, "every time that Your Majesty creates an office 
 God creates a fool to buy it." Every imaginable con- 
 trivance was utilized not only by Pontchartrain, but by 
 his successors, de Chamillard and Desmarets. But dur- 
 ing the latter part of the King's reign, royal loans bene- 
 fited very much from the assistance of Samuel Bernard, 
 financier, who was money lender, speculator, and inti- 
 mate adviser of the King. 
 
 a The tontine principle consists in dividing the part of the benefits of 
 the dying to the survivors, until the last one, at whose death the rente goes 
 over to the State. 
 
 132 
 
History and Methods of the Paris Bourse 
 
 In the system of the organization of offices the increas- 
 ing of salaries played a large part. The salaries were 
 the stipend given by the King to the officer. This sti- 
 pend was generally the interest on the money which had 
 been paid for the office. The King allowed an increase in 
 salary, provided an increase in money be given to him. 
 It was not a disguised loan, but a forced one, for if the 
 officer could not pay, some other person desirous of get- 
 ting such an office could be found; then the old holder 
 of the office would be reimbursed, unless both were 
 allowed to continue in office together, in which event 
 numerous difficulties had to be faced. From 1689 the 
 practice of increasing salaries was much in vogue. The 
 most important offices in the kingdom, those which re- 
 quired learning and skill, were made hereditary. The 
 judiciary bodies, the parlements, the chamber of accounts, 
 and all assistants were one way or another for sale at 
 auction. The same was true also of municipal offices. 
 The industrial and commercial professions were monop- 
 olized under the most peculiar conditions. Stackers of 
 wood, testers of salted butter, inspectors of wigs, overseers 
 of the roast. meats, examiners of pigs' tongues, searchers 
 of fresh butter, testers of cheese all these were govern- 
 ment officers. The King, "who is anxious that abun- 
 dance should reign in his good town of Paris, has noticed 
 that three or four individuals have so monopolized the 
 oyster business that his subjects can get only as much as 
 it seems proper to the oyster merchants to sell." And 
 the King makes officers of caterers or sellers of oysters. 
 
 (19) It is now in place to pass to the public credit which 
 was established by private companies with or without gov- 
 
 133 
 
National Monetary Commission 
 
 ernment aid. We shall see how the share and the bond 
 assume their form. 
 
 The ancients seem to have been unacquainted with 
 associations having their capital divided into shares. 
 Greek authors very rarely referred to associations of more 
 than three or four persons, and we can with reasonable 
 certainty advance the opinion that shares never existed 
 in Greece. As regards the Romans, the question is more 
 difficult, for they had vast companies, notably the socie- 
 tates vectigalium publicorum, whose object was the exploi- 
 tation of the farming of the tax. According to certain 
 commentators, notably Orelli and Becker, these com- 
 panies had been formed on the basis of shares. However, 
 if some transferable parts were ever provided for in any 
 of these companies, it is very probable that it was done 
 only exceptionally and without modifying their general 
 character. 
 
 At Toulouse there was a mill, named du Basacle, which 
 was given in the twelfth century by the prior of la Daurade 
 to a company, the members of which were known as 
 pairiers, whose parts, real transferable shares, did not 
 entail the personal responsibility of the holders. 
 
 Some stock companies were in existence in Italy and 
 Germany at quite a remote period; among them we find 
 the Bank of St. George, at Genoa, which best displayed 
 the general traits of the stock company. In 1407 it was 
 reestablished with a capital divided into 20,400 shares, 
 according to information given by Scaccia. .All were 
 of equal value, carrying no personal responsibility and 
 withholding from the members the privilege of negotia- 
 
 a See Ed. Guillard. Les operations de bourse, p. 12. 
 134 
 
History and Methods of the Paris Bourse 
 
 tion. There was a general assembly and a board of 
 supervision. 
 
 At the beginning of the seventeenth century all civilized 
 nations of Europe are acquainted with the principle of 
 share holding. In 1602 there is instituted in Holland the 
 Netherland East-Indian Company. In England a similar 
 company is established in 1613. 
 
 Under the old regime, maritime commerce was not con- 
 ducted under the same conditions as it is conducted to- 
 day. The reasons for it are obvious. It presented at 
 that time too many perils and entailed too many expenses 
 for individuals to be able to engage in it. Therefore 
 licensed companies were organized upon which, in ex- 
 change for great advantages and an. exclusive monopoly, 
 quite onerous conditions were imposed. 
 
 " Henry IV, intending to follow the example of the Dutch 
 in the Far East, authorized in 1603 a certain Gerard de Roy 
 to form a company which, being granted a monopoly for 
 fifteen years, should take in hand the trade with the East 
 Indies. But the Provinces unies (United Territories) pointed 
 out to him the harm this company would do their company 
 of the East Indies (established March 20, 1602) , and induced 
 him to turn his endeavors to the West Indies. Henry IV 
 later returned, but without success, to the project of the 
 East-Indian Company. Amsterdam watched over its 
 monopoly on spices." a 
 
 (20) Under I^ouis XIII Richelieu took this idea up again, 
 which, to be sure, had never been abandoned. In 1625 
 there was founded the company du Morbihan for com- 
 
 a Ernest Lavisse. Histoire de France depuis ses origines jusqu'a la 
 Revolution, T. VI-II, p. 82. 
 
 135 
 
National Monetary Commission 
 
 merce with New France, Moscow, Norway, Sweden, and 
 Hamburg; the company de la Nacelle de Saint-Pierre 
 Fleurdelysee, for negotiating and transacting business in 
 all countries not hostile to the crown; the company des 
 Cent associes (of one hundred partners) , for colonizing New 
 France (Canada) ; and some others notably, two com- 
 panies, for trading with the East Indies. Because of lack 
 of funds all of these companies went to ruin. 
 
 The failure of these companies is the characteristic 
 event in the colonial and commercial history of the reigns 
 of Henry IV and Louis XIII. The companies in turn 
 disappear, reappear, and vegetate. Outside of the reli- 
 gious world the colonies were not popular. The French at 
 that time were a saving people, modest in their tastes, 
 and leading a stay-at-home life, and preferring, as Mont- 
 chretien has already remarked in his Traite d'Economie 
 Politique (1615), to live sparingly at home in any employ- 
 ment, than to seek fortunes in the colonies or in a foreign 
 country. 
 
 (21) Under Louis XIV, thanks to the influence of Col- 
 bert, there were established (i) the West-Indian Company 
 (des Indes Occidentales) , started in 1664, which alone had 
 the right to do business in our settlements in North 
 America, the Antilles, Guiana, and Senegal; it had its 
 center in Le Havre; (2) the East-Indian Company (des 
 Indes Orientates), started in 1664 which had the monop- 
 
 a In the History of France by M. Ernest Lavisse, T. VI-I, pp. 238-239, 
 are found interesting details about the formation of the East Indian Com- 
 pany. The beautiful and costly armorial emblems presented to the com- 
 pany on the day of the granting of its privilege, the grand advertising of the 
 affair, and the great enthusiasm displayed, under the influence of Colbert, 
 by the King, the Queen, the official world, judges and prominent civilians, 
 both in subscribing themselves and in exhorting others to subscribe to the 
 funds of the company, are described in a lively and fascinating style. 
 
 136 
 
History and Methods of the Paris Bourse 
 
 oly of commerce over the broad ocean from the Cape of 
 Good Hope to the Strait of Magellan, thus including our 
 settlements in Madagascar, in the Isles of France and of 
 Bourbon, and in Hindostan; it had its center at Lorient; 
 
 (3) the company du Levant (of the Levant), started in 
 1670, which contended with Venice, England, and Holland 
 for the trade with Turkey, Asia-Minor, Syria, Egypt, and 
 the Barbary States it had its center at Marseille; and 
 
 (4) the company du Nord (of the North), started in 1669, 
 which traded, but without exclusive rights, with Holland, 
 Northern Germany, Sweden, Denmark, Russia, and 
 Poland; it had its center in Dunkirk. 
 
 The first two of these companies exercised complete 
 royal authority over the colonies already founded or to be 
 founded. They installed governors and judges, had the 
 right of peace and war in their relationships with the 
 natives, and flew the white colors on their ships. They 
 enjoyed the sovereign authority similar to that which the 
 English company in the Indies exercised over all Hindo- 
 stan up until the mutiny of 1857. 
 
 The company des Indes Occidentales disappeared in 
 1674; from its remains were formed the companies du 
 Senegal, de la Guinee, d'Acadie, du Canada, de la baie 
 d'Hudson, de Saint- Domingue, and especially the company 
 du Mississippi, so famous during the period of the financial 
 policies of I/aw. The company du Nord succumbed about 
 1 67 2; the company du Levant in 1690; the company des 
 Indes Orientates lingered on till 1718. From a part of its 
 possessions was formed, twice (in 1700 and 171 2), the com- 
 pany of China (de la Chine) . When one of these companies 
 dissolved, the colonies again became directly responsible 
 
 137 
 
National Monetary Commission 
 
 to the king, and once more commerce was free for indi- 
 viduals. In 1719 the company des Indes was reconsti- 
 tuted. 
 
 (22) John Law, by letters patent of May 2, 1716, pro- 
 cured the privilege of establishing a bank. It was called 
 Banque Generate, and had a capital of 6,000,000 livres, 
 divided into 1,200 shares of 5,000 livres each. 
 
 The 5,000 livres were to be paid in as follows: A fourth, 
 1,250 livres, in specie, and the remaining three-fourths 
 in government notes. The government notes were the 
 result of a loan of 250,000,000 livres at 4 per cent, pre- 
 viously issued by the Regent's Government; the loan had 
 met with only middling success, and it was not long before 
 the notes lost four-fifths of their value. This ability 
 of the subscribers to pay for their shares in government 
 notes explains the favor which Law gains in the eyes of 
 the Regent. It did not take long before the Banque Gen- 
 erate was transformed into the Banque Royale. 
 
 Toward the end of August, 1717, a trader, Crozat, had 
 procured a license to do business in Louisiana. Crozat 
 granted the license to Law, who formed a company under 
 the name Compagnie d'Occident, having a capital of 
 100,000,000 livres payable in government notes; various 
 monopolies were conceded to this company, notably the 
 monopoly of tobacco. 
 
 Soon after Minister d'Argenson had granted the lease of 
 the imposts and duties to the Paris Brothers, who had 
 formed a stock company with this lease as a basis, Law 
 succeeded in having the Banque Generate declared Banque 
 Royale, and in amalgamating all the trading companies 
 
 138 
 
History and Methods of the Paris Bourse 
 
 which existed at that time with the company d'Occident. 
 The new company was called Compagnie des Indes. 
 
 This company, having become very wealthy, was instru- 
 mental in causing the withdrawal of the lease of the 
 imposts and duties from the Paris Brothers and the trans- 
 fer of the grant to itself. The series of policies which had 
 been put into practice at this occasion was given the name 
 of Law's System. 
 
 At the end of October, 1719, Law issued in securities 
 "to bearer," 300,000 shares of the company des Indes, 
 at the prevailing price of 5,000 livres each. (To Law, 
 as originator, is due this form of security.) The pro- 
 ceeds of this issue were to be a billion and a half livres, 
 which the company des Indes was supposed to loan to 
 the Government at the rate of 3 per cent. The State 
 owed him, then, for this principal an annual interest 
 of 45,000,000 livres. On the other hand, however, Law 
 owed the State the price of the lease of the duties and 
 imposts, which amounted to 52,000,000. 
 
 The overtaxed emissions and the difficulties experienced 
 by the company des Indes in maintaining the shares at 
 a high price led to their fall. The bank met with ruin 
 in repurchasing its own shares. The intrigues of the 
 Court completed Law's doom. In May, 1720, the license 
 was withdrawn from the bank, and Law ran away, 
 completely ruined. He died in misery in Venice, 1729. 
 
 From 1716 to 1720 the rue Quincampoix had been the 
 scene of one of the most whimsical frenzies of stock- 
 jobbing which has ever taken hold of the people. The 
 Court, the clergy, and the town gave themselves over 
 to the most stupid speculations in securities of the com- 
 
 139 
 
National M o n et ar y Commission 
 
 pany des Indes. Such and such a servant became mas- 
 ter, and by habit rode behind his coach instead of getting 
 inside. A widow by the name of La Caumont realized 
 70,000,000 in profits. The Duke of Bourbon realized 
 enormous profits, which enabled him to rebuild the castle 
 of Chantilly with a royal magnificence. This beautiful 
 estate, which is at present occupied by the Institut de 
 France, owes much of its splendor to the speculations let 
 loose by John Law. 
 
 (23) After the breakdown of Law's policy, it was 
 thought necessary in some way to reorganize the financial 
 market, which had fallen into extreme disorder. The 
 financial market had been, to a certain extent, shaping 
 itself out into some sort of anarchy. An ordinance of 
 March 22, 1720, which henceforth prohibits any assembling 
 in the rue Quincampoix, states that "several dishonest 
 dealers, taking advantage of the tumult and confusion 
 which resulted from the meeting of unknown people, a 
 few of whom were even without residence and social recog- 
 nizance, have often embezzled and misappropriated the 
 property of those who have had opportunity to deal with 
 them; that a large number of servants and artisans have 
 left their masters #nd their occupations, either themselves 
 to carry on transactions or to help and act as broker for 
 other people who did not dare to make their appear- 
 ance." The Government goes on to consider that the 
 stockbrokers (agents, de change) will assure the common- 
 wealth against the return of the excesses which took 
 place, forgetting that the cause of those excesses was 
 other than a certain organization of the market, and 
 that what is intended henceforth to mitigate speculation, 
 
 140 
 
History and Methods of the Paris Bourse 
 
 is the lack of nourishment, the complete breakdown of 
 the system, its crisis. Another ordinance followed a few 
 days later (March 28, 1720). All persons, with the excep- 
 tion of stockbrokers, are prohibited from assembling in 
 any place or section whatsoever, and from keeping an 
 office for the negotiation of paper; the penalty for violat- 
 ing this law is imprisonment or 3,000 livres fine. Specu- 
 lators moved away and established themselves, instead, on 
 Place Louis -le-Gr and, known to-day as Place Vendome. 
 " On July 20, 1720, a royal ordinance orders that the trans- 
 actions of shares of the company des hides and the nego- 
 tiation of bills of exchange or other negotiable certificates 
 shall be carried on in the garden of the Hotel de Soissons." 
 The Hotel de Soissons, we learn from the Manuel des 
 agents de change, was situated almost exactly in the 
 very place where the commercial bourse has recently 
 been erected, in the quartier des Holies. The entrance 
 is through the rue des Deux-Ecus. On August 30, 1720, a 
 decree of the Council of State suppresses the sixty exist- 
 ing offices of stockbrokers created by the edicts of the 
 month of August, 1708, and of November, 1714, and 
 orders that there be established sixty new stockbrokers 
 by special appointment. By article 9, all persons are 
 prohibited from meddling with the duties of stockbrokers 
 "on penalty of paying 3,000 livres fine, and even of im- 
 prisonment and greater punishments, if servants, appren- 
 tices, workmen, laborers, or Vagabonds are the offending 
 parties." A few days later, however, October 25, 1720, 
 a decree of the Council of State orders also the shutting 
 up of the bourse established in the Hotel de Soissons, 
 and no assemblage is allowed anywhere at all. 
 
 141 
 
National Monetary Commission 
 
 Finally, on September 24, 1724, another decree of the 
 Council of State, in its first article, ordered that there be 
 immediately established in the city of Paris a place called 
 la Bourse, the principal entrance to which shall be through 
 rue Vivienne. 
 
 THIRD DIVISION The decrees of the Council from 1724 to 1788 The 
 financial market on the eve of the Revolution. 
 
 (24) From 1 724 to 1 788 a series of decrees of the Council 
 led to the modification of the regime of the Bourse. 
 
 In 1724, according to the phraseology of the decree of 
 the Council of September 24, recourse to the agency of 
 stockbrokers was strictly obligatory for the negotiation 
 of royal bills and negotiable paper. 
 
 In January, 1723, there were created 60 offices of stock- 
 brokers, and the report was spread that those who wished 
 to take up the offices, that is to say, to declare them- 
 selves purchasers, would have to pay in a sum of money. 
 To insure the buying out of the offices created, mention 
 was made in the decree of 1724 of the privileges and 
 advantages attached to the incumbents of these offices. 
 But no purchasers appeared. 
 
 The decree of September 24, 1724, was then revoked. 
 
 The decree of the Council of State of February 26, 1726, 
 ordered that the business of negotiable paper and other 
 bills be made more free on the Bourse. Notwithstanding 
 the provisions of the decree of September 24, 1724, "all 
 merchants, traders, bankers and others who have been 
 or shall be admitted to the Bourse," are, by the terms 
 of the new decree, allowed to deal among themselves in 
 shares of the company des Indes, and in other securities 
 and negotiable paper, in the same manner as bills of 
 
 142 
 
History and Methods of the Paris Bourse 
 
 exchange, bills "to bearer," promissory notes, and mer- 
 chandise are dealt in. 
 
 (25) In 1733 there is a sudden change. Purchasers of 
 offices begin to appear. 
 
 The decree of 1726 is revoked, and in accordance with 
 the decree of September 24, 1724, the King orders that 
 transactions in shares of the company des Indes and in 
 other securities and negotiable papers shall be made only 
 through the agency of two stockbrokers. 
 
 (26) August 7, 1785, a new decree of the council of the 
 King is issued: 
 
 ART. 3. " His Majesty wishes that, in accordance with 
 the provisions of articles 17 and 18 of the decree of Sep- 
 tember 24, 1724, the negotiation of royal and other 
 public securities should be considered to be valid only 
 when stockbrokers have acted as intermediaries, and that 
 such negotiations shall take place nowhere but on the 
 Bourse, where the price of the securities will be quoted, 
 according to the terms of the regulations, by two stock- 
 brokers." Certain specified merchandise brokers are also 
 allowed to go to the Bourse and to negotiate bills of 
 exchange and bills "to bearer." 
 
 ART. 4. Stockbrokers must not list on the Bourse other 
 than royal securities and the price of exchange. 
 
 ART. 5. They must not negotiate royal securities or other 
 negotiable paper for their personal account, the penalty 
 being removal and the payment of a fine of 3,000 livres. 
 
 ART. 7. Time bargains in royal or other securities with- 
 out actual delivery, or even without the deposit of said 
 securities at the very moment of the signature of the 
 contract, are declared null and void. 
 
 143 
 
National Monetary Commission 
 
 ART. 8. This shall not be interpreted as prejudicing the 
 right of merchants, dealers, bankers, and others admitted 
 to the Bourse, to deal among themselves in bills-of -exchange 
 notes "to bearer" or "to order," shares of the new com- 
 pany des Indes, and other commercial effects, without the 
 mediation of stockbrokers. 
 
 (27) On March 19, 1786, a royal ordinance raises the 
 number of stockbrokers to sixty, thus annulling the 
 decree of December 22, 1733, which had diminished their 
 number to forty. 
 
 (28) On July 14, 1787, a decree of the Council of State 
 withdraws from the stockbrokers the monopoly of the 
 negotiation of securities other than royal securities and 
 of shares of la Caisse d'Escompte (a national discount bank 
 established by Turgot in Paris in 1776). 
 
 (29) But on June 10, 1788, a decree of the Council of 
 State renews the provisions of the decree of 1785 and rati- 
 fies a resolution of the stockbrokers, in which they declare 
 that they will waive 270,000 livres in annual salaries 
 attached to their offices. 
 
 It can be seen from the preceding that the Govern- 
 ment would grant privileges to the stockbrokers which 
 it would later withdraw in order to grant them again, and 
 somewhat later once more to withdraw. Thus, in 1595, 
 nobody is required to take a broker. In 1705 it is dif- 
 ferent. Individuals must resort to a stockbroker for the 
 negotiation of loan certificates. But the prescription is not 
 observed. A decree of 1724 reenforces it. It is repealed 
 in 1726, but in 1733 a return to the principles of 1724 is 
 made. In 1785 and 1786 the monopoly of stockbrokers 
 once again gains more power. In 1787 it is diminished, 
 
 144 
 
History and Methods of the Paris Bourse 
 
 but in 1788 the stockbrokers giving up the interest on 
 their security, the King agrees to revert to the principles 
 laid down by the edicts of 1785 and 1786. 
 
 (30) Let us rapidly examine the condition of the trans- 
 ferable security on the eve of the Revolution. 
 
 There existed royal securities (effets royaux). -They 
 were loan certificates issued by the King, rente contracts, 
 lottery tickets, and exchange notes. 
 
 In 1785 there existed a few stock companies. The 
 company des Indes and the Caisse d'Escompte (Discount 
 Bank) were the best known among them. Then came 
 the company des Eaux, founded by the Perier brothers 
 (ancestors of Casimir Perier) for the purpose of fur- 
 nishing Parisians with water from the Seine. Mirabeau 
 in his pamphlet (Denonciation de I 'agiotage au roi 1788) 
 cites a number of companies, among which may be men- 
 tioned the Glass Company of Saint Gobain, the Rubber 
 Company of Senegal, and several fire-insurance stock 
 companies. In 1789 the transferable securities on the 
 Bourse numbered seventeen. 
 
 (31) Let us cast a glance on the condition of govern- 
 ment finances on the eve of the Revolution. 
 
 When Louis XVI gave over to Calonne the manage- 
 ment of the finances (November 3, 1783), there was a 
 deficit of 80,000,000 in the ordinary budget, and there 
 remained 580,000,000 of debts to be funded. a The new 
 Controller-general first of all made the King sign an 
 edict authorizing a loan of 100,000,000, which turned 
 out to be a success. Soon after he undertook a loan of 
 
 Charles Gomel, Les causes financier es de la Devolution franQaise, Paris, 
 1893; The last controllers-general, p. 80. 
 
National Monetary Commissio 
 
 n 
 
 125,000,000. The administration of Louis XVI at that 
 time had already borrowed almost 1,200,000,000 livres. a 
 
 The expenses increased so much that the deficit in 
 1785 was about 102,000,000, and the expenses of that 
 financial year which remained unpaid were 72,000,000. 
 The decline in royal securities frightened the Minister. 
 Besides, the public took up the stocks of a Spanish bank, 
 la Banque de Saint Charles, founded in 1782 by a French 
 financier, Cabarrus. The extreme fondness which cap- 
 italists showed for it, displeased Calonne. He consid- 
 ered it bad that a foreign security should come to compete 
 with our public capital, and since some loan securities 
 issued by him in December of 1784 were about to take 
 their rank among other securities, Calonne decided to 
 prohibit by an edict the negotiation in France of foreign 
 securities. Mirabeau, having received Calonne's permis- 
 sion and financial backing, published a virulent diatribe 
 against the Banque de Saint Charles and its director, 
 whom Mirabeau compared to Law, and whose private life 
 he had the indelicacy to attack. The stocks fell from 
 750 livres to 400 livres, and speculation, which the 
 Government switched over to royal securities, increased. 
 
 When the Government wishes people to speculate in 
 rentes, the phenomenon has always been, and is now, 
 the same. It intends to have rentes rise on the market. 
 If they fall the Government does not hold itself respon- 
 sible for the fall, but blames those who have suffered. 
 Dealing in rentes for future delivery, which at that time 
 was a common practice, was blamed for the actions of 
 M. de Calonne. 
 
 Charles Gomel, Les causes financidres de la Revolution franqaise, Paris, 
 1893, p. 165. 
 
 146 
 
History and Methods of the Paris Bourse 
 
 "The King is informed," says the preamble to the de- 
 cree of the Council of August 7, 1785, "that for some 
 time there has existed in the capital a kind of transaction 
 or mutual agreement, as dangerous to sellers as to buyers, 
 by which one party engages to furnish, on long terms, 
 securities which he does not possess, and the other party 
 consents to pay for them without having the necessary 
 funds." 
 
 In the meantime the zeal of Calonne had taken him too 
 far. He was forced by many complaints and the exigen- 
 cies of the Exchequer to change his tactics. The decree 
 of October 2, 1785, mitigated the severities of the pre- 
 ceding decree. By a decree of September 22, 1786, Ca- 
 lonne fixed the maximum time for bargains at two months. 
 Calonne noticed that when certain securities rise the 
 prices of rentes resist all causes for a decline which are 
 likely to affect them. 
 
 The example of England, he wrote later to the King, 
 is sufficient proof that a wise government should be pre- 
 pared, when the time requires it, to maintain by secret and 
 indirect methods the price of the public stocks, and, in 
 time of need, to make certain sacrifices to raise their price. b 
 This operation cost the Exchequer 14,600,000 livres. c 
 
 a Leon Say : Les Interventions du Tresorala bourse depuis cent ans, Annales 
 de I'Ecole des sciences politiques. Anne"e 1886, pp. 6 a 9. 
 
 & Ch. Gomel, loc. c., p. 254. 
 
 c It is at this period 1787 that the celebrated speculations of the 
 Abbe d'Espagnac took place, and a little later Mirabeau published his 
 virulent denunciation of stockjobbing. Calonne and Necker were not 
 spared by the author. The pamphlet cost Mirabeau ... a lettre de cachet 
 ordering his arrest. But he was not arrested, Calonne having apprised him 
 through the Abbe Perigord. D'Espagnac was brought before the revo- 
 lutionary tribunal, April 3, 1794, condemned, and executed the same day on 
 the Place de la Revolution. 
 
National Monetary Commission 
 
 FOURTH DIVISION. The financial market during the Revolution. 
 
 (32) The Revolution found the stockbroker's profes- 
 sion, as well as a number of other professions, raised to 
 the dignity of an office. The venality of offices and the 
 bad speculations originated by the Government were 
 among the most objectionable features of the old regime; 
 the legislature endeavored to remedy these matters. 
 
 "Nature makes no jumps," says an adage. What the 
 naturalists and the anthropologists say of the phenomena 
 of animal and vegetable life, is equally true of social 
 phenomena. The French Revolution marks by a violent 
 furrow the change in the political, economic, and social 
 regime in France; but the work of the philosophers, the 
 acts of the royal authority, its necessary concessions to the 
 new ideas, had accomplished revolutionary phenomena 
 even before certain facts, which history puts to the 
 account of the Revolution, had been accomplished. 
 
 Turgot, the Minister of Louis XVI, of whom his colleague 
 in the ministry, Lamoignon de Malesherbes, said " He has 
 the head of Solon and the heart of 1' Hospital," dared ask 
 of the King to make the nobility subject to taxes. On 
 January 5, 1776, Turgot presented to the Council the 
 drafts of various edicts which were to suppress the corvee 
 (statute labor) and the police regulations of Paris on 
 grains, offices, wardenships, and masterships. b 
 
 All of these edicts met with an active opposition in the 
 inner circles of the Council. Nevertheless, they were 
 accepted. The edict involving the suppression of war- 
 denships and masterships was passed March 2, 1776. 
 
 a Salzedo. La Coulisse et la jurisprudence, p. 29. 
 & Turgot, by L. Robineau. 
 
 148 
 
History and Methods of the Paris Bourse 
 
 But after the fall of Turgot, in May, 1776, the edicts, which 
 it had cost him so much trouble to have passed, were 
 again annulled. 
 
 The legislative assembly, however, again suppressed 
 all offices, masterships, and wardenships. " Beginning 
 with the coming April ist," says article 2 of the law of 
 March 10, 1791, "the offices of wig makers, barbers, bath 
 keepers, bagnio keepers, as well as those of stock- 
 brokers, are all equally abolished." The legislative 
 assembly placed all offices on a basis of freedom. 
 
 (33) We are compelled, although we have hardly arrived 
 at the threshold of our study of the revolutionary period, 
 to warn the reader against a widespread error regarding 
 the effects of the freedom granted to the profession of 
 stockbrokers. 
 
 An unprecedented outburst of stockjobbing took place 
 at that time, and it is concluded that the fault lies in the 
 freedom of commerce in transferable securities. 
 
 Stockjobbing was caused, however, by the troubles 
 arising from the foreign political situation, by the wars, 
 and by domestic troubles that is to say, riots, insurrec- 
 tions, the cessation of all production, the trregular pay- 
 ment of rentes in assignats, the excessive issue of assignats, 
 the law of the maximum, etc. 
 
 (34) Stockjobbing is the result of political and financial 
 disorder. When the sources of production have been 
 stopped, and when the necessary commodities for con- 
 sumption are paid for with a depreciating currency, there 
 must necessarily be inaugurated a passion for speculation 
 which will keep on increasing so long as the originating 
 
 a See Cre"pon, counsellor of the Cour de cassation: De la Nigociation d* 
 effets publics et autres, p. 8. 
 
 149 
 
National Monetary Commission 
 
 evil continues to grow. It is somewhat important to 
 explain the physiology of this phenomenon. 
 
 A paper currency is circulated by a government. It is 
 circulated in such quantities that it depreciates in the 
 minds of those who receive it. With this money, too, it 
 will be necessary to buy the most essential necessities, and 
 the purchasers of these necessities will find themselves 
 facing sellers. 
 
 If, by hypothesis, the seller of commodities is obliged 
 to specify the price in a paper money whose depreciation 
 he is fearing, how will he protect himself? By raising his 
 price so that he will have much paper, with the result that 
 this paper will guarantee him by its quantity against the 
 consequent effects of depreciation. 
 
 Whence the first phenomenon with its double aspect: 
 The rise in the price of commodities along with the fall of 
 paper. 
 
 Now, if the seller whom we have seen receiving much 
 paper, sees that it depreciates again while in his hands, 
 it will not be long before he will notice that gold is the 
 metal with which one pays abroad for purchased com- 
 modiites, and* that he who holds gold, is safer than the 
 holder of bills, which depreciate while in his hands. He 
 will then make haste to change his paper for gold, and 
 through this operation he will make two good bargains; 
 he will protect himself against the future decline of his 
 paper, and he will have in his possession some gold, which 
 will continue to be in demand as long as the Govern- 
 ment continues to issue paper. This gold he will be able 
 to sell again against paper, or he will buy merchandise 
 abroad for which he will settle in gold. As a holder of 
 
 150 
 
History and Methods of the Paris Bourse 
 
 merchandise, he will be in a position to begin again the 
 same operation to sell against paper; to buy gold with 
 this paper; to buy foreign merchandise with this gold. 
 
 Whence the second phenomenon: The emigration of 
 gold. 
 
 Thus there is manifested the law known as Gresham's 
 Law: Bad money drives out good money. 
 
 Both phenomena took place during the Revolution. 
 Assignats depreciated in proportion to the quantity 
 issued; the price of all things rose. Gold rose. The 
 bill of exchange on the foreign market, which represented 
 gold, was in demand. Speculation was not the cause of 
 these phenomena, but an inherent condition. It could not 
 be otherwise. The abolition of the monopoly of stock- 
 brokers was not the cause, and monopoly, if it had ex- 
 isted, would not have been able to prevent it. Besides, 
 when it was reestablished, the phenomenon of economic 
 gravitation could not be prevented from asserting itself. 
 
 What follows will prove our assertion with perfect 
 clearness. 
 
 (35) From the very first days of the Revolution the 
 financial situation was a critical one. On June 17, 1787, 
 the national assembly declared the creditors of the Gov- 
 ernment to be under the protection of the honor and 
 loyalty of the French nation. Immediately after, Necker 
 resorted to two loans, one on August 7, and the other on 
 August 27 both of which were without success. He later 
 resorted to a patriotic contribution of a fourth of the 
 income of each citizen exceeding 400 livres, and of 2^ 
 per cent of their silver plate, jewelry, and coined silver. 
 It was not in this way that one could raise credit and 
 
National Monetary Commission 
 
 money. At this time the total debt was 208,027,242 
 francs. Besides, the debt represented only a small part 
 of the needs of the Government. 
 
 (36) It was at this time that a decree of December 21, 
 1789, placed on sale some of the royal domains and a part 
 of the ecclesiastical- property in order to raise the sum of 
 400,000,000 francs. At the same time 400,000,000 assig- 
 nats were created, which were to be redeemed by the 
 proceeds from the sales. They paid an interest of 5 per 
 cent. 
 
 Four months after the creation of these assignats, by 
 order of the law of April 17, 1790, their interest was 
 reduced to 3 per cent. According to the terms of this 
 law, the assignats were to be received as specie in public 
 and private cash offices. 
 
 The assignat, which had depreciated about 2 per cent 
 almost immediately after its creation, was quoted in April 
 at 94. In other words, 100 livres in paper were given 
 for 94 livres in metallic money. 
 
 In August, 1790, an issue of 800,000,000 assignats was 
 voted for by the assembly. These new assignats which were 
 created as a result of the decree of September 29, 1790, 
 bore no interest, and by a decree of October 10 the 3 per 
 cent interest on the assignats of the first issue was cut off. 
 
 From this time on, it may be said, the assignat de- 
 preciated in the public estimation. 
 
 On October i , 1791, the quantity of assignats in circu- 
 lation was about i, 1 5 1, 500,000 livres, and they lost 16 per 
 cent of their value. Fourteen months later, January i , 
 1793, the quantity of assignats in circulation rose to 
 2,825,906,618. They lost 50 per cent of their value. 
 
 152 
 
History and Methods of the Paris Bourse 
 
 Then came a series of decrees all tending to the depre- 
 ciation of the assignat. A decree of April 1 1 , 1 793, imposed 
 some severe penalties on any person who should buy or 
 sell assignats for less than their nominal value in money, 
 or should make any distinction in the prices of his merchan- 
 dise according to whether payment would be made in 
 paper or specie. 
 
 But the prices were to be stipulated in assignats, so that 
 no law could prevent anyone from asking for a higher price 
 for his merchandise. 
 
 When a government employs empirical processes with 
 a view to sustain the public credit, it produces discredit. 
 
 Public trust resides in the citizen's state of mind. A 
 state of mind can not be decreed, especially when it has 
 to exercise itself upon the valuation of commodities. 
 But governments, inspired by a misapprehension of the 
 conditions of public credit, do not easily yield to evidence. 
 The more discredit is created, the more do they entangle 
 themselves in their own errors. When a government 
 issues depreciating paper money, if it investigates the 
 cause of the fall, it is necessary that it should without bias 
 decide whether it is the fault of the stockjobbers or its 
 own fault. But the Government never hesitates. For 
 it the decline is caused by the stockjobbers. The Bourse 
 is the only place where it originates. 
 
 (37) In the month of June, 1793, the assignat lost 64 per 
 cent of its value. It was worth 36 per cent. A decree 
 of June 27, 1793, ordered the closing of the Bourse. 
 
 During the time that the Bourse was closed, negotia- 
 tions in coin and bills of exchange were transacted in the 
 Palais Royal, or as it was now called Palais Egalite, in 
 
 153 
 
National Monetary Commission 
 
 the place known as Le Perron. The stockbrokers, removed 
 in 1791, immediately organized into a free company, con- 
 sisting of 80 members forming a syndicate, with the pur- 
 pose of avoiding all conflict with the free, newly come 
 stockbrokers; it seems that at that time there was not 
 much occasion for complaint at the new condition of 
 affairs. 
 
 But, nevertheless, the scarcity of coin and the decline 
 of assignats were attributed to the Bourse. The stock- 
 brokers were arrested and their goods confiscated, and a 
 decree of the 2ist-24th of August, 1793, ordered that 
 associations known under the name of caisse d'escompte 
 (discount bank), life-insurance companies, and in general 
 all those companies whose capital is made up of shares 
 "to bearer," of negotiable bills, or of book registrations 
 transferable at will, were abolished. 
 
 (38) These measures did not in any way cause the assig- 
 nat to rise in value. In July, 1793, it again lost 13 per cent 
 of the June price. In other words, it was worth only 23 
 per cent of its book value. 
 
 Frantic stockjobbing raged at that time; it was not 
 the free market which generated it, but the causes which 
 we have just examined, and the very absence of a market. 
 Stockjobbing was in a feverish state which the slightest 
 event could only increase. 
 
 (39) What could the Convention do? On August i, 
 1793, an d on May 10, 1794, decrees were passed imposing, 
 as the case might be, heavy fines, imprisonment, or even 
 death, on anyone who should in any way discriminate 
 against the assignat. 
 
 Eugene Lon. tude sur la Coulisse et ses operations. Paris, 1896. 
 Page 31. 
 
 154 
 
History and Methods of the Paris Bourse 
 
 This measure did not prevent the sale of the most essen- 
 tial commodities at a raised price in assignats. A decree 
 of September 4, 1793, extended to various necessities the 
 decree of May 3, permitting the directories of the districts 
 to fix a maximum price for grain and flour. But, besides 
 that it was practically impossible to have this provision 
 executed, a large number of commodities escaped the 
 category of those specified. 
 
 (40) The Convention, having observed that the absence 
 of the public market was detrimental to public credit, 
 ordered its reopening on the 6 Floreal, year III, upon the 
 request of Jean Bon-Saint-Andre; going from one excess 
 to another, the Government which had before wished to 
 suppress the Bourse, promulgated on August 30, 1795 
 (13 Fructidor, year III), a law making it an offense to sell 
 gold and silver anywhere else than on the Bourse. It 
 was declared an offense, also, by this same law, to sell, 
 in any public place other than the Bourse, any kind of 
 merchandise not shown at the place of the sale, and 
 to sell goods and securities which one does not actually 
 own when making the sale. The penalties for either of 
 these offenses were imprisonment for two years, public 
 exposure of the offender with an inscription on his breast 
 of the word " agioteur" (stockjobber), and confiscation of 
 his property for the benefit of the Republic. 
 
 It was at this time that the assignat lost 97.25 per cent 
 of its value. It continued to decline and was worth no 
 more than 2 per cent, having lost 98 per cent. 
 
 The convention closed the Bourse again, September i, 
 I 795 ( 2 5 Fructidor, year III), eight days after having 
 reopened it; and the assignat still kept on declining. 
 October, 1795, it was worth 1.36. 
 
 155 
 
National Monetary Commission 
 
 (41) A new law on the Bourse was promulgated October 
 20, 1795. It is the law of 28 Vendemiaire, year IV. 
 
 Since the time of the Legislative Assembly, the assignat 
 had become the only credit and loan instrument of the 
 Revolution. a 
 
 In 1792, the maker of a bill to bearer was made liable 
 to the death penalty. 6 
 
 In the year IV (October, 1 795) the number of assignats 
 in circulation represented 17,879,337,898 livres, and during 
 the last three months of that period 5,541,194,037 livres 
 had been issued. 
 
 During the year IV the manufacture of assignats rose 
 to 70,000,000 daily. The less they were worth, the more 
 of them was required ; or, rather, the more of them that 
 were made, the less they were worth. 
 
 Terrible famines afflicted the country and provoked 
 bloody insurrections. England undertook to fight France 
 by every way possible. She did not limit her hostilities 
 to the expedition of Quiberon. Marquis de Puissage per- 
 suaded Pitt of the advantage of inundating the enemy's 
 country with counterfeit assignats, to be fabricated by 
 the best engravers of Holland "with such skill that 
 Cambon himself would accept them." c 
 
 It is under these circumstances that the law on the 
 police regulations of the Bourse, 28 Vendemiaire, year IV, 
 was passed. 
 
 <* Lon Say (Dictionnaire des Finances, under the words Public Debt, 
 p. i, 425. Charles Gomel, Histoire financiere de la Legislation et de, la Con- 
 vention. Paris, 1905, Guillaumin, editor. 2 vol. Passim). 
 
 & Albert Wahl (Traite theorique et pratique des litres au porteur, Paris, 
 1891; Rousseau, edit., t. i, No. 145). 
 
 c Michelet, Histoire du XIX siecle. Directoire. Chapter Quiberon. 
 
 156 
 
History and Methods of the Paris Bourse 
 
 Twenty-five stockbrokers were to be appointed, twenty 
 of whom were to carry on banking and negotiate paper 
 on the foreign market, and the remaining five were to 
 deal in coin and bullion. No transaction was legally 
 recognized or valid which had not been made through 
 the agency of these twenty or of these five stockbrokers, 
 wherever their respective agency was required. 
 
 Further, the law prohibits the stockbrokers from 
 negotiating exchange bills on the foreign market for their 
 own account, and from any trading whatsoever in exchange 
 upon the foreign market for future delivery or on option, 
 under penalty of being reputed stockjobbers and being 
 punished as such, according to the law of 13 Fructidor, 
 year III. (See No. 40.) 
 
 (42) These laws of year III and year IV show us ten- 
 dencies opposite to those of 1791. After a period of 
 absolute liberty, there followed a period of regulation, 
 strict, rigid, and extremely menacing. The Bourse was 
 made responsible for disturbances in the prices which 
 were caused by the political and economic troubles of the 
 period. 
 
 In the years III and IV the fundamental principles of 
 public right counted for nothing. If the life and liberty 
 of the citizens were not respected, would the principle 
 of liberty in commerce be respected? 
 
 In this way are explained the Draconian measures of 
 years III and IV. These laws were enforced with diffi- 
 culty, and when circumstances permitted it, and peace 
 was restored, a new legislation was ushered in more hu- 
 mane and more moderate. 
 
 157 
 
National Monetary Commission 
 
 (43) In August, 1 796 (Thermidor, year IV) , the quantity 
 of assignats in circulation represented 45,578,810,040 
 livres. They fell to 0.36 per cent and even to nothing at 
 all. A law of 28 Ventose, year IV (March 18, 1796), 
 ordered their exchange for territorial drafts in the pro- 
 portion of 30 for i. Twenty-four billion assignats were 
 exchanged for 800,000,000 drafts (or to be more exact, 
 promises for drafts), to the payment of which were as- 
 signed the proceeds from the sale of 3,785,000,000 livres 
 in territorial property. In spite of this change, the 
 assignats continued to remain in circulation up to the 
 time when the law of 22 Pluviose, year IV (February 10, 
 1797), ordered the complete canceling of those which 
 should not be presented for exchange on the following first 
 Germinal. 
 
 The territorial drafts also were paper money and had a 
 forced price from the day of their creation. On the very 
 day of the issue, in spite of penal prescriptions which were 
 intended to keep the price at par, the promises for drafts 
 fell from 100 livres to 18 livres. The law of 29 Messidor 
 (July 17, 1796) granted freedom to transactions and sup- 
 pressed the forced price of the drafts which anyhow was 
 of little account, as even the Government accepted their 
 value only according to the current market prices. The 
 surrender of the national property into the hands of the 
 bearers raised the prices for awhile; but in the following 
 December they again suffered a decisive relapse, before 
 there had even been a chance to change the promises of 
 drafts for real certificates. The law of 16 Pluviose, year 
 V (February 4, 1797). withdrew them from circulation. a 
 
 J. M. Fachan. Hislorique de la Rente franqaise. 
 158 
 
History and Methods of the Paris Bourse 
 
 In order to get an idea of the rise of gold in compari- 
 son to assignats, let us give the following examples. In 
 August, 1795, the gold louis was worth i ,020 livres in 
 paper; in September, 1,200; in October, 3,000; in Decem- 
 ber, 5,100; in January and February, 1796, 8,600 livres. 
 
 The accompanying illustrations show the forms of 
 assignats of different denominations. 
 
 (44) While the convention was proceeding with meas- 
 ures which belong to the field of political history and also 
 with financial measures which we have just examined, 
 the Grand Livre de la Dette Publique (Great Book of the 
 public debt) was established. This document contains 
 the totality of the government liabilities constituting the 
 registered debt. The desire of Cambon was that all the 
 government debts should be capable of being placed on 
 the Grand Livre. This plan was incompatible with the 
 wide range of liabilities which the State was led to con- 
 tract. Therefore when one speaks to-day of the Grand 
 Lime one merely means the book open to the registration 
 of rentes. 
 
 Up to 28 Pluviose, year IV (February 17, 1796), rentes 
 were paid for in assignats at their nominal value. The 
 holders of government rentes were reduced to beggary. 
 In the year IV, like government employees, they received 
 for a certain time a daily ration of bread and meat. 
 
 (45) The more the assignat depreciated, the heavier the 
 debt became, since the Government received assignats at 
 their nominal value and delivered them at their real value. 
 The Treasury was placed in an impossible position, the 
 only means of escape being nothing less than bankruptcy. 
 
 (46) The distress of the Treasury was such that the 
 
 159 
 
National Monetary Commission 
 
 government of the Directory went into bankruptcy, 9 
 Vendemiaire, year VI (September 30, 1797). 
 
 The law passed on that day ordered the inscription of 
 rentes in the Grand Livre reduced by two-thirds. The 
 third inscribed took the name of the "funded third" 
 (tiers consolide). The interest was fixed at " denier vingt" 
 (the twentieth denier), that is to say, at 5 per cent. The 
 other two-thirds were reimbursed in bonds "to bearer" 
 (bonsau porteur) called "Dette publique mobiliere" (Floated 
 public debt) . These securities had no value, and tumbled 
 almost immediately to zero. 
 
 Subsequently, on Ventose 30, year IX (March 21, 1801), 
 the Consular government passed a law entitling the bonds 
 " to bearer " of the two-thirds to be converted into perpet- 
 ual rentes, in the proportion of one-quarter per cent of 
 the quantity brought for exchange. In this way a mil- 
 lion of 5 per cent perpetual rentes were created. On the 
 22d of February, 1806, the collection and burning of the 
 bonds of the two-thirds were ordered. Their liquidation 
 was achieved by means of their being funded at 5 per cent 
 (Loan of September 15, 1807). 
 
 The financial operations of the year VI consisted of an 
 issue of 40,2 16,000 francs of 5 per cent rentes. At the end 
 of the eighteenth century the total of the French funded 
 debt amounted, in round numbers, to 46,000,000 of rentes, 
 representing a capital of 920,000,000 francs. & 
 
 Let us recall that these issues were registered. Rente 
 securities "to bearer" exist only since the ordinance of 
 April 29, 1831. France reestablished her credit when she 
 
 a Vide Fachan : Historique de la Rente jranqaise et des Valeurs du Tresor, 
 p. 132. 
 
 & Leon Say. Dictionnaire des Finances. Under " Dette Publique." 
 
 1 60 
 
History and Methods of the Paris Bourse 
 
 went into bankruptcy. This statement seems paradoxical, 
 but, nevertheless, nothing can be more true. 
 
 (47) The great legislative work of the Consulate affected 
 the Bourse as well as a number of other institutions, and we 
 owe to the legislation of this period the fundamental law 
 of 28 Ventose, year IX, in regard to commercial bourses. 
 Three principal considerations seem to have actuated the 
 legislator of the year IX: (i) To establish order on the 
 bourses; (2) to reconcile the provisions necessary to as- 
 sure public order, with a proper regard for the principle of 
 freedom of trade ; (3) to preserve the institution of stock- 
 brokers from the risks of speculation and stockjobbing. 
 
 In order to insure the attainment of these ends the law 
 requires that the stockbrokers be appointed for their 
 public trust by the Government, which shall be guided in 
 their choice by their moral character and their professional 
 knowledge, and shall, besides, demand the pledging of a 
 part* of their fortune with the State as a guarantee of 
 their good conduct and of proper expiation for their errors 
 or failures. The law also emphasizes the principle of the 
 freedom of commerce, expressly stating that nobody is 
 obliged to have recourse to an intermediary, if he does 
 not desire it. 
 
 (48) Further, the stockbrokers were subjected to several 
 regulations with a view to prevent speculation and stock- 
 jobbing. Thus, they were obliged to keep a journal; 
 their books were to be marked and signed by the President 
 of the Tribunal de commerce; they could not trade nor 
 carry on banking for their own account; no one who had 
 been in bankruptcy was allowed to assume the duties 
 of a stockbroker. The law also makes the stockbroker 
 
 161 
 
National Monetary Commission 
 
 responsible for the delivery of the securities sold and for 
 the payment of the sums stipulated, even before either 
 have been received by him from his clients his security 
 being appropriated for this pledge if need be . This respon- 
 sibility was intended as a check upon transactions for 
 future delivery. All these regulations were embodied in 
 the decree of the 27 Prairial, year X. 
 
 (49) Transactions for future delivery, however, were not 
 prohibited to private individuals. But still this kind of 
 operations could not benefit from the security guaranteed 
 by the law for transactions through an intermediary. 
 
 (50) At this time the scope of action for stockbrokers 
 was very narrow. The official quotation list was wholly 
 contained upon the recto of an octavo leaf, the largest 
 part of which was given to gold and silver. It contained 
 only ten kinds of securities, and no quotations for the 
 account. It is only in 1844 that the official quotation list 
 assumes its present form, with columns for cash (du 
 comptant), for future delivery (du terme), for continu- 
 ations (reports), and for options (des prime). 
 
 FIFTH DIVISION. The Nineteenth century. 
 
 (51) The history of the French financial market during 
 the whole of the nineteenth century, is filled with three 
 groups of events of unequal importance. 
 
 1. The operating of the Bourse itself. The financial 
 market has benefited by the progress of public credit, and, 
 in its turn, has given further impulse to that progress. 
 
 2. A special event. The acknowledgment, in 1885, of the 
 legality of " marches a terme " (dealings for future delivery) 
 displayed a tendency on the part of the French lawmaker 
 
 162 
 
y^-o*- ""* JP^V 
 
 OF THE \ 
 
 UNIVERSITY I 
 
 V OF 1 
 
 X^^UFORH^^ 
 
 History and Methods of the Paris Bourse 
 
 to include transactions in securities within the scope of 
 commercial transactions under common law. 
 
 3. Another special event. The struggle of the "agents 
 de change" (stockbrokers) against the " coulissiers " (curb 
 brokers) that is to say, privilege against freedom, 
 monopoly against competition ended, after sundry vicis- 
 situdes, in the course of which the principle of uphold- 
 ing the curb (Coulisse) had prevailed, in a retrogressive 
 movement in 1898 that is to say, in the strengthening 
 of the stockbrokers' monopoly. 
 
 (52) The needs of the States impelled their governments 
 to resort to credit. In order to do so, they had recourse 
 to issues of securities certificates of rentes or loans in 
 sundry forms. To insure success for their operations, 
 a wide market was required. And the market gave 
 them the benefit which results from the existence of some 
 sort of constant source of credit. 
 
 Any progress in the industrial line must necessarily 
 have its origin either in an invention, in a mere improve- 
 ment, or in a stroke of genius. But the inventor's 
 genius itself is not sufficient. That social power "inven- 
 tion" needs another power which should, in some way, 
 give it the necessary impulse to cause it to leave the 
 purely scientific realm. That other power is organiza- 
 tion. It includes the consolidating of capital, the deter- 
 mining of the rights of the owners, the directing, the 
 financing, and the installing of machinery. It is easily 
 understood, however, that organization, so far as it 
 concerns an appeal to the forces of capital, requires 
 liberal corporation laws and well equipped financial 
 
 163 
 
National Monetary Commission 
 
 markets, where transactions in securities are easy, quick, 
 and safe. 
 
 When a country is conscious of the existence of such a 
 market, the budding out of an enterprise, the shares of 
 which have circulated on the Bourse, is apt to give rise 
 to another enterprise, and thus is proven the law found 
 in the natural order of things as well as in the sociological 
 order, that the function creates the organ and the 
 organ hastens the function. 
 
 Thus, the development of securities in France has 
 been the expression of the development of public credit, 
 especially of the credit of the French State, of the 
 Departments, and of commerce; the expression of the 
 parallel movement above referred to, which took place 
 abroad and which manifested itself especially during the 
 second half of the nineteenth century in a considerable 
 influx of foreign securities into France; and, finally, the ex- 
 pression of the incorporation of numerous limited-liability 
 companies in shares (societes anonymes) in important 
 industries and in powerful commercial enterprises, ren- 
 dered easier and easier by the more and more liberal 
 corporation laws, the establishment of large credit institu- 
 tions, and the development of dealings for future delivery. 
 
 (53) In 1900, during the World's Fair, an "Interna- 
 tional Congress of Securities " was held. We take pleasure 
 in selecting the following remarks from the report on the 
 organization of the Congress, presented by M. Alfred 
 Neymarck : 
 
 "Since the beginning of the nineteenth century, and 
 more particularly in the second half, there have been cre- 
 ated and issued in Europe alone more than 400,000,000,000 
 
 164 
 
History and Methods of the Paris Bourse 
 
 of pieces of paper called certificates of rentes, shares and 
 bonds, dividend shares, lottery bonds, etc., designated 
 under the generic name of "valeurs mobilieres" (trans- 
 ferable securities) . 
 
 "These securities yield yearly 15,000,000,000 to 
 20,000,000,000 francs and are distributed among 1 5,000,000 
 to 20,000,000 holders of certificates, capitalists, and 
 'rentiers' (private holders of government bonds). Now, 
 the aggregate circulation of metallic currency and bank 
 notes, all over the world, hardly reaches 5 per cent of the 
 amount of 400,000,000,000 that is, 20,000,000,000. On 
 December 31, 1899, the total amount of paper money, 
 in all the European banks of issue, amounted in round 
 numbers to 15,000,000,000 francs (to be exact, 
 14,992,000,000); the gold reserve kept on hand by these 
 banks, amounted to 7,859,000,000, while the holdings of 
 silver were 2,585,000,000 making a total of 10,444,000,000 
 francs. The aggregate of paper money and cash on hand 
 amounted to 25,000,000,000 francs. 
 
 " From the discovery of America up to the present time, 
 the total value at par of all the silver and gold which, 
 during four hundred years, has been extracted from 
 the bowels of the earth, may be estimated to be 
 between 100,000,000,000 and 110,000,000,000 nearly 
 50,000,000,000 gold and almost 60,000,000,000 silver; 
 while the aggregate of transferable securities created and 
 circulated in Europe exceeds 400,000,000,000. 
 
 "This creating of negotiable instruments, and their 
 distribution throughout all countries of the world, is surely 
 one of the characteristics of modern times. * * * 
 
 165 
 
National Monetary Commission 
 
 "The creating and successive issuing of this mass of se- 
 curities, always easy to purchase and to sell on the Bourse, 
 have been the real cause of credit expansion. They were 
 instrumental in accomplishing real marvels in France and 
 abroad. As personal property increased, endeavors have 
 been made to render exchanges easy, and to make trans- 
 fers as little expensive as possible; transferable securities, 
 owing to their denomination, their form, their mode of 
 maturity for the payment of interest, their conditions for 
 redemption, and the ease with which they are negotiated, 
 have been brought within the reach of all purses, and 
 have thus developed the spirit of saving. 
 
 " The consolidation of capital, under the form of stock 
 companies, issuing shares and bonds that everybody can 
 obtain, encompasses on all sides the civilized nations of 
 the world. 
 
 "We may say, with Paul Leroy-Beaulieu, that now, 
 owing to capital being accumulated in the shape of 
 negotiable instruments, it is the stock company which 
 takes us on a journey; often it provides us with food 
 and lodging, sells us coal and light, makes up our cloth- 
 ing and even sells it to us; it procures news for us and 
 inspires our newspapers. Further, it insures our lives 
 and our dwellings; it feeds the unassuming Parisian in 
 the 'Bouillons ' (cheap cook-shops) and feasts the stylish 
 Parisian in the fashionable wine taverns. 
 
 "The distribution of all these securities has materially 
 contributed to the formation of small inheritances. It 
 has influenced the development of savings institutions, 
 mutual benefit societies, pension funds, and insurance; 
 it has thus rendered invaluable service in the public role 
 
 1 66 
 
History and Methods of the Paris Bourse 
 
 it has fulfilled. Thanks to it, these companies multiply 
 and increase as the capitalization of their funds is made 
 easier. 
 
 ' ' It has also had another result. It has shown that there 
 is no longer a plutocracy, but a veritable financial democ- 
 racy; when these thousands of millions of certificates are 
 minutely segregated, there are only found atoms of cer- 
 tificates of stocks and bonds, and atoms of income so 
 great is the number of capitalists and independent indi- 
 viduals who divide these securities and these incomes 
 among themselves. 
 
 "At the beginning of the year 1800, the securities negoti- 
 able on the Paris Bourse included certificates of 'Rentes 
 des tiers consolides' (French government stock reduced to 
 one-third, September 30, 1797, see No. 46), certificates of 
 the ' caisse des rentiers ' (office for the paying of rentes to 
 independent individuals) , shares of the Banque de France, 
 and 3 per cent English consols in all, about seven or 
 eight kinds of securities, representing about 40,000,000 
 francs in rentes, and less than 200,000,000 francs in capital 
 or other property. The first bourse quotation list dates 
 from the second Vendemiaire, year IV (September, 1795). 
 It gave the foreign exchange quotations: Amsterdam, 
 Hamburg, Madrid, Cadiz, Genoa, Leghorn, Basle; then, 
 under the pompous headings of ' Public Securities and 
 Gold and Silver Bullion and Coins,' it gave the prices of 
 Louis, Ecus, fine gold, silver bars, registered rentes, and 
 bonds to bearer. 
 
 " Louis were quoted 1,165 livres; other coins, registered 
 rentes, and bonds to bearer, were entered ' No quotation.' 
 
 " Now, on February 28, 1900, the official quotation list 
 
 167 
 
National Monetary Commission 
 
 contained: (i) not less than 442 stock companies, the 
 shares and bonds of which, numbering 90,909,250, 
 represented, at the market prices of that day, a capital of 
 42,000,000,000 francs; and (2) 203 loans of governments, 
 departments, and cities, amounting to 56,000,000,000 
 francs. 
 
 "Adding 26,000,000,000 francs in French rentes to that 
 amount, we find the capital of securities entered on the 
 official quotation list on February 25, 1900, reaches 
 almost 125,000,000,000 francs. 
 
 " On a corresponding date, viz, March 15, 1900, the quo- 
 tations on the coulisse (marche en banque) were as follows 
 according to the official bulletins of the Syndicat des 
 banquiers en valeurs a terme (Syndicate of Bankers in 
 Securities for the Account) and the Syndicat des banquiers 
 en valeurs au comptant (Syndicate of Bankers in Securi- 
 ties for Cash), acting near the Paris Bourse: For future 
 delivery, 4 kinds of government issues, 3 kinds of rail- 
 road securities, and 47 mining and sundry securities; 
 for cash, 386 different kinds of securities, of which 38 were 
 issues of different States, 57, of gold mines, 38, of other 
 mines, 26, of railroad and transportation lines, and 35, of 
 metal industries; the balance was in sundry securities, 
 including 77 kinds of bonds, of which 22 were railroad 
 bonds, and 22, gas and electricity bonds. 
 
 " It may be said that the total number of transferable 
 securities quoted on the Paris Bourse and the sundry 
 French markets, comes up to about 2,000 denominations, 
 representing a capital not far from 135,000,000,000 francs. 
 Of these 135,000,000,000, 80,000,000,000 to 85,000,000,000 
 francs belong to our French capitalists and 'rentiers,' 
 
 168 
 
History and Methods of the Paris Bourse 
 
 and to insurance and sundry companies, yielding, on an 
 average, an income of 4,000,000,000 to 5,000,000,000 
 francs. 
 
 "Such is, in a general way, the situation of trans- 
 ferable securities during the nineteenth century." 
 
 (54) We shall trace the history of the development of 
 public credit, following the genesis of each important 
 phenomenon, its growth and development, up to its attain- 
 ment of its present state. This will in some way reflect 
 also the plan of a history of the Bourse, of the transferable 
 securities, and of the financial institutions of the nineteenth 
 century. For this purpose we shall start with the public 
 credit, properly so called the public loans. 
 
 Public debts are ordinarily divided into four important 
 categories : 
 
 1. The perpetual debt. The borrower is not compelled 
 to pay back the principal. He is liable only for the 
 interest. But he has the privilege to pay the principal if 
 he wishes to, although this is not required. 
 
 2. The amortisable debt. The borrower agrees to pay, 
 besides the interest, a part of the capital, until the entire 
 principal is paid. 
 
 3. The floating debt, comprising time loans of relatively 
 short duration necessitated by needs of the exchequer. 
 
 4. The life debt, consisting of rentes which expire on the 
 death of the beneficiary, and originating in the majority 
 of cases in pensions of retired veteran soldiers and servants 
 in the civil service. These last two categories in the 
 French public debt do not concern us, for we are investi- 
 gating only that part of the debt which is represented by 
 securities circulating on the Bourse. In this respect, the 
 
 169 
 
National Monetary Commission 
 
 last two categories play only a nominal part on the Bourse. 
 It is different, however, in the case of the perpetual debt and 
 the amortisable rente. These are the life substance of the 
 market for French rentes. We shall scan their history briefly. 
 
 (55) The bankruptcy of two-thirds of the debt in the 
 year VI of the Republic did not entirely solve the financial 
 problem. 
 
 From the time of the creation of assignats, budgets 
 ceased to be made. Every month the balance between 
 the receipts and the expenses was filled by a previous 
 deduction from the reserve of assignats. No bookkeep- 
 ing records were kept since the convention. The dis- 
 order which needed to be straightened out was so great 
 that not until 1801 was it found possible to make a budget. 
 The Cour des Comptes (audit office) was instituted Sep- 
 tember 1 6, 1807. The Bank of France was reorganized 
 in 1806; it was founded in i8oo. a There was no public 
 credit worth speaking of. 
 
 a The Banque de France was founded on the 24th Pluviose, year VIII 
 (February 13, 1800). At the beginning it was a free credit company with 
 the right of issuing notes, formed by an association of persons high in the 
 political and financial world of Paris. The capital consisted of 30,000,000 
 francs, divided into 30,000 shares of i ,000 francs each. The Amortization 
 Office was authorized by a decree of the 28th Nivose, year VIII, to sub- 
 scribe for 5,000 shares. The total placing was slow, and ended in 1802 
 According to the terms of its original statutes, the bank had for its object: 
 i, bank operations, such as discount, collections, advances, and deposits; 
 2, the emission of "bearer" and "sight" notes. The issues were to be 
 made in such a proportion that, with the cash reserve in its vaults and the 
 maturity of the paper in its portfolios, the bank could in no case be 
 exposed to the necessity of deferring the payment of its engagements. 
 The law of the 24th Germinal, year XI (April 14, 1803), conferred upon 
 its statutes a legal character, and made the bank the only association hav- 
 ing the right of issuing notes. Its organization, functions, and powers 
 were modified and completed several times by special laws. The capital 
 of the Banque de France at present amounts to 182,000,000 francs. The 
 number of its shareholders is 31,249. 
 
 170 
 
History and Methods of the Paris Bourse 
 
 (56) At the beginning of the nineteenth century the 
 funded debt amounted to 50,000,000 francs of 5 per 
 cent rentes, representing a nominal capital of a billion 
 francs. 
 
 On April i, 1814, the perpetual debt was 63,307,637 
 francs of rentes. 
 
 On July 31, 1830, the amount of the perpetual debt 
 was about 202,381,180 francs of rentes. 
 
 At the time of the revolution of 1848, the perpetual debt 
 was about 244,287,266 francs of rentes. 
 
 On December 31, 1851, the perpetual debt amounted 
 to 242,774,478 francs of rentes; this means that during the 
 second Republic there was a decrease of 2,000,000 francs 
 of rentes, due to an excess of abrogations over issues. 
 
 During the second Empire, the sum total of the per- 
 petual debt rose to 402,977,516 francs (December 31, 
 1870). 
 
 Although the financial operations of the Third Republic 
 have been enormous having had to liquidate the debts 
 of the Second Empire and the charges of the war of 1871, 
 amounting to 9,000,000,000 francs yet the total increase 
 of the funded debt up to the present, owing to success- 
 fully conducted extinctions, amounts only to 254,695,999 
 francs. 
 
 On January i, 1909, the amount of the perpetual debt 
 was 657,673,515 francs of rentes, represented uniquely by 
 3 per cent perpetual rente securities. The amortisable 
 debt amounted to 107,629,800 francs. 
 
 (57) One of the phenomena which are conducive to the 
 establishment of public credit is the democratization of 
 the transferable security. The more easily accessible the 
 
 171 
 
National Monetary Commission 
 
 transferable security is to all, the more extensive will pub- 
 lic credit be, and the larger the clientage of the Bourse. 
 
 The Restoration by establishing in the treasuries a 
 supplementary Grand Livre (great book for the inscription 
 of rentes, see No. 44) ; the Government of I,ouis Philippe 
 by authorizing the creation of securities "to bearer" 
 through an ordinance of April 29, 1831; and the Second 
 Empire and the Third Republic by reducing the figures of 
 the minimum amount of coupons (there exist coupons for 3 
 francs rente) and, especially, by having resorted to issues 
 by public subscription have to a marked degree extended 
 the clientage of the French rente. 
 
 In 1848 there were 291,808 entries of rentes; in 1860, 
 1,073,801; in 1870, 3,580,805; in 1903, 4,631,857. In 
 1900 the number of rentiers was about 1,500,000. 
 
 (58) The question of the methods of the emission of 
 rentes is intimately connected with the study of the con- 
 ditions of the working of a financial market. Aside from 
 the fact that a direct appeal is sometimes made to the 
 Bourse, by immediately offering the created rentes for sale 
 on its market, it is often also the place where special ne- 
 gotiations are created before the issue, properly speaking, 
 takes place negotiations "for the issue" (a I' emission) , 
 or negotiations for the results. Once the emission has 
 been realized, wholesale subscribers and even guarantee 
 syndicates undertake diverse operations on the market. 
 Finally, the securities having more or less taken rank, they 
 become the regular merchandise of the market in trans- 
 ferable securities. 
 
 The Revolution did not have recourse to public loans 
 in the modern sense of the term. Its attempts to make 
 
 172 
 
History and Methods of the Paris Bourse 
 
 patriotic and forced loans completely failed. It ob- 
 tained extraordinary resources through paper money 
 guaranteed by national property, assignats, territorial 
 drafts, etc. The First Empire could make no use of 
 the financial market for its needs, both on account 
 of the insecurity of the resources of the State, and on 
 account of the dwarfed condition of the banking busi- 
 ness and the impoverishment of France in general, owing 
 to the constant state of war and revolutions lasting 
 for twenty-five years. And although the Restoration 
 did raise loans by public subscription, yet even these 
 were not loans in the real sense of the word, owing to 
 the undemocratic conditions requiring only wholesale 
 subscriptions with a minimum of 5,000 francs and the 
 presentation of guarantees. A loan of 9,585,220 francs 
 of 5 per cent rentes was placed in 1821, by contract, in 
 the hands of a consortium, in which the firms of Hope, Hot- 
 tinger & Co. and Baguenault, Delessert & Co. took part. 
 On July 10, 1823, a loan of 23,114,516 francs of 5 per cent 
 rentes was contracted with the Rothschild Brothers for 
 89.55. From that time on until the Second Empire the 
 Rothschilds had the monopoly of these issues of rentes. 
 
 The process of public subscription began really to 
 be used in France only since 1854. Napoleon III, obey- 
 ing political considerations, endeavored to democratize 
 credit. He relied on the mass of the populace, whom 
 he considered stronger than the bankers. From that 
 time on, during the whole of the nineteenth century 
 emissions of rentes by public subscription rapidly in- 
 creased in volume, in number of subscribers, and in popu- 
 larity. This is true both of perpetual and amortisable 
 
 173 
 
National Monetary Commission 
 
 loans, which were introduced in 1878, and have been 
 negotiated on the Bourse through the mediation of 
 the syndicate of stockbrokers (syndicat des agents de 
 change) by the general paying treasurers of the Depart- 
 ments. 
 
 (59) There are other debts, besides those of the State, 
 which have the character of public debts; these are debts 
 of departments and municipalities, which give rise to a 
 large circulation of securities upon the market. The 
 departmental debts, directly concluded and, consequently, 
 not including engagements for guaranteeing profits to pri- 
 vate companies, the annual charges on which amount 
 to 50,000,000 francs, are valued at 700,000,000 francs. 
 The communal debts are more important than those 
 of the departments. They rise approximately to a fig- 
 ure slightly above 4,095,000,000, of which 2,545,000,000 
 fall to the account of the city of Paris alone. On 
 December 31, 1869, there were on the official quota- 
 tion list in Paris 14 different stocks of departmental 
 and municipal loans, representing a capital of 808,- 
 600,000 francs. Their number at present (1909) is 
 58, and they represent 2,300,000,000. The obligations 
 of the city of Paris form the majority of munici- 
 pal bonds figuring on the list, and belong to different 
 loans of the period between 1860 and 1906. All other 
 loans of this and earlier periods have been amortised. The 
 number of certificates in circulation is 4,618,205, repre- 
 senting a capital of 2,090,107,200 francs. The majority of 
 these are lottery bonds. 
 
 (60) Trie scope of this publication allows us only to make 
 brief mention of the loans of colonies and protectorates. 
 
History and Methods of the Paris Bourse 
 
 They began with that of Tunis in 1892. Since then, there 
 were loans issued by Algeria, Guadeloupe, Indo-China, 
 Madagascar, Martinique, Occidental Africa, the Reunion, 
 the protectorate of Annam and Tonkin, and Tunis. The 
 number of bonds at present in circulation rises to 2,286,573, 
 representing a capital of 816,166,500 francs. 
 
 (61) Brief mention should be made also of foreign 
 credit, which France has favored to a considerable degree, 
 although its development is only recent. Till 1823 there 
 existed a prohibition against the dealing of stockholders in 
 any other but royal bonds. All dealings in foreign secur- 
 ities in Paris was done only by curb brokers. In Decem- 
 ber, 1830, there were only n different stocks entered upon 
 the official list. a 
 
 Under the Second Empire there were already many 
 important foreign issues figuring on the quotation list. 
 Turkey, Austria, Spain, Hungary, Egypt, Russia, and 
 Italy were among the borrowing governments of that 
 period whose securities prevailed on the Paris market. 
 
 The emissions of public funds of foreign countries be- 
 came still more numerous during the period between 1870 
 and the present time. Egypt, Hungary, Russia, and even 
 Japan and England, are among those that issued heavy 
 loans, and whose bonds are among the securities prevailing 
 on the Paris Bourse. 
 
 In a communication to the International Congress of 
 Transferable Securities, named Les Valeurs Mobilises en 
 France, M. Thery claims that it is impossible to give a 
 precise estimate of the number and capital of foreign 
 securities held by French capitalists. He ascribes the 
 
 oClaudio Jannet, Capital, speculation et finances au XlXcsitcle, page 522. 
 90312 10 - 12 175 
 
National Monetary Commission 
 
 reason to the fact that these same foreign securities are 
 traded in on many international great markets of Europe, 
 besides Paris and their original countries; that these 
 securities are in constant movement on account of their 
 offering of great inducements of arbitrage, and because of 
 real demands and offers of French capital and thus con- 
 stantly escape every control. 
 
 But yet an estimate has been tried. Le*on Say puts the 
 capital of the foreign securities at between 10,000,000,000 
 and 1 2,000,000,000 francs. Paul Leroy Beaulieu puts it at 
 between 12,000,000,000 and 15,000,000,000. Neymarck 
 estimates it at 20,000,000,000. However, it is of little 
 importance to know the exact proportion of the French and 
 foreign funds prevailing on the French market, provided 
 the institutions of the country are such as to give free 
 scope to indigenous demands, and provided that these 
 demands are satisfied. 
 
 (62) The first appearance of shares of insurance compa- 
 nies on the official quotation list of the stockbrokers in 
 Paris dates from the time of the Restoration. The first 
 insurance company was authorized by an ordinance of 
 April 22, 1818, under the name of Compagnie royale 
 (T assurances maritimes, which has since become the 
 Compagnie d'assurances generates maritimes. Soon after, 
 in 1819, there were formed by special ordinances one 
 general fire insurance and one general life insurance com- 
 pany. In 1830 we find already 7 insurance companies 
 on the official quotation list. 
 
 The insurance companies have followed during the nine- 
 teenth century the general progress in insurance and in 
 the laws upon joint stock companies. Article 66 of the 
 
 176 
 
History and Methods of the Paris Bourse 
 
 law of the 24th of July, 1867, exempts insurance com- 
 panies (excepting mutual and fixed-premium companies) 
 from government supervision or authorization, and leaves 
 them free to form themselves, subject only to the general 
 regulations of public administration. 
 
 According to a memoir by M. le Chartier, submitted to 
 the International Congress of Transferable Securities of 
 1900, out of 327 fire insurance, life insurance, accident 
 insurance, and maritime insurance companies that have 
 been founded in France during the nineteenth century, 209 
 ceased operations, and the capital lost is estimated at 
 692,825,000 francs, while the 118 companies existing in 
 1900 had a lump capital of 485,840,000 francs. This does 
 not include the reserve funds. 
 
 According to a report of M. Neymarck to the Interna- 
 tional Institute of Statistics, at the meeting of 1907, the 
 insurance values figuring on the official list on December 
 31, 1906, were represented by 402,930 certificates and by 
 a nominal capital of 4,643,618,100 francs. The Coulisse 
 had at the beginning of 1909 seven different insurance 
 stocks, representing a nominal capital of 54,000,000 francs. 
 
 (63) The establishment of railroads in France, as in 
 other countries, was the signal for a prodigious economic 
 movement. The money market was the crucible in which 
 was molded the capital permitting of the formation of 
 railroad companies. 
 
 In 1832, when the advantage of railroad concessions was 
 first understood, many railroad companies were formed. 
 After a law had been passed in 1842, permitting temporary 
 concessions and establishing the eight great trunk lines 
 whose construction was very important for the whole 
 
 177 
 
National Monetary Commission 
 
 country, there ensued a veritable fever of railroad building 
 and speculation. In six years 6,000 kilometers of rail- 
 road tracks were granted in concessions, of which more 
 than 1,250 had been constructed. Speculation increased 
 so much that a law was passed on July 15, 1845, prohibit- 
 ing the sale of promises for railroad shares. 
 
 (64) The following revolutionary period of 1848 was a 
 difficult one for all kinds of enterprises. Receipts fell off. 
 The Government had to intervene and buy back the Paris- 
 Ivy on road; many companies went into receivers' hands. 
 A panic ensued when the population had demolished a 
 great number of railroad stations and bridges, and doubts 
 arose as to the intentions of the Provisional Government 
 with regard to the rentes of railroad companies. A great 
 tumble in the values of railroad stocks was the result. 
 
 (65) Under the Second Empire, prompted by uniform 
 concessions for a period of ninety-nine years, the then 
 existing 27 lines, with concessions of different duration, 
 were united into six principal great regional trunk lines. 
 In 1859 the existing concessions contained 14,756 kilo- 
 meters, and the roads in exploitation covered 9,074 
 kilometers. But, following a commercial panic which 
 raged in 1857, the public was frightened by the large funds 
 engaged. The Government decided to fund the indebted- 
 ness of the companies, and the agreements of 1859 were 
 concluded. 
 
 By those agreements the Government guaranteed 4 per 
 cent interest upon each of the less productive new systems, 
 and a minimum of revenue upon each of the old systems 
 of railroads. Besides, in virtue of new traffic procured for 
 the old systems by the creation of the new ones, a part of 
 
 178 
 
History and Methods of the Paris Bourse 
 
 the receipts of the old lines was reserved for the new 
 systems. 
 
 The credit of the companies rose rapidly, and they 
 could easily place their bonds at advantageous rates. 
 From 1859 t I 870, the length of exploited lines was in- 
 creased by 8,365 kilometers, and the ceded lines passed 
 from 16,441 to 23,440 kilometers. 
 
 After the crisis of 1870 the national assembly, in spite 
 of the difficulties in which the country found itself, con- 
 tinued the work of construction, and from 1870 to 1875 
 granted not less than 4,680 kilometers of railroad lines. 
 Then comes the construction of the government railroad 
 system, as a consequence to the taking over of the second- 
 ary companies that failed. Then also comes the Freycinet 
 plan of the creation of 3 per cent amortisable rentes. 
 The plan was too vast for accomplishment, since it was 
 evident that the Government was unable to build 10,000 
 kilometers in the presence of the lines that had been given 
 rank by the law of July 17, 1875. 
 
 (66) Then came the famous agreements of 1883, so much 
 decried, which, however, permitted the railroad industry 
 to begin its ascent to the heights on which it stands 
 to-day. 
 
 By these agreements, the six great companies were de- 
 clared the grantees of 1 2,687 kilometers of railroad tracks 
 under exploitation, in construction, and to be constructed. 
 The distinctions between old and new roads were sup- 
 pressed. The receipts and expenses were kept in one 
 account. From the receipts the companies had previously 
 to deduct the sum necessary to assure the interest on 
 their loans and the payment of dividends guaranteed by 
 the Government to their shareholders. 
 
 179 
 
National Monetary Commission 
 
 (67) By the side of the great systems, there were formed 
 a large number of systems of local interest, whose aim 
 was to connect localities of secondary importance with 
 one another or with the great lines. The development 
 of these secondary lines was promoted first by the law of 
 1665 which granted state, departmental, and municipal 
 subsidies; but to a much greater extent by the law of 
 1880 and the supplementary decree of 1881, which 
 replaced the subsidies, that promoted speculation a with- 
 out development, by mere guaranties of profits in case 
 of actual exploitation of the roads in question. 
 
 At the same time in the interior of the cities there de- 
 veloped the use of mechanical traction, replacing animal 
 traction. Paris set the example, and the formation of 
 its system of tramways called " de penetration" gave birth 
 to a great number of large companies. These traction 
 companies extend their activity also to the province, and 
 the creation of affiliations and trusts, toward the end of 
 the nineteenth century, was the occasion of a considerable 
 issue of paper. 
 
 At present the official quotation list mentions not less 
 than 60 secondary railroad or tramway companies for 
 France and its colonies. 
 
 (68) The French financial market was to a very great 
 degree concerned with foreign railroads. In 1837 there 
 appeared for the first time on the Coulisse, and later on 
 the Parquet, shares of a foreign railroad company. The 
 political and financial order of events, as well as the con- 
 dition of affairs on the Bourse at that time, did not permit 
 a very great development in transactions in securities of 
 
 a See an article by M. Gomel in the Dictionnaire d' Economic Politique of 
 L6on Say. 
 
 1 80 
 
History and Methods of the Paris Bourse 
 
 foreign railroads. But the Rothschild firm was interested 
 in the first railroad companies for the development of the 
 north Italian and south Austrian regions, which later 
 formed the Compagnie des Chemins de fer Lombards, whose 
 shares appeared on the quotation list in 1856. From now 
 on, under the impulsion of the newly formed Credit Mo- 
 bilier, the financial market becomes more and more in- 
 terested in a large number of foreign railroads. In 1858 
 a decree of May 22 announced the conditions which foreign 
 railroad companies have to fulfill, in order to become ad- 
 missible to the official quotation list of the stockbrokers. 
 
 (69) According to a report by M. Alfred Neymarck to 
 the International Institute of Statistics (session 1 907) , the 
 securities of railroads and street railways, figuring upon the 
 official quotation list on December 31, 1906, represented a 
 capital of 20,167,834,000 francs, in 5,843,608 shares. 
 There were in all 71 companies, 32 of which were for for- 
 eign railroads, and represented a capital of 7,541,329,600 
 francs. 
 
 (70) We have dwelt on the creation and development 
 of railroads, because they have marked in a very strong 
 way the industrial progress of France and the develop- 
 ment of credit in its relations to the Bourse. Besides, also, 
 numerous companies were formed, from 1820 to 1852, for 
 the exploitation of iron mills and various manufactories, 
 of mines, and of transportation. The Credit Fancier and 
 the Credit Mobilier were among these associations. Both 
 of these companies, in cooperation with many other con- 
 temporary ones, considerably developed the transferable 
 securities. From 1830 to 1838 many limited-liability 
 companies in shares (societes anonymes) were formed by 
 
 181 
 
National Monetary Commission 
 
 a sort of degeneration of the " commandite" form of 
 company (societe en commandite), in which the managers, 
 or active partners, were under unlimited liability." The 
 securities of the companies formed on this new basis ap- 
 peared on the Bourse in great numbers since i832. 6 
 
 The most diverse industrial enterprises were thrown into 
 this form of company. The promoters of doubtful enter- 
 prises put at their head men of straw, in order to avoid 
 personal responsibility. The shares of certain enterprises 
 reached fantastic prices (over tenfold their par value), 
 owing to exaggerated expectations of shareholders. Stock- 
 jobbing was rife on the Bourse. But most of these inse- 
 cure undertakings were swept away by the crisis of 1838. 
 
 The formation of lottery combinations also belongs to 
 that period. 
 
 (71) We come now to the era of the great credit associa- 
 tions. 
 
 The Comptoir d'Escompte (national discount bank) 
 dates from the period of turmoil of 1848. Its powers 
 
 The French law at present recognizes four forms of commercial compa- 
 nies: i. The partnership (la societe en nom collectif}, in which the partners 
 are responsible for debts contracted by the company to the whole extent 
 of their personal estate. 2. The "commandite " form of company (la societe 
 en commandite) , in which one or several members are responsible with the 
 whole of their estates, while several others are responsible only up to a sum 
 which they announce in the contract. The second category of partners 
 take the name bailleurs de fonds, or commanditaires (sleeping or silent part- 
 ners). 3. The "commandite" in shares (commandite par actions), in which 
 the commandite members are shareholders in the ordinary commercial 
 sense, involving liability only to the amount of their shares. The member 
 or members responsible with all their estates are called gerants (managers, 
 directors). 4. The limited-liability company in shares, in whic"h all the 
 members are only shareholders, liable to the amount of their shares, and 
 which are managed by one or several administrators by proxy (mandataires 
 des actionnaires) . 
 
 &M. Jannet. Le Capital, la Speculation et la Finance, page 510. 
 
 182 
 
History and Methods of the Paris Bourse 
 
 spread to such an extent that at the present time it is one 
 of those establishments which are known as the great finan- 
 cial magazines, and the most conspicuous of which are the 
 Credit Lyonnais, the Societe Generate, and the Credit In- 
 dustrial et Commercial, all of which were founded during 
 the Second Empire. The principle which governed the 
 founding of the Comptoir d'Escompte goes back to a period 
 previous to 1848. 
 
 After a commercial panic in 1827-28 an attempt was 
 made to found a discount bank in Paris, intended to serve 
 as an intermediary between the public and the Bank of 
 France. Large sums of money were advanced to it by the 
 treasury and the Bank of France; it was thus able to dis- 
 count bills of two signatures. But this institution failed 
 in April, 1832, practically before it had time to work. 
 
 The deplorable condition of the financial market in 1848, 
 and the many financial catastrophes caused by the revo- 
 lutionary turmoil, induced the Provisional Government to 
 establish a number of discount banks all over France, un- 
 der the general name of Dotation du petit commerce. The 
 basis and the main statutory provisions governing them 
 all were as follows: Private persons, the State, and mu- 
 nicipalities were called upon to furnish each one-third of 
 the capital of the banks. The third coming from private 
 persons was to be fully paid in and represented by shares; 
 the other two-thirds were to be represented by treasury 
 bonds and municipal obligations deposited in the treasury 
 of the bank. Besides this capital, the banks received from 
 the State at the time of their formation a subventitious 
 loan in specie, at the interest of 4 per cent for the State's 
 benefit. Almost all these loans had been reimbursed dur- 
 
 183 
 
National M o n et ar y Commission 
 
 ing the first three years. The chief purpose of all these 
 banks was discount; they could, however, add to this all 
 operations tending to facilitate the circulation of notes, such 
 as the collection of bills of correspondents, the collection 
 of debts for departments or foreign states, the opening of 
 accounts, etc. The city of Paris, naturally, was the first 
 to be endowed with this institution; a decree of March 7 
 created the Comptoir National d'Escompte de Paris. 
 Many towns soon followed suit and gave birth to similar 
 institutions. Their number was 67, and they represented 
 a capital of 130,449,500 francs in shares. The Paris in- 
 stitution was reconstituted under the old name, after liqui- 
 dation in 1889, owing to mismanagement of its director- 
 general, M. Denfert-Rochereau. 
 
 The original capital of 40,000,000 francs, divided into 
 80,000 shares of 50 francs, was now increased to 80,000,000 
 francs. Later it was successively reduced to 75,000,000, 
 increased to 100,000,000 (1895), and to 150,000,000 (1900). 
 Only recently (1909) it was increased to 200,000,000. 
 
 (72) We come now to the founding of the Credit Fonder 
 and the Credit Mobilier. Both of these associations were 
 founded in 1852. 
 
 Simultaneously with the construction of railroads in 
 France, which was the occasion of an extensive demand for 
 credit, people decided to resort to credit also for the exploita- 
 tion of landed property and the development of agriculture. 
 
 Real estate at that time experienced the greatest 
 difficulties in procuring capital at moderate rates of 
 interest. The main reasons were the uncertainty of the 
 real estate regime, and the inability of the borrower to 
 pay off at short maturity. 
 
 184 
 
History and Methods of the Paris Bourse 
 
 The solution of the problem consisted in putting an 
 intermediary between the lender and the borrower, who, 
 on the one hand, had powerful means of investigating 
 the validity of the proposed mortgage, and, on the other 
 hand, could substitute himself for the borrower in the 
 emission of securities at long maturity. 
 
 With this aim in view, as formulated by the decree 
 of February 28, 1852, there was founded in Paris (with a 
 charter for twenty-five years, under the jurisdiction of 
 the Cour d'appel) the Banque Fonder e de Paris, Sodete 
 de Credit Fonder (Real Estate Bank, Mortgage-Loan 
 Company) with a capital of 25,000,000 francs. 
 
 In December, of the same year, the Paris institution 
 amalgamated with similar institutions which had been 
 established earlier in the same year in the various depart- 
 ments, and formed one company, known as the Credit 
 Fonder de France. This new company received a subsidy 
 of 10,000,000 francs from the Government; its capital 
 increased to 60,000,000 francs, and it bound itself to 
 advance loans under certain conditions. A first loan of 
 250,000,000 francs was issued, which met with but mid- 
 dling success. 
 
 By two decrees, of 1853 and 1856, respectively, the 
 great institution was granted certain privileges, and placed 
 under the strict supervision of the state. From that 
 time on the Credit Fonder rapidly developed. In 1860 
 it founded the Credit Agricole, having for its object the 
 furthering of the progress of agriculture. But the new 
 company undertook imprudent transactions which led 
 to its absorption by the Credit Fonder (1877). Later, 
 in 1882, the institution bought up another company, 
 
 185 
 
National Monetary Commission 
 
 the Banque Hypothecate, which had been established 
 three years previously with the purpose of doing the 
 same kind of business as the Credit Fonder, but without 
 possessing the same privileges. At the end of the nine- 
 teenth century the Credit Fonder considerably developed 
 its activity, and its capital was successively increased to 
 30,000,000 (1862), 60,000,000 (1862), 90,000,000 (1869), 
 130,000,000 (1877), and finally, in 1882, as a result of 
 the amalgamation with the Banque Hypothecate, to 
 200,000,000 francs, at which figure it now stands. 
 
 The operations of the Credit Fonder are of two kinds: 
 i, loans for short term, reimbursable in ten years at most, 
 and 2, loans for long term, payable by annuities. In 
 case of communal loans (where the borrower is a city 
 or a department) the social capital must equal one- 
 twentieth of the bonds in circulation. 
 
 From 1853 to 1908 the Credit Fonder has granted 152,622 
 hypothecary loans for a total of 5,698,000,000 francs, of 
 which some are for a term of fifty to fifty-nine years, and 
 others, of sixty to seventy-five years. The communal 
 loans since 1860 have been 38,128 in number, for a sum of 
 1,094,000,000 francs. In the total we obtain, since 1853, 
 190,740 loans for the sum of 9,501,000,000 francs. 
 
 Of this total sum there remained unpaid on December 
 31, 1908, the sum of 2,118,348,000 francs of the 
 hypothecary loans and 1,852,783,000 francs of the com- 
 rAunal loans. 
 
 The amount of real estate bonds for the same period 
 was 2,480,000,000 francs, and of communal bonds, 
 1,712,000,000. 
 
 186 
 
History and Methods of the Paris Bourse 
 
 (73) While the Credit Fonder de France was being 
 established, there was formed in Paris a Societe Generate 
 de Credit Mobilier. A decree of November 18, 1852, 
 authorized the creation of this incorporated joint-stock 
 company; it was entirely free from all government 
 connections. 
 
 The object of this general credit institution was to 
 establish industrial and financial companies. It sub- 
 scribed shares and bonds of different industrial and finan- 
 cial enterprises, and in disposing of them in the way it 
 could, it brought to bear the publicity and mechanism of 
 bourse operations. In issuing bonds, in order to work 
 out its own programme, it had to contribute powerfully 
 to the development of transferable securities. It was 
 constituted with a capital of 60,000,000 and with the 
 power of issuing bonds for 600,000,000 francs. 
 
 Between 1852 and 1867 the Societe Generate de Credit 
 Mobilier succeeded in establishing and aiding numerous 
 influential and powerful companies. Among these were 
 railroad, gas, maritime, loan, and insurance companies, 
 banking institutions, etc. It was reconstituted in 1871 
 under the name of Societe de Credit Mobilier. In 1902 
 it combined with the Office des Rentiers, and another 
 company was then formed, by the name of Credit Mobilier 
 Francais, with a capital now amounting to 45,000,000 
 francs. 
 
 (74) Upon the model of the Credit Mobilier numerous 
 other companies and discount banks have been estab- 
 lished since that time. The Credit Industriel et Commercial, 
 the Credit Lyonnais, and the Societe Generate, with the 
 original capitals of 60,000,000, 20,000,000, and 1 20,000,000 
 
 187 
 
National Monetary Commission 
 
 francs, respectively (at present 100,000,000, 250,000,000, 
 and 400,000,000), are types of these institutions. All of 
 them little by little went over to the practice of issuing 
 securities and participating in financial operations on a 
 grand scale. 
 
 (75) The impetus given to transferable securities by the 
 commercial credit institutions, as they were then known, 
 ought not to make us lose sight of the valuable work 
 done in this respect by the Banque de France. (See note 
 to No. 55.) 
 
 Its services to national commerce have become more 
 and more valuable in the same measure in which its 
 powers and privileges have been gradually broadened 
 and extended since 1808. It advanced money on pub- 
 lic notes remitted for discount; it loaned money on 
 deposits of French rentes, of shares and bonds of rail- 
 road companies, of the bonds of the city of Paris. Later 
 it undertook to issue and to dispose of bonds for account 
 of French railroad companies, which has brought them 
 in an amount of 1,200,307,500 francs. Finally, it is 
 known that the bank undertakes the safe-keeping of 
 securities. This service, which in 1860 was utilized by 
 18,226 depositors for securities representing 916,000,000 
 francs, has not stopped growing. In 1890 there were 
 46,558 depositors for a quantity of securities represent- 
 ing 3,988,000,000 francs. At the end of 1908 there were 
 94,998 depositors, and 7,646,000,000 francs in securities 
 were deposited. In 1895 the Banque de France decided 
 to accept bourse orders, which it would transmit to the 
 financial markets for account of its clients. In 1908 it 
 transmitted 98,721 orders for 500,000,000 francs in capital. 
 
 188 
 
History and Methods of the Paris Bourse 
 
 (76) The great impetus which was given to the finan- 
 cial activity of the period between 1876 and 1881 by 
 the successful loans launched by the French Govern- 
 ment for the paying of its war indemnity of 5,000,000,000 
 francs, and which expressed itself in the establishment 
 of many powerful financial institutions of a private 
 character, was stopped by the crash of the Union Generate. 
 The Union Generate was founded in 1878 with a finan- 
 cial, political, and religious programme. The political 
 programme, it may be said, was carried out. But the 
 commercial enterprises set on foot by the Union Generate 
 were not all of the most fortunate kind; only a few 
 succeeded and became prosperous. The political and 
 religious programme consisted in supplanting the Jewish 
 and Protestant financiers upon the field of financial emis- 
 sions, and in serving at one and the same time the 
 royalist cause in France, and the papal cause in Italy. 
 
 The pursuit of this plan involved the need of large 
 funds rapidly acquired, and the Union Generate under- 
 took a campaign for a rise upon its own shares, in order 
 to realize an increase of its capital and dividends by 
 forcing the prices of its stocks as high as possible. It 
 tried to do this by buying up its own securities, for which 
 the funds of the depositors were freely used. In this 
 way the capital of the Union Generate was increased 
 from 25,000,000 to 100,000,000 francs, and, as the new 
 funds served to further pursue this campaign for a rise, 
 the shares rose to unwarrantably high prices. People 
 of all conditions eagerly bought and sold again the stocks 
 of the Union Generate and of the enterprises it created, 
 
 189 
 
National Monetary Commission 
 
 until their aggregate value surpassed the billion mark. 
 The mania for investment spread to all financial circles. 
 
 Finally, however, a reaction set in. Shares of the 
 Union Generate began to fall. On January 10, 1882, 
 the shares were listed 3,020 francs; on January 16, 
 2,750 francs; on January 18, 2,400 francs; on January 
 19, 1,300, and on January 27, 900 francs. On the 28th 
 of January payment was suspended, and the shares 
 fell to 600; on the next day they were 450. On January 
 30 the administrative board asked the court to appoint 
 a trustee. On February i, MM. Bontoux and Feder 
 the former president of the administrative board and 
 the latter a director were arrested. 
 
 Failure of the Union Generate had grave consequences. 
 The Parquet of the stockbrokers of Lyon was unable 
 to pay. Out of 30 stockbrokers, 1 4 owed 65,000,000 francs 
 to their associates. Debtors and creditors alike were in 
 great straits. A judicial liquidation took place, and the 
 creditors received bonds which the Syndical Chamber of 
 Lyon sells every year at auction. The stockbrokers of Nice 
 were also caught in the panic, and their Parquet was sup- 
 pressed by a decree of the 29th of January, 1889. At Paris 
 the situation was extremely serious. The stockbrokers 
 owed 175,000,000 francs to their clientage. The gravity 
 of the situation was enhanced by the resulting threatening 
 condition of the treasury. The conversion of the 5 per 
 cent rentes had long since been under consideration; but 
 in this disorganized condition of the market the bankers 
 and the commercial credit associations could not proceed 
 with a single emission. They had invested large sums in 
 
 190 
 
History and Methods of the Paris Bourse 
 
 "continuations" (reports). What was going to happen 
 if the carried-over securities should remain on their hands ? 
 
 The Banque de France then advanced 80,000,000 francs 
 to the Syndical Chamber of the stockbrokers. The State 
 also intervened, and effected "continuations" for the 
 sum of 165,000,000 francs for the February settlement. 
 Stocks were carried over from month to month during a 
 period of seven months. a As a result of this event the 
 market was so completely disorganized that for some 
 months, and even for some years, hardly any transactions 
 of a certain speculative range could be carried through. 
 
 The total loss in values of listed securities of that period 
 is estimated at 4,000,000,000 francs. 
 
 (77) With the downfall of the Union Generate there 
 began a series of failures, liquidations, and reorganiza- 
 tions of financial companies and banking institutions, 
 which ended in the elimination of a great number of such 
 as were weak either on account of unwarranted specu- 
 lation and mismanagement, or on account of irregular 
 constitution and distribution of fictitious dividends. 
 Toward the beginning of the twentieth century there 
 remained only the very strongest, which withstood the 
 storm of the crisis by virtue of powerful resources and 
 prudent management. These succeeded in immensely 
 increasing their funds and their means of activity. They 
 solicited deposits, established branch offices in the prov- 
 inces and even abroad, and practised extensively discounts 
 of commercial paper, opening of accounts, investing of 
 their funds in "continuations," and especially issuing of 
 
 Vide Le'on Say, Les interventions du Tresor & la Bourse depuis 100 ans; 
 Annales de VEcole des Sciences Politiques, 1888. 
 
 90312 10 13 191 
 
National M on et ar y Commission 
 
 transferable securities. They have supplanted the small 
 banker and discounter, who would charge exorbitantly for 
 their services to commerce. But yet they have not entirely 
 displaced the smaller banking institutions, nor the large 
 private banker, doing business on his own personal account. 
 These are still doing a vast amount of business inde- 
 pendently. It is true that there is a preponderance 
 of large companies, but this preponderance does not exist 
 through a legal monopoly. It has been claimed that the 
 four large credit companies, the Comptoir d'Escompte, the 
 Credit Lyonnais, the Societe Generate, the Comptoir Indus- 
 triel et Commercial, to which are joined for this purpose 
 the Banque de Paris et des Pays-Bas, the Banque de I' Union 
 Parisienne, and the Banque Francaise pour le Commerce et 
 V Industrie, are enjoying a monopoly as a matter of fact. 
 This is not so, however, for numerous issues are made out- 
 side of these large companies. A number of smaller 
 banks and credit companies, not included in the above 
 list, handle some very important issues, even if they are 
 secondary. 
 
 (78) At the end of December, 1908, the number of 
 French credit companies listed on the financial market was 
 about 37, representing a nominal capital of 1,492,000,000 
 francs. 
 
 M. Alfred Neymarck, in his report to the Institut Inter- 
 national de Statistique, session of 1907, estimated at 155,- 
 000,000,000 francs the value of the transferable securities 
 in negotiation in France on December 31, 1906. One 
 hundred and fifty billions belonged to the Paris market 
 alone, of which about 65,000,000,000 were in French 
 securities, 67,000,000,000 in foreign securities on the 
 
 192 
 
History and Methods of the Paris Bourse 
 
 official market, and 18,000,000,000 on the Coulisse (marche 
 en banque). Of home securities the value of French 
 rentes is estimated at 24,000,000,000 francs; of bonds 
 of the city of Paris, of treasury bonds, including those of 
 Departments and colonies, at 3,069,000,000; insurance 
 securities are valued at 702,000,000; those of the Credit 
 Fonder, at 4,447,000,000; of banks and credit companies, 
 at 3,101,000,000; of the great railroad and navigation 
 companies, at 24,268,000,000; of railways and tram- 
 ways, at 2,200,000,000; of electricity, iron mills, foun- 
 dries, and coal mines, at 2,463,000,000, etc. Of the 
 foreign securities, Russian securities are valued at about 
 10,000,000,000; divers other government funds, at 
 47,000,000,000; railroad securities, at about 6,000,000,000. 
 In 1880 the total of the transferable securities circulating 
 in France could be estimated at 70,000,000,000, made up 
 as follows: Forty-five billion five hundred million of 
 French securities, 15,000,000,000 of foreign securities, and 
 10,000,000,000 of securities from the departmental mar- 
 kets and from the Coulisse. The rapid expansion of 
 transferable securities after the crisis of 1882 did not 
 take place without serious setbacks from the deprecia- 
 tion in value of a great number of securities, following 
 each new failure or liquidation. The movement was 
 interrupted and checked in 1889, 1890, 1895, and in 1901. 
 (79) As we have seen, public credit was the outcome of 
 the call for capital. And the agreement entered into by 
 the borrower State, or private enterprise and the 
 lender, was made manifest through a deed the trans- 
 ferable security. The transferable security, in its turn, 
 owing to the ease with which it can be distributed, de- 
 
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National Monetary Commission 
 
 veloped the public credit. But, in order that the double 
 phenomenon be easily produced, it was necessary that 
 there should exist a public market where the one who 
 wishes to sell his securities and the one who desires to 
 buy them might meet each other. No doubt the seller 
 and the purchaser do not necessarily require a public 
 market, and, in practice, it happens that some trades are 
 carried on without the merchandise being offered or asked 
 for on an exchange. But public markets are none the less 
 useful, and their accessory functions plainly stimulate the 
 production and circulation of wealth. 
 
 The bourse des valeurs (stock exchange) is for securities 
 what the bourse des marchandises (commercial exchange) , 
 the fair, or the market, is for traffic in merchandise. 
 
 The financial market is an accessory organ, because it 
 has no part in the phenomenon of the creation of securi- 
 ties, or in the contract which puts them in circulation. 
 When a State borrows, it issues a certificate to anyone 
 who brings it money. The same is done by any financial 
 institution which brings out an issue. The accessory 
 organ is nevertheless useful in a high degree, because if it 
 did not exist, the public would decline to subscribe for 
 securities, which it could not easily dispose of in case of 
 need of money. 
 
 (80) This consideration leads us to the examination 
 of the French financial market, taken as it is. Is it a 
 tool destined to facilitate the distribution of securities? 
 Does it fulfill its mission well? 
 
 It can not be denied that it has fulfilled it, but it is 
 quite clear that it could fulfill it only on account of enjoy- 
 ing the widest freedom. 
 
 194 
 
 
 
History and Methods of the Paris Bourse 
 
 The financial market was instituted in the year IX of 
 the Republic, under such conditions that, if it had pre- 
 served its shackles, there would either have been no finan- 
 cial market, or the financial market would have insti- 
 tuted itself in spite of the law. 
 
 Is it possible to imagine a financial market resting 
 upon 60 men, appointed by the Government, who are 
 forbidden to do business for their own account, to have 
 partners or representatives, to guarantee their clients' 
 transactions, to negotiate securities without having first 
 received the securities from the sellers and the money 
 from the buyers, and to quote foreign government securi- 
 ties? One of two things: Either the public market will 
 establish itself outside of these 60 men, or these 60 men 
 will prevent the establishment of the public market. 
 
 It is the first of these two phenomena which occurred. 
 On the one hand, the Coulisse injected into the public 
 market the activity it required, and on the other hand, 
 the corporation of the stockbrokers (agents de change), 
 profiting by the activity, gradually obtained the "liber- 
 ties," without the granting of which it would have disap- 
 peared. The curb brokers (coulissiers) dealt for future 
 delivery for their own account and for the account of 
 their customers; they could negotiate foreign securities. 
 They transferred their gatherings from the boulevard to 
 the Bourse and from the Bourse to the boulevard at any 
 hour of the day, or even of the evening. They charged 
 less for their services to their customers than the stock- 
 brokers. The latter protested. 
 
 The Governments let them protest; then, as by degrees 
 the stockbrokers, taking pattern from the coulissiers, also 
 
 195 
 
National Monetary Commission 
 
 began to transact time bargains and to deal in foreign se- 
 curities, the authorities granted them all that had earlier 
 been forbidden to them, without, however, granting them 
 the abolition of the Coulisse. In 1898, however, a retro- 
 gressive phenomenon took place. We shall explain it and 
 ascertain its meaning later. 
 
 Thus is explained, how the Coulisse was tolerated during 
 the nineteenth century, and what led to the successive 
 laws which somewhat altered in the details of certain 
 operations the work of the lawmaker of the year X. 
 
 (81) But first we must make mention of a special meas- 
 ure passed in 1816 for the benefit of the stockbrokers. 
 At that time they became the owners of their offices, as 
 they were prior to the revolution. Since the year IX they 
 had been appointed by the Government and had held a 
 commission subject to repeal. The law now intended to 
 permit them to introduce their successors with the consent 
 of the Government. 
 
 The right of introduction is practically an article for 
 sale. The stockbroker, on retiring, does not sell his office, 
 but he sells to his successor the right of introduction. 
 
 This measure was brought in under the following con- 
 ditions: The budget for the year 1815 having shown an 
 excess of expenses of 133,433,000 francs, the Government 
 of the restoration had to look around for resources to 
 meet them. 
 
 Therefore, by the law of April 28, 1816, the stock- 
 brokers, as well as notaries, barristers practicing before 
 the court of cassation (auocats a la Cour de cassation), 
 lawyers, court clerks, bailiffs (" huissiers," those who pro- 
 test commercial paper, serve writs, etc.), commercial 
 
 196 
 
History and Methods of the Paris Bourse 
 
 brokers, and appraisers, acquired the right of introducing 
 their successors in consideration of an additional surety 
 bond, aggregating 40,000,000 francs for the totality of 
 these ministerial offices. 
 
 It is that right, conferred on ministerial officers, to 
 present their successors a right which the beneficiaries 
 may sell which has been considered as a return to the 
 system of vendibility of government offices. That system 
 has been the object of much criticism. Notably, it has 
 the grave defect of placing the State in a position where 
 eventually it may have to indemnify the holders in a pro- 
 portion ever increasing, unless it permit the evil to be 
 perpetuated on account of its inability either to indem- 
 nify the holders or to redeem the offices. a 
 
 The law of 1816 can not be placed among those which 
 were intended to render the financial market flexible. 
 
 a To this Rossi has called attention in a masterly way. (Cours d'Eco- 
 nomie Politique, t. i, p. 309.) 
 
 "The more we advance," he said as far back as 1840, "the more the 
 evil increases. On the day the "Government wishes to recover its full 
 freedom of action, it would have but two serious disadvantages to choose 
 from some sort of revolutionary spoliation, or else an enormous sacrifice 
 of the public treasury; and this, on account of having permitted the trans- 
 formation of a personal function into a transferable property, and of hav- 
 ing permitted, in part at least, and under another form, the revival of an 
 old custom, which had been born from the miseries of the royal treasury 
 under Francis I, and should have remained buried forever with the fee estates, 
 the wardenships, the entails, and the serfdoms of the old regime. The in- 
 crease of surety bonds, which took place in 1816, did not warrant that 
 return toward the past." 
 
 Therefore, that strange compensation was, it seems to me, more a pre- 
 text than a motive for that partial restoration of an old abuse, against 
 which, even under the old regime, powerful voices arose. 
 
 "'It is a gangrene,' exclaimed the Duke of St. Simon, in speaking of the 
 venality of military appointments, ' which for a long time has been prey- 
 ing upon all classes and all parts of the State, and to which it is bound 
 to succumb, but which fortunately is not known, or but little known, in 
 all other European countries.'" 
 
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National Monetary Commission 
 
 To raise a profession to a ministerial office is not to 
 modernize it. But the provisions of 1823, 1862, and 1885 
 were different. 
 
 (82) A royal ordinance of November 12, 1823, author- 
 ized the stockbrokers to quote foreign government 
 securities. 
 
 (83) A law of July 2, 1862, authorized stockbrokers 
 doing business on "bourses with parquets" to take capi- 
 talists into partnership (bailleurs des fonds), that is to say, 
 silent partners (commanditaires) . 
 
 A law of March 28, 1885, recognized as legal all trans- 
 actions for future delivery (marches a terme) even those 
 which are settled by paying the difference and removed 
 those special obligations imposed upon stockbrokers which 
 were of a nature rendering such operations impossible. 
 
 Finally, a law of April 14, 1898, was the crowning 
 point of what was improperly called the reorganization 
 of the financial market. 
 
 Concerning the law of 1885 an d the law of 1898, it is 
 necessary to make a special study of the conditions which 
 led to their formation. 
 
 The first law has an economical importance reaching 
 beyond the realm of the Bourse. All transactions for 
 future delivery are recognized as legal. 
 
 The second is specifically intended for the financial 
 market. 
 
 (84) The law on time-bargains (marches a terme) is very 
 important from an economic standpoint. Not only does 
 it indicate a social progress, in that it removed the mon- 
 strous immorality which was formerly widespread, and 
 which consisted in permitting speculators to decline to pay 
 
 198 
 
History and Methods of the Paris Bourse 
 
 their differences by presenting the plea of gambling, but it 
 indicates, besides, a philosophical progress a progress in 
 the general trend of thought. The time-bargain is not 
 simply a contract the settlement of which is postponed to 
 a certain date, one which works itself out hi time and 
 space; it is a contract upon generalized merchandise. 
 
 We know that Bourse operations, whether they apply 
 to merchandise or securities, bear upon things in genere 
 which can be replaced by each other one being as good 
 as the others, and reciprocally. To be sure, it is easy, 
 even very easy, to conceive of a trade bearing upon a 
 specific object, since it is always so in retail trading: 
 Goods against money, money against goods, be it for 
 cash or on credit. Peter sells to Paul this or that object, 
 payable immediately, or Peter sells to Paul this or that 
 object, for 100 francs payable in three months; it is 
 a time-bargain (marche a terme) bearing upon a specific 
 object. 
 
 But the vast majority of time-bargains of commerce 
 bear upon things fungible (interchangeable) things in a 
 generalized and not in a specialized sense. 
 
 A speculator calls upon a commission merchant; he 
 buys from him 100 casks of alcohol and 100 bags of sugar. 
 Those 100 casks of alcohol and those 100 bags of sugar 
 are not in the hands of the commission merchant. This 
 merchandise, these quantities which the commission 
 merchant sells, are not necessarily in his stores. The 
 contract calls for merchandise of a certain type, which 
 the seller shall deliver on the date fixed. 
 
 Well, if it is a question of alcohol, sugar, wheat, flour, 
 wool, or copper, on the commercial bourse, it is under- 
 
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National Monetary Commission 
 
 stood that the goods will always be of a current type, 
 applicable to all contracts. 
 
 The same applies to securities." 
 
 In this way, all securities are made fungible (equivalent, 
 interchangeable). On that principle, Peter goes to Paul, 
 the banker, and purchases from him 25 shares Credit Fon- 
 der for the end of the month. It may happen that the 
 transaction is specific, but in most cases he does not buy 
 25 shares, numbered i to 25 or 25 to 50 or 50 to 75. He 
 purchases 25 shares, no matter which, provided they be 
 shares of the Credit Fancier. This condition is the regular 
 one on the Bourse. 
 
 It is this fundamental condition, necessary, we may 
 say, for transactions for future delivery, which leads cer- 
 tain people to conclude that they are non-existent and 
 fictitious. Where was the merchandise at the time of sale ? 
 Where were the securities at the time of contract? They 
 are not found, and thereupon is based the non-existence 
 and fictitiousness of contracts. But this merchandise is 
 not found, because it can not be found; because, we repeat, 
 the contracts have aimed at things in genere, and because 
 the nature of the operations is such that specification 
 has been done away with for the very convenience of the 
 transactions. There can be seen, indeed, where lies the 
 error of those who deprecate dealings for future delivery. 
 An operation bears upon things assumed as equivalent 
 and fungible (choses fongibilisees) , and people exercise 
 ingenuity to treat it like a transaction bearing upon 
 
 a It is by application of that principle that article 46 of the decree of 
 October 7, 1890, states that "the transactions have bearing only upon cer- 
 tain quantities, without any specification of the securities negotiated by way 
 of indicating their numbers or otherwise." 
 
History and Methods of the Paris Bourse 
 
 specific objects. It is not surprising, then, that when one 
 looks into a contract for something which can not be 
 found in it, one is led to conclude that that object does 
 
 not exist, and that the contract is therefore fictitious. 
 
 f 
 
 No doubt, before 1885, the validity of transactions bear- 
 ing on fungibles (choses fongibles), or even on securities 
 in a general form, was recognized; but whenever a judge 
 could see no merchandise moving, whenever there were 
 presented to him only accounts of differences, a psycho- 
 logical process took place in his mind which caused him to 
 conclude that the transaction was fictitious. All of this 
 rests on no basis of reality, he thought. And if one of the 
 speculators stood up for that argument, which was freely 
 current elsewhere in popular centers, the gambling plea 
 advanced by the debtor was freely accepted. Article 
 1965 of the Code civil states that the law grants no action 
 for a gambling debt. Thus, a time bargain closing with a 
 difference was considered a gambling debt. But, since 
 1885, it has been established that a transaction for future 
 delivery (marche a terme) is legal, and if the operator means 
 to gamble he must bear the consequences of his acts. 
 
 (85) For a long time financiers, economists, and business 
 men, clamored for legal recognition of dealings for future 
 delivery, and even of speculative bargains, "short" or 
 "long" of stocks (operations a decouvert), or of such that 
 close by paying the difference. 
 
 As early as in 1801 Count Mollien, while talking with 
 the first consul, told him: a " It is true, General, that these 
 transactions (marches a terme) were proscribed before the 
 Revolution by a council's decision; but when it is seen 
 
 a Memoires d'un Ministre du Tresor Public, T. I, pp. 251 to 273. 
 
 201 
 
National Monetary Commission 
 
 that they have never been more numerous than since that 
 time, we might ask ourselves whether it is the law or the 
 dealings for future delivery (marches a terme) which are 
 to be found fault with. When we then consider the 
 course of all civil transactions, we see everything resolved 
 into transactions for future delivery ; through them towns 
 are supplied, armies are maintained; on them are based all 
 great commercial combinations ; we praise the cleverness of 
 the merchant who purchases provisions for a sum tenfold 
 his capital, because he has so well gauged the requirements 
 .of consumption that the sale of his goods is assured him 
 before reaching the maturity fixed for the payment. 
 
 " Why should not that principle, which is held in esteem 
 in all European centers, be recognized in that place called 
 the Bourse? Will anyone object that on the Bourse trans- 
 actions for future delivery are not always bona fide? 
 Should we then give up bills of exchange because dishonest 
 merchants make ill use of them? 
 
 " If abuses have been introduced into Bourse trans- 
 actions, the blame should be laid on the administration 
 of justice, which places these transactions beyond the 
 reach of the law; if they break public faith, the less should 
 the courts refuse to take cognizance of this fact. Their 
 duty is to search for and punish that breach. 
 
 " When a free man has involved himself in reckless 
 engagements, it is in their fulfillment that he must find 
 the penalty for his folly and his bad faith; the efficacy 
 of the penalty is to be found in the warning it leaves; 
 and, surely, to declare the object of the offense void for 
 the benefit of the more guilty person, was not a salutary 
 warning given by the jurisprudence of 1786? 
 
 202 
 
History and Methods of the Paris Bourse 
 
 " Bourse transactions have a peculiar character, in that 
 the two contracting parties, unknown to one another, 
 bind themselves,, through the mediation of a stock- 
 broker, who is the representative of the law (I'homme de la 
 loi) ; he is responsible before the law for all his actions ; 
 therefore, the law should not decline to pass upon any of 
 these actions. 
 
 "The common objections to bourse contracts are: 
 One can not sell that w r hich one does not own, and the 
 law can not recognize a bargain which should never 
 have been made. In the main, these objections are 
 merely begging the question; it seems to me that the law 
 should not protect that which it can not punish; it should 
 not prohibit in Paris a mode of dealing sanctioned through 
 long practice in London and Amsterdam. 
 
 "I do not claim that time-bargains (marches h terme) 
 are free from abuses, but I demand that, in order to 
 repress these abuses, the contracting parties be judged 
 according to common law on contracts." 
 
 The transactions for the account on the Bourse were, 
 nevertheless, if not prohibited, at least made imprac- 
 ticable, through the texts of the old ordinances on the 
 Bourse the Council decisions of 1774, 1785, and 1788. 
 The decree of 27 Prairial, year X, exacted that the stock- 
 broker should have on hand the securities to be disposed 
 of and the funds necessary for purchases. No doubt, to 
 meet the requirements of the times, transactions for the 
 account were considered as allowable, provided they were 
 made in good earnest. At any rate, if they were not 
 made good by depositing the securities or the cash, they 
 were illegal. 
 
National Monetary Commission 
 
 It was thus that the stockbrokers understood the decree 
 of the 27 Prairial, year X, on day following the publi- 
 cation. Indeed, on the loth Fructidor, year X, they met 
 and decided that they should deliver securities to one 
 another on the day following the contract. 
 
 (86) The Code de commerce added nothing to the provi- 
 sions of the organic law of the Bourse, but it brought in 
 preciseness. From the draft of the code, it followed that 
 the ''short" sales and "long" purchases (marches a terme 
 a decouvert literally, "uncovered" time-bargains) that 
 is to say, the real time-bargains, implying credit as 
 regards both merchandise and money were prohibited to 
 stockbrokers. Private individuals were permitted to deal 
 in them. No doubt, so far as they were concerned, it 
 might be gambling or not, according to circumstances; 
 but no text prohibited any person from binding himself 
 toward another to deliver securities at a given time. It 
 was only by a special provision, that the stockbroker could 
 not undertake to be responsible for the operations in which 
 he acted as intermediary. Such was the provision of arti- 
 cle 86 of the Code de commerce, so that if he acted as inter- 
 mediary in a transaction for future delivery, he violated 
 article 86 and ran the risk of a fine and removal. 
 (Art. 87.) 
 
 The report on Title V of the Code de commerce of 1807 
 is explicit on that point. The reporter, Jard Panvillier, 
 expressed himself as follows, when speaking of the "agents 
 de change:" 
 
 " Moreover, the law honors their profession, in declaring 
 that it can not be exercised by a man who has failed, unless 
 he has been rehabilitated; and, with a special foresight 
 
 204 
 
History and Methods of the Paris Bourse 
 
 in their behalf, it safeguards them against the possibility 
 of exposing themselves to a case of exclusion on that 
 account, by forbidding them, under penalty of irrevoca- 
 ble removal, to transact commercial or banking opera- 
 tions for their own account and to render themselves 
 liable for the carrying out of transactions in which they 
 act as brokers. 
 
 "The kind of perfect confidence which must be granted 
 them by those who avail themselves of their services, 
 renders this measure necessary. They must not be 
 allowed to expose themselves to the danger of compro- 
 mising the interests of -their clients, by compromising 
 their own fortune in a risky or unfortunate enterprise. 
 
 " This is what the law wanted to guard against through 
 a provision which some of them may find too severe, but 
 which will meet with the approval of all those who are 
 wise and act in good faith; this provision is more than 
 ever necessary nowadays, when gambling in public secur- 
 ities has become a mania, causing the ruin of a large 
 number of individuals, without any advantage to the 
 Government or to the owners of state rentes who consider 
 them in the light of real property and property to be held. 
 
 "The guaranty which some stockbrokers, enticed by a 
 more or less heavy rate of commission, do not hesitate 
 to give for a trade in effects that neither buyer nor seller 
 possesses, and that often the tenfold of their actual pos- 
 sessions could hardly realize this guaranty compromises 
 not only their own fortunes and personal honor, but also 
 the reputation of their association, which the honest men 
 composing it are interested in preserving unblemished. 
 Let us hope that the fear of being prosecuted as bank- 
 
 205 
 
National Monetary Commission 
 
 rupts, in case of failure, will deter those whom their own 
 self-interest properly understood has not been able so far 
 to restrain from entering into such risky engagements; 
 and let us hope, also, that for want of finding solvent 
 guarantors, the foolhardy or inconsistent men who have 
 drawn from the English the baneful mania of what is 
 commonly known as 'agiotage' (stockjobbing), will forego 
 that dangerous game, in order to apply themselves to more 
 respectable and more useful occupations." 
 
 Thus the stockbroker, practically, can not act as inter- 
 mediary in transactions for future delivery. Individuals 
 wishing to deal for their own account, as the English do (as 
 stated by Jard Panvillier) , are free to do so. In any case, 
 they will not find any stockbrokers to guarantee their 
 operations. 
 
 We have seen that under the First Empire and up to the 
 time of the Restoration the French financial market was 
 weak; public loans were granted to London and Amster- 
 dam houses. At that time it was necessity which drove 
 the stockbrokers to transact bargains for the account. 
 Speculators dispensed with them. It was therefore a 
 question of either violating the regulations, or observing 
 them and, thus, condemning oneself to being wiped out 
 in short order. 
 
 (87) A famous lawsuit, the case of "agent de change" 
 Perdonnet against M. Forbin Janson, reminded the stock- 
 brokers of the severity of the regulations they violated. 
 The Cour de Paris and the Cour de cassation (August 
 n, 1824) declared in force the old decisions of the Coun- 
 cil under the old royalty, and the decree of the 27 Prai- 
 rial, year X, and decided that the plea of gambling was 
 
 206 
 
History and Methods of the Paris Bourse 
 
 opposable to intermediaries who undertake bargains for 
 the account in public securities, without previously exact- 
 ing the deposit of the securities or of the funds required 
 for the payment. 
 
 The higher Parisian commerce was stirred up. It drew 
 up a " Par ere" (memorial of merchants on matters of 
 commerce) which we reprint from M. Alfred Naquet's 
 report, in 1885, on the draft of the bill, now law, on deal- 
 ings for future delivery : a 
 
 " Parkre" OF 1824. 
 
 " We, the undersigned bankers, merchants, tradesmen, 
 and capitalists, certify: 
 
 " i. The form of contract stated below 6 is the only 
 one in use for transactions made on the Bourse under 
 the designation of fixed transactions (marches fermes) or 
 operations for future delivery (marches a terme). 
 
 "2. That in all these operations, without excepting any, 
 it is only the seller that grants time to the purchaser, and 
 that the latter may exact delivery of the securities pur- 
 chased at his first requisition. 
 
 " 3. That the operations in question are settled through 
 the delivery of the securities sold, whether they are in 
 
 a Chambre des D&put&s. Documents parlementaires, session 1882, No. 
 1196. 
 
 & This is the form referred to : 
 
 "Bought (or sold) of Mr. (number of certificates) with 
 
 accrued interest, deliverable on liquidation of (maturity) , or sooner, at the 
 discretion of the purchaser, against payment of the sum of . 
 
 ' ' Issued in Paris, in duplicate, the (date) . 
 
 " (Signature) " 
 
 The words "sooner, at the discretion of the purchaser" (plutdt d la 
 volonti d'acheteur) show the discount privilege (jacult6 d'escompte) granted 
 to the purchaser. 
 
 i 14 207 
 
National M o n et ar y Commission 
 
 the hands of the seller at the moment the purchaser de- 
 mands delivery, or the seller causes them to be purchased 
 in order to effect the delivery. 
 
 "4. That in all cases, there is always, on one side, the 
 purchase of an object which must be paid for, and on the 
 other side, the sale of an object which must be delivered; 
 therefore, it is not permissible to regard these kinds of 
 operations as betting on the quotations of public securities. 
 
 "5. That dealings for future delivery, called 'marches 
 fermes' (fixed transactions) , as they are practised nowadays 
 on the Paris Bourse that is to say, restricted to a period 
 of sixty days, and subject to the condition that delivery is 
 expected when exacted by the purchaser are advan- 
 tageous both to the Government and to commerce; to 
 the Government, because the State could not carry out 
 the transactions in rentes made necessary by the finan- 
 cial system now sanctioned, without the assistance fur- 
 nished by these forms of trade, and yet the financial sys- 
 tem based on credit, is one of the principal conditions of 
 the strength and power of modern government ; to com- 
 merce, because these transactions present to holders of 
 rentes a sure, expeditious, and cheap method of obtain- 
 ing, whenever they wish, the funds they need, by giving 
 as guaranty these selfsame rentes; that, on the other 
 hand, capitalists find in these transactions the means to 
 place their funds for as short a time as they choose, and 
 with the certainty of being able to call them in at will. 
 Thus, on the one hand, rentes become a real representative 
 sign, increasing the bulk of capital, and, on the other 
 hand, all the idle funds find employment for as long 
 
 208 
 
History and Methods of the Paris Bourse 
 
 or as short a period as is suitable to the owners. This 
 increase in the number of representative signs and in the 
 bulk of circulating funds necessarily tends to reduce their 
 price that is to say, the interest and thereby renders 
 to commerce the most useful of all sendees. 
 
 ' ' For this reason the undersigned hold that the trans- 
 actions in question are indispensable in the present situa- 
 tion of France, and that the jurisprudence adopted by 
 the King's court (which rests on ancient Council deci- 
 sions, given at a time and under circumstances that 
 can in no way be compared to those prevailing in our 
 times) is in opposition to the true political and commer- 
 cial interests of our country. 
 
 " (Signed) 
 
 "J. IVAFFITTE. ARDOIN-HUBBARD. 
 
 "MAU.ET FRRES. OPPERMANN. 
 
 " ROUGEMONT DE LOWEMBERG. MANDROT. 
 
 "PihuER FR^RES. THURET. 
 
 " Piw,ET-ViUv. JONAS HAGERMANN. 
 
 "GUISRIN DE FRONCIN. ANDR COTTIER. 
 
 " L. DURAND. A. VASSAL. 
 
 "J. LEFEVRE. A. ODIER. 
 
 " DECHAPEAUROUGE. J. A. BLANC-COLUN. 
 
 "CissAR DE LAPANOUZE. G. CACCIA. 
 
 "GOULARD. GABRIEL ODIER. 
 
 " J. F. CHEVALS. J. LABAT." 
 
 (88) The administration of justice persisted in the 
 same direction for nine years; but when it exhibited some 
 tendency toward more liberality, M. Ilarle*, in the 
 Chamber of Deputies, asked the "July Government" 
 
 209 
 
National Monetary Commission 
 
 for measures to repress speculation. Gamier Pages 
 answered him (session of January 23, 1833): 
 
 " If you admit, together with M. Harle, that the seller for 
 future delivery must deposit in advance his certificate of 
 rentes, you would often render actual operations impos- 
 sible; this is true of rentes, as of all other merchandise. 
 
 "One instance will permit you to grasp more easily 
 what I have in mind. I will suppose that Antwerp, 
 Amsterdam, or London quotes the rente at a higher price 
 than Paris a thing which happens everyday; well then, 
 if a banker has given an order to purchase in London, 
 in Amsterdam, or Antwerp, and is in the meantime un- 
 able either to deposit the rente which he has not yet 
 received, or even to indicate its number, by what right 
 would you prevent him from selling that rente, for 
 delivery as soon as it will arrive?" 
 
 To prevent him from effecting that operation, would be 
 forcing him to gamble, since you would make him run 
 the chances of a rise or fall which may occur between the 
 time of purchase at the foreign exchange, and the moment 
 the security will reach his hands. 
 
 The Harle proposition was rejected. 
 
 (89) On July 12, 1842, MM. Bagnenault, Hottinguer, 
 De Rothschild, Fould, Ch. Laffitte, Larien, and Lavareille 
 addressed the following memorial (parere) to the Gov- 
 ernment : 
 
 "We, the undersigned bankers and capitalists, after 
 having taken cognizance of the declaration made in 1824 
 by the principal houses in Paris, are eager to confirm 
 it in the most explicit manner, believing it our duty to 
 call the attention of the Minister to the difficulty, nay, 
 
 210 
 
History and Methods of the Paris Bourse 
 
 the insurmountable obstacles, which the great financial 
 operations connected with public credit would experience 
 if this method of dealing, sanctioned by custom and the 
 requirements of the market, should be interfered with." 
 
 (90) In 1867 the Imperial Government appointed a 
 commission to inquire into the question of time-bar- 
 gains. M. Iy. Chevallier, a member of the commission 
 of 1867, made a remarkable report on the subject, con- 
 cluding in favor of the necessity that the law recognize 
 dealings for future delivery. 
 
 (91) After the disaster of the " Union Generate," in 
 1882, the scandal was enormous; the Bourse had pre- 
 sented a frightful spectacle. The stockbrokers had com- 
 pletely violated the regulations of their profession. But 
 it must be said in their defense, that, since the begin- 
 ning of the century, they had been obliged to violate them, 
 and that the different administrations, by overlooking 
 their actions, while the merchandise brokers had been 
 placed under the direction of the Minister of Finance, 
 were partly responsible for the fact that certain regula- 
 tions had not been followed. However, if the saying " est 
 modus in rebus " (there is a mean in all things) is kept 
 in mind, it becomes certain that in granting credits to 
 clients, the stockbrokers lacked judgment. The spec- 
 tacle presented by this very clientage was not less scan- 
 dalous. Many persons occupying a certain social standing 
 did not hesitate to refuse to meet their obligations. 
 
 The administration of justice which admitted the plea of 
 gambling as regards time-bargains settled by a difference, 
 permitted them to take that stand. 
 
 Public opinion was aroused. 
 
 211 
 
National Monetary Commission 
 
 On February 8, 1882, the Paris Chamber of Commerce 
 passed a resolution calling on the Government for a modi- 
 fication of the existing laws, M. Gustave Roy preparing 
 the report. 
 
 In concluding, that report expressed itself as follows: 
 
 "An administration of justice which would permit a 
 speculator to carry on two deals of equal importance with 
 two different brokers, one for a rise and the other for a 
 fall, and, while collecting from one the profit he had 
 made, to advance the plea of gambling toward the other, 
 in order to avoid paying the loss which the operation 
 showed such an administration, I say, could not hold 
 any longer; that fact alone would condemn it. 
 
 " Experience shows that the plea of gambling has never 
 protected anybody but those of bad faith, and has only 
 encouraged the excess of speculation, as was stated by 
 M. Andrieux in his report presented to the Chamber in 
 1877, in the name of the seventh Commission of Initiative. 
 
 " Prompted by these reasons, and considering that the 
 present legislation, far from preventing gambling, encour- 
 ages it; considering that bad faith finds protection in 
 the jurisprudence sanctioned; and further considering 
 that in commercial affairs, as in any other, it behooves 
 to allow every one his full freedom, as well as to hold him 
 responsible for his actions I beg to suggest that an 
 address be sent to the Minister of Commerce, confirming 
 the letter of the Chamber of Commerce of November 25, 
 1877, and requesting the Government to introduce a bill 
 in the Chambers, declaring that article 1965 of the Code 
 civil does not apply to debts resulting from dealings for 
 
 212 
 
History and Methods of the Paris Bourse 
 
 future delivery, and that articles 421 and 422 of the Code 
 penal are repealed. 
 
 (92) In the Chamber of Deputies two members, MM. 
 Alfred Naquet and Lagrange, introduced a joint proposi- 
 tion tending to recognize dealings on the "long" and 
 "short" accounts (operations a decouvert) as legal. The 
 Government, on its part, appointed a special commission 
 to study the question. It was composed of MM. J. 
 Bozerian, senator, chairman; Charles Ferry, deputy; 
 Clamegeran, councillor of state; Monod, councillor at the 
 Cour de cassation; I/aew, public prosecutor at the Tri- 
 bunal de la Seine; Gay, director-general of government 
 funds; Pallain, director of audits in the finance depart- 
 ment; Girard, director of interior commerce; Gonse, 
 chief of the division of civil matters in the ministry 
 of justice; Lyon-Caen, professor at the Toulouse fac- 
 ulty; Vavasseur, barrister at the Cour d'appel at Paris; 
 Baudelot, former president of the Tribunal de commerce 
 of Paris; Moreau, syndic of the stockbrokers of Paris; 
 Ivecomte, stockbroker; Alphonse Mallet, regent of the 
 Banque de France; Girod, manager of the Comptoir 
 d'Escompte; and Durrieu, manager of the Credit Industriel 
 et Commercial. 
 
 This special commission appointed as its reporter Pro- 
 fessor Lyon-Caen (to-day Dean of the faculty of law of 
 Paris), and it was the elaborate work of this eminent 
 reporter which was used as an explanatory statement for 
 the bill presented by the Government. 
 
 (93) The reporter in the Chamber was M. Alfred 
 Naquet. When the bill was voted upon, M. Naquet, 
 who in the meantime had become a senator, was intrusted 
 
 213 
 
National Monetary Commission 
 
 with the preparation of the report before the higher 
 legislative assembly. After being argued in the Senate, 
 the bill, slightly amended, was returned to the Chamber, 
 and the report was then made by M. Peulevey. 
 
 The law on dealings for future delivery (marches a terme) 
 was promulgated on April 8, 1885. Having been finally 
 voted upon on March 28, it is generally known as the law 
 of March 28, 1885. Dealings for future delivery are recog- 
 nized as legal. They were legal before ; on that point the 
 law aimed only to do away with the surrounding uncer- 
 tainties, which resulted from the special regulations made 
 for stockbrokers. Thus, in the terms of that law, no one 
 can, in regard to operations for future delivery, plead 
 article 1965 of the Code civil, according to which the law 
 grants no recourse to a party for the payment of a gam- 
 bling debt or a bet. Article 1965 of the Code civil is not 
 repealed, but it can not be applied to transactions clos- 
 ing by a difference. 
 
 It should be noted, however as a result obtained from a 
 discussion within the senate commission a that if the con- 
 tracting parties have in advance made a written contract, 
 agreeing that they would not exact delivery, they will 
 not enjoy the provisions of the law. 
 
 Finally, the law repeals the former provisions which 
 make it obligatory for the stockbroker to have on hand 
 the securities for sale, as well as the cash for purchase, and 
 forbid him to hold himself guarantor for transactions in 
 which he acts as intermediary. 
 
 Let us note, in conclusion, that the law of 1885 has a 
 wide range. It applies to operations in merchandise and 
 
 a Senat. Documents parlementaires, 1884, No. 161, p. 12. 
 214 
 
History and Methods of the Paris Bourse 
 
 in securities negotiated through intermediaries other than 
 stockbrokers. 
 
 As to securities negotiated through stockbrokers, they 
 could always be sold direct for cash by private individuals. 
 They could likewise be sold direct for future delivery, but 
 operations settled by differences were subject to being 
 barred as gambling. Since the law of 1885, this last plea 
 can no longer be brought in, but the privilege of the stock- 
 brokers is still invoked for these operations. According 
 to a legal argument, which is very disputable (Cour de 
 cassation, March 23, 1893, Sirey, 1893, 1.240), trans- 
 actions for future delivery, closed by differences, can not 
 be made the objects of direct operations. This solution is 
 against the express wish of the lawmaker. The direct 
 transaction, even when made for future delivery, and 
 closed by a difference, was permissible before 1885. It 
 should derive benefit from the law of 1885. To forbid it 
 through indirect ways is to antagonize not only the wish 
 of the lawmaker of 1885, but also the wish of the law- 
 maker of Ventose, year IX. a 
 
 (94) Having inquired into the law on transactions for 
 future delivery, we shall proceed to look into the state of 
 things since 1898. 
 
 In 1893 a tax on Bourse operations was established. 
 At that moment occurred a particularly acute phase of the 
 many centuries old struggle between the stockbrokers 
 (agents de change) and the curb brokers (coulissiers) . 
 
 This occurrence led to what has been very improperly 
 called the " Reorganization of the financial market of 
 1898." It is important, therefore, to recite summarily 
 
 See note of M. Lyon-Caen. Sirey, 1893, p. 240. 
 215 
 
National Monetary Commission 
 
 the history of the struggle of the stockbrokers of the " Par- 
 quet" against the curb brokers of the "Coulisse." 
 
 The " coulissiers" were men who illegally served as 
 intermediaries in the public market. 
 
 According to M. Fremery, a the words "coulisse" and 
 " coulissiers" originated from the fact that, in the old 
 premises devoted to the Paris Bourse, the parties operating 
 without the services of the "agents de change" met in a 
 separate passageway or hallway (couloir) separated by a 
 breast-high partition from the place where the dealers 
 assembled. That passageway was called "La Coulisse" 
 (the Coulisse). 
 
 But if that name has not been very long in use, the 
 institution though we can hardly give such a name to a 
 gathering so unorganized, and, we may say, formless 
 is very old. 
 
 The brokers, or money changers, who did business at 
 the fairs in the middle ages, are the predecessors alike 
 of the merchandise brokers, of the stockbrokers, and of 
 the curb brokers. 
 
 But an ordinance of Philip the Fair, in February, 1304, 
 directed, as we saw, that the "Change de Paris" (the 
 exchange traffic of Paris) shall be held on the Grand Pont 
 (the great bridge on the Seine) ; it was forbidden to do it 
 elsewhere. Sundry royal edicts, in 1305, direct that no 
 one " shall dare traffic in exchange" (" oser tenir change ") 
 if he has not obtained "royal assent and permission" 
 (" as sentiment et conge royal"). It appears, therefore, 
 that those who in Paris engaged in money-changing else- 
 where than on the Grand Pont, and outside of Paris 
 
 o Des operations de Bourse, p. 494. 
 216 
 
History and Methods of the Paris Bourse 
 
 elsewhere than at the "tables" (royal exchange premises), 
 "without assent or permission" (and some such there 
 surely were), were the first " coulissiers." 
 
 At all times, whenever there have been privileges, some 
 men have been found to oppose them. Of course, these 
 men are not theorists, or pedants; they are simply men 
 whom this or that privilege prevents from working freely, 
 and who represent the manifestation of that mysterious 
 force of things which tends toward freedom of trade. 
 Commercial law owes its birth only to these protestations 
 of practical men in apparent revolt against the laws, which 
 become the unconscious shapers of future legislation. 
 From the day when there was an "agent de change" there 
 was a "coulissier" The first called the second a thief, 
 because he encroached upon his privilege. The second 
 hurled back the compliment, because the privilege robbed 
 him of his natural right. We have seen numerous 
 council decisions under the old regime forbidding private 
 individuals the unwarrantable interference with the func- 
 tion of stockbrokers. That it was repeatedly forbidden 
 is proof certain that the offense was constantly committed. 
 
 (95) Under the First Empire, the curb brokers were 
 already organized; there were conditions for their admis- 
 sion and introduction. The authorities closed their eyes. 
 The stockbrokers complained, and requested that the 
 unwarranted interference be forthwith referred to the 
 courts. This request was denied by advice of the Council 
 of State of May 17, 1809. "It must be acknowledged," 
 said the learned M. A. Buchere, in his treatise Opera- 
 tions de Bourse? "that some of them (curb brokers) 
 
 No. 33. 
 217 
 
National Monetary Commission 
 
 effected their transactions in the most honorable way, 
 and, in some cases, even for account of stockbrokers, who 
 considered it safe to intrust them with certain risky or 
 somewhat irregular operations." 
 
 (96) Under the Restoration, speculation, which was 
 considered by many as necessary for the upholding of 
 public credit, greatly expanded. The Coulisse was toler- 
 ated almost encouraged. In 1824, M. de Villele publicly 
 refused to take measures against the Coulisse. In 1835, 
 a new attempt of the stockbrokers was followed by a 
 complete defeat. In 1842, M. Delessert, prefect of police, 
 sent a report to the Minister of Finance, 6 who, in pursu- 
 ance of a complaint of the stockbrokers, had instructed 
 him to make a thorough inquiry into the methods used 
 by the Coulisse. The conclusion of the report was that 
 there was no ground for prosecution, as the stockbrokers 
 themselves were guilty of the same practices with which 
 they reproached the curb brokers. 
 
 On February 17, 1843, the stockbrokers, in order to have 
 the Coulisse broken up, presented a voluminous memorial 
 to the Minister of Justice, who, however, did not recognize 
 their request as justifiable. 
 
 (97) In 1859, a complaint made by the Syndical Cham- 
 ber succeeded in changing the state of affairs; the curb 
 brokers were prosecuted, found guilty, and expelled from 
 the Bourse building. c 
 
 Much of contemporary evidence establishes the fact 
 that this measure had the most disastrous effect upon the 
 
 a Eugene Leon. Etude sur la coulisse et ses operations, p. 44. 
 & Alfred Neymarck, Le Rentier, March 17, 1898. 
 
 c Tribunal correctionnel, June 25, 1859; Cour de Paris, August 2, 1859; 
 Cour de cassation, January 19, 1860; Dalloz, 1860, 1.40. 
 
 218 
 
History and Methods of the Paris Bourse 
 
 credit, both public and private; the " Temps " a borrows 
 from a financial publication of that time the following 
 statement : 
 
 "The stockbrokers, who hoped that the suppression of 
 the Coulisse would bring back business to the Parquet, 
 were mistaken. The business of the Coulisse has dis- 
 appeared with the Coulisse itself. The market has 
 been hit and destroyed, but has not been transferred. 
 The Government, which expected that, by suppressing the 
 Coulisse, it would raise the level of the public credit, has 
 not realized its expectations." 
 
 This decline was testified to by the "Revue des deux 
 Mondes," b in an article from the pen of M. Poujard'hieu, 
 published after the failure of the Fould conversion scheme : 
 
 "The discussions which have taken place in the legisla- 
 ture," said the author, "have called public attention to 
 the measures which the Government thought proper to 
 resort to, in order to foster its undertaking, in the 
 face of the impotence resulting from the practice of 
 monopoly. It is safe to say, that all the means employed 
 have only succeeded in laboriously hoisting up the 3 per 
 cent rentes to 71 francs, in order to see them soon again 
 lagging in the neighborhood of 69 and 70. And yet that 
 painful effort caused too glaring disasters in the markets 
 not to hurt the government's undertaking." 
 
 Further the author calls attention to the fact that this 
 fall of 2 francs in a restricted market has had worse con- 
 sequences than a fall of 14 francs in 1848, or a fall of 8 
 francs in 1859, because, the risks being then divided 
 
 Bulletin Financier du "Temps," February i, 1897. 
 & June, 1862, p. 740. 
 
 219 
 
National M on et ar y Commission 
 
 amongst a greater number of intermediaries, the market 
 felt more secure than in 1862, following the lawsuit of 
 
 1859- 
 The result was that the Coulisse reappeared. 
 
 (98) On November 4, 1861, the Minister of Finance, M. 
 Fould, granted to the Bourse the permission to suppress 
 the turnstiles, and, if the reestablishment of the Coulisse 
 can not be attributed directly to this measure, we may 
 yet be permitted to make use of an image and say that 
 the curb brokers came back through the open door. 
 They soon formed serried ranks. Nor was it long before 
 affairs became enlivened. Some banks had been founded 
 about this time, having launched some securities. In 
 1855 the six great railroad companies had been formed; 
 in 1852 there had been established the Credit Fancier 
 (national mortgage loan society) and numerous banking 
 institutions. 
 
 These corporations required a broad market, and the 
 market widened in spite of the narrow sphere prescribed 
 to it by law. 
 
 In 1863, the Credit Lyonnais is founded; in 1864, the 
 Societe Generate. The law of July 24, 1867, concerning 
 joint-stock companies, replaces the law of 1856 govern- 
 ment authorization for limited-liability companies in 
 shares (societes anonymes) being done away with. A new 
 era was near at hand, when the war of 1870 broke out. 
 
 (99) After 1870, the payment of the war indemnity, 
 and the enormous expenses necessary to rehabilitate the 
 country occasioned great credit operations. The State, 
 as well as private enterprises, appealed to public sav- 
 ings. Considerable activity reigned on the Bourse, as 
 
 220 
 
History and Methods of the Paris Bourse 
 
 everywhere else. M. Thiers never ceased to congratulate 
 himself on the help received from the open market at 
 the time of the emissions upon whose success depended 
 the liberation of French territory. a 
 
 a M. Alfred Neymarck, in the course of a discussion at a meeting of the 
 Societed'EconomiePolitique, recalled the services of the Coulisse; he showed 
 that M. Thiers and M.Teisserencde Bort, interim functionary of finance, had 
 applied to the curb brokers, and had obtained information from them con- 
 cerning the condition of the market. "The Coulisse," said M. Neymarck, 
 " brought subscriptions to our loans for liberation; it kept up the rente, 
 whiclvissued at 82. 50 and 84.50, rose to 119 and 120. At that time, stock- 
 brokers, merchandise brokers, and curb brokers all rendered services not 
 to be easily forgotten." (Sociitk d'Economie Politique, Seance du 5 awil, 
 1893, Journal des Economistes, 1893, n. p. 95.) 
 
 In that regard, let us also mention those eloquent lines of M. Anatole 
 Leroy-Beaulieu: "The confession may be painful, but patriotism makes 
 it a duty for us to acknowledge the fact that the Bourse represents one of 
 the live forces of France. It has been for France an instrument of regen- 
 eration after defeat, and it remains for us a powerful tool in war and in 
 peace. Let us recall the already remote years of our convalescence, after 
 the invasion, years at once sorrowful and comforting, when with the gloom 
 of defeat and the suffering of dismemberment, mingled the joy of feeling 
 the revival of France. Whence came our first consolation, our first vindi- 
 cation before the world? Whether glorious or not, it originated on the 
 Bourse. 
 
 "The Paris market came out unscathed from the ruins of the war and 
 of the 'commune' and straight from the hardly ratified peace and quelled 
 insurrection, it threw itself into the work for France's regeneration; because 
 it was, indeed, for France's regeneration that the stockbrokers and mer- 
 chandise brokers worked under Thiers and MacMahon. In the worst days 
 the Bourse had the uncommon merit of showing an example of faith in 
 France. When more than one political skeptic and discouraged thinker 
 allowed themselves to write down upon the crumbling walls of our burned- 
 down palaces 'Finis Gallice,' the Bourse kept its faith in France and her 
 fortune, and that faith in France was spread by it all around, at home and 
 abroad. Speculation was patriotic in its way; it has exhibited a confidence 
 in our resources which the discretion of many a wise man rated as fool- 
 hardy. Have we already forgotten our great loans for liberation? With- 
 out the Bourse, these colossal loans, the amount of which exceeded the 
 dreams of financiers, would never have been subscribed for, or, if ever, it 
 would have been only at rates much more onerous for the country. With- 
 out the Bourse, our French rentes would not have taken such a rapid flight; 
 our credit, restored even more quickly than our armies, would not have 
 equaled that of our victors, on the very morrow of our defeat. In that 
 
 221 
 
National Monetary Commission 
 
 It should be noted that during that period of activity, 
 the struggle between the stockbrokers and the curb 
 brokers almost ceased. The hostile brothers seem recon- 
 ciled. But when business shall begin to slacken again, 
 when events shall have shaken the public's confidence in 
 the monopoly, then both sides will resume the fight. 6 
 The curb-brokers will exclaim against the oppressive 
 monopoly and demand the broadening of the market, 
 while the stockbrokers, in their appeals to the author- 
 ities, will say of their competitors that they represent 
 anarchy, robbery, and stockjobbery in its worst form, 
 
 regard, all that justice demanded us to say previously of the higher banking 
 institutions may with right be repeated concerning the Bourse. 
 
 "To those who lived through that pale dawn of France's recovery, that 
 rush of the Bourse and of capitalists to offer us the thousands of millions 
 which we required exceeded the eagerness and boldness of speculation. 
 But even if we were to consider it but gambling and betting for specula- 
 tion, such speculation was betting for France's regeneration ; it bravely placed 
 its bet on the vanquished. Those national and foreign financiers, who 
 have been accused of pouncing upon her like birds of prey, brought to the 
 noble wounded their dollars and their credit, and if they reaped a profit 
 thereby, are we to reproach them for it, when they helped us to recon- 
 struct our armies, our fleet, and our arsenals? If France regained her rank 
 among the nations of the world so quickly, the credit for it should be 
 mainly given to the Bourse. And to its services in war, we should, if we 
 wanted to be just, also add its services in times of peace. Without the 
 extensiveness of the Paris market, and the stimulus given to our capital- 
 ists through speculation, how many things would have remained unac- 
 complished in the recklessly overdriven condition of our finances? We 
 should have been unable to complete our railroad system, or renew our 
 national stock of tools, or create beyond the seas a colonial empire which 
 shall cause France to be again one of the great world powers. When the 
 Bourse is on trial, such credentials should not be overlooked. Before con- 
 demning it in the name of morality and private interests, a patriot should 
 give due consideration to its services rendered for the national weal; if 
 all its defects and misdeeds be heaped up on one scale tray, then services 
 of like importance will easily counterbalance them." (Anatole Leroy- 
 Beaulieu, La Rigence de V argent, "Revue des deux Mondes." February 25, 
 1897, pp. 894 and 895.) 
 
 & A proverb says: "Lorsqu'il n'y a plus de join au ratelier, les chevaux se 
 battent" (when there is no more hay in the manger, horses fight). 
 
 222 
 
History and Methods of the Paris Bourse 
 
 and that the members of the open market are a mob 
 of cosmopolitan speculators as dangerous for the State 
 as for public savings. 
 
 Following a fit of speculation in shares of the Union 
 Generate, which had taken place in 1882, the Lyons stock- 
 brokers were unable to meet their engagements. The 
 Paris stockbrokers were compelled to borrow 80,000,000 
 francs. Monopoly was seriously injured in public opinion, 
 so that at the time the Government brought in a bill 
 on operations for future delivery, M. Menard-Dorian, also, 
 brought in a bill, February 23, 1882, making the profession 
 of stockbroker free to everyone. 
 
 The question was divided within the parliamentary 
 commission, for the problem of reorganizing the market 
 was more complicated than that of recognizing dealings 
 for future delivery, and was, therefore, in a position to 
 prevent the solution of the latter. Yet, though clearly 
 set, the problem at issue was not solved, as has happened 
 many a time in the case of other problems. 
 
 The downfall of the Union Generate, the need felt by the 
 Bourse to avoid being spoken of, and the grave threat which 
 M. Menard-Dorian's proposition constituted for the stock- 
 brokers' association, produced the result that the official 
 intermediaries and their competitors, the unattached inter- 
 mediaries, refrained from asking that the question of the 
 financial market be solved in Parliament. The republican 
 dogma was not at all favorable toward monopolies, and the 
 Third Republic was at that time quite apt, in the eyes of the 
 stockbrokers, to solve the question of monopoly by sup- 
 pressing it. The heavy depreciation which the panic pro- 
 duced in the value of seats, would have made the operation 
 
 223 
 
National Monetary Commission 
 
 an easy one so far as it concerned the Treasury. Thus it 
 happened that for about two years no complaints of 
 stockbrokers against the curb brokers (coulissiers) were 
 registered. 
 
 (100) On September 21, 1892, the syndics of the stock- 
 brokers of Paris, Lyons, Bordeaux, Nantes, Toulouse, 
 and Lille collectively asked the Minister of Finance to 
 demand the suppression, by every legal means, of the 
 "petite bourse" (curb meeting) which took place every 
 night at 9 o'clock in the hall of the Credit Lyonnais. 
 They claimed that any depreciation in the prices of 
 government securities that might show itself on the 
 market would instigate a general panic. 
 
 The surprised curb brokers called attention to the fact 
 that the rente 5 per cent had fluctuated between 18 and 
 40 francs in 1800, and that in 1892 it had reached 106 
 francs. They added that the 3 per cent rente, which had 
 been quoted at 60 in 1825, and which had fluctuated 
 between 50.30 and 58.45 in 1871, was quoted at 100 in 
 September, 1892, on the very day when the stockbrokers 
 sent in their petition, after having been quoted at 95 in 
 the beginning of the year. 
 
 The ground invoked against the Coulisse was cer- 
 tainly piteous, but it was nevertheless true that the 
 stockbrokers were within their right when they demanded 
 that the "little bourse" be suppressed. 
 
 They undertook to forbid the Coulisse to gather during 
 the evening in the place where it used to meet that is 
 to say, in a covered inclosure in the hall of the Credit 
 
 a To hold meetings of merchants or bankers elsewhere than on the 
 Bourse, and at the appointed hours, is forbidden by article 3 of the law of 
 27 Prairial, year X. 
 
 224 
 
History and Methods of the Paris Bourse 
 
 Lyonnais; but they could meet on the highway in the 
 Galerie d' Or leans. That victory of the stockbrokers was, 
 therefore, only a " paper " success. The question of taxing 
 bourse operations was again going to fan the flames. 
 
 (101) On several occasions notably, on December 15, 
 1891, November 1 4 and 15,1 892 bills due to parliamentary 
 initiative were introduced on the subject of taxing bourse 
 operations. On December 22, 1892, a bill of that sort, 
 introduced by M. Jourde, was thrown out by 281 votes 
 against 232, upon the remarks made by M. Tirard, the 
 Minister of Finance, and M. Rouvier, a former Minister 
 of Finance. The speakers had demonstrated how diffi- 
 cult it was to collect such a tax. Were they to tax the 
 operations of the stockbrokers exclusively? That would 
 be giving the curb brokers an advantage. Were they 
 to tax the operations of the curb brokers? That would 
 mean to recognize them, they thought. Then, should 
 the Coulisse be suppressed? This could not be 
 thought of. Should it be recognized? That was a grave 
 question. In any case, the question was to be studied 
 by itself, independently of the tax question. 
 
 However, the Minister of Finance had declared that, in 
 principle, he was not opposed to the taxation. The 
 difficulty which it presented was the only thing "that 
 restrained him. It did not restrain him long, however. 
 
 On January 14, 1893, M. Tirard introduced a bill 
 having in view the establishment of the tax. The new 
 provisions were to be introduced in the finance law of 
 1893, which had not yet been voted on. The difficulty 
 was removed in the manner of the cutting of the Gordian 
 knot by Alexander; the Coulisse was to be suppressed. 
 
 225 . 
 
National Monetary Commission 
 
 Indeed, according to the terms of the bill, every bourse 
 operation was to be subject to a tax reckoned off on a 
 journal, every article of which, for the securities admitted 
 on the official quotation list, was to specify the name and 
 address of the stockbroker through whom the trans- 
 action had been effected. The tax could be paid only 
 by the stockbroker, and, consequently, every inf ringer 
 would not only be guilty of unwarranted interference 
 with the functions of a stockbroker, according to the old 
 legal conditions, but would also be guilty of infringing 
 the revenue laws. Each infringement would be subject to 
 a fine equal to one-twentieth of the value of the securities. 
 
 The Coulisse itself would have been permitted to pay 
 the tax only on unlisted securities. Their number was 
 very limited. Rio Tinto, which before long was to be 
 dealt in on the Parquet, the Alpine, Tharsis, and De 
 Beers, were really the only securities which had a consider- 
 able circulation, without, however, being of sufficient vol- 
 ume to supply the needs of such a market, as was the 
 bankers' market. The struggle was on. Viewed from the 
 standpoint of the parties interested, the belligerents 
 seemed both to be wrong in accepting the principle of 
 taxation; and M. Tirard, Minister of Finance, took ad- 
 vantage of that fact before Parliament. 
 
 "Gentlemen," said the Minister, "you have just been 
 told, with good reason, that at first all were opposed to 
 the tax, claiming that it would greatly disturb the Paris 
 market, and that it would give an advantage to the 
 foreign markets. And then, after due reflection, the 
 stockbrokers said to themselves : * Perhaps the Govern- 
 ment, in order to collect the stamp tax payable upon 
 
 . 226 
 
History and Methods of the Paris Bourse 
 
 the memorandum account, will be forced to apply to us, 
 because it could not through its finance law approve an 
 illegal and unlawful act. We should thus obtain a more 
 formal acknowledgment of the rights which we have up 
 to this day rather precariously exercised through our own 
 fault.' On their side, the curb brokers, no doubt, said to 
 themselves : ' It is quite possible that the Government will 
 shrink before the severity of the proposed collection of 
 the tax it intends to create and that, on that account, 
 it may permit all those doing bourse operations to pay 
 the stamp tax, without inquiring whether they be lawful 
 or illegal operations.' 
 
 "Then, what was at the beginning a source of trouble 
 and worry the fear of placing a large portion of the Paris 
 business in jeopardy all that disappeared, in the hope 
 that the respective condition of both parties would be 
 benefited through the tax levy. 
 
 " I have, therefore, concluded that when people have no 
 anxiety about the general welfare, because they feel at 
 ease concerning their personal welfare, it is to be supposed 
 that the general welfare was not compromised (very good) 
 and that the trifling tax we propose levying on bourse 
 operations is not calculated to be detrimental to the 
 French market." 
 
 Thus spoke the Minister of Finance. 
 
 " Let the tax strengthen our monopoly," said the stock- 
 brokers, "and our operations alone will be legal." "Let 
 the tax free the financial market," replied the curb brokers. 
 " If the redemption of the offices is the main obstacle 
 
 a Chambre, D6bats Parlementaires, 2$et 24 fevrier, 1893. Journal Officiel, 
 24 et 25 ffrvrier. 
 
 227 
 
National M on et ar y Co mm is s i o 
 
 n 
 
 to an open market, would it not be just that the yield 
 of the tax be appropriated for that redemption ? If we 
 are to be taxed, well and good, but let the money we 
 pay in be used in freeing us. Let the tax pay the cost 
 of reform. This is its object after all, and the only 
 vindication for it." 
 
 Had they only been satisfied with the use of such 
 arguments! * * * But such was not the case. 
 
 The controversy was exceedingly bitter. Pamphlets, 
 newspaper articles crossed each other. Libels followed 
 one another with astonishing rapidity. Adversaries chal- 
 lenged one another, like Homer's heroes, while in Parlia- 
 ment there began a debate which was marked by a good 
 deal of passion. 
 
 (102) M. Tirard's bill was adopted by the Chamber 
 of Deputies on February 24, 1893. But in the Senate, 
 through the intervention of the reporter-general of the 
 finance commission, M. E. Boulanger, it was thought 
 that the question of organizing a financial market was 
 too important to be settled one way or another, through 
 a vote on the budget. The severance of that project 
 from the finance law was voted on March 28, 1893. 
 
 Two days later, on March 30, the Minister, who had 
 been unable to carry the Chamber on a question of severing 
 from the budget a plan of reform on the taxing of bever- 
 
 The following took part in the debate: MM. Tirard, Minister of 
 Finance; Poincare, Reporter-General; Gauthier (de Clagny), Jourde all 
 speaking in favor of it ; Yves Guyot, who advocated the nominating of a 
 special commission for the purpose of inquiring into sundry plans in regard 
 to bourses; Naquet, against the very principle of tax; F61ix Faure, who 
 advocated a counter plan, first accepted and then discarded by the budget 
 commission, which plan allowed the payment of taxes by affixing stamps; 
 Jullien, in opposition to the Government's bill. 
 
 228 
 
History and Methods of the Paris Bourse 
 
 ages, withdrew, and M. Peytral succeeded M. Tirard as 
 Minister of Finance. The new Minister proposed a waiting 
 policy to Parliament. The bourse tax was to be col- 
 lected without making it necessary for the Government 
 to trouble itself about the legality of the transaction. 
 All those subjected to the keeping of a bourse record 
 would have to deposit in the registration office copies of 
 said record on fixed dates, and heavy fines would be 
 imposed upon all infringements or frauds. 
 
 The bill was passed. It was placed in the finance law 
 of April 28, 1893. 
 
 In January, 1 894, the conversion of the 4^ per cent rentes 
 into 3% per cent rentes was decided upon. The operation 
 was entirely successful. In 1895 the Minister of Finance, 
 M. Doumer, having stated that the tax was as much of a 
 burden on the open market transactions as on those of the 
 official market, demanded that the tax on transactions in 
 French rentes be reduced by three-quarters . a The demand 
 was soon granted, in pursuance of a favorable report by 
 M. Georges Cochery , reporter -general for the budget of 1 896. 
 
 But the solution reached on April 28, 1893, was, as we 
 stated, only provisional. M. Tirard, while praising his 
 system, which had not prevailed, had promised to inquire 
 into a reorganization of the market within a short time, 
 and M. Felix Faure answered him: " I trust that when we 
 shall occupy ourselves with the organization of the finan- 
 cial market, we shall succeed in suppressing monopoly." 6 
 
 a Chambre des Deputes. Journal Officiel, 14 Decembre, 1895. See also 
 Maurice Jobit: Les Titres Grangers et la loi fiscale, 1896. Annexes p. 116 
 (surVart. 8, de la loi de finances du 27 dec. 1895). 
 
 AChambre des Deputes, Seance du 24. Ffrvrier, 1893. Journal Officiel du 
 25 F&vrier. 
 
 229 
 
National Monetary Commission 
 
 The system presented by M. Peytral having prevailed, M. 
 Peytral, as Minister of Finance, undertook the same task 
 as his predecessor. "We acknowledge, there is need to 
 proceed with the reorganization of the French market. 
 We intend doing it by means of a complete plan, estab- 
 lishing a legal organization which shall be based on 
 freedom, but without excluding regulation. Such a plan 
 is under advisement." 
 
 Well, that plan has never been submitted to considera- 
 tion, for what reasons is not known. And meanwhile 
 there broke out what has since been called the "gold 
 mines boom." 
 
 (103) About the middle of 1894 most publications treat- 
 ing of economic questions described the great industrial 
 development brought about in the Transvaal by the gold 
 seekers. Gold mining in the Transvaal during the ten 
 previous years had given rise to speculation on the Trans- 
 vaal and English bourses. This speculation, like every- 
 thing else in this world of ours, had its good as well as 
 its bad sides. In the south of Africa, not far from the 
 mines, bourses were opened, and there took place some 
 skyrocketing of quotations, followed by violent breaks. 
 These fluctuations above and below the real value which 
 is, moreover, quite difficult to ascertain, bring to your 
 mind the air bubble near the water level, which oscillates 
 in the neighborhood of the spot where it is going to settle. 
 Some have since endeavored to compare the speculation 
 to which the South African mines have given rise, to the 
 " tulipomania " which raged in Holland about 1634, and 
 to those "manias" of which M. Leon Say speaks in his 
 
 a>Ibid., 28 Amil, 1893, Journal Officiel du 29. 
 230 
 
History and Methods of the Paris Bourse 
 
 work " Sur les Interventions du Tresor a la Bourse" or also 
 Bagehot, in his book on the " Money Market." To be sure, 
 there was a good deal of extravagance in the speculations 
 which took place, but the criticisms drawn up against the 
 mining companies and those who brought out their securi- 
 ties, have likewise been singularly extravagant. Thanks to 
 the Transvaal mines, roads and railroads have been built, 
 cities have sprung up, profiting at one stroke from all the 
 modern improvements in the art of construction. Indus- 
 try has opened South Africa and preserved it for Euro- 
 pean civilization, and, all in all, there has been an increase 
 of wealth, of which the English and German capitalists 
 alone seemed at the first moment to have the immediate 
 profit. 
 
 But in the course of 1894 English houses commenced 
 some advertising in Parisian newspapers, and soon there 
 was noticed a pretty strong stream of bourse orders toward 
 the London market. Some bankers thought that the 
 French market should share in the profit derived from 
 this stream, which the London Stock Exchange seemed 
 to have monopolized; they opened negotiations with 
 English bankers, and discussed the terms on which the 
 Transvaal mining securities could be introduced on the 
 Paris market. It was mostly in the bankers' market 
 that they were introduced. 
 
 On June 30, 1894, only 3 kinds of gold- mining shares 
 were dealt in on the market for future delivery of the 
 bourse for securities (marche a terme de la bourse des 
 valeurs) including the Robinson, already dealt in before, 
 and the Randfontein. Six months later on December 
 31 there were 7, of which, however, i was American. 
 
 231 
 
National M on et ar y Commission 
 
 There were 12 on June 30, 1895. On December 31, 1895, 
 32 kinds of securities of gold mines, real estate com- 
 panies, and colonial exploration companies were negotiated 
 for future delivery in the Coulisse. At that same date 
 there were dealt in for cash (au comptant) 66 kinds of 
 gold-mining, coal, colonial exploration companies, among 
 which, of course, should be numbered the 32 entered on 
 the market for the account (marche a terme). In the 
 London market these securities were counted by the 
 hundreds and represented thousands of millions. 
 
 The Coulisse was not quite alone in fostering the 
 movement. If it operated in Transvaal mining shares, 
 it was because the shares of these enterprises were of a 
 nominal value of 25 francs, and the decrees of February 
 6, 1880, and December i, 1893, did not permit securities 
 to be admitted on the official quotation list, if the par 
 value of their shares was less than that authorized for the 
 French companies by the laws of July 24, 1867, and 
 August i , 1 893. The stockbrokers' association (compagnie 
 des agents de change) later admitted on the official list the 
 shares of ''Treasury" and " Robinson Banking." It had 
 such a good opinion of the Transvaal gold mines that 
 it led its customers into large speculations in Modder- 
 fontein. a Through the attorneys for the offices many 
 stockbrokers had become interested in the Nevmann syndi- 
 cate, whose object was to place mining stocks in Paris 
 and London. (We know that the head of the Nevmann 
 syndicate subsidized the Jameson expedition.) Finally, 
 
 a See the report of M. G. Graux on his bill having in view the creation 
 of shares of 25 francs. Chambre des Deputes, Stance de 1896, No. 1950, in 
 the appendices, p. 31. Hearing of the well-known M. de Verneuil, syndic 
 of the association of stockbrokers. 
 
 232 
 
History and Methods of the Paris Bourse 
 
 on November 15, 1895, a Banque Francaise de VAfrique 
 du Sud (French Bank of South Africa) was established, 
 and the president was none other than the well-known 
 M. Herbault, syndic of the Stockbrokers' Association of 
 Paris (Syndic de la Compagnie des Agents de Change de 
 Paris), who had resigned his office in order to become 
 president of the new bank. 
 
 At any rate, on January i, 1896, the Transvaal was 
 invaded by a troop of volunteers under the command of 
 Doctor Jameson. When it was ascertained that this 
 expedition this raid, as it was called had failed and that 
 the relations between the Governments of President 
 Kruger and of England were much strained, a sudden 
 depreciation took place in Transvaal securities, and the 
 previous boom was succeeded by the gold-mines panic. If 
 the disaster of the Union Generate had not swept away the 
 Compagnie des Agents de Change (saved by the slowness 
 of parliamentary procedure), the disaster of the gold 
 mines was going to carry off the Coulisse, which through 
 clever manipulations was to be alone held responsible 
 before Parliament for the decline and the damages result- 
 ing therefrom. 
 
 (104) The gold-mining boom had incensed the Com- 
 pagnie des Agents de Change. No doubt they had shared 
 in the negotiations of mining securities, but not in the 
 measure they would have liked. The "Bulletin de Statis- 
 tique et de legislation comparee duMinistere des Finances" b 
 showed that from 1893 to 1895, inclusive, of the 35,596,000 
 
 a Economists Frangais of January 27, 1900. The Nevmann syndicate 
 was liquidated and reorganized under the name of "Association Minidre," 
 the shares of which are quoted on the Official List March 6, 1905. 
 
 & January, 1898, p. 52. 
 
 233 
 
National Monetary Commission 
 
 francs yielded by the tax on bourse operations there had 
 been collected outside of Paris 1,707,291 francs, and in 
 Paris, through the stockbrokers 11,758,542 francs, while 
 all other parties subject to the tax curb brokers, money 
 changers, credit institutions, bankers had paid in 
 22,130,167 francs, i. e., double the amount. 
 
 First the stockbrokers thought of taking the gold mines 
 away from the Coulisse, or at least of taking advantage of 
 an exceedingly timely offer made to them through a truly 
 providential chance by M. Georges Graux, a deputy, with 
 whom M. Meline associated himself. On October 26, 1895, 
 M. Georges Graux introduced a bill tending to authorize 
 the creation of 2 5 -franc shares in French stock compa- 
 nies (the law permits that denomination only for companies 
 having a capital of 200,000 francs or less) . On the day when 
 French companies could be organized with 25-franc shares, 
 no principle would stand in the way of admitting foreign 
 25-franc shares on the official list. M. Georges Graux was 
 appointed reporter of his bill. He handed in his report 
 on June 2 2, 1 896, and, though the gold-mine panic was in 
 full swing at the time, the worthy reporter urged that 
 his bill be adopted, the result of which would have caused 
 the gold mines to be transferred to the Parquet. 
 
 The stockbrokers would then be in a position to benefit 
 by the recovery in mining stocks. 
 
 The report was never brought to debate. To tell the 
 truth, that document was of such little substance that 
 it could not have survived the first words in an open 
 debate. a The author , in view of the comments , which were 
 not spared in the special organs, failed to uphold his work, 
 
 a Chambre des DepiU&s, session 1 896 ; Documents Parlementaires, No. 1950. 
 
 234 
 
History and Methods of the Paris Bourse 
 
 in spite of the evident parliamentary influence, and in 
 spite of the fact that the Honorable M. Meline had indorsed 
 his proposition. 
 
 As we have seen, the rise in gold-mining shares had 
 awakened the envy of the stockbrokers a feeling no 
 doubt quite justified, since commercial competition has 
 no other incentive. The decline which followed was to 
 be taken advantage of by their supporters in Parliament 
 at a propitious opportunity. And that propitious oppor- 
 tunity presented itself. 
 
 The reorganization promised by the Minister, M. 
 Peytral, had been neither studied nor prepared in the 
 Ministry of Finance. Two worthy senators, MM. 
 Tarieux and Boulanger, on June 29, 1897, introduced a 
 bill relative to the exercising of the profession of stock- 
 broker. A summary report of M. Pauliat advocated 
 that the bill be taken up for consideration. A commission 
 was appointed; stockbrokers and curb brokers appeared 
 before it. The Senate was called upon to inquire into the 
 matter. At that time a desire to drop the matter became 
 
 manifest. 
 
 
 
 (105) During the discussion of the budget of 1898 in 
 the Chamber, two deputies, MM. Lacombe and Fleury- 
 Ravarin, each introduced an amendment, worded almost 
 identically, with the exception of the final paragraph. 
 Later, M. Lacombe withdrew his amendment in order to 
 associate himself unconditionally with his colleague. 
 
 The provisions of the Fleury-Ravarin amendment were 
 worded as follows: 
 
 "Whoever makes it a business to take up bids and 
 offers on bourse securities must, whenever called upon to 
 
 235 
 
National Monetary Commission 
 
 do so by the Registry Office agents, when it is a question 
 of securities admitted on the official quotation list, ex- 
 hibit stockbrokers' statements or give particulars of the 
 numbers and dates of statements, as well as of the names 
 of the stockbrokers from whom they emanate, and, when 
 it is a question of securities not admitted on the official 
 quotation list, personally pay the amount of the tax." 
 
 This was merely returning to the scheme of M. Tirard. 
 The Minister of Finance, the Honorable M. Georges 
 Cochery, stated before the budget commission that he 
 would assent to that amendment, and that the Govern- 
 ment, represented by the Honorable M. Meline, concurred 
 in this, in order to preserve for the Bourse the existing 
 legislation, save for the modifying of certain petty details 
 through decrees. This procedure would, of course, result 
 in putting a check upon the proposition submitted to the 
 Senate; but, said the Minister, the Stockbrokers' Associ- 
 ation (Compagnie des Agents de Change) had brought in 
 a complaint before the courts against the curb brokers, 
 and it was necessary that the financial market be not 
 disturbed by the incidents of a lawsuit such as was 
 certain to be started. a 
 
 a Should the Government have ever given in under such pressure? 
 How can the State prevent the stockbrokers from applying to the courts, 
 if they consider themselves wronged? This is their inalienable right- 
 The Government had only to let them act; the interested parties would 
 certainly have looked after their own interests, and finally the stockbrokers, 
 when better advised, would not have persisted in their original intention. 
 The judges would have weighed and decided according to the law and 
 the facts; if the law had favored, and, let us say, does favor, the 
 agents of the monopoly, facts would have been stronger than the law, 
 and would have found them to be wrong. In their own interest the 
 stockbrokers and the curb brokers would at last have come to an under- 
 standing. The State had no reason to interfere. (Alfred Neymarck, 
 Journal Le Rentier, March 17, 1898.) 
 
 236 
 
History and Methods of the Paris Bourse 
 
 The Fleury-Ravarin amendment was voted on in the 
 Chamber and even in the Senate. 
 
 (106) The Fleury-Ravarin amendment became article 
 14 of the law of April 13, 1898, and three decrees, dated 
 June 29, 1898, were published in the ''Journal Officiel" 
 of June 30, in view of the reorganization of the financial 
 market promised by the Minister of Finance during the 
 debate on the budget. 
 
 Through the first decree, articles 17, 55, and 56 of the 
 decree of October 7, 1890, were modified. Article 17 
 treats of the composition of the syndical chambers of 
 stockbrokers. Articles 55 and 56 express the conditions 
 under which the syndical chambers are bound to execute 
 a trade in place of a defaulting stockbroker. Thus was 
 the solidarity of stockbrokers established. 6 
 
 In the Chamber of Deputies the following took part in the debate: 
 
 Session of March 7, 1898: MM. Lhopiteau, Fleury-Ravarin, Georges 
 Cochery, Minister of Finance; Viviani, Gauthier de Clagny, Gabriel 
 Dufaure, and Ribot. 
 
 Session of March 8: MM. Krantz, Viviani, Georges Cochery, Minister 
 of Finance; Gauthier de Clagny, and Fernand Cremieux. 
 
 Vote: In favor of, 333; against, 136. 
 
 In the Senate, on April 2, 1898, the following took part in the debate: 
 
 MM. Raynal, Eugene Guerin, Gouin, Georges Cochery, Minister of 
 Finance, and Prevet de Lamarzelle. 
 
 The severance of the amendment was put aside by 142 votes against 
 131, and this was passed by a vote of hands. 
 
 &The solidarity was established under the following circumstances: On 
 March 8 M. Viviani caused the Chamber of Deputies to adopt two amend- 
 ments one establishing the solidarity of the stockbrokers, the other 
 that the books of the stockbrokers should be audited by treasury inspect- 
 ors. The Ministry of Finance caused these two provisions to be set aside 
 by the Senate, after which the solidarity of stockbrokers was established 
 by the decree of June 30, 1898, as stated above. The legality of the pro- 
 ceeding is very debatable. According to article 1202 of the Code civil, 
 solidarity (outside of solidarity by mutual agreement) can be declared 
 only by law. 
 
 237 
 
National Monetary Commission 
 
 The second decree increased the number of stockbrokers 
 of the Paris Bourse to seventy, and the third decree 
 treated of the brokerage rates, modifying those pre- 
 viously established by the stockbrokers themselves. 
 
 In general, the new rate prescribed was o.io percent, 
 where the old one was 0.12% per cent, and the bro- 
 kerage for the transactions in French rentes was fixed 
 at 12.50 francs for the one-half unit of speculation, while 
 the old rate was 20 francs. On the other hand, the private 
 regulations of the stockbrokers of December 3, 1891, were 
 modified. The maximum number of chief clerks was in- 
 creased to six (it was previously four) . Provisions were 
 made that the settlement of cash transactions in certifi- 
 cates to bearer be effected before the fifth bourse session 
 following the session when the operation was made. How- 
 ever, from January 30, 1899, this delay was extended until 
 the tenth Bourse, and the obligation for the stockbroker 
 with unadjusted claims to "execute" (buy-in or sell-out, 
 compel settlement by) his fellow-member in arrears was 
 replaced by the right of recourse to the procedure of "exe- 
 cution." Finally, on July 12, 1901, a new tariff, raising 
 brokerage rates, was established by M. Cailloux, Minister 
 of Finance. The minimum of 50 centimes was fixed. The 
 brokerage fee was increased to 0.25 franc for each share 
 or bond worth less than 250 francs and 0.50 franc for 
 securities the prices of which range between 250 and 500 
 francs. 
 
 The reorganization of the financial market had there- 
 fore been "botched up" under the queerest circum- 
 stances. They had come back to the Tirard system 
 
 "See Nos. 16 and 38, Book II. Translator. 
 238 
 
History and Methods of the Paris Bourse 
 
 through the Fleury-Ravarin amendment, we said; but 
 M. Tirard himself, although in favor of the stockbrokers' 
 monopoly, had agreed that the question of organizing a 
 public market was one of those whose solution could 
 not be improvised and which could not be withheld 
 from public discussion. Answering M. Nivert, M. Tirard 
 said, on February 24, 1893: "After a vote has been taken 
 on the bill submitted to your deliberation, I have in 
 mind to place the consideration of this question before 
 the Council of State, and to prepare a bill which shall 
 have the advantage of having been thoroughly studied." 
 Well, the question proposed in 1898 was the same as in 
 1893. Monopoly or freedom of brokerage, or, also, a 
 mixed system, admitting of regulated freedom. Two 
 senators spoke for freedom. In the meanwhile an 
 amendment to the budget changed the mode of collecting 
 the tax; and there you are. By means of decrees a 
 Minister revises brokerage rates, arranges for the appoint- 
 ment of ten stockbrokers, institutes a solidarity of doubt- 
 ful legal standing, and calls that operation a "reorgani- 
 zation." Legally, even the very word "reorganization" 
 can not be used. Laws can not be modified by decrees; 
 and, as decrees are based on laws already existing, it 
 would be more correct to say that there was a sup- 
 pression of the question of reorganizing the financial 
 market, which had been proposed by two senators after 
 the Government had failed to do so. It is hardly possi- 
 ble to understand at present how a question which in 1893 
 required such an extremely exhaustive study in the eyes of 
 M. Tirard and of all others, could be touched upon and 
 decided in the circumstances detailed above that is to 
 
 239 
 
National M on et ar y Commission 
 
 say, under the most unwonted circumstances and the 
 most contrary to precedent. 
 
 (107) For what reasons was the bill announced by M. 
 Peytral never submitted to consideration? For what 
 reasons was the bill proposed by the two senators in some 
 way withdrawn from the Senate? For what reasons did 
 the Meline ministry in 1 898 entangle itself in that strange 
 procedure, contrary to all precedents in legislative mat- 
 ters? These are points which have never been cleared 
 up, and concerning which the parties most interested seem 
 to desire to avoid all discussion. a Some explanations of 
 that little financial and parliamentary coup d'etat have 
 been furnished, but the moderation necessary for the 
 present study does not allow our reproducing them here. b 
 
 The following reasons may be substituted for or added 
 to the above : We know that in matters of political econ- 
 omy the regime of commercial treaties was superseded by 
 the regime of tariff maximum and minimum in 1892. A 
 strong protectionist current had become apparent in the 
 political spheres since 1878. M. Meline was the leader 
 thereof. In the newspaper world some writers had made 
 themselves the champions of international bimetallism 
 and protectionism, especially MM. Edm. Thery and Jules 
 Domergue. The Stockbrokers' Association (Compagnie 
 des agents de change) expressed its fellow-feeling at an 
 early date, and gave its support to the bimetallist and 
 protectionist movement, either from economic convic- 
 tion or through design, thinking that economic parties 
 
 a Congres International des valeurs mobilieres de 1900 a Paris. Stance du 
 6 juin, 1900. Compte-Rendu (Paul Dupont, imprimeur.) 
 & Journal I' Action of November 7 and December 12, 1903. 
 
 240 
 
History and Methods of the Paris Bourse 
 
 become political parties and that political parties have 
 their expression, when they are successful, in executive 
 power. The Meline ministry was, therefore, in power 
 in 1898; it rewarded those who had supported it, while 
 the protectionist and nationalist papers directed a 
 virulent campaign against the Coulisse. The time had 
 been admirably chosen. We know what painful strife 
 had taken place in the country concerning the Dreyfus 
 affair. In 1898 the question of knowing whether there was 
 ground or not to review the military trial of 1894 was 
 obscured by passions. If anyone wanted to see the trial 
 reviewed, he was a traitor to his country, an opponent of 
 the army, an enemy of order, a conspirator against the fair 
 name of France abroad, and even against the credit of the 
 State. On the other hand, if anyone else opposed the 
 review of the trial, he was a pretorian (meaning a mer- 
 cenary soldier) , he was a reactionist, retrograde; the shouts 
 of "Long live the army!" "Death to the Jews!" and 
 "Down with the priests!" were heard in the streets and 
 at meetings. Men of the most incongruous spheres of 
 society combined or contended with one another. 
 
 It so happened that some of the curb brokers (cou- 
 Lissiers) who brought to our market orders from Frank- 
 fort, Berlin, Madrid, London, Vienna, and Constantinople, 
 were foreigners. Some of them were Jews. It is easy 
 to guess what powerful assistance the Dreyfus affair 
 brought to the stockbrokers. The Coulisse was the 
 victim. The nationalist and protectionist papers man- 
 aged the campaign, reproached some of the opponents 
 with their origin, and the Parliament resounded with the 
 
 241 
 
National M o n et ar y Commission 
 
 saddest discourses ever uttered in the glorious French 
 rostrum. 
 
 To-day one can not read the debates without expe- 
 riencing deep astonishment at the wretchedness of the 
 arguments that animated all this debate, which, more- 
 over, was altogether foreign to the budget discussion. The 
 author of the amendment, the keystone of the reorganiza- 
 tion, M. Fleury-Ravarin, pleaded that there had been tax 
 frauds in the open market; to-day it seems to be an 
 established fact that there were none. b M. Gauthier de 
 Clagny called to account the foreigners in the Coulisse. 
 But nevertheless, they permitted the " Rente Coulisse" to 
 stay; so that, as far as public credit alone is concerned, 
 there are Frenchmen of ancient stock who negotiate 
 Ottoman bank shares, Turkish rentes, and exterior Span- 
 ish. The same speaker, concluding from the particular to 
 the general, charged the Coulisse with the emission of a 
 security, "La Watana, " which he called a swindle, an 
 emission in which two curb brokers were interested. d In 
 the Senate, M. de Lamarzelle reproached the Coulisse 
 with having introduced the gold-mines securities, 6 but 
 there was no question of taking away from the Coulisse 
 the gold-mines securities in which it was dealing, and these 
 securities will remain there. The Minister of Finance, M. 
 Cochery, carried off the vote in the Senate by maintaining 
 
 a Session of March 7, 1898; Journal Officiel of the 8th. 
 
 & Cote de la Bourse et de la Banque; annee 1898, Nos. 141. 144, 255, 278. 
 
 c Session of March 8, 1898; Journal Officiel of March 9. 
 
 & Proceedings were instituted against the issuers, which resulted in their 
 being fully acquitted. (Police court of the Seine, eighth chamber, June 
 21, 1901. Le Droit, June 23, 1901.) 
 
 Session of April 2, 1898; Journal Offlciel of the 5th. 
 
 242 
 
History and Methods of the Paris Bourse 
 
 that on two occasions the curb brokers had attempted to 
 depress the prices of French rentes and Russian rentes, 
 both of which were dealt in only on the "Parquet" by 
 the stockbrokers. a The fact is substantially incorrect. 
 
 Here are the very words uttered by M. Cochery, Minister of Finance. 
 They were taken from the Journal Officiel of April 3, 1898, in the report 
 of the session of April 2 : 
 
 "Just now a singularly painful event was recalled to our memory. On 
 two occasions, while in France everyone rejoiced when the journey of 
 the Russian Emperor in France and the journey of the President of the 
 Republic . . ." [Shouts and interruptions.] 
 
 M. DE LAMARZELLE. "But this is quite correct." 
 
 The MINISTER. "Gentlemen, I wonder at these protests. [Speak, speak.] 
 I am bringing with me particulars for the information of the Senate, and 
 with no thought in mind but the public welfare. 
 
 " I say that on two occasions, at a time when events gave France 
 more confidence in herself and in the future, at a time, consequently, when 
 it seemed that an upward movement in the securities of 'the two allied 
 nations was due, there occurred in the market not in the official mar- 
 ket, but in the open market tactics calculated to cause a considerable 
 decline." 
 
 Well, the Russian rentes were dealt in on the open market neither in 
 1896, when the Russian Emperor visited Paris, nor in 1897, when M. Felix 
 Faure went to St. Petersburg. They were dealt in exclusively on the offi- 
 cial market, so that it was materially impossible for tactics to be set at 
 work in the open market against the Russian rentes. 
 
 As to the French rentes, we give below the comparative rates in the offi- 
 cial and the open markets, according to the Official Quotation List for the 
 former and according to the "Cote de la Bourse et de la Banque" for the 
 latter. 
 
 (a) Prices of French rentes, 3 per cent, from October 3 to October 8, at 
 the time of the Russian Emperor's trip to Paris: 
 
 October 3 
 
 Official market 
 
 101 . 80 
 
 101 60 
 
 101 65 
 
 
 
 Open market 
 
 101. 78 
 
 101 . 57 
 
 101. 80 
 
 101. 62 
 
 October 4 
 
 Bourse closed. 
 
 
 
 
 
 October 5 
 
 Official market 
 
 101 . 57 
 
 101 . 55 
 
 101. 70 
 
 101. 70 
 
 
 Open market 
 
 101 53 
 
 
 
 
 October 6 
 
 Bourse closed. 
 
 
 
 
 
 October 7 
 
 Official market 
 
 
 
 
 
 
 Open market _ 
 
 101. 68 
 
 101 . 72 
 
 101. 50 
 
 101 . 50 
 
 October 8 
 
 Official market 
 
 
 
 
 
 
 Open market 
 
 101. 68 
 
 101. 73 
 
 101 . 53 
 
 101. 53 
 
 
 
 
 
 
 
 243 
 
National Monetary Commission 
 
 However, he permits the "Coulisse des rentes" to 
 remain in existence. The same Minister advanced as a rea- 
 son for supporting the Fleury-Ravarin amendment, that 
 the Stockbroker's Association had entered a complaint 
 against the curb brokers. a Thus he desired to avoid the 
 disturbance which might have befallen the financial 
 market, and he fulfilled the expectations of the stock- 
 brokers before they obtained such fulfillment by legal 
 means. This time the matter was taken out of the 
 court's hands, as it had been taken out of the Senate's. 
 All is chaos and anarchy in that discussion and in those 
 irregular proceedings. MM. Lhopiteau, Viviani, and 
 Ribot called the Chamber's attention to that fact, & and 
 notably M. Ribot, who, however, declared himself in 
 favor of the stockbrokers' monopoly, M. Gouin, in the 
 Senate, president of the commission appointed to look 
 into the Trarieux-Boulanger proposition, vainly pro- 
 tested. c Inconsistency in arguments ; illogicalness in solu- 
 
 (&) Prices of French rentes, 3 per cent, from August 23 to 27, at the time 
 of President Faure's trip to Russia: 
 
 
 Official market 
 
 104. 87 
 
 104. 90 
 
 104. 82 
 
 104. 87 
 
 
 Open market 
 
 104. 93 
 
 104. 93 
 
 104. 83 
 
 104. 92 
 
 
 Official market 
 
 104. 85 
 
 104. 90 
 
 104. 82 
 
 104. 87 
 
 
 Open market - 
 
 104. 88 
 
 104. 93 
 
 104. 83 
 
 104. 90 
 
 
 Official market 
 
 104. 85 
 
 104. 92 
 
 104. 85 
 
 104. 90 
 
 
 
 104. 87 
 
 104. 93 
 
 104. 87 
 
 104. 90 
 
 
 Official market - 
 
 104. 84 
 
 104. 87 
 
 104. 60 
 
 104. 60 
 
 
 Open market 
 
 104. 90 
 
 104. 91 
 
 104. 62 
 
 104. 63 
 
 
 Official market 
 
 104 75 
 
 104. 77 
 
 104. 60 
 
 104. 65 
 
 
 Open market 
 
 104. 78 
 
 104. 78 
 
 104. 60 
 
 104. 70 
 
 
 
 
 
 
 
 a Senate, session of April 2, 1898; Journal Officiel of the 3d. 
 & Chamber of Deputies, session of March 7, 1898; Journal Officiel of 
 the 8th. 
 
 c Senate, session of April 2, 1898; Journal Officiel of the 3d. 
 
 244 
 
History and Methods of the Paris Bourse 
 
 tions. What of it? The vote on the budget of 1898, 
 which was to take place before the end of the year 1897, 
 is away behind time; elections are approaching. There 
 is need to hurry. Minds are disturbed. Once more the 
 Dreyfus affair is in full swing. The ministry obtains 
 what it asked for. a 
 
 (108) The curb brokers resorted to libels in answering 
 the attacks they were subjected to in the newspapers. 
 But the discussion gained neither in broadness nor in 
 theoretical interest. The two parties fired their griev- 
 ances at each other, and it must be admitted that if the 
 Stockbrokers' Association did not deserve victory, the cou- 
 lisse party deserved defeat. Hardly had the law of 1893 
 permitted them to deal publicly in listed securities when 
 the curb brokers entirely lost sight of the fact that that 
 state of things would only nay, could only be tempo- 
 rary. To trade, to buy, or to sell that was all that 
 concerned them. The gold mines engrossed their atten- 
 tion. They lacked entirely* the sense of professional 
 
 a The Honorable M. Cochery, who presided at the Congrds International 
 des valeurs mobilises (International Congress of Transferable Securities) 
 in 1900, condescended to acknowledge to the author that the arguments 
 brought forward in favor of the freedom of the market (in the session 
 of June 6 of said Congress) were mostly new to him ; that it was a mat- 
 ter of regret for him that, for some inexplicable cause, these arguments 
 had never come to his notice; and that, if he had been aware of them, he 
 would have hesitated in extolling the prevailing system in its totality. 
 These words do great honor to the Minister. Moreover, the Honorable M. 
 Cochery in his closing speech of the Congress a speech bearing the stamp 
 of great elevation of mind made plainly known the emotion he had expe- 
 rienced during the session devoted to the inquiry into the organization of 
 bourses: "Relating to the market organization, the debate at one time 
 assumed a truly passionate aspect .... but passionate in the right 
 way the passion resulting from the wish to protect common interests." 
 [Loud applause.] Stenographic report of the Congress, C. I. P., 308, 
 P. Dupont, printer. 
 
 245 
 
National M o n et ar y Commission 
 
 orientation. Many looked upon their profession as some 
 sort of tolerated condition, to cease the day it would 
 suit the stockbrokers to have it cease. They had no 
 idea of a natural right to be transformed into a positive 
 right, and it was the lack of this notion that caused 
 their reply to be so little interesting. "We represent 
 such an amount of taxes, licenses, such a number of 
 telegraphic messages, we employ so many clerks, "- 
 this was the level to which the discussion rose, unless 
 once in a while there happened an argument "ad 
 homines" in answer to those aimed at them. The one 
 who evoked an economic principle was called a theorist, 
 a transcendental metaphysicist. Moreover, there was no 
 discipline on the Coulisse. Its president, M. Alphonse 
 Lange, who died shortly afterwards, undoubtedly should 
 be given credit for wanting to offer energetic resistance. 
 Personally very wealthy, he might have, like many 
 others, said to himself that, if conquered, the defeat 
 meant but little to his own personal interests. Yet he 
 put up a really good fight, but he was little adapted for 
 such discussions; moreover, no one among the curb 
 brokers a thing unheard of seemed prepared for them. 
 Besides, had not the announcement been given out that 
 twenty new offices of stockbrokers were to be created ? a 
 Many of the curb brokers intended to be candidates for 
 these new offices. It was, therefore, necessary that the 
 opposition of the crowd should not be too fiery, lest all 
 of the candidates be rejected; and these, being more or 
 less clear-sighted, stood in the way of a too energetic 
 
 a The Minister of Finance confirmed that item of news in the Chamber of 
 Deputies, March 8, 1898, Journal Officiel of the Qth. 
 
 246 
 
History and Methods of the Paris Bourse 
 
 action for the defensive or the offensive. But a group 
 of professional men, whoever they may be, containing, 
 in spite of its immense resources, such elements of 
 weakness, is incontestably destined in advance to defeat. 
 Financiers . make the great mistake of not sufficiently 
 taking into account that moral force and professional 
 dignity are worth more than gold. However strong may 
 have been the cause of the Coulisse, its advocates failed 
 in their efforts on its behalf, and it was no easy matter 
 to champion it in Parliament, because its defenders were 
 badly treated in certain publications. 
 
 Now, if the curb brokers had to be defeated if, as a 
 special group, they deserved the defeat they had expe- 
 rienced was not their cause superior to, did it not go 
 beyond, the individual members; were there not sufficient 
 grounds to watch against the strengthening of the mo- 
 nopoly ; was it not necessary to beware of having recourse 
 to surreptitious means in proceeding to a reorganization 
 of the market ; was it not necessary that the Bourse 
 should be either free or regulated? 
 
 It seems that the act of reorganization should have 
 been prompted by considerations superior to the interests 
 of the stockbrokers or of the curb brokers. At any rate, 
 let us see what took place within the Coulisse on the 
 day following the reorganization. 
 
 (109) After the "reorganization," the Coulisse remained 
 composed of the following elements: 
 
 The "coulisse des rentes" (Coulisse for rentes) remained 
 the same as before. It keeps on in a state of being 
 tolerated. 
 
 247 
 
National Monetary Commission 
 
 The ' ( coulisse des valeurs" (Coulisse for securities) does 
 not any longer exist in a state of being tolerated. Curb 
 brokers deal freely, as intermediaries or otherwise, in 
 securities not susceptible of being quoted, whether these 
 securities be such that the stockbrokers do not care to 
 quote, or such that they are not allowed to quote. In 
 the latter category are found the foreign securities, in 
 denominations of 25 francs, which the French law does 
 not permit for French corporations. (Law of August i, 
 1893; decree of December i, 1893.) 
 
 Under these conditions, a number of bankers who 
 make it a practice to deal among themselves in the Paris 
 market, established two professional syndicates, under 
 the terms of the law of March 21, 1884, concerning syn- 
 dicates : one for the bankers dealing for future delivery 
 (b terme) , and the other for the bankers dealing for cash 
 (au comptant). Of course, one may belong to the pro- 
 fession without being connected with either of the syndi- 
 cates. There is nothing to prevent a banker from pur- 
 chasing certain securities from another banker, whether 
 he belongs to a syndicate or not, but members of syndicates 
 constitute groups only among themselves. 
 
 The Coulisse is not officially known under that name. 
 The professionals on the bourse who are not stock- 
 brokers (agents de change) are called bankers (banquiers). 
 The curb brokers (Coulisse members) in rentes form the 
 "groupe des Banquiers en Rentes Francaises." The 
 groups for other securities are formed by the members 
 of the "Syndicat des Banquiers en valeurs au comptant" 
 (syndicate of bankers dealing in securities for cash) , and 
 
History and Methods of the Paris Bourse 
 
 of the "Syndicat des Banquiers en valeurs a terme" (syn- 
 dicate of bankers dealing in securities for future delivery) . 
 A special group is formed by the "Union des Banquiers" 
 (Bankers' Union), which deals in commercial bills. The 
 "Union des Banquiers" has always kept out of the 
 quarrel. 
 
 (no) Truly it would be judging superficially, to con- 
 clude from the above that conditions are satisfactory. 
 The condition of the Coulisse for rentes is necessarily 
 precarious. To be tolerated is neither a prosperous nor 
 a progressive condition. 
 
 As to the Coulisse for securities, according to the 
 decision of the Cour de cassation of June i, 1885, as 
 soon as a security is admitted to the Official Quotation 
 List, the dealings in the same become an attribute of the 
 monopoly. In that regard, therefore, there is yet a rela- 
 tive condition of toleration. The same applies, in a strictly 
 legal aspect, to securities concerning which an agreement 
 was reached in 1901 between the Stockbrokers' Associa- 
 tion and the bankers dealing in securities for future 
 delivery. Finally, as to foreign securities which can not 
 be officially quoted, because their denomination is inferior 
 to the par value of French shares, a mere reduction of 
 the limit fixed by French lawmakers would result in 
 rendering available for quotation on the " Parquet" the 
 2 5 -franc shares of foreign corporations. This change is 
 eagerly sought by the Stockbrokers' Association. 
 
 (in) As to the stockbrokers' monopoly (monopole des 
 agents de change), it reigns supreme, as sovereign master, 
 outside the restricted sphere in which the Coulisse oper- 
 
 , 1885, p. 257. 
 249 
 
National Monetary Commission 
 
 ates. This is equitable neither from the standpoint of 
 public justice, nor from the economic point of view, nor 
 from that of the State's interests. 
 
 The principles of public justice, belonging to the natu- 
 ral or civil order, refer to the rights of individuals. They 
 include personal liberty, civil equality that is to say, 
 equality before the law, the right of assemblage, the free- 
 dom of labor, of commerce, and of industry. Proclaimed 
 by the Declaration of the rights of man and of the citizen 
 (Declaration des droits de Vhomme et du citoyen), on August 
 26, 1789, they are to-day the foundation of French public 
 rights, and have been mentioned either explicitly or im- 
 plicitly in all constitutions: 
 
 "Of all monopolies intrusted to ministerial officers," 
 said M. Ducrocq "there are few which are more dis- 
 puted or more disputable, from the standpoint of prin- 
 ciples, than the stockbrokers' monopoly. Their office, 
 indeed, is one of those in which the character of public 
 office has the least share, and in which, on the contrary, 
 the professional and even the commercial character 
 occupies the most important place. The negotiating of 
 bourse securities, in return for a compensation, is no 
 more a public function than the selling of any other 
 kind of merchandise 
 
 "We can conceive of no serious reason, drawn from the 
 interests of public credit, to maintain the market for 
 bourse securities within the hands of a close corporation. 
 This dealing in bourse securities is indeed the essential part 
 of the vocation of the stockbroker; his other duties are 
 
 Cours de droit administratif et de legislation jranqaise des finances T. Ill, 
 No. 4, 215. 
 
 250 
 
History and Methods of the Paris Bourse 
 
 mere accessories. Well, there is no doubt that, in order to 
 give to the trading in securities the moral and material 
 safety which is indispensable for public credit, there is no 
 necessity to turn it, contrary to its nature, into a public 
 function. It is sufficient to regulate and to control the 
 profession, which thus becomes reconciled, within the 
 measure demanded by public interest, with the principle 
 of freedom of labor and commerce. 
 
 " The other duties of stockbrokers the verifying of quo- 
 tations and the certifying of transfers are accessories of 
 which the stockbrokers might be relieved, so as to remain 
 invested only with their principal and essential role the 
 role of dealers in securities. There would be no more pre- 
 text for monopoly. A few real officials could be intrusted 
 with the duty of certifying transfers and drawing up the 
 quotation lists. At any rate, if, instead of proclaiming the 
 markets absolutely free, the law were to suppress the 
 monopoly, and to regulate the profession by the indemnity 
 system applied to merchandise brokers by the law of July 
 1 8, 1866 (No. 1208) , could not then the new syndical cham- 
 ber continue to provide for those two features, in a wide- 
 open corporation, under requirements of legal qualifica- 
 tions, morality, and solidarity? The fixed time and place 
 for holding the Bourse, its publicity, the trading in 
 a loud voice, are such sure bases of genuineness for estab- 
 lishing the quotation list that the regulation of the pro- 
 fession should certainly suffice to allow it to continue 
 attending to the matter by itself. Does not the syndical 
 chamber of the stockbrokers (chambre syndicate des 
 agents de change) content itself with merely registering 
 the quotations of the prices set up by the exchange and 
 
 251 
 
National Monetary Commission 
 
 metal brokers, though legally it should be prepared by 
 the syndical chamber itself? It is therefore not neces- 
 sary, for the verification of quotations, that there exist 
 ' agents de change,' holders of ministerial offices. 
 
 " France is about the only country whose financial mar- 
 ket is in the hands of intermediaries who are, in fact, the 
 owners of their offices, invested with absolute monopoly.. 
 There are even countries where the freedom of the market 
 is complete, as in England, where the Bourse, called the 
 Stock Exchange, is a private institution, elective and 
 subject to its own by-laws; in the United States, where 
 the organization is the same; in Belgium, since the law of 
 December 20, 1867, which proclaimed the free exercising 
 of the functions of merchandise brokers and stockbrokers ; 
 in most of the Swiss Cantons, excepting, however, Basle, 
 Geneva, and Zurich, which have monopolies; and in the 
 South American Republics (Argentine Republic, Brazil, 
 and Paraguay) . In all other countries, the financial mar- 
 ket system is built up on the principle we recommend, 
 of the freedom of the profession combined with its regu- 
 lation. Such are the legal provisions of the German 
 Empire, Austro- Hungary, Russia, Italy, Spain, Portugal, 
 Holland, and the Scandinavian States." 
 
 MM. Lyon-Caen and Renault point out with the same 
 clearness, that mediation in negotiating securities possesses 
 in itself no attribute of a public function. We quote: 
 
 "It should be noticed that in 1866 nobody asked that 
 the stockbrokers' monopoly be suppressed. Sundry rea- 
 sons have often been brought forward in favor of its 
 being maintained. Their part is not limited to trading 
 
 a Trait^ de Droit Commercial, T.1V, No. 1035. 
 252 
 
History and Methods of the Paris Bourse 
 
 in bourse securities ; they guarantee the identity of parties 
 and the genuineness of signatures for the transfer of gov- 
 ernment and other securities; they are necessarily, for 
 a certain time, depositaries of important sums and 
 numerous securities ; every day they verify the quotations 
 of securities, especially government securities. Thanks to 
 the stockbrokers ' monopoly, the Treasury enjoys perfect 
 security as to the transfers involving its responsibility; 
 transactions are carried out with great rapidity, and the 
 interest of inexperienced people, who have to hand in 
 their securities or their money, is protected. Such is the 
 summary of the reasons given by the Government in 
 the explanatory statement of the law of July 18, 1866. 
 (J. Bozerian. De V Institution des Agents de Change.) 
 These arguments advanced in favor of the monopoly held 
 by the stockbrokers are not decisive. Mediation in nego- 
 tiating securities has nothing in itself constituting a public 
 function. Moreover, one could conceive that freedom was 
 allowed in this matter, and that, without monopoly, meas- 
 ures had been taken for the verification of quotations and 
 for the avoidance of the worst abuses. Besides, there are 
 many countries where there is no monopoly either for the 
 brokerage in merchandise, insurance, and freight, or for 
 the mediation in negotiating securities, and yet the free- 
 dom does not appear to stir up any complaints. See, 
 especially, the Belgian law of December 30, 1867; the 
 regulation attached to decree of December 14, 1882, given 
 out for the execution of the Italian commercial code of 
 1882; and the Hungarian code (art. 524 et seq.) The 
 German commercial code (art. 66 et seq.) authorizes official 
 brokers, leaving to private individuals the right to do 
 
 353 
 
National M o n et ar y Commission 
 
 brokerage as private brokers. This code reserves the 
 right for each State to establish a monopoly for the ben- 
 efit of official brokers (art. 84). 
 
 " None of the States, however, has availed itself of this 
 privilege, while Bavaria, Wurttemberg, and Hamburg have 
 each abolished the monopoly there existing. In Bremen 
 (1867) and in Hamburg (1871) the official brokers have 
 been suppressed. "In Austria the law of April i, 1875, 
 has sanctioned the monopoly; but the law has shown 
 no results. The private brokers remain in fact, and 
 operate as commission men with the brokers themselves. 
 (V. Endeman, Handbuch des Deutschen Handelsrechts, III, 
 pp. 135 and 137.)" 
 
 (112) Leaving now the critical analysis of jurists, and 
 passing to the examination of the question of the stock- 
 brokers' monopoly from the economic standpoint, we can 
 not but condemn it in the most unequivocal terms. 
 
 Let us observe, however, that public justice and politi- 
 cal economy have such affinities in many respects that, 
 when the economic principles have passed into the do- 
 main of law, it is impossible to distinguish between the 
 considerations depending upon the one or the other 
 science. Moral and political sciences, moreover, are not 
 separated by impenetrable walls, and the divisions set up 
 by men for the accommodation of their reasoning in 
 no way interfere with the community of principles on 
 which they depend. Thus we may say that the consid- 
 erations of public justice we have just expounded serve as 
 an introduction to those which are to follow. 
 
 The modern doctrine of monopoly does not derive it 
 any longer from a royal or state prerogative. The right 
 
 254 
 
History and Methods of the Paris Bourse 
 
 to labor belongs to all. Certain lines of work are subject 
 to special conditions in France the practice of medicine, 
 or the practice of pharmacy, for instance; but inquir- 
 ing into the conditions for recruiting professional men 
 for these practices, we see that there is no monop- 
 oly on them. All those who meet certain conditions 
 may be physicians or pharmacists. Monopoly exists 
 when the State exercises certain public services, or car- 
 ries on a certain industry, or again, when it deprives cer- 
 tain people of the right to labor, granting it to others in 
 consideration of a fee or gratuitously. In the first case 
 it is a public monopoly, in the second it is a private 
 monopoly. Well, the stockbrokers' monopoly is exer- 
 cised by ministerial officers, not for account of the State, 
 but for their own account. This is a private monopoly, 
 to which all economists are strongly opposed. 
 
 "Like all monopolies, but more justly than many 
 others, the stockbrokers' monopoly is furiously attacked. 
 It may be impossible to give decisive reasons in its favor, 
 though in the last resort it may be acknowledged that 
 the Bourse intermediaries should be bound to furnish 
 personal guarantees." 
 
 Thus expressed himself M. Paul Cauwes, a professor in 
 the Law Faculty of the Paris University. 
 
 M. Courcel-Seneuil expressed himself as follows: 6 
 
 "The monopoly, giving rise to exceptional profits, 
 creates an entirely artificial property, built up at the 
 public expense and for the benefit of the first holders, a 
 property acquired without labor, growing without labor 
 
 a Precis d* Economic Politique, T. i, p. 648. 
 
 & Trait d'Economie Politiqiie, 1801, T. 2, p. 125. 
 
 90312 10 17 255 
 
National Monetary Commissio 
 
 n 
 
 with the increase in population and general wealth, and 
 having no justification." 
 
 At the congress of 1887 of the Association Franfaise 
 pour I'avancement des sciences M. Arthur Raffalovich ex- 
 pressed himself as follows, in a lecture on the Paris 
 Bourse: "In spite of the increasing value of transferable 
 wealth of the transactions effected daily at the Bourse, 
 France presents the strange phenomenon of a legislation 
 relatively stationary, of an old-fashioned regulation, 
 which is not in keeping with the requirements of the 
 times * * *. The monopoly of the stockbrokers 
 seems to me doomed to disappear; it does not exist in 
 any of the great European markets." 
 
 The Traite d' Economic Politique of M. Joseph Garnier, 6 
 after having expressed the view that (No. 191) "all arti- 
 ficial monopolies in favor of individuals" are contrary 
 to justice, detrimental to production, and have a tend- 
 ency to assume the character of "abusive and iniqui- 
 tous" privilege, declares that those are the vestiges of 
 the guild system that have to be eradicated. The au- 
 thor expressly aims at the ministerial offices of stock- 
 brokers after having shown that in March, 1858, the 
 "Butchers' Guild " (corporation) had been suppressed, in 
 1863 the "Bakers' Guild," and in 1866 the "Commercial 
 Brokers' Guild." (Footnote under No. 196.) 
 
 It would not be difficult, however, to find also a good 
 many complaints in the literature of the time coming 
 from those whose privileges were to be suppressed. "If 
 the butchers and bakers were no longer constitute/! as a 
 
 a Comptes Rendus de 1887, Masson, editor, p. 984. 
 
 & Edition of 1889, brought up to date by M. Andr6 Liesse. 
 
 256 
 
History and Methods of the Paris Bourse 
 
 privileged corporation, everybody was to die of hunger!" 
 "As for free brokerage, it would be even a much greater 
 calamity. A lot of vagabonds would undertake to work 
 as brokers, and would prostitute commerce." The legisla- 
 ture of 1866 took no notice of these arguments, and nobody 
 wants monopoly any longer. It was, moreover, what had 
 already happened a century before. When, in 1776, all 
 corporations were threatened, the six principal trades 
 unions addressed petitions and requests, and explained 
 that wardenships, masterships, and guilds secured for con- 
 sumers integrity in contracts and quality in merchandise. 
 The arguments in favor of the "agents de change" are 
 exactly the same as those of the guilds of the seventeenth 
 century and of the holders of privilege of 1866. 
 
 The Societe d'Economie Politique in 1859" discussed 
 the monopoly of stockbrokers. MM. Reybaud, Wolowski, 
 Michel Chevalier, Courcelle-Seneuil, P. Coq, Courtois, Du- 
 puit, de Parieu, and J. Gamier took part in the dis- 
 cussion, which terminated in condemning the monopoly. 
 In 1893 the same discussion presented itself and con- 
 cluded in the same way. The following took part in the 
 discussion: MM. Courtois, Brandts, and Alfred Neymarck. 
 The latter expressed himself energetically against the 
 monopoly of stockbrokers, and M. Gide declared "the 
 institution as entirely undeserving of interest. " 6 In 1 898, c 
 right before the "Reorganization," the Societe d'Economie 
 Politique expressed itself again energetically against the 
 monopoly of stockbrokers. Only M. Manchez upheld it; 
 
 ^Journal des Economistes, April 15, 1859. 
 b Journal des Economistes, April 15, 1893. 
 c Journal des Economistes, June 15, 1898 
 
 257 
 
National Monetary Commission 
 
 9 
 
 but those who spoke against it were MM. de Mont- 
 planet, J. Siegfried, Neymarck, Emmanuel Vidal, and 
 Frederic Passy. The latter, who closed the debate, 
 expressed the opinion that the monopoly, when held up 
 as the means of guaranteeing the genuineness of quota- 
 tions, carried in itself the denial of such genuineness. 
 The Paris Chamber of Commerce expressed an opinion 
 unfavorable to the stockbrokers' monopoly, and the 
 Tribunal de commerce de la Seine, when asked for advice 
 concerning the expediency of creating new offices in 
 completing the "reorganization" scheme, declared itself 
 against the measure. 6 So we see, it is not alone the 
 economists who are opposed to the monopoly, but also 
 the business men, who every day struggle with realities. 
 
 It has often been claimed that the stockbrokers', mo- 
 nopoly was necessary for the welfare of the national 
 credit. But facts singularly deny that assertion. Why 
 was it necessary in 1898, that, simultaneously with the 
 upholding of the usefulness of bolstering up the stock- 
 brokers' privilege by the Honorable M. Cochery, he should 
 undertake to tolerate the existence of the Coulisse, plac- 
 ing it, in fact, under the exclusive supervision of the 
 Stockbrokers' Association (Compagnie des Agents de 
 Change) ? No argument could be more flatly contradicted. 
 
 Moreover, how could the "agents de change" support 
 the country's rentes? It should be borne in mind that 
 in the countries whose rentes enjoy the best reputation 
 among the investing public in London, Berlin, and New 
 York, there are no ministerial officers for the negotiation 
 
 a May 14, 1898, Cote de la Bourse et de la Banque of May 17. 
 & May 25, 1898, Cote de la Bourse et de la Banque of May 26. 
 
 258 
 
History and Methods of the Paris Bourse 
 
 of securities. Moreover, the stockbrokers in France can 
 not undertake bourse operations for their own account, 
 according to article 85 of the Code de Commerce. But 
 one can uphold the price of a merchandise or a security 
 only by buying it and by meeting repeated and persistent 
 offers by bids of equal force, able to counterbalance them 
 and force the short sellers to cover. We have seen before 
 that, on the contrary, the French national credit was built 
 up on the freedom of transactions. 
 
 Some imagine that to be admitted to the official quota- 
 tion list is a guarantee to the public of the intrinsic value 
 of the enterprise the securities of which are quoted. 
 This is erroneous. Public savings derive no benefit of 
 increased safety from the stockbrokers' monopoly. This 
 is no reproach to monopoly. It essentially could not be 
 otherwise. 
 
 Below we cite the opinion on that subject given in 
 1875 by the Syndic of the stockbrokers, Moreau, at the 
 General Assembly of his colleagues. 05 
 
 "It is to be much regretted that our duties are so 
 little understood by the public, that some of our pro- 
 ceedings are charged with a function they do not possess, 
 and which they never did possess. Often some people 
 wrongfully imagine that the admission of a security on 
 the official quotation list, is a kind of indorsement given 
 that security, a testimonial in its favor, an introduction 
 by the syndical chamber. 
 
 ' ' Nothing is further from the truth. 
 
 "The quotation list is simply the verification of the 
 prices at which a security has been dealt in. Whenever a 
 
 a Semaine Financidre of February 7, 1875, p. 137. 
 259 
 
National Monetary Commission 
 
 certain number of capitalists choose to effect a sufficiently 
 large number of transactions in any given enterprise, 
 whether good or bad, it is for them, and not for us, that 
 the delicate task of price-fixing is reserved; and, if it is 
 done within the conditions exacted by the revenue laws, 
 and allowing sufficient competition and publicity, we can 
 not refuse to serve them, since we are in possession of a 
 monopoly, and we are bound to execute orders." 
 
 Existing theory is in unanimous agreement with this 
 opinion. 
 
 "It should be noticed," said Mollot, a "that, although 
 the Syndical Chamber is intrusted by law with the duty 
 of verifying quotations of securities, it can not guarantee 
 their value. It is not called upon to inquire into their 
 merit, whether as to their form or as to the solvency of 
 the debtors. The value of the securities may vary ad 
 infinitum, without ever making the Chamber responsible 
 for it. It is for those who operate to investigate the 
 nature and soundness of enterprises. They buy at their 
 own risk." 
 
 In his Dictionnaire de Droit Commercial* M. Ruben de 
 Couder expresses himself as follows: 
 
 "The Syndical Chamber does not guarantee the value 
 of the securities the quotations of which it verifies. It 
 is for those who operate to satisfy themselves as to their 
 soundness." 
 
 In the "Dictionnaire universel de la Bourse et de la 
 Banque" c we read: "It is not correct to imagine that 
 
 a Bourses de Commerce, No. 479. 
 
 b Under ''Agents de change." 
 
 c Uncompleted work published under the management of M. J. Boze"rian 
 under "Admission a la cote" (Comite des Publications scientifiques et indus- 
 trielles, 5, cite Palgalle). 
 
 260 
 
History and Methods of the Paris Bourse 
 
 admission of a security to the quotation list is some sort 
 of sanction given to that security, like a testimonial in 
 its favor, a reference of the Syndical Chamber." 
 
 M. Buchere limits the responsibility concerning the 
 admission to the quotation list, to the case when securities 
 have not been regularly issued. This is common law; 
 this is not the principle of a special responsibility per- 
 taining to the stockbrokers. No matter whether one is 
 the issuer of the stock, or only aider and abettor, he incurs 
 the same responsibility. 
 
 M. Abel Valdmann is explicit on that point: 
 
 "The statement of all the qualifications as to form, 
 making a security fit to be quoted officially, does not 
 involve in fact, has no connection with the statement 
 of its merchantable qualifications; that is to say, of those 
 relating to the intrinsic value of the security." 6 
 
 And later the same author adds: 
 
 "There has never been found, and there never will be 
 found, a court that will countenance the absurdity, that 
 the admission to the quotation list guarantees to the 
 buyer that he is making a good investment. Well might 
 we ask what guaranty the syndical chambers would then 
 give to the seller, who is likewise one of the contracting 
 parties in every trade, and quite as interested as the 
 purchaser." 
 
 To be sure, no foreign security can be admitted on the 
 quotation list without the positive permission of the Min- 
 ister of Finance, but this in no wise renders the Minister 
 liable. 
 
 a Traite des valeurs mobilieres, No. 1108. 
 6 La profession d' Agent de Change, No. 313. 
 c No. 329. 
 
 261 
 
National Monetary Commissio 
 
 n 
 
 Since 1837 the Chambre Syndicate des agents de change 
 has asked the Minister of Finance to undertake to give an 
 opinion in last resort on the admissions of new securities 
 to the quotation list. The Minister, M. Lacave-I/aplagne, 
 declined all responsibility, acknowledging, nevertheless, 
 that the responsibility should not fall upon the Syndical 
 Chamber. Never since has any minister accepted such 
 responsibility. By the way, the right the Minister of 
 Finance has to forbid a foreign security from being ad- 
 mitted to the quotation list is independent of the 
 question of monopoly, and that right may be maintained 
 whatever be the regime of the financial market. 
 
 The actual financial power of the Paris stockbrokers 
 is put forward as an argument, and it is affirmed that our 
 financial market is the first in the world. In our opin- 
 ion, even granting that this is true, which is far from 
 having been proven, the cause is confounded with the 
 effect. When a country, owing to its geographical loca- 
 tion, its climate, and the character of its inhabitants, pos- 
 sesses numerous natural riches, and even moral riches, 
 they cooperate in increasing its wealth; when it has the 
 advantage of certain political and economic conditions, 
 when it enjoys a monetary and commercial organization 
 which promotes, instead of paralyzing, human activity 
 in most of its manifestations, then that country is rich 
 and deserves to be rich. And it may then happen that 
 some organization, defective in itself, and the source of 
 manifold vexations, is nevertheless prosperous, as much 
 on account of certain facts of adaptation as because it 
 
 a Dictionnaire universel de Bourse et de Banque, under "Admission b, la 
 Cote. 1 ' 
 
 262 
 
History and Methods of the Paris Bourse 
 
 unavoidably lies within the reach of the rays of national 
 wealth. It reflects that wealth. But the Paris Bourse 
 does not owe its prosperity to its organization. Seventy 
 ministerial appointees intrusted with the negotiation of 1 30 
 billions of transferable securities are powerful personali- 
 ties. They would be more powerful if they were but 35. 
 They would be more powerful if there were but 20 of 
 them, or 10 or 5, or even i if there were in the market 
 but i autocrat, a single arbiter of securities, centralizing 
 bids and offers, and the king of the Bourse, just as we see 
 in America an oil king and a steel king. . In such a case 
 the soundness of a market is more seeming than real. If 
 that system had been applied to provisions and merchan- 
 dise, infinitely more necessary for consumption than 
 rentes or shares in companies, the market for wine, 
 bread, and meat, appropriated by a few barons, might, 
 perhaps, be stupendously high, but in this respect experi- 
 ence speaks in favor of freedom of trade only. It seems 
 therefore necessary that public and private credit should 
 enjoy the benefit of an organization more pliable and more 
 in harmony with the general condition of a country's 
 commerce. Let us therefore beware of mistaking the 
 appearance of force for force itself a deception that 
 should impress us no more than the sight of the effigies 
 of iron-clad warriors, standing on rich trappings in a mili- 
 tary museum. If our financial market were opened to 
 all who have funds and understand the profession, it 
 would be stronger still. If the market's favorable situa- 
 tion were distributed among several hundred individ- 
 uals, the division of risks would render the market more 
 stable, competition would secure for our market the 
 
 263 
 
National Monetary Commission 
 
 desired elasticity, and, if wanted, regulation under the 
 supervision of the Minister of Finance would create a 
 condition half way between unlimited freedom, which, 
 with more or less reason, scares so many people, and 
 monopoly, which is an old outfit, in no way suiting our 
 customs, and disturbing the harmony of our laws without 
 rendering the services expected from it. 
 
 As another argument in favor of a monopolized market 
 the joint liability of the brokers is pleaded. It is indis- 
 putable that when the public is told: "The agents de 
 change are conjointly liable," it receives a pledge on 
 which it rests its faith, and yet it is certain that the joint 
 liability of the stockbrokers is perhaps the most detestable 
 of all measures passed in 1898. 
 
 It must be admitted that M. Cochery, the Minister of 
 Finance, energetically contested the measure of the stock- 
 brokers' joint liability. He called attention to the fact 
 that the result would be to weaken in the stockbroker 
 the care for his personal responsibility. 
 
 Then, yielding to the objections of some deputies, who 
 disliked to strengthen the monopoly without some redeem- 
 ing features, M. Cochery inserted in his decree of June 29 
 a provision establishing the joint liability of stockbrokers, 
 in a way not incontestably legal, for again it ,m,ay seem 
 strange that a decree is made to do the service of a law. 
 
 M. Cochery was apparently correct as far as the stock- 
 broker in normal times is concerned; but events have 
 demonstrated the defects of joint liability in times of finan- 
 cial panics; in such times it causes a real suspension of 
 the market. (February, 1904.) 
 
 264 
 
History and Methods of the Paris Bourse 
 
 We find, then, two defects of the joint liability when we 
 examine its effects upon the stockbroker. 
 
 But is the joint liability useful so far as the public is 
 concerned? This is another side of the question of joint 
 liability. 
 
 The customers of stockbrokers are divided into three 
 categories: Givers of cash orders, speculators, and invest- 
 ors in continuations (reporteurs) . 
 
 Those giving orders for cash have no use for the stock- 
 brokers' joint liability. The transaction for cash in- 
 cludes, so to speak, no serious risk for the customer. In- 
 deed, in giving an order, he deposits a small cover. A few 
 days later he is informed that the securities are at his 
 disposal, or that he may bring the securities sold. He 
 calls, settles, and leaves either with the cash or with the 
 securities. However, not all operations have that imme- 
 diately interchangeable character. But, as a matter of 
 fact, the risk, independently of the joint liability, is re- 
 duced to a minimum. Should that minimum be yet too 
 high, it would not be difficult in a proper system of 
 bourse organization to endeavor to prefer certain creditors, 
 without having to resort to such an empirical means as 
 brokers' joint liability. 
 
 Let us pafss to the speculators. The most interesting 
 are those who purchase for future delivery to take up 
 securities, or who sell for future delivery to deliver. But 
 the settlement of these transactions is made at liquida- 
 tion ; that is, the moment when the settlement for cash is 
 effected, money against securities, securities against cash, 
 within a very short time. 
 
 We can refer these operations to transactions for cash. 
 
 265 
 
National Monetary Commission 
 
 Now, all these transactions for cash or for future deliv- 
 ery which we have considered thus far are ordinary com- 
 mercial transactions, such as are customary for wheat, 
 oil, iron, wool, and other merchandise. These, conse- 
 quently, the lawmaker protects neither through monop- 
 oly nor through joint liability. We are thus able to 
 say that it is not in pursuance of reasons applying to 
 commerce in general that the stockbrokers' joint liability 
 was established. It is in view of conditions peculiar to 
 the profession. Each stockbroker has a considerable 
 following of customers trading for future delivery, who 
 settle their transactions by paying the differences. It 
 is even that class of customers which is most prized ; it is 
 the most profitable class. It is for their benefit and for 
 the benefit of "contangoers" (reporteurs) that the joint 
 liability was established. 
 
 Speculators speculate either for a rise (sont places d la 
 hausse), in which case they are buyers, or for a fall (sont 
 d la baisse), in which case they sell short (sont vendeurs d 
 decouvert) . 
 
 The joint liability is therefore a measure which aims 
 to make the stockbrokers liable for the defaults of one 
 or more of them in times of panics; that is to say, when 
 there is a general decline in the value of securities. 
 
 Who are the creditors of the stockbrokers at such 
 times? Not the bulls (speculateurs d la hausse; they are 
 the debtors of the stockbrokers. It is the bears (specula- 
 teurs d la baisse) who are the creditors. They are the 
 ones who have the benefit of the joint liability. Can 
 anything more illogical be imagined? The main effect of 
 the joint liability is to protect the speculator for a fall, 
 
 266 
 
History and Methods of the Paris Bourse 
 
 whom the lawmaker of the year III punished with im- 
 prisonment, forfeiture of property, and exposure to pub- 
 lic view with a sign on his breast bearing the inscription 
 "agioteur" (stockjobber); against whom, until recently, 
 article 422 of the Code penal was directed, and against 
 whom there still exists to-day the " faculte d'escompte" 
 (right of purchaser to demand his stock at any time by ten- 
 dering the money) . This is a striking instance of aberra- 
 tion in the authors of the law of 1898, which again demon- 
 strates that when the lawmaker starts from false premises, 
 he is bound to be unceasingly tossed about and to fall into 
 all sorts of follies, intended in his mind to justify him, but 
 which succeed only in causing his errors and nonsense to 
 blaze out with greater force. 
 
 If we examine the usefulness of the joint liability for 
 continuations (reports), we reach conclusions just as much 
 disappointing from an economic standpoint. 
 
 Peter is buyer for the 1 5th instant of securities worth 
 100,000 francs. Paul is seller of these same securities. 
 Then comes the fifteenth. Paul brings his securities, but 
 Peter has not the funds; this does not concern Paul; he 
 has sold; he delivers. At that moment enters the "con- 
 tangoer" (reporteur) Jack, we will say with 100,000 
 francs. He takes up the securities and resells them to 
 Peter for the next settlement. All this takes place at the 
 stockbrokers', and Peter, Paul, and Jack do not meet. 
 Now, Jack's transaction is very simple. He takes up 
 securities which he resells at once at a slight profit. He 
 makes a temporary investment and, as a result, keeps the 
 securities as long as he is not repaid. He is well insured 
 against risk. 
 
 267 
 
National Monetary Commission 
 
 Capitalists, "contangoers," "takers-in," are, therefore, 
 useful, but may we be pardoned for our license of 
 speech they are, of all workers, the workers that work 
 the least. They make temporary investments and remain 
 "covered". Well, when we see common commercial 
 contracts resting on trust; when we see thousands upon 
 thousands of tons of merchandise delivered, and the seller 
 merely holding three months' acceptances; when every 
 kind of labor means risks ; when every bold capitalist runs 
 all sorts of dangers, the law favors the most timid and the 
 best secured of capitalists. This is not only a violation 
 of justice, it is also a bad economic measure. 
 
 Therefore, from an economic standpoint, the stock- 
 brokers' joint liability is not in itself a beneficial measure. 
 It is useful only to the stockbrokers intrenched behind 
 this apparent advantage. It intends to fortify a mo- 
 nopoly in public opinion, but, in so doing, it helps to 
 preserve an institution resting on an obvious error of the 
 lawmaker, by a process which is unnatural, useless nay, 
 even dangerous. 
 
 Moreover, if it is necessary that the stockbrokers be 
 jointly liable, is the joint liability conditioned on mo- 
 nopoly? Is it not possible to conceive of a system of 
 broader association, regulated, as said before/in a proper 
 measure, and propped by the establishing of special guar- 
 anty funds through obligatory contributions from those 
 exercising the profession? 
 
 Public safety, then, does not make the monopoly an 
 absolute requirement. 
 
 (113) Is the monopoly of the stockbrokers an advan- 
 tage for the State? The State faces a financial cor- 
 
 268 
 
History and Methods of the Paris Bourse 
 
 poration, whose power it has itself created, and of which 
 it can rid itself only by indemnifying it. 
 
 But the longer we wait, the more will increase the 
 value of negotiable securities, and the more must the 
 seats of the agents de change rise in value. 
 
 In 1800 there were only six kinds of securities mentioned 
 on the official quotation list. There were eight in 1807. 
 
 In 1823 a royal ordinance (of November 21) authorized 
 the quoting of foreign securities. The monopoly was by 
 that much increased in value. The great industrial move- 
 ment resulting from railroad building found its financial 
 expression in the creation of numerous certificates "to 
 bearer." The value of the monopoly was by that much 
 increased again. In 1867, on July 24, the French law 
 proclaimed the freedom of the limited-liability company 
 in shares. Shares, bonds, and parts start at once mul- 
 tiplying ad infinitum. The monopoly is thereby once 
 more increased by that much. In 1885 a law on 
 transactions for future delivery is promulgated, which 
 recognizes as legal the very transactions the inter- 
 diction of which seems to have necessitated the insti- 
 tution of the agents de change. In 1893 the corporation 
 law becomes still more liberal. Thus, gradually, as the 
 economic movement manifests itself, and the lawmaker 
 enacts measures of more liberal scope, the monopoly 
 ipso facto is found to expand the field of its privilege, 
 taking advantage of the economic movement of an 
 entire country and of the lawmakers' liberalism stand- 
 ing by, a passive onlooker of that movement, and watch- 
 ing the value of its offices climbing up, as a result of a 
 progress in which it takes no part. 
 
 269 
 
National Monetary Commission 
 
 And it was under these conditions that, in 1898, they 
 proceeded to a reorganization which strengthened the 
 stockbrokers' monopoly. No doubt, in 1898, ten new 
 offices were created. But the ten titularies had to indem- 
 nify their new colleagues, and the total market value of 
 all the offices remained the same, keeping its tendency to 
 rise, a as much from the fact of the expansion of the 
 securities, as from the weakening of the Coulisse. 
 
 No doubt, in 1898, brokerage rates were lowered, but 
 they were slightly raised again in 1901, and a lively press 
 campaign was started in latter times to demand their 
 restoration. & 
 
 Let us proceed to the last events. 
 
 (114) On July 22, 1901, the Compagnie des agents de 
 change of Paris entered into a treaty with the curb 
 brokers, according to the terms of which the latter may 
 obtain the stockbrokers' statements of their own transac- 
 tions (bordereaux d' agents de change) in consideration of 20 
 per cent of the brokerage, when these transactions bear 
 on Turkish or Servian securities and relate to operations 
 balancing each other. 
 
 a The first office sold was valued at 30,000 francs; about 1830 they rose 
 to 850,000 francs. After the July revolution they fell to 250,000 francs 
 and rose again to 950,000 francs before 1848. They declined at that time 
 to 400,000 francs and reached again in 1857 2,400,000 francs. They de- 
 clined to 1,400,000 francs after the war, and were unable to rise for some 
 time after the failure of the Union Generate. (V. Courtois, Operations de 
 Bourse, 13 6d., p. 239.) 
 
 The value of each of the offices on the day following the Reorganiza- 
 tion of the financial market was placed at 1,600,000 francs, representing 
 for the 60 offices 96,000,000 francs. The ten new titularies each paid 
 1,372,000 francs to their combined colleagues, that is to say, 13,720,000 
 francs, so that the 70 offices were worth 96,000,000 francs as a grand 
 total. 
 
 &Semame financiere du "Temps," September and October, 1908. 
 
 270 
 
History and Methods of the Paris Bourse 
 
 In order to fully understand that clause, let us imagine 
 a banker, Peter, receiving the order from a client, Jack, 
 to buy Turkish rente, and another banker, Paul, receiving 
 an order from another client, Louis, to sell. 
 
 Peter and Paul, bankers, meet on the Bourse and deal 
 together. They visit together a stockbroker, and ask 
 him for a sale and purchase statement in the name of 
 one of the two. Together they will take all the necessary 
 measures, in order that each may show his client by means 
 of the said statement that the operation was legally 
 carried out. 
 
 In that respect it will be rather interesting to cite an 
 important notice published on the subject by the "Annales 
 de Droit Commercial," managed by M. Thaller, professor 
 at the law school of the Paris University : a 
 
 " People living at a somewhat remote distance from 
 the Bourse have still in mind the conditions under which 
 the Paris market was reorganized in 1898. They fancy 
 that now the parquet des agents de change (the stockbrok- 
 ers' parquet) strictly enforces the privilege established for 
 listed securities by article 76 of the Code de commerce; it 
 has even been said that the coulisse de la rente (the rente 
 coulisse) has been spared. But it now happens that a 
 compromise of wider scope, entered into with the syn- 
 dicate of bankers dealing in securities for future delivery, 
 causes the public no longer to understand anything of the 
 system of transactions and of the tutelage the law exer- 
 cises over it. 
 
 "The safeguard which the personal mediation of the 
 stockbroker was to give to the execution of bourse orders, 
 
 a August, 1901, p. 225. 
 18 ' 271 
 
National Monetary Commission 
 
 is transformed into some kind of tithe, which he collects on 
 transactions concluded without him. The name 'remisiers' 
 is given to those who make contracts by themselves, with 
 the* only proviso that they shall daily have their trades 
 recorded on the pad of an ' agent,' who, in return for a 
 percentage of the brokerage, will hand them an official 
 contract. And the members of the Parquet have lent 
 themselves to this playing of the part of a machine. In 
 order that the stockbroker shall run no risk, it was stip- 
 ulated that the transactions countersigned by him should 
 be booked at once to balance one another that is to say, 
 the transactions reported on the pad as purchases should 
 immediately be counterbalanced by recording a sale to 
 the same customer, the same curb broker, at the same 
 price. 6 
 
 "So far it has been naively believed: (i) That the 
 transactions by application were subjected to regulation 
 limits, such as the verification of whether there had been 
 more advantageous bids or offers (decree, October 7, 1890, 
 art. 43) ; (2) that a transaction by application that had 
 been immediately carried out had no validity; (3) that 
 the stockbroker held an indirect means of restricting 
 prices, because it was in his power to determine the amount 
 of cover to be exacted, and that wherever his agency does 
 not require him to exact cover, he ceases to be in a posi- 
 tion to repress the market's outbursts. It was taken 
 for granted that all the bourse regulations were dependent 
 upon public order. But it rather seems that they were 
 at the mercy of a contract entered into by two corpora- 
 tions anxious to treat each other gently." 
 
 a See Le Marche Financier du "Journal des Dtbats," February 17. 
 
 272 
 
History and Methods of the Paris Bourse 
 
 However, it is necessary to remark that this agreement 
 was forced upon the stockbrokers. The Waldeck- Rousseau 
 Ministry was then in power and was deeply shocked at the 
 way the financial market had been reorganized. The 
 economic principles of M. Caillaux, the Minister of Finance, 
 did not seem to him of a nature to admit that a broad 
 market should be based on a monopolized organization, 
 which is necessarily narrow. In 1898 M. Waldeck- 
 Rousseau had become counsel for the Coulisse after 
 the death of M. Clauzel de Coussergues; but the eminent 
 statesman, the Advocate- Prime Minister, was too high- 
 minded and conscientious to let his client's affairs 
 interfere with his government position. Moreover, any 
 legislative modification with a view to reorganize the 
 financial market, in the manner of the reorganization 
 of 1893, would have been a very serious proceeding, 
 a meaningless formula characteristic of his predecessor, 
 who had been his friend * * * before the "Dreyfus 
 Affair," and in opposition to whose policy the new 
 ministry was called "the Ministry of Republican 
 Defense." The members of the Coulisse were aware of 
 their lawyer's high-mindedness ; they had the good sense 
 to understand it, and they abstained from asking the least 
 favor of him; but Waldeck-Rousseau, better than anyone 
 else, knew the extent of the injustice done in 1898. The 
 stockbrokers knew it also, and when M. Caillaux, Min- 
 ister of Finance, exacted that they enter into an arrange- 
 ment with the curb brokers, they obeyed, being thor- 
 oughly convinced that to resist would be of serious con- 
 sequence, and that the monopoly would not be worth a rap 
 the day a Minister made up his mind to make an end of it. 
 
 273 
 
National Monetary Commission 
 
 Moreover, the stockbrokers are no theorists ; not to any 
 greater extent than the curb brokers are. One does not 
 feel embarrassed by considerations of public justice when 
 one is benefited by a privilege in becoming party to a 
 business. On the other hand, if one enjoys a monopoly, 
 he defends it to the best of his ability. If the Govern- 
 ment requires that the monopolist give in, he must give 
 in in order to hold on to whatever he can save. And 
 this is why the stockbrokers, when urged to enter into 
 an arrangement with the curb brokers, came to terms, 
 yielding, however, as little as possible. 
 
 (115) In short, the French financial market was able 
 to fulfill its mission only by taking the liberties which 
 the law refused to grant to it. 
 
 The official market of the stockbrokers, spurred on by 
 the competition of the curb brokers since the beginning of 
 the nineteenth century, has been transacting dealings for 
 future delivery. The laws gave in. They allowed the 
 stockbrokers to do that which was forbidden to them. 
 
 They allowed them to have sleeping partners (bailleurs 
 de fonds) . 
 
 They allowed them to deal in foreign securities. At 
 the present time the stockbrokers are legally unable to 
 close a deal with their clients, to have representatives in 
 a market other than the one with which they are con- 
 nected. These interdictions are the very corollary of 
 their condition. They are ministerial officers, appointed 
 to transact business in one market. To expand their 
 means of action can not be thought of. 
 
 But are the curb brokers permitted to undertake what 
 is forbidden to the stockbrokers? 
 
 274 
 
History and Methods of the Paris Bourse 
 
 On securities not listed by the stockbrokers yes. 
 
 On securities listed by the stockbrokers no. 
 
 If the curb brokers were to operate in officially listed 
 securities, they would encroach on the stockbrokers' mo- 
 nopoly, and would be liable to administrative fines for 
 want of being able to enter the name of a stockbroker 
 on the register prescribed for the payment of taxes on 
 bourse transactions; also to prosecutions in police courts, 
 and to see, besides, their clients plead the transactions 
 null and void. 
 
 The coulisse for rentes (coulisse de la rente) is tolerated. 
 The Registry Department enters no complaint against 
 its members, because the stockbrokers provide the curb 
 brokers in rentes (coulissiers a la rente) with special docu- 
 ments, valid only as regards the internal revenue not 
 valid so far as the clients are concerned. And the clients 
 may plead against the curb brokers nullity of the trans- 
 actions made for their account. 
 
 Credit companies and bankers may purchase or sell 
 listed securities over the counter. But they can not 
 apply purchases to sales. In such a case this would be 
 acting as intermediaries, and would fall under the ban of 
 the law of 28 Ventose, year IX, which punishes unwarrant- 
 able interference with the functions of the stockbrokers 
 (immixtion dans les fonctions des agents de change) . 
 
 Besides, there exists a judicial tendency, whereby a sale 
 over the counter, even if carried out as a commercial 
 transaction free from any act of mediation, might be 
 considered as a case of unwarrantable interference with 
 the functions of the stockbrokers. 
 
 275 
 
National Monetary Commission 
 
 In this way dealings in securities are subject to gro- 
 tesque and incongruous legal regulations. 
 
 A reorganization of the financial market appears neces- 
 sary. That of 1898 was not a reorganization. Its prin- 
 cipal aim was to prevent the passage of the measure 
 which was then paramount in everybody's mind, and 
 which was to be founded on freedom, without excluding 
 regulation. 
 
 The freedom of the market that is to say, free access 
 for everyone to the exercise of the profession of broker in 
 securities, freedom modified by a system of regulation 
 in the exercise of the profession certainly would offer a 
 desirable compromise between the system of monopoly 
 and the system of absolute freedom. 
 
 But the French Government does not seem inclined to 
 study the question seriously: first, because the stock- 
 brokers would have to be indemnified; and secondly, 
 because the stockbrokers themselves are desirous of hold- 
 ing on to their present monopoly. As time passes, the 
 securities, continually on the increase, tend to increase 
 their profits. A financial power has been created whose 
 existence, whose ever spreading influence, form the sub- 
 ject of a serious economic problem, which some day may 
 turn out to be an even more serious political problem. 
 
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