STOCK EXCHANGE METHODS.

Auckland Star, Volume XLI, Issue 162, 11 July 1910, Page 6

STOCK EXCHANGE METHODS.

(To the Editor.) Sir, —We have lately heard so much regarding tlie methods of the Stock Exchange that I have come to the conclusion it is about time some reply was made to those critics whose remarks, however absurd they may appear to those who are in close touch with financial affairs, are evidently taken as gospel by a section of the public who are not in a position to gauge tho value of the criticism so glibly expressed by a number oi amateurs whose ignorance of the subject is profound. Numerous are the critics who appear to think that the members of the Stock Exchange are in a position to put shares up and down at will, and that brokers combine with one another to do this. It may not be generally known that the Stock Exchange daily calls are attended by representatives of the Press, and that the keenest rivalry ds displayed in buying or selling shares, the prices of which, like anything else, are regulated by the immutable laws of supply and demand. Surely a moment's thought will convince any reasonable being that at what is practically an auction sale, where 30 or 40 brokers are assembled, representing thousands of clients with diverse interests, any combination of this sort is practically impossible. Can other brokers control the prices of land, wheat, oate, or any other marketable commodity? If a broker could do this, he could retire with a fortune in a few months. V". ithout knowing how many commercial brokers have retired with fortunes, I do know that during the last half century one could count on the fingers of one hand the number of sharebrokers who have retired with even a modest competency. This, I think, disposes of the amazing fallacy that the members of the Stock Exchange can control prices. Tlie only way they can keep up prices is to continue to buy aud pay for as many shares as the other members at the daily calls choose to sell j so soon as the sellers offer more shares than the buyer can take, prices cannot be maintained, and values must fall, just as prices recede when there is a surplus in the .supply of oats or wheat or any other marketable commodity. On the other hand, if there are more buyers for shares, or for oats, or for anything else, a rise in prices is inevitable. We now come to the much-discussed question of "bearing" shares. On every occasion shares fall in value, owing to legitimate selling orders, it has become a habit with certain people who have

not been lucky enough to sell at top prices to accuse brokers of "bearing" the shares. As. a member of the profession, I can assure tp.e public there is a heap of nonsense talked about this subject. A "be_r" is a speculator ' who sells on the chance of stock falling in price, and who attempts to depress the market by selling "short," or what 'i 3 usually termed over-selling. The question of overselling has been recent--1 ly'discussed hy a conference of members ; representing all the Stock Exchanges in New Zealand, with a view to the suppression of a practice which is gener--1 ally condemned. Its suppression is not 1 such an easy matter as Messrs. H. Poland, E. H. Taylor, and other airy ' .critics appear to believe. The danger 1 from a sharebroker's point of view is ' that, whereas they realise how little 1 Messrs. Poland and E. H. Taylor know ' about the subject, a majority of tlie ' public in the Dominion may take those ! gentlemen seriously. Whilst I am on * this subject, may I Implore Mr. Po- ' land to refrain from making himself ridiculous by suggesting that the numbers of shares should be quoted when ! selling? If Mr. Poland had a merely ' elementary knowledge of transfer registers, he would know that when, say, ! 1,000 shares are bought they are fre- . quently purchased in lot 3. of fifties, '. hundreds and in dozens of other de- . nominations, all of which have their ' respective numbers. When those share- , j are sold, they may be disposed of in ' I various parcels to people in various parts I of the Dominion. One can imagine the . chaos that would rule if Mr. Poland'e suggestion were adopted. \ Ao I have already stated, the Stock " Exchanges of New Zealand are strenu- • ously endeavouring to remove an evil, which, although.much exaggerated, ceri tainly exists, and if "Mr. Poland or Mr. E. , If. Taylor would take the trouble to i confer with the Stock Exchange authori- . ties, they would learn that our rules . provide that, except when seller lives at [ a distance, transfers can be demanded E from sellers within three days from date i of sale. This rule, if enforced by tho • public, would do much more to stop overselling than any suggestion yet made. In conclusion, I would assure the representatives for Ohinemuri and Thames > that the sharebrokers of New Zealand are possessed of at least as many virtues as any other class of the community— not excluding politicians, professional or otherwise. —I am, etc., EDWARD ANDERSON. * Auckland, July 6.