MONEY AND BUSINESS AFFAIRS

Manawatu Standard, Volume LVI, Issue 63, 12 February 1936, Page 6

MONEY AND BUSINESS AFFAIRS

STOCK EXCHANGES. (By H.J.K.) A stock exchange may be claimed to be one of the business amenities of a city, and as the people of Pahnerstom North hope to see t'heir city with a population of 50,000 —a good project to foster—a stock exchange becomes one of the earliest necessities. It may be said that the town is not ready tor such an institution; then the stranger desires to know when it will be ready. Such institutions invariably start in a small way. The Wellington Stock Exchange started with about five members in the ’eighties, and now. with its country members is the largest in the Dominion. If there are three or tour licensed brokers in the town they could hold a call at least once a day, say, at 2 p.m., and post up the quotations. It will be slow work at first, but that is the case with all new efforts. Palmerston North must have a stock exchange sooner or later, and the sooner the better. , The London Stock Exchange, in Capel Court, is the most important in the world, and was started in 1802 with fifty members. But stockbrokers were in the habit of meeting long before that. 'they used to congregate m Change Alley, the leading brokers meeting in Jonathan’s Coffee House. The present Stock Exchange is a member-owned business, capitalised at £720,000 plus £540.000 of debentures. Each of the 19,900 ordinary shares, £36 paid, is now quoted around £275. Membership increased last year by 27 to 3988. Lon don stockbrokers have had a very thin time, during the slump, but if the “economic recovery” continues, many of them will be switching from whisky and cigarettes to champagn4 and cigars. BECOMING A MEMBER.

It costs a lot of money to become a member of, say, the New York Stock Excliange, but in London they preier character of wealth, and like liiember-i-h.p experience. If a peison has not quaiifiou by service tor special terms, and wants to become a member, he must find three members to recommend Him and become surety for £SOO apiece. Then there is 000 guineas entrance fee and 100 guineas subscription. Further, the applicant must buy the “nomination" of a deceased or retiring member. This varies with the state of the market; in the 1928-29 period it ran as high as £IBSO and has since been as low as £SO, Finally, the new member must acquire a minimum of three stock exchange shares. But a clerk who has been working four years in the stock exchange can get in for half the ordinary entrance fee and annual subscription; he need buy only one stock exchange share, and find two guarantors in the sum of £3OO each. Whether the new member sinks or swims is thereafter strictly up to himself. Anyone who thinks high technical efficiency or pre-eminence in theory is going to make a broker rich, errs. Successful brokers, like successful lawyers, can hire cheaply all the academic brains they need. The men who make big money are the men who can -build up connections and drag in a large volume of business. The London stockbroker is forbidden to advertise, and thus getting business is the mb. The conservative controllers of this professional' close corporation, the thirty members of the General Committee, draw the attention of the citizens by a dignified advertisement to the fact that a. number of gentlemen of integrity, operating under strict rules and regulations in a constituted market place, are willing to buy or sell for you shares, stocks, bonds or debentures. But if you write and ask to be put ill touch with a good broker, all you will get will be a list of the members. It is left to you to pick one.

GETTING BUSINESS. Tlie London broker may not provide facilities for speculation through a chain of branch offices, which, is the case in New York. He is allowed one office address and there he has to stick. How then does he get business? Apart from his own personal connection, he gets it through banks, insurance companies and other business organisations with money to invest, through solicitors and trustees; and he gets it through one-tliird commission agents and half-commission men. The latter are skirmishers who may or may not know anything about trade industry, economics, finance and all the other underlying factors which move markets; they go out and drag in business from drawingrooms, dining rooms, cocktail bars, boudoirs, restaurant clubs and regimental messes. London and New York look at the commission problem from different angles. London considers it ethical to split a commission, but unethical to advertise; New York sees it the other way round —it is the worst of professional crimes for a Wall Street broker to split a commission. In New York they clear up their affairs daily, settling by stock delivery and cash payments, and margins must be put up if one wants to deal. London, on the other hand, is a contract market with deliveries and payment fortnightly, and the speculator who is properly vouched for need not put up margins, at any time for reasonable dealings. The London system gives greater facilities for speculative operations. If investigation is made into this seeming paradox it will be found that it is not the system that matters so much as the human element. Even in a “bull” market mood the British public do not gamble so wildly as they do in the United States. Stock market regulation is also made lighter in London. While the London Stock Exchange is divided between brokers and jobbers (members can be either, but not both), the jobber being the dealer who makes the price to the broker without knowing whether the latter is buyer or seller, the New York broker is everything—he accepts orders, deals, trades on his own account and can do many other things which the British broker is forbidden to do in the public interest. ON THE CONTINENT.

The Paris Bourse is State-controlled and supervised. Its seventy members alone may trade in officially listed securities. Around the pillars of the Bourse portico will be found coulissiers dealing in securities not officially listed—that market corresponds to the New York Curb market, and is, as a matter of fact, bigger l and livelier than the august Bourse proper. The Berlin Bourse is even more strictly controlled. The big banks dominate it. The banks are members of the Bourse and do practically all the buying and selling for the German public, while the Berlin stockb-oker deals with the banks and not with the public. They have a bank check system for securities, which have a habit of staying in bank strongrooms. Some 300 only of all the securities traded in on the Berlin Bourse fluctuate in_ price daily; the rest are subject to a daily price fixing. The Amsterdam Beurs, alone of the European stock exchanges, is free; but its 1000 members limit their trading to an hour daily, and dealings are for cash. The securities on the official list of

the London Stock Exchange aggregate £18,500,000,000, 'and it is by far the freest of all the stock markets and the most important to the world flow of capital. London stockbrokers are nob licensed by the State as they are in New Zealand.