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The Stock Exchange
BOOKS ON BUSINESS
_Crown 8vo. 2s. 6d. net._
A series dealing with all the most important aspects of commercial
activity.
"Short, pithy, simple, and well informed, and written by men of
acknowledged authority, these books are equally interesting, whether
the reader knows something or nothing of the subject."
_Manchester Guardian._
PORTS AND DOCKS. By DOUGLAS OWEN, Barrister-at-Law, Secretary to the
Alliance Marine and General Assurance Company.
RAILWAYS. By E. R. MCDERMOTT, Joint Editor of the _Railway News_,
City Editor of the _Daily News_.
THE STOCK EXCHANGE. By CHAS. DUGUID, City Editor of the _Daily
Mail_, Author of the "Story of the Stock Exchange," etc. etc.
MONOPOLIES, TRUSTS, AND KARTELLS. By F. W. HIRST.
TRADE UNIONS. By G. DRAGE.
THE BUSINESS OF INSURANCE. By A. J. WILSON, Editor of the
_Investors' Review_, City Editor of the _Daily Chronicle_.
THE ELECTRICAL INDUSTRY. By A. G. WHYTE, B.SC., Editor of
_Electrical Investments_.
LAW IN BUSINESS. By H. A. WILSON.
THE MONEY MARKET. By F. STRAKER, Fellow of and Lecturer to the
Institute of Bankers and Lecturer to the Educational Department of
the London Chamber of Commerce.
THE SHIPBUILDING INDUSTRY. By DAVID POLLOCK, M.I.N.A., Author of
"Modern Shipbuilding and the Men Engaged in It," etc. etc.
THE BUSINESS SIDE OF AGRICULTURE. By A. G. L. ROGERS, M.A., Editor
of the last Volume of the "History of Agriculture and Prices in
England."
THE BUSINESS OF ADVERTISING. By C. G. MORAN.
THE COTTON INDUSTRY AND TRADE. By S. J. CHAPMAN.
CIVIL ENGINEERING. By T. C. FIDLER.
THE IRON TRADE OF GREAT BRITAIN. By J. S. JEANS.
THE BREWING INDUSTRY. By JULIAN L. BAKER, F.I.C., F.C.S.
THE AUTOMOBILE INDUSTRY. By GEOFFREY DE HOLDEN-STONE.
MINING AND MINING INVESTMENTS. By A. MOIL.
THE STOCK EXCHANGE
BY
CHARLES DUGUID
CITY EDITOR OF "THE DAILY MAIL"
AUTHOR OF "THE STORY OF THE STOCK EXCHANGE"
"HOW TO READ THE MONEY ARTICLE"
ETC. ETC.
THIRD EDITION
METHUEN & CO. LTD.
36 ESSEX STREET, W.C.
LONDON
_First Published.... February 1904_
_Second Edition..... November 1906_
_Third Edition .... November 1913_
PREFACE
In accordance with the scope of the series of Books on Business, of
which this little work forms an item, its main object is to explain to
the unversed in simple terms the somewhat complicated machinery of the
Stock Exchange. Some criticism is ventured upon here and there, and a
practical hint may be gleaned now and again from its pages; but the real
aim of the book is merely to explain, not to comment. If the book
conveys some idea of the important part the Stock Exchange plays in the
economy of the nation, and of how it plays that part; if it furnishes a
solution of the various mysteries which the routine of the Stock
Exchange presents to many minds, the objects of the little work will
have been attained.
Owing to the continued demand for the book, and to the changes which
have occurred during the decade which has elapsed since it was written,
it is now reprinted in revised form.
C. D.
PARK LODGE,
NEW BARNET, HERTS,
_July, 1913_.
CONTENTS
I. WHAT THE STOCK EXCHANGE IS 1
II. THE MARKET-PLACE 6
III. THE MEMBERS AND THEIR CLERKS 18
IV. THE COMMITTEE 26
V. BROKERS AND JOBBERS 32
VI. HOW BUSINESS IS TRANSACTED 45
VII. THE SETTLEMENT 56
VIII. THE ZOOLOGY OF THE HOUSE 65
IX. OPTION DEALING 72
X. THE WARES OF THE MARKET 84
XI. FAILURES 101
XII. PRICE LISTS AND RECORDS 109
XIII. THE ROYAL COMMISSION'S VIEW 125
XIV. A SKETCH HISTORY 138
XV. A BROKER'S DAY 150
XVI. FROM A SOCIAL POINT OF VIEW 161
INDEX 169
CHAPTER I
WHAT THE STOCK EXCHANGE IS
The Stock Exchange has been described as the mart of the world; as the
nerve-centre of the politics and finances of nations; as the barometer
of their prosperity and adversity; and so on. It has also been described
as the bottomless pit of London, and as worse than all the hells.
Perhaps, however, the Stock Exchange can best be defined and described
as a market. Just as Smithfield is the market for meat and Covent Garden
the market for flowers, fruit, and vegetables, so is the Stock Exchange
the market for stocks and shares.
These stocks and shares, as everyone knows, are, roughly speaking,
sleeping partnerships. The holder of railway stock is a part-proprietor
of the railway, and is entitled to his proportion of its profits; the
holder of shares in a mining company is similarly part-proprietor of the
mine. Even although the holders of the stocks of a nation, such as
Consols, or of the debenture stocks of a company, are creditors and not
proprietors, they depend, for the income which those stocks yield them,
upon revenue and profits, just as does a partner in a business.
It will at once be seen that although the Stock Exchange may be defined
as a mere market, the wares that are displayed and dealt in are of such
importance as to entitle it to the more ambitious definitions with which
it has been exalted. It is worthy of being defined as the mart of the
world, because these wares represent property in every part of the
world, and because the orders which are executed in this mere market
emanate from all over the world. The business of the Stock Exchange is
more varied and cosmopolitan than that of any other mart, except,
perhaps, the Money Market. The business of the Stock Exchange may be
described as the business of businesses. The institution may be defined
as the nerve-centre of the politics and finances of nations, because in
this mere market all that makes history is focussed and finds
instantaneous expression. It is worthy of being defined as the barometer
of their prosperity and adversity, for a glance at the tone of this mere
market, whose wares are more mercurial than these of any other mart,
suffices to indicate their condition. It may almost be said that the
price of Consols is the welfare of the world expressed in one figure.
Perhaps the Stock Exchange is unworthy enough to be defined as the
bottomless pit, and to be described as worse than all the hells, if we
look at the mere market from the point of view of those who abuse the
facilities which it offers for free dealing--but only from that point of
view. Without the Stock Exchange our commercial and industrial life
could never have attained its modern refinements. Indirectly this
institution provides the sinews of industry and commerce, or, at all
events, that one great sinew, capital. The inventor with an idea to
develop, the trader with a business to expand, the pioneer with a
country to explore, the Government with a scheme to finance, all betake
themselves eventually to the Stock Exchange.
It is the organisation of capital for speculation and investment, even
as the banks are the organisation of capital for loans. Its members are
in close touch with all the capitalist investors and speculators in the
country, and can lay any scheme for which the financial sinews are
required before them. Moreover, in providing a free market for the
securities upon which the money is subscribed, the Stock Exchange tempts
subscriptions, and indeed renders them possible where otherwise they
might not be. Most people would hesitate to part with their money in
exchange for even the best securities, did they not feel assured that,
if necessity arose, they could readily obtain its return by selling the
security in the free market which the Stock Exchange affords. But for
the Stock Exchange, even the Government would find a difficulty in
borrowing; whilst great schemes, national, commercial, and industrial,
would languish in the lack of a ready flow of capital. Railways could
not traverse the land nor ships the sea; enterprise would be
discouraged, and the original and progressive ideas of clever men would
decay undeveloped. Thus the Stock Exchange is linked closely with the
prosperity of the world in general and of the nation in particular, and
it has grown with the development of that prosperity.
Some very fair idea of how it has grown is obviously conveyed by a
statement of the nominal value of the wares in which it deals. It is
impossible to form an estimate of the whole of the enormous amount, as
there are dealings in so many securities which are not recognised in the
Official List of the market. But the nominal value of the securities
thus quoted at the end of 1912 reached the enormous total of
£10,990,249,126; this comparing with £8,787,316,406 in 1902, an increase
of £2,202,932,720, or no less than 25 per cent. In other words, the
amount of securities officially quoted in the Stock Exchange is
one-quarter larger than it was a decade ago.