PRICE LISTS AND RECORDS
Foremost amongst the publications which emanate from the Stock Exchange,
and there are a good many, is, of course, "The Stock Exchange Daily
Official List." Its main purpose is to supply the outside world with an
official record of the prices of securities. It is compiled under the
authority of the Committee and the superintendence of the Secretary of
the Share and Loan Department, and published by the Trustees and
Managers. The Committee is thus the editor of the List, and is
responsible for the accuracy of the prices and other particulars which
it collects and sets forth. The List is an imposing publication of
sixteen closely printed pages, and contains the names of over four
thousand securities. It is issued at about 5 o'clock each evening (about
2 o'clock on Saturdays) and gives the prices at 3.30 (1 o'clock on
Saturdays). The annual subscription for the List is £4, exclusive of
postage, and single copies cost sixpence each. Long before the time of
publication, every day there may be seen outside the offices a motley
queue of commissionaires, clerks, and office-boys waiting for the copies
as they are delivered from the press.
The securities quoted in the List may be described as favoured
securities, for it is the ambition of every company to obtain an
official quotation for its stocks and shares. Every week there is
published by the Committee a list of those securities for which
quotation is sought, and another list of those in the case of which the
application has been granted. The Committee is never tired of
asseverating that when it grants quotation in the Official List to any
security it does not thereby imply that that security is of superior
status to other stocks and shares which are not so quoted; but the fact
remains that official quotation does, undoubtedly, endow a security with
a certain prestige. There is always some kind of market in securities
quoted, and it is more easy to borrow upon them at the banks; whereas it
is impossible to buy or sell many securities not quoted without long
negotiation, and some of them may not be recognised by anybody except
the promoters who have issued them.
Before a security can obtain quotation in the Official List, it has to
possess certain characteristics, and its sponsors have to conform to
certain formalities. The idea of quotation is not to enable those
interested in the loan or company to sell the securities; quotation is
for the benefit of the public; indeed, before quotation is granted, at
least two-thirds of the securities issued must have been allotted to the
public as distinct from vendors and others. The formalities to be
observed resemble in many respects those imposed in the case of the
granting of a special settlement. The loan or company has to be of
sufficient magnitude and importance. Such documents as the prospectus,
which must have been publicly advertised, the articles of association,
which are the rules of the company, the allotment book, showing the
extent to which the securities have been publicly issued, the banker's
pass-book, certified copies of contracts and concessions, have all to be
deposited. It has to be stated that the certificates or bonds are ready
for delivery, and that the purchase of the properties has been
completed. These are roughly the requirements, and a broker has to be
appointed in connection with the loan or company authorised and ready to
give full information in answer to the inquiries of the Committee.
It will be noted that in considering applications for quotation in its
Official List the Committee attaches importance to the production of a
publicly issued prospectus. This is natural, for the prospectus is, as
it were, the written guarantee of those offering the securities for sale
to those who subscribe money for them. In spite of the requirement,
however, the number of new companies floated without the issue of a
prospectus is far greater now than it was before the Companies Act of
1900 was passed. Under the old law, the regulations as to the
information which a prospectus should impart were far less stringent
than they are at present, and company promoters, who then had no
objection to issuing prospectuses, seem anxious to avoid their issue
now. The directors of a certain class of company find it inconvenient to
bind themselves down in writing to statements sufficiently attractive to
induce subscriptions, and yet sufficiently true to stand investigation
should questions subsequently arise. Thus even at the risk of
sacrificing the possibility of quotation in the Official List, they
prefer to issue no prospectus at all. Some of them in its place publish
a statement which is described as being not a prospectus, and as being
issued for public information only, not to invite subscriptions. Such a
statement, of course, may contain all that is in favour of the company
of whose shares it is sought to dispose, and yet need not contain
particulars as to contracts and the like, which the law requires in a
prospectus, and with which it is essential the subscriber should be
acquainted.
When such a statement is issued, care is taken by the promoters that the
shares are easily obtainable in the market, although the statement dare
not invite subscriptions for them, for by so doing it would convert
itself into a prospectus. Simultaneously with the publication of the
statement, a process known as "making a market" goes on in the Stock
Exchange. The promoter, who holds all the shares, arranges with a jobber
to sell them. He probably gives the jobber a call on the shares at a
certain price, and anything which the jobber can obtain for them over
that is his profit. Then the promoter instructs some brokers to buy the
shares and others to sell them, and in this way he produces a semblance
of activity. It can easily be arranged that the price shall rise rapidly
enough to attract attention. The buying may cost the promoter a good
deal, but if a public demand is thus created, it is merely a case of the
sprat to catch the whale. The public demand is not created, of course,
through the honest brokers, who have no difficulty in seeing through the
game, but with the aid of financial and other newspapers of a certain
class. The character of these papers is notorious, but there seem to be
always some among the public ready to be misled, and in this way the
process of making a market sometimes succeeds even in these days of
awakened intelligence in Stock Exchange affairs. It would succeed less
if it were not the fact that some straightforward and successful
companies exist to-day which have never issued a prospectus, and which
in some form or other have made a market in their shares. It is
conceivable, of course, that a market may be made naturally without the
underhand expenditure of the promoter. But the manner in which the
public has been fleeced over and over again by the process of
market-making has led to much of the unpopularity with which the Stock
Exchange has to contend. It is a glaring blot on an institution
otherwise excellently managed, and it is not too much to hope that the
Committee will at some time or other give the subject its attention.
That the Committee is aware of the importance of the issue of a
prospectus, which places the shares of a company without the process of
market-making, is shown by its requiring the production of the document
before the securities can be quoted in the Official List. When they are
so quoted, the list gives not only the latest price of the stocks or
shares, but provides an adequate description of the security, states the
total amount of the authorised issue, the amount which has actually been
issued, the rate of the last interest or dividend payment, and the date
when those payments are due. It also gives the nominal amount or the
amount paid up on the stock or share, and by comparing this with the
market price it can at once be seen whether the security stands at a
premium, or at a discount, or at par. Ten-pound shares quoted at
13-1/2-14-1/2 are at 4 premium, 14 being the middle price between the
selling price and the buying price, both given. One-pound shares quoted
at 13/16-15/16 are at 1/8 discount; when the market quotation is exactly
equal to the denomination of the share, the price is at par.
Immediately against the quotation there often appear the letters _x d_,
an abbreviation for ex dividend, which means that the price of the
security does not include the dividend which the company has just paid
or is about to pay upon it. The name of one who sells the security after
the dividend is declared may be on the books of the company, and he will
receive the dividend warrant; but if at the time of sale the stock was
not quoted ex dividend, he has to hand over the amount of the dividend
to the buyer of the stock. The buyer's broker will demand it. Thus when
a stock is quoted ex dividend the price immediately falls, other things
being the same, by the amount of dividend payable. The dividend in the
case just mentioned is sent to the seller of the stock, because from the
point of view of the company he is its holder--the transaction occurred
after the books of the company had been closed in order to prepare the
dividend. The stock is not, of course, quoted ex dividend before the
books of the company have been closed, nor before the dividend is
actually declared, but the guiding principle is to quote it ex dividend
as soon after these events as possible. In the case of the Funds,
however, where the closing of the books is on a fixed date, the
settlement is made to synchronise with the closing of the books, and the
quotation becomes ex dividend practically simultaneously.
Other marks somewhat similar to ex dividend may appear against the
quotation in the Official List, such as ex rights, ex new, or ex all.
"Rights" may probably refer to the privilege which a holder of the
shares has of subscribing to shares in another company, a privilege
which enhances the value of the shares he holds. "New" may probably
refer to the privilege which a holder has of subscribing for new shares
in his own company. Sometimes the holder is entitled to both these
privileges, and perhaps others, besides the dividend; all these
privileges being referred to for abbreviation's sake as "all." A seller
of the shares after they are marked "ex" these privileges retains the
privileges, and consequently gets a lower price for the shares.
There is provided in the Official List against the name and quotation of
every security ample space for the record of the prices at which
business has actually been done during the day. This space is usually
blank. If the business done were accurately represented by the markings
in the List, the Stock Exchange would be an idle place indeed. Reference
has been made in a previous chapter to the reason for the blank
appearance of the "business done" column, and it is often urged that in
this matter there should be some reform. Many, indeed, go farther and
suggest that not only should the prices be recorded in the case of all
business transacted, but that means should be devised for placing on
record the total volume of that business, as is done in the New York
Stock Exchange. There day by day the public is informed as to the number
of shares that have been bought and sold; here no such record is kept.
Criticism has often been levelled against the Official List, too, on the
ground that its prices are so wide as to be valueless. When a stock is
quoted at, say, 106-109, no one who knows his Official List will suppose
for a moment that the stock can be bought by the jobber as low as 106
and sold as high as 109. The broker going to the jobber in the market
would obtain a much narrower quotation. Even if the student of the
Official List might conclude that as the stock is theoretically quoted
106-109, the practical price is round about 107-1/2, that is, midway
between the two, it would be something. But as a matter of fact, whilst
the stock is quoted 106-109, business may actually be done at 106-1/4 at
one time and below 107 all day.
Other critics would have the List greatly expanded, so that official
prices might be obtainable for a number of securities more in accordance
with the number of those in which dealing actually takes place. These
critics say that if the inclusion of all kinds of securities would be
inexpedient, as altering the character of the List, then a supplementary
list should be issued. Yet other critics say that the prices should be
made up to a later hour. The latest profess to be 3.30 o'clock prices,
whilst as a matter of fact, they are in the great majority of cases
collected half an hour previously; and whilst the official closing time
of the Stock Exchange is half-past three o'clock, the House remains open
until four o'clock, and dealings go on inside the House until that hour.
Even after the Stock Exchange is closed, of course, business is
transacted in what is called the Street Markets. Generally speaking,
business in only the most speculative securities is transacted in the
street after hours. Dealers in South African mining shares block
Throgmorton Street itself for a couple of hours, more or less, according
to the activity of business; and dealers in American railroad shares
occupy Shorter's Court, a diminutive square just off Throgmorton Street,
with which it is connected by a covered way, an entrance to the Stock
Exchange being situated in the square. The Street Market in Americans is
legitimate in a special sense, because business in New York has been
going on for less than an hour when our market is closing, and, of
course, the trend of prices in New York has a considerable effect upon
quotations here. But the Stock Exchange recognises no street dealings of
any kind, and has never done anything to encourage business after hours,
in spite of various suggestions that have been made, especially at the
time when several members found themselves in the police court, charged
with causing an obstruction in Throgmorton Street.
Partly because prices are made up officially only to 3.30 o'clock, but
more because brokers desire to furnish their clients with the prices of
stocks and shares in which they are specially interested, many brokers
compile price lists of their own for despatch to their clients. For
practical purposes these smaller lists are more serviceable than the
great Official List, as the quotations are not only later, but, being
less wide, give more idea of the prices actually prevailing. Another way
in which prices are conveyed from the Stock Exchange to the outside
world, and a way much more expeditious than by either the Official List
or the brokers' lists, is through the medium of the tape machines of the
Exchange Telegraph Company. These tape machines are to be found in
brokers' offices, clubs, and wherever a subscriber may care to have
them, and from the ingenious instrument the tape issues forth all day,
showing not only the prices, but the time at which they are quoted.
There is only one class of persons who may not subscribe for the Stock
Exchange price service of the Exchange Telegraph Company, and those are
outside brokers. Until about twenty years ago a roaring business in the
way of betting on the tape used to be transacted in the offices of these
outside brokers. Some say they derived their title of "bucket-shops"
from the fact that the tape was made to fall from the machine into a
bucket for tidiness' sake, but that derivation of the opprobrious title
is doubtful. Then, however, the Stock Exchange Committee put a stop to
the practice by informing the Exchange Telegraph Company that it must
cease to supply outside brokers with the tape, or its privilege of
collecting prices in the Stock Exchange would be withdrawn. It was with
some difficulty that the privilege was obtained. The company collects
the prices in the markets by means of its own staff, and the prices it
telegraphs are by no means official.
A kind of weekly edition of the Stock Exchange Daily Official List is
issued under exactly the same auspices as that list, and is called "The
Stock Exchange Weekly Official Intelligence." It quotes all the same
securities, repeating the salient particulars, but instead of giving the
current price it shows the highest and lowest prices touched during the
week which it covers and since the beginning of the year. It also gives
a list of the securities which have been removed from the Daily List
owing to absence of business in them, keeping on record the last price
marked. It further publishes other important official information,
giving notice of forthcoming settling days and buying-in days, recording
the special settlements and quotations which have been applied for and
have been granted; it gives notice as to when securities are to be
quoted ex dividend; it announces dividends, forthcoming company
meetings, and closing of transfer books; publishes important notices
issued by companies, sets forth traffic returns, and imparts other
information. The subscription is £2 10_s._ a year, exclusive of postage,
and single copies may be obtained for 1_s._ 3_d._ each. It consists of
about thirty large pages.
The information contained in the Daily Official List and in the Weekly
Official Intelligence is covered in a ponderous tome called "The Stock
Exchange Official Intelligence," which is issued annually. In spite of
drastic steps taken in recent years to reduce the bulk of this important
Stock Exchange publication, the current volume contains 1,784 pages, and
weighs eleven or twelve pounds. Its published price is 50_s._ The great
work deals exhaustively and concisely with practically every security of
any importance known in the Stock Exchange, stating clearly the amount,
the rate of interest borne or the dividends paid in the past few years,
with the highest and lowest prices where they are quoted in the Official
List. What amounts to an outline history of every security is furnished,
and in the case of companies the names of the directors and officials
are set forth. Besides being thus an encyclopædia of Stock Exchange
securities, each annual volume contains a number of masterly
authoritative treatises on topical subjects, and other appropriate
information of a general character. In the compilation of such a work,
which is now in its thirty-first year, a vast amount of documentary
record has been collected and preserved. The Stock Exchange naturally
possesses the most voluminous store of financial and company documents
in the world.
Other publications are issued by the Stock Exchange, such as an annual
Directory of Members, giving their names and private and business
addresses, showing the partnerships which exist between them, stating
the names of their bankers, and showing the year in which they became
members. The Committee also issues, of course, volumes containing the
Rules. These number 178, and however salutary they may be in practical
effect, they are exceedingly complicated and loosely drafted. The Rules
of the Stock Exchange are like its architecture; their compilation has
been governed by opportunism. A clause has been added here, and taken
away there, to meet exigencies, just as in the case of the structure
offices have been absorbed and walls removed, as opportunity arose of
providing more space. This has resulted in a lack of homogeneity and
other defects; but even as the members manage to put their House, of
which they are exceedingly proud, to good use, so do they manage to
conform to their Rules, with which they are, of course, supposed to make
themselves thoroughly acquainted.