The stock exchanges of the world must not be considered simply as
noisy congregations of brokers speculating in securities under the
guise of legitimate business. They really play an important and
necessary part in the financial mechanism of the country, and are
instruments of enormous value in subdividing and distributing capital,
and in directing its employment in great commercial and industrial
enterprises.
The largest stock exchange of the world is that of London. It is not
only the centre of the English market for stocks and securities but,
like the Bank of England, it is linked internationally with nearly all
the financial centres of the world. Almost every reputable security is
marketable in London, either through the ordinary channels provided by
arbitrage dealers, who buy in the cheaper and sell in the dearer
markets, or through the agency of trusts and investment concerns. The
magnitude and extent of the financial resources of the London Stock
Exchange are enormous. Its advantages to the business public outweigh
altogether the drawbacks imposed by the too-speculative spirit of
mankind. It is a great business barometer, extremely sensitive to all
conditions likely to disturb the world's finances. The London Stock
Exchange has scarcely more than one hundred years of history. In the
early part of the century the elder Rothschild was one of the giants
"on 'change," and it was in this business that he amassed the great
fortune which makes the name of his house a synonym for money power.
The membership of the London exchange is not limited to a fixed
number, as in Paris and New York. In the Paris Bourse all agents are
strictly forbidden to trade on their own account.
[Illustration: The Paris Bourse.]
The New York Stock Exchange was formed in 1792. There are 1100
members. Members are elected and must be nominated by two men who will
say that they would accept the uncertified cheque of the nominee for
$20,000. The initiation fee is $20,000. Memberships have sold as high
as $32,500, and the market value of a seat on the Exchange varies only
slightly from year to year.
[Illustration: Interior view of New York Stock Exchange.]
There are stock exchanges in all large cities, and scattered
throughout the country in convenient centres are grain and produce
exchanges, cotton exchanges, petroleum exchanges, etc. These exchanges
are really the central markets for the commodities they represent.
Commodity exchanges deal in actual products, even though the dealers
handle nothing but warehouse receipts or promises to deliver. Stock
exchanges deal in credits and securities, which may or may not have a
tangible value back of them.
There is no reason why bonds and shares should not be publicly dealt
in--and in large quantities--as well as dry goods, corn or cotton;
but, unfortunately, few stock exchanges confine their transactions
wholly to legitimate business. You will look in vain in the quotations
for the stock of dozens of corporations whose securities are among the
choicest investments. It is upon fluctuations that stock speculations
prosper, and it is often true that the largest profits are made on the
poorest stocks.
Transactions are quickly collected and reported to the world. In
hundreds of offices in New York, Chicago, and other American cities
may be seen a little instrument called a _ticker_, which automatically
prints abbreviated names of stocks, with their prices, on a narrow
ribbon of paper. These _tickers_ are rented to these offices by the
telegraph companies, and as fast as the sales are made the quotations
are ticked off in thousands of offices in all parts of the United
States.