736 



STOCK-EXCHANGE 



exception is India rupee paper, where the pur- 

 chaser buys at the quotation tor the )iriuci|ial and 

 pays the vendor of the security the amount of 

 accrued interest. 



Stock-exchange securities are of two characters, 

 inscrilied or registered, and to l>earer. In home 

 government funds and several colonial and munici- 

 pal ' inscribed ' issues the names of stockholders are 

 registered (inscribed) in books kept at the Bank 

 of England, or other banking agents of the govern- 

 ment or corporation. When such stock is sold the 

 vendor or his attorney must attend the l>ank and 

 sif,'ti tin 1 tr.-in-fi-r in the books. Where stock in a 

 railroad or other company that registers the name 

 of the stockholder is sold by the registered pro- 

 prietor a deed of transfer, subject to stamp-duty, 

 has to be executed, and this deed, with the stock 

 or share certificate, is passed to the purchaser, who 

 directly or through his agent lodges them with 

 the company for registration into nis own name. 

 Securities to bearer are those the title to which 

 passes by mere delivery, and the interest or divi- 

 dends are paid periodically by means of coupons. 



Almost all stock-exchange transactions in Great 

 Britain are purchases or sales for what is termed 

 the settlement. There are cash transactions for 

 immediate payment or delivery, but except for 

 consols bargains for cash are exceptional. The 

 settlements are periodical monthly in the case 

 of home government funds and bi-monthly in other 

 securities. The Consols settlements fall due about 

 the first or second day of the month, sometimes a 

 day or two later. Settlements in foreign and col- 

 onial government bonds, railway, and other indus- 

 trial and miscellaneous securities are fixed to fall 

 in the middle and at the end of each month. In 

 dealing in registered securities it is necessary for 

 the purchaser or seller to furnish the broker en- 

 trusted with the business with full particulars. 

 A purchaser should give his full name, address, 

 ana occupation. A seller is required to forward 

 to the broker the certificate of title. Where the 

 transaction is in securities to bearer the vendor 

 simply has to hand the securities to his broker, 

 and tlie transaction is in all respects similar to the 

 exchange of a bank-note for cash. 



Hn the Paris Bourse settlements arc arranged 

 each fortnight in foreign government and mi.-eel 

 bin-on-, securities, ami monthly in French rentes, 

 <'ity of 1'aris bonds, Bank of France shares, Credit 

 Foncier securities, and French railway stocks. 

 The 'settlement ' (liquidation ) occupies five or six 

 days, and except for intervening holidays or Sun- 

 days the procedure is as below : 



Monthlr Liquidation : option* decland Fortnlfktlr Liquidation ; ink ol 

 iMt day of month. month. *lo carrying am. 



Rente continued lit next month 



Other securities continued id ,. 18th of month. 



Account* nude tin 3d n 17th n 



Client* pay broken and ) ... 



dellrerVcuritie, {** " *"> 



Broken pay client* sth n 19th ,, 



Broken deliver securities.. 6th .. 20th .. 



In Berlin the bust .lay of the month is 'pay' day, 

 and live days In-fore in option day. In New York 

 transactions are for cash, with daily settlements. 



A very large j>io|Mtitioii of the business done 

 in the stock market* is speculation done in time 

 bargains. A purchaser who imagines that some 

 MM-eial security is likely to rise in price buys for 

 the settlement, in the hope of being able to sell at 

 a profit before the date for payment falls due. If 

 a change in price the way lie expects is delayed, 

 he renews the transaction from settlement to settle- 

 ment. It may be the case that a fall in price is 

 expected, and 'an operator sells in the hope of lieing 

 able to buy back at a lower price. The purchaser 

 for a higher quotation is in stock -exchange parlance 

 called a bull. The seller who anticipates a fall in 



prices is termed a bear. If there is a pr< 

 aiii-t- of bull sixM-iilation high terms are a*Ked for 

 the loan of money on the security of stock, termed 

 a rate of runtungu, which may be expressed as so 

 much ]"-r share or per cent, on the nominal liuniln-<l 

 ]N>unda of capital, or it may be a rate per cent. 

 upon the actual amount of money to be borrowed. 

 If many |>ersons have formed an adverse opinion 

 as to the course of the market, and there is what 

 is termed an oversold state of the account, it fre- 

 quently hapiiens that those bears who have sold 

 what they do not possess are called upon by real 

 owners of stock, snares, or bonds to provide a 

 bonus, termed backwardation, to pay the holder 

 of the security for the trouble and risk attendant 

 ou lending it to the seller. Sometimes a long-con- 

 tinued speculation for the fall is attended with 

 very high backwardation charges, and not infre- 

 quently violent fluctuations in the price of the 

 scrurity. Combinations to resist the adverse effect 

 of sales by speculators for the fall are sometimes 

 entered into in face of really adverse circumstances. 

 A powerful group with command of money finding 

 that 'bear' operations in a security of w'hich the 

 amount is small have been entered into to an 

 excessively imprudent extent, buy all the st<ick 

 that is offered, and call upon those who have sold 

 what they do not possess to deliver it. This results 

 in what is called a corner, and the operators who 

 have sold have to pay whatever price the operators 

 who have iNiught like to ask. An instance in 

 point may be quoted. A South American govern- 

 ment some years ago came upon the market as a 

 iMirrower of a million pounds. The government 

 was not one in good credit, and heavy speculative 

 sales of the bonds were made on the expectation 

 that there would be a fall in price of the bonds ; 

 but parties interested in bringing out the loan 



iMiught more of it than there was in existei 



being enabled to do so through the sales of persons 

 who sold what they did not own, and called upon 

 those who had sold bonds to deliver them. For 

 some months they continued raising the price 

 against those who had sold, and at each fortnightly 

 settlement exacted rates of backwardation some- 

 times as high as the equivalent of about 100 per 

 cent, per annum. The loan was issued to the 

 public at the price of 80 per cent, and was raised 

 to very near 100 in cash for the 100 bond. The 

 purchasers forced those who had sold to buy back, 

 and after the successful coup the views taken by 

 the adverse party were found to l>e perfectly correct, 

 for eventually the price receded to about 4 for 

 the 100 bond. Corners have been very frequent 

 on the New York and Chicago Stock exchm 



A large amount of speculation in stock-exchange 

 securites is conducted on what is known as <>/>tui 

 business. Options can lie of threefold character 

 the payment of a sum for the right to purchase 

 or to sell at a future date at an agreed price, or the 

 right to sell only, or again the right to buy only. 

 These options are termed respectively ( 1 ) the jiat 

 anil call, (2) the put, (3) the call. In America 

 the double option of put and call is termed a 

 straddle. This option MtjMM enables any oper- 

 ator to enter into speculative engagements with a 

 known maximum of loss. 



See Francis, Chronirlrt of the Stock Exchange ( 1849) ; 

 O. R, Gibson, The Stock Exchanvn of London and Ifew 

 York (1889); Burdett's Official intelligence, issued under 

 the sanction of the London Stock -exchange Committee; 

 the .Stoat Kxehnnijr Year-book, by T. Skinner; besides 

 works on the fluctuations of stocks by Crump (1875), 

 Giffen (1879), Ellis (1879); on the lav and uugei of 

 the Stock-exchange, works liy Pateraon, Royle, Mels- 

 hcimcr, Lnwn-nri-. Stutttii-lil ( 1891) ; Bagehot's Lomlxr rii 

 Mnrt ( loth nl. \XV1 1 ; nml American works l)j- Ijcwis, 

 Itiilille, Do* 1'aasoe, and Oook ; also the article liitoKKH. 



