hTHE CK EXCHANGE BUSINES, lOURSE OF STUDY WITH 1 REFERENCES Wm /Jii'^t il ,|:, mm^v- i:'Oi- ■.•W"-' :\r, ■■!+■ W :«1 ' i''*.' INVESTMENT BANKERS A$...., OF AMERICA AND ASSOCIATION OF STOCK EXCHANGE FIRMS THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES GIFT OB ©m U.C V'-'-y LIBRARY OF Mer^i^ Trust Coinpany of California The Stock Exchange Business A Course of Study with References LIBRARY OF Bl^^^fSf] TniSi Coi?:>fi2y cf California New York Doubleday, Page & Company for Investment Bankers Association' of America and Association of Stock Exchange Firms 1918 ^3x.l- -i-v^ •^•) Copyright, igi8, by Investment Bankers Association of America and Association op Stock Exchange Firms All rights reserved, including thai of translation into foreign languages, including the Scaiulinavian hL\ 4' INVESTMENT BANKERS ASSOCIATION ~ ^' OF AMERICA Education Committee Lawrence Chamberlain, Chairman E. W. Bulkley Preparation of material by S. S. Huebner, Ph. D. Professor of Insurance'and Commerce, Wharton School, University of Pennsylvania; Lecturer on Insurance at Columbia University; Lecturer on Stock Brokerage, New York University School of Commerce, Wall Street Division. Neither the Investment Bankers Association of America nor its Education Committee assumes responsibility for any statements made in these outhnes or in any books referred to in the outlines. The books were selected with re- gard to their general availability and without prejudice to any other books treating of the same subjects. Full titles of books referred to will be found in the Bibliography at the end of the book. c:**j*j*7>A o DIVISION I FUNCTIONS OF EXCHANGE MARKETS TOPIC I ECONOMIC FUNCTIONS OF ORGAN- IZED EXCHANGE MARKETS Functions of a broad continuous market. Briefly outlined these services are : — Huebner, 7, 8-9. Van Antwerpy 17-23. Emery y 156-^8. (1) Mobility given to property. (2) Constitutes the chief reliance of credi- tors for prompt liquidation of collateral. Ex- change quotations are used by banks everywhere as a basis for collateral loans. Exchange quo- tations also constitute evidence of value, the courts of justice measuring damages on the basis of these quotations. (3) Constitutes the reliance of owners of securities for prompt conversion of their hold- ings into cash, thus enabhng the prompt limit- ing of losses, if desirable. (4) Makes the use of stop orders feasible. (5) Makes possible the convenient trans- action of business by odd-lot brokers for the best advantage of small investors. [3] (6) Gives constant quotations for the benefit of security owners and creditors. (7) Furnishes a ready market for privileged subscriptions by making arbitraging in "rights" possible. (8) Makes arbitraging between different markets, and all the advantages resulting from this practice, possible. (9) Enables arbitraging in convertible se- curities. Exchanges are clearing houses of current news. Huehner, 8-g. Van Antwerpy 41-42. Emery, loi-io^, loy-ioSy 115-118. Quoted prices and actual values are harmonized, and defenseless security holders are protected against false or concealed news. Van Antzverpy 4-16. Values are standardized and the flow of capital is directed from unprofitable to profitable channels. Huebner, 11-13. Van Antzverpy 17-20, 26- 32. 43- Emeryy 143-56. Favorable influence exerted upon the money market. Huebnefy ly-iS. [4] Exchange markets discount future business con- ditions. Huebnefy 13-17- Van Antwerp^ 22-24., 46- 49. Emery, 115-118. Functions of short-selling. Briefly summarized these services are: — Huehner, 15-17. Van Antwerp, 71-95- (i) Stabilizing effect upon the market. (2) Discounting function. (3) Resisting power to excessive inflation. (4) Supporting power against unwarranted declines in the market. (5) Sellers of securities, unable to deliver at once, may borrow for delivery purposes. (6) Hedging dangerous market positions. (7) Operations of odd-lot dealers made possible. (8) Operations of specialists in the market made possible. (9) Arbitraging between markets made possible. (10) Arbitraging in rights. (11) Enables selling of ''rights" before new securities are issued. (12) Enables arbitraging in convertible se- curities. [5] (13) Continuous character of the market greatly increased. (With reference to this topic see Chapters on "Discounting Function of Exchange Mar- kets'* and *'The Functions of Short-seUing'*. Huebner: *'The Stock Market".) [6] TOPIC II REGULATION OF BROKERAGE TRANS- ACTIONS AND THE CONDUCT OF BROKERS Economic service resulting from the safeguards which an organized exchange market gives in regu- lating brokerage transactions and maintaining a standard of commercial honor among brokers and dealers much higher than would otherwise exist. Huehner^ g-ii. Regulation of the personnel constituting the market: Obligation of members to abide by the constitution and all subsequent amendments thereto. Constitution of the New York Stock Exchange, Ar- ticle XIII y Section 5. Admission requirements and method of re- instatement. Constitution of the New York Stock Exchange, Ar- ticle XV, Section 2. Article XVI, Sections 4, S^ 6. [7] Regulation of partnerships and branch offices. Constitution of the New York Stock Exchange, Ar- tide XXXV. Prohibition of certain kinds of fraud or undesir- able practices: Fictitious transactions — -"wash sales" and "matched orders." Constitution of the New York Stock Exchange, pp. SO, q6. *' Bucketing" of orders. Constitution of the New York Stock Exchange, p. 82. Buying or selling by broker of the securities for which he has accepted an order, for his own account, for that of a partner, or for any ac- count in which he has an interest. Constitution of the Nezv York Stock Exchange, p. 81. Securities for which brokers have both orders to buy and sell must first be offered at one-eighth per cent higher than their bid before making transac- tions with themselves. Constitution of the New York Stock Exchange, p. 78. [8] Improper use of a customer's securities by a member or his firm. Constitution of the New York Stock Exchange y p, 97- Brokers must keep complete accounts, subject at all times to examination by the proper committee, and which may not be destroyed or refused for sub- mission. Constitution of the New York Stock Exchange, pp. Publication of advertisements of other than a strictly legitimate business character forbidden. Constitution of the New York Stock Exchange, p. 76 Acceptance or carrying of an account without proper or adequate margin. Constitution of the New York Stock Exchange, p. 97- Reckless or unbusinesslike dealing. Constitution of the New York Stock Exchange, p. 97- Adoption and significance of general rules which may be extended to cover every practice regarded [9I as contrary to just and equitable dealing. As events justify, various acts or omissions are from time to time declared to come within the scope of one or the other of the following: Hearings on S. sSg^y 6jd Congress, Second Session, 723-3O' Expulsion when members are adjudged "guilty of fraud or of fraudulent acts". Constitution of the New York Stock Exchange, Ar- ticle XVII, Section 2. Suspension or expulsion for "conduct or proceedings inconsistent with just and equitable principles of trade". Constitution of the New York Stock Exchange, Ar- ticle XVII, Section 6. Suspension for acts "which may be deter- mined by the Governing Committee of the Exchange to be detrimental to the interest or welfare of the exchange". Constitution of the New York Stock Exchange, Ar- ticle XVII, Section 8. Establishment of a Committee on Business Conduct charged with the duty of "considering matters relating to the business conduct of members with respect to customers' accounts," [10] and of keeping "in touch with the course of prices of securities Hsted on the exchange, with a view to determining when improper transac- tions are being resorted to." Constitution of the New York Stock Exchangey Ar^ tide Xly Section 4. Regulation of brokerage transactions as regards: Acceptance of smaller offerings when offer- ing to buy or sell more than one hundred shares. Constitution of the New York Stock Exchange^ pp. 78-81. Arbitration of disputes arising between members, and if non-members are willing, be- tween members and their customers. Constitution of the New York Stock Exchange^ Ar- ticle XI y Section j. Regulation of bids and offers. Constitution of the New York Stock Exchangey Ar- ticle XXIII . Comparison of orders and liability on con- tracts. Constitution of the New York Stock Exchangey Ar- tide XXIV. [II] Payment for and delivery of securities — settlement of contracts. Constitution of the New York Stock Exchange, Ar- ticles XXV, XXVI, 13 XXVIL Closing of contracts "under the rule". Constitution of the New York Stock Exchange, Ar- ticle XXVIII. Deposits on contracts. Constitution of the New York Stock Exchange, Ar- ticle XXXI. Dividends, interest, or premiums. Constitution of the New York Stock Exchange, Ar- ticle XXXII. Transfer and registry. Constitution of the New York Stock Exchange, Ar- ticle XXXIII. Commissions to be charged. Constitution of the New York Stock Exchange, Ar- ticle XXXIV, and pp. 86, Suspension and re-instatement of insolvent Constitution of the New York Stock Exchange, Ar- ticle XVI. [12] TOPIC III NATURE AND FUNCTIONS OF OPTIONS A knowledge of the nature and uses of "op- tions" or "privileges" is necessary to a full understanding of the functions of organized ex- change markets. Too frequently such contracts are used for unnecessary, or even illegitimate purposes. Yet such misuse of options should not cause us to overlook their true economic and insurance functions. While not recognized by the New York Stock Exchange, unlike the Lon- don and Paris Exchanges, stock exchange firms may deal in privileges, and some have from time to time issued special circulars describing their nature and functions. (In addition to the following bibliography, reference should be made to Leonard R. Hig- gin's work on "The Put-and-Call", London, Effingham Wilson, Royal Exchange, 1906. This book treats of the London practice pertaining to options, is highly scientific in its nature, and is devoted largely to a discussion of the math- ematical phases of the subject.) Definition of various kinds of options, and con- tract forms used. ^^,^^^^ ^^_^^^ ^^_^^^ ^^.^^_ [13] Status on the New York Stock Exchange. Constitution of the New York Stock Exchange^ Ar- ticle XXIII, Sec. g. American and London Options contrasted Huehner {Chapter on " Privileges and their Func- tions" in " The Stock Mar- ket"), Services rendered by: Limiting losses on market commitments while leaving open the possibility of increased profits. Insuring accumulated profits. Insuring dealers who make numerous trades and wish frequently to change their position in the market. Huehner {Chapter on Priv- ileges and Their Functions, "The Stock Market"). Unnecessary or illegitimate uses of privileges: Operating in stocks without actually buy- ing or selling the same. Misleading market opinion by manipulators attempting to accumulate or distribute certain lines of stocks. Facilitating the operation of a corner. Trading in options themselves. Facilitating advertising and selling cam- paigns. [14I Betting purposes. Nelson, 22-2g. Huehner {Chapter on Priv- ileges and Their Functions, ''The Stock Market"). Considerations determining the value of options. Nelsony 14-17, 30-43. Legal principles governing. Dos PassoSy /, 404-406, 601-14. Question i. Define: "call", "put", "strad- dle", or "spread". Question 2. If, after the option has been sold, the seller feels that he ought to protect himself, show fully how the seller of the option may limit his risk. Question 3. Explain all the differences between London and American options. In this connection explain the application of the interest allowance in the case of London options. Question 4. What are the considerations which suggest the figure, let us say of 5>^, as a safe premium for the risk incurred in sell- ing a "put" or "call" on Union Pacific for a period of three months ? Why should the quotation for the same stock be higher if the period covered is greater? Question 5. Explain the several ways in which options may serve the purpose of insurance. Question 6. What is the legal status of options, and explain the reasoning of the courts. [15] TOPIC IV NATURE AND FUNCTIONS OF ARBI- TRAGING Description of New York-London arbitraging. Nelson, 51-59- Stock Exchange Regulations concerning. Constitution of the New York Stock Exchange, y6- 78. How shipment of securities is avoided. Nelso7i, 54-55. Huehner, 20. Method of, and expenses connected with the shipment of stocks between London and New York. Nelson, 67-72. Conversion of London into New York prices. Nelson, 78-87. Services rendered by: Facilitates the cancellation of international debts. [16] Brings prices of securities to a common level in all the leading stock markets of the world. Huehnefy ig-20. Arbitraging in privileged subscriptions or "rights" (Also see Topic XVI.) Nelson, 60-63. Question i. A certain stock was purchased in London at 245 and shipped to New York. Ascertain the cost of the stock in New York, assuming the cost of a cable transfer to be ^4.87. Explain how the arbitrageur manages to eliminate as much as possible the shipment of securities from one mar- ket to the other. Question 2. With exchange at ^4.863^, convert a London price of 186 into its New York equivalent, and explain the reason why you follow the method used. Question 3. The Canadian Pacific Railroad Company issued new stock to its stock- holders at $150 a share to the extent of ten per cent of their holdings. With the old stock quoted at ^240 a share, the math- ematical value of the "rights" would be 8X. Explain fully how an arbitrageur would effect an arbitrage transaction be- tween the "rights" and the stock. I17] DIVISION II ORGANIZATION AND OPERATION OF THE MARKET TOPIC V LEGAL STATUS AND ORGANIZATION OF STOCK EXCHANGES The general legal nature of stock exchanges. Unlike produce exchanges, American stock ex- changes are private, voluntary, unincorporated as- sociations. ^^^ p^^^^^ j^ ^^.^^^ Emery, 13-17- Stock exchanges are unlike partnerships, cor- porations or incorporated joint-stock associations. Dos Passos I, 28-32. Members* rights in the property holdings of non- incorporated stock exchanges. Dos Passos /, 32-40. Law governing suits against stock exchanges. Dos Passos /, 40-36. Legal interpretation of the powers of exchanges to suspend and expel members. Dos Passos ly 72-112. [21] Property rights of stock exchanges in quotations, representing their floor transactions, and their right to control the publication and distribution of the same. Dos Passos /, 22-28. Commercial Telegram Co, vs. Smith, 4J Hun. 494. Legal nature of a stock exchange seat. Dos Passos /, 144-164. Emery, 22. Preferred rights of exchange members to the proceeds of defaulting members' seats. Several times provisions in the constitution of a stock exchange providing for the distribu- tion of the proceeds of a seat in a definite order of priority, favorable to members as compared with outside creditors, have been upheld by the courts. Constitution of the New York Stock Exchange, Ar- ticle XV, Sec. J. Dos Passos I, 113-28. Hyde vs. Wood, 94 U. S. 523- The government of stock exchanges — powers and duties of various officers and standing committees, and qualifications for admission to membership. Constitution of the New York Stock Exchange, Ar- ticles II to XIII, inclusive. [22] Comparison of American stock exchanges with leading foreign exchanges. Emeryy Chapter 2, Part I. Van Antzuerpy Chapters VidaU ^'History and Meth- ods of the Paris Bourse''. Koch, "German Stock Ex- change Regulation'. [23] TOPIC VI CLASSIFICATION AND DESCRIPTION OF VARIOUS CLASSES OF STOCKS Nature of stocks as contrasted with bonds. Chamberlain, 2Q-^y, 488- go. ClassiiScation with reference to par value. Adams, 43-45- Lyon /, 84. Classification with reference to issue: Authorized and unissued stock. Adams, 45. Lyon I, log. Treasury Stock. Adams, 45-46- Lyon II, g-i2. Assessable stock. Adams, 46. Common stock and the rights pertaining thereto. Adams, 46-48. [h] Preferred stock classified according to: Dividends — "cumulative" or "non-cumula- tive"; special dividend funds; first, second, etc., preferred stock. Adamsy 49-50, 52-53. Assets on dissolution of the corporation. Adams, 50-51. Voting power — exclusive or special. Adams, 51-52. Lyon /, 22-28. Callable feature. Adams, 53-55. Lyon I, 25-28. Convertible feature. Adams, 55-56, 57-58. Lyon I, 20-21. Participation in earnings over and above stipulated dividend. Adams, 56-57. Lyon I, 17-20. Deferred Stock. Adams, 48-49. Guaranteed stock and various conditions of the guarantee. Adams, 5g-6o. Debenture stock. Adams, 61. [25] TOPIC VII QUOTATION SERVICE OF EXCHANGES Manner of collecting and disseminating quota- tions. Pratt, 182-83. Nature and interpretation of the abbreviations used in recording quotations on the tape. Pratt, 184-88. The ticker as a timekeeper for the street. Pratty 188. Exchange safeguards preventing misuse of the ticker service. p^^tt, 183, 189. Non-ofRcial character of quotations recorded by the stock exchange, p^-^tt, i8g. The right of stock exchanges to own and to con- trol the publication and distribution of quotations representing their floor transactions. Dos Passos /, 22-28. Commercial Telegram Co. vs. Smithy 47 Hun. 4Q4. Importance to the market of other methods of wire communication and of news agencies. Pratty i8g-gy. [26] TOPIC VIII LISTING OF SECURITIES It is one of the primary purposes of the stock exchange to see that the interests of the pubhc are properly safeguarded as regards the issuance and marketing of securities. To this end Hsting of securities constitutes one of the essential elements of an organized security mar- ket. By this practice corporations, before their stocks or bonds can be dealt in on the floor of an exchange, must comply with certain stand- ards of legality, security and workmanship. Stock exchange regulations concerning the Stock List Committee and its powers and duties. Constitution of the New York Stock Exchange, Ar- ticle XI, Section 12; Ar- ticle XXXIII, Sections 2, 3^ 4- Listing is not a guarantee of value and does not imply the Exchange's recommendation of the se- curity for favorable consideration by investors and speculators. Pratt, 125-27. Chamberlain, 62-6 J. [27] Listing requirements of the New York Stock Ex- change concerning: Organization of the corporation and the nature of its securities. Hearings on S. sSg^y 6jd Cong., Second Session, 739-41- Description of the property. Hearings on S. J^P5, 739- 41. Engraving of certificates. Hearings on S. 38g3, 744.- 45- Regulation of the printed text of certifi- ^^^^^* ' Hearings on S. 3893^ 739~ 40. Transfer and Registry. Hearings on S. 3895, 744. Papers to be filed with the application for listing. Hearings on S. 3895, 742. Agreements with the Exchange which cor- porations must observe. Hearings on S. 3893, 742- 43- Pratt, 130-31. Listing of securities of reorganized cor- porations. Hearings on S. 3895, 741- [28] Listing of additional amounts of securities already listed. Hearings on S. 389S, 742. Suspension or removal of securities from the list. Hearings on S. jSg^, 210- i6y 743- The process of listing explained. Hearings on S. jSg^, igg- 200^ 20$. Advantages of listing: Reasonable assurance of legality of issue, proper text of the security, and safeguards against counterfeiting. Hearings on S. 5^, New York Central 71, U. S. Steel common QO^^; Union Pacific 118, and Southern Pacific 88. Prepare broker **X's" clearance sheet, which is to be submitted to the Clearing House. Prove that in the above illustra- tion broker *'X" did not lose or gain through the operation of the clearing house system. Question 2. Explain the complete process of clearing the above mentioned business, in- cluding the discussion of clearance tickets and allotment sheets. Question 3. Suppose that, in addition to the business referred to under Question i, broker "X" had borrowed from broker "I" 100 shares of U. S. Steel common and loaned to broker "J" 100 Union Pacific. Show how broker "X" would clear these loan transactions, and why this method is adopted. Explain the advantages result- ing to the business community from the existence of a stock exchange clearing house and illustrate each advantage with the data furnished in Question i. [48] TOPIC XIV ASSIGNMENT AND TRANSFER OF SE- CURITIES Stock Exchange rules designed to secure uniform- ity of action and to eliminate unnecessary risk, as illustrated by the New York Stock Exchange: Constitution of the New York Stock Exchange, Ar- ticle XX F, Section 2; Ar- ticle XXXII; and Article XXXIIIy Section i. Hearings on S. S^95i ^3<^ Congress, 2d Session, 744- 45- (i) Corporations are required to maintain a transfer agency and registry office in the Borough of Manhattan, and both transfer agent and registrar must be acceptable to the Com- mittee on Stock List. The registrar appointed must file with the secretary of the exchange an agreement to comply with the requirements of the exchange in regard to registration. (2) The entire issue of capital stock must be transferable at the office at New York. If [49] transfers are made in other cities, certificates issued in such cities must be interchangeable and identical in color and form. No change in the form of certificate, the transfer agent, the registrar or the trustee of bonds can be made without the approval of the Committee on Stock List. (3) Thirty days' notice must be given to the Exchange before a corporation increases its authorized capital stock. (4) To prevent counterfeiting, all bonds, coupons, or certificates of stock must be made in accordance with the regulations of the Ex- change. (5) As regards the distinguishing features of various classes of securities, each denomina- tion must be of such distinctive appearance and color as to make them readily distinguish- able from other denominations. (6) The purchaser is given the option to require delivery to be either in certificates or by transfer. In case, however, personal lia- bihty attaches to ownership, the seller is given the right to deliver by transfer. When the transfer books are closed, the buyer cannot require delivery by transfer (7) The blank form of assignment and power-of-attorney is prescribed by the ex- change; and to constitute a good delivery, the assignment must conform with the rules of the Exchange. I50I Negotiable securities dealt in on exchanges. Dos Passos /, 64.8-56. Necessary elements of negotiability. Dos Passos /, 6^5-^8 . Negotiability of stock certificates. Dos Passos /, 700-725. Analysis of the blank form of assignment and power-of-attomey. Leading principles to be observed in connection with the assignment, transfer and registration of various classes of securities. Process of transferring stock explained. Significance attaching to the guarantee of signa- tures by brokers. Method of effecting transfer of stock by corpora- tions. Replacement of new for lost certificates. (With reference to the last six sub-heads of this topic see Chapter on "The Transfer of Securities", Huebner: "The Stock Market".) [51I TOPIC XV CONVERSION OF SECURITIES At a recent date total outstanding issues of listed convertible securities, exclusive of do- mestic and foreign convertible government bond issues, amounted to over $1,500,000,000. Of this total approximately 80% consisted of bonds convertible into stock, and most of the balance of stocks convertible into other stocks. When major price movements occur in the market the conversion privilege often assumes an important place in the work of certain classes of dealers in the security market. Meaning of the conversion privilege. Rollins, 97-Q8 {In Volume on *' Stocks and the Stock Market".) Various conditions governing the conversion privilege, and the motives prompting their adoption. Rollins y g8-ioi, 102-03, 106-07, 108-10. Price movement of convertible securities in rela- tion to one another, and reason therefor. Rollins, loj. [52] Effect which the conversion privilege sometimes has upon the market value of the stock. Rollins, I0I-I02. Method of reducing current quotations of bonds and stocks, into which they are convertible, to a common basis. Rollins, 4, 6-y {In Volume on ''Convertible Securi- ties".) Accumulation dividend tables and their use. Rollins, i8-ig. Conversion tables and their use. Rollins, 6-7, i8-ig. Method of adjusting fractional shares which can- not be converted evenly. Rollins, io8-og. Rollins, 8-10. Price relationship between convertible issues where the conversion privilege becomes effective at some future time. Rollins, 104.-106. Rolli?is, 14-16. Method of treating accrued interest and dividends when a conversion is made. Rollins, 107-108. Arbitraging in convertibles explained. Rollitis, 18-IQ. [53] Question i. What effect has the existe,nce of a convertible bond issue upon the price of the stock into which the bond may be con- verted ? Question 2. Suppose a ^looo bond is convertible into stock at 130. Explain (mathemat- ically) the several methods of adjusting the fractional shares. Which method of adjustment do you regard as the most de- sirable, and why? Question 5. What considerations would you take into account in deciding between the desirability of purchasing the convertible bond or the stock at prevailing quotations, where the right to exchange the bond into a Stock becomes operative, say, 10 years from date ? Assume that the current quota- tions clearly reflect a conversion value in the bond over and above a mere investment worth. Question 4. Union Pacific 4% convertible bonds, due in 1927, are convertible at par into common stock at 175. State all the cir- cumstances under which it will prove profitable to exercise the conversion priv- ilege. Assume Union Pacific stock to be quoted on April 8 at 155H, and that the pre- ceding dividend date was April i. Tak- ing the bond referred to in the above para- graph, show the manner of computing the conversion equivalent of the bond. [54] With the bond quoted at 102.93, show the manner of computing the stock equiva- lent. Question 5. Suppose that on April 8, with the stock selling at ISSH* the bond was selling at 3^ below its conversion equiva- lent. Show (mathematically) how an ar- bitrage transaction between the two se- curities is consummated. Need an arbi- trageur actually effect a conversion? tssl TOPIC XVI MARKETING OF PRIVILEGED SUB- SCRIPTIONS, OR "RIGHTS" Meaning of "rights" on different Stock Exchanges. BurgundeTy 7^. Mite he II J 241-42. Extent to which rights have been issued by lead- ing American corporations. BurgundeTy 73-74, 78, 87- g6. Determination of the mathematical value of rights. BurgundeTy 76-77. Lyon II y 23-24. Meaning of "rights on" and "ex-rights" ex- plamed. BurgundeTy 74. Lyon II, 27. Stock Exchange regulations concerning "ex- rights" and commissions. Constitution of the New York Stock Exchangey Ar- ticle XXXIIy Sec. 2; XXXIVy Sec. 2. (c). [56] Plans of issuance followed by various corpora- tions. _ , „ Burgunder^ 74-7Si o^. Mitchell, 2^9-40. Methods which stockholders may employ in dis- posing of their rights, and the respective advantages and disadvantages of each method. (In addition to the following methods it may be added that rights are nearly always discounted in the market. Accordingly the stockholder may, if he is willing to part with his original investment, sell the same when the rights are announced, the price including the value of the right) : May sell his rights since a market for them is made as soon as the corporation announces the allotment. Mitchell, 240-42, 243-44. Lyon II, 24. May sell an amount of his original holdings equal to the number of new shares to which he is entitled, replacing the shares sold with the new stock when issued. Mitchell, 238-40, 243-44. May subscribe to his allotment of new shares, selling the same when issued by the corporation. Mitchell, 236. May sell "short" an amount of stock equal to the allotment, borrow to fulfil delivery on I 57] the short sale, and return the stock borrowed when the new shares are issued. Mitchell, 236-J8. Extent and method of arriving at the profit where successive offerings of stock have been taken and added to the original holdings. Burgunder, 75-76, 77-85, 87-96. Mitchell, 245-58. Arbitraging in rights. Burgunder, 77. Lyon II, 27-29. Nelson, 60-63. (With reference to this Topic see Chapter on *' Privileged Subscriptions", Huebner: "The Stock Market".) Question i. Discuss the various methods which a stockholder may adopt in disposing of his rights, explaining in connection with each: (i) the procedure followed. (2) the advantages of the plan. (3) the disadvantages of the plan. (4) The relative value of the plan judged from the standpoint of financial return to the stockholder. Question 2. The Penna. R. R. Co. gave its stockholders the privilege of subscribing to new stock at par ($50) to the extent of [58]" 10% of their holdings. At the time of the announcement of the privilege, the stock sold at S7H- Explain the mathematical computation of the value of the right in New York. What would be the equivalent quotation for this right in the Philadelphia market? Explain the reasons for the dif- ference in the quotation prevailing in the two markets. Question j. With Penna R. R. stock selling at 57^, explain mathematically the procedure by which an arbitrageur effects a profitable arbitrage transaction between the "stock" and the "rights", and outline the services which such an arbitrageur renders. Also explain the considerations which the pur- chaser of rights should take into account in determining the market price that may be paid for rights. [59] TOPIC XVII CURB AND AUCTION MARKETS Relation of the New York Stock Exchange to the New York Curb Market. Van Antwerp, ^jj, ^jj. Huehner, 21-2^. Pratt, igg-200. Constitution of the New York Curb Market, 11. New York Curb Market Manual, 75. Functions of the Curb Market. Van Antwerp, 4^2, ^55. Pratt, igg-200. Organization of the New York Curb Market. Constitution of the New York Curb Market. Pratt, 200-201. Disciplinary control over members. Constitution of the New York Curb Market, il. [60] Types of orders and contracts. New York Curb Market Manual^ 16-18. Regulations concerning deliveries. New York Curb Market Ma7iualy 18-21. Comparison of transactions. New York Curb Market Manual, 22-25. Listing requirements. New York Curb Market Manual, 25-27. Transfer of curb securities. New York Curb Market Manual, 28-J2. Cbmmissions charged. New York Curb Market Manual, 38. Security Auction markets. Huebner: Chapter on "Curb and Auction Mar- kets" in ''The Stock Mar- ket". 16.1 DIVISION III FACTORS AFFECTING SECURITY PRICES AND VALUES TOPIC XVIII FACTORS AFFECTING THE PRICES AND VALUE OF SECURITIES INTRINSIC EARNING POWER Distinction between market prices and intrinsic values. Pratt, 92-g7, 98. Stock markets are essentially markets for "incomes", i.e., in the long run prices are con- trolled by values. The general trend of prices is governed primarily by prospective funda- mental values. In the long run, despite the ceaseless backing and filling of price movements, "prices" and "values" tend approximately to coincide. Pratt, 96-103. Comparative and fundamental statistics con- trasted. The physical condition and the earning power of a corporation are indicated by the reports of the corporations under consideration. The data contained in these reports should be classified as "comparative statistics". These [ 65 ] statistics relate to the present and past record of individual properties, and guide the investor or speculator in determining the approximate safety of an investment, or in the making of a selection between several investments. They should be distinguished from so-called "funda- mental statistics" which refer to the present and prospective business situation in general, as reflected by certain well-known barometers, which, while showing the trend of the present, serve principally as a guide for the future. Babson, Chapter /, J5-29. Melvin T. Copeland, Sta- tistical Indices of Business Conditions, pp. 1-41. Quarterly Journal of Eco- nomics, Vol. XXIX, May, 1915- Analysis of comparative statistics. The value of both bonds and stocks, al- though representing entirely distinct classes of equities, must be ascertained along much the same methods of analysis. The important question is that of permanency, or "the result of the decade" which averages a showing for both poor and prosperous years. A good report contains detailed information along three dis- tinct lines, viz., the physical characteristics, an income account, and a balance sheet dealing with financial characteristics. Each part is essential and all bear an intimate relationship [66] to one another. In analyzing these three parts, it is essential (i) not to judge a property on the basis of one year's showing, and (2) to bear in mind that, since all things are relative, com- parisons must be made on the basis of certain fixed standards. Moody, ''Ho-cv to Analyze Railroad Reports'', {^7] TOPIC XIX FACTORS AFFECTING THE PRICE AND VALUE OF SECURITIES (CONT.) THE MONEY MARKET IN ITS RELA- TION TO SECURITY PRICES Relations between the stock and money markets : Various uses which stock brokers, syndi- cates, investment houses and banks make of securities in the credit market. Pratt, 266-67, 2Sg-go. ■ Manner of financing margin transactions. Pratt, 267-68. Overcertification of broker's checks. Pratt, 268-73. Van Antwerp, llJ-14. Nature and method of handhng broker's call loans. p^^^^^ ^^^_^^^ Explanation of the New York Clearing House Bank Statement. Uuehner: Chapter on " Re^ lation of the Stock Market and the Money Market'^ in ''The Stock Market". [68] Value of the New York Bank Statement as a barometer of credit conditions. Babson, 2g'/-g8. Huebner: (above chapter). Significance of the "loan", "cash", "deposit" and "surplus reserve" items of the Bank Statement, and the interpretation of their movements under various circumstances: Ratio of "loans" and "loans and invest- ments" to bank resources. Babson, 2/O-yg. Huebner: {above chapter). Ratio of "cash" to "deposits" and to re- sources. Babson, 280-88. Huebner: {above chapter). Interpretation of the showing of "surplus reserves" under various conditions. Babson, 288-g4. Huebner: {above chapter). Various Bank Statements — "summarized", "ac- tual", "average" and "detailed" — described. Huebner: {above chapter). I69] TOPIC XX FACTORS AFFECTING THE PRICE AND VALUE OF SECURITIES (CONT.) PANICS AND BUSINESS DEPRESSIONS INCLUDING AN EXPLANATION OF BAROMETRIC INDICES OF TRADE The cause and psychology of panics and depres- sions. Though secondary causes may contribute to make economic crises more severe, or to shorten or prolong their duration, the under- lying cause is over-speculation and through this the over-extension of credit. Jones, Chapter Vllly 153- yg; Chapter IXy 180- 217, Periodicity of crises. Jones, Chapter VII, 131- Importance of the "factor of safety", with par- [70] ticular reference to the position of low-dividend or non-dividend stocks during periods of industrial or financial stress. Gibson, *' Cycles of Specu- latiouy" 1 14.-1"/. Barometric indices of trade — their signifi- cance, and the sources from which they are de- rived. The aforementioned bibliography empha- sizes the fact that, under modern credit sys- tems, distinct cycles of trade occur at more or less irregular intervals, and, roughly speaking, each of these cycles contains a period of de- pression, a period of improvement, a period of prosperity and great speculation, and a period of decline, ending again v^ith a period of de- pression. The approximate determination of v^hich of the above-mentioned periods in the cycle the country is experiencing is necessarily a statistical one. For this purpose various groups of statistics (so-called "barometers" or "indices" of trade) are commonly consulted and periodically published in the leading finan- cial journals. Whatever may be thought of the value of this data from the standpoint of fore- casting future conditions (a matter which vitally affects stock market prices, since the stock market is essentially a discounting agency) there can be no question that a correct compila- tion of the data furnishes a fairly accurate view of the condition of trade for the time being, and furnishes the basis upon which se- [71] curity owners may exercise their judgment as to the future. BahsoUy Chapter I. James H. Brookfnire, ''Methods of Business Forecasting Based on Fun- damental Statistics ", pp. 43-j8, American Economic Review, March, IQ13, Vol. Ill, No. I. Melvin T. Copeland, Sta- tistical Indices of Business Conditions, pp. 1-41. Quarterly Journal of Eco- nomics, Vol. XXIX, May, 1915- [72] TOPIC XXI FACTORS AFFECTING THE PRICE AND VALUE OF SECURITIES (CONT.) VARIOUS TYPES OF MANIPULATION Fraudulent methods of manipulation. — (These have assumed three main forms, namely: (i) fraudulent management of properties and the issuance of fraudulent or deceptive reports and news items; (2) selling securities through im- properly spread "tips" or "news"; and (3) "wash sales" and "matched orders".) Pratt, 364-65, 386-87I Manipulative campaigns planned with reference to future conditions, and involving skilful manage- ment in the art of accumulating or distributing lines of stock to the best advantage of the manipulator. Pratt, 364, 365-68. Bond, 77-85. Comers. — (These have at times caused tre- mendous upheavals in the security market and become possible only because of the existence of a short interest in the market. A corner is brough about by an operator or pool obtain- [73] ing virtual possession of the shares available for delivery in fulfilment of short sales. Such sales are first induced on a large scale by ap- parently high prices or other methods, the short seller depending upon a continuous market for the purchase of stock for purposes of delivery. When the time to deliver arrives, the short inter- est finds that none is available, either for buying or borrowing purposes. The operator (or pool) has obtained possession of practically all the stock called for by the contracts made by the shorts. The only means of escape is to settle at a price determined by the operator, or to repudiate the contracts. While repudiation is permitted by law, such practice has not been countenanced by the rules of stock exchanges. In the case of various produce markets, however, rules have been adopted which provide that in case of a corner a reasonable settlement price can be established by a properly constituted com- mittee, thus protecting the short interest against the arbitrary whim of the manipulator. Such rules, it is believed, will remove the incentive for operating a corner, since the decision of the committee will have in view the establishment of a fair settlement price.) Pratt, 368-70, 387-88. Illegality of comers. Samuels vs. Oliver, 130 III. 73- "Technical condition" of the market. (Refer- ence is constantly made in the press to the [74] "over-bought" or "over-sold" condition of the market. By these terms it is meant that there has been, in view of the normal supply and demand of a given security, an unusually large amount of buying on margin or an un- usually large amount of short selling. If this over-bought or over-sold condition is dis- covered, the opposing interest in the market may seek to compel a decline, or to compel the short interest to cover. Such a situation, known as the technical condition of the market, is rendered worse at times by the existence of (i) pyramiding and (2) an unusually large number of stop-loss orders.) Bondy 68-76. [75] TOPIC XXII FACTORS AFFECTING THE PRICE AND VALUE OF SECURITIES (CONT.) INCREASING GOLD SUPPLY AND RAP- IDLY RISING COMMODITY PRICES AND THEIR RELATION TO SECURITY PRICES Causes producing rising commodity prices. With two main exceptions, the price factors, out- Hned in these topics, are either temporary in their operation or can only be considered in their relation to individual properties. These two exceptions are the intrinsic earning power of corporations and increasing commod- ity prices. These two basic causes affect security prices in general over long periods of time and without much regard to locality.) Chamberlain, 4Q2-^I2. Gibson, s-ig, 73-94. Effect on interest rates and on bonds, which, while possessing the advantage of certainty, have the disadvantage of a definitely limited income. Chamberlain, 492-^12. Gibson, 15-16, 79-8$. [76] Effect upon preferred stocks having a fixed rate of income. Gihsoriy 79-8 5. Effect upon the common stocks of railroads and most public service corporations. Gibson, 17-ig, 85-88. Effect upon the stocks of industrial corporations. Gibson, 88-89. [77] TOPIC XXIII FACTORS AFFECTING THE PRICE AND VALUE OF SECURITIES (CONT.) CROP PROSPECTS AND THEIR RELA- TION TO SECURITY PRICES Of the numerous current happenings which have a vital bearing on security prices, few approximate in importance the annual condi- tion of the nation's agricultural crops. The value of these crops aggregates annually be- tween eight and nine billions of dollars. This huge mass of new wealth, besides furnishing directly a very large share of the high revenue producing tonnage of the nation's railroads, also vitally affects numerous other leading industries whose securities are listed on ex- changes. While mining and forestry products are important, they are fairly regular and are subject to control in accordance with the de- mands of business requirements. The products of the soil, however, are mainly dependent on climatic conditions and their output is there- fore uncertain to an unusual degree. The an- nual yield of leading staples, such as wheat, [ 78 ] corn and cotton, frequently vary from ten to thirty per cent, as compared with the preceding year. Fluctuations in these crops may also be much greater in one section of the country than another, thus vitally affecting corporations in those localities. Intimate relationship between crop prospects and the movement of stock prices. Gibson, "Elements of Spec- ulation", 11-13, 35-43- Government crop reporting system. (Were it not for some fairly accurate and unbiased sys- tem of crop reporting, first-hand information would be limited to a very few. The aver- age person would be at the mercy of a flood of rumors and manipulation would exist on a scale infinitely greater than at present. For these reasons, as well as because of the fun- damental importance of the subject from a business standpoint, it is highly important to have the Government issue reports periodically which represent about 95 per cent, of the acre- age and 80 per cent, of the total of the nation's agricultural output) : Economic functions resulting from such reports. Murray, go, pp. Sources of the data used, and method of preparing and disseminating the reports. Murray, 91-94, 96-99. [79] Method of interpreting "condition" figures in order to arrive at the total yield. Murray,^g4-95. Gibson, " Elements of Spec- ulation", ly-ig. Private sources of current information on crop prospects. Mudgetty io4j iig. [8c] DIVISION IV LEGAL PRINCIPLES GOVERNING THE STOCK EXCHANGE BUSINESS TOPIC XXIV LEGAL PRINCIPLES AND USAGES RELA- TING TO THE EXECUTION OF OR- DERS AND THE CARRYING OF AN ACCOUNT In addition to the principles enumerated in Topic X, the following duties of the broker in connection with the execution of orders and the carrying of ac- counts, deserve special study: No secret profits may be made by the broker out of the transaction. Dos Passos I, 2i8-ig. The customer must be given full notifica- tion of every transaction. This is also a stat- utory requirement at present. Dos Passos /, 21J-14. Brokers are bound by the acts of their managers although there may be a violation of some private instruction unknown to the customer. Dos Passos I, 214-18. Failure to carry out a definite order ren- ders the broker liable for any consequent loss. Dos Passos I, 206-08. [83] An order to purchase is not an entire con- tract, the broker being enabled to buy or sell a smaller quantity than is ordered. By usage, however, it is customary not to split into odd lots an order for the purchase or sale of a hundred shares or multiples thereof. Dos Passos I, 208-10. Proper accounts must be kept by a broker, showing the names of the persons with whom he deals for his customer; and failure to comply with this duty legally involves a presumption of value against him. Dos Passos 7, 218-ig. A broker is legally forbidden to buy his customer's stocks or to sell his own stocks to the customer, except by consent, i.e., he "can- not act as principal and agent in the same transaction without his customer's consent". Dos Passos 7, ^6^-82. Usages in the stock brokerage business. Dos Passos 7, pp. 410-66. The principal propositions, relative to the doctrine of usage in the stock brokerage busi- ness, as outlined by Dos Passos, are: (i) "The usage of the business is never permitted to make an entire or new contract for the parties". The purpose of a usage is to supply deficiencies and omissions. (2) The interpretation of technical words and phrases (and there are few businesses in [84I which peculiar terminology is so abundant) depends upon the usage of the business. The broker is protected if the usage, as understood by the trade, has been complied with. Written and express contracts, however, cannot be varied by usage. (3) Usages cannot be opposed to fixed rules of law, may not be opposed to public policy, and may not be unreasonable. If, however, a usage does not conflict with the aforementioned three principles it is perniissible as forming a part of the contract and is pre- sumed to enter into the intention of the con- tracting parties. (4) When employing a broker, a customer may presume that he has been employed with reference to "the customs of brokers". The stock broker, hkewise, may presume implied authority to observe all the rules and usages of the exchange of which he is a member. The courts have gone so far as to read into the order, even if given in the form of a telegraphic message, the entire constitution and by-laws of the exchange of which the employed broker is a member. (5) The usages of a particular brokerage firm may be introduced to interpret a contract when they are known to the party whom it is sought to charge with the same. But a broker cannot legally bind his client to such particular usages, which do not follow the ordinary and customary method, unless there is an express agreement covering the usage. [85] (6) The usual obligations of a broker may be changed and controlled by special agree- ments with his client, i.e., special contracts may be entered into, limiting the liability of the parties in any respect. Thus joint adventures m stocks (for speculation on joint account) may be entered into. Dos Pas SOS /, Chap. IF. When a broker may close a transaction: In the absence of an express agreement to the contrary, the broker may, upon reasonable notice, require his client to take securities car- ried for him and thus close the transaction. This principle is held by virtue of the fact that the client has a reciprocal right to close an account. Moreover, the courts hold that the commission is earned by making the transac- tion. Dos Passos /, 385-86. The client's securities may be sold in case of his bankruptcy, and it is the duty of the broker to take notice of the fact of bankruptcy. Dos Passos /, 386-87. The broker is justified in closing an ac- count in case of the death of his client. In New York, however, the broker, if acting in good faith, may continue the account until the appointment of a legal representative. Dos Passos /, 387-88. [861 Where demand for sufficient niargin is not complied with, and where the right to sell without notice at either public or private sale has been reserved. Markham vs. JaudoUy 41 N. Y. 235, Brokers' communications are not privileged. Dos Passos /, 400-04. [87] TOPIC XXV RIGHTS AND DUTIES OF BROKER TO CLIENT AS (i) AGENT AND (2) PLEDGEE Topic XI dealt with the principles govern- ing client and broker in a speculative transac- tion as laid down by the widely known case of Markham vs. Jaudon {41 N. Y. 2^5). This case, however, is concerned only with the gen- eral basic principles governing pledgor and pledgee in speculative transactions and does not take cognizance of the numerous special problems that arise in such transactions. It is the purpose of this topic to present these special problems. Degree of due care and diligence required of a broker when acting as agent or pledgee. Dos Pas SOS /, 218-41. Isham vs. Post^ 141 N. Y. 100. Leading legal principles governing the disposition and safe-keeping of stock when purchased by a broker : [88] Liability in case of loss of the securities by- theft, or otherwise. Dos Pas SOS /, 241-42. Liability of remaining partners to a client whose securities are misapplied by one of the partners — liability for wrongful acts of clerks. Dos Pas SOS /, 24^-44. Rights of the broker wuth reference to the transfer of stock purchased for a customer on margin. Dos Passos I, 241-46. Extent of a broker's right to vote stock held by him for a customer's account. Dos Passos I, 24/-4g. Obligation of the broker at all times to have a sufficient quantity of stock under his control to dehver to his cHent upon payment of the amount due. Dos Passos /, 252-64. Rights of the broker with reference to dividends or assess-ments in connection with stock held by him as a pledge. Dos Passos /, 264-75. A broker's right to repledge stock en bloc. There are four important New York cases which relate to the legal principles governing [89] this important subject, viz., Douglas vs. Car- penter, 17 App. Div. ^2Q {iSgy); Rothschild vs. Allen, go App. Div. 255 (1904), affirmed 180 N. Y. 561 ; Strickland vs. Magoun, iig App. Div. 113 (igoy); and Mayer vs. Monzo, 151 App. Div. 866 {igi2). Of these cases the first and particularly the last are the most important, because they represent the previous and present law on the subject in New York. The courts of most other states have decreed that a broker may borrow money by sub-pledging margined stock en bloc. In New York, however, until the Mayer vs. Monzo decision, the ruling was otherwise, i.e., to the effect that a customer's margined stock could not be commingled with other securities by the broker and then pledged en bloc for a larger amount than the customer's indebtedness on the stock. Such commingling was held to constitute a conversion. This con- clusion, as stated, was reversed in the important case of Mayer vs. Monzo. A study of this case is important not only because it presents the law of today but because the dissenting opinion reviews the facts and conclusions of all the preceding cases. Mayer vs. Monzo, 151 App. Div. 866 {igi2). Liability of a broker when cooperating with an in- solvent broker. Austin vs. Hayden, i^y N. W. 317. [90] Measure of damages in case of error or conver- sion. Dos Passes Ily Chapter Vllly particularly pages 912-34. Joint Adventures in Stocks. Dos Passes /, 313-23. [91I TOPIC XXVI EXTENT TO WHICH MARGINS AND PLEDGED SECURITIES OF CUSTOM- ERS ARE PROTECTED— PRINCI- PLES GOVERNING THE IDEN- TIFICATION OF SECURITIES The customer's right to pledged securities in case of the broker's insolvency: Where a customer's stock is repledged by the pledgee, the customer (the owner) can re- cover from the sub-pledgee only after payment of the first pledgee's full debt. McNeil vs. Tenth National Bank, 46 N. Y. 32$. A customer's stock, carried by a broker, goes to the customer and not the broker's as- signee in case of insolvency. Willard vs. White, ^6 Hun 581. Certain customers may have special claims over other customers because of special circum- stances, such as payment of the full purchase [92] price to the broker for an outright purchase, or the misappropriation of a customer's securi- ties by a broker and the placing of the proceeds of the unauthorized sale in his bank account. In the latter case the courts follow the doctrine of tracing trust funds. In re Mulligany ii6 Fed. Garrard Glen7i, "Rights of the Customers of an In- solvent Broker", Columbia Law RevieWy May, igi2y 'pp. 422-4.2. If a broker mingles the stock of different owners and hypothecates the same en bloc, some rightfully and some wrongfully, customers whose stock is wrongfully hypothecated have a superior equity and are entitled to have prior payment of their losses, provided their stock or its proceeds can be traced. Matter of Mills , 12 S App. Div. 750. Identification of Securities. (The application of the aforementioned principles depends upon the ability of owners of securities to properly identify the same, thus frequently giving rise to numerous questions as to the marshalling of securities or proceeds between the cus- tomers.) Dos Passes /, 285-93- [93] BOOKS REFERRED TO IN THE OUTLINE OF A COURSE ON STOCK EX- CHANGE BUSINESS Adams — Stocks and Their Features — Division and Classification. By John Adams, Jr., 1910, pp. 43-62. Published In the Volume on "Stocks and the Stock Market", Annals of the American Academy of Political and So- cial Science, Philadelphia, $1.50. Bab SON — Factors Affecting Commodity Prices. By Roger W. Babson, 191 1. PubUshed in the Volume on "American Produce Exchange Markets", Annals of the American Academy of Political and Social Science, Philadelphia, $1.50. Business Barometers for Anticipating Con- ditions. By Roger W. Babson, 191 7. Tenth Edition. Wellesley Hills, Mass. Babson Statistical Organization, $2.00. Bond — Stock Prices: Factors in Their Rise and Fall. By Frederick D. Bond, 191 1. Moody's Mag- azine Book Department, New York, $1.00. Brookmire — Methods of Business Forecasting Based on Fundamental Statistics. By James H. Brookmire, 191 3. American Economic Re- view, Vol. Ill, No. I, pp. 43-58. [94] / BuRGUNDER — The Declaration and Yield of Stock- holders' Rights. By B. B. Burgunder, 1910. Published in the Volume on "Stocks and the Stock Market," Annals of the American Acad- emy of Political and Social Science, Phila- delphia, $1.50. Chamberlain — The Principles of Bond Investment. By Lawrence Chamberlain, 191 1. Henry Holt & Co., New York, $5.00 net. Constitution of the New York Stock Exchange. CoPELAND — Statistical Indices of Business Condi- tions. By Melvin T. Copeland, 191 5, Quar- terly Journal of Economics, Vol. XXIX, May, 1915, pp. 1-41. Dos Passos — A Treatise on the Law of Stock Brokers and Stock Exchanges. By John R. Dos Passos, 1905. The Banks Law Publishing Co., New York, two volumes, $12.00. Emery — Speculation on the Stock and Produce Ex- changes of the United States. By Henry C. Emery, 1904. The Macmillan Co., New York, $2.00; paper $1.50. Gibson — The Elements of Speculation. By Thomas Gibson, 1913. Gibson Publishing Co., New York, $1.00. The Increasing Gold Supply. By Thomas Gibson, Editor, 1908. Gibson PubUshing Co., New York. The Cycles of Speculation. By Thomas Gibson, 1907. The Moody Corporation, New York, ii.50. Glenn — Rights of the Customers of an Insolvent Broker. By Garrard Glenn, 191 2. Columbia Law Review, May, 191 2, pp. 422-42. [95] Goldman — A Handbook of Stock Exchange Laws. By Samuel P. Goldman, 1914. Doubleday, Page & Co., New York. Hearings before the Senate Committee on Banking and Currency on S. 3895^ 6jd Congress^ Second Ses- sion. 1914. Government Printing Office, Washington. HiGGiNS — The Put-and-Call. By Leonard R. Hig- gins, 1906. London, Effingham Wilson, Royal Exchange. HuEBNER — The Scope and Functions of the Stock Market. By S. S. Huebner, 1910. Published in the Volume on "Stocks and the Stock Market", Annals of the American Acaderny of Political and Social Science, Philadelphia, $1.50. ''The Stock Market,'* a text now in course of preparation. (Also see "Stocks and the Stock Market".) Jones — Economic Crises. By Edward D. Jones, 1900. The Macmillan Co., New York. Koch — German Imperial Banking Laws, together with the German Stock Exchange Regulations. 1910. Edited by R, Koch. Government Printing Office, Washington. Published by the National Monetary Commission, 6ist Congress, 2d Session, Sen. Doc. No. 574. Lyon — Corporation Finance. By Hastings Lyon. Complete Edition, 1916. Houghton Mifflin Co., New York. Vols. I and II bound to- gether, ^3.00. Mitchell — Stockholders' Profits from Privileged Sub- scriptions. By Thomas Warner Mitchell, [96] iQoq. The Quarterly Journal of Economics, Cambridge, Mass., Volume XIX, Feb., 1905, pp. 231-269. UooDY-How to Analyze Railroad Reports. By John Moody, 191 2. Analyses Publishmg Co., New York. Uv^GETT— Current Sources oj Information in Produce Markets. By Bruce D. Mudgett, 191 1- Pub- lished in the Volume on "American Produce Exchange Markets", Annals of the American Academy of Political and Social Science, Philadelphia, $1.50. Murray— r/j^ Crop Reporting System. By Nat C. Murray, 191 1- Pubhsfied in the Volume on "American Produce Exchange Markets , Annals of the American Academy of Political and Social Science, Philadelphia, $1.50. NELSON-n. A. B. C. oj Options and Arbitrage. By S. A. Nelson, 1904- New York, 75c. Norton— n^ Purchase or Sale of Securities through ^ a Stock Broker. By Eliot Norton, 1910. Pubhshed in the Volume on Stocks and the Stock Market", Annals of the American Academy of Political and Social Science, Philadelphia, $1.50. Short Sales of Securities through a Stock Broker. By Eliot Norton, 1907- PRATT-n. Work of Wall Street^ ^y Sereno S. Pratt, 1914. D- Appleton & Co., New York, $2.00. ^oi.i.ms-Convertihle Bonds and Stocks By Mont- gomery Rollins, 1910. P,"bhshed in the Vol- ume on "Stocks and the Stock Market , [97] Annals of the American Academy of Political and Social Science, May, 1910, pp. 97-110, Philadelphia, $1.50. Convertible Securities. By Montgomery Rollins, 1913. Second Edition. Financial Publishing Co., Boston, $5.00 net. (The introductory Chapter to which page refer- ences refer may be obtained separately for 50c. per set.) Stocks and the Stock Market. Edited by S. S. Hueb- ner, 1910. Annals of the American Academy of Political and Social Science, Philadelphia, $1.50. ToDMAN — Brokerage Accounts. By Frederick S. Todman, 1916. Ronald Press Co., New York, $3.50. Van Antwerp — The Stock Exchange from Within. By Wm. C. Van Antwerp, 1914. Doubleday, Page & Co., New York. ViDAL — The History and Methods of the Paris Bourse. By E. Vidal, 1910. Government Printing Office, Washington. Published by the Na- tional Monetary Commission, 61 st Cong., 2d Session, S. Doc. No. 573. S/ Withers — Stocks and Shares. By Hartley Withers, 1 910. E. P. Dutton & Co., New York, $2.00. 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