Chapter VIII: The Day on ’change, with Suggestions for Beginners (1)

The stockbroker’s praises are never sung; if he has good qualities, one seldom hears of them. Doctor Parker once defined the Stock Exchange as the “bottomless pit”: Doctor Johnson said a broker was “a low wretch”; politicians vie one with another in painting him a parasite and a social excrescence. Impatient idealists who would take a short cut to perfection assert that he is of no real economic value, and would enact laws to restrain him. In the novels and on the stage he becomes sleek, cunning, convivial, and slippery, while there is ever about him a rank smell of money and a Machiavellian sublety that enables him to get something for nothing. Without understanding him and without comprehending his devious ways, we feel somehow that he lacks what Lord Morley calls “original moral impetus,” and that in some mysterious way there is a stratagem lurking in all his actions. When he enters the stage or the story we say:

“By the pricking of my thumbs,
Something wicked this way comes.”

Members of the Stock Exchange are more or less familiar with Baron Munchausen and Mother Goose--for if rumor be credited both these characters live in Wall Street--so they accept with good humor the epic touch of playwright and novelist who thus take poetic liberties with them and their profession. But the iron enters into their souls when you term them non-producers and parasites, and long into the night they will debate it with heat, bringing down the lath and plaster on their detractors with the heavy artillery of all the orthodox economists, and painting in gloomy colors the picture of a commercial world without its great Exchanges.

At such times they become very earnest, and the listener, who perhaps never thought of it before, comes away at least partially persuaded that society as it is constituted to-day will have to undergo a very decided transformation before it can get along without the machinery of which these maligned persons are so important a part. It has stood the test of time; it has come to stay; its fundamental idea, economy and utility in trade, began with the Agora of ancient Greece and the Forum of Rome. If there is something apocryphal, then, in the tradition that derides the profession, here at least is evidence of its early origin, its growth, and its power of endurance. In any case, membership in the Stock Exchange is to-day the ambition of good citizens everywhere, and affords to many a father a solution of the question at once difficult and important, “What shall we do with our sons?”

There are arguments against such a career, of course, just as there are against all roads that lead anywhere this side Utopia, but nevertheless, a man with capital, average intelligence, and good health, daily contributing by his labor to the silent forces that ebb and flow within these walls, can do well on ’Change without sacrificing anything that makes for self-respect and without diminishing in any degree his value as a useful member of the community. Moreover, he is free from things sedentary and is brought into daily contact with men and affairs that broaden and instruct him. He becomes a thinking and observing person, one whose mind never becomes atrophied for want of material on which to feed. He must be equipped with patience and philosophy to enable him to endure, without losing his nerve, the long periods of dulness that are a sorry part of the business, but he will not complain of wasted days if he learns to know that waste time, like waste material, may be converted into valuable by-products; that just as manufacturers are vigilant in turning their scrap-heaps into commercial utilities, so, in his daily economy the Stock Exchange member may, if he has the right stuff in him, turn the ashes, slag, and refuse of the hour into things of practical value. Once he has learned to do this, the novitiate has surmounted the most serious obstacle in his profession.

His days on “the floor,” as it is commonly termed, will bring him in contact with many different types. He will find here all that is finest in human character, and many withering things that are most fatal to it; these he may find anywhere, because there will always be men who carry all sail and no ballast, “men who cannot believe life real until they make it fantastic.” But the Stock Exchange is a great leveler; infallibly its swift analysis of character will search him out, weigh him and measure him, and place him just where he deserves to be. Nowhere else among business men does this silent and sure appraisal of worth find a more perfect result. It has nothing to do with the size of one’s purse nor the blue in one’s veins; it takes no account of what a man has been nor of what his ancestors were. Commercial honor is what counts, and within these four walls it is raised to a high plane and maintained with reverence. They live a touch-and-go life, with quick changes and nerves all in action, but they make no mistakes when they analyze character in their great crucible.

Those brutal aphorisms, “money talks,” “might makes right,” “whatever is, is right,” and all similar phrases, become meaningless in the matter-of-fact subordination of externals that one witnesses daily on ’Change, where life is stripped of all save elementals. It is character that “talks” here, not money; if might makes right, it is the might of decency and not of brute force or “pull”; whatever is, is “right” only so far as it conforms to the code of gentlemen and exalts the square deal. Unless a candidate understands this in its fullest sense, and is determined to make it his goal, he had better avoid the Stock Exchange. Conversely, we find in this critical atmosphere another reason why honorable men are ambitious to become members, for it is something inspiriting to have won the discriminating approval of a critical assembly abounding in experience and guided by good traditions.

The New York Stock Exchange is an association and not an incorporated body. It resembles a club in its organization, and hence through its governing board it exercises a control over its members that could not be maintained by differently constituted authority. From the moment a man signs that Ark of the Covenant, the constitution, and thereby becomes a member, he places himself, his partners, his customers, his employees, his books and all his business affairs unreservedly in the hands of the Board of Governors. This body, which is composed of members of the Exchange, is chosen in classes of ten, by the full Board at an annual election. It consists of forty members, divided into eleven standing committees, of some of which the President, Vice-President, and Treasurer are also members.

It has been urged in times past, by those who have not understood the peculiar powers of this Governing Board, that the Stock Exchange should incorporate in the manner provided by law, and thus place its affairs within the control of the State authorities, so that if mistakes occur and wrongdoing becomes evident offenders may be dealt with by the legal authority vested in the Courts. But the essential point altogether missed in this suggestion lies in the fact that the absolute power vested in the Board of Governors, by the existing plan, gives the Stock Exchange authorities vastly greater control over its members than any law on the statute books could possibly give. The Hughes Commission, which went thoroughly into the affairs of the Stock Exchange in 1909, recognized this fact, and its report emphasized the point that if changes were necessary they should come from within the Exchange itself, because of the broad control vested in it by its constitution.[93]

The manner in which the Board of Governors handles offences as they occur, and the way punishment is meted out, would not have a constitutional leg to stand on if, as an incorporated body, offenders could invoke their legal privileges. Under its present organization, for example, the Board may, if it sees fit, intercept and cut off a member’s telephone connection; it may dictate with whom he may or may not do business, and in its wisdom it may determine how, when, and where that business shall be conducted. If it were an incorporated body and each offender could resort to the courts in instances such as I have cited, what would become of its rules, and how could the Exchange authorities maintain its absolute determination to protect the public at all hazards? Under the existing system, which true friends of the Exchange and of the public may well wish to see maintained, the governors are enabled to find the direct way and the common-sense way, without being blocked by a jungle of legal technicality. They are not to be delayed or restricted by alibis, by pleas of immunity, or by States’ evidence, nor are they to be interfered with by the rain of legal writs through which an accused man, in the courts, may twist and double and block and delay the punishment for his sins, if sins there be.

Wonderment is often expressed by men in other lines of business at the severity of the punishment sometimes inflicted by the governors in this autocratic control. To expel or even to suspend a member, and thus bring upon him great pecuniary loss as well as disgrace, all because of an offence which might go unpunished in other professions, naturally seems to an outsider to be unnecessarily severe. The answer to this is, of course, that the governors, recognizing their great duty, accept as a public trust the power and the ability to maintain it. No matter whose head is hit, the rules will always be vigorously enforced because they are designed to protect the public--a public, I am sorry to say, that has not always tried to understand what the Exchange stands for. That is why no statute of limitations can interfere to protect any one of its members from the penalties that attend a departure from the straight line of business morality. A rigid enforcement _from within_ is the only efficient way, and no one who knows the governors and their arduous labors on behalf of the principle for which the Exchange stands can ever doubt it. The members themselves, no matter who is punished, are a unit, and an enthusiastic unit, in upholding the disciplinary action of the governors every time.

The best course for a young man to pursue who wishes to become a member is first to spend a year or more as clerk in a well-regulated broker’s office. The business is by no means intricate, and there are details with which he should familiarize himself. If in future years his partners are absent, he can then go over his firm’s books and acquaint himself, as he should, with all its affairs. A dishonest partner could ruin him, or, what is worse, disgrace him, for the governors recognize no distinctions as between partners, nor is ignorance accepted as an excuse. Office partners who are not members of the Exchange do not always understand the rules, nor the rigorous spirit in which they are enforced, and just as the Board member is held accountable for his partners, so he must pay the penalty for their misconduct.

This means that a member must choose his partners carefully, must familiarize himself with what they are doing, and must know how to read every entry on the firm’s books. Then, too, it is immensely satisfactory to one who has been on the floor all day and more or less out of touch with his office details to learn of his own knowledge each day, before he goes home, just where the firm stands. He looks over the customers’ accounts, the loans, and the nature and amount of the firm’s unemployed resources, including its balances at the banks. Such a man sleeps well, and reduces to a minimum the anxieties that, at critical times, make of this a nerve-racking occupation. It is all simple enough, and in the modern methods of office economy in bookkeeping he can do it without loss of time. Above all other considerations, such a man knows his business thoroughly from top to bottom, and he should not think of investing his capital on any other basis.

Perhaps a word will not be amiss regarding partnership agreements. A Stock Exchange commission business is one that should be conducted like any other business--that is to say, reserves should be laid aside and surplus balances created for the inevitable rainy day. That this is not done by all brokerage houses in the way it should be done is due to the curious habit that has grown with the years, whereby stockbrokers spend their money, uptown and down, with a lavish hand. Too many men of the younger generation thus give hostages to fortune in their private extravagances by “drawing down” their credit balances as fast as they accrue. “Easy come, easy go,” seems to be the guiding principle, and when hard times come, as come they must, debit balances are created that soon eat into capital account.

No hard and fast rule can be laid down to meet conditions like these, but the best method I have seen, and the one most wisely designed to avoid mishaps for beginners, consists in a partnership agreement by which each member of the firm may draw a monthly sum, worked out to meet his normal requirements, _and no more_. All that remains is then turned into capital account, where it draws interest, becomes a producer, and grows by what it feeds on. I have in mind a firm of young men who some years ago resorted to this method of compulsory saving, with such success that, despite the vicissitudes of the passing years, the members comprising it are now all wealthy, attributing their good fortune wholly to this wise and provident copartnership agreement.

New York Stock Exchange memberships are obtained in only one way. Having assured himself that he can meet the requirements of the Committee on Admissions, and having provided himself with two sponsors, the candidate enters into negotiations with the secretary of the Exchange for the purchase of a “seat,” as it is termed. As there are only 1100 members, and as the membership is always full, he must either purchase the seat of a deceased member, or make a bid sufficiently high to attract a seller. He may, of course, subject to approval by the committee, inherit a seat or acquire it by private transfer, but the customary process is to buy openly through the secretary, a salaried officer of the Exchange, whose authority in matters of infinite detail is such as to make him a mighty power in executive affairs. Thereupon he pays over the purchase price, together with an initiation fee of $2000, and presents himself and his sponsors before the Committee on Admissions.

This committee first calls his proposer, and then his seconder, and they are subjected to a careful inquiry as to how long they have known the candidate, and whether in a business or social way; his qualifications for membership, his health, his character and reputation, and his previous business experiences are all subjected to a microscopic scrutiny. His sponsors are also asked if in the ordinary course of business they would accept his check for $20,000.[94] If the answers to these questions prove satisfactory, the candidate himself is summoned and put through a similar examination. As his name has been publicly posted on the bulletin board for two weeks, anything detrimental concerning him will probably have been communicated to the authorities before he is examined, but if not, provided he proves satisfactory and the particular department of Stock Exchange work which he proposes to undertake meets with the approval of his inquisitors, and provided also his partners are not objectionable, he is elected to membership after he signs his name to that _magnum opus_, the constitution.

The price paid for memberships in recent years has varied widely with the condition of the times and the state of the stock market. In the halcyon days of December, 1905, and the opening months of 1906, there were several transfers at $95,000, the high-water mark. Following the panic of 1907 seats declined in December of that year to $51,000 and rose again in 1909 to $94,000. The only dues are $100 annually, together with $10 voluntarily paid by members to the heirs of each of their deceased colleagues, but this amount is, under the regulations of the Exchange, limited to $150 annually, the balance, if more than fifteen members die in any one year, being paid out of reserve funds. The sum of $10,000 which thus accrues to the heirs of deceased members is, of course, much cheaper than any other form of insurance. The Exchange is enabled to maintain it by the $10 contribution as described, and the general fund is kept intact because the 1100 members actually contribute $11,000, of which the extra $1000 is set aside as a reserve, which is prudently invested.

If we accept the fallacious argument that a thing is worth just what one can get for it, there can be no argument as to the value of Stock Exchange memberships, but that is not the way to approach the subject. It may be said with certainty that no matter how much has been paid in the past, or how much may conceivably be paid in the future, a purchaser who devotes to his business the same time and labor that he would devote to any other business in which a similar capital was invested will always be able to earn a good return. Those awful periods of stagnation will appear now and then, and accidents in the shape of losses will occur and return again to plague him, but, nevertheless, the hard worker will find no cause for complaint when he sums up, let us say, a five-year average. This is demonstrated by the fact that it is only on rare occasions a Stock Exchange member changes his vocation, which is another way of saying that memberships are held at high prices because holders are prosperous and will not sell.

In considering the value of Stock Exchange memberships it is important to include the “unearned increment” that goes with them. Despite all that may be said against it by members themselves, who in dull times denounce their calling with cynical extravagance, membership carries with it certain undefined advantages. It is a centre of the financial world in America; the business is one that quickens enterprise and encourages adventure; it undeniably gives a man a certain standing and character among his fellows; he is always abreast of the times, his hours are not long, he acquires habits of deduction, analysis, and observation that sharpen his wits and give zest to life; he is surrounded at all times by a great storehouse of wit, wisdom, and experience, and from the very nature of his business he is often brought into contact with important news of which he can take advantage and which may lead to highly profitable opportunities for investment or speculation. He would be less than human if he did not avail himself of such opportunities, and the business would lose much of its enjoyment; indeed “the tranquillity of dispassionate prudence” of which Goldsmith speaks may easily be carried too far on ’Change.

When a newly elected member makes his appearance on the floor he is taken to the rostrum by one of his sponsors, who introduces him to the Chairman. That formality concluded, he is greeted by shouts of “New Tennessee,” and is instantly surrounded by a howling mob of young members bent on initiating him. The origin of this war-cry, “New Tennessee,” is an enigma one would like to solve, but it is lost in obscurity. Even the board-room antiquarians have no clue. One of the members tells me that his grandfather, who was a member of the old Exchange that stood at the corner of Wall and William streets in the early 1830’s, often told him that the phrase was in use then, just as it is to-day. Its early origin, at least, is thus established, and one’s curiosity concerning it is proportionately increased. However it originated, it remains the popular slogan, and when a shrill-voiced member in any part of the room cries out above the din, “New Tennessee,” there a crowd of the boisterous younger element gathers to welcome a new member.[95]

To-day, thanks to the prudence of the Committee of Arrangements (which has charge of the board-room discipline), the hazing of new members is confined to harmless pranks, but up to a year ago the process was a severe one. Newspapers rolled into clubs were used to beat the novitiate over the head; he was pelted with everything within reach; his collar and tie were torn off, and after a hundred strong young men had thus jostled and mauled and pounded him all over the room, he was a sorry sight. It began to be felt, after a peculiarly severe hazing of this sort, that something might happen one day to bring reproach upon the Exchange and sorrow to the members themselves, so the committee wisely put a stop to the practice.

When the new member settles down to serious work he will find open to him several different methods of doing a brokerage business, and in this respect the New York Exchange differs widely from those abroad. In London, for example, there are but two classes, jobbers and brokers, to only one of which a member may belong. Until very recently the distinctions between the two classes were but vaguely defined, and even now frequent undercurrents of resentment are aroused between them because of the alleged encroachments of one class upon the domain of the other. In Paris, where the seventy _Agents de Change_ enjoy an absolute monopoly by government authority, there is very decided opposition by the less fortunate members of the fraternity, and there are many who predict that the friction and dissatisfaction which monopolies arouse in this day and age will sooner or later bring about a reformation of the French system.

Here there are no such distinctions, and no friction. A member may be any one of several different kinds of brokers, or he may be all of them at once, if his arms and legs will stand the strain, and if his financial resources will enable him to meet the losses arising from mistakes. These mistakes are a sorry part of the business, and they are bound to occur every now and then, no matter how careful a man may be, but I have observed that they come about most frequently in the case of men who try to do too much.

A man may, if he chooses, become a partner in a commission house, and confine his time to the execution of orders for his firm’s customers. For these services his firm receives and is compelled to collect, by the rules, a commission of one eighth of 1 per cent.--that is to say, $12.50 per hundred shares. Or he may be a “specialist,” and establish his headquarters at some one spot in the room, and do nothing but execute orders entrusted to him by his fellow-members in the one stock or group of stocks situated at that particular spot. For his services in these transactions he receives a commission of two dollars per hundred shares, to which is added $1.13 if he is required to “clear” the trade--that is, to receive or deliver the stock. The latter is called “three-and-a-shilling business,” or “clearance business.”

The vocation of the specialist is one that causes frequent comment and ill-merited abuse. It has been charged that he sometimes exercises arbitrary power in executing his orders, and complaint is heard that the price at which he deals is not always a fair price. My observation is that four times out of five the fault lies, not with the specialist, but with the broker who gives him the order. The latter has been trying to do too much, he has held the order in his hand whilst engaged elsewhere in the hope of saving the commission for himself, and then, when he has “missed his market,” turns the order over to the specialist and shifts the responsibility to his shoulders. This is scarcely fair, and it simply should not happen. The customer protests at the delay and at the price; he is told the specialist is responsible, and straightway another voice joins the chorus that holds the specialist in abhorrence.

Like the chairman of the House Committee of a club, the specialist is made to bear everybody’s burdens; he is the target for all the criticism that any one chooses to hurl at him. And yet he is one of the most useful and indispensable features of the Exchange machinery. Without him there would be no market whatever in very many securities; like the London jobber, he is constantly on the spot, ready to take chances by creating at his personal risk a market where none may have existed. If it be urged that the specialist should not speculate, but should confine himself solely to executing the orders on his books, it may be answered that in such a case he would often be useless, for in many instances the orders on his books are insufficient in volume to establish a close market or anything approaching it. By reason of his speculations a market is created; without them it may not exist. He speculates, therefore, for the same reason that jobbers in the London market speculate, and dealers in wheat, cotton, and wool. Like them, he must have goods on hand to supply the demand, and in the purchase of these goods (securities) he speculates, legitimately, on the hope or belief that buyers will appear.

If the new member chooses, he may become what is known as a “two-dollar broker,” with a roving commission, executing orders for members in any part of the room at $2 per hundred shares. The “two-dollar man,” as he is termed, is a hard worker above his fellows. He labors for a minimum wage; he must work every day or forego his revenues, for he cannot delegate his orders to any one else and receive a commission for these vicarious services. He takes big risks, because he has many orders from many different houses; the least inattention means loss. I have known one of these two-dollar men to lose $10,000 on a mistake on a 500-share order from which his commission was but $10. He is supposed to be a mine of information concerning floor gossip; his value to the houses that employ him lies quite as much in his ability as a newsgatherer as in his skill as a broker. He is on the jump every minute. The one redeeming feature of his business is that he has no office responsibilities, and none of the burdensome--and sometimes painful--duties that attend the stockbroker’s relations to his clients.

There are perhaps fifty “odd-lot” brokers on the floor, and a member may, if he pleases, take up this branch of the business. It has to do with the buying and selling of fractional lots of securities, on which no commission is charged because the peculiar nature of this business enables the broker to trade against his commitments as they arise, and thus obtain compensation for his services in the resultant profit. In a small way the odd-lot broker, like the specialist, resembles the London jobber. One of the houses that confines its operations to this “odd-lot” business has nine partners, seven of whom are members of the Exchange; another has seven partners with six board-members. The fact that two such houses should have a million dollars invested in memberships, to say nothing of the large sums employed as capital, speaks eloquently for the volume of business they are called upon to handle.

This business, which includes fractional lots of securities from one to a hundred shares, is one of the most important on the floor, since it represents, very largely, the purchases and sales of an army of small investors all over the world. To such customers, very properly, the Stock Exchange gives the best it has, safeguarding their interests with quite as much care as it bestows on the greatest of market operators. The handling of all the odd-lot orders that accumulate in a busy day, the skill required in the office-machinery, the vigilance of the floor expert, and the foresight necessary to conduct the trading operations of the firm make this a most fascinating business.

Another field to which a member may turn is that which has to do with transactions in bonds. The “bond-crowd,” as it is called, makes its headquarters on a platform under the east gallery. There are about fifty of these “bond-men,” and the compensation paid them for their service is the same as that paid on stocks, ten thousand dollars in bonds being reckoned equivalent to 100 shares. As there are twice as many bonds as stocks listed on the Exchange, one would think a larger number of brokers than this little coterie would be required to handle the transactions, but, despite this disparity in the relative size of the lists, it so happens that very many of the listed bond issues are rarely dealt in, and hence there is no surplus business. Moreover, brokers from all parts of the room are constantly executing their own bond orders without having recourse to the assistance of brokers who make this department a specialty.

Still another opportunity presents itself in the business of arbitraging. The arbitrageurs stick closely to the rail along the south wall, where there are pneumatic tubes connecting with the cable offices downstairs. Their business is one that calls for the utmost speed, since it involves taking advantage of fractional differences that arise from time to time in the prices of stocks that are listed on foreign Bourses as well as on the New York Stock Exchange. Thus Canadian Pacific may sell at 270 in London and at the same time at 269½ in New York, and as an excellent cable service keeps pace with these fractional differences, the arbitrageur may buy in New York and sell in London and receive a confirmation, all within three minutes.[96]

Because of its complexity and its risks, arbitraging is not a business that appeals to beginners on the floor. One must have reliable colleagues on the foreign Exchanges who are constantly watchful and alert, and who are moreover possessed of sufficient capital to finance large transactions. In addition, there are labyrinthine difficulties to surmount in the way of commissions, interest charges, insurance of securities in transit, fluctuations in the money markets abroad and at home, cable tolls, letters of confirmation, rates of foreign exchange, settlement days, contangoes, and many other matters. Unless a man has had a long experience in the difficult art of arbitraging, he had better shun it or prepare for trouble.

Finally, in determining what branch of the Stock Exchange business he will undertake, a member must consider that numerous and shifty contingent known as “floor traders.” These gentlemen afford an interesting study. They do not accept orders; each man is in business for himself. They entertain no illusions, and they recognize no alliances with each other. Each one follows his own inclinations, and does not permit himself to be moved by tips, or rumors, or gossip, or sentiment. He scoffs brazenly at all forms of “inside information.” His power of observation is keen, and his habit of analysis and deduction is wonderfully developed. In the surging crowd around an active stock he sees things with microscopic eye, and acts with surprising promptness; once his conclusions are reached, speed and agility are relied upon to do the rest. Age cannot wither, nor custom stale, his infinite variety. He is a bull one minute, and a bear the next. He is intent, resourceful, suspicious, vigilant, and ubiquitous. He asks no quarter, and gives none. Now he is sphinx-like, deaf, inscrutable and impenetrable; now exploding with the frenzy of battle. You may stand and chat with him, and he may seem to listen to you. In reality he does not hear you at all. His roving eye is elsewhere, his mind is intent on other things. In the middle of a sentence he may leave you abruptly and go tearing from crowd to crowd like a thing possessed, the incarnation of energy.

Visitors in the gallery who look down upon the scene on the floor in active markets, when all the Stock Exchange elements just described are striving at their utmost, come away in wonderment. The scene is one they do not understand. Such tumult is foreign to anything in their experience, and in their failure to recognize the economic forces at work in the animated panorama before their eyes they are prone to form superficial and erroneous opinions. The disorderly nature of the work seems to impress the visitor forcibly, yet the Stock Exchange is perfectly orderly; transactions involving millions come and go without the slightest friction. Nothing could work more smoothly.

It does not occur to the uninstructed spectator that mighty forces are here at work in establishing values; that the object of the Stock Exchange is to safeguard investors; that it is the one unobstructed channel through which capital may flow from sources where it is least needed into those where it may be most beneficially employed. The casual onlooker often gives no thought to the high standard of commercial honor that is maintained here; he does not realize that his own affairs, whatever they may be, would face a serious situation were this very important part of the modern mechanism of business to suffer interruption. And so it sometimes happens, in his hazy and nebulous impressions of the Stock Exchange as gathered from the visitors’ gallery, that this man’s mind is fertile ground for the seed which may be sowed there by every genteel humbug, demagogue, or quack whom he chances to meet.

It may be admitted freely that the facilities afforded by Stock Exchanges, like all other great public utilities, are sometimes foolishly or dishonestly abused, but by no stretch of the imagination can such abuses attain to the mischief done by those who would deceive people into the belief that the Stock Exchange, because it deals with large affairs in a large way, has some improper quality about it. Many minds, many hands, and many hours of patient labor have been bestowed on the making of the chronometer which is a vital part of a great ship; yet a child may “put it out of business,” and destroy the ship’s company.

That these observations apply to the New York Stock Exchange need not be elaborated when we consider that one third of our nation’s wealth is represented by its securities; that there are two million owners of them; and that, through the widespread publicity of Stock Exchange quotations the world over, all these owners are given gratis the epitomized judgment of experts as to the value of those securities each day and their prospective value in the future.[97]

The Stock Exchange is open for business from 10 A.M., to 3 P.M., and on Saturdays from 10 to 12 noon. The broker reaches his office between 9 and 9:30 A.M., looks over his correspondence, makes a mental note of the general status of the firm’s affairs, glances at the morning’s news that is rapidly reeling off the ticker, reads the prices cabled over from the London Stock Exchange which has been in session four hours, and thus in a general way acquaints himself with what may be expected at the opening of the New York market. The two-dollar broker and the specialist do not concern themselves greatly with such matters, and frequently they go directly to the floor without stopping at their offices.

By 9:45 A.M. the Board is beginning to present a scene of animation. Of the 1100 members not more than 600 are in attendance, and often not more than 400; indeed, there are members who have never once entered the room. But the attendance is increased by the presence of some 230 pages in uniform, wearing five-year service stripes, of which the sleeve of the superintendent is adorned with eight; 30 telegraph operators, whose business it is to hurry from place to place gathering quotations as they occur, and sending them out over the ticker, and by 550 telephone clerks who occupy the long booths on the west wall, where private lines connect members with their offices.

These clerks are not permitted to go on the floor. Their employers, who rent the telephones from the Exchange, pay $50 annually to the institution as a fee for each clerk. As their duties are extremely important, involving the transmission by ’phone of orders and reports that often run into millions, it will be seen that this small army of private line operators is of necessity highly trained. An instant’s relaxation or inattention, or a failure to transmit promptly and correctly the verbal messages entrusted to them, may conceivably lead to confusion and losses of great importance.

At each of the sixteen posts in the room, from twenty to forty stocks are situated, and another group covers the north wall. Once a position is assigned to any security by the committee in charge, it is seldom moved elsewhere, and thus, although there are nearly six hundred different issues of securities, the broker soon learns the location of each one and turns automatically in that direction when an order reaches him. At each of the posts, and along the north wall, the specialists in these various groups of stocks are at work before the opening of the market, entering the day’s orders in their books, some with the rapid energy that betokens an active opening, others with an indifference that spells dulness in their particular line.

At Post 4, in the northeast corner, there is also an ante-market gathering, for this is the spot where stocks and money are borrowed and loaned. This “loan crowd,” as it is called, was formerly the gathering to which one turned to gauge the market position of the bear party, since the borrowing of stocks by “shorts,” as done here, furnished an index of the strength or weakness of that interesting element. But of late it has lost its ancient prestige as a guide in such matters, because in order to hide the information sought, borrowing of stocks on a large scale is now done privately. This “crowd” has been the scene of some tremendous excitement, as in the Northern Pacific corner of May 9, 1901, when the price soared to $1000 per share and the shorts were trapped, and on that day in October, 1907, when money, after loaning at 125 per cent., was not to be had, for a time, at any price, although brokers with the best collateral would have paid 200 or 300 per cent. for accommodation, and ruin stared every one in the face.

As the hour of ten draws near, activities increase. On the south wall the arbitrageurs are busy deciphering their code messages and distributing orders, many hundred telephone bells are ringing in the long booths where clerks are hastily writing their messages; crowds of visitors gather in the gallery, while beneath it the bond-brokers prepare for their labors; indicator boards on the north and south walls, like great kaleidoscopes, display and hide their number with the same electric suddenness that seems to characterize everything and everybody--then bang! the gong rings, the chairman’s gavel falls, and another day begins. Yesterday is embalmed with the Pharaohs; they never speak here of what _has_ happened, but only of what _will_ happen--and this is a new day.

Naturally, certain securities are more active than others, and here there are the largest crowds. As the limits surrounding the trading-posts are but vaguely defined, one crowd will sometimes get mixed up with another, whereupon confusion results, and good-natured if earnest appeals are heard to “get out,” and “get over.” Into one of these struggling masses a broker with an order or a trader with an inspiration literally hurls himself; each sound in the jargon of voices, which means only Bedlam and Babel to the visitor, is to him perfectly understood. He may be pushed this way and that, or tossed aside, or hidden altogether by bigger men who surround him, yet he has no difficulty in determining the price and in doing what he came there to do; all this with surprising celerity and accuracy. The business done, he hastens to his telephone, makes his report, and is ready for the next order. The manner in which some of these transactions take place between brokers has long been a subject of praise. A word, or a nod, or an upraised finger, or a tap on the arm, and hundreds of thousands of dollars change hands without a scrap of writing or a witness. A magazine writer thus describes it:

One pastime of the American public is the manly sport of throwing
mud. A shovelful of scandalous mud--a clean white target, and many
a reputable and disreputable citizen is having the time of his
life. We bespatter our philanthropists, our statesmen, merchants,
lawyers, and divines. We vilify our art, our architecture (I take
a hand in that sometimes myself), our literature, or anything else
about which some one has spoken a good word.

One of the time-honored institutions of our land--one which has
never ceased to be the centre of abuse--is the New York Stock
Exchange. Here conspiracies are organized for robbing the poor
and grinding the rich; so despicable and damnable that Society is
appalled. Here plots are hatched which will eventually destroy
the nation, and here the Gold Barons defraud the innocent and
the unwary, by stock issues based solely on hot air and diluted
water. Here Senators are made, Congressmen debauched, and judges
instructed--even plans consummated for the seduction and capture of
the Supreme Court. All this is true--absolutely true--you have only
to read the daily papers to be convinced of it.

There is one thing, however, which you will not find in the
daily papers. It is not sufficiently interesting to the average
reader who needs his hourly thrill; and this one thing is the
unimpeachable, clear, limpid honesty of its members.

When you buy a house even if both parties sign, the agreement is
worthless unless you put up one American dollar and get the other
fellow’s receipt for it in writing. If you buy a horse or a cow, or
anything else of value, the same precaution is necessary. So too if
you sign a will. Your own word is not good enough. You must get two
others to sign with you before the Surrogate is satisfied.

None of this in the Stock Exchange. A wink, or two fingers held up,
is enough. Often in the thick of the fight when the floor of the
Exchange is a howling mob, when frenzied brokers shout themselves
hoarse and stocks are going up and down by leaps and bounds, and
ruin or fortune is measured by minutes, the lifting of a man’s hand
over the heads of the crowd is all that binds the bargain.

What may have happened in the half hour’s interim, before the
buyer and seller can compare and confirm, makes no difference in
the bargain. It may be ruin--possibly is--to one or the other,
but there is no crawling--no equivocation--no saying you didn’t
understand, or “I was waving to the man behind you.” Just this
plain, straight, unvarnished truth, “Yes, that’s right--send it in.”

If it be ruin, the loser empties out on the table everything he
has in his pockets; everything he has in his bank; all his houses,
lots, and securities--often his wife’s jewels, and pays 30, 40, or
70 per cent., as the case may be.

What he has saved from the wreck are his integrity and his good
name. In this salvage lies the respect with which his fellows hold
him.

Every hand is now held out. He has stood the test, he has made
good. Let him have swerved by a hair’s breadth and his career in
the Street would have been ended.[98]

Of course mistakes and misunderstandings do sometimes occur, and these are the banes of the broker’s life. He will lose $500 with equanimity on a personal venture, but he will howl in distress over a loss of $25 on a mistake, and apply to himself a lurid mosaic of epithets because of it. The one merely shows bad judgment and is one of the little amenities; the other he feels is stupidity. At such times the stockbroker adopts Talleyrand’s bold hyperbole when he heard of the death of the Duc d’Enghien, “It is worse than a crime; it is a blunder.”

When a “mix-up” occurs in a crowd, as when four or five men make claim to having supplied a bid simultaneously, everybody produces a coin and “matches” on the instant. It is a case of “odd man wins,” and no time to lose. The market may be active and differences of seconds may spell losses of thousands. In less time than it takes to tell it, everything is adjusted and forgotten. But sometimes a mistake occurs which is not discovered by either party until after the market has closed. A man may think he sold 500 shares, for example, whereas the buyer has only 400 on his book. In a case of this sort, the discrepancy is covered “at the market” next morning and the loss or profit is divided. Differences between members are seldom irreconcilable, and when they assume serious proportions any third man will act as arbiter and speedily settle them. It is a significant fact that the Committee of Governors selected to arbitrate disputes is rarely called upon. Rarely, too, is there acrimony or hard feeling. The use of epithets is forbidden; to call a man a liar means prompt suspension. And so they live on raw nerves, with incidents occurring daily that add to the strain, yet ever with good-humored acquiescence toward whatever fortune deals out to them, and with generous camaraderie one to another.

As the day advances on ’Change, news and gossip and rumors of all kinds pour in, and to these the active broker must devote a large part of his time. It is astonishing to what extent the public, or that part of it that lingers in brokerage offices, calls for news from the floor. The demand is insatiable. “What do you see over there?” “Who is buying Steel?” “Who is selling Union?” “What’s the news in Copper?” “What do you think of the market?” These are the messages that come over the wires all day long, not merely from the New York offices, but from Montreal, Boston, Chicago, St. Louis, and many other points. And no matter how busy the floor broker may be, time must be found, somehow, to reply to every question as best he may, for at the other end of the line there is a customer waiting to hear from him.

Just why this customer yearns for news from the floor has always been a mystery to me. What does he expect to learn? What value attaches to a list of names of brokers who buy or sell Steel, when everybody knows that really important principals in these matters invariably hide their hands? All the significant news of the day is printed on the news tickers and reaches the customer’s eye before the broker or the floor knows anything about it, yet never an hour passes but he is importuned to “say something” about what is happening on ’Change, although half the time nothing whatever is happening. The climax of this sort of thing is reached when the floor man is asked to predict the future course of the market, a request that reaches him a dozen times a day. Now, in the name of common sense, what does he know about whether the market is going up or down? How can a man who is swimming with the current tell how fast he is going? If he were a seer who could foretell such things he would have all the money in Wall Street, in which case he wouldn’t remain a broker very long.

Just watch him; he is as busy as a man can be; his hands are full of orders, his head is occupied with many anxieties, his eye is on the indicator board, or scanning the room; arms and legs are working as fast as nature will permit; he must concentrate at all times. His ears ring with the strife of the room; all sorts of rumors, many of them ridiculous, are hastily whispered to him; “boos” and groans from the bears, shrieks and yells from the bulls--this is the sort of thing he hears all the day long. How can he form an opinion when thus distracted? He stands too close to the picture; he lacks perspective. What such a man thinks of the market isn’t worth anything; indeed, he does not “think” at all except about executing his orders, and heaven knows that is enough to engross him.

Answering all the questions that come to him over the wires is the hardest task, and the most distasteful thing the floor man is called on to do. He knows that he doesn’t know anything; from his point of view no information is better than misinformation. He feels with Josh Billings, “It’s a mitey site better not 2 no so mutch than 2 no so mutch that ain’t so,” but nevertheless he must continue to express views and theories and opinions and predictions, whether he likes it or not. Some of his oracular utterances are illuminating. “Market is going down,” he replies, “because there are more sellers than buyers.” Inexorable logic.

There was old Y----, who used to talk to his customers sitting near his office window, which faced Battery Park. He was a shifty professor of finance who never was known to hold the same opinion of the stock market two days running. “This market,” he said one day, “is going away up, crops are good, money is easy, railroads are rolling in wealth, and--look over there”--pointing to a line of immigrants walking through the park from the landing place--“the brawn and sinew of old Europe coming over here to develop our resources.” The very next day the market had what is called a “healthy reaction.” Quite unmindful of his consoling prophecies of yesterday, old Y---- looked at the tape and said, “This market is going away down. Crops are poor, money is tight, railroads are in a bad way, and--look over there”--pointing to another procession of immigrants--“the scum of Europe coming over here to rob our American laborers.”

If that portion of the public which buys and sells stocks often has its little joke at the expense of brokers, so also brokers in their turn frequently have cause to laugh at their clients. “Cheer up,” was the message sent over the wire by a hopeful broker to a despondent client; “cheer up, the market can only go two ways.” “Yes,” was the reply, “but it has so damn many ways of going those two ways.” During the rubber boom of 1910 on the London Stock Exchange, a broker wired to a client in Ireland, “Rise in bank rate considered likely,” to which he received a prompt reply, “Buy me five hundred.” A telegram came over a private line one day last summer from a customer in Montreal. It was a deadly dull period, when, owing to the indifference of the public, stockbrokers were not making expenses. “What are you chaps doing over there?” said the telegram. “Why don’t you start something?” to which the floor member replied, “Read St. Luke 7:32.”[99] This must have been the same member who, when customers were few and far between, hastily ’phoned his office partner, “Put all our customers into copper,” to which his partner replied with grim resignation, “He won’t be down to-day.”

When the gong rings at three, the day’s work on ’Change is at an end, and the shouting and the tumult dies. It is then 8 P.M. in London, and there in the Street hard by the Exchange, even at that ungodly hour, brokers and jobbers in the “Yankee” market are still at work in all kinds of weather. “The American market,” says the (London) _Quarterly Review_, “continues, as a rule, to deal up to 8 P.M. (5 P.M. on Saturdays), when the cable offices on this side close down. Up to that time wires are coming in continually from New York with orders and prices; and a man would be ill advised to undertake jobbing in the American market unless he has a splendid constitution and lives within easy reach of town. Every year the Yankee market levies a death-tax upon its members through the medium of pneumonia and other complaints brought on by long exposure in the Street after official hours; and very little is done to provide these late dealers with adequate accommodations or shelter.”[100]