Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1909-06-17
HUGHES COMMITTEE
H||S CURB GAMBLERS
SUGGESTS RULES TO END MAR
.kEr "coRNERs" AND TO PRE-
VENT OTHER ILLS.
MANY OF PRESENT METHODS
ARE SEVERELY CONDEMNED
Short Selling and Trading in Margins
Upheld by Representations Boards to
es Necessary as Means Of Fixing
Prices, But Gambling Should Be
Stopped. Il


Stopped. Il
New York, June 17.-The report OF
the committee appointed by Governor
Hughes to investigate speculation in
Organizations used in dealings therein
was made public last night. The New
York stock, the Consolidated stock, the
cotton, the produce, the coffee, the
mercantile and the metal exchanges
and the curb market were thoroughly
investigated, and recommendations
docking to improvement Of existing
conditions were made at length by the
committee, The most drastic finding
IS that affecting the mercantile and
metal exchanges, as follows: Under
present conditions we are of the opin-
don that the mercantile and metal e,e-
changes do actual harm to producers
and consumers, and that their char
ters should be repealed"
Concerning speculation in general,
the committee declares that it may be
wholly legitimate. pure gambling, or
something partaking Of the qualities of
both, that in some form 1t is a neces-
sary incident Of productive operations;
that 1t tends to steady prices, and that
for the merchant or manufacturer the
epeculator performs q service which
has the effect of insurance. I'm law"
says the report, Speculation becomes
gambling when the trading which it
involves does not lead, and is not in
kended to lead, to the actual passing
from hand to hand Of the property that
Is dealt in.
.'The rules Of all the exchanges for
bid gambling as defined by this opinion.
but they make SO easy technical de-
livery of the property contracted for
that the practical effect OF much
speculation, in point Of form degiti-
mate. is not greatly different from that
Of gambling"
The committee makes no present.
ment against short selling, but de-
clares the tendency of such selling is
to steady prices. It is recommended
that the minimum margin should be 20
per cent, and strong disapproval is ex-
pressed Of branch brokerage offices
which supply liquor and resort to ether
Improper means to induce speculation.
Tho New York Stock Exchange.
Taking up the New York Stock Ex-
change, the volume Of transactions
thereon is referred to as making it
probably the most important financial
institution in the world, its enormous
business affecting the financial and
credit interests Of the country in so
large measure that its proper regu-
1ation Is matter Of transcendent i'm
portance." Patrons of the exchange
are divided by the committee into five
groups, namely, investors who pay
for what they buy: manipulators of
prices: floor traders; outside operators
having capital and experience. and elm
experienced persons who act on inter-
ested advice, tips advertisements in
newspapers. or circulars sent by mail,
or take flyers in absolute ignorance
and with blind confidence in their luck.
Almost without exception they eventu-
ally lose" As to the character of the
transactions the committee declares it
a sunquestionable that only small part
Of them is Of investment character; a
Substantial part may be characterized
as virtually gambling. Yet we are un-
able to see how the state could distin-
guish by law between proper and i'm
proper transactions, since the forms
and mechanisms used are identical.
Rigid statutes directed against the lat
ter would seriously interfere with the
former. The experience of Germany
with similar legislation Is illuminating,
but the Exchange. with the plenary
power over members and their opera
Aions. could provide correctives, as we
shall show.
Purchasing securities on margin is
as legitimate transaction as pur-
chase Of any other property in which
part payment is deferred. We there
fore see no reason whatsoever for rec
ommending the radical change sug-
sested. that margin trading be prohib-
tied.
I'm 30 far as losses are due to insuffi-
e9Art margins. they would he materi-
allJ reduced II the customary per-
cent&ge OF margins were increased. In
preference to recommending legisla-
ttion. we urge upon all brokers to dis
courage speculations upon small mar
gins. and upon the Exchange to use It's
}nfluence. and, II necessary, its power.
70 prevent members from soliciting
Pnd generally accepting business on a
less margin than 20 per cent"
Pyramiding, that is the use Of paper
profits a. margin for further commit
ments. should be discouraged, says the
committee In this connection it is