The sun., 1909-06-18
TIGHTER EXCHANGE RULES
GOVERNORS TO DEAL 'ROUNDLY
WITH FICTITIOUS TRADING.

u.,. Found q Way to DO It-Expuision
without Mercy for Proved Offenders
Partner In Every Branch Or,ee--No
Universal 10 Per Cent. Margin Ruic.
The governors of the Stock Exchange
acted on some Of the recommendations
of the Hughes commission before the
,s,ort was published. The governors
and other members had been before the
commission and presented frankly all
things demanded by it, and in this way
had learned, no doubt, the opinion Of the
commission in regard to every important
matter under consideration.
On the day before tine publication OF the
,enort President r. H. Thomas Of the
Stock Exchange sailed for Europe. But
in the two days before his departure
the stock Exchange authorities after a
series Of conferences had. as brokers
will learn, decided upon new rules or
strcter enforcement of old rules in
compliance with the suggestions Of
members Of the commission. T..
The burden of the governors displeasure
IA 10 fall upon brokers who break the
niles regarding fictitious transactions
or matched sales or laundry business .
Nc such dealings are variously character
zed.
hall thot 1un at a mn
could prevent this usage. but said that
.vbere the activities Of two or more
brokers in certain securities become so
extreme as to indicate manipulation
rather than genuine transactions the
of1icers of the exchange would be remiss
unless they exercised their influence and
.;;,cority upon such members in way
to cause them to desist from such sus-
picous and undesirable activity
The governors are convinced that they
can destroy the Objectionable business as
far as it relates 10 big transactions. In
Stock Exchange history the most no.
torious example has been the trading Of
A. O Brown 4 Co. last August, when in
A tso hour Saturday session preceding
lis failure the firm dealt in more than
100000 shares Nothing like that will
happen again or should have happened
then il the exchange rules were strictly
enforced. Hereafter IL the governors
ideas are enacted there will be COM
mittee with plenary powers to trace the
source OF every buying and selling order
il need aVses. The committee will have
the sheets OF the Stock Exchange clear
ing houss at its disposal and will have
the authority to compel brokers to disclose
their principals. -A
In case any broker resorts 10 subter-
,fuee, evasion or deceit the governors
viii expel him, They have the power and
have de6ded 10 exercise it -
One q; the conmissiou's recounnsnda-
tions beafins upon this matter was that
in Gaze .beoker bid osrtaih pridA FOR .
certain amount of stock be should be corn-
relled to take any part o the bid In 100
share lots. Previously one OF the ad-
vantages OF The n,anipulator has been
derived from the fact that he could. for
instance. bid for 1000 shares all or none.
while broker beside him was trying to
sell for a customer 100 shares. which is
the unit OF trading. at a lower price. Such
procedure has facilitated washed sales
and other improper manipulation. The
new rule will provide. in aooordnce with
the COMMISSIONS report. that broker
bidding for a block Of stock must take
any part of it in uns. lots. He must not
wait for the man with the red necktie.'
Neither the members OF the commission
nor the governors OF the Stock Exchange
believe that their combined efforts can
absolutely prevent washed sales. Yet
they are convinced that practically all
Of the harmful manipulation viii be pre-.
vented " the new regulations
The rules Of the Stock Exchange. the
governors believe. will be more closely
followed in the future. In fact they are
confident that they will be obeyed i'm
phcitly, for the penalty for infrsction
d a trading rule is to be expulsion. with
out recourse. and forever. The only
suspensions on which member may
secure readmission will be for offences
against order. such as the suspension
u lsidor Wormser. DR., not long ago
Tor indecorous language. The spirit
II the recommendations in regard to
ttanch Offices in tbs city will be com.
Plc2 "lttl. Dut tfle kOVcTuOIS W tot W.
leve the branch Offices will be abolished
hey have made complaints Of the use
q. branch Offices uptown for bridge and
lquor, but have been told that IL such
Inducements were offered TO customers
the managers Of the branch Office were
10 blame.
No such cxcJs-A II the rule formulated
a. the conference this week is accepted,
will he available in the future. That
rule provides that every branch office
= must be under the personal direction
OF resident partner. No office. here
or elsewhere, can be conducted by a
telephone boy. scalping clerk or quick
wire man.
Adoption Of this rule 10 sure to en-
counter opposition. 1t did in this weeks
conference Of the governors and exchange
members. Its importance II far greater
Than appears, for the houses with out Of
town Offices have generally left them In
c,ntrol Of offics managers.
ltis proposed by the new rule to prevent
New York house from having Chicago
t'anch conducted by man who is not a
member Of the hrm. The New York house
may do business with a Chicago house
''hIch holds New York Stock Exchange
membership, and ills beloved that such an
Interchange OF b Stness will oompensate