The evening times. [volume] (Grand Forks, N.D.) 1906-1914, 1909-06-17
STOCK DEALING
ESSENTIAL TO
GOOD BUSINESS
Report Of Governor Hughes
Committee a Wall Street
White Wash
CURB MARKET ONLY DANGER
TO THE C0NF|O|AC PUBLIC

This Line of Trading Is Not Under
the Supervision of the Stock Ex.
change But Individual Members Are
Among the Dealers.
| New York, June 16.-The report of
the committee appointed by Governor
SHughes to investigate speculation in
securities and commodities and the Or
ganizations 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
looking 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-
ion that the mercantile and metal en-
changes do actual harm to producers
and consumers. and that their charters
should be repealed"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 it is a
necessary incident of productive oper-
ations;. that it tends to steady prices
and that for the merchant or manufac-
turer the speculator performs SER
vice which has the effect of insur-
ance." I'm law says the report,
speculation becomes gambling when
the trading which it involves does not
lead, and is not intentended 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 opin-
ion; but they make so easy a techni-
cal delivery OF the property contracted
for, that the practical effect of much
speculation in point of form legiti-
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. 1t is recommended
that the minimum margin should be
20 per cent and strong disapproval is
expressed of branch brokerage Offices
which supply liquor and resort to 9TH
er improper means to induce specula-
ton.
Taking up the New York stock ex-
change, the volume of transactions
thereon is referred to as making it
probably the most important financial
! tinStifnti0p =, tho yl,or11 itc
business affecting the financial and
credit interests of the country in SO
large measure that its proper regu-
lation is a matter of transcendent inn
portance." Patrons of the exchange
are divided by the committee into five
groups. namely. investors who pay for
what they buy: manipulators of pri-
ces: floor traders; outside operators
having capital and experience and 'in-
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
eventually lose" AS to the character
of the transactions the committee de-
clares it is unquestionable that only a
small part of them is of investment
character; substantial part may be
characterized as virtually gambling.
Yet we re unable to see how the state
could distinguish by law between prop
er and improper transactions. since
the forms and mechanisms used are
identical. Rigid statutes directed
against the latter would seriously in
terfere with the former. The experi-
ence of Germany with similar legisla-
ton is Illuminating. But the ex-
change. with the plenary power over
members and their operations, 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
recommending the radical change sug-
gested, that margin trading be pro-
hibited.
Insofar as losses are due to insult
ficient margins. they would be materi-
ally reduced if the customary percent
age of margins were increased. In
preference to recommending legisla-
tion. We urge upon all brokers to dis
courage speculation upon small mar
gins and upon the exchange to use it's
influence. and if necessary. its power.
to prevent members from soliciting
and generally accepting business on a
less margin than 20 per cent"
Pyramiding. that is the use of paper
profits as margin for further commit
ments should be discouraged, says the
committee. In this connection it is
cuoucctod that if brokers oOd tho
banks would make it rule to value
securities for the purpose of margin
or collateral, not at the current price
of the moment. but at the average
price of, say the previous two or three
months (provided that such average
price were not higher than the price
of the moment the dangers of pyra>
miding would be largely prevented.
| Short Sales.
I'VE have been strongly urged to