Omaha daily bee. (Omaha [Neb.]) 187?-1922, 1909-06-17
Markets Depends on Operations Of
the Bulls and Bears.
SOME THINGS ARE NOT VERY NICE
Plain Gamblil futures Should Be
Absolu, &. rOhibited.
TWO "ExCHAN CONDEMNED
"ictni" ana "Me, : e" Are Not
Legitimate DO. ctunIIy
he AbOIia
TWO "EXCHAN .
CONDEMNED

NEW YORK. June 1G.-The report of the
committee appointed by Governor Hughes
to Investigate speculation I'm securities and
commodities and the organiza tons used
IN dealings therein was made public to-
night. The New York stock, the Con-
solidated stock, the cotton, the produce,
the coffee, the mercantile and the Metal
exchanges and the Curb market were thor
oughly investigated and recommendations
looking to imp ovement of existing cond-
tions were made at length by the COM
mittee. The most drastic finding is that
affecting the Mercantile and Metal ex-
changes, as follows:
Under present conditions we are of the
opinion that the Mercantile and Metal ex
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be repealed"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 something
partaking of the qualities of both, that in
some form II is a necessary incident OF
productive operations; that Ii tends to
steady prices and that for the merchant or
manufacturer the speculator performs
service which has the effect of insurance.
In law" says the report, speculation be-
comes gambling when the trading which
il involves does not lead, and is not
intended to lead 10 the actual passing
from hand to hand OF the property that
is dealt,in. The rules OF all the exchanges
forbid gambling as defined by this opinion;
bu, they make so easy as to technical de-
livery OF the property contracted for that
the practical effect OF much speculation,
In point of form legitimate, is not greatly
1ifferent from that of gambling"
The committee makes no presentment
against short selling, but declares the
tendency of such a selling is to steady
prices. 1t is recommended that the
minimum margin should be 20 per cent
and strong dlsapproval is expressed OF
branch brokerage offices which supply
liquor and resort TO other improper means
70 induce speculation
Most Important I'm the World.
Taking up the New York Stock Ex-
hange the volume of transactions thereon
referred to as making it probably the
most important financial institution in the
world, it's enormous business affecting
Ahe financial and credit interests of the
country in so large a measure that its
proper regulation Is a matter of trans
sendent Importance" Patrons Of the Ex-
change 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 inexperienced
persons who act on interested advice,
tips advertisements in newspapers, or
circulars sent by mail, or take flyers
Hn absolute ignorance and with blind con-
fidence in their luck. Almost without ex-
ception they eventually lose" As to the
character of the transactions the commit
tee declares:
1t is unquestlonable that only e small
part of them is of investment character;
substantial part may be characterized
10 see how the state could distinguish by
law between proper and improper trans
actions. since the forms and mechanisms
used are identical Rigid statutes directed
against the latter would seriously inter-
tere with the former The experience l ,,t, OF
minating, But the Exchange, with the
plenary power over embers and their
we shall show.
Purchasing seoui.,. on margin is as
legitimate transae ..y.i a purchase of
any other property m which part payment
Is deferred. We therefore see no reason
change suggested. that margin trading be
Insofar as losses are due to insufficient
margins, they would be materially reduced
II the customary percentage Of margins
were increased. In preference to recon-
mendng legislation, we urge upon all
brokers to discourage speculation upon
small margins and upon the Exchange 10
use its influence, a"d IL necessary, its
power, to prevent me.hbers from soliciting
and generally acceptns business on a less
margin than 20 per cent.
PyramidinE is Condemned.
Pyrsmiding, that is the use OF paper
profits margin for further commitments
should be discouraged. says the commit
tee. In this connection 1t is suggested
that If brokers and the banks would make
II rule to value securities for the pur-
pose 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 momsno the dangers OF pyramiding
would be largely prevented. The report
says:
We have been strongly urged TO advise
the prohibition or limitation OF short sales
not only on the theory that IL is wrong
sess, but that such sales reduce the mar
ket price of the securities involved. We
do not think that it is wrong to agree TO
sess, but expects 20 obtain later. Short
sellers endeayor TO select times when
prices seem high in order to sell, and
times when prices seem low In order TO
buy their action in both cases serving to
nrco JSn m otSeT words nI,gGines or
so ruuduce steadness In prices, which is
ana advantage 10 the community. No other
mems Of restraining unwarranted mark
ing up and down OF prices has been sug-
gested TO us.
The committee here calls attention to
the New York law OF 1872 which declared
void all short sales, and 10 the law of
1875, repeating The act of lS2 and legalizlng
short sales.
milking the Market.
Manipulation OF prices Is divided by the
committee into two classes; First that
which is resorted to for the purpose Of
making a market for issues of new secur-
tiles. and second. that which is designed
10 serve merely speculative purposes In
the sndeavor 10 make profit as the re-