New-York tribune., 1909-03-27
LETTERS TO THE EDITOR
THE STOCK EXCHANGE.
4 Reply to .4ttocks on It's Rules and
PROCEEDINGS.
To the Editor of the Tribune.

! of the New York Stock Exchange and reaches the
conclusion from the writer of this letter con-
! siders to be entirely false premises that very
large, if not the largest, proportion Of losses IN
Wall Street are occasioned by brokerage charges,
compounding OF interest and to quote the editor 5
note at the beginning o. the articIe) the mere
expenses Of the gamble, the kitty" The writer
of the article question is Mr.. John Parr and
in order 10 give an idea Of the impression as TO
Wall Street methods intended to be conveyed to
the reader, the note Of the editor OF -YeryDody =
Magazine Is reproduced herewith:
Editors Note-you who play the narket-haye
in the Wall Street game Have you ever ever Ggr[tu ;
out how much 1t costs YOU to buy ana sell SeguI
ties on d margin2 What DO you. Know. aoCul @
Rounded? Nothins. probably, and vet these items
the mere expenses Of the gamble the kitty
ae&P r. stock & ehange S0n5E pay on 4G the 0f go6e IFS anG
furnish millions for the palaces and the auto
comes out of YOU. Here is a plain eN2lanation l
not totally blind. should force you at least 10
moments thought before your next plunge into into
against margin gambling in Wall Street.
Under the rules of the New York Stock E8-
change members may charge. and are required to
charge one-sghJh Of per cent, the commissions 10
be calculated upon the par value Of securities
This means that the charge for buying one hundred
shares OF Great Western costing say $500, is the
same as for buying two hundred shares of Della
ware Lackawanna & Western t-ar value $500.
costing $4,000. In both instances the broker re-
ceives SO 50 hundred shares
Compare this payment with the amounts re-
ceived by real estate brokers twho, by the way,
assume no risk. whereas in margin transaction.
a stock broker risks his own capital TO the extent
Of SO. so or 90 per cent?. on the purchase Of New
York CITY property the brokerage is per cent
on the amount of money involved, on suburban
property 2Is to 5 per cent and on the negotiation
of mortgages from l12 TO 2l3 per cent. Il other
words. if q real broker bought a client
a house on Riverside Drive costing S50000, his
he rh- TOr
similar transaction in the suburbs would range from
S1.250 $4,000 As stated above. the stock
broker ON a $4,000 purchase receives Sl2 so and
it is not impossible that he advances more than go
per cent of tho money Involved As the amount in
creases the compensation OF the real estate broker
increases. Not 50 with the stock broker. He still
continues 10 impose urun his vretched victim the
crushing eighth of l per cent the par value
Twelve dollars and fly cents, Terrible terrible!
The writer cf the article in "Every5ody's takes
up at very great length the question Of another OF
the brokers bleedings. viz, the interest charged
on margin accounts. He assumes that a certain
unfortunate person who is designated as Mr.. Thin
margiuist. goes TO a broker. puts up $1,000 and
buys one hundred shares of Atcason al par.
$4,000 Then he assumes that the account is car
ried for month at psv cent. tNhy this par
,lcular period Of time Mr. Parr does not undertake
to explaiED At tie end of a month the customer
receives a statement showing bit balance Of
S9057 S. net cost of So So. AR Parr then goes
on 10 say At the end of the second month you
would md yourself charged per cent interest
ths whole OF it. You would be paying interest on
interest and interest on the commission. and #
would be compounded monthly long the
account stood open. Is IL 10 be wondered at that
brokers' are secretive abont the interest account?
Now, Mr.. Parr, ''EveTybody's Maga-
zine or auyoody Interested I'm this attack on
stock brokers wished 20 tell the whole truth on
this subject he would give the figures Of this
cornpourdius and interest interest. and forth
Il Is "a fact that brokers render accounts monthly,
4rrHt rl
balance. but AIr Parr neslects TO state that n
cases where dividend stocks purchased the dvi-
dsHdz they accrue credited Co the buyer
and do much Offset the brokers carrying
charges He also fails 20 mention rhe fact taat
banks and trust companies ana o:Ie- lenders of
money are APT 20 veuder accounts molth'y an Can
loans. and thcse charges mtst te pald b. he
broker
No4, Il the interest charge Is az the rate of
cent per alaum. the compoguding referred 10 by
llr. Parr amounts 10 orc-siXth Of per cent per
annum or. expressed IN figures on Slc1 for one
year the conpoundtns would amount 10 81 g. or on
$4,000 tha amount would ce SIS % The interest on
the commission for one wear would be . cents.
coTnpoundiug on the commission for buying and
selling would amount 10 about hve cents. and these
staggering should DC added 70 the 81 g or the
SIS .o as the case might he,
feel Ike apoioglZng Tor tCespasslnC upon your
columns 10 ask attention To such absurd state
rleuts as are made IN Mr.. PARIS article. hut
brokers have been misrepreseuted and viihed and
Kicked about TO such extent that our patience Is
about exhausted. I shall not weary YOU with A
general denial of the assertions in Every boCy's
that margin customers pay for such expensive
buildings as tie Stock Exchange This institution
(speaking generally is supported by dues of the
members ana 10y large receipts from the operations
Of the stock Exchange clearing House These pay
rneuts ere made wholly 10y members. and are never
CHARGED 4. their customers. either directly ndi-
rect!y Neither does il necessary 10 deny that
brokers are ''secyetye about the interest account
After an experience of nearly thirty years of active
business in Wall Street, can say that have never
heard such tElns suggested until read 1t In
'.HIyeI ybody's Magazine Brokers' accounts are
always open to their customers; matters Of detail.
ii not understood are folly explained. and the in
tercst account Is Frequently ana fully and openly
discussed as any item of any business could possi-
ply be- And. rs tine way, speaking Of interest Air
Parr appears TO- take il for granted that brokers
always charge AS high a rate as per cent on all
the case of my, own ottice no rate as high as this
has been charged for perhaps year.
To sum up the points I have tried TO make clear
are: % That the rate Of commission charged by
members Of the New York Stock Exchange is
vtrv small, when one considers the personal risk
involved in the amount OF money advanced by the
broker and the chance of loss owing To mistakes
Of employees ana from other causes; 90 that brok-
ers commissions and interest ,harges form a
very small proportion Of the amounts of money
lost or gained in stock operations, and 80 that
while there may ne. are. black sheep in every
fold the standard of morality and fair dealing
among stock brokers is exceptionally high. These
facts that are patent 10 any one sufficiently
interested to make careful inquiry and they could
easily have been gathered by "Evcrybodys Maya
Mr. Parr concludes his article by saving. Put
wouldn't be well for Mr. Parr 10 stick to his
own business, instead OF trying 20 write about
New Y6rE. March g. ls5s A N S