The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1909-06-17
GAMBLING, BUT
NECESSARY TO
DO BUSINESS
Continued from Page I.

~ reduced If the customary percentage
of margins We're increased. In prefer
ence to recommending legislation, we
urge upon all brokers to discourage
speculation upon small margins and
upon the exchange TO use its 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 il is
suggested that if brokers and the banks
would make 10 a rule to value securi-
ties for the purpose of margin or col
lateral. 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 mo-
menD, the dangers of pyramiding
would be largely prevented.
Short Selling Advantageous.
we have been strongly urged to ad-
wise the prohibition OF limitation of
short sales" says the report, mot only
on the theory that it is wrong to agree
TO sell what one does not possess, but
that such sales reduce the market price
of the securities involved We do not
think that it is wrong to agree to sell
something that one does not now pos
sess. but expects to obtain later. Short
sellers endeavor to select times when
prices seem high in order to sell. and
times when prices seem low in order to
buy, their action i'm both cases serving
TO lessen advances and diminish de-
clines Of price. In other words. short
selling tends to produce steadiness in
prices. which is an advantage to the
community. No other means of re-
straining unwarranted marking up and
down of prices has been suggested TO
us The committee here calls atten-
ton to the New York law Of 1872 which
declared void all short sales, and to
the law of 1858 repeating the act of 1912
and legalizing short sales.
Manipulation of Prices.
Manipulation Of prices is divided by
the committee into two classes: first.
that which is resorted to for the DUR
pose of making market for issues OF
new securities, and second. that which
Is designed TO serve merely speculative
purposes I'm the endeavor to make a
profit as the result of fluctuations which
have been planned in advance. The re-
port then says;
The first kind Of manipulation has
certain advantages, and when not ac-
companied by matched orders is unob- !
Jectionable per Sc. It is essential to the
organization and carrying through of
important enterprises, such as large
corporations. that the organizers should |
be able to raise the money necessary to |
complete them. This can be done only /
by the sale Of securities.
The second kind of manipulation /
4r..ar.
ous criticism. 1t has for its object either /
the creation of high prices for particu- |
lar stocks. i'm order to draw i'm the pub /
Tie as buyers and TO unload upon them
the holdings of the operators. or to de /
press the prices and induce the public /
10 sell There have been instances of |
sross and unjusdfahle manipulation of 4
securities, as i'm the case of American /
Ice stock. While we have been unable /
10 discover any complete remedy short !
OF abolishing the stock exchange itself, |
we are convinced that the exchange can |
prevent the worst forms of this evil bv /
exercising its influence and authority !
over the members to prevent them.
When continued manipulation exists it /
Is patent 10 experienced observers"
Matched Orders Condemned.
Severe condemnation of matched
orders is expressed. We refer" the
report says, "to that class Of trans
actions engineered by some manipulat-
OF, who sends a number of orders
simultaneously TO different brokers.
some TO buy and some to sell Since
they are legal and binding, we find a
difculty i'm suggesting a legislative
remedy. But where the activities of
two or more brokers in certain securf.
ties become SO extreme as to indicate
manipulation rather than genuine
transactions. the officers of the ex-
change would be reniss unless they ex-
ercised their influence and authority
upon such members in "a way to cause
them To desist from such suspicious and
undesirable activity.
The subject of corners i'm the stock
market has engaged our attention. The
stock exchange might properly adopt !
rule providing that the governors shall
nave power TO decide when a corner
exists and 10 fix a settlement price. SO
as To relieve innocent persons from the
INJURY or ruin which may result there
from. The mere existence of such
rule would tend to prevent corners"
Books Should Be Examined.
The board Of governors Of the stock
exchange should improve present con-
diuons with regard 20 failures OF /
Ut oheFS, according 10 the COMMITTEES. Ii
is suggested that the books of members
of the exchange should be subject to
periodic examination under rules TO be
prescribed by the exchange. It is de-
clared further that when broker sells
a customers securities for his own ben
ett, ne should be held guilty of larceny. L
and a statute TO that effect is recon-
mended. Ii is set forth also that rules /.
should be made 10 prevent dealing for
any clerk or subordinate employe of
bank OF other mOneyed corporation 1
More stringent requirements for the
listing of securities on the stock ex-
change are advocated, among them
that the exchange should exact a state
ment showing how much of the stock 81
the company has been issued for cash.
and also showing what commission mas
been paid 20 the promoters. The uu-
listed department. except for temporary
issues, should be abolished says the
committee. tt is i'm the unlisted depart
neEt that stocks Of certain companies
which have not supplied all infoTma-
ion desired by the exchange are traded
IN. The passage of a statute Is advo-
az inc ]