The Salt Lake tribune. [volume] (Salt Lake City, Utah) 1890-current, 1909-06-17
L|MEL|GHT TURNED
ON SPECULATION
Report of Committee Appointed
by Governor Hughes Is Now
Made Public.
MERCANTILE AND METAL
EXCHANGES ARE SCORED
DO Actual Harm to Producers
and Consumers; Charters
Should Be Repealed"

NEW YORK. June 16.-Thc report
of the committee appointed by Gov
ornor Hughes 10 investigate specula-
tlon IN securities and commodities and
the organizations used in dealings
therein was made public tonight. The
New York stock, the Consolidated
stock, the Cotton, the Produce, the Cof-
fee, the Mercantile and the Metal cX-
changes and the Curb market were
thoroughly investigated and recon-.
mendations 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: " Tn
der present conditions we are of the
opinion that the Mercantile and Metal
exchanges do actual harm to producers
and consumers. and that their charters
should be repealed, -
Concerning speculation in general,
.1hc committee declares that it may be
wholly legitimate, pure gambling. or
i something partaking of the qualities
of both, that in some form ii is ne
ceSsary incident of productive opera
tions, that 1T tcnds TO steady prices
and that for the merchant or manu-
|
service which has the effect of lnsur
ance. "ln law says the report.
Speculation becomes gambling when
the trading which it involves does not
lead, and is not intended 10 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 2 tech
nical delivery of the property con.
tracted for, that the practical effect Of
much speculation. in point Of form
legitimate, IS moi 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
per cent and strong dIsapproyal is ex
pressed Of branch brokerage Offices
which supply liquor and resort TO other
improper means 10 induce speculation.
The New York Stock Exchange
Taking up the New York stock ex-
change. the volume of transactions
thereon is referred TO as making il
probably the most important financial
institution in the world, its ''enormous
business affecting the financial and
credit interests of the country in so
large 2 measure that its proper regu-
/ lation is matter of transcendenf i'm
portance. Patrons of the exchange
arc divided by the committee into FIVE
groups, namely. investors. who pay for
what they buy; mauipulators of prices,
! floor traders. outside operators, hav-
| ing capital and experience. and Gin
experienced persons who act on in.
terested advice. tips, advertisements
| in newspapers. or circulars sent by
| ~,
norancc and with blind confidence in
! their luck. Almost without exception
! they eventually lose As 10 the char.
actcr OF the transactions the commit
tee declares it is unquestioDable that
only a small part Of them is Of invest
! ment character; - substantial part
may be characterized as virtually gam
! bling. Yet we are unable 10 see how
| the state could distinguish by law be
| tween proper and improper transac-
tons, since the forms and mechanisms
used are identical Rigid statutes di
rcctrd against the latter would Sc
riouslv interfere with the former. The
experience Of Germany with similar
! legislation is Illuminating. But the
exchange, with the plcnary power over
members and their operations, could
provide corrcctiycs, as we shall show.
Margining Legitimate.
rs legitimate a transaction as a pnr-
chase Of any other property in which
part pavment is deferred We there
/ fore see no reason whatsoever for rec.
ommenCing the radical change sug
Gested. that margin trading be prohlb-
! tied,
| "Tnsofar as losses are due to insult
ficient margins, they would be mate
rally reduced if the customary per
| ccntago of margins were increased. In
/ preference TO recommending lpgisla
ton. we urge upon all brokers 10 dis
courage speculation upon small mar
gins ard upon the exchange 10 use It's
! influence, and if necessary, lis power,
to prevent members from soliciting and
margin than 30 per cent.
| PYramiding, that is the use oJ paper
profits rs margin for further commit
mcnts should be discouraged, saws the
committee. In tins connection it is sug-
pcsted that if brokers and the banks
would make il rule TO value sccurl-
tics for the purpose OF margin or col
lateral, not at the current price of the
moment. but AT the average price Of,
say, the prcvious two or three months
" (providcd that such average price
were not higher than the price of the
moment) the dangers Of pyramiding
would be largely prevented.
Short Sales Defended.
.We have been strongly urged to
advise the prohibition or limitation or
short sales, - says the report, "not only
ON the theory that it is wrong to agree
10 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.
scss. but expects to obtain later. Short
sellers epdeaVor 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 serv-
ing TO lessen advances and diminish
, declines Of price. In other words,
short selling tends 10 produce steadi-
; ness in prices. which Is an advantage
TO the community. No other means or