Arizona republican., 1909-06-17
A, THURSDAY MORNING, JUNE r, 1909.

 We have been strongly urged to advise the prohibition or limitation of short sales" says the report. mot only on the theory that it is wrong to agree 1 to sell what one does not possess, but l 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 possess. but expects to obtain later Short sellers endeavor to se- lect times when prices seem hIgli in order to sell and times when prices seem low in order to buy. their action in both cases serving to lessen ad- vances and diminish declines of price. In other words, short selling tends to produce steadiness in prices. which is an advantage to the community. No other means of restraining unwarrant- ed marking up and down of prices has been suggested to us" The committee here calls attention to the New York law of 1858 repeating the act of 1872 and legalizing short sales.
 Manipulation of prices is divided by the committee into two classes: First, that which is resorted to for the pur- | fpoN pA itlSihiii5 iiieii htN lpl iooltS Ol new securities, and second, that which is designed to serve merely specula- tive purposes in the endeavor to make profit as the result of fluctuations which have been planned in advance. The report then says:
 "The first kind of manipulation has certain advantages, and when not ac- companied by matched orders Is un- objectionable 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 nee essary to complete them. This can be done only by the sale of securities
 The second kind of manipulation mentioned is undoubtedly open to se- rious criticism. It has for its object either the creation of high prices for particular stocks, in order to draw in the public as buyers and to unload upon them the holdings of the Oper- ators, or to depress the prices and in- duce the public to sell There have been instances of gross and unjustifi- able manipulation of securities, as in the case of American Ice stock. While We nave DCti tO hiSNpNti any complete remedy short of abolishing the stock exchange itself, we are con- vinced that the exchange can prevent the worst forms of this evil bv exer- cising its influence and authority over the members to prevent them. When continued manipulation exists it is patent to experienced observers"
 Severe condemnation of matched orders" is expressed. We refer" the report says, "to that class of transac- tions engineered by some manipulator, who sends a number of orders simul- taneously to different brokers, some to buy and some to sell. Since they are legal and binding. we find difficulty in suggesting d legislative remedy. But where the activities of two or more brokers in certain securities become so extreme as to indicate manipulation rather than genuine transactions, the officers of the exchange would be re- miss unless they exercised their influ ence and authority upon such members in way to cause them to desist from such suspicious and undesirable activ- ity.
 The subject of corners in the stock market has engaged our attention. The stock exchange might properly adopt a rule providing that the governors shall have power to decide when a corner exists and to fix settlement price, so as to relieve innocent persons from the injury or ruin which may result therefrom. The mere existence of such rule would tend to prevent corners"
 The board of governors of the stock exchange should improve present con ditions with regard to failures of brokers according to the committee. It is suggested that the books of mem bers of the exchange should be sub ject to periodic examination under rules to be prescribed by the exchange. It is declared further that when broker sells a customers securities for his own benefit, he should be guilty of larceny and a statute to that effect is recommended. It is set forth also that rules should be made to prevent dealing for any clerk or subordinate employe of a bank or other moneyed corporation. More stringent require ments for the listing of securities on the stock exchange are advocated, among them that the exchange should exact a statement showing how much of the stoyk of the company has been issued for each and also showing what commission has been paid to the pro motors. The unlisted department, ex- cept for temporary. issues. should be abolished. says the committee. It is in the unlisted department that stocks of certain companies which have not supplied all information desired by the exchange are traded in. The passage of a statute is advocated providing that in case any purchase or sale by bro ker was not actual bona fide, the GUS toner shall recover three times the amount of the loss he sustained there by Preservation of the sheets of the exchange clearing house for six years is recommended. It is also recom- mended that trading on the exchange be done on the basis of a reasonably small unit, say 100 shares of stock, and that a bidder for more than 100 shares be required to accept offers in the 100 tend to prevent matched orders.
 The committee does not favor the incorporation of the stock exchange, holding that under existing conditions, being voluntary organization, it has almost unlimited power over the con- duct of it's members, and it can subject them to instant discipline for wrong doing, which it could not exercise In summary manner if it were an incor-