Daily press. [volume] (Newport News, Va.) 1896-current, 1909-06-20
Hughes Committee ADVISES That
Exchanges Correct Their Own Vices

discourage speculation upon small
! margins and upon the Exchange To
use its influence and If necessary.
It's mower, TO prevent members from
soliciting and generally accepting bus
, mess on a less margin than 20 per
| cent"
Pyramiding, that is the use of paper
profits as margin for further com
mitments should be discouraged. says
| the committed In this connection II
| Is suggested that If the brokers and
the banks would make IL a rule to
value securities for the purpose OF
margin or collateral. not at the cur
rent 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 Cf the mOment) the
dangers Of pyramiding would be large
iy prevented.
we have been strongly urged to
advise the prohibition or limitation
OF short sales" says the report, mot
only on the theory that II is wrong
20 agree TO sell what one does not pos
sess, but that such sales reduce the
market OF the securities involved. We
do not thing that II Is wrong TO agree
to sell something that one does not
now possess. but expects to obtain
later. short sellers endeavOr to Sc.
lect 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 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 com
mittee here calls attention to the New
York law OF 1912 which declared void
all short sales. and to the law of 1856
repeating the act tot 1912 and legaliz-
ing short sales.
Manipulation has certain advan- !
tages. when not accompanied by
matched orders is unobjectionable
per Sc. II is essential to the organ
ization and carrying through Of i'm
pcrtaRt enterprises. such as large cor !
poratiOns, that the organizers should |
be able to raise the money necessary
to complete them. This can be done
only by the sale of securities.
1.-The second kind Of manipulation |
mentioned is undoubtedly open to Sc
rious criticism. Ii 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-
atCrs, or to depress the prices and
induce the public to sell. There have
been instances of gross and unjusti- I
fable manipulation of securities, as in !
the case OF American Ice stock. While
we have been unable to discover any |
complete remedy short OF abolishingl
the Stock Exchange itself. we are
convinced that the Exchange can pre-
vent the worst forms OF this evil by
exercising its influence and aIthori- /
ty over the members to prevent them.
When continued manipulation exists
it is patent to experienced observers.
Severe condemnation of patched
orders" is expressed. We refer the
report says, ito that class OF trans |
actions engineered by some manipula- !
tor, some TO buy and some TO sell. |
Since they are legal and binding, We
find difficulty in suggesting a legis-
latiye remedy. But where the &C
tfvities Of two or more brokers in
certain securities become so extreme |
as to Indicate manipulation rather
than genuine transactions. the Off |
GERS of the Exchange would be remisS
unless they exercised their influence
and authority upon such members in
a way to cause them TO desist from
such suspicious and undesirable ac-
tivity
The subject OF corners In the
stock market has engaged our atten-
ton The Stcck Exchange might
properly adopt a rule providing that
the governors shall have power toi
decide when corner exists and TO
fix settlement price. so as to re-
lieve innocent persons from the in
Jury or ruin which may result there
from. The mere existence Of such a
rule would tend TO prevent corners.
The Board OF Governors Of she
Stock Exchange should improve pres
emf conditions with regard TO failures