Arizona republican., 1909-06-17
Report Of Gov. Hughes, Con-
 mission on Speculation
ITSMANY RECOMMENDATIONS
Suggest That the Securities and Commodities Markets
 Purify Themselves Rather Than That New Sweeping Legislation Be Enacted.

New York, June 16.-The report of the committee appointed by Governor Hughes to investigate speculation in securities and commodities and the or ganizations used in dealings therein was made public tonight The New York stock, the Consolidated stock, the cotton, the produce. the coffee. the mercantile. and the metal exchanges and the curb market were thoroughly investigated and recommendations look ing to improvement of existing cOndi- tiOns were made at length by the com mittee. The most drastic finding is that affecting the mercantile and the metal exchanges, as follows:
 Under present conditions we are of the opinion that the mercantile and metal exchanges do actual harm to pro- ducers and consumers, and that their charters should be repealed"
 Concerning speculation in general, the committee declares that it may be wholly legitimate. pure gambling, or something partaking of the qualities of both, that in some form it is nee essary incident of productive opera tions; that it tends to steady prices and that for the merchant or manu- facturer the speculator performs service which has the effect of insur ance. In law says the report, spec ulation becomes gam bling when the trading which it involves does not lead. and is not intended to 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 a technical delivery of the property contracted for that the practical effect of much spec uIation, in point of form legitimate. is not greatly different from that of gambling"
 The committee makes no present. ment against short selling but declares the tendency of such selling is to steady the prices. It is recommended that the minimum margin should be 20 per cent and strong disapproval is expressed of branch brokerage offices which supply liquor and resort to other means to induce speculation.
 The New York Exchange.
 Taking up the New York stock eX- change, the volume of transactions thereon is referred to as making 1t probably the most important financial institution in the world, it's enormous business affecting the financial and credit interests of the country in so large a measure that it's proper regu- lation is a matter of transcendant inn
 nF hA laa facra are divided by the committee into five groups, namely, investors who pay for what they buy: manipulators of prices; floor traders; outside operators having capital and experience and 'inexperi- enced persons who act on interested advice, tips advertisements in news papers, or circulars sent by mail, or take flyers in absolute ignorance and blind confidence in their luck. Almost without exception they eventually lose" As to the character of the trans actions the committee declares 1t IS unduestionable that only small part of them is of investment character: substantial part may be characterized as virtually gambling. Yet we are un- able to see how the state could distin- guish by law between proper and lm- proper transactions, since the forms and mechanisms used are identical. Rigid statutes directed against the lat ter would seriously interfere with the former. The experience of Germany with similar legislation is Illuminating. But the exchange, with the plenary power over members and their opera tions. could provide correctives, as we shall. show.
 Purchasing securities on margin is as legitimate a transaction as a pur- chase of any other property in which part payment is deferred. We there fore see no reason whatsoever for rec ommending the radical changes sug- gested, that margin trading be pro- hibited
 Insofar as losses are due to insuf- ficient margins, they should be mate rially reduced if the customary per centage of margins were increased. In preference to recommending legisla- tion. we urge upon all brokers to dis courage speculation upon small mar gins and upon the exchange to use its influence, and if necessary, its power. to prevent members from soliciting and generally accepting business on 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 it is suggested that if brokers and the banks would make it rule to value securi- ties for the purpose of margin ar col lateral, not at the current price for the moment, but at the average price of say, the previous two or three