The Washington herald., 1910-06-05
Wall Street Hit Hard by the
Decline in Stocks.
How Business Il Carried on in
Brokers officez-ConditiOns Upon
Which Their Revenue Depends.
Must Make Large Sums to Come
Out Even Each Year.


for $4,000. while the same seat year ago
would have commanded close up to $780,
OOc. The fact is commented upon here as
showing the depreciating tendency of a
dull stock market
A brief description Of how business is
carried On in the brokerage Offices Of this
city may be found Of interest:
There are $50 New York Stock Exchange
houses. Many of them do business in
cotton and grain as well as in stocks, but
when reckoning is made OF the amount or
business they would have 10 do on the
stock exchange TO make expenses and
fair profit from commissions alone, It Is
clear that such stock market as that or
the last three months does not allow, in
commissions. fair living all around.
There are probably go houses which, 10
pay Office expenses and make per cent
on the cost OF their memberships and the
capital employed in the business. must
earn at least $4,000 a year each. These
are houses OF small capital and low ex-
penses. transacting for the most part
business for other members. at 81 10 1875
per 100 shares. They do, Of course. some
business at the full commission Of $3.50
per hundred shares.
Basis OF Profit.
Their commissions might average $6.25
per 100 shares. To earn Sl5,000 a year
each they would have 10 do combined
gross business OF about $9.168 a day.
which, at the commission averaging s6-2
per 100, would mean 146, 666 shares Of stock
a day. That amount OF business would
appear on the tape as T3 5S3 shares. Every
share OF stock reported on the tape as
sold Is also bought. and two commissions
are represented.
There are probably 100 houses which.
10 pay Office expenses and make per
, cent on the capital invested. would have
70 earn $4,000 a year each, or a combined
gross business OF $4,000 a day. which.
at the same average commission OF S55
per 100 shares. would mean 10000 shares
OF stock bought and sold. or $1,000 on the
| tape.
Then there are probably 100 large
I houses whose expenses are much larger.
who maintain private wires and expen-
/ sive offices, and who would have TO earn
an average OF 100000 a year each 70 do
/ as well as the smaller houses. Their
! commissions average higher. inasmuch as
/ they originate business outside. Their
/ commissions would not average Sl250 per
/ 100. however. as they give out a great
many orders az s. per 100 shares 20 other
members.
On Basis of SO share.
II their average commission was SO
per 100 shares, they would have to do.
all together. about S5SS33 shares a day.
/ or 1866 shares. as II would appear on
/ the tape, 10 earn their $4,000 a year
each from commissions alone. So. in the
/ three classes named are $50 stock ex-
4 change houses. which would have 20 do
4 each day $4,000 shares between them, or
! $50 900 shares "one way" as the tape
records the business, 20 make expenses
and earn per cent on their capital from
! commissions There are 100 houses not
accounted for. Some OF these are bank
| ing houses not wholly or largely depend
ing up the stock exchange business for
1 income; others are houses not easily
classified.
From these calculations It appears that
II brokers depended chiefly upon commits
/ siOns for income, approximately 350.0QC
shares OF stock would have 20 be bought
and sold in bona lde manner each day
20 pay their expenses and yield them
per cent on the capital invested. But
when. at the end OF day. there Is re-
ported total of $4,000 shares bought and
sold, that includes the business done BY
member traders. either for themselves or
| through other brokers. at 81 q 100 for the
/ keeping of books on IT,
Sometimes without Profit.
The proportion of total transactions
contributed thus by traders, and which
is OF little or no profit to brokers, will
vary. with changing phases Of the mar
ket but # might average through the
year to be one-half Thus. there would
have 10 be market of 700.0 900 shares
more or less, 10 indicate that brokers
were doing $4,000 shares a day.
The year 1903 was a very active stock
exchange year, but transactions averaged
only a little more than 10000 shares. and
If traders contributed One-half, there was
left an average OF only $4,000 shares a
day for the brokers, and the commission
arising therefrom could not have made
that year a profitable one for them
However, seats sold last year as high al
s94. 900.
The simple fact that stock exchange
seat is worth $4,000. even in very dull
times, and that brokers continue to main
tain extensive establishments and keep
large capital invested. prove that there Il
large potential profit in the stock ex
change business.
Commissions Only One Item.
The explanation is that an active stool
exchange house does not rely who'll!
upon commissions for revenue. AS Gus
todians OF their clients balances and al
large borrowers OF funds to finance thel
clients speculatiOnS. they do Wha
amounts to q banking business. which, II
the aggregate. is sometimes enormous
For instance. a house whose loans durinI
year would average So 10000 might OBJ
tain the money at 4 per cent and charg,
its clients per cent, in which case pc
cent, or S200,00O. would be profit.
That would be an unusual, though by NJ
means an impossible. case. The loans o
active stock exchange houses run from
81, zoo, 600 TO 50,000,000. and the broker gen
orally charges his customers higher IN
terest than he pays. This will sugges
what possibilities there are In the stool
exchange business, when the public i
carrying stocks"
1t is when the public is neither tradlnl
so as to yield commissions nor carrying
stocks" SO as to make the interest &C
count profitable. that the stock exchang
business does not pay That has beel
more the case since the end of Januar-
last than at any previous time since tn
beginning Of 1903, hence the decline Il
| the price OF stock exchange seats.
Breaking II Gently.
From Life.
Simpkins always was soft-hearted, an