Arizona republican., 1912-12-13
Broker Sturgis Tells Money Trust Investigating Com mittec Some of the Inside Workings of the Stock Exchange
SHOWS HOW
 STOCK IS USED
Securities of Customers Are Often Used to Protect Business of Concern s Having Little or No Equity ill Them
ASSOCIATED PRESS DIsPATCH1

highways and byWays of finance, as traversed by the operators of the New York Stock Exchange. were mapped out before the House bank ing and currency committee today at the money trust" inquiry
 Frank K. Sturgis of the brokerage firm of Strong, Sturgis x Co, and former president and member of the board of governors of the stock eX change. told the committee about the ways of the Street. The examination of Sturgis by Samuel Untermyer with technical questions and in volved digressions Sturgis at times insisted on long explanations in an swering questions and once flatly declined to answer. His counsel, John C. Milburn, interfered to preserve the dignity of the occasion.
 According to the testimony of Sturgis the membership of the stock exchange has not increased since 1869, when it was fixed at HOO. and although the business done and the stocks listed on the exchange have increased about fifty times over, he said an increase of membership is unnecessary.
 In d dozen different failures he ad- mitted that stock exchange houses had carried with them stock owned in part as partners. but hypothecated by the brokers for more than the real ownership of the broker. h such cases the proceeds of sale from the sale of a bankrupt brokers seat on the exchange goes. he explained, rot to customers. but to creditors in side the exchange. Sturgis thought this fair and just
 Stock exchange brokers usually use stock owned in part by customers as collateral support of their own leans, Sturgis said, a e-hypothecating securities for a greater amount than is represented in the debt of cus- toner on the stock. He added that the governors of the exchange would welcome any suggestions that would put a stop to the practice.
 Sturgis insisted that the stock eX- change could not prevent manipula- ton of the market by pools and syn dcates He said the stock exchange did not go behind a transaction to to discover a buyer or sellers mo- tives. On this point, Sturgis and counsel for the committee had a spirited argument.
 '-Is it legitimate for a member of l the exchange to give an order to sell d certain amount of stock to one broker and order to buy the same amount of the same stock from an other broker?" asked Mir. Untermyer. 50 long as there is no collision | and the commissions are paid it Is ! not illegitimate," said Sturgis.
 The important part is that the | brokers commission is paid?' asked 1 the lawyer.
 Yes"
 You know the object of that sort of a transaction is to raise or de- | press the price of a stock?'' ''The object is to create an active market?"
 "A market that appears to be ac- tive, you mean?"
 i Yes"
 | Untermyer sought in vain to get l from Sturgis view of the position of the trading public in such a trans action with the stock at fictitious i figure, and finally objected to the form of the witness answers.
 You are answering moral ques- tion and I am answering a stocl exchange question: said Sturgis, witt 9 smile, and the committee laughed
 The witness insisted that these transactions were beyond the power of the exchange discipline, so lOnt as the commissions are paid.
 The relation of the New Yorl exchange and the consolidated ex
 change came in for a share of Sur
 gis' attention, following the exam
 ination of half a dozen members o
 the consolidated exchange, who de
 clared that the stock exchange rule
 forbade members to do any busi
 ness with the consolidated broker
 or any one connected with the con
 solidated exchange.
 Sturgis said the consolidated Ina,
 always been a competitor of tn
 stock exchange and sometimes tn
 feeling of rivalry grew bitter. H
 went on to say that in 1909 the stocl
 exchange endeavored to force tn : Western Union Telegraph Compan :, to withdraw from the consolidate
 exchange two stock ticllers Ove
 which the Western Union was de
 livering the New York stock ex