Evening star. [volume] (Washington, D.C.) 1854-1972, 1912-12-13
CALL IT GAMBLING
Two New York Stock Ex.
change Governors Testify.
IN MONEY TRUST PROBE
Frank K. Sturgis and Rudolph Kepp-
Ter Discuss "Short Sales"
BOARD TAKES NO ACTION
Both Declare System Is Allowed to
Proceed by Those at Head
of Institution.
IN MONEY TRUST PROBE
BOARD TAKES NO ACTION

Of Institution.
Two members Of the board of governors
OF the New York Stock Exchange today
told the House banking and currency
committee investigating the money trust
that at least part Of the transactions in
the stock market were gambling" Frank
K. Sturgis and Rudolph Keppler were the
witnesses under examination. Both are
former presidents of the exchange.
Mr.. Sturgis was led by Counsel Inter
myer for the committee through a
lengthy discussion OF the moral aspect
OF short sales," or sales Of stock which
the seller does not possess. He admit
ted that personally he believed the
moral obloQuy'' of such a transaction
overcame any advantage it might give.
But he said he had never urged the
governors of the exchange to take
any action toward eliminating it by a
rule OF the exchange.
Does Not Urge Moral Reforms.
1T is not part of my duty to urge moral
reform upon the community" said Mr.
Sturgis- He took the same stand as to
manipulation" of stock to a higher or
lower level by cross sales and purchases,
declaring that the exchange as such did
not recognize such transactions, and
could could not forbid Them
The moral obligations of the stock ex-
change toard the public generally was
the subject of an involved discussion, in
the duty of the stock exchange toward
the public is only to see that a proper
place Is maintained for buying and selling
and that proper restrictions are OBJ
served"
On the question of short sales Mr.. I'm
termyer asked:
''As a matter of fact, short selling is
just gambling. pure and simpler"
Yes. largely that" admitted Mr.. Stur-
gis.
Mr.. Keppler Not Definite.
Mr.. Untermyer had difficulty in pinning
Mr.. Keppler down to definite statements
when he followed Mr.. Sturgis on the
stand. He declared that manipulation
was perfectly proper SO long as it was
legitimately conducted the commissions
were paid" and there was no collision.
do you agree with the conclusion Of
the Hughes commission that a substan-
tial part of the transactions on the stock
exchange are gambling? asked Mr..
Untermyer.
Il would say that some transactions on
the stock exchange are somewhat of a
SdUhDHnS nature, answered MI. heppIer,
after some hesitation.
In the examination of Mr.. Sturgis MIR.
Untermyer endeavored to secure an ex-
PLANTATION of why the two members of the
pool which manipulated Hooking Valley
stock in 1902 who failed were the only
ones suspended by the exchange.
Was it because they failed?' he asked.
No. 1t was because they went into
transactions above their financial re-
sources"
..Tho othor five ,,oernhors of thu mol
were not suspended"'
mo. They were censured.'
Business Of the Exchange.
Mr.. Untermyer endeavored to draw
from Mr.. Sturgis an estimate Of the
amount of business done on the New
York Stock Exchange annually, but was
unsuccessful. The lawyer read from the
answers furnished by the exchange to
questions of the Hughes commission an
estimate Of yearly business amounting to
196OOO,OOO shares of stock. Mr.. Sturgts
said he believed the figures to be about
right.
Now. on that 1876, 900. 900 shares the
brokers doing the trading receive 25
cents a share in commission. 121s cents
on each side of the transaction, do they
not?" asked Mr.. Untermyer.
NO. because some Of that speculation
is by brokers for themselves. and on
that there is no commission answered
Mr.. Sturgis.
Commissions, he said. were charged on
the par value of stocks without regard
to the market price.
Says Banks Are Not Misled.
The witness said that he did not be-
lieve the stock exchange was guilty of
misleading banks as to the value of
securities manipulated.
On this point he argued at length, Mr..
Untermyer endeavoring to secure the ad-
mission that the stock exchange should
make dealings on the floor of the ex-
change, dealings in the real value of
stocks, that the securities might be quot
ed at a price representing real value.
Mr.. Untermyer and Mr.. Keppler en-
gagged in a war of wits on the subject of
stock market manipulation. The witness
mentioned that cross safes and purchases
were legitimate so long as the commits
sions were paid and there were no
wash sales or matched orders In the
transactions.
Mr.. Untermyer endeavored IN vain to
get specific answers from Mr.. Keppler
who insisted on giving broad general re-
plies. Finally the lawyer desisted from
this line of examination and took up the
relations Of the stock excange with the
curb market
Would Limit Brokers.
Mr.. Sturgis gave testimony before the
committee all during yesterday afternoon.
He said the stock exchange would well