New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-06-15
HOPE FOR REMOVAL
!, OF ARBITRACE BAN
Joint Account Operations
Are Likely to Come
Back Again.

Gov a restoration of joint account arpi-
a.. - and appointed a committee OF their
- nber to look into the feasibility OF
!, rsinr the rules so as to make such
:, rstions possible. on the floor OF the
sr hange the belief is strong that some
d, on will Re taken by the governors be-
many weeks more have passed, and
wish is father to the thought that 1t
/, be favorable TO what has been shown
nigh petition to he the desire OF an
rwhelming majority Of the members Of
exchange
.o,nt account arbitrage comprises trans
ions between New York and the great
re,rn security markets, conducted wholly
professional traders for their own &C
,urt and interest Both the member Of
New York stock Exchange and the
rog-member (the foreign broker or other
nsrtv TO the joint accounD charged
commission in the days when this business
4o-irished; nevertheless. abuses grew up,
SD as practically nullifed the commits
son law Of the New York Stock Ex-
change and for that reason joint account
srdtrsge was prohibited on July !. 1S11.
Il has been mistakenly supposed that all
arbtrage dealing was done away with by
this resolution Of the governors, but, as
matter OF fact. the prohibition had to do
orlv with joint account operations, and
ordinary arbitraSe dealings have been go
ing on without interruption.
More Business for Brokers.
The principal reason why the lifting OF
the ban is sought from joint account aroi-
TRACE is that il would mean considerably
more business for members Of the eN-
change. particularly for the so-called
"tVo-dolar brokers'" who have had none
too much in recent months. The two
dollar brokers" are those who do no gen
eral commission business, but act as
agents for other brokers or are their own
principals. For executing orders for other
brokers they are allowed a commission OF
81 a hundred shares; hence the name
Practically all arbitrage business is done
through their agency.
In principle arbitrage and 5oint account
arbitrage have been held eminenuy desir-
able not only by stock brokers but by
nomists. Arbtrage operations among
the great security markets OF the world
tend 10 annihilate space and time. They
come as close 10 establishing the same
price for the same thing at the same time
i'm all important markets as anything hu-
manly devised could hope TO do. ln that
way they tend TO reduce fluctuations IN
prices and place investors all over the
world on an equal footing. With arbi-
TRACE normally active a man might rea-
sonably expect 10 be able TO buy stock
like Steel. say, in London. at any given
time Al cheaply as his brother can buy 1t
IN Now York-always providing. of course,
that the time chosen be an hour when
hoth the London and the New York Stock
exchanges wero in session. Or he might
ssu IL he chose. at as advantageous a
price. Thus, arbitrage operations have
great economic value, since they help 10
stabilize prices.
Protecting Commission Law.
The commission law was established by
the founders Of the New York Stock Elk
change to prevent ruinous competluoh
Among the members and to protect the
puhlic Violations of that law are al
va severely punished by the exchange
au. Critics. because il is recognized that
IN are discriminatory against one part
~ n,,blic and that they would IL un-
q cl ed. eventually reduce the Vaiue Oh
,ge. where there is a very loose COM
:, - law abuses are Of continual ocr
rance and memberships are worth
ling like what they are IN Ne" I'm
vas round in the old days when
I account arbitrage operations NC
ar Kew Yorl, and Europe were per-
ted. the broker on each side OF the
ta, charged one-eighth OF l per cent
ibe,e charges so often counterDaiailceu
tha. commissions merely canceIled eacn
other and so the brokers involved did
b,stness practically without any agents
&c This was true enough where
asc. on this side and sales on the
rA a. vice versa. were equal in
amou Il. but that was a thing OF COM
parati. Ely infrequent occurrence. MOTE
asen ,an not a man buying 1000 steer
here. instance. would not be able 10
seu NJ . than 500 shares abroad, anu
woule I'VE 10 sell the remaining 800 IN
his ma Ket. In such case there wouid
be C omission charge on LOU shareS
IN THIS arket and only 900 abroad. But
Il was Just such instances as these
that al es crept up. When there were
commits, IN charges against l5OO SHARES
here and only 800 abroad, the foreign
brokers were sometimes tempted to throw
IN enough fictitious transactions TO make
balance. New York suffered gooo
N deal more than London or other centres
II by this practice. because this was the
prinary market and did the greater
amount Of business.
II Joint account arbitrage IS reviVeo
here, as seems very probable, some way
| viii nave TO be found TO thwart these
Attempted evasions OF the commission
Law. The natural inference is that the
Stock Exchange authorities will take ad-
vantage Of their unlimited powers OF
4 scrutiny and will arrange either for spe-
= elfe reports from their members and
- nose members correspondents or for
- regular examinations OF their books. Pos
ably way may be found to establish
an inspection abroad. At any rate. II is
\ certain that before permitting resump-
- uon Of joint account operations the gov
~ rfning con-. 'l ind way OF pro-
cling absU J'ely TIC commission law.
prosperity p labor Unions.
me Bache Review" has the follow