New-York tribune., 1920-12-26
Resumption of Joint Account
Arbitrage Stirs Little Trade
More Business Being Done With Amsterdam and
Paris Bourses, Says Observer; Holland Ex-
pected to Buy American Securities

New York Stock Exchange firms
which in the past have been active in
conducting arbitrage operations with
the European bourses assert that the
ruling of the exchange permitting the
resumption OF joint account dealings
on and after December has had little
effect on the volume of this business.
The chief result of the reestablish-
ment Of joint account arbitrage has
been to give to the foreign member of
the joint account once more the right
to charge for his services.
j. D. Struys, Of Boissevain & Co.,
arbitrageur for that firm, states more
arbitraging is now being done with
Amsterdam and Paris than with Lon
don and that this has consisted chiefly
in handling selling orders in American
railroad bonds and stocks by Euro
peans who are desirous Of liquidating
because of the high price of the dollar
The only country which will buy
American securities in volume In the
future, in the opinion Of Mr.. Struys,
is Holland, as she still has a surplus
capital not found among the other
European nations. Discussing arbtrage
with The Tribune, Mr.. Struys said:
Many people are lnquiring just what
the ruling of the governors of the New
York Stock Exchange reestablishing
joint arbitrage transactions means.
Several years ago the governors
passed ruling prohibiting joint ar
bitrage business on the ground that it
resulted in the cutting # comm .ssions
1t ruled then that no joint account
would be tolerated which allowed the
foreign member to charge q commission
on the transactions entered into in his
market while the New York member
was obliged under the rules to charge
the full commiss on on any transaction
orig mating on this sioe.
The ruling reestablishing Joint ar
bitrage transactions really amounts to
giving the foreign member of the joint
account once more the right to charge
for his services, which in all fairness
cannot be denied is only just. consider
ing that such G. foreign member has to
pay one.half Of whatever losses might
occur.
There is little doubt that In the past
joint arbitrage accounts have at times
been used to violate the commlssi on
laws, but we think it safe to assert that
such pract ce was not indulged in by
any of the reputable arbitrage houses.
AS matter Of fact, real arbitrage bust
ness has nothing whatsoever to do with
commissions, as it consists Of purely
speculat We transactions depending on
their ultimate profitable result. First,
on a great turnover originating from
hnt L <to. ~ 4
these transactions are started with a
small profit based upon the last quoted
prices Of the market in which it is in
tended TO undo the deal.
1T is easy to understand that on ac-
count Of the impossbi.ity of buying
OF selling securities in a foreign mar
ket and undoing the transaction at ab-
solutely the same moment in our own
market great risks are run in the
interval between the start Of operation
and tho completion thereof. Losses
and profits of ten points have been
known to occur in widely fuctuating
markets
"Arbtrage can be best illustrated as
follows
UNITED States Steel common stock is
listed both in New York and London.
suppose A In New York and B in Lon
don, both members Of their respective
stock exchanges, have joint arbtrage
account in securities. United States
Steel common closes In New York at
". For some reason many people in
England are desirous OF disposing Of
their stock. The London exchange is
governed by the closing prices Of New
York the day preceding their business
day on account Of the difference in
time. Az there are more sellers than
buyers, tho atock must bo disnosed or
at price which Is attractive compared
with Now York's closing price. 3 in
London buys this surplus stock a, that
price, which is governed, first. by the
New York closing prices; second. bv the
! margin which he calculatea ma ahould