The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1923-06-15
n. !. EXCHANGE
AIDS FIGHT ON
BUCKETEER.
Seymour Cromwell Tells OF
Working and Purpose Of
Stock Market.
By w. S. COUSINS.
Copyright. 1898, by Cosmopolitan
News Service,)

| News Service.)
NEW YORK, June 15.-Declarins
that the stock exchange and its mem
bers would participate in the move
ment to rid the country Of "those
thinly disguised thieves who utilize
the brokerage business for the rob
berry Of the people Seymour l.
Cromwell, president Of the New York
| stock exchange, said today that the
institution had always afforded the
investing public a large measure OF
protection.
| Before a security can be dealt IN
on the stock exchange" said Mr.
| Cromwell, every effort is made to
| prevent fraud or Misrepresentation
concerning it. After a company conf
plies with the requirements of the
| listing committee-which consists OF
five members of long experience III
passing upon such applications-and
| if it meets with their approval, the
application is presented to the full
| governing committee of forty-tWc
| members, which gives its approval OF
disapproval before the securities are
admitted to listing. Not only Is the
character of the security itself
critically analysed. but the character
of the people engaged In the manage
ment of the company must be shown
to be OF the proper type, and the dis
tribution of the stock must be large
enough to make sure of free and
open market.
Mr.. Cromwell said also that the
immediate registering Of prices on
the stock tickers was a guarantee
Of the honest execution of orders.
Examine Members Yearly.
''I believe the greatest safeguard
recently set up" said Mr.. Croni.
WELL has been the inauguration OF
a system Of examining the business
of members Of the exchange
through our questionnaires, at least
twice a year.
1.-THE improper use of a Gus
toner's security by a member or his
firm is an offense which is pun
ished in a drastic manner"
Mr.. Cromwell believes a man
with only a few hundred dollars
should not attempt to speculate in
the stock market.
"It Is against the public interest
to have people with small funds
speculate he said. THE large
Spectator, who, in times Of finan.
cial calamity, can afford to under.
take risks that may save collapse
of markets, is of great service
But the small Spectator, is, in
essence, a gambler who cannot at
ford to lose and he should be pro
tected against himself.
One OF the most frequent criti
cisms against the methods Of the
| stock exchange is in connection
| with the system Of margin trad
ing" Discussing this. Mr.. Crom
| well said:
at is natural for any one who
| has never studied the subject to
question the usefulness. or desir-
ability Of it. The use OF margins
in purchasing securities is not at all
! peculiar to the stock market; the
term margin in stock transactions
corresponds to the term equity in
all business. 1t amounts, in fact,
simply to the employment Of credit,
whose use is universal in modern
| business.
Margins Necessary.
1.-The house builder who uses
mortgage money, or the merchant
who borrows at his bank to pur.
chase goods, is in no different posi-
| ton than the investor or speculator
/ who owns only a part equity in the
securities he purchases, and who
must borrow upon them to buy
them. 1t is just as legitimate, and
just as economically desirable tc
employ credit in the purchase Of Sc
curities as in the purchase of any
thing else.
ITO halt the extension of credit
for the purchase of securities-anc
that is what margin trading fun
damentally amounts to-would be
even more disastrous nationally
than to halt it in house construc
ton or most other lines of business
For. in the case of securities,
curtailment of the use Of credi
would a once check the FREE
flow OF capital into all our ma jor in
dustries, cripple our securities mar
kets, make largely nonnegotiabl
fully a fifth of our national wealth
now existing in security form, anC
operate to the serious detriment O
the Government Itself.
1T must not be forgotten that thu
Liberty loans were floated by en-
courag1ng the marginal investor, ant
the use of credit is imperatively nee
essary In maintaining a free ant
open market for them today.
Encourage Large Margins.
''It is generally true that the small
er the equity or margin owned II
a security or securities by an in
weston or Spectator, the easier /
may be wiped ont by a sudden fluc
tuation in price. This Is as true il
mercantile operations as in tn
stock market. The stock exchang
insists that it's members demand
adequate margins from their Gus
toners. In recent years there ha
been marked tendency TO emplo.
larger margins in trading and, conse
quently. to borrow proportionatel.
smaller amounts from the banks.
Margin trading Is not gambling
but speculation. The two processe
are completely unlike Gambling
consists in placing a bet on som
event. Speculation, on the othe
hand, is always based upon the pur
chase and sale Of property. and b,
thus acting as a ready dealer in sc
curities the speculator perform
many valuable economic services t
society. But the gambler simpl.
creates new risks, instead Of assum
ing existing and inherent risks, an
performs, no useful economic function
at ALL