Evening star., 1923-10-05
HALF OF BROKERS
NOT IN EXCHANGES
Move to Bring Stock Markets
Under Legal Supervision
Complicated.
BY ROBERT II. SMALL.

BY ROBERT T. SMALL.
Special Dispatch. to The Star.
NEW YORK, October 5.--ln their
attempt to bring brokerage ana IN
vestment concerns under closer super
vision state and federal authorities
are confronted by the fact that more
than one-half of the brokers doing
an active business in New York city
are not members of any of the recog-
nized exchanges.
That is why the New York Stock
Exchange is resenting the presump-
ton that it has in some way oeen
responsible for the many brokerage
failures during the past three years
through lack of proper supervision.
Nevertheless, the movement is
growing to bring all of the New \ ork
exchanges under state SUPERVISION
One group of Wall street reformers'
headed by Samuel Untermyer, is 60
ing to appeal to Congress this winter
for legislation bringing the New YORK
stock Exchange under federal super
vision.
Compared to Banks.
The theory of the Wall street re-
formers is that brokerage concerns
are in effect in the same category as
private banks or trust companies
..They handle the funds OF customers.
Therefore it is argued they should pc
brought under the same general SUI
pervision as the banks and trust COM
panies.
Joab H. Banton, district attorney
of New York county, said today:
what should be done? There is
only one answer to this question
that Is, classify brokers with pank
ers and put them under the super'i.
sion of the state superintendent or
banks. During the same period tnal
$50 brokers failed in New YORK coun-
ty not one bank failed in the entlre
state. During the same perlod thal
155 brokers failed in New York county
only one insurance company went INTO
liquidation in the entire state. Banks
and insurance compaies are uder state
supervision. Brokers are not.
VIII Fight Control.
The stock exchange is just as de-
tcrmined AS ever to fight any move 10
bring il under state supervision or IN
CORPORATION. 1t also will fight the move
to place 1t under the jurisdiction OF the
federal authorizes on The ground that
it is not engaged in interstate com
merce and therefore not subject to led
eral control. Neither is the exchange
seeking the federal privileges which go u
national banks and which naturally
brings those banks under federal laws.
The New York Stock Exchange is
what is known in this state as .volun-
tary association" 1t is organized under
the club laws of the state and is, IN
fact, club. That is why 1T mas the
right to accept or expei members at
will. The brokerage concerns which
buy" seats on the exchange every
now and then do so only with the ap-
proval and consent Of the governing
board.
The stock exchange claims the
state can no more regulate its affairs
ha nt..rn
any other club. The exchange Is a
clubhouse where the members meet
to deal with each other. Only its
members are admitted to the floor.
business outside, If they lease wires
from one end of the country to the
other, and maintain branch houses
in many cities. that is their affair.
Limit to Operations.
The exchange itself neither exc
actions. Thn only transactions of
which it takes cognizance are the
buying and selling Of stocks and
bonds on the exchange floor.
1t Is not generally known, but the
New York Stock Exchange had its
lowly beginnings in much the same
manner that the curb market sprang
into existence. At one time its men,
bers met upon tie street corner to
trade with each other. Not only were
well. In the course of the years the
exchange became more and more of a
formal affair and finally was able to
buy a building of its own The curb
market has followed the same course.
After many years of trading under
the lot suns and the cold SHOWS of
Broad street, the curb has a home Of
its own and has won it's own recog-
milton in the world of finance.
District Attorney Banton Is not
making a fight. to force the New York
Stock Exchange to take out state
charter fte pc ieveS it should be per-
mitted to continue to regulate Itself.
The stock exchange has failed in
two particulars, however" he says.
First, in the regulation of the affairs
of it's own members. for which failure
the exchange Is directly responsible.
Secondly, in its inability OF regulate
the affairs of brokers who are not
it's members. For this the exchange
is not responsible except in SO far as
1t has opposed legislation tending to
regulate the brokerage business of
this state"
President Cromwell of the stock
exchange Is out with statement
that the exchange had never spent
money to fight or promote legislation
of any kind and had never maintained
a lobby at Albany. 1t will continue
to oppose legislation, however, which
it believes to be detrimental to the
public interest. The exchange, Mr..
Cromwell concluded. has everything
to gain and nothing to lose from a
public discussion of it's affairs.