Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-11-12


ference with an open market, are now
advocating this procedure as absolutely
necessary to meet the present debacle
in the stock market.
Nonsense" reply the short sellers,
who in the last few days have strength
ened their position In the market con-
siderably. eliminate short selling now
and you eliminate just so much buying
power. For every share Of stock sold
means lust that much must be bought
back at some figure to clear the books.
Market recoveries in the last few days
have been due largely to buying py
short interests Had it not been Tor
that The market would have receded
still further"
Exchange Has Power.
To answer this argument, those VINO
favor moratorium on short selling as
an emergency measure substantially
say this:
lnincorporated body-a club. Its MEM
iprsfin has arbitrary power to do
whatever it considers mutually pene-
ficiaI. 1t could stop short selling In
an hour If it wished to do SO.
Recently. in a public address, Elcn-
ard whitney, president OF the SUCK
Exchange, said that the purpose Oh Ins
EXCHANGE was to furnish an open ano
was impossible to have such market
n Il was interfered with in any way,
either on the long side or on the snort
side IF rule Is imposed to prohlbit
short selling 1t will be just as sensiple
to put in a rule to prohibit long nuylng;
Destroy enc and you destroy the otner.
But those who favor the moratorium ".
81 this time reply that the present sit
ration is an emergency. They do not
ask that short selling be eliminated
forever. but only at this critical time.
one former exchange. member told this
writer that in his opinion the practlce
of short selling could be stopped, py re-
curing every seller of stock to De a
bonafide owner.
sales slin. You will see on every slip
the statement that actual delivery OF
the stock bought or sold is contemplat-
ed But If il is short sale, the de-
livery is made by borrowing the STOCK
from some owner.
Floor Traders.
A large percentage of the daily trans
actions that are carried on are by the
SPECIALIZED floor traders. These traders
buy and sell repeatedly during the ses-
sion and always even up before the
close. Possibly more than hiuf the
sales are of this character.
There is another interesting angie 70
this situation not often commented
uuon. Twenty years ago-yes, ten years
ago-tfTe New York Stock Exchange
was a noisy bedlan during the nve-
hour session. But not any more. To-Day
1000 men carry on without any COM
motion or noise. And why? Because
nearly all buying and selling is handed
by about 200 stock specialists, VINO are
appointed by the board of governors
~ ~ ,.o1.av,ua Toah IF these eTlecf1l-
lists carries book containing the rec
ord Of the orders which that particular
specialist has power to handle. There
are specialists in United States Steel.
in Radio, in American Can, in General
Electric, in General Motors, etc.
When floor trader wants to buy
United States Steel he does not, as ne
did in the old days. call out IN louo quo
voice asking for the stock. He Walks
over quietly to the specialist In Steel
and gives the order. This specialist re-
cords the order in his book. Another
trader wants to sell Steel. He goes over
to the same man and gives his order.
Again the specialist records 1t in his
book. All these stock orders are sup
posed to be secret In the hands OF the
specialist, therefore, lies the execution
OF the orders.
Might Depress Stock.
Now let's zee what could happen in
this so-called open market:
Suppose a specialist in XyZ had or
ders to buy 100 shares at IS; another,
200 at 1881, another 500 at 751z, an
other 100 at 75H4, and another 100 at
as. Suppose he also received an order
TO sell 1000 shares at rs on. stop ian
order which carries with it demand to
sell whenever the market touches rs or
under). Now let's suppose that this
last trader did get little peek" at the
stock book Of the specialist 1t has
happened. All he has to do is to supply
all the bids and then buy the 1000
shares at IS. On this one transaction,
the trader would make s525 net profit.
less stamps and small charge for
clearance.
What has this trader done? He has
deprecated The price of that stock by 81
q share, has made his profit of $525, and
has never had 10 cents invested in the
shares. Multiply this transaction 900
times, and you have picture Of the
New York Stock Exchange today. That's
whether it is as open and free as its
sponsors indicate.
BY such action, the whole financial
structure Is weakened, prices go lower,
margin accounts are wiped out, owners
are discouraged and frightened, and
the people get panicky.
Stocks and Business.
For six months previous to the panic
Of 1929 students of business conditions
knew that stocks were selling entirely
out Of line with their real or potential
earnings. Stocks were eagerly bought,
even when they were selling at 80, 40
and so times their net earnings. Old
timers, holding back. were laughed at.
H. Aaane - - "a
changed everything. The sky was the
limit. Now what?
Quite the reverse. Brokers advise old
customers to send for their list of few
dividend paying stocks, whose earnings
warrant the continuation of present
dividends. The others are ignored.
Even the blue chip stocks have been
sliding down hill with the rest
SO with this situation staring the
American public in the face, there Is q
growing feeling that the stock market
figures are the worst business barometer
there is; and that the exchange, which
has absolute control over its own affairs
should stop short sales by making every
seller" produce evidence to show that
he Is a bonaf1de owner of the stocks he
wishes to sell.
II some move is not made by the ex.
change shortly and the market con-
tinues down, as IL has in the past sew
eral weeks. the fear in Wall street 4
that q thorough investigation of thu
New York Stock Exchange viii be de.
nnanded by Congress when it meets
again in December.
tCopyright 1890 by North American News
paper Afliance.i
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POTATO MARKET.
CHICAGO, November IL (&9 (Unitet
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