Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-07-08
BROKERS UPHOLD
MARGIN DEALING
Action of One Firm Barring
Such Trading Finds No
Followers.
~ the Associated Press.

~ the Associated Press.
NEW YORK, July 8.--Announeernen
that one of the Oldest Wall Street
brokerage houses has decided to aban-
don the handling of marginal accounts
once more turns the spotlight on this
highly controversial aspect Of security
trading.
In these lean days upon which Wall
Street has fallen a canvass of q num-
Der of leading brokers disclosed an en-
phatic unaniInity of opinion that the
announcement of Harvey Fisk & Sons
represented purely an individual situa-
ton and could not be regarded as in
the nature of q precedent likely to be
widely followed.
Marginal trading constitutes about 80
per cent Of the volume of activity on
the floor of Che Stock Exchange, and
probably more in very active markets.
A partner in large commission house
said you might as well paddock the
financial district from Maiden Lane
south as to abandon marginal trading
altogether.
Margin Accounts Troublesome.
however, is one of the most troublesome
and expensive aspects Of brokerage bus
mess ana there is feeling in commits
sion house circles that any firm with o
well established investment business and
small number of trading accounts
might profit by giving up the trading
accounts altogether particularly at this
gloomy period, when expansion of q
small trading business TO profitable pro-
portions seems out of the question.
The house Of Harvey Fisk &c Sons
dates back to Owl War times and for
years has leaned toward investment
business. For some time 1t was lead
ing dealer In Government securities. It
has not been leader in late years In
volume of stock trading handled.
While Wall Street is firm in its con-
viction that marginal security trading
or holding is an essential process In
any important capital market, there
has been considerable modification Of
opinion as to who should trade on
margin. particularly since the unpleas-
ant experiences of last Autumn.
There has been a general tighten
ing up OF requirements. Few indeed are
the houses that will carry less than 20
shares on margin and an increasing
number will not accept orders for less
than round lots of 100 snares for mar
ginal accounts.
Tighten Up on Holdings.
A few years ago houses that dealt with
the general public would carry almost
any number Of shares, but even before
the Autumn crash the tightening up
process had made important progress.
The great bull market of 1926-29 at
tracted horde of SPECTATORS from all
over the country who had had no pre-
vious experience with the market and
This head-over-heels rush of the inno-
cent into the market was making con-
sentative houses rather nervous.
Marginal requirements were pushed
up. Most houses were requiring from
one-third to one-half the purchase price
OF the stock when the crash came, but
even ut that prices plunged so swiftly
that margins were quickly wiped out
and traders were sold out Not Tnanv
small traders had needed warnings TO
maintain reserves of cash. Brokers
found themselves in endless cortrover-
sizes with customers who asserted they
We're not given ample time to put UP
more margin or that they were sold out
without warning. 1t was an extremely
unpleasant ana improbable episode for
many brokers who specialized In small
accounts.
The more daring Of the small traders
rushed back into the market as soon
as they could scare up enough cash. in
desperate efforts to regain their losses.
Inere was a feeling that the market
was well Donated, and several houses
IeIt Justlned In reducing marginal re-
qulrements to Il of the purchase price
Then came the new crash in the mar
ket this Spring. While the general pub
Tic was not arSfarge loser at that time,
there was further necessitous selling out
OF accounts Of traders who had taken
long chances in efforts to recoup their
Autumn losses, and again it was an I'M
pleasant affair for brokers with many
lightweight margin customers.
Asking 80 Per Cent Marsin.
Some commission houses are now tell
ing their customers that they should
maintain at least SO per cent of their
funds In cash II they want to trade
on margin. Furthermore, there Is q
tendency to check up on the financial
standing and general reputation of pro-
spective customers. Heretofore, cash in
hand was the only admission ticket
needed. A few houses will no longer
suit OF some unpleasant displays of
temperament. When It looked as though
stocks could do nothing but so up. the
broker seemed to be everyb0dys friend.
but the minute the tide turned his tHou-
bles began, and he has decided It pays
to be somewhat discriminating.
So far as the general principle of
marginal trading is concerned, Wall
street maintains that professional trad
ers and dealers in securities perform an
important economic function in making
free and active market for capital
and that their use of credit should not
be restricted any more than that of
dealers in or producers of staple COM
modities or manufactured products. It
is also maintained that the small trader
or investor is justified in borrowing
against stock or bonds, or holding them
on margin, which amounts to the same
thing, provided he is able to assume
the risk, as the householder may mort
gage his home to help himself over a
lean period, to hold it for appreciation.
or spread out the period in which he
proposes to pay for 1t. Wall street is
proud of the fact that not l cent has
been lost TO lender in the call loan
market, while the sad experiences in
real estate and other types of loans
at various periods in modern economic