Evening star., 1936-05-18

margins. W. W. Spaid.
As president of the association, he
made the keynote address, pointing to
the more vital changes in the broker
age business in the past year. In spite
of the mounting regulations governing
the exchanges he said, the regulation
of the so-called over-the-counter
markets" remains to be dealt with
and the purpose of all S. E. c. leeis-
lation fails unless this control can ac-
tually be accomplished"
"Exacting unreasonable margins"
Mr.. Spaid said, will drive legitimate
speculative funds to other markets
where the requirements are not so
high. I cannot find any other specu-
lative market that makes such an un-
reasonable requirement as SIS per cent
of the market value or l22 per cent
of the amount loaned. SO that part
of our business-that is, the carrying
of securities-is on the way out. un-
less. of course, these requirements are
reduced.
Control Held Ineffective.
Il am fully aware of the fact that
Sc. C. laws and regulations are said
to have been made for the benefit OF
the public and not for the brokers. but
let us see if that is the way 1t is work.
ing out. 1t is apparent that the idea
of credit control by raising and lower
ing margins is pretty firmly imbedded
in the minds of those in authority.
Such a thing would be possible theo-
retically if all markets were controlled;
but where the control is of not more
than 20 per cent or Is per cent OF all
trading it cannot be effective.
BY this method, it is true, some
buying in listed securities on registered
exchanges can be stopped; but, may l
ask. of what value is this accomplish
ment when the money, thus removed
from the legitimate or regulated chan
nels, is driven directly into the unreg-
ulated, uncontrolled and unliquid
markets? The public certainly has not
been benefited; it actually has been
harmed.
Il make bold to say that as our mar
kets exist at the present time such
activities will not only fail to accom-
plish a regulation or control of credit,
but will do the public an injury as
we'll I do not have to tell you that
this change in the use of speculative
funds, if continued, puts our commits
sion houses in the class of short-line
railroads and street car companies
we are a decadent business" he said.
Type of Business Changing.
There is no doubt in my mind but
that the character of our business is
changing. For example, let us take
the commission house whose principal
business for years has been buying and
carrying stocks for its clients-the
kind of an organization which has
come in for very little criticism.
Il feel safe in saying that heretofore
the business of a so-called commission
house has been about 75 per cent to 80
per cent in margin accounts. Today
over so per cent of its transactions are
for cash, and while this statement at
first blush might seem to justify the
theory that We are turning a nation
of spectators into a nation of in
vestors, that theory Is far from the
truth.
1T is not the amount of margin de-
posted in an account that distin-
guishes speculation from investment,
but the character of the purchase.
Speculative securities purchased out
right are still speculations.
cat the present time IS per cent Of
the trading in stocks and bonds in this
country is not regulated. An increase
or decrease in margin requirements on
the 25 per cent of securities traded in
on regulated exchanges is not going to
change the economic trend Of our
country or the business morals of our
people.
Sees Education Needed.
mo one knows better than we do
that during these seven lean years
since 1929 the stock -broking business
has not been blessed with surplus
amounts of public applause. This atti-
tude may be attributed partly to our
own mistakes-we have made plenty
Of them-but mostly 1t is due to lack
Of public understanding of the prin-
ciples and purposes of our stock
exchanges.
Our business is just as essential and
just as necessary to the present finan-
cial set-up of this country as any other
economic factor of exchange. It is OUR
duty to see that the public understands
rf No L.,
education, by the elimination of bad
and unethical practices, and by the
expulsion from our business of dis
honest so-called brokers, who have no
objectives save the making of money
regardless of the means employed" he
concluded.
Safe Deposit Experts Meet.
Albert E. Fisher, Riggs National
Bank. chairman of the safe deposit
section of the District Bankers Asso-
citation; Richard z. Harris, American
Security g. Trust Co., former chair.
man, and Mrs. Helen r. Sharpe, Bank
OF Commerce & Savings, secretary oi
the section, leave Washington tomor.
row to attend the National Safe De.
posit Convention at st. Louis, May 81
% and %. They will join groups
from Baltimore and Philadelphia, a,
well as delegations from New York
and New England, at Harrisburg
The members of the organization in
clude supervisors of safe deposit de.
partments and those directly in
charge of safe deposit vaults.
Heard In the Financial District.
Trading on the Washington Stock
Exchange today included the sale oi
IS shares of Riggs National Bank COM
mon at 270. Potomac Electric Power
51a per cent preferred changed hands
on two 10-share sales at 110A and
the same corporations preferred STOCK
moved at 100, all sales ex dividend.
Auchincloss, Parker g. Redpath
New York Stock Exchange firm, has