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instrument used in relation to the operation of the New York
Stock Exchange is the telephone. As has been explained, the
telephone is used in transmitting the orders of the customers
to buy or sell, from the office to the Exchange, and then, when
that order has been executed, the data of that transaction are
returned to the broker's office. When one considers that in
one day alone the transactions on the Exchange may run as
high as 2,000,000 shares or over, it is readily seen that without
the telephone the Wall Street system would be badly slowed up.

50. Telegraph and Cable Systems. — ^The telegraph
and cable systems are of use in conducting out-of-town busi-
ness on other exchanges.

51. News Slips. — In Wall Street there are two news
agencies, one of which is Dow, Jones Co., and the other is the
New York News Bureau. These agencies provide news items
in the form of news slips every few minutes. These news
slips contain important news as to recent developments which
migh? have a tendency to affect the market. These slips are
delivered to subscribers' offices by special messenger.

52. News Ticker. — The news ticker operates in a man-
ner similar to the ticker already described, only instead of
printing a series of stock transactions in abbreviation on a
narrow slip of paper, it prints a page on a sheet of roll paper
about 6 inches wide, and provides a series of news reports on
the condition of the market and of the happenings throughout
the world.

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53. Meaningrs of Terms. — ^Wall Street has a distinct
vernacular all its own. To understand it, one must mix in the
life there and learn it. Some of the more common terms are
here explained.

A bull is one who is long of the market, one who is holding
securities and expects the market to rise.

A bear is a short seller, one who is short of the market, and
who is trying to force the market down by selling short.

To straddle the market is to hedge one's account ; that is,
to be long of the market on certain securities and short in

A lamb is a person inexperienced in the stock market.
When he sustains a loss he is said to have been sheared.

Margrin is the deposit required by a broker when a customer
gives him an order to buy securities or to sell them short.
Usually 20 per cent, of the amount of money involved in the
transaction is required. The amount by which the market
value of securities hypothecated exceeds the amount loaned
on them is also called the margin.

The persons operating in the stock market are called bankers,
brokers, principals, investors, manipulators, speculators, pro-
fessionals, lambs, plungers, room traders, bulls, bears, spe-
cialists, cliques, pools, syndicates, and the like.

When the market prices of securities change but little the
market is called steady. The market may take on other aspects
so that it is called weak, active, or inactive; it might be In boom
or a panic, and the prices shown are said to rise or fall, advance
or decline.

A strongr market is one that shows substantial gains in
price. It is zveak when the prices decline. It is said to be
stagnant when the volume of sales is low.

A pool is a group of operators who advance a contribution
to a common fund for the purchase of certain stocks, and when
the pool sells out each one takes his proportionate share of
profit or loss. A blind pool is one in which no one but the
one managing it knows what stock is being dealt in.

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An operation known as pyramiding: is the act of buying
other securities from the fictitious profits of an initial invest-
ment. Thus, a man makes an initial investment on a small
margin in a rising market, or a bull market. Prices advance,
but instead of selling and taking his profit he still holds the
investment on the original margin and the broker accepts the
profit as shown on his books in lieu of cash to buy more securi-
ties on margin. SucTi profits are called fictitious, or paper,
profits, and the man is said to be pyramiding his holdings. This
pyramid is very likely to be upset by a decline in the market
and the investor will then sustain loss.

A wasli sale is a fictitious sale for the purpose of creating a
fictitious market price.


54. Tlie Broker. — ^As will be seen from the discussion
thus far, the broker may be regarded as the middleman, or the
one situated directly between the buyer and the seller. He is
the one who negotiates as agent for either the buyer or seller.

New York, July 2, 19
John Doe & Co.

Buy for my account and risk
200 [/. S. Steel at the market

H. Appel

Fig. 3

Therefore it can be seen that a man of business ability is
required to occupy this position. It must necessarily be so, for
his advice on conditions in the market and recommendations to
customers are of vital importance.

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55. Tlie Order to Buy or Sell. — Next to be considered
are the operations in the broker's office when a customer gives
an order. The customer makes out an order in some such form
as shown in Fig. 3.

The order is telephoned to the exchange and there executed,
the data returned to the office, and a notice as shown in Fig. 4
IS given to the customer.

As shown thereon, the customer is notified to the effect that
the Frank Moran Company has bought for his account and
risk 200 U. S. Steel at the price of $98 per share, and that a

New York,

July 2,


John Doe & Co,

Sell for my account and risk
100 Smelters at pj



Fig. 5

commission of $30 has been charged, making the net price paid
by Mr. Appel $19,630. The broker from whom the security
was bought was W. H. Jones & Co.

When the order was given it was entered in the Customers'
Order Book, when executed it was entered in the Purchase and
Sales Book, then into the blotter, and from the blotter it was
posted to that customer's ledger account, which was debited for
the net amount as shown on the notice.

Should Mr. Appel give an order to sell, it would be given as
shown in Fig. 5.

As before, the order is telephoned to the Exchange, executed,
and then the data telephoned back to the office, and a notice is
given Mr. Appel to the effect that his order was executed.

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The notice is given in the same form as that shown in Fig. 4,
and in this case is filled out to read : We have this day sold
for your account and risk, Shares lOo; Securities, Smelters;
Price, $g3; Federal and State Tax, $4; Net, $9,281; Name of
Broker, T. O'Keefe & Co. The net price received is made up
of the market price received less commission charges and
transfer tax to the state and federal governments; because
these are charges which the customer must pay, therefore they
are deducted.

As in the case of the purchase previously described, the
entries are made in the several records there mentioned and
the customer's account is credited with the amount noted in the
net column.

The manner of handling each and every record used in the
broker's office will be taken up in a later Section.


56. Begrinning: of the Curb Market. — As has been
previously explained, the stock brokerage business first began
to function on the curb stones of the streets of Paris and Lon-
don. Later on, the curb market began to function in New York
under an old buttonwood tree near 68 Wall Street. Securities
were bought and sold at this place in New York until about the
time of the Civil War, when the market was removed to Wil-
liam Street, between Exchange Place and Beaver Street. Trad-
ing in this market, just as in London and Paris, began at an
early hour and continued until 6 :00 p. m. on the curb, and later
in the hotel lobbies.

57. The Curb Association. — During the interval of
time as described above, the curb market might be termed
unorganized. However, in 1910, the New York Curb Associa-
tion was formed through the efforts of a few men who were
far-sighted enough to see the benefits accruing from an organi-

There are two hundred and fifty members of this association
and the dues of each member are $100 per year.

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Under the existing laws of the association, the trading on
the curb is not restricted to the members only, but it is open to
all who choose to trade there.

58. Tlie Market Place. — The present meeting place for
the curb market is on Broad Street in front of the Wall Street
Journal building.

59. Business Hours. — ^Just as on the Exchange, the
business hours extend from 10:00 a. m. till 3 :00 p. m. During
this time the firms who trade on the curb keep a representative
there, whose duty it is to execute the customers' orders in the
open market. The manner of trading is similar to that on
the Exchange. The buyer finds the seller, a trade is arranged,
the order is executed, and the data returned to the office.

The broker notifies his office of the trades put through, by
means of telephones located in booths situated in the windows
overlooking the curb market. When an order is received from
a customer, the broker's office notifies the telephone clerk in
this booth ; he, in turn, notifies the curb broker by means of a
sign language, or signals, similar to those used by deaf and
dumb persons. The broker executes the order and by signs
notifies the telephone clerk, who notifies the office.

60. Method of Accounting. — The method of account-
ing is similar to that employed for recording Stock Exchange
transactions and will be explained in Stock Brokerage Account-
ing Methods,

61. Securities Dealt in. — The securities traded in on
the curb are those that have not as yet been admitted to the
Exchange for trading ; and, accordingly, most Stock Exchange
houses maintain representatives on the curb.

In spite of the fact that the securities there dealt in are not
listed on the Exchange, there are many important issues dealt
in on curb. For example, up until July, 1919, the stocks of the
Standard Oil companies were traded in wholly on the curb.
In 1919, application was made to list certain of the securities
of that company on the Exchange.

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From this brief discussion it will be seen that the curb
market plays an important part in the financing of new stock
companies, for, as has been explained, the security of a new
corporation is first dealt in on the curb market, and the security
will continue to be bought and sold there, by the public and
others, until* it is listed on the Exchange.

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1. As has been explained in the previous Section, the
transactions resulting from the buying and selling of securities
by a broker for his customers are numerous. For this reason
a system of books of account has come into use in brokers'
offices for recording all necessary data regarding any single
transaction, such as the kind of security bought or sold, the
quantity (number of shares) bought or sold, the price, for
whose account, from whom bought, to whom sold, and many
other important facts, which will here be taken up and
explained in detail.

The books of account commonly used in a broker's office in
Wall Street are as follows :

1. Order Book.

2. Purchase and Sales Book.

3. Margin Record.

4. Clearing House and Ex-Clearing House Blotters

5. Customers' Ledger.

6. Private Ledger.

7. General Ledger.

8. Securities Ledger.

9. Stocks Borrowed and Loaned Book.
10. Money Borrowed and Loaned Book.


I LT 234-7

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11. Stock Transfer Register.

12. Vault List.

13. Revenue Tax Register (2), required by law.

The records just mentioned are to a large extent prescribed
by the laws of New York State or the Federal Government, or
by the laws of the New York Stock Exchange. It may there-
fore be safely stated that the same system of bookkeeping is
used by each broker, and each office does not follow a system
of bookkeeping that is entirely a product of the bookkeeper's
own selection.

The system of bookkeeping and accounting in operation in
Wall Street is very efficient, for it has been created to meet the
demands of that business, ahd is not a system forced upon it.


2. Use, — The Order Book is a book in which the orders
of the customers are recorded. As has been explained in the
previous Section, when a customer gives an order to a broker
to buy or sell for his account and risk, he does so in writing.








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Fig. 1

These orders, as soon as given, are written up in the Order
Book. If it is an order to sell, then it is entered under the sell
orders side, as in Fig. 1 ; if it is an order to buy, it is entered
under the buy orders side. Fig. 2.

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3. What Is Recorded. — The facts recorded regarding a
sell order are as follows :

1. The amount of security to be sold.

2. Name of security.

3. The price at which to sell.

4. When the order expires.

5. Name of customer giving the order.
6: Name of broker to whom sold.

4. Stop Orders. — In Wall Street, a customer very often
sets a figure at which to sell certain of his holdings in case
of a decline in the market price. Such an order is called a stop
order. In the case of a stop order, if the customer tells the
broker to sell a certain security when the price falls to a certain
point, that price is recorded in the price column. Fig. 1. Then,
should that order be good till some other order takes its place,
it would be good till countermanded, and this information, rep-
resented by the abbreviation G. T, C, would be recorded in
the column headed Expires. Then again, a customer might
give an order that is to hold for, say, 3 days ; in that case, the
date of expiration, j da,, would be recorded in the Expires
column. The name of the broker to whom the sale is made is
recorded in the column headed Sold To.

In the case of a buy order, the facts recorded are the same,
with the exception that the name of the broker from whom the
security was bought is included in the Bought From column.

5. Example of Use. — To see just how this record is
used, consider the following transactions, which are to be
entered as shown in Figs. 1 and 2. Suppose that on July 1,

1. W. A. Fordham gives Broker John Jones an order to
buy for his account and risk 100 shares U. S. Steel at the
market price (which is $98 J a share).

2. W. A. Fordham gives Broker John Jones an order to
sell for his account 200 shares Rubber at $90 a share.

3. H. Aery gives Broker John Jones an order to buy for
his account and risk 10 shares Studebaker at $70 per share;
100 shares Sears Roebuck at $105 per share.

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4. H. Aery gives Broker John Jones an order to sell for
his account 10 shares Anaconda Copper at $85 per share, in
3 days ; 100 shares Sears Roebuck at $108 per share on July 1.

It is here assumed that these orders were executed on
July 1, 192 — , in order to proceed with the explanation. Just
as fast as the orders to buy or sell come in, the order clerk
enters them in the Order Book. Mr. Fordham's first order to
buy 100 U. S. Steel at the market, which price was $98J per
share, is entered in the Order Book, Fig. 2, as follows : In the
Amount column is recorded the number of shares to be bought ;
in the Security column is recorded the name of the stock; in
the Price column is recorded the price at which the purchase
takes place. In the Expires column is recorded how long a



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time the order is good for — in this case it expires very
quickly — and in the Customer column is recorded the name of
the customer who gives the order to buy, in this case W. A.
Fordham. The making of all the entries to this point may be
considered as operation No. 1.

When the order is received it is immediately telephoned to
the firm's representative on the floor of the exchange. He
executes the order and telephones the result back to the office.
Then takes place operation No. 2, which consists of enta-ing
the name of the broker from whom the stock was bought; in
this case the selling broker was J. T. Lamb. Then, since the
customer ordered the security to be bought at the market price,
whatever it might be, the price entry would be made in the

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price column. If, however, the customer had ordered the
security to be bought when the market reached a certain price,
the price specified would have been entered in operation No. 1.
From this explanation, the entries of the other transactions,
as shown in Figs. 1 and 2, will be easily understood.


6. Use. — The Purchase and Sales Book is a book of
original entry. It is used to record all the purchases and sales
of securities by a firm of brokers, for their customers after the
orders are given and executed.

In this record the following facts are recorded regarding a
given transaction :

1. Name of the broker who executed the order.

2. From whom bought or to whom sold.

3. Nuniber of shares bought or sold.

4. Description of security.

5. Market price at which bought or sold.

6. For whose account bought or sold.

7. Time of delivery under terms of contract

8. The total amount paid.

7. Since there are what are known as Clearing House and
Ex-Clearing House stocks^ it would naturally be assumed that
there were two books used, one for recording each group of
items. On the contrary, there is only one Purchase and Sales
Book used, but in that book all Clearing House items are
usually segregated from the Ex-Clearing House items.

8. Bids and Offers. — For convenience, the provisions of
laws of the New York Stock Exchange regarding bids and
offers, which were given in the preceding Section, are here
repeated, and details of recording of bids and offers are

Under the laws of the New York Stock Exchange, bids and
offers for the purchase and sale of securities may be made as
follows :

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1. Cash: Security to be delivered on the day of purchase
or sale and payment made for it.

2. Regular way: Security to be delivered and payment to
be made therefor on the next business day following the pur-
chase or sale.

3. At 3 days: Security to be delivered on the third day
following the contract to buy and sell.

4. Buyer's or seller's options: For delivery of security
not sooner than the fourth day nor later than 60 days after the
date of contract. Contracts are exchanged on the day follow-
ing the transaction. Some of these contracts provide for inter-
est and others do not. Where the contracts do not provide for
interest they are known as "flat."

Under these buyer's and seller's options the buyer may
demand delivery, or the seller has the right to deliver the securi-
ties at any time before the expiration of the option. On such
contracts, one day's notice must be given at or before 2 :15 p. m.
on the day before the securities are deliverable prior to the
maturity of the contract.

9. Abbreviations Used. — The information regarding
time ot delivery under the terms of the contract is recorded in
the Time- column by means of certain abbreviations, as follows :

1. Cash, C.

2. Regular way, 7?.

3. At 3 days, B O^ or S 0\

4. Buyer's or seller's options, B O^ or S 0^^.

The abbreviations for cash and for regular way explain
themselves-; B O and S O mean buyer's option and seller's
option, respectively, and the exponent indicates the maturity of
the contract. Thus, if you were selling stock and agreed to
make a delivery on the third day after the date of contract,
then, since you were the seller, you would hold the* seller's
option at 3 days, or, in abbreviation, S O^. On the other hand,
were you the buyer at 3 days, then you would hold the buyer's
option at 3 days, or, in abbreviation, B O^, If the option were
for any other time, as 4 days or 30 days, it would be written as
shown, B O^ or S O^^y as the case might be.

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10. Example of
Use. — ^As an example
of the use of the Pur-
chase and Sales Book,
Figs. 3 and 4 show the
entries resulting from
the transactions noted
in the Order Book, as
listed in Art. 5.

In the case of Mr.
Fordham's order, for
example, it will be seen
that under Name of
Broker is recorded the
name of F. A. Downe,
the broker who bought
the stock; under From
Whom Bought is re-
corded the name of
J. T. Lamb, which was
obtained from the
Order Book, Fig. 2.
Under Number of
Shares is recorded the
number of shares
bought, in this case
100; under Description
is the name of the
stock, in this case U. S.
Steel; under Price is
the market price paid;
under For Whose
Account is the name of
the person giving the
order, in this case
W. A. Fordham.

In the Time column
is recorded the time

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when the security will be delivered under the terms of the
contract. In this case the contract was made in the regular
way, and that fact is recorded by the symbol R.

The Amount column records the total cost under terms of
contract, in this case $9,887.50.

The other transactions are entered in a similar manner.


11. Use. — As a customer may buy stocks and bonds on
margin, it is highly important that the broker have at hand a
statement of the amount of capital each customer has advanced
on his purchases which the broker is holding for him. There-
fore the Margin Record was introduced to fill that need.

This record is one of the most important kept in the broker's
office. It is also the one most carefully watched by the broker,
especially when the buying and selling of securities is very
large and the market is very active.

The Margin Record is kept either on what are known as
margin cards or in some loose-leaf record, the latter being usu-
ally preferred. This record shows at a glance all the informa-
tion regarding a customer's account as listed below :

1. The number of shares — long, short, hedged.

2. A description of the securities held.
*3, The net price of those shares.

4. The market price paid.

5. The margin deposit (ledger credit balance).

6. The margin remaining to carry the holdings, stated
either in points or percentages.

12. MsLTginsil Requirements. — Usually the broker
requires the customer to deposit 20 per cent, of the amount of
money involved in a given transaction, as a margin, on all
securities which that customer may have bought or sold short.
Thus, if an account were long, that is, if the customer holds.

♦The net price is made up of the market price plus commission
charges, if a purchase; if a sale, the tax and commission charges are
deducted from the market price.

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say, 100 shares of stock costing $10,000, then that customer
would be required to deposit as a margin with the broker the

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