It is a popular belief with many people that the stock exchanges are highly prejudicial to the public interest and to public safety; as if they actually manufacture stocks, fix their price, and sell them to the public. It is also believed by many persons--even by men with enough brains to buy and sell securities--that whatever they lose on their transactions is gained by the stock exchange or the broker through whom they trade; and that the brokers on the floor of the exchange plan out each day’s campaign and manipulate the stocks with utter disregard of the outside world. Furthermore, it is commonly supposed by a certain class of uninformed people that stock exchanges create panics and financial depressions; that they are licensed evils, feeding and fattening upon the credulity of an innocent public. Nothing could be farther from the truth; nothing could disclose a more profound ignorance of existent facts than for one to adhere to any or all of these fallacious beliefs. The stock exchange itself has no more control over the price of securities than it has over the ocean tides. It is merely an auction room where anyone may send in orders to sell stocks and bonds, either at a certain asking price, or “at market” to the highest bidder. On the other hand anyone may put in either a limited or “at market” bid for whatever securities he wants, provided they are on the list admitted for trading; and no securities are so admitted without being passed upon by a committee of competent judges whose duty it is thoroughly to investigate every company before admitting its securities to the board. The great value of this service to both traders and investors is plainly evident. The people who run the exchange have no other privileges, prerogatives or authority than to buy and sell securities on their own account, or to act as buying and selling agents for the public, and to execute their orders precisely in accordance with given directions. The interests of the public are safeguarded by every known precautionary device, and if a broker makes a mistake he stands the loss, regardless of what the amount may be. In this connection, those who have stood in the visitors’ gallery of the New York Stock Exchange on a busy day have been induced to wonder how it is possible for the brokers to avoid errors under such seemingly chaotic conditions as exist there. To the onlooker it resembles a riotous mob scene in a modern cinema, and one might easily mistake it for a place where a lot of frantic men are trying to buy insurance on a sinking ship, instead of dealing in gilt edge securities which are not immediately perishable. A benevolent sweet-natured old lady who stood for a time looking down upon this wild confusion was asked what she thought of it. “I think it’s all very interesting,” she said. Then after some reflection she added: “But my husband never told me that we are in a financial panic. And even so, why should the men get so angry with one another?”
No matter what anyone may say or think to the contrary, there is no business or profession on earth in which a higher degree of honor and business integrity prevails than among the brokers on the floor of the New York Stock Exchange; and there is no business or profession in which sharp and unethical practices among its members are more quickly detected, or more promptly and summarily dealt with. And by way of passing comment it may be remarked that the going price of $150,000 for a membership on the New York Stock Exchange would seem to imply that the brokerage business is no less profitable than it is honorable. In its certificates of membership the New York Stock Exchange declares itself to be “An institution whose history dates back to 1792, and whose rules and regulations have been formulated for the purpose of maintaining high standards of honor among its members, and for promoting and inculcating just and equitable principles of trade.” And it is required of every member that in every particular he live up to these principles. It is a place where a nod of the head or a lifted finger consummates transactions involving millions of dollars. In ordinary business affairs a deal wherein only a few dollars are concerned is signed, sealed, witnessed and sworn to before a notary; but here contracts involving millions are ratified by a mere gesture, and never questioned by either party.
Every buyer or seller of stocks is a free agent to do as he pleases, and if he gets hoodwinked through the stock exchange it is generally because in trying to outwit or undo somebody else he overreaches himself and falls into his own snare. The only percentage against him is what he pays in commissions and taxes on his trades; and the only chances against him are his own blunders in judgment; these, indeed, are likely to prove a sufficient handicap. Every corporation whose securities are listed on the stock exchange is obliged to make a full and comprehensive report to the exchange at least once a year, and these reports can be found in any brokerage office; they are always open to public inspection, and no one need buy any stock or bond without first satisfying himself regarding the nature of the industry, capitalization, earnings, management and other details. Moreover, if at any time a purchaser becomes dissatisfied with his investment and wishes to get his money back or change into something else, there is always a ready market for the stock. It may be more, or it may be less, than he paid for it, but in either case it can be quickly converted into cash.
The investor in stock market securities may equip himself, free of cost, with full information concerning every listed security; what the company’s earnings have been over a period of years, how much stock and how many bonds are outstanding, the highest and lowest prices at which the stock has ever sold, and all such matters in the fullest detail. He therefore enters “the game,” as the stock market is oftentimes called, with his eyes open, and the cards all faced up on the table. But if he deviates from sound principles and resorts to dabbling in stocks that he knows nothing about, except from hearsay among traders and market tipsters, and undertakes to guess the maneuvers of cliques who are manipulating them, he has no one to blame but himself for indulging in such an expensive folly.