THE BOND MARKET

271

their less active market, bonds could not ordinarily be borrowed
in this way, and consequently they usually could not be sold
short for “regular way” delivery on the next full business day.’
Accordingly, in 1923 the Exchange inaugurated a plan for
the delayed delivery of bonds. It was arranged’ that in the
bond market, “regular way” dealings should still provide for
the delivery of bonds upon the full business day following the
day of contract, except when the seller states at the time of
closing the transaction on the floor of the Exchange that his
bonds are sold for delayed delivery; in this latter case, the
delivery should be made upon the seventh day following the
day of contract, but may be made on any full business day
prior thereto, upon one day’s written notice being given by the
seller of his intention to do so. This plan has provided a muchneeded
 flexibility to the Stock Exchange bond market, and is
frequently utilized each day.

Economic Functions of the Bond Market.—It has already
been pointed out that the bond department of the Stock Exchange
 is not a primary market to the same extent as is the
market on the Exchange for shares. From a functional standpoint,
 therefore, the Stock Exchange bond market must be
considered not only as a primary market—which it occasionally
is—but also as a public market, dependent upon the outside
private market and sharing with the latter its actual economic
functions.

When heavy liquidation or other causes of strain in the
bond business arise, or when economic circumstances impart an
unusual speculative quality to all bonds, the outside or “overthe-counter”
 bond market tends to dry up, and bond dealings
tend to concentrate in the Exchange bond department as a primary
 market. At such times the economic functions of the
Exchange bond market are generally similar to those consistently
 exercised by the share market on the Exchange: these

® See Annual Report of the President, 1923-24, pp. 26-28.
© See Appendix Xa.