ADMINISTRATION OF THE STOCK EXCHANGE 455
of every order executed for them, which states the name of the
firm from whom the customer’s stocks were purchased, or to
whom they were sold. This important safeguard obviously
prevents the broker from only pretending to execute the customer’s
orders, since it enables the customer to verify their
execution readily and quickly.
Matching Orders.—A similar but subtler evil consists of
“matching orders.” An outside party might conceivably hire
two brokers, and by giving orders to one to buy and to the
other to sell, at identical prices, manipulate the price of a
security listed on the Exchange. Both brokers could be quite
innocent of any intention of misdoing, and still be the unconscious
agents of collusion. For such a practice is contrary to
the rule of the Stock Exchange quoted above, which forbids
the execution of “an order for the purchase or sale of securities
the execution of which would involve no change of ownership.”
In practice, however, two Exchange brokers, even if so inclined,
could scarcely match sales often enough to cause any
considerable manipulation of price in the open market, without
attracting the attention of other members. The Business Conduct
Committee is constantly watching any peculiar price movements
occurring on the Exchange, with full authority to investigate
and report them to the Governing Committee.
A few other instances where there is danger of matched
orders also deserve brief explanation. It may happen that a
broker may receive two separate orders from two distinct
sources over the telephone from his firm, one to buy and the
other to sell the same security at the same price. To avoid any
doubtful practices arising from such cases, the Constitution
(Rules, Chapter I, Sec. 1 3) provides that:
When a member has an order to buy and an order to sell the same
security, he must offer such security, if bonds at 14 of 1%, and if
stocks at 14 of one dollar, higher than his bid before making a transaction
with himself, if not so already bid or offered.
