APPENDIX 
607 
But in the three European markets only cash dealings were allowed 
on the reopening, and term settlements (by which short sales are made 
there) were forbidden until May 22, 1922, in London, January 2, 1920, 
in Paris, and October 1, 1925, in Berlin. Owing to this war-time 
han on term settlements, further and specific limitations on short- 
selling in these markets were unnecessary. 
But in New York, accustomed to handling short sales on a cash 
settlement basis, special restrictions on short selling per se were con- 
sidered necessary, and were imposed by the New York Stock Ex- 
change itself. On November 1, 1917, the Governing Committee passed 
a rule that all Exchange members must report in a sealed envelope 
daily the amount of their short sales and the names of the persons 
for whom they were made, and also the amount and names of stocks 
borrowed. Both Exchange members and their customers were placed 
on notice that if “bear raids” in the stock market were attempted, 
the Exchange would at once make public the names of the short-sellers. 
This system bore excellent results; while “bear raids” were effectually 
prevented, at the same time the function of the short sale in providing 
a cushion for declining prices—a particular necessity during the un- 
certain years of the war—was not destroyed. 
(VIIg) The question of the legitimacy of short sales is almost as 
old as the question of speculation itself. At the present time, short 
sales are permitted on all the leading stock exchanges of the world, 
although in Paris and also Milan the buyer is entitled to demand under 
certain conditions a delivery of securities earlier than that specified 
in the term-contract by which the short sale is effected. Even the 
hostile Pujo Committee (1913) stated “there seems no greater reason 
for prohibiting speculation by way of selling securities in the expecta- 
tion of buying them back at lower prices, than by way of purchasing 
‘hem in the expectation of at once reselling them at higher prices.” 
(Pujo Report, p. 52.) 
In British experience, the first anti-short sale legislation was the 
so-called Sir John Bernard Act of 1733, which was in practice dis- 
regarded for over a century and eventually repealed in 1860. British 
legislation against short sales thus narrowed down to the Leeman Act, 
which prohibited only the short sale of bank shares; this was done 
1pon the curious theory that short selling of such shares might cause 
runs on the respective banks There is considerable testimony on this 
score in the Royal Commission Report (#1178-1184, p. 43). Mr. 
Spurling, a prominent London broker and money-lender, testified be- 
fore the Commission that the failure of London banks in 1866 was 
not due at all to the short sale of their shares. but resulted inevitably