ORGANIZED SECURITY MARKETS 43
the stock market on the New York Stock Exchange is already
organized and is ready at all times to absorb your buying or
selling orders.
The usefulness of this quality of marketability which stock
exchanges confer upon their listed securities has often been
demonstrated by the very different behavior of the organized
and unorganized security markets during a crisis. The latter
type are “fair weather” markets, which do well enough perhaps
while rosy optimism reigns, but which have a disconcerting
way of vanishing almost completely when the pressure of
heavy selling appears. During a drastic decline in security
prices, the loosely organized security markets for the time being
simply cease to function. The issues ordinarily marketed there
are rendered practically unsalable. Under the circumstances,
the banks naturally hesitate to lend funds on such non-negotiable
security collateral. But on the Stock Exchange, though
prices may fall sharply, security holders can always sell at a
price, and furthermore they are more quickly furnished with
actual sales prices by which to judge the current value of their
holdings. At such times, however, many security holders are
apt to sell their Stock Exchange securities to protect their
unsalable non-listed securities, and in this way the organized
market is forced to bear the brunt of the whole selling movement
in all securities.
One important reason for this continued negotiability of
listed securities arises from the “short sale,” as will be pointed
out in more detail.’ At times, the only buying power in the
stock market consists of the so-called ‘‘short-interest.” No one,
as a rule, sells short in an unorganized market because of the
difficulty of borrowing stock to deliver, and as a result in such
a market holders are not protected in a crisis by the existence
of a “short interest.” As a rule, also, the superior quotation
service of a stock exchange more quickly draws the attention
of bargain-hunting investors to securities whose price has
6 See Chaoter VIL. o. 198.
