The work of the Stock Exchange

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Monograph

Identifikator:: 1831284952

URN:: urn:nbn:de:zbw-retromon-225876

Document type:: Monograph

Author:: Meeker, James Edward http://d-nb.info/gnd/126597340

Title:: The work of the Stock Exchange

Edition:: Revised edition

Place of publication:: New York

Publisher:: The Ronald Press Company

Year of publication:: [1930]

Scope:: XVI, 720 Seiten; Illustrationen, Diagramme

Digitisation:: 2022

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter IV. The distribution of securities

Collection:: Economics Books

THE DISTRIBUTION OF SECURITIES 101 begins, unless some stipulated condition has still to be met before such trading can take place. The Creation of an Active Market.—The “free and open market” maintained by the Stock Exchange demands, as is made clear in the distribution statement, that “all stock is free for sale and is held under no syndicate, agreement or control.” This requirement is, of course, designed to prevent blocks of the new issue being held off the market by a syndicate to main- tain an unduly high price for it. An underwriting syndicate invariably feels a keen respon- sibility for the market action of its newly listed security during its initial career on the Exchange. The syndicate members realize that the financial reputation of their respective firms is largely at stake over the success of the issue. But while there is a considerable element of self-interest in the syndicate’s atti- tude toward the initial career of its new issues on the Exchange, there is also a large ethical element involved. An integral part of the work of an underwriting syndicate is to see not only that its issues are initially distributed among investors and that other investors can at all times readily buy them, but also that such investors shall be protected by being able, if need be, to sell them with equal readiness. Now there is no inherent magic in listing on the Stock Exchange which can produce auto- matically an active and stable market in a new security as soon as trading in it is permitted. Active markets in any security result from many buyers and many sellers, and their stability depends in large measure upon the orders to sell above and buy below the current price, which stand on the brokers’ and dealers’ books.** But it takes time for the investing and specu- lating public to become enough interested in a security to buy and sell it in equal enough and constant enough volumes to create an active market for it. Moreover, when it is first listed there has been no opportunity as yet for the stabilizing orders “away from the market” to accumulate in dealers’ and spe- i4 See Chapter VIII, p. 225.

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