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 103 as that it may amount to a manipulation of prices at which sales are made. Scale orders cannot be used without fixing upon some one figure above which the syndicate will sell and below which it will purchase. This of course tends to confine the price approximately to this figure, since, if heavy selling orders come into the market, they will meet the syndicate’s scale buying orders and thus prevent the price from declining severely, while heavy buying orders will similarly meet the syndicate’s scale selling orders and prevent a sharp rise in price. [f the figure around which the syndicate tends temporarily to confine the movement of prices is a fair one and in accord with the real value of the security, no economic harm is done. On the other hand, should the price set by the syndicate be higher than the inherent value of the security warrants, the possibility of causing ultimate losses to investors arises. Practical Power of Syndicates in the Market.—But it must not be forgotten that the syndicate manager is, after all, dealing in a national market. He has given publicity to the essential details of the equity and earning power behind the new security. Sales of it made on the Exchange are instantly reported all over the country. Any disparity between price and value immediately makes speculative profits possible. If, there- fore, he attempts to stabilize its price at a figure in excess of its inherent value, the new issue will at once become a target for speculators from every corner of the nation. Against the com- bined pressure which they can quickly exert, no syndicate could hope to hold its ground for any length of time. In consequence of this irresistible and immediate corrective force which national speculation exerts, the power of syndicates to do harm by attempting to stabilize prices is reduced to a minimum, although it is not wholly eliminated. On the other hand, the stimulation of activity and stabilization of price is a temporary but inevitable practical necessity in the case of newly listed securities. In this connection, it is interesting to recall that in 1917 the United States Treasury Department, in coop-

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