The work of the Stock Exchange

Bibliographic data

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.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter IV. The distribution of securities

Collection:: Economics Books

THE DISTRIBUTION OF SECURITIES 107 all or almost all of the outstanding amount of a given issue. When such a situation develops, anyone short of the security (and therefore under the necessity of purchasing it) is at the mercy of those holding the corner, who can either extort a premium from him on the stock he has borrowed to deliver to the original purchaser, or compel him to buy in his short stock at an exorbitant figure.'* In the ordinary course of trading the possibility of a premium being charged on stock when bor- rowed, as well as that of its price rising, are in themselves strong safeguards against the creation of an excessive short interest. But when the remedy becomes more dangerous than the disease, it is the Stock Exchange’s view of the matter that what was a slight and necessary economic readjustment be- comes a deliberate and premeditated attempt at extortion by a few individuals, which is contrary to the just and equitable principles of trade. The Exchange accordingly acts to halt the offense by suspending dealings in the cornered security. The sensational interest attending corners is in itself a proof of their rarity on the Stock Exchange. Function of the Floating Supply.2>—Both prior and sub- sequent to the listing of a new issue upon the Exchange, a large part of it is often held by speculators who stand ready to sell out their holdings quickly, while the remaining portion of it is held by investors who desire to hold it for a longer period. The latter part of the issue is said to have been absorbed by investors, while the former part, held by speculators, is known as the “floating supply.” The floating supply of a security is the current surplus over investment demand. By making it easier for it to be carried by speculators, the Stock Exchange, as we have previously noted,” performs a most necessary economic service to the 8 See Chapter VII, p. 194. 2 The author made a full statistical study of this sort, based upon U. S. Steel sta. tistics, in 1928; this was issued as a series of articles in the New York Evening Post, and subsequently republished by the Exchange in pamphlet form under the title of “The Distribution of Securities Through the Stock Market.” 4 See Chapter II, p. 55

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