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.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VII. Credit transactions in securities

Collection:: Economics Books

184 THE WORK OF THE STOCK EXCHANGE demand that his customer put up more margin whenever the market value of the latter’s stock declines, so that there will constantly be a reasonable surplus when the purchase price of the stock is subtracted from its market value plus the cus- tomer’s margin. Since the purchase price of the stock is fixed at $15,000, it is obvious that the less the stock is worth on the market, the more margin the customer must put up to maintain this surplus.’ There is no uniform rule regarding the exact percentage of margin initially required, or the extent to which a broker will carry his margin customer in a declining market before calling upon him for additional margin. The credit of individuals varies so widely that brokerage houses, just as banks, must decide each case involving an extension of credit on its own separate merits. It is, however, a well-recognized fact that it is to the advantage of both broker and customer to establish and maintain adequate margins, and that the most successful brokerage houses are apt to be those which are most conser- vative about margin requirements. The Constitution of the Stock Exchange (Rules, Chapter XII, Sec. 1) states: “The acceptance and carrying of an account for a customer, whether a member or a non-member, without proper and adequate margin, may constitute an act detrimental to the interest or welfare of the Exchange.” . “Margin Calls” and Profit-Taking.—But to return to our example: If the price of Steel declines to 125, the broker may demand that Jones put up an additional $2,500 of margin, since the 25-point decline has reduced the surplus of the value of the stock plus the margin over the purchase price to only $2,500. In case the stock continues to decline, and Jones, after being notified by the broker, refuses to put up the amount of margin thus requested, the broker may then sell his 100 shares of Steel at—say—i110. Out of the $11,000 resulting from the sale he will then pay off the $10,000 loan and return $1,000 "5 See Chapter XV. pn. 430.

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