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

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VII. Credit transactions in securities

Collection:: Economics Books

(86 . THE WORK OF THE STOCK EXCHANGE money rather than in terms of goods, owing goods is apt to seem to the average man much more dangerous than owing money. Let us follow through its various stages, a typical short sale of stock occurring on the New York Stock Ex- change, and see if this practice is the evil and nefarious thing which many sincere but superficial critics of the stock markets would have us believe. Selling 100 Corn Products Short.—Thompson, who is a “bear” and anticipates declining prices, instructs his brokers, White & Co., to sell 100 shares of Corn Products stock short for him at 100. Thompson does not possess this stock, but can, of course, buy or borrow it whenever he so desires. Before proceeding to execute this order, the brokers must not only have confidence in Thompson’s financial responsibility, but will probably insist on possessing tangible evidence of it in the form of a margin of—say—3o0 points, or $3,000, to protect themselves against the unwelcome possibility of a rise in the price of the stock to be sold. It is also understood between Thompson and White & Co. that in case Corn Products stock should advance in price, Thompson will maintain this 30-point margin by putting up more margin, so that a surplus of $3,000 shall always remain after the current purchasing price of the stock has been subtracted from the price of $10,000 at which it was sold plus the Customer’s margin. As in the case of a margin purchase, the broker in the event of an upward movement in the value of the stock will demand that Thompson put up a proportionate amount of additional margin, while if the price of the stock declines, Thompson's margin will be in- creased to that extent. Also, in case Thompson does not furnish the additional margin when this becomes necessary and is requested by his broker, the latter will proceed to buy 100 shares to conclude the transaction and return to his cus- tomer what remains of his margin. In a short sale the cus- tomer is not called upon to pay interest charges, since he is not borrowing any money. But, as we shall see. he must expect

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