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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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VII. Credit transactions in securities

Collection:: Economics Books

CREDIT TRANSACTIONS IN SECURITIES 193 prices by encouraging margin purchasers, the chances are that Corn Products will rise rather than decline in price. Stock Prices and the Money Rate.—So many factors enter vitally into the establishing of stock prices that the influence of the call rate upon them is frequently offset by some counter- force. In some of the duller periods in stock market history, although call funds were ruling as low as 2%, nevertheless dividends on stocks had been proportionally reduced, with the consequence that stock prices also remained very low despite the prevalence of “cheap money.” Yet, other factors being equal, the result of changes in the call rate on stock prices will be as stated above, and thus forcibly demonstrate that every margin purchase of stock presupposes a short sale of money, and that every short sale of stock presupposes a margin pur- chase of money. As methods of purchase and sale, the margin purchase and the short sale are, therefore, inseparably and reciprocally con- nected, like the two sides of a coin, owing to the fundamental fact that every sale is and must be a twofold operation involv- ing both money and goods. The illogic of attempting to restrict short selling, and at the same time to permit margin purchasing or any use of credit in dealings, is thus apparent. Shortages of Money.—Since every margin purchaser of stock assumes a debt of money and every short seller a debt of stock, it is obvious that a shortage of money may seriously hinder the former from making his deferred payment, while a shortage of stock may similarly embarrass the latter in making his deferred delivery. These shortages of money and stock are risks inevitably involved by credit transactions in the stock market. While an examination of the “call loan” system employed to finance margin purchasers of stock must be deferred to a later chapter,’ some few of its features deserve comment here. The Stock Exchange has no control over the shortages which "J See Appendix VII,

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