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 VIII. The floor trader and the specialist

Collection:: Economics Books

THE FLOOR TRADER AND THE SPECIALIST 207 necessitates the constant taking of losses. There is no magic and infallible formula available to the floor trader as he stands about the posts on the Exchange floor and makes his trades. Years of experience and the highest degree of natural aptitude and ability in the business do not prevent him from incurring frequent losses. His aim must be, therefore, not so much to avoid losses absolutely—for this would be utterly impossible— as to overbalance his losses with his profits. But even if he is successful in three out of four trades, his net profit is not $25, or anything like it. To begin with, as we have seen, he usually is forced to pay some commission house $1 or more on each 100 shares to clear his trades, or else assume the considerable overhead expense of becoming a clearing mem- ber himself and providing the office machinery required to per- form his own clearance. In either case the clearing expense is just as great on an unprofitable as upon a profitable transaction. Thus, on account of this expense alone, his net profits on a successful trade can be only $11. 50, and his loss on an unsuc- cessful trade will be $13.50. State and Federal Stamp Taxes.—But this is not all. On every sale of 100 shares of stock of $100 par value he must pay $2 for the New York State tax stamp and $2 for the Fed- eral tax stamp. These tax levies in themselves seem small enough, for both amount to only 1/25% of the par value of the shares. But when the small profits for which the floor trader deals are remembered, the matter assumes a very dif- ferent aspect. Moreover, he is taxed just as heavily on his losses as upon his profits. Counting in these taxes, when he makes 1% on a trade his cash. profit is only $7.50, while when he loses 1% on a trade his actual cash loss is $1 7-50. In conse- quence, if three out of four of his trades are successful, he makes a net profit of only $5. And to be 75% successful in this business, with its stern demands of swiftness and accuracy and with its constant risks, is, as any floor trader will testify, no slight achievement.

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