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 XI. The security collateral loan market

Collection:: Economics Books

SECURITY COLLATERAL LOAN MARKET 285 through the “money desk” system on the floor of the New York Stock Exchange. Both borrowers and lenders use which- ever of these methods is most advantageous in the given case. The personal element in such loans is an important factor in the first case, less important in the second, and mainly inconse- quential in the third. Also, the rates and conditions of loans made by the first method are private and usually undisclosed, in the second mainly so, and in the third a matter of common public knowledge. Usually interest rates are about the same in all cases, but when a considerable difference in rates develops between them, funds tend to flow into the most profitable sec- tion of the market and borrowers flock to the cheapest section of it, with the result of speedily effecting an equalization in rates between them again. Time loans are never made through the “money desk” on the Exchange, but are made either directly between borrowers and lenders, or through a money-broker who charges the bor- rower on the average 1/32% of the principal of the loan for his services in obtaining the funds. On the other hand, a large proportion of new call loans are made through the “money desk,” and a very large proportion of all outstanding call loans are renewed each day at the renewal rate posted there. In order to diversify its risks, the New York lending insti- tution naturally prefers to lend its funds to many rather than to only a few security dealers and brokers. Similarly, a bor- rower on security collateral usually prefers to obtain his funds from several different lenders, in order to diversify the risk of having an inconvenient amount of his loans called at one time, The market has therefore developed the standard unit of $100,000 for security loans, although such loans in multiples of $100,000 and also for lesser amounts than $100,000 are frequently made. Changeability of Supply and Demand.—The extreme liquidity of the call loan market permits of swift changes in 2 Soe Appendix XIf

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