SECURITY COLLATERAL LOAN MARKET 309
satisfactory as the present cash settlement for many reasons
inherent not only in the New York money and stock markets,
but in the whole economic character of the United States. To
mention only one drawback, a term settlement would at once
lead to much greater speculative trading, since traders would
be dealing entirely in open contracts until the arrival of settle-
ment day. It was for this and other reasons that the shrewd
Amsterdamsche Beurs, some years ago, refused after careful
investigation to establish a term settlement in their market
which, like that on the New York Stock Exchange, had long
been on a cash settlement basis. The collapse of term settle-
ment systems in Europe during the war has, even after their
subsequent resumption, made them less popular there than
prior to 1914. Many conservative firms in London today
refuse to “carry-over” or “contango” securities bought for the
account. In the writer's opinion, the New York Stock Ex-
change should not attempt to tear down and disorganize the
present highly perfected call loan system, for the sake of
benefits which appear more likely on theoretical than upon
realistic and practical grounds. While the foreign term settle-
ment systems may satisfactorily meet existing conditions in
foreign security markets, under the totally different economic
conditions in this country they would not afford any genuine
improvement in our financial markets over indigenous and
existing American methods.
Rediscounting Security Loans.?>_The Reserve Act speci f-
ically forbids rediscounting of collateral loans upon other than
U. S. Government collateral. The inability of the Reserve
Banks to rediscount security loans keeps them out of direct
contact with the security loan market—the largest and most
highly organized section of the New York money market—
and thereby interferes with their ability to lead and on occasion
to control it. For to make its policies effective in the security
loan market, the Reserve system must relax or tighten credit as
ston S55, Address of President E. H. H. Simmons in Chicago, May 9, 1929, on
