102 THE WORK OF THE STOCK EXCHANGE
cialists’ books. During this uncertain initial period of trading
in a new issue, most underwriting houses consequently feel
under the necessity of stimulating its activity and stabilizing
its price.*®
This they do by putting orders in the market to buy the new
security “on a scale down,” or sell it “on a scale up.” A given
syndicate manager, for example, might give orders to buy 1,000
shares of a given newly listed stock at 99, 1,000 shares at g8,
at 97, and 96, respectively; together with orders to sell 1,000
shares at 101, 1,000 at 102, at 103, and 104, respectively. The
giving of such orders in no way constitutes “matching
orders,” ** for the syndicate manager’s buying and selling
orders are fixed at such prices that they cannot meet, but simply
make it possible to execute any buying and selling orders which
may come into the market, at approximately 100.
By such operations any investor who wishes either to buy
or sell the new security can be certain of being able to do so.
In due course orders away from the market are sent in by
investors and speculators, just as in the case of long-listed
securities, and accumulate in the dealers’ and specialists’ books.
Gradually, but as rapidly as they can, the syndicate members
reduce the amounts of their “scale orders” until at length, the
dangerous initial stage having been past, the new security is
left to follow its own devices. It should be noted that this
effort of the syndicate to provide an active market is not under-
taken for the purpose of speculative profit; it tries to avoid
heavy losses, of course, but usually incurs small ones by the
operation. From the standpoint of the syndicate, it is an irk-
some, dangerous, and not inexpensive moral duty which it
owes to its investors and to its own good name.
The Question of “Scale Orders.”—The grounds for objec-
tion to this practice of employing scale orders are not so much
that it stimulates the activity of trading in the new security,
Sue Arend DE ats
