CREDIT TRANSACTIONS IN SECURITIES 183 
ing his “margin” of $5,000, he would obtain a profit on the 
transaction of about $2.000. 
Duties of the Broker.—In stock purchases of this kind, 
the broker of course demands and deserves ample protection. 
The actual purchase of stock on the floor of the Exchange, as 
well as any loan which he may subsequently obtain upon it at 
the bank, are both contracted for in the broker’s name. Conse- 
quently, in case of the unwillingness or inability of the customer 
to “carry” the stock, as well as the loan and the interest upon 
it, his broker must do so. The broker’s only profits in a 100- 
share transaction in a stock selling around $150 a share consist 
of his commission of $25 for buying the stock and $25 for 
selling it (or, for both transactions, about 15 of 1% of the 
value of the stock), plus the interest on $10,000, in case the 
broker advanced this money to Jones to make the purchase. 
In case the broker obtained the $10,000 for Jones from a bank, 
he will charge a slight addition to the rate of interest demanded 
by the bank to compensate him for the trouble, expense, and 
responsibility he assumes in obtaining the money. The broker 
is acting simply as Jones's agent. Since he will not share in 
any speculative profits which Jones may make in the transac- 
tion, he cannot be expected to share any more of the speculative 
risks involved than he can help.* 
The principal risk taken by a broker when his customer 
purchases stock on margin is that the cash value of the stock 
on the market may decline below the amount of money origi- 
nally borrowed to purchase it. If, for example, Jones's 100 
shares of Steel should decline from 150 to 9g, their value 
would shrink from $15,000 to $9,500, or $500 less than the 
$10,000 loan originally made to purchase them. If meanwhile, 
the broker was so foolish as not to call upon Jones for more 
margin, he would find himself liable for the $10,000 loan, with 
only $9,500 worth of stock to secure it. To protect himself 
against possible losses of this kind, the broker will therefore 
Set Chapter XV, p. 416.