CHAPTER XI

THE SECURITY COLLATERAL LOAN MARKET

Members and member firms of the Stock Exchange play a
major part in the security collateral loan market, usually as
borrowers but sometimes also as lenders. The New York
Stock Exchange itself, however, never borrows or lends such
funds, and therefore is only indirectly concerned with the
problems arising from the security collateral loan market.
Nevertheless, the Stock Exchange Constitution® contains specific
 regulations in regard to the lending or borrowing activities
 of its members, and provides central facilities on its floor
for them. To students of the Stock Exchange, therefore, the
subject of security collateral loans is of inevitable interest,

Evolution of the Market.—The security collateral loan
market in New York cannot be understood without reference
to its long and peculiar evolution. As the most highly organized
 section of the New York money market, it has been developed
 far beyond any security loan market abroad. The close
proximity and economic interdependence of the European
nations from early times forced a development of foreign
trade, and the employment of bankers’ bills by which such trade
can best be financed. Thus the money markets of London
and to a lesser extent of other European centers also, came
to be based essentially upon their bill transactions and bil
markets. ?

The economic development of the United States has been
on quite different lines, and has compelled a very different evolution
 in the New York money market. Early in the nineteenth
 century, when our lack of manufacturing facilities made
age Constitution, pp. 38, 73, 87, 88, 92-94, 99, and 118.