SECURITY COLLATERAL LOAN MARKET 293
balk at securities of excellent intrinsic value, which cannot
readily be sold on the Stock Exchange and will often decline
absolutely to lend on them if they are not listed there. He is
also wary of stocks with very high prices, or others subject to
heavy price fluctuations. He dislikes “odd lots” of from I to
09 shares of stock, since these may involve a more compli-
cated process in marketing than “round lots” of 100 shares or
multiples of 100 shares.
As security markets became more organized and continu-
ous, the securities dealt in upon them became more and more
available for loan collateral, apart entirely from their intrinsic
value. This fact not only explains the popularity of collateral
which is listed on the New York Stock Exchange, but also the
increasing acceptance as collateral of issues listed on other
definitely organized and increasingly dependable stock ex-
changes in this country.
Protection of Lenders.—In the example of the $100,000
loan envelope given in Figure 22, it will be noticed that the
loan is secured by an excess of collateral amounting to about
25%. The amount of this security margin over the face of
the loan demanded by lenders, varies somewhat from time to
lime according to conditions in the money market and the
stock market, and also according to the quality of collateral,
the particular policies of individual lenders and numerous other
factors. Often, however, Stock Exchange firms take pride in
ronsiderably exceeding the minimum security margin require-
ments of the lender, and when collateral values shrink through
declining security prices, usually provide additional securities to
margin their loans before the lenders even request it. As the
large lenders all have stock tickers in their loan departments,
however, they are always in a position to require more margin
the instant they consider it necessary. Also, under their agree-
ments with the borrower, they can “throw out” of the en-
velopes any collateral they do not like, and require the borrower
‘0 make “substitutions” by providing more acceptable securi-
