CHAPTER XII 
COMPARISON AND SECURITY CLEARANCE 
Only Negotiation of Contracts on the Exchange.—The 
New York Stock Exchange system consists of four essentially 
different parts:* (1) its floor, or market; (2) its central 
clearing and settling mechanism; (3) its commission houses 
through which the public has access to its market; and (4) its 
administrative organization. Previous chapters have analyzed 
and described the first of these parts—the Stock Exchange 
floor where its members, as specialized brokers and dealers, 
make contracts with each other. It is now necessary to pro- 
ceed to the consideration of the second part of the Stock Ex- 
change system—its subsidiary Stock Clearing Corporation 
where these Stock Exchange contracts are cleared and settled. 
In Chapter VI we watched Jenkins and Wilkins, two com- 
mission brokers, effect a sale of 100 shares of Steel common 
at 150 on the floor of the Stock Exchange. It is highly im- 
portant to notice that they exchanged no actual stock certificates 
or money there, but simply made a contract to deliver stock 
and pay money later. Since every sale is in reality an exchange 
of money and goods, Jenkins as the seller contracted to receive 
$15,000 as well as to deliver the 100 shares of Steel, while 
Wilkins as the buyer contracted to deliver $15,000 as well as 
to receive the 100 shares of stock. As we saw, each broker 
made a report of the transaction, which was sent to their 
own respective offices by their telephone clerks. It was then 
left for their offices, and not for Jenkins and Wilkins person- 
ally, to see that the money and the stock involved by this 
contract should be properly paid and delivered. 
The New York Stock Exchange has a “daily settlement” 
1 See Chapter III, p. 84.