326 THE WORK OF THE STOCK EXCHANGE
Employment of Settlement or Delivery Prices.—Accord-
ingly, the clearing systems of all the great stock exchanges here
or abroad resort to the use of the artificial but very handy
device of a “delivery” or “settlement price,” at which all trans-
actions in all cleared securities will at first be settled; after-
wards, with every firm, an adjustment is made of the differ-
ences between the settlement prices it has thus employed and
the actual prices at which it really bought and sold. Suppose
this is done in the foregoing case, at a settlement price for
Reading of 80. A delivers the 100 Reading to C, and C pays
him $8,000 for it. Thus A, who really sold it for $7,900 gets
$100 too much, while C who really bought it for $8,100 pays
$100 too little. But the clearing system knows this perfectly
well, and calls upon each of them for $100, which they pay to
it forthwith. Meanwhile B is told to draw a draft against the
system for his $200, and. this draft is paid from the proceeds
of the two checks for $100 already collected from A and C.
The New York Stock Exchange settlement prices are fixed
by the Night Branch for each day’s transactions, soon after
the close of the market. The delivery price for each cleared
stock is usually arrived at by selecting the nearest even price
(excluding fractions) to the closing bid price for the day.
Consequently, the settlement price on a closing bid of 7918
would be 79, or on a closing bid of 7954 would be 80. Some-
times, in the less active stocks, the price of the last sale is used,
when the closing bid price is too weak to furnish a satisfactory
basis. Thus, when the last sale of such a stock has been made
at 86, and its closing bid and asked prices are 82-87, the
delivery price might be made at 80.
Preparing for the Night Clearance.—All day long, as
transactions are entered into by Stock Exchange members on
the floor, they are reported back to their offices. Transactions
in cleared securities are entered on the “clearing blotter” and
exchange tickets dispatched to the other parties to each trade.
When the corresponding exchange tickets from these respec-
