454 THE WORK OF THE STOCK EXCHANGE
such disputes as arise from transactions made on the floor of
the Exchange. In previous chapters the conditions under which
contracts are entered into on the Stock Exchange have been
hriefly described. Often, indeed, a single word or even a mere
nod of the head constitutes an agreement to buy or sell securi-
ties worth many thousands of dollars. Occasionally, however,
in the speed and rush of the trading, misunderstandings will
arise. Some of these are settled on the spot by the parties con-
cerned.’ The rule of the Exchange is that, once entered into,
a bargain must stand, unless both parties to it agree to alter its
terms. Accordingly, any serious disputes are taken before the
Arbitration Committee and judged entirely on their merits,
justice being done quickly and effectively. On appeal from this
committee, the case may be taken before the Governing Com-
mittee as the final authority in the Exchange. |
“Wash Sales.”—So much is said concerning “wash sales”
that a word concerning them is necessary here. A “wash sale”
securs when two parties engage in fictitious transactions in
order to establish artificial prices, with no real intention of
exchanging money or goods. This indefensible practice is non-
existent on the floor of the New York Stock Exchange. We
have seen'® that the original Constitution of the Exchange
provided expulsion for any member of the Board “making a
fictitious sale or contract” The present Constitution states:
A member who shall be adjudged by a majority of all the existing
members of the Governing Committee guilty of making a fictitious
transaction or of giving an order for the purchase or sale of securities
the execution of which would involve no change of ownership, or of
executing such an order with knowledge of its character, shall be
suspended or expelled as said Committee shall determine.
Both by the old custom of the Stock Exchange and by the
laws of New York State (since 1913), a stockbroker is com-
pelled to render his customers on their request a confirmation®
17 See Chapter VI, p. 165.
18 See Chapter 111, p. 64.
19 Constitution, Article XVII, Sec. 3
® See Chapter XV, p. 419,
