APPENDIX 
637 
Meanwhile, however, the continual growth of stock market activity 
rendered the problem of certification increasingly burdensome to the 
hanks. Stockbrokers themselves likewise experienced greater and 
greater difficulties in making security deliveries and money payments 
each day under the cash settlement system. It was thus the growth of 
the stock market itself which primarily brought matters to a head. 
A Special Committee appointed by the Stock Exchange to study the 
subject reported. “Our present system of actual payment of entire 
value in every transaction blocks up in active times both banks and 
Hffices to an intolerable extent, and is an obstacle to the growth of 
the business commensurate with the growth of the country.” 
The clearing system proposed by the Committee and later adopted 
by the Exchange (today embodied in the work of the Night Clearing 
Branch) was not original but modeled upon previous attempts in New 
York and upon stock clearing systems successfully inaugurated in 
other American cities. It differed fundamentally from European 
clearance systems, since it was based upon a daily rather than upon 
2 term settlement. Its most significant features consisted in the 
thoroughness and accuracy of its detailed provisions, and in the fact 
that it was made compulsory for its members by the Stock Exchange. 
The conservative fears of many Stock Exchange members led 244 
out of 1,100 members to vote against the constitutional amendment 
by which the Exchange adopted this compulsory clearing system. The 
frst clearance was held May 17, 18g92—the centennial of the first New 
York stock-brokers’ agreement from which the Exchange originally 
{erived. The result was awaited with curiosity. Only four stocks 
were cleared—Reading, St. Paul, Louisville & Nashville, and Northern 
Pacific preferred. Only one error was reported, and the guilty mem- 
ber was fined $5. On this day shares cleared both sides were 261,000, 
valued at about $16,000,000. Stock balances amounted to only 25,000 
shares worth $1,383,000, and cash balances amounted to $822,000. 
Thus, even in the clearance of only four active stocks, the new system 
obviated the employment of approximately $7,000,000 in certified 
checks; the manager of the clearing house and his ten clerks could 
consequently look with real satisfaction on this first day’s work. 
The emphatic success of the new system almost immediately dissi- 
rated the objections which some Stock Exchange members at first 
entertained in regard to it, and its obviation of the need for large 
amounts of certified checks won for it the instant approval of the 
banks. Exchange members found that special clerical work required 
by it was more than offset by the economies which it effected for them, 
and experience showed that fears as to possible dangers of the revealing