Part 9

The clerk, Joe, who was a sort of assistant manager, came out from behind his cage, walked up to my friend, looked at him and then looked at me.

“It’s funny,” he said slowly--“it’s damned funny that you never do a single thing here when your friend Livingston isn’t around. You just sit and look at the board by the hour. Never a peep. But after he comes in you get busy all of a sudden. Maybe you are acting for yourself; but not in this office any more. We don’t fall for Livingston tipping you off.”

Well, that stopped my board money. But I had made a few hundred more than I had spent and I wondered how I could use them, for the need of making enough money to go back to New York with was more urgent than ever. I felt that I would do better the next time. I had had time to think calmly of some of my foolish plays; and then, one can see the whole better when one sees it from a little distance. The immediate problem was to make the new stake.

One day I was in a hotel lobby, talking to some fellows I knew, who were pretty steady traders. Everybody was talking stock market. I made the remark that nobody could beat the game on account of the rotten execution he got from his brokers, especially when he traded at the market, as I did.

A fellow piped up and asked me what particular brokers I meant.

I said, “The best in the land,” and he asked who might they be. I could see he wasn’t going to believe I ever dealt with first-class houses.

But I said, “I mean, any member of the New York Stock Exchange. It isn’t that they are crooked or careless, but when a man gives an order to buy at the market he never knows what that stock is going to cost him until he gets a report from the brokers. There are more moves of one or two points than of ten and fifteen. But the outside trader can’t catch the small rises or drops because of the execution. I’d rather trade in a bucket shop any day in the week, if they’d only let a fellow trade big.”

The man who had spoken to me I had never seen before. His name was Roberts. He seemed very friendly disposed. He took me aside and asked me if I had ever traded in any of the other exchanges, and I said no. He said he knew some houses that were members of the Cotton Exchange and the Produce Exchange and the smaller stock exchanges. These firms were very careful and paid special attention to the execution. He said that they had confidential connections with the biggest and smartest houses on the New York Stock Exchange and through their personal pull and by guaranteeing a business of hundreds of thousands of shares a month they got much better service than an individual customer could get.

“They really cater to the small customer,” he said. “They make a specialty of out-of-town business and they take just as much pains with a ten-share order as they do with one for ten thousand. They are very competent and honest.”

“Yes. But if they pay the Stock Exchange house the regular eighth commission, where do they come in?”

“Well, they are supposed to pay the eighth. But--you know!” He winked at me.

“Yes,” I said. “But the one thing a Stock Exchange firm will not do is to split commissions. The governors would rather a member committed murder, arson and bigamy than to do business for outsiders for less than a kosher eighth. The very life of the Stock Exchange depends upon their not violating that one rule.”

He must have seen that I had talked with Stock Exchange people, for he said, “Listen! Every now and then one of those pious Stock Exchange houses is suspended for a year for violating that rule, isn’t it? There are ways and ways of rebating so nobody can squeal.” He probably saw unbelief in my face, for he went on: “And besides, on certain kinds of business we--I mean, these wire houses--charge a thirty-second extra, in addition to the eighth commission. They are very nice about it. They never charge the extra commission except in unusual cases, and then only if the customer has an inactive account. It wouldn’t pay them, you know, otherwise. They aren’t in business exclusively for their health.”

By that time I knew he was touting for some phony brokers.

“Do you know any reliable house of that kind?” I asked him.

“I know the biggest brokerage firm in the United States,” he said. “I trade there myself. They have branches in seventy-eight cities in the United States and Canada. They do an enormous business. And they couldn’t very well do it year in and year out if they weren’t strictly on the level, could they?”

“Certainly not,” I agreed. “Do they trade in the same stocks that are dealt in on the New York Stock Exchange?”

“Of course; and on the curb and on any other exchange in this country, or Europe. They deal in wheat, cotton, provisions; anything you want. They have correspondents everywhere and memberships in all the exchanges, either in their own name or on the quiet.”

I knew by that time, but I thought I’d lead him on.

“Yes,” I said, “but that does not alter the fact that the orders have to be executed by somebody, and nobody living can guarantee how the market will be or how close the ticker’s prices are to the actual prices on the floor of the Exchange. By the time a man gets the quotation here and he hands in an order and it’s telegraphed to New York, some valuable time has gone. I might better go back to New York and lose my money there in respectable company.”

“I don’t know anything about losing money; our customers don’t acquire that habit. They make money. We take care of that.”

“Your customers?”

“Well, I take an interest in the firm, and if I can turn some business their way I do so because they’ve always treated me white and I’ve made a good deal of money through them. If you wish I’ll introduce you to the manager.”

“What’s the name of the firm?” I asked him.

He told me. I had heard about them. They ran ads in all the papers, calling attention to the great profits made by those customers who followed their inside information on active stocks. That was the firm’s great specialty. They were not a regular bucket shop, but bucketeers, alleged brokers who bucketed their orders but nevertheless went through an elaborate camouflage to convince the world that they were regular brokers engaged in a legitimate business. They were one of the oldest of that class firms.

They were the prototype at that time of the same sort of brokers that went broke this year by the dozen. The general principles and methods were the same, though the particular devices for fleecing the public differed somewhat, certain details having been changed when the old tricks became too well known.

These people used to send out tips to buy or sell a certain stock--hundreds of telegrams advising the instant purchase of a certain stock and hundreds recommending other customers to sell the same stock, on the old racing-tipster plan. Then orders to buy and sell would come in. The firm would buy and sell, say, a thousand of that stock through a reputable Stock Exchange firm and get a regular report on it. This report they would show to any doubting Thomas who was impolite enough to speak about bucketing customers’ orders.

They also used to form discretionary pools in the office and as a great favor allowed their customers to authorize them, in writing, to trade with the customer’s money and in the customer’s name, as they in their judgment deemed best. That way the most cantankerous customer had no legal redress when the money disappeared. They’d bull a stock, on paper, and put the customers in and then they’d execute one of the old-fashioned bucket-shop drives and wipe out hundreds of shoe-string margins. They did not spare anyone, women, school-teachers and old men being their best bet.