The Stock Exchange

CHAPTER I. What the Stock Exchange Is

WHAT THE STOCK EXCHANGE IS

The Stock Exchange has been described as the mart of the world; as the nerve-centre of the politics and finances of nations; as the barometer of their prosperity and adversity; and so on. It has also been described as the bottomless pit of London, and as worse than all the hells. Perhaps, however, the Stock Exchange can best be defined and described as a market. Just as Smithfield is the market for meat and Covent Garden the market for flowers, fruit, and vegetables, so is the Stock Exchange the market for stocks and shares.

These stocks and shares, as everyone knows, are, roughly speaking, sleeping partnerships. The holder of railway stock is a part-proprietor of the railway, and is entitled to his proportion of its profits; the holder of shares in a mining company is similarly part-proprietor of the mine. Even although the holders of the stocks of a nation, such as Consols, or of the debenture stocks of a company, are creditors and not proprietors, they depend, for the income which those stocks yield them, upon revenue and profits, just as does a partner in a business.

It will at once be seen that although the Stock Exchange may be defined as a mere market, the wares that are displayed and dealt in are of such importance as to entitle it to the more ambitious definitions with which it has been exalted. It is worthy of being defined as the mart of the world, because these wares represent property in every part of the world, and because the orders which are executed in this mere market emanate from all over the world. The business of the Stock Exchange is more varied and cosmopolitan than that of any other mart, except, perhaps, the Money Market. The business of the Stock Exchange may be described as the business of businesses. The institution may be defined as the nerve-centre of the politics and finances of nations, because in this mere market all that makes history is focussed and finds instantaneous expression. It is worthy of being defined as the barometer of their prosperity and adversity, for a glance at the tone of this mere market, whose wares are more mercurial than these of any other mart, suffices to indicate their condition. It may almost be said that the price of Consols is the welfare of the world expressed in one figure.

Perhaps the Stock Exchange is unworthy enough to be defined as the bottomless pit, and to be described as worse than all the hells, if we look at the mere market from the point of view of those who abuse the facilities which it offers for free dealing--but only from that point of view. Without the Stock Exchange our commercial and industrial life could never have attained its modern refinements. Indirectly this institution provides the sinews of industry and commerce, or, at all events, that one great sinew, capital. The inventor with an idea to develop, the trader with a business to expand, the pioneer with a country to explore, the Government with a scheme to finance, all betake themselves eventually to the Stock Exchange.

It is the organisation of capital for speculation and investment, even as the banks are the organisation of capital for loans. Its members are in close touch with all the capitalist investors and speculators in the country, and can lay any scheme for which the financial sinews are required before them. Moreover, in providing a free market for the securities upon which the money is subscribed, the Stock Exchange tempts subscriptions, and indeed renders them possible where otherwise they might not be. Most people would hesitate to part with their money in exchange for even the best securities, did they not feel assured that, if necessity arose, they could readily obtain its return by selling the security in the free market which the Stock Exchange affords. But for the Stock Exchange, even the Government would find a difficulty in borrowing; whilst great schemes, national, commercial, and industrial, would languish in the lack of a ready flow of capital. Railways could not traverse the land nor ships the sea; enterprise would be discouraged, and the original and progressive ideas of clever men would decay undeveloped. Thus the Stock Exchange is linked closely with the prosperity of the world in general and of the nation in particular, and it has grown with the development of that prosperity.

Some very fair idea of how it has grown is obviously conveyed by a statement of the nominal value of the wares in which it deals. It is impossible to form an estimate of the whole of the enormous amount, as there are dealings in so many securities which are not recognised in the Official List of the market. But the nominal value of the securities thus quoted at the end of 1912 reached the enormous total of £10,990,249,126; this comparing with £8,787,316,406 in 1902, an increase of £2,202,932,720, or no less than 25 per cent. In other words, the amount of securities officially quoted in the Stock Exchange is one-quarter larger than it was a decade ago.

CHAPTER II. The Market-Place

THE MARKET-PLACE

The market-place, where the dealing in this mass of securities is carried on, is by no means of imposing appearance from the exterior point of view. Of all the Stock Exchanges, Bourses, and Bolsas throughout the country and the world, the London Stock Exchange makes, perhaps, the least exterior show. The tourist often seeks it in vain, and thousands of Londoners pass it every day without knowing that behind the suites of offices, with their Portland-stone walls relieved by granite, is hidden the mighty market-place. Yet, for its purposes, the Stock Exchange, or the House, as the members and even the Rules affectionately term it, could not be better situated. It is in the very heart of the City. Its west door, the Capel Court entrance, which is the most important by tradition though not by usage, faces the eastern end of the Bank of England, and the building occupies the greater part of the triangle which has Bartholomew Lane for its base, Throgmorton Street for its north side, and Threadneedle Street and Old Broad Street for its south side, the apex of the triangle being formed by the junction of Throgmorton Street and Old Broad Street.

As to the interior, it is without form, though anything but void in business hours. There is no trace of the triangle to the insider, the boundary lines being broken where the surrounding offices abut, or where they have been swept away as opportunity offered for the extension of the Stock Exchange proper. Although the site, including the surrounding offices, occupies some 40,000 square feet, the Stock Exchange itself is only about half that in floor area. The whole design of the interior architecture, Italian in style, is marked by a good deal of solidity. The walls are for the most part covered with marble, the peculiar veining of which suggested the title, Gorgonzola Hall, by which the Stock Exchange is sometimes known. Massive pillars, also marble, abound. The floor is of teak, oak, which was formerly used, having been found of insufficient durability to stand the wear and tear of the members' feet. The feature of the interior architecture, however, is the dome, 70 feet in diameter and 100 feet high, covering the central octagonal area. Beneath the Stock Exchange proper, and extending to almost the same area, is the Settling or Checking Room, the walls of which are lined with oak panelling and glazed tiles.

To the interior of the Stock Exchange the public is not admitted, the authorities and the members themselves, aided, of course, by the janitors stationed at the doors, keeping most careful guard. Many are the stories, generally exaggerated, as to what befalls the stranger who has the temerity and skill to pass within the sacred portals. Occasionally, however, distinguished visitors are shown round, and the list includes the late King Edward VII. Only once have the Managers given permission for drawings to be made of the interior for publication, and on one occasion photographs of the interior were taken and sold for charity.

One of the most common remarks of the clerk who sees it for the first time is, "How small a place!" The impossibility of taking in the whole of the building at a glance is responsible for the false impression so often formed by the disappointed young man newly introduced to a scene of which he has heard so much. But to take one's stand at the Bar of the House, which is just inside the door at Capel Court, is to obtain a much better view than that usually offered by the waiters on effecting the introduction of a new-comer. One is then in the Consol Market, in some respects the most important of all, and looks right down the whole length of the House from west to east. The vista is fine, if not, indeed, impressive. The massive pillars, so often criticised by the members for the loss of space they involve at their huge bases, stand out with a certain solid grandeur, but the dome of what is still called the New House, the most beautiful feature of the Stock Exchange, is lost by reason of the lower roof just in front of us. On the left hand or north side of the Bar is the Parlour, and on the right stands the Kitchen, names handed down through decades for the two little sets of desks on each side of the Bar. Moving forward through the Consol Market, and slightly to the left or north-east, one passes through the Colonial Stock and Bond Market, and stands upon the threshold of the Grand Trunk section. It will be understood that there are no lines or barriers to form boundaries of the various markets. When one talks of a Stock Exchange market, he has in his mind a mere space in the Stock Exchange near some pillar or window; or, much more likely, he has in his mind the group of men who occupy it, dealing, or prepared to deal, in certain securities. Generally speaking, custom alone forms the barrier between the various departments, and the consequence is that when one particular market attracts many members by reason of its animation, the dealers in the busy part frequently overflow the fancy boundaries and press hard upon the neighbouring space. Thus it often happened that the American Railroad Market, touching the Home Railway section on one side and the Grand Trunk section on another, overlapped the boundaries of each, and eventually, because of the inconvenience, the home of American Railroads had to be enlarged.

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