No one but members are allowed upon the floor of the exchange. All buying and selling, or agreements to buy and sell are made by oral contracts. The member making the offer specifies the number of shares, the fractional part of the price, (such as 3/8 in case the quototion is 103 3/8)and the terms of the sale. When no amount of stock is named in an offer 100 shares of the par value of $100 each is understood. The terms of the sale are either "cash," that is for delivery and payment upon the day of sale, "regular" that is, delivery and payment upon the next business day following the sale; "at three days," which is for delivery and payment upon the third day following the sale, or for "buyers option" or "sellers option," which is after three days and within 60 days after the date of making the contract, at the option of the party holding the privilege or option. Under this form of contract the buyer, or seller as the case may be, has the right to call for the consummation of the transaction at any time he chooses within the limit of sixty days.

Immediately after a transaction has been made between two members upon the floor of the exchange each is supposed to jot down a synopsis of it upon a small pad, which he carries for the purpose. From this imperfect record the entries are carried upon the books of the members and afterwards compared. It is very seldom that a member disputes his liability under the pad entry. If the stock is not delivered as per agreement, or not paid for upon delivery offered, the matter is reported to the proper officer of the exchange, who buys or sells the stock at the market price, in other words endeavors to carry out the agreement of the member who is in default, and whatever loss is entailed thereby, or whatever the difference between the agreed price and the market price, the one party has a claim against the other for its recovery. Stocks sold "ex-dividend" do not carry the dividend to the purchaser. When the books of a corporation are closed and a dividend declared, the dividend no longer goes with the stock, but just prior to the declaration of another dividend, that dividend does go with the stock unless it is again sold ex-dividend.

As previously stated, with the exception of purchases made for the purposes of investment, the bulk of the business of buying and selling stocks and bonds is done upon margins. The buyer does not pay for the securities in full, but buys them largely upon credit, paying probably ten or twenty per cent. of their value to the broker as a margin to cover any possible adverse movement of the market. The broker furnishes the capital necessary to purchase the securities and charges his customer interest upon their cost, over and above the amount of the margin in his hands. Thus, suppose A. desires to buy stocks worth $100,000. He deposits $10,000 with his broker, together with instructions to buy the specified stock. The broker is merely the agent of the customer and must carry out his instructions. The broker may advise his customer as to the best course to pursue, and his advice is usually valuable, since it is founded upon intimate association with the stock market, but the customer issues the actual orders to buy or sell. The broker protects himself from loss through fluctuations in the market by requiring a sufficient margin to be deposited. The amount of the margin will vary according to the character of the stock. While ten per cent. is ample margin in the case of most stocks, a larger margin may be necessary in some cases, and of this the broker is the judge. In case the market fluctuates to the limit of the margin, the broker calls upon the customer for more margins. If the customer fails to respond, the broker sells the stock immediately in order to save himself from loss by a still further fluctuation.

Margins

Stocks or other securities purchased by a broker for his customer must be paid for on delivery. But the customer has placed only a margin of perhaps 10 per cent. of the cost of the securities in the broker's hands. The remainder of the purchase money the broker must, and does, furnish. Suppose a broker buys 1,000 shares of stock at 120, the whole amounting to $120,-000. The customer has deposited $12,000 as margin. The broker must furnish the remaining $108,000. Brokers are not rich men, and even if. they were, they could not possibly furnish sufficient capital to buy all of the securities which a large brokerage business would require. The broker arranges with his bank for a loan large enough to supply the needed funds, the securities about to be purchased to be deposited as collateral. He extends credit to his customer and in turn gets credit from his bank. He extends a credit to his customer equal to, say 90 per cent. of the cost of the stock, and the bank extends a credit to him of, say 80 per cent. of the cost of the stock. Thus, the customer furnishes $12,000 of the purchase price, the broker furnishes $12,000 of his own capital, and the bank furnishes the remainder, $96,000. But the securities are not yet delivered to the buyer, and the condition of their delivery is the simultaneous payment of the money. The matter is arranged in this way: The broker has an understanding with his banker that the bank will over-certify his check temporarily. After certification the check is passed over in exchange for the stock, which is then sent to the bank as collateral for a loan large enough to make the account good. It is true, however, that banks will not over-certify checks in this way unless the character and standing of the broker are such as to warrant implicit confidence in him. The broker must also carry a constant balance in the bank large enough to entitle him to such favors.

It will thus be seen that over-certification of checks is an absolute necessity in stock transactions under the custom of buyOver-Certifica-tion of Checks ing securities on credit or under the system of margins. A clause in the National Bank Act forbids the over-certification of checks by National banks, and on account of this restriction (and others) Trust Companies and private banks have been organized in considerable numbers to meet the public needs.

Call loans are a feature of stock trading, and are extensively made from day to day, subject to "sharp call," which means that upon notification from the bank, to the borrower, such loans shall be repaid before the close of banking hours of the same business day. These loans are secured by stock collateral, and when stock loans are terminated by such notification the debtor is very likely compelled to borrow other money in the open market, (which tends to advance the rate of interest on loans upon that particular security) or to sell such securities in the open market, which is apt to depress its market price, especially if it should become known to have been discredited as collateral by the trust companies.

In hundreds of offices in Chicago and other cities throughout the country may be seen little telegraphic instruments called "tickers," through which runs a narrow paper ribbon on which the instrument prints automatically the names and prices of stocks and bonds in abbreviated forms. These tickers, together with the service which they furnish, are rented to offices by the Western Union Telegraph Company, and as fast as sales are made on the New York Stock Exchange the telegraph conveys the information to the public by means of these instruments.*

♦The same device is used for the produce exchanges.