Once the issue is sold and the listing is com plete, the bankers will have to watch the market until they are sure that the course of dealings is well established. During the process of sale they will have done everything possible to build up a market as described in the preceding discussion of raising funds through the banking houses. Building a market, in the sense of establishing a course of trading, is much like building an arch; if the process is complete the market will sup port itself. A buying demand will exist suf ficient to meet without breakdown any pres sure to sell. The bankers who brought out the issue can now welcome the speculators; every speculative purchase and sale means one more transaction to help make the mar ket more active and therefore more stable.
Though this is not the place to discuss the function of speculation, we may remark that the result of speculation resembles the effect of a gyroscope in its stabilizing power.
Listing does not cost heavily in the direct charge imposed by the New York Stock Ex change. The Exchange exacts a fee of only $50 for each $1,000,000, or fraction, of the par value of securities, or, in the case of stock without par value, $50 for each 10,000 shares. The expense of complying with the require ments of the Exchange in the furnishing of information would substantially increase the total cost. Besides the costs, which, once met, do not recur, the corporation will have to bear the continuous expense of maintaining a transfer agency and a registrar of transfers in the Borough of Manhattan, New York City.
From the standpoint of the work of the Exchange this requirement of maintaining a transfer agency and a registrar of transfers conveniently near is most important. With the volume of transfers necessary as a result of active dealings it would be impossible to put through the business if every time a transfer were required the certificate had to be sent out of town. This applies with greater force to the American exchanges, with their daily settlements, than to the foreign exchanges, with their settlements at longer periods. Since any real Stock Ex change activity in the securities of a corpo ration requires an organization to take care of the transferring anyway, the matter of the location does not work greatly to the disad vantage of the corporation. Some of the transfer agencies for the largest and most ac tive issues are considerable, and, in active times, very busy organizations. Their work
and problems deserve a more extended de scription than we have space for. It is hardly necessary to say that the Stock Exchange sees to it that the registrar of transfers forms no part of the same organization as the transfer agency. A trust company regularly attends to the duties of registrar. If transactions are not numerous, another trust company may perform the duties of transfer agent. Prin cipal and interest of listed bonds and divi dends on stock must be made payable at the office of the transfer agency. The corpora tion must not change its transfer agency or its registrar of stock without the approval of the Stock Exchange authorities.
The corporation must agree to publish and submit an annual report to its stockholders at least fifteen days before its annual meeting. This report must show an income account and balance-sheet and an income account and balance-sheet of all constituent, subsidiary, owned, or controlled companies, and must contain a statement of the physical condition of the corporation. This requirement of annual publicity, together with the amount of information demanded at the time of listing, has proved an obstacle to the listing of the issues of some corporations. Doubtless the desirability of listing has overcome the un willingness of the managers of other corpora tions to furnish such information. The cor poration must agree also not to dispose of its stock interest in any subsidiary, owned, or controlled company, or to allow any constitu ent, subsidiary, owned, or controlled com pany to dispose of a stock interest in other companies, except for retirement and can cellation, unless under existing authority or on direct authorization of stockholders of the holding company. If the corporation issues any stockholders' rights it must notify the Exchange, and must make all rights transfer able, payable, and deliverable in the Borough of Manhattan.
The Stock Exchange demands great care in the mechanical execution of securities as a prerequisite to listing. The reader will find some discussion of the importance of these requirements at page 212 of the first volume. The Exchange requires that securities must be engraved and printed in a manner satis factory to the committee on the stock list from at least two steel plates.