The cashier's department keeps the ac counts and records of the banking house; attends to receiving, paying for, delivering, and collecting payment for, securities that pass through the organization. It also has charge of the loans from the banks and the collateral deposited to secure them. The partners will have attended to the bank con nections of the house and to the more im portant matters in connection with arrang ing the loans, but the cashier's department attends to all details. In making deliveries of securities to out-of-town clients the cashier will usually, on the instructions of the client, send them by registered mail, insured, to a designated bank with draft attached. Un less the client gives contrary instructions, however, the cashier may estimate whether it may not be cheaper to deliver the securi ties by an express company, in which case the express company is the insurer. The cashier's department will have to compute all accruals of interest, and all other matters of price and "bases" of true income on all purchases and sales, whether the purchases are of the issue from the corporation or of securities from a client.
During the process of distributing securi ties the bankers must support the market. After they have sold the securities they must make a market for them, so far as the nature of the issue permits. We will discuss later the matter of listing securities on the stock exchange. If the bankers, while they have any part of an issue to sell, should permit quotations at prices less than their offering price, on the exchange or off the exchange, —for hardly anything in the way of a trans action fails to become known on the street, —it will become impossible for them to dis pose of the securities. Of course no one will pay the bankers their price for the security if it can be bought from some one else at a lower price. While the bankers are selling an issue they must keep the market clean of the security, and must be careful in their selling to place securities where they are not likely, for the time being, at least, to be offered in the market.
The banker will prefer the small investor in making sales to this end of keeping securi ties off the market. If the securities are offered publicly and are oversubscribed, the bankers will allot small subscribers all of the security they subscribe for, or a proportion ally greater part than the large subscriber, and the allotment of the large subscriber will be proportionally cut down. The small subscriber is more likely to be an investor, or, stated the other way, the large subscriber is more likely to be a speculator simply hoping to make a market turn on the possi bility of an oversubscription, and intending to put his securities right back into the mar ket, whatever happens.
We should remember that since the mar ket in listed stocks is on the exchange, and practically no dealings take place in them off the exchange, then in building up a mar ket in a stock the banker will especially have to watch the exchange. The market will be
largely off the exchange in other securities, whether listed or not. When building up a market in such securities the banker will enlist the interest of brokers who are not connected with the stock exchange, and of smaller dealers whose clients may want to purchase some of this particular issue, but who would prefer to purchase through their regular dealer. Through allowing such bro kers and dealers a commission, though only a quarter of a point, for purchases or sub scriptions through them, the bankers stimu late their interest in the issue. Once such a dealer or broker has handled the security for some of his clients he feels something of an interest in the security, and may go on recommending it or offering to deal in it. Interest of this kind will prove very useful in working up a really active market.
In underwriting syndicates bankers lay a much stronger substructure for a market. Through them, many other banking houses are interested with that vital interest arising out of a financial stake in the transaction. Every one of them becomes in some degree a trading post for the security thereafter. Usually these syndicates are thought of only as a means of getting sufficient distributing power to dispose of the issue in the first instance. They are also highly important as a base for that trading which makes an active market and gives an issue that valu able quality of marketability.
When a banking house has disposed of an issue, it will not drop the matter entirely and turn its attention absolutely to other mat ters. For the sake of its own clients it must maintain a trading position in the security. Though these clients may have had no thought but investment at the time they bought the securities, situations will arise which, without any prior thought of specu lation, will require some of these clients to sell. In such circumstances the bankers will have to be ready to take the securities off the hands of the client or else lose his good-will. Unless the bankers have built up a trading market with known quotations, they will have to pay, in order to satisfy the client, a price somewhere near the price at which he bought the securities, even though financial conditions are such that all securities have suffered in their market value for causes quite outside the issuing corporation. If the security has had a regular course of deal ings with known quotations, the client is more likely to have drawn his own conclu sions. In any event, he knows that he can not get more than the market price. So, for their own protection, the satisfaction of their clientele, and for their general reputation, the bankers will endeavor to build up a course of dealings in any issue of large enough size to make a market really possible.