8. "Two-dollar" brokers.—The member who exe cutes orders for other members at a rate of '$2 for every hundred shares handled, is known as a "two dollar" broker. At first glance it would seem strange that any broker should take the trouble to execute or ders for other members at this rate, when he could get $12.50 for doing the same amount of work for out side clients. There are, however, a considerable number of brokers who do not care for a business that involves a large number of negotiations and accounts with customers and the maintenance of a more or less expensive establishment, but who would rather execute the floor business of other members who have a large clientele. It is obvious that because of the low rate of commission that these men charge for performing this function, they must transact a large volume of business in order to secure a fair amount of profit. Reliance on efficiency and celerity in the execution of orders is their means of securing business and the pro ficiency they display, especially during periods of ac tivity, is often astonishing. There are several hun dred "two-dollar" brokers.
9. "Odd-lot" brokers.—Those members who are purchasers and vendors of fractional lots of securities, are called "odd-lot" brokers. They are about fifty in number. These men charge no commission, because they are allowed to make profits by trading against their commitments when these occur, that is, the brokers do not have to turn the stock over to their customers at precisely the same price that the former paid for it. It must be understood that these odd-lot brokers have no dealings whatever with any outsiders. Their business consists in buying from, or selling to, commission brokers from one to ninety-nine shares of stock, and then putting these small lots together into 100-share certificates; or splitting up 100-share certificates, as the case may be.
On the Stock Exchange the "unit" of trading is one hundred shares of stock and $10,000 in bonds. Unless otherwise specified, that amount is always understood when a broker buys or sells. By specifying, he can buy any number of shares less than one hundred, but it has not generally been found practical to conduct business on the floor on the basis of ten-share or one share units. Indeed, the whole huge fabric of stock trading would probably break down if all the brokers had usually to deal in small lots among themselves. But there are millions of investors and speculators thruout the country who own less than one hundred shares. This made possible by the odd-lot brokers. The outsider does not come into contact with these brokers, who are wholesalers on a large scale, but goes to his regular broker, who buys for his client the three or seven shares, as the case may be, from the ever ready odd-lot man.
The odd-lot brokers usually secure the cooperation of a large number of floor members, because of the enormous detail of their work. Their expenses are heavy, since upon them falls the burden of having 100 share certificates split up into small lots. An odd-lot therefore costs the outsider one-eighth more than a 100-share lot, and it can be sold, generally, only for one-eighth less. Odd-lot brokers transact fully one fifth of the total business that is done on the floor.
10. Room operators who do busi ness independently, go by the name of room traders. They do not carry on transactions for others, but speculate or "trade" on their own account. Room traders do not try to make large profits on any one transaction, for they rely upon their volume of trade to yield an adequate income. Since they are on the floor of the Exchange at all times, and do not have to rely upon mechanical devices to bring them infor mation concerning the movement of prices—which, in rush hours, cannot be secured until several minutes after a transaction is concluded upon the floor of the Exchange—they are able to take advantage of every slight fluctuation, and can therefore sell upon the slightest upward movement and buy again when prices begin to sag. Their usual procedure is to specialize in a few stocks, so as to guard against being caught in any general movement of prices. In order to use as little cash as possible in settlement, they try each day to make their sales and purchases as nearly equal as they can under the circumstances. There are pos sibly one hundred room traders, and they, together with the arbitrageurs' transact nearly one-third of the entire business of the Exchange.
11. Specialists.—Those members who make a spe cialty of a few selected securities are called specialists. Like the room traders, they have no dealings with the public at large. In some cases, one security is the obj ect of their attention or study, altho usually they confine their operations to three or four. In most cases, because of their expert knowledge, the business of these brokers comes from the fulfilment of orders given by other brokers.
In the case of inactive stocks—that is, those infre quently in—the commission brokers would al most always seek out a specialist rather than another commission broker. Specialists are always supposed to know the last price of their particular securities, and it is largely from them that the quotations are obtained. The fact that a broker is specializing in any given stock is always well known to other brokers.