LISTING SECURITIES ON THE STOCK EXCHANGE 1. What listing means.—Before we discuss the fur ther operations and trading methods on the stock ex changes, it is desirable to explain in some detail the admission or "listing" of the securities on the "Board," which is the Wall Street niclulame for the Stock Ex change. This subject is far more important than it appears at first, and its numerous ramifications can be suggested only in this place. The Stock Exchange is as exclusive in regard to admitting stocks as it is in regard to admitting members.
While the Stock Exchange is a very efficient organi zation created for the purpose of trading in securities, it is to be noted that these securities are of selected classes. The floor has been compared to a vast auc tion room, but its wares differ radically from those of the usual auction room in that they are gathered to gether systematically.
The Exchange does not permit the broker-member to buy or sell any securities other than those which have received approbation from the exchange as well as the privilege of being listed. Many believe that every stock which has any real value is dealt in on the Exchange but this is far from correct. There are many securities which are more valuable from the in vestors' point of view and desirable from the stand point of the public, than those which are listed. An other common error is the belief that securities traded in on the Exchange having been selected impartially because of their merit, those which are not listed must have been denied the privilege because of some in herent defect. This idea is inaccurate. Listed se curities range from one extreme to the other in point of desirability. Some are of the highest grade while others are practically worthless.
It cannot be too strongly emphasized that listing a security does not prove its worth. It may be neither safe nor desirable. The Stock Exchange assumes no responsibility and affords absolutely no guarantee. But in the great majority of cases, companies whose stocks are listed must be important and sufficiently established to furnish the most exhaustive information. No stock or bond has gone on the Stock Exchange in recent years unless all the information reasonably and humanly possible to furnish, as far as the Exchange authorities could then determine, had been given. A
few cases where accountants' reports were found later to be either misleading or totally inaccurate prove nothing except that perfection is impossible and that no one can foretell absolutely the future movement of securities, or estimate exactly the value of good will and other intangible items.
This much may be said of listed securities: the in vestor has all the available facts upon which to form an opinion; how far these facts extend will be shown later on in this chapter. It is true that numerous com panies whose stocks and bonds are listed have been ruined by high finance or mismanagement; but even in these cases the companies have had enormous amounts of actual property, and have not been pat ently fraudulent schemes, mere paper projects, such as are offered to the investor outside the stock ex change, literally by the scores of thousands.
2. Classes of securities listed.—It is neither possible nor necessary to name the various securities listed on the Stock Exchange. Reference to a daily newspaper will quickly afford practically a complete list. Most of the great, interstate corporations are listed. Par ticularly are the stocks of very large companies with a widely diffused ownership listed upon the Board. No stock held by a few owners will be admitted. Nor does the Stock Exchange care to take in even the larg est corporations during their period of inception and incubation. It prefers to leave these to the curb market. It wants the stock to be at least a year old.
Until recently very few foreign securities were ad mitted to the New York Exchange, because American capital was not available for them and American in vestors took no interest in them. But the European war has brought about a great change. Increased attention has been given to the few foreign securities that were listed and several new ones have gone on the Board. In this respect the New York Stock Ex change differed radically in the past from the European exchanges, especially the London Ex change where thousands of foreign securities were ac tively traded in.