The exclusive right to negotiate bills of exchange and similar instruments means that the important banking houses of France must be members of the Bourse, and it is partly for that reason that member ship is so valuable. It will also be seen from the fore going enumeration of their powers that the agents de change perform many of the functions of trust companies in this country, such as acting as transfer agents and caring for the property of minors.
Settlement of accounts, as in the case of the London Stock Exchange, is made twice a month but in the case of government securities the period is still further prolonged to one month. The clearing period in the middle of the month continues for four days and the one at the end of the month for five days.
Stock brokers must under no circumstances permit the name of their customers to be made known. In addition they are strictly forbidden to carry on busi ness operations for their own account. If a stock broker forms a partnership he may act as the firm's representative on the Bourse. But the fact that he is their associate does not permit the other members of the firm to trade on the Exchange any more than it does in New York. His co-partners may advance the sum necessary for the purchase of his member ship on the Bourse but in no case must this exceed three-fourths of the total price.
In the rare case of the bankruptcy of a stockbroker, the penalty is much more severe than the one inflicted upon private brokers. It is the custom in the bourse for the governing board (the Chambre Syndicale) when members are in a position of financial stringency and cannot settle their obligations, to meet their liabili ties out of the general fund. This is not compulsory but the practice has been established. The solvency of stock brokers is therefore a rather assured circum stance which generates a feeling of mutual confidence on the part of the public and the brokers.
6. Kinds of dealings.—When a client gives an or der to his stock broker to buy or sell, there are three methods by which it can be executed: at a fixed price, at the best price or at the average price. The first is called a "tours fixe." A says to his broker, "Buy me so much French Rentes 3 per cent at 101 francs." The price is definite and the broker complies with his instructions if possible.
The order at best (au mieux) simply means that the broker is to secure the best quotations that the conditions of the market permit. It is merely as sumed that the stock broker will have the interests of his customer at heart and will do the best he can.
The third method of trading an order at the average price, "cours moyen.." or, as it is abbreviated "C.M." is the most customary. The average price is the one that is half-way between the lowest and highest quotations for the day. Before the Bourse opens, the stock brokers and their clerks come together in a special room set aside for this purpose and state the number of securities they want to buy or sell. Trans actions as to the volume of sales is thus completed al tho the price has not been agreed upon. At the end of the day the average of the lowest and highest prices is the price the customer must pay. This figure in other words is based on the prices existing in the other two forms of trading. If there is only one quotation this single price is declared the average and if no quo tation is made the orders are not executed.
7. Margins and commissions.—No definite margin on transactions conducted by a stock broker is stip ulated. "The broker makes inquiries concerning his customer's father and grandfather, his financial con nections and whether he is a man of honor." Then he uses his knowledge of the individual, with his finan cial standing and character, as a basis upon which to determine the amount he should advance. The higher the standing the smaller the margin.
Brokerage commissions in France are lower than in the States. If the price is above 500 francs the rate is one-tenth per cent on the net amount of the entire transaction, if between 250 and 500 francs the rate is 50 centimes for each security and if less than 250 francs, 25 centimes. Brokerage for the smallest amount dealt in for future delivery on a foreign se curity is 25 centimes and one eighth of one per cent if securities are worth more than 400 francs ($80) . Special rates apply to government securities.
8. Clearings and deliveries.—There is no clearing house on the Paris Bourse. After the business day is closed the brokers return to their offices and check up their sales and purchases. They immediately send to each other confirmation of the day's business. If there is any difference of opinion as to the price or the quantity of stock sold during the day, the Chambre Syndicale is called in for the final decision. Cash de liveries are made the next day and "future" deliveries before the tenth session following the sale.
9. The"coulisse."—This is the name applied to the "curb" market of Paris, an extra-legal body in contra distinction to the official "parquet" or floor. Here no limitation as to numbers is set. Any French sub ject can join the coulisse. It is governed by two Chambres Syridicales, one for the account or future market, and the other for the cash or comptant mar ket. Altho, according to the French law only stock brokers are permitted to deal in French Rentes, curb brokers compete with the others in transacting busi ness of this character. Suits are never brought against them altho in court their operations are con sidered void. The theory underlying this apparently curious and illogical attitude is the belief that the gov ernment will ultimately derive greater advantages by having the market for its obligations free and exten sive.
Altho the coulisse has no official or logical recog nition it has met for years under the colonnade of the Bourse building, and is a firmly entrenched body. Its name comes from its place of meeting, the word coulisse meaning side issues, wings of a theatre, pas sageway. There have been generations of conflict be tween the parquet and the coulisse, but their interests are by no means wholly opposed, because in the end the outside brokers must come to the agents de change for the transfer of securities. The number of small cash transactions on the coulisse is enormous.
In times of great speculative excitement a body of street brokers springs up in Paris. They meet in the open street near the Bourse and are lmown as pieds hztmides (wet feet).
The period of trading on the bourse is 12 a. m. to 3 p. m. whereas the coulisse opens at 11.45 a. m. and closes at 4 p. m. Each exchange issues daily its offi cial lists with the names of all the securities admitted, prices, rates of exchange, prices of gold and silver bullion, etc.