THE NEW YORK STOCK EXCHANGE 1. Membership.—The New York Stock Exchange is a very exclusive organization — in reality, a club. Membership is limited to 1,100, and has been full for many years. The cost of a membership varies with the supply and the demand. The supply consists of the "seats" of members who retire, who desire to sell, or who die; there is no other way of obtaining entrance but by obtaining their seats, since all seats have al ready been purchased. The demand, of course, con sists of the number of persons desiring to become brokers on the Exchange. The price of memberships, or seats, as they are commonly called, has ranged in recent years from about $35,000 to $95,000, the usual price is from $55,000 to $75,000.
The word seat is a misnomer. In early days the brokers had seats in a room arranged like the or dinary legislative chamber, but at the present time the business of the Exchange is handled upon a great floor, . where the brokers transact their business standing.
The applicant for admission to the Stock Exchange must be a citizen of the United States, and at least twenty-one years of age. In order to have his ap plication considered by the Secretary of the Exchange he must indicate two sponsors who will vouch for his honesty, integrity and financial responsibility. Hav ing fulfilled this requirement, he must then begin negotiations with the Secretary concerning a seat on the Exchange. After the payment of the initiation fee of $2,000, lie and his sponsors are summoned be fore the Committee on Admissions for examination. His personal history, condition of health and business experience are examined in elaborate detail and, if everything proves satisfactory, he is elected to mem bership and required to sign the constitution. The authorities are especially inquisitorial regarding the source of the funds which the candidate employs to buy the seat. This is because the Exchange fears that he may use money to which some "string," or condition, is attached, and that the supposed owner, if he should get into trouble, might not have the cap ital with which to meet his obligations.
In brief, the reason for such painstaking exclusive ness is that the Stock Exchange desires a high degree of financial responsibility in those who join. Mem
bers cannot make distinctions in their operations. They must accept the first bargain offered — pro vided, only, the price is acceptable. Unlike most lines of business, the buyer or seller cannot draw any per sonal lines whatever, even when he thinks the other person's credit is not good. Nor is there any method by which this rule can be evaded. Since they are required to do business with the first fellow-member who presents himself, the members, as a rule, are nat urally very careful whom they admit.
Dr. Weld in his "Marketing of Farm Products" gives an excellent summary of the advantages of in sisting upon high membership values on the produce exchanges. His remarks apply equally well to stock exchanges. He says: The principal reasons for maintaining high membership values are, to make it necessary for an individual to have sonic means before assuming the financial obligations incum bent on members, and to increase the disciplinary power of the exchange over its members. . . . It is necessary for the exchange to hold some club over its members to enforce its rulings. If a membership is valued lightly a member may be willing to run the risk of expulsion in order to be able to stoop to some illegitimate practice. - If his membership has a high financial value, he will be held more easily to the rules. Expulsion from one of the large exchanges carries with it not only financial loss but business disgrace. The more se vere the restrictions on admission, the greater the disgrace from expulsion.
2. The were formerly admit ted to a gallery where they might view the Stock Exchange in action, but this is no longer permitted. Those who have business at the Secretary's office, and newspaper men are the only persons who enter the building, except members, officers and employes. Newspaper men are never allowed to go on the main floor of the Exchange; they may enter only the Sec retary's office or the library on the fifth floor, both far away from the place in which business is trans acted.
© Brown Bros., N. Y.