THE WAYS OF WALL STREET 1. Four methods of trading.—As far as the Stock Exchange is concerned, there are four ways in which "bids and offers"—that is, buying and selling—may be conducted. These methods are (1) cash, (2) reg ular way, (3) at three days, (4) buyers' and sellers' option.
In "cash" transactions on the Exchange the securi ties must be delivered by the seller to the buyer and paid for upon the same day that they are sold. Pay ment is usually made by certified check, not by cash in the strict sense of the word. The London Stock Ex change has a similar method of business, known as "for money." "Regular" or "regular way" transactions are made with the understanding that the delivery and the pay ment are to take place before 2.15 p. m. on the day fol lowing the date of the sale, unless the sale is made on Friday or Saturday, when delivery and payment take place on Monday.
In transactions "at three days," delivery is made upon the third day after the contract is made.
"Buyers' and sellers' option" must be for a period of not less than four days and not more than sixty days.
By far the greatest amount of business, probably more than 95 per cent of the whole, is done by the second method—"regular," or "regular way." If the seller fails to deliver the at 2.15 p. m. on the day after the sale, according to the contract, the proper committee of the Exchange is immediately notified and thereupon proceeds to purchase the securities in question "under the rule," i.e. on the open floor of the Exchange, and if a greater price is demanded for them than that of the original sale, the difference must be covered by the person who failed to keep the terms of the contract. If the latter fails to meet these terms, he is liable to be suspended or expelled from the Ex change.
The fourth method of trading—"buyers' and sellers' option"—involves contracts by the terms of which the buyer has the right to a certain number of shares, at a specified price, at any time within the period of the option. This system corresponds roughly to that of "futures," which is so extensively used in the case of produce speculation. Futures are fully described
in Chapter XIII.
The rule of the Exchange in regard to agreements involving more than three days, is that they must be in writing and must be exchanged before the close of the day after the sale, and that interest charges are permissible in this case. If the party owning the op tion should desire to have the securities, due notice must be given before 2.15 p. m. of any day, and the request must be complied with on the following day.
Until the beginning of , the great European war, this fourth method, "buyers' and sellers' option," was practically obsolete. But owing to the delay in ship ments, and other wartime disturbances, a large amount of business in seller's options in bonds has been carried on of late. For the first time in many decades these transactions have been important, and are indi cated in the reports by such figures as " S20 " or "S30," meaning seller's option to deliver within twenty or thirty days, as the case may be. Unless oth erwise specified at the time, all transactions are under stood to be "regular way." 2. Commissions.—It is a universally accepted rule, to which all members must strictly adhere, that com missions shall be charged on all sales or purchases in securities that are made for others. Rebates, either by direct action or by indirect means are forbidden, and any violation of this rule brings serious punish ment. For the first offense, the penalty is suspension for a period ranging from one year as a minimum to five years as a maximum, according to the facts of the case, and any member who is guilty of a second of fense is expelled. A member who fails to charge a customer with the commission authorized by the Ex change, is considered as having granted a rebate and is punishable accordingly. When a member is sus pended for this or a similar offense, he is not permitted, during the period of suspension, to avail himself of the reasonable rate of commission charged to members.