Stock Exchange Information Prior to 1901 (7)

Stock Exchange Seat As Property

Owing to the peculiar personal nature of a member's rights and privileges, the exact legal status of a seat as a property right is not settled in all jurisdictions. By the general weight of authority, however, a seat may be considered as a species of incorporeal property held subject to such rules and regulations as may be adopted by the exchange. This gives a seat an anomalous position in the law of property because of the qualified and restricted character of an owner's rights. As it cannot be transferred except with the consent of the exchange, and to a person acceptable to the latter, it is held that it cannot be seized and sold upon an execution, but it seems settled in most jurisdictions where the question has arisen that a receiver appointed in proceedings supplementary to execution may apply to the court for an order requiring the judgment debtor to arrange for a transfer of his seat to a person acceptable to the exchange, and apply the proceeds to the satisfaction of the judgment.

This may also be done by a judgment creditor's bill in some jurisdictions. Thus, it will be seen that the courts do not assume to proceed against the seat itself, but attain the desired and through their power over the debtor. The United States Supreme Court has held that the rights of a member to his seat in an exchange pass to his assignee in bankruptcy, and the latter may take such steps as may be necessary to compel the bankrupt to procure a transfer of his seat subject to the rules of the exchange. By the rules of probably all exchanges the claims of members must be first satisfied upon the sale of a seat. A seat cannot be bequeathed or devised by will, nor is it strictly descendible, as the person to whom it might be thus given or descend might not be acceptable to the exchange; but the rules generally provide for the sale of a seat on the death of a member to an application of the proceeds to any claims the other members may have against the deceased, and a distribution of the proceeds to his personal representatives. The courts are loath to interfere with any reasonable rules and regulations of a stock exchange and with any action it may take to maintain discipline or enforce its rules, and their aid could probably only be invoked in cases of gross fraud or imposition upon a member.

Discipline

Strict discipline over the conduct of members is maintained by all the larger exchanges. The penalty is suspension from the privileges of the exchange for a given period or expulsion in the case of serious offense. On the New York Stock Exchange these penalties may be imposed for fictitious sales, for trifling bids, for acceptance of smaller commissions than those prescribed by the Exchange, and for "obvious fraud." More recently discipline has been exercised for dealing with a rival exchange contrary to the regulations of the member's own exchange, and for questionable business conduct outside of the exchange. In London the same penalties are made applicable on the general ground of failure to comply with the committee's decision or of dishonorable and disgraceful conduct. the rules of the Paris Bourse prescribe penalties in case the member "does not confine himself strictly to his duties" or "introduces injurious innovations."

Curb Trading

An institution which has grown to considerable proportions in recent years has been the so-called "curb trading," so named because the transactions are usually conducted on the street outside the entrance to the stock exchange. In London, Paris, and New York this trading has at times reached very large proportions, though the system which it represents is radically different in the three cities. In London curb trading is utilized for the sake of dealing in foreign shares whose home market is open after the official closing of the London Exchange. For example, trading in American securities is conducted in Shorter's Court, behind the London Stock Exchange, frequently until 6 P.M. or later, the New York Stock Exchange, on account of the five hours' difference in time being actively at work at that hour. In Paris the curb market, under its French title of the "Coulisse," has had a longer history.

It has represented virtually a rival exchange, not subjuct to the numerous and rather vexatious limitations of the older Bourse. The Coulisse has frequently been suppressed by law, but has invariably revived, and has probably conducted a larger total business than the Bourse itself, except, perhaps, in Government securities. At present the Coulisse conducts its operations on the portico of the Bourse and is a recognized institution. In New York curb trading devotes itself exclusively to securities which have not been admitted to the list of the Stock Exchange.

In this category are comprised many very important enterprises, including shares of the Standard Oil Company and of the various banks. The curb also provides a market for newly organized enterprises which have not reached a stage where they can apply for a place on the Stock Exchange list, and it gives an opportunity for fixing values of a forthcoming security before the share or bond certificates are formally issued. In the conversions of the United States Steel Corporation stock, for instance, the shares and bonds were bought and sold "when, as, and if issued" on the curb, and on these terms their values fluctuated in some cases 14 or 15 points before the security itself ever legally existed. There is no restriction of the right to deal in the "curb" market, but in practice its privileges are limited to regular and responsible parties, whose position or credit is known to the other party to a bargain.

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