A General Cleaning

The Three Exchanges Plan Reforms -- Past History

" Testify or get out," was the edict which the New York Stock Exchange and the Curb Market gave to their members last week. Recent exposures of fraud on the part of stockbrokers (notably the case of E. M. Fuller & Co. of the Consolidated Stock Exchange) led to the attempt to " clean up " the exchanges. The Consolidated Stock Exchange is the one most vitally concerned, but the others are taking the cleaning up on their own shoulders.

The Attorney General's office, however, is not satisfied with the action thus far taken. These Federal authorities want all three exchanges to order their members not only to testify but to waive immunity from prosecution or to face expulsion from the exchanges. The members of the "Big Board," as the New York Stock Exchange is familiarly known, have considered removing their tickers from the Consolidated, but their legal right to do so is questionable.

At a meeting of the Board of Governors of the Consolidated Exchange it was believed that reforms would be inaugurated: 1) that its members would be ordered to waive immunity, as W. S. Silkworth, its President, promised the Attorney General's office; 2) that Mr. Silkworth would resign the Presidency; 3) that the Consolidated would be " reorganized" according to a plan drawn up by its attorneys.

The stock market in New York, created after the Revolutionary War to deal primarily in U. S. Government bonds, consisted originally of a dozen or more brokers, who used to gather under an old buttonwood tree then standing in lower Wall Street. In 1817 the more substantial of these brokers organized an association known as " The New York Stock and Exchange Board," and hired a second-story room in Wall Street. In the course of the following century this organization shortened its name to " New York Stock Exchange," expanded its membership to 1,100, built a splendid marble building for itself, and became not only the leading market for American securities, but a great international market as well. The Exchange became in time very particular as to the sort of securities which it allowed to be sold upon its floor. Accordingly another security market became necessary, where issues not " listed on the Exchange " could be dealt in. This need was supplied during the Civil War by an open-air market which assembled daily in Broad Street, and which, with its finger signals and turbulent excitement, was for years one of the sights of New York. Because of its open-air character, this " Curb Market," as it came to be called, utterly lacked the severe disciplinary regulation for which the Stock Exchange was noted, and while economically an essential part of financial machinery, its ethical tone was distinctly low. In 1921, however, the better element of Curb traders and brokers erected a building for themselves and moved indoors, much as the Stock Exchange had done over a century before. This indoor meeting place enabled the New York Curb Association for the first time in its history to punish its members for unethical practices by expelling them. The recent and laudable attempt of the Curb Market to put down fraud or dishonesty among its members has borne highly successful results. Both the "Big Board" and the Curb Market are indispensable parts of the national financial machinery. There is, however, a third trading center in New York--the Consolidated Stock Exchange. This organization developed in comparatively recent years by the merging of several small security exchanges with the one time Petroleum Exchange. The latter had, like other commodity exchanges, been granted the use of a New York Stock Exchange ticker When the legitimate business in crude oil upon it came to an end, and the business in mainly rubbish shares proved insufficient as a source of income, its members resorted to the expedient of trading on the " Big Board " quotations.