Other publications are issued by the Stock Exchange, such as an annual Directory of Members, giving their names and private and business addresses, showing the partnerships which exist between them, stating the names of their bankers, and showing the year in which they became members. The Committee also issues, of course, volumes containing the Rules. These number 178, and however salutary they may be in practical effect, they are exceedingly complicated and loosely drafted. The Rules of the Stock Exchange are like its architecture; their compilation has been governed by opportunism. A clause has been added here, and taken away there, to meet exigencies, just as in the case of the structure offices have been absorbed and walls removed, as opportunity arose of providing more space. This has resulted in a lack of homogeneity and other defects; but even as the members manage to put their House, of which they are exceedingly proud, to good use, so do they manage to conform to their Rules, with which they are, of course, supposed to make themselves thoroughly acquainted.
CHAPTER XIII
THE ROYAL COMMISSION'S VIEW
Perhaps the most important event which ever affected the Stock Exchange as an institution was the inquiry into its constitution and customs by the Royal Commission, which was appointed in 1877. Not only was that event of much historical interest from the Stock Exchange point of view, but the report issued by the Royal Commission is a document which, even to-day, possesses interest and importance as throwing light upon the methods of the institution as seen by an independent body most competent to examine into its affairs and comment upon them. The report still possesses importance because the constitution and customs of the Stock Exchange are, to all intents and purposes, much the same now as they were then—it brought about no important alteration, for on the whole it proved to be a vindication of the Stock Exchange as the Royal Commissioners found it. Some minor recommendations for reform were adopted by the Stock Exchange itself, or have been adopted since the report was made; and one or two sweeping recommendations have been ignored, with the result that the Stock Exchange is now as it was then, and in that sense the report is quite up to date. In fact, the report still forms an admirable essay on the constitution of the Stock Exchange and the conduct of its business.
The Royal Commissioners found that in the main the existence of such an association and the coercive action of its rules on its members had been salutary and to the interests of the public. The Commissioners seemed to incline to the view that the dual control of the institution by the Managers on the one hand, and the Committee on the other, should be superseded by the amalgamation of the two bodies. The Commissioners expressed the idea that matters were tending in that direction—and they are still so tending, especially since the enactment of the rule making it obligatory for new members to purchase one or more shares in the Stock Exchange.
The Committee, it was found, acted uprightly, honestly, and with the desire to do justice in the administration of the rules. These rules were capable of affording relief and exercising restraint far more prompt and often more satisfactory than was the law of the land. A suggestion had been made that the Committee should be assisted in its deliberations by an outside assessor or assessors, especially in cases of important questions involving the personal interests of fellow-members and others; but the Commissioners preferred the Committee as it is, on the ground that the members understood the complicated questions to be decided much better than any outsider would understand them, and that it was necessary in most cases that the decisions should be very prompt and complete. Similarly the Commission preferred the present practice of the Committee in arriving at its decisions to the proposed subdivision into special panels for special subjects.
The Commissioners reported that they were persuaded that the apprenticeship served by a clerk who eventually became a member on his own account carried with it a promise of future success. At that time such apprenticeship was not compulsory, and the recent alteration in the rules compelling every would-be member to serve the apprenticeship would doubtless have given much satisfaction to the Commissioners. As a matter of fact, the Commission recommended that in the case of the election of new members there should be a substantial inquiry into their character, position, and general fitness, and that the inquiry should be real, not covered by the answers to the formal questions required by the rules. It thought that such inquiry could better be carried out by a small sub-committee, in spite of its objection to the general idea of dividing the Committee into panels. It further recommended that the guarantee of the sureties should be extended from two years to four years. There is now a subcommittee for the election of new members, and the guarantee does now extend over four years.
As to the Stock Exchange principle that members should be entitled to look to the members with whom they dealt as if they were principals, quite apart from their engagements with outsiders, the Commission held that this had the merit of enabling the Committee with its absolute power to enforce bargains and adjust disputes with speed and facility. The public were not injured by such a system so long as the legal rights and liabilities of the member in relation to the principal outside were not extinguished or affected. No rule of the Stock Exchange ought to be allowed to qualify or destroy that legal relation.
On the question of the abolition of the jobber, which has frequently been mooted, the Commission found that his existence was of extreme value to the public, attributing to the facilities for business which the system provided the fact that orders given on provincial exchanges or foreign bourses were constantly sent to London. But in cases of inactive securities, in which the jobber was unwilling to make a price in the ordinary way, the Commission recommended that a book should be kept in which brokers could enter their requirements, with a view to bringing the brokers of buyers and sellers into immediate contact. As a matter of fact, a board for such a purpose does now hang in the Home Railway Market, but it is very little used. In the matter of the facility with which brokers and jobbers transacted their business, the Commission paid a special tribute to the machinery of the Clearing Department, which, it said, appeared to answer its purpose of settling a whole series of bargains, by bringing the ultimate seller into contact with the ultimate buyer, exceedingly well. Nowadays the Clearing Department is sometimes subjected to criticism, and its machinery has broken down more than once, notably under the exceptional strain of the South African boom in 1895.
The Commission also paid a compliment to the members in general in the mention of the fact that the absence of a written contract in the dealings between them had in practice no evil results, and that out of the millions of bargains transacted in the Stock Exchange, such a thing was hardly known as a dispute as to a contract or its terms.