Reminiscences of a Stock Operator

by Edwin Lefevre

“Yes,” he said. “But the next day they sent telegrams to the same people advising them to close out their interest in everything and buy—or sell—another stock. I asked the senior partner, who was in the office, ‘Why do you do that? The first part I understand. Some of your customers are bound to make money on paper for a while, even if they and the others eventually lose. But by sending out telegrams like this you simply kill them all. What’s the big idea?’

“‘Well,’ he said, ‘the customers are bound to lose their money anyhow, no matter what they buy, or how or where or when. When they lose their money I lose the customers. Well, I might as well get as much of their money as I can—and then look for a new crop.’”

Well, I admit frankly that I wasn’t concerned with the business ethics of the firm. I told you I felt sore on the Teller concern and how it tickled me to get even with them. But I didn’t have any such feeling about this firm. They might be crooks or they might not be as black as they were painted. I did not propose to let them do any trading for me, or follow their tips or believe their lies. My one concern was with getting together a stake and returning to New York to trade in fair amounts in an office where you did not have to be afraid the police would raid the joint, as they did the bucket shops, or see the postal authorities swoop down and tie up your money so that you’d be lucky to get eight cents on the dollar a year and a half later.

Anyhow, I made up my mind that I would see what trading advantages of this firm offered over what you might call the legitimate brokers. I didn’t have much money to put up as margin, and firms that bucketed orders were naturally much more liberal in that respect, so that a few hundred dollars went much further in their offices.

I went down to their place and had a talk with the manager himself. When he found out that I was an old trader and had formerly had accounts in New York with Stock Exchange houses and that I had lost all I took with me he stopped promising to make a million a minute for me if I let them invest my savings. He figured that I was a permanent sucker, the ticker-hound kind that always plays and always loses; a steady-income provider for brokers, whether they were the kind that bucket your orders or modestly content themselves with the commissions.

I just told the manager that what I was looking for was decent execution, because I always traded at the market and I didn’t want to get reports that showed a difference of a half or a whole point from the ticker price.

He assured me on his word of honor that they would do whatever I thought was right. They wanted my business because they wanted to show me what high-class brokering was. They had in their employ the best talent in the business. In fact, they were famous for their execution. If there was any difference between the ticker price and the report it was always in favor of the customer, though of course they didn’t guarantee that. If I opened an account with them I could buy and sell at the price which came over the wire, they were so confident of their brokers.

Naturally that meant that I could trade there to all intents and purposes as though I were in a bucket shop—that is, they’d let me trade at the next quotation. I didn’t want to appear too anxious, so I shook my head and told him I guessed I wouldn’t open an account that day, but I’d let him know. He urged me strongly to begin right way as it was a good market to make money in. It was—for them; a dull market with prices seesawing slightly, just the kind to get customers in and then wipe them out with a sharp drive in the tipped stock. I had some trouble in getting away.

I had given him my name and address, and that very same day I began to get prepaid telegrams and letters urging me to get aboard of some stock or other in which they said they knew an inside pool was operating for a fifty-point rise.

I was busy going around and finding out all I could about several other brokerage concerns of the same bucketing kind. It seemed to me that if I could be sure of getting my winnings out of their clutches the only way of my getting together some real money was to trade in these near bucket shops.