Toward the end of the first fortnight after the closing of the Exchange, the communications received by the Committee made it plain that there were quite a large number of purchasers, attracted by the low figures reached in the last day's trading, who were ready and anxious to buy securities at or above the closing prices. Obviously purchases of this kind by investors who happened to be in a position to take securities out of the market, promised to bring relief to interests whose position was critical and thus to fortify the general situation. This facility could not be extended in the form of a general permission to the members of the Exchange to make transactions privately at or above closing prices. To have permitted as far reaching a relaxation of restraint as this in so critical a time would have entailed too great a risk. If any one of the eleven hundred members had proved disloyal in the exercise of so dangerous a privilege and privately negotiated sales at prices below those of the closing, the whole plan of sustaining values might have been jeopardized.
After considering the matter very carefully the Committee concluded that the machinery and clerical force of the Stock Exchange Clearing House could be advantageously used to supervise and control transactions of this character, and, on August 12th, they issued the following ruling:
"Members of the Exchange desiring to buy securities for cash may send a list of same to the Committee on Clearing House, 55 New Street, giving the amounts of securities wanted and the prices they are willing to pay.
"No offer to buy at less than the closing prices of Thursday, July 30, 1914, will be considered.
"Members of the Exchange desiring to sell securities, but only in order to relieve the necessities of themselves or their customers, may send a list of same to the Committee on Clearing House, giving the amounts of securities for sale.
"No prices less than the closing prices of Thursday, July 30th, 1914, will be considered."
Thus was established a market in the Stock Exchange Clearing House which was kept in operation until the complete reopening of the Exchange. Immense labor and difficulty were brought upon the Clearing House Committee in order to handle and supervise this unusual method of trading, and the extraordinary success with which it was carried through has entitled them to the lasting gratitude of their fellow members. The business was conducted by having a large clerical force tabulate the orders received and bring purchasers and sellers together who were willing to trade in similar amounts and at similar prices. In order to consummate a trade the Clearing House would notify both parties, leaving it to them to carry out the delivery and payment, and requiring them to inform the Clearing House when the transaction had been completed.
The first effect of furnishing this means for establishing a restricted market was very encouraging. A very considerable amount of business began at once to be entered into. Many people with ready money, who felt that securities had fallen to bargain prices, appeared as purchasers and relieved the necessities of those who had been embarrassed by the war crisis. A little later, however, when the progress of the war took on a more discouraging aspect, this "Clearing House Market" fell to the arbitrary minimum of the closing prices with a large excess of selling as compared to buying orders, and the "New Street Market" grew in proportion. During the darkest days of depression the prices of a few leading stocks such as U. S. Steel and Amalgamated Copper dropped in the Street ten points or more below their July 30th closings, and business in the Clearing House almost ceased, but in the later Autumn, when the rapid rise in the volume of American exports began to foreshadow a readjustment in foreign exchange, the New Street prices rose again to the Clearing House level and a relatively small business in the "outlaw" market was transformed into a relatively large business conducted under the supervision of the Exchange.
It is an interesting detail, worth mentioning, that the ruling of the Committee quoted above, which established a market in the Clearing House, used the permissive word "may" in stating that orders to buy and sell might be sent to that institution. This was soon taken advantage of by a few individuals who proceeded to conduct private transactions among themselves. Their excuse was that if transactions were merely permitted in the Clearing House it became optional as to whether they should take place there or elsewhere. Within a few days thereafter the Committee amended the ruling by substituting the word "must" for the word "may." The great responsibility attached to promulgating rulings, which were to be the law during this critical period, is made more apparent when it is realized that the ill considered use of a single word might bring on unforeseen and perhaps dangerous consequences.
During the month of August a constantly increasing pressure from every conceivable direction was exerted to break down the dam with which the Committee was striving to hold back the natural flow of dealings in securities. By letter and by personal appearance before the Committee individuals, in and out of the Exchange, strove to induce them to countenance transactions at prices below the arbitrary level of the closing. In addition to this agitation among individuals and firms, restlessness began to show itself in some of the other Exchanges. At one time the Stock Exchange of a great neighboring city, which had permitted restricted dealings exactly similar to those carried on in New York, wished to have those dealings regularly quoted in the newspapers; at another time a movement developed on the Consolidated Stock Exchange to establish some kind of restricted public dealing on their floor. The Committee of Five were obliged to labor hard and assiduously to hold this pressure back and keep the dam intact, and its efforts were ably and loyally seconded by the Committee of the Bank Clearing House whose great influence was unremittingly exerted to prevent the danger of premature action of any kind.
On September 1st the Clearing House banks were anxious to determine what was the amount, measured in money, of securities sold in New York by Europe and not yet received. The object of obtaining this information was to know what demand would be made upon the loan market if, at any time, these securities should be shipped. At the suggestions of the bankers the Committee of Five summoned before them representatives of all the houses doing a foreign business and requested them to send answers, as promptly as possible, to the following two questions: