The manner in which such traders are fleeced by the unscrupulous scoundrels who conduct these institutions may be illustrated as follows: One of them will inform a confiding patron that he has received information from a source which he regards as trustworthy, that some inactive stock—perhaps Denver & Rio Grande—then selling at 9, is about to rise. At his suggestion his customer purchases, let us say, 15,000 shares on a margin of one dollar per share. This done, the proprietor of the “bucket shop” telegraphs to a broker to “sell 3,000 D. & R. G.—quick, quick,” in blocks from 8¾ to 8. The broker who receives the dispatch, either alone or with assistance, offers the stock; the offer is promptly accepted by another broker, to whom the wily manager has telegraphed instructions to buy the stock at the price named. The final quotation, 8, fixes the price, and the sale is promptly reported to the bucket shop by telegraph. The result is that the too trustful customer’s $15,000 advanced as margin, is swept into the coffers of the daring rascal who has perpetrated the fraud, and whose only outlay is the payment of one-fourth of a cent commission on the fictitious sale and purchase.
Let us take another illustration, drawn from a suppositious transaction in wheat. The speculator perceives from the quotations on the blackboard that some future delivery of wheat opened at 86⅛. Every minute or two new quotations are shown on the board, the apparent tendency of the market being upward. He also sees that during the preceding hour the price has been as high as 86⅝, and as low as 86. When it touches 86 again he concludes to buy, guessing that it is likely to rise. Accordingly he purchases 1,000 bushels at that price, advancing ten dollars as a margin. Perhaps the next change is an advance to 86⅛. He might now sell out without loss, as the ⅛ in his favor amounts to exactly the commission charged by the shop. The next quotation is, say 86, and the following one 85⅞. If it should continue to fall until 85⅛ is touched, he is said to be “frozen out,” inasmuch as the decline of ⅞ added to the ⅛ brokerage charged by the proprietor, equals the ten dollars which he has advanced. Perhaps he concludes to “re-margin,” in which case he will put up ten dollars more. Possibly the market may now take an upward turn and rise until 86⅛ is again reached. It is now within his power to close the transaction without loss other than that involved in the payment of the commissions. Let us suppose that he does so. It is quite probable that it will now occur to him that the market is likely again to recede, and he accordingly sells 1,000 bushels at 86⅛, once more advancing ten dollars as a margin. If the price continues to rise until 87 is reached, our venturesome speculator is again frozen out, and is ten dollars lighter in pocket.
The above supposed cases are fair illustrations of the average bucket shop trading. A majority of the patrons of these establishments are “scalpers,” satisfied if they can win five, ten, or twenty dollars, and close observers say that fully seven out of ten guess the market wrong. The shop always makes its regular commission, no matter what may be the result of the transaction. “Puts,” “calls” and “straddles” are also sold at these places, although, of course on a far smaller scale than by members of the regular exchanges.
But bucket shops have other and darker sides. It is by no means uncommon for a manager so to manipulate quotations as to wipe out speculators margins at his own pleasure. Thus, if it is for his interest that a certain stock or commodity should decline, the quotations which he posts upon his blackboard show a fall, without reference to the actual course of the market at the regular exchanges.
Another, and favorite, device of the gentry, by which large sums are often realized, is to “fail.” A considerable amount of money—say $50,000 or $60,000—having been received as margins, and being carried by the house, a plan is formed by which it may be absorbed by the proprietor with but little chance of detection. In order to accomplish this he has resort to the aid of some reputable (?) firm of brokers, who are members in good standing, of some regular exchange. He arranges with them to enter in their books, records of fictitious transactions with him of such a character and to such an amount that he may appear to have lost the money in speculating, for the benefit of his customers, upon ’Change. The obliging firm of brokers receive, for rendering this valuable service, the regular commission of one-eighth of one cent per bushel upon the transactions thus fraudulently entered. It is, in itself, a striking commentary upon the methods and morals of the average commercial exchange of the last quarter of the nineteenth century, that brokers can be found, who, while claiming to be upright, honorable business men, are willing, for so paltry a consideration to outrage integrity, and drag honor in the dust.
Apropos of bucket shops, however, it may be cited as a singular commentary on the sincerity of the instituted condemnation heaped upon them by the Western exchange which resolved to cease its dissemination of “valuable commercial and economic information,” that the same organization has recently adopted a rule reducing the limit of bushels of grain which may be bought and sold upon the floor to one thousand bushels. It would be uncharitable to suppose that the institution in question intended to enter into rivalry with the bucket shops; yet had that been its intention it could scarcely have devised a scheme better calculated to bring about such a result. Men, the scantiness of whose means had forbidden their speculating on the regular exchange, may now gratify their inclinations upon the “floor” with almost the same ease as before the huge blackboard in the bucket shop.
Nor should it be forgotten that there is an aspect in which the great commercial exchanges work more harm to the community at large than do the less reputable concerns which follow at a respectable distance in their wake. A sale or purchase of a large “block” of grain or provisions upon the floor of a regular exchange affects the price of the commodity in every retail market throughout the country, thus working a direct injury to the consumer, who finds himself unable to judge, from one day to another, what will be the cost on the morrow, of the necessaries of life. A transaction involving precisely the same quantity of the same commodity in a bucket shop works no such result. It is the “operators,” whose selfish greed brings about the fluctuations which work such hardships to the poor.
Such is the commercial exchange of to-day, and such the fungus-like excrescence[excrescence] which is its off-shoot. Call these practices which have been here described by what name you will, plain, unvarnished truth stamps them as gambling on a gigantic scale and in one of its deadliest forms. And yet the State holds over them the protecting ægis of the law, and the community at large gives them the moral support of its approving smile. For the avowed professional gambler there is no place in the political edifice. In the eye of society he is a pariah; in that of the law a culprit; in that of the church a moral leper. Yet the heartless operator who deliberates long and earnestly how he may most speedily and surely accomplish the ruin of the man for whom he professes the sincerest friendship; for the selfish speculator who passes toilsome days and sleepless nights in devising schemes for forcing up the price of the necessaries of life; for the far-seeing scoundrel who concocts a cunningly devised scheme for wrecking a railroad in whose stock, it may be, are invested the funds on which the widow and the orphan depend for subsistence—for these men, society has no condemnation, the law no terrors, and the pulpit no denunciation. They build churches and found colleges; they preside at public gatherings and occupy posts of honor upon public committees. It is a trite aphorism that “nothing succeeds like success,” and no more apt illustration of its truth could be given than the adulation bestowed upon men whose fortunes have been cemented by the groans of the unfortunate, and the tears of the widow. Of a truth it is time that society placed the seal of its disapproval upon gambling openly conducted in marble palaces as emphatically as upon the same vice carried on behind darkened windows and barred doors. In this, as in every other great moral reform, much depends upon the attitude and influence of the clergy, who, as a body, have hitherto kept silent as to the crying evil spread out before them.
The idea of the inception of the exchange was grand in its scope. Such organizations have a lofty mission, and it is within their power to encourage commerce, to promote honesty in trade, and to advance the best interests of the State. When an enlightened public sentiment shall compel the elimination from them of those baleful features which have been here portrayed, when the pure gold of legitimate traffic shall have been separated from the dross of illegitimate speculation, when the revival of a healthful moral tone shall have averted the danger which now menaces us, that through the influence and example of the exchange we shall become a nation of gamblers, then no longer shall phantoms haunt the imagination and fallacies pervert the judgment of men; but there shall rise upon the eye of the world the lineaments of a republic far transcending the loftiest conceptions of Plato; a republic of which poets have dreamed and which prophets have foreshadowed; the flowerage of centuries; the bloom and perfume of a Christian civilization.
