When a newly elected member makes his appearance on the floor he is taken to the rostrum by one of his sponsors, who introduces him to the Chairman. That formality concluded, he is greeted by shouts of “New Tennessee,” and is instantly surrounded by a howling mob of young members bent on initiating him. The origin of this war-cry, “New Tennessee,” is an enigma one would like to solve, but it is lost in obscurity. Even the board-room antiquarians have no clue. One of the members tells me that his grandfather, who was a member of the old Exchange that stood at the corner of Wall and William streets in the early 1830’s, often told him that the phrase was in use then, just as it is to-day. Its early origin, at least, is thus established, and one’s curiosity concerning it is proportionately increased. However it originated, it remains the popular slogan, and when a shrill-voiced member in any part of the room cries out above the din, “New Tennessee,” there a crowd of the boisterous younger element gathers to welcome a new member.[95]
To-day, thanks to the prudence of the Committee of Arrangements (which has charge of the board-room discipline), the hazing of new members is confined to harmless pranks, but up to a year ago the process was a severe one. Newspapers rolled into clubs were used to beat the novitiate over the head; he was pelted with everything within reach; his collar and tie were torn off, and after a hundred strong young men had thus jostled and mauled and pounded him all over the room, he was a sorry sight. It began to be felt, after a peculiarly severe hazing of this sort, that something might happen one day to bring reproach upon the Exchange and sorrow to the members themselves, so the committee wisely put a stop to the practice.
When the new member settles down to serious work he will find open to him several different methods of doing a brokerage business, and in this respect the New York Exchange differs widely from those abroad. In London, for example, there are but two classes, jobbers and brokers, to only one of which a member may belong. Until very recently the distinctions between the two classes were but vaguely defined, and even now frequent undercurrents of resentment are aroused between them because of the alleged encroachments of one class upon the domain of the other. In Paris, where the seventy Agents de Change enjoy an absolute monopoly by government authority, there is very decided opposition by the less fortunate members of the fraternity, and there are many who predict that the friction and dissatisfaction which monopolies arouse in this day and age will sooner or later bring about a reformation of the French system.
Here there are no such distinctions, and no friction. A member may be any one of several different kinds of brokers, or he may be all of them at once, if his arms and legs will stand the strain, and if his financial resources will enable him to meet the losses arising from mistakes. These mistakes are a sorry part of the business, and they are bound to occur every now and then, no matter how careful a man may be, but I have observed that they come about most frequently in the case of men who try to do too much.
A man may, if he chooses, become a partner in a commission house, and confine his time to the execution of orders for his firm’s customers. For these services his firm receives and is compelled to collect, by the rules, a commission of one eighth of 1 per cent.—that is to say, $12.50 per hundred shares. Or he may be a “specialist,” and establish his headquarters at some one spot in the room, and do nothing but execute orders entrusted to him by his fellow-members in the one stock or group of stocks situated at that particular spot. For his services in these transactions he receives a commission of two dollars per hundred shares, to which is added $1.13 if he is required to “clear” the trade—that is, to receive or deliver the stock. The latter is called “three-and-a-shilling business,” or “clearance business.”
The vocation of the specialist is one that causes frequent comment and ill-merited abuse. It has been charged that he sometimes exercises arbitrary power in executing his orders, and complaint is heard that the price at which he deals is not always a fair price. My observation is that four times out of five the fault lies, not with the specialist, but with the broker who gives him the order. The latter has been trying to do too much, he has held the order in his hand whilst engaged elsewhere in the hope of saving the commission for himself, and then, when he has “missed his market,” turns the order over to the specialist and shifts the responsibility to his shoulders. This is scarcely fair, and it simply should not happen. The customer protests at the delay and at the price; he is told the specialist is responsible, and straightway another voice joins the chorus that holds the specialist in abhorrence.
Like the chairman of the House Committee of a club, the specialist is made to bear everybody’s burdens; he is the target for all the criticism that any one chooses to hurl at him. And yet he is one of the most useful and indispensable features of the Exchange machinery. Without him there would be no market whatever in very many securities; like the London jobber, he is constantly on the spot, ready to take chances by creating at his personal risk a market where none may have existed. If it be urged that the specialist should not speculate, but should confine himself solely to executing the orders on his books, it may be answered that in such a case he would often be useless, for in many instances the orders on his books are insufficient in volume to establish a close market or anything approaching it. By reason of his speculations a market is created; without them it may not exist. He speculates, therefore, for the same reason that jobbers in the London market speculate, and dealers in wheat, cotton, and wool. Like them, he must have goods on hand to supply the demand, and in the purchase of these goods (securities) he speculates, legitimately, on the hope or belief that buyers will appear.
If the new member chooses, he may become what is known as a “two-dollar broker,” with a roving commission, executing orders for members in any part of the room at $2 per hundred shares. The “two-dollar man,” as he is termed, is a hard worker above his fellows. He labors for a minimum wage; he must work every day or forego his revenues, for he cannot delegate his orders to any one else and receive a commission for these vicarious services. He takes big risks, because he has many orders from many different houses; the least inattention means loss. I have known one of these two-dollar men to lose $10,000 on a mistake on a 500-share order from which his commission was but $10. He is supposed to be a mine of information concerning floor gossip; his value to the houses that employ him lies quite as much in his ability as a newsgatherer as in his skill as a broker. He is on the jump every minute. The one redeeming feature of his business is that he has no office responsibilities, and none of the burdensome—and sometimes painful—duties that attend the stockbroker’s relations to his clients.
There are perhaps fifty “odd-lot” brokers on the floor, and a member may, if he pleases, take up this branch of the business. It has to do with the buying and selling of fractional lots of securities, on which no commission is charged because the peculiar nature of this business enables the broker to trade against his commitments as they arise, and thus obtain compensation for his services in the resultant profit. In a small way the odd-lot broker, like the specialist, resembles the London jobber. One of the houses that confines its operations to this “odd-lot” business has nine partners, seven of whom are members of the Exchange; another has seven partners with six board-members. The fact that two such houses should have a million dollars invested in memberships, to say nothing of the large sums employed as capital, speaks eloquently for the volume of business they are called upon to handle.
This business, which includes fractional lots of securities from one to a hundred shares, is one of the most important on the floor, since it represents, very largely, the purchases and sales of an army of small investors all over the world. To such customers, very properly, the Stock Exchange gives the best it has, safeguarding their interests with quite as much care as it bestows on the greatest of market operators. The handling of all the odd-lot orders that accumulate in a busy day, the skill required in the office-machinery, the vigilance of the floor expert, and the foresight necessary to conduct the trading operations of the firm make this a most fascinating business.