Another field to which a member may turn is that which has to do with transactions in bonds. The “bond-crowd,” as it is called, makes its headquarters on a platform under the east gallery. There are about fifty of these “bond-men,” and the compensation paid them for their service is the same as that paid on stocks, ten thousand dollars in bonds being reckoned equivalent to 100 shares. As there are twice as many bonds as stocks listed on the Exchange, one would think a larger number of brokers than this little coterie would be required to handle the transactions, but, despite this disparity in the relative size of the lists, it so happens that very many of the listed bond issues are rarely dealt in, and hence there is no surplus business. Moreover, brokers from all parts of the room are constantly executing their own bond orders without having recourse to the assistance of brokers who make this department a specialty.
Still another opportunity presents itself in the business of arbitraging. The arbitrageurs stick closely to the rail along the south wall, where there are pneumatic tubes connecting with the cable offices downstairs. Their business is one that calls for the utmost speed, since it involves taking advantage of fractional differences that arise from time to time in the prices of stocks that are listed on foreign Bourses as well as on the New York Stock Exchange. Thus Canadian Pacific may sell at 270 in London and at the same time at 269½ in New York, and as an excellent cable service keeps pace with these fractional differences, the arbitrageur may buy in New York and sell in London and receive a confirmation, all within three minutes.[96]
Because of its complexity and its risks, arbitraging is not a business that appeals to beginners on the floor. One must have reliable colleagues on the foreign Exchanges who are constantly watchful and alert, and who are moreover possessed of sufficient capital to finance large transactions. In addition, there are labyrinthine difficulties to surmount in the way of commissions, interest charges, insurance of securities in transit, fluctuations in the money markets abroad and at home, cable tolls, letters of confirmation, rates of foreign exchange, settlement days, contangoes, and many other matters. Unless a man has had a long experience in the difficult art of arbitraging, he had better shun it or prepare for trouble.
Finally, in determining what branch of the Stock Exchange business he will undertake, a member must consider that numerous and shifty contingent known as “floor traders.” These gentlemen afford an interesting study. They do not accept orders; each man is in business for himself. They entertain no illusions, and they recognize no alliances with each other. Each one follows his own inclinations, and does not permit himself to be moved by tips, or rumors, or gossip, or sentiment. He scoffs brazenly at all forms of “inside information.” His power of observation is keen, and his habit of analysis and deduction is wonderfully developed. In the surging crowd around an active stock he sees things with microscopic eye, and acts with surprising promptness; once his conclusions are reached, speed and agility are relied upon to do the rest. Age cannot wither, nor custom stale, his infinite variety. He is a bull one minute, and a bear the next. He is intent, resourceful, suspicious, vigilant, and ubiquitous. He asks no quarter, and gives none. Now he is sphinx-like, deaf, inscrutable and impenetrable; now exploding with the frenzy of battle. You may stand and chat with him, and he may seem to listen to you. In reality he does not hear you at all. His roving eye is elsewhere, his mind is intent on other things. In the middle of a sentence he may leave you abruptly and go tearing from crowd to crowd like a thing possessed, the incarnation of energy.
Visitors in the gallery who look down upon the scene on the floor in active markets, when all the Stock Exchange elements just described are striving at their utmost, come away in wonderment. The scene is one they do not understand. Such tumult is foreign to anything in their experience, and in their failure to recognize the economic forces at work in the animated panorama before their eyes they are prone to form superficial and erroneous opinions. The disorderly nature of the work seems to impress the visitor forcibly, yet the Stock Exchange is perfectly orderly; transactions involving millions come and go without the slightest friction. Nothing could work more smoothly.
It does not occur to the uninstructed spectator that mighty forces are here at work in establishing values; that the object of the Stock Exchange is to safeguard investors; that it is the one unobstructed channel through which capital may flow from sources where it is least needed into those where it may be most beneficially employed. The casual onlooker often gives no thought to the high standard of commercial honor that is maintained here; he does not realize that his own affairs, whatever they may be, would face a serious situation were this very important part of the modern mechanism of business to suffer interruption. And so it sometimes happens, in his hazy and nebulous impressions of the Stock Exchange as gathered from the visitors’ gallery, that this man’s mind is fertile ground for the seed which may be sowed there by every genteel humbug, demagogue, or quack whom he chances to meet.
It may be admitted freely that the facilities afforded by Stock Exchanges, like all other great public utilities, are sometimes foolishly or dishonestly abused, but by no stretch of the imagination can such abuses attain to the mischief done by those who would deceive people into the belief that the Stock Exchange, because it deals with large affairs in a large way, has some improper quality about it. Many minds, many hands, and many hours of patient labor have been bestowed on the making of the chronometer which is a vital part of a great ship; yet a child may “put it out of business,” and destroy the ship’s company.
That these observations apply to the New York Stock Exchange need not be elaborated when we consider that one third of our nation’s wealth is represented by its securities; that there are two million owners of them; and that, through the widespread publicity of Stock Exchange quotations the world over, all these owners are given gratis the epitomized judgment of experts as to the value of those securities each day and their prospective value in the future.[97]
The Stock Exchange is open for business from 10 A.M., to 3 P.M., and on Saturdays from 10 to 12 noon. The broker reaches his office between 9 and 9:30 A.M., looks over his correspondence, makes a mental note of the general status of the firm’s affairs, glances at the morning’s news that is rapidly reeling off the ticker, reads the prices cabled over from the London Stock Exchange which has been in session four hours, and thus in a general way acquaints himself with what may be expected at the opening of the New York market. The two-dollar broker and the specialist do not concern themselves greatly with such matters, and frequently they go directly to the floor without stopping at their offices.
By 9:45 A.M. the Board is beginning to present a scene of animation. Of the 1100 members not more than 600 are in attendance, and often not more than 400; indeed, there are members who have never once entered the room. But the attendance is increased by the presence of some 230 pages in uniform, wearing five-year service stripes, of which the sleeve of the superintendent is adorned with eight; 30 telegraph operators, whose business it is to hurry from place to place gathering quotations as they occur, and sending them out over the ticker, and by 550 telephone clerks who occupy the long booths on the west wall, where private lines connect members with their offices.