which only comprehends the system in a very hazy manner, often blunders into a theory that the jobber is an expensive luxury, and can not understand why it should have to pay the jobber's turn as well as the broker's commission. But in fact the jobber is an ingenious example of the division of labor and without him the brokers would have to charge their clients extra commissions, which would more than make up for the saving of the jobber's turn, and much of the business that is now done readily and quickly could not be got through at all.

In recent years there has been a tendency toward the blurring of the line that divides the two classes of members of the London Stock Exchange. Certain of the brokers have taken to specializing in various securities and making prices in them like jobbers, to the detriment of the business of the latter, and a practice has also now been developed, by which brokers with orders to execute, sometimes find it advisable to do their business with outside firms instead of with the jobbers in the House. This was especially the case with South African shares, large orders in which were frequently transacted with the South African firms, and American bonds in which the Anglo-American houses were often able to provide dealing facilities on more favorable terms than the jobbers. And since the brokers who dealt outside the House received a commission from both parties, it was plausibly urged by the jobbers who opposed the system that it led to their sometimes doing so even when their clients' interests would have been best served by a bargain with a jobber.

While the brokers were thus encroaching on, or ignoring, the jobbers in the transaction of business, the latter were

at the same time retaliating by opening business connections outside the stock exchange. The most notable example of this process was the development of arbitrage business between Wall street and the jobber in the American market in London, and of similar transactions between the English provincial stock exchanges and the jobbers in the various markets. Formerly the provincial brokers when they had an order to execute in London sent the order to a firm of London brokers; but many of them gradually adopted the plan of opening up direct relations with a firm of jobbers in each of the principal markets in the London Stock Exchange and doing a business with them, similar to arbitrage in securities with a foreign center, but commonly called "shunting." The provincial broker, being kept advised of the state of the market in London by his allied jobber, bought and sold in Liverpool, or wherever else he might be established, and covered his bargains in London, dividing the profits or losses with the jobber. From the nature of these relations it followed that the provincial brokers were unable to avail themselves of one of the most important safeguards which the English system gives to the London brokers in dealing for their clients, namely, their power of going on from one jobber to another, if they believe that they can so get better terms for their clients. The provincial broker was evidently in the hands of the jobber with whom he entered into relations, and it was consequently contended that his client's business was not done any more cheaply for the elimination of the commission paid to the London broker, which earned for the client the power to take advantage of the higgling of the market.

In any case the tendency by which brokers and jobbers were encroaching on one another's functions and breaking down the boundary which originally divided the two classes of members was noted with strong disapproval by a majority of their number, and led in 1908 to a reaction which produced an amendment of the rules, by which the functions of the two classes were more clearly defined and brokers and jobbers were expressly forbidden to poach on one another's preserves. No alteration was made in the matter of arbitrage transactions with foreign centers, but "shunting shunting" business with provincial exchanges was forbidden. Critics of this reform promptly demonstrated its illogical nature, but the English mind is never afraid of disregarding logic. Jobbers were restricted to their original function of making prices for brokers who came to them with business to do, and brokers were forbidden to do business except with jobbers, unless they had first ascertained that they could thereby buy or sell on more favorable terms, and if they found that they could deal to greater advantage outside, they were forbidden to take two commissions.

These measures were strongly objected to by an important section of the members of the stock exchange, most of the leading firms opposing them. Since these leading firms had built up or increased their business under the freer conditions previously prevalent, it was natural that they should regard as reactionary and undesirable a change which modified these conditions profoundly. But the rank and file of the members took the contrary view, being apparently convinced that the institution of the jobber is a useful and indispensable wheel

in London's machinery, enabling it to conduct an enormously diversified business with remarkable economy and dispatch, and that a tendency under which the distinction between him and the broker was being gradually eliminated had to be checked. And the 1909 election of the committee for general purposes, which is responsible for the framing and interpretation of the rules governing these details of business, emphatically indorsed the reform of 1908 by which the division of members into brokers and jobbers was defined more strictly and more rigorously enforced. But it should be added that the majority of the leading firms persist in the view that this "reform" is a step backward, and since the jobbers constitute a majority of the members, and their existence was threatened by the tendency against which the new rules were directed, their emphatic indorsement of them must have been to some extent biased by considerations of personal interest.

(B) CONSTITUTION AND MEMBERSHIP.

As compared with the New York Exchange or the Paris Bourse, the London Stock Exchange has hitherto made very inadequate stipulations for the financial strength and stability of its members. And it is generally supposed that this neglect of a very important detail arose from the nature of its constitution. It is practically a proprietary club, owned by shareholders in whose eyes the extent of the annual profits and the bulk of the dividends they receive are naturally the most important consideration. From their point of view, since the chief source of revenue of the company was the annual sub

scriptions of the members, it followed that a rapid and constant increase in their numbers was the consummation most of all to be desired, and that any attempt at an examination of their financial status was almost entirely left out. The consequence of this defect is that a considerable number of members are supported by resources which are quite inadequate when compared with the standard of New York or Paris, and that in this respect the London Stock Exchange is a less helpful handmaid to the English banking system than it might be. Since it is highly important to bankers that the securities which they handle, invest in, and advance against, should be readily realizable in time of difficulty, it follows that the ability of the stock exchange to suffer shocks with equanimity is a matter of great moment from the banking point of view. And it can not be doubted that the number of members whose resources are comparatively slender, and the consequent comparatively high proportion of failures among them, give a certain amount of instability to markets in London. But it is easy to exaggerate the importance of this consideration, and the great aggregate wealth of the members, and the ease and elasticity with which the English banking system provides credit facilities, go far toward mitigating it.

Some attempt has been made at reform in this connection, though the direct object aimed at by the reformers was not, perhaps, an increase in the financial stability of the members so much as a restriction in the increase in their numbers and the creation of a vested interest for the existing members of their body. The proprietors, or shareholders, in the stock exchange were all of them