necessarily members of it, but members were not necessarily shareholders, and this fact tended to a diversity of interest. As has been shown, the shareholders from the point of view of an increasing revenue desired a constant addition to the number of the members, from whose entrance fees and subscriptions their revenue was derived. The members, as a whole, especially in times when the volume of business was small, naturally considered that the constant addition to their number was an inconvenient process, since it tended to whet the edge of competition and so reduce the commissions earned by the brokers and the turns made by the jobbers. (For it should be noted that in London the commissions charged have not " hitherto been in any way regulated by the governing authority, but are left to arrangement between brokers and their clients.) From the point of view of the public, this increase of competition and cheapening of stock exchange facilities was an obvious gain, but against it we have to set the disadvantage caused by the comparative insecurity arising out of the constant influx of members whose financial resources were limited. From the public's point of view, as well as that of the bankers, it is highly important that the members of the institution which buys and sells securities for it should be well supplied with capital and credit. If a considerable number of them are comparatively poor, the fear of default by clients or of being locked up with securities that can not be realized except at a loss, has an exaggerated effect on their nerves and on their actions in times when markets are demoral

a June, 1909. The question of an authorized scale is now engaging the attention of the committee.

ized by any political or financial accident; and consequently a leaven of weakness among the members of the stock exchange, who are apt to rush to realize and reduce commitments on behalf of themselves or their clients at the first hint of difficulty or trouble, has some effect in diminishing the stability of markets.

Formerly the utmost that was required of anyone aspiring to become a member of the London Stock Exchange was that he should pay an entrance fee of £510, and find three members who would be sureties for him to the extent of £500 each for a period of four years; that is to say, if he failed before this period had passed, his sureties were bound to pay up to that amount to his creditors on the stock exchange. Afterwards he stood on his own legs, and since his entrance fee had passed to the shareholders, there was nothing but his own capital that any creditor could depend on. Concerning the amount of his capital, there was no stipulation or inquiry, and instances have been known of members beginning business with £500, or less.

By new rules made in 1904 each candidate for admission to membership must obtain a nomination either from a member willing to retire in his favor, or from one who has retired within the previous twelve months, or from the legal representatives of one who has died within the previous twelve months; and also has to become a proprietor in the stock exchange by acquiring one or more shares.

The object of these regulations was to insure that henceforward members of the "house" should be possessed of something of which they could dispose on retirement, but

since one of the rules embodying them laid it down that the right of nomination should not be exercised by a defaulter, they did not go far toward strengthening the position of creditors in case of failure.

A certain number of candidates for election may be admitted each year without nomination; the number is fixed annually by the committee, and these nominated candidates are confined to the ranks of clerks who have served for three years in the "house" or four years in the settling room. It should be explained that a clerk in the "house" is one who has the right of entry to the stock exchange itself in which the business of dealing is carried on (he is not necessarily empowered to deal, and can not be, until he has served two years as a clerk in the "house;" if he is, he is called an authorized clerk). A settling room clerk only has the right of entry to the rooms in which the business of checking bargains is done and part of the detail work of the settlement is carried out. Clerks in the "house" and settling room clerks wear distinctive badges. Those who desire to become members without the expense of procuring a nomination must have served four years in the "house" or settling room, with a minimum service in the "house" of three years.

Clerks of this standing are also privileged in the matter of sureties or recommenders, since they are only required to find two who will guarantee them to the extent of £300 for four years. Other applicants must find three recommenders, who will each engage to pay £500 to their creditors if they default within four years. In any case the recommenders must be members of the stock exchange of not less than four years' standing, who have fulfilled all their

engagements and are not indemnified. Applicants who enter with two sureties only have to pay half the entrance fee charged to the less privileged class. It is 500 guineas for the latter, 250 guineas for the former.

The recommenders have to answer, concerning the candidate whom they recommend, certain questions, as to whether he has ever been bankrupt, etc., and among them, "Would you take his check for £3,000 in the ordinary way of business?" But it must not be supposed that an affirmative answer to this question implies that the candidate has £3,000 of his own. It does imply that in the opinion of the recommender he would not draw such a check unless there were funds at his back to meet it; but it is only an expression of opinion and does not in any way bind the recommender. This inquiry is an institution of old standing, and it has not prevented the introduction of many members whose resources were far below the sum named in it.

It should be noted that clerks who before their employment on the stock exchange were engaged as principals in any other business must produce three sureties for £500.

To return to the acquisition of proprietorship that is now necessary before admission, in this case again the way is made easier for candidates who have served a qualifying period as clerks; they have to acquire one share in the company that owns the stock exchange, whereas those who come in with three sureties must become possessed of three shares. By this process, in course of time all members of the stock exchange will ultimately be share-holders, and the diversity in the interests of the proprietors and members will thus gradually be abolished.

Summing up the payments and preliminaries that have to be gone through before an applicant can become a member of the stock exchange, we find that he now has (1) to pay an entrance fee of £525, if entering with three sureties, or £262 10s. od. if entering with two sureties; (2) to buy a nomination (now, June, 1909, said to be worth £100 to £125), unless specially admitted by leave of the committee; (3) to buy one share (priced now at £177) if a clerk of four years' standing, or three shares if not, or if previously a principal in some other business; (4) to obtain two sureties (whom he must not indemnify) for £300 for four years if a clerk of four years' standing, or three sureties for £500 if not, or if previously a principal in some other business.

The most that he can be required to pay is thus £1,181, and the least £439 10s. od. If he becomes a defaulter he forfeits the right of nomination, and so the minimum that he must certainly be possessed of in that case is one share in the stock exchange. In Paris each agent de change has to buy a seat, costing about £60,000 and show that he possesses a working capital of £20,000, and deposit £12,000 making a total necessary capital of about £92,000, and his solvency is guaranteed by all the rest; and in New York, each member has a seat to dispose of, the value of which ranges about £16,000; and it is thus evident that the financial strength of the members of the London Stock Exchange is, comparatively, extremely limited, and the much greater frequency of failures in London is thus easily accounted for.

This weakness of the London Stock Exchange, proceeding from the limited financial resources of many of the members, has arisen largely from the fact that it is a pro