Expulsion

from the exchange forfeits membership, but not the proceeds of it. Temporary insolvency involves suspension..: Permanent insolvency involves lo of membership and the: proceeds of the membership are applied to the payment of the claims of creditors who are members of the exchange. If there is a surplus it goes to the member or to his a ignee if he has been declared a bankrupt. When a member dies his seat may be disposed of by the committee on admi ions and the proceeds delivered to his executor or the administrator of his estate. New York Stock Exchange clearing house. The place where the differences in the accounts of brokers on the New York Stock Exchange are settled. Before the establishment of the clearing house a broker who had made sales of stocks was obliged to send the stocks to the offices of the various purchasers and collect payment from them. At the same time brokers from whom he had bought stocks were obliged to send the stocks to his office and | collect payment from him. A: broker may have made sales to | the amount of $500,000 and purchases to the amount of $475,- | ooo. He was compelled to make collections and payments for | the full amounts, whereas under a clearing house plan he might have settled all the transactions in one operation and by the | payment of only the difference of $25,000. Now, a broker at the end of each day makes up a sheet called a clearing house sheet, containing his purchases and sales. On one side of the sheet (the left hand side) the broker puts down his purchases, each purchase having a line for itself. In each transaction the name of the broker from whom the purchase was made comes first and then in order follow the number of shares, the name of the stock, the price at which purchased, 7 and finally, the amount in dollars of the purchase. This side of the sheet is headed “Received from,” meaning that the broker. has contracted to receive the stocks enumerated. The other side of the sheet (the right-hand side) contains the list of stocks sold (made out in the same order as the list of stocks bought) and this side of the sheet is headed “Delivered to,” meaning that the broker has contracted to deliver the stocks enumerated., If his purchases amount in money to more than his sales he accompanies his sheet with a check drawn on his own bank and payable to the clearing house bank (a bank in which the | | | clearing house account is kept). If his sales amount in money to more than his purchases he accompanies his sheet with a draft on the clearing house bank, which is accepted by the manager of the clearing house (made collectable by the indorsement of the manager). This draft is returned to the broker and is deposited by him in his own bank for collection in the ordinary course. If the broker has bought more of any particular stock than = © he has sold or sold more than he has bought there is a stock difference (as well as a money difference) to be-settled, but the settlement of this stock difference is provided for when the sheet is made up. If, for instance, the broker has bought 200 shares of a certain stock and has sold too shares he receives th» difference or balance of stock, which is 100 shares. Some other broker who sold 100 shares more of the stock in question than he bought is directed by the manager of the clearing house to deliver this extra 100 shares to the first broker. The first broker credits himself on his sheet with the amount in money of the stock at the settling price while the second broker charges himself with the amount of it on his sheet. The settling price is an arbitrary price fixed by the manager of the clearing house. Each day at the close of busine the manager of the clearing house sends out through the ticker the settling prices for the various stocks for the tse of brokers in making up their clearing house sheets. In their use in making up the sheets they are called making-up prices; in their use in making settlements they are called settling prices. These settling prices are the even prices next nearest to the last prices of the day. Thus, if the last price of a stock was 99 3-4 - or 101 1-4 the settling price would be 100.. The broker who bought 200 shares may have bought them at 99 1-2 and the 100 which he sold may have been sold at 100 1-2. If the settling price was 100 he would put down the extra 100 shares due him in the soid column at 100 the same as if he actually had sold the stock at roo. Then his account would figure out thus: Bought 200 at 99 1-2, which equals $19,900; sold 100 at 100 1-2 and 100 at 100, which equals $20,050. The difference is $150, which the broker collects by draft on the clearing house. Had he not included the 100 shares at 100 he would have owed $8,850. To the broker who delivers the 100 shares to him at 100 he gives a check for $10,000.; This particular part of the operation (the delivery of the stock and collection for it) is wholly outside of the clearing house. Deducting from this $10,000 the $150 received in the clearing house settlement his net payment is $8,850, exactly what it would have been had he not included the 100 shares at 100 in the clearing house sheet. No matter if a broker bought more stock than he sold or sold more than he bought or what the prices may be or how many stucks may be included in his sheet the system employed in clearing his sheet accomplishes its end. Inasmuch as the differences both in cash and stocks are provided for in the clearing house sheet there is, when the general settlement is concluded, no balance left of either cash or stock. There-was, of course, as much of each stock sold as was bought, because there was a seller as well as a buyer at the same price in each individual transaction, and, accordingly, there was as much receivable in the aggregate as there was payable. Both sides of every account are bound to balance or equalize when the differences in stock and money are figured out and put down in the proper places. The broker who is short of stocks in his sheet (who sold more than he bought) must borrow the stocks that he is short of for the deliveries which he is directed by the manager of the clearing house to make. Not all the stocks that are dealt in on the New York Stock Exchange are cleared through the stock exchange clearing house. Only those on the clearing house list are cleared. The stocks on this list are the ones actively (largely) dealt in. If an inactive stock becomes active it is put on the list; if an active stock becomes inactive it is taken off the list. 389