Foremost amongst the publications which emanate from the Stock Exchange, and there are a good many, is, of course, "The Stock Exchange Daily Official List." Its main purpose is to supply the outside world with an official record of the prices of securities. It is compiled under the authority of the Committee and the superintendence of the Secretary of the Share and Loan Department, and published by the Trustees and Managers. The Committee is thus the editor of the List, and is responsible for the accuracy of the prices and other particulars which it collects and sets forth. The List is an imposing publication of sixteen closely printed pages, and contains the names of over four thousand securities. It is issued at about 5 o'clock each evening (about 2 o'clock on Saturdays) and gives the prices at 3.30 (1 o'clock on Saturdays). The annual subscription for the List is £4, exclusive of postage, and single copies cost sixpence each. Long before the time of publication, every day there may be seen outside the offices a motley queue of commissionaires, clerks, and office-boys waiting for the copies as they are delivered from the press.
The securities quoted in the List may be described as favoured securities, for it is the ambition of every company to obtain an official quotation for its stocks and shares. Every week there is published by the Committee a list of those securities for which quotation is sought, and another list of those in the case of which the application has been granted. The Committee is never tired of asseverating that when it grants quotation in the Official List to any security it does not thereby imply that that security is of superior status to other stocks and shares which are not so quoted; but the fact remains that official quotation does, undoubtedly, endow a security with a certain prestige. There is always some kind of market in securities quoted, and it is more easy to borrow upon them at the banks; whereas it is impossible to buy or sell many securities not quoted without long negotiation, and some of them may not be recognised by anybody except the promoters who have issued them.
Before a security can obtain quotation in the Official List, it has to possess certain characteristics, and its sponsors have to conform to certain formalities. The idea of quotation is not to enable those interested in the loan or company to sell the securities; quotation is for the benefit of the public; indeed, before quotation is granted, at least two-thirds of the securities issued must have been allotted to the public as distinct from vendors and others. The formalities to be observed resemble in many respects those imposed in the case of the granting of a special settlement. The loan or company has to be of sufficient magnitude and importance. Such documents as the prospectus, which must have been publicly advertised, the articles of association, which are the rules of the company, the allotment book, showing the extent to which the securities have been publicly issued, the banker's pass-book, certified copies of contracts and concessions, have all to be deposited. It has to be stated that the certificates or bonds are ready for delivery, and that the purchase of the properties has been completed. These are roughly the requirements, and a broker has to be appointed in connection with the loan or company authorised and ready to give full information in answer to the inquiries of the Committee.
It will be noted that in considering applications for quotation in its Official List the Committee attaches importance to the production of a publicly issued prospectus. This is natural, for the prospectus is, as it were, the written guarantee of those offering the securities for sale to those who subscribe money for them. In spite of the requirement, however, the number of new companies floated without the issue of a prospectus is far greater now than it was before the Companies Act of 1900 was passed. Under the old law, the regulations as to the information which a prospectus should impart were far less stringent than they are at present, and company promoters, who then had no objection to issuing prospectuses, seem anxious to avoid their issue now. The directors of a certain class of company find it inconvenient to bind themselves down in writing to statements sufficiently attractive to induce subscriptions, and yet sufficiently true to stand investigation should questions subsequently arise. Thus even at the risk of sacrificing the possibility of quotation in the Official List, they prefer to issue no prospectus at all. Some of them in its place publish a statement which is described as being not a prospectus, and as being issued for public information only, not to invite subscriptions. Such a statement, of course, may contain all that is in favour of the company of whose shares it is sought to dispose, and yet need not contain particulars as to contracts and the like, which the law requires in a prospectus, and with which it is essential the subscriber should be acquainted.
When such a statement is issued, care is taken by the promoters that the shares are easily obtainable in the market, although the statement dare not invite subscriptions for them, for by so doing it would convert itself into a prospectus. Simultaneously with the publication of the statement, a process known as "making a market" goes on in the Stock Exchange. The promoter, who holds all the shares, arranges with a jobber to sell them. He probably gives the jobber a call on the shares at a certain price, and anything which the jobber can obtain for them over that is his profit. Then the promoter instructs some brokers to buy the shares and others to sell them, and in this way he produces a semblance of activity. It can easily be arranged that the price shall rise rapidly enough to attract attention. The buying may cost the promoter a good deal, but if a public demand is thus created, it is merely a case of the sprat to catch the whale. The public demand is not created, of course, through the honest brokers, who have no difficulty in seeing through the game, but with the aid of financial and other newspapers of a certain class. The character of these papers is notorious, but there seem to be always some among the public ready to be misled, and in this way the process of making a market sometimes succeeds even in these days of awakened intelligence in Stock Exchange affairs. It would succeed less if it were not the fact that some straightforward and successful companies exist to-day which have never issued a prospectus, and which in some form or other have made a market in their shares. It is conceivable, of course, that a market may be made naturally without the underhand expenditure of the promoter. But the manner in which the public has been fleeced over and over again by the process of market-making has led to much of the unpopularity with which the Stock Exchange has to contend. It is a glaring blot on an institution otherwise excellently managed, and it is not too much to hope that the Committee will at some time or other give the subject its attention.
That the Committee is aware of the importance of the issue of a prospectus, which places the shares of a company without the process of market-making, is shown by its requiring the production of the document before the securities can be quoted in the Official List. When they are so quoted, the list gives not only the latest price of the stocks or shares, but provides an adequate description of the security, states the total amount of the authorised issue, the amount which has actually been issued, the rate of the last interest or dividend payment, and the date when those payments are due. It also gives the nominal amount or the amount paid up on the stock or share, and by comparing this with the market price it can at once be seen whether the security stands at a premium, or at a discount, or at par. Ten-pound shares quoted at 13-1/2-14-1/2 are at 4 premium, 14 being the middle price between the selling price and the buying price, both given. One-pound shares quoted at 13/16-15/16 are at 1/8 discount; when the market quotation is exactly equal to the denomination of the share, the price is at par.
Immediately against the quotation there often appear the letters x d, an abbreviation for ex dividend, which means that the price of the security does not include the dividend which the company has just paid or is about to pay upon it. The name of one who sells the security after the dividend is declared may be on the books of the company, and he will receive the dividend warrant; but if at the time of sale the stock was not quoted ex dividend, he has to hand over the amount of the dividend to the buyer of the stock. The buyer's broker will demand it. Thus when a stock is quoted ex dividend the price immediately falls, other things being the same, by the amount of dividend payable. The dividend in the case just mentioned is sent to the seller of the stock, because from the point of view of the company he is its holder—the transaction occurred after the books of the company had been closed in order to prepare the dividend. The stock is not, of course, quoted ex dividend before the books of the company have been closed, nor before the dividend is actually declared, but the guiding principle is to quote it ex dividend as soon after these events as possible. In the case of the Funds, however, where the closing of the books is on a fixed date, the settlement is made to synchronise with the closing of the books, and the quotation becomes ex dividend practically simultaneously.
Other marks somewhat similar to ex dividend may appear against the quotation in the Official List, such as ex rights, ex new, or ex all. "Rights" may probably refer to the privilege which a holder of the shares has of subscribing to shares in another company, a privilege which enhances the value of the shares he holds. "New" may probably refer to the privilege which a holder has of subscribing for new shares in his own company. Sometimes the holder is entitled to both these privileges, and perhaps others, besides the dividend; all these privileges being referred to for abbreviation's sake as "all." A seller of the shares after they are marked "ex" these privileges retains the privileges, and consequently gets a lower price for the shares.
There is provided in the Official List against the name and quotation of every security ample space for the record of the prices at which business has actually been done during the day. This space is usually blank. If the business done were accurately represented by the markings in the List, the Stock Exchange would be an idle place indeed. Reference has been made in a previous chapter to the reason for the blank appearance of the "business done" column, and it is often urged that in this matter there should be some reform. Many, indeed, go farther and suggest that not only should the prices be recorded in the case of all business transacted, but that means should be devised for placing on record the total volume of that business, as is done in the New York Stock Exchange. There day by day the public is informed as to the number of shares that have been bought and sold; here no such record is kept.
Criticism has often been levelled against the Official List, too, on the ground that its prices are so wide as to be valueless. When a stock is quoted at, say, 106-109, no one who knows his Official List will suppose for a moment that the stock can be bought by the jobber as low as 106 and sold as high as 109. The broker going to the jobber in the market would obtain a much narrower quotation. Even if the student of the Official List might conclude that as the stock is theoretically quoted 106-109, the practical price is round about 107-1/2, that is, midway between the two, it would be something. But as a matter of fact, whilst the stock is quoted 106-109, business may actually be done at 106-1/4 at one time and below 107 all day.
Other critics would have the List greatly expanded, so that official prices might be obtainable for a number of securities more in accordance with the number of those in which dealing actually takes place. These critics say that if the inclusion of all kinds of securities would be inexpedient, as altering the character of the List, then a supplementary list should be issued. Yet other critics say that the prices should be made up to a later hour. The latest profess to be 3.30 o'clock prices, whilst as a matter of fact, they are in the great majority of cases collected half an hour previously; and whilst the official closing time of the Stock Exchange is half-past three o'clock, the House remains open until four o'clock, and dealings go on inside the House until that hour.
Even after the Stock Exchange is closed, of course, business is transacted in what is called the Street Markets. Generally speaking, business in only the most speculative securities is transacted in the street after hours. Dealers in South African mining shares block Throgmorton Street itself for a couple of hours, more or less, according to the activity of business; and dealers in American railroad shares occupy Shorter's Court, a diminutive square just off Throgmorton Street, with which it is connected by a covered way, an entrance to the Stock Exchange being situated in the square. The Street Market in Americans is legitimate in a special sense, because business in New York has been going on for less than an hour when our market is closing, and, of course, the trend of prices in New York has a considerable effect upon quotations here. But the Stock Exchange recognises no street dealings of any kind, and has never done anything to encourage business after hours, in spite of various suggestions that have been made, especially at the time when several members found themselves in the police court, charged with causing an obstruction in Throgmorton Street.
Partly because prices are made up officially only to 3.30 o'clock, but more because brokers desire to furnish their clients with the prices of stocks and shares in which they are specially interested, many brokers compile price lists of their own for despatch to their clients. For practical purposes these smaller lists are more serviceable than the great Official List, as the quotations are not only later, but, being less wide, give more idea of the prices actually prevailing. Another way in which prices are conveyed from the Stock Exchange to the outside world, and a way much more expeditious than by either the Official List or the brokers' lists, is through the medium of the tape machines of the Exchange Telegraph Company. These tape machines are to be found in brokers' offices, clubs, and wherever a subscriber may care to have them, and from the ingenious instrument the tape issues forth all day, showing not only the prices, but the time at which they are quoted.
There is only one class of persons who may not subscribe for the Stock Exchange price service of the Exchange Telegraph Company, and those are outside brokers. Until about twenty years ago a roaring business in the way of betting on the tape used to be transacted in the offices of these outside brokers. Some say they derived their title of "bucket-shops" from the fact that the tape was made to fall from the machine into a bucket for tidiness' sake, but that derivation of the opprobrious title is doubtful. Then, however, the Stock Exchange Committee put a stop to the practice by informing the Exchange Telegraph Company that it must cease to supply outside brokers with the tape, or its privilege of collecting prices in the Stock Exchange would be withdrawn. It was with some difficulty that the privilege was obtained. The company collects the prices in the markets by means of its own staff, and the prices it telegraphs are by no means official.
A kind of weekly edition of the Stock Exchange Daily Official List is issued under exactly the same auspices as that list, and is called "The Stock Exchange Weekly Official Intelligence." It quotes all the same securities, repeating the salient particulars, but instead of giving the current price it shows the highest and lowest prices touched during the week which it covers and since the beginning of the year. It also gives a list of the securities which have been removed from the Daily List owing to absence of business in them, keeping on record the last price marked. It further publishes other important official information, giving notice of forthcoming settling days and buying-in days, recording the special settlements and quotations which have been applied for and have been granted; it gives notice as to when securities are to be quoted ex dividend; it announces dividends, forthcoming company meetings, and closing of transfer books; publishes important notices issued by companies, sets forth traffic returns, and imparts other information. The subscription is £2 10s. a year, exclusive of postage, and single copies may be obtained for 1s. 3d. each. It consists of about thirty large pages.
The information contained in the Daily Official List and in the Weekly Official Intelligence is covered in a ponderous tome called "The Stock Exchange Official Intelligence," which is issued annually. In spite of drastic steps taken in recent years to reduce the bulk of this important Stock Exchange publication, the current volume contains 1,784 pages, and weighs eleven or twelve pounds. Its published price is 50s. The great work deals exhaustively and concisely with practically every security of any importance known in the Stock Exchange, stating clearly the amount, the rate of interest borne or the dividends paid in the past few years, with the highest and lowest prices where they are quoted in the Official List. What amounts to an outline history of every security is furnished, and in the case of companies the names of the directors and officials are set forth. Besides being thus an encyclopædia of Stock Exchange securities, each annual volume contains a number of masterly authoritative treatises on topical subjects, and other appropriate information of a general character. In the compilation of such a work, which is now in its thirty-first year, a vast amount of documentary record has been collected and preserved. The Stock Exchange naturally possesses the most voluminous store of financial and company documents in the world.
Other publications are issued by the Stock Exchange, such as an annual Directory of Members, giving their names and private and business addresses, showing the partnerships which exist between them, stating the names of their bankers, and showing the year in which they became members. The Committee also issues, of course, volumes containing the Rules. These number 178, and however salutary they may be in practical effect, they are exceedingly complicated and loosely drafted. The Rules of the Stock Exchange are like its architecture; their compilation has been governed by opportunism. A clause has been added here, and taken away there, to meet exigencies, just as in the case of the structure offices have been absorbed and walls removed, as opportunity arose of providing more space. This has resulted in a lack of homogeneity and other defects; but even as the members manage to put their House, of which they are exceedingly proud, to good use, so do they manage to conform to their Rules, with which they are, of course, supposed to make themselves thoroughly acquainted.