Money Market

This is a term applied to the business of lending money and not to a place where money is loaned, for there is no specific place (in New York) for lending money.

In New York the banks, trust companies and insurance companies are the chief lenders of money, but there are other corporations and not a few firms and individuals who are lenders. As in every other market, supply and demand are the factors which determine prices, or in other words, the rates exacted for the use of money. If the demand is large and the supply small, rates are high; if the demand is small and the supply large, rates are low.

Money is stiff when it commands high rates of interest. It is tight when it is difficult to obtain even at high rates; in these circumstances there is a pinch or stringency in money. There is a squeeze in money when it cannot be borrowed except at exorbitant rates; in a squeeze a premium as well as interest is exacted on call loans. A premium of 1/8% a day and interest (at the rate of 6%) figuring on the customary basis of 365 days in a year, means a rate equal to 52% a year.

Money Rates

Means the rates of interest at which money is lending. There are different rates for call money (money loaned on call - that is, returnable on the demand of the lender) and time money (money loaned on time - that is, loaned for a specified period). The rates for call money are usually lower than those for time money. For additional information see Call loan; also see Time loan.

Monometalism

Exists in a country when the currency of the country is based on a single metal, as either gold or silver.

Mortgagee

The grantee under a mortgage; the one to whom the mortgage is executed.

Movable Exchange

If foreign exchange is quoted and also is payable in the money of the country where collection is to be made, it is called movable exchange. For instance, exchange on Paris is quoted in francs in New York and is therefore movable exchange. The dollar is the basis and the franc fluctuates instead of the dollar in which it is reckoned. The opposite of movable exchange is fixed exchange.

Municipal Bonds

Those issued by a borough, town or city possessed of a charter of incorporation conferring privileges of local self-government.

National Debt

Same as public debt; the debt due from a nation to individual creditors.

The national debt of the United States consists of bonds, United States notes (greenbacks), old demand notes (notes issued prior to the present United States notes), national bank notes for the redemption of which money has been deposited by the issuing banks, fractional currency, gold certificates, silver certificates and Treasury notes (issued for the purchase of silver bullion).

Net

Clear of all charges or deductions as actual profit or actual loss. The net earnings of a stock company are the earnings left after deducting expenses.

Brokers on the outside or curb market in stocks often take an order net, which means that the customer will deliver or receive the stock, as the case may be, at a fixed price. The broker receives no commission but is allowed to make as much on the transaction for himself as he can.

New York Clearing House Association

The official title of the organization under which the associated banks of New York conduct daily clearings.

The association was organized September 13, 1853, and clearings were begun on October 11 in the basement of No. 14 Wall Street. The first day's clearings amounted to $22,648,109.87 and the balances to $1,290,572.38. The number of banks making clearings was 52. The first manager was George D. Lyman, who had been a teller in the Bank of North America. The association now owns the handsome white marble building Nos. 79 to 83 Cedar Street.

The New York Stock Exchange is an unincorporated voluntary association, and while it is not a corporation neither is it a partnership. It exists, however, under a written constitution and by-laws. Neither the constitution of the New York Stock Exchange nor the rules and regulations of the London Stock Exchange in express terms state the object for which those bodies were organized, but they are so manifest that a statement of them has not been deemed essential.

The New York Stock Exchange has its origin in an agreement dated May 17, 1792, by "Brokers for the Purchase and Sale of Public Stock." By public stock was meant government securities; in other words, government bonds. At that time the brokers met and did business under a buttonwood tree that stood in front of the dividing line between the present Nos. 68 and 70 Wall Street. In 1817 a constitution was adopted under the name "New York Stock and Exchange Board." On January 29, 1863, the present name, "New York Stock Exchange," was adopted.

The membership of the New York Stock Exchange is limited to 1,100. The admission fee is $2,000, but this is in addition to the cost of a membership itself, which depends on the "state of the market" for seats, as memberships are called. A membership is obtained by buying the seat of a. retiring, deceased or expelled member. A member is elected for life, or until he resigns or is expelled.

Expulsion from the exchange forfeits membership, but not the proceeds of it. Temporary insolvency involves suspension. Permanent insolvency involves loss 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 assignee, if he has been declared a bankrupt.

When a member dies his seat may be disposed of by the committee on admission and the proceeds delivered to his executor or the administrator of his estate.

The place where the differences in the accounts of the brokers on the New York Stock Exchange are settled.

Before the establishment of the clearing house a broker who had made sales of stock was obliged to send the stocks to the office 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 $475,000. 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 numbers of shares, the name of the stock, the price at which purchased, 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 100 shares he receives the 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 this 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 business the manager of the clearing house sends out through the ticker the settling prices for the various stocks for the use 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 100 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 shares 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 sold column at 100, the same as if he actually had sold the stock at 100.

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 the broker bought more stock than he sold, or sold more than he bought, or what the prices may be or how many stocks 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 the 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 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.

Transactions in stocks not on the clearing house list are not reported to the clearing house at all. Settlements in these stocks are made between the brokers in the ordinary course of business. For another thing, only stocks bought and sold "regular way" (in the regular way) and at seller 3 are cleared.

Stocks bought and sold "regular way" are put on the clearing house sheet on the day they are bought and sold, but are deliverable on the following day. Stocks bought and sold at seller or buyer 3 are not delivered until the third day after they are sold, and are not put on the clearing house sheet until the second day after they are bought and sold; they are put on the clearing house sheet at the selling price on the second day.