135. Purchase And Sale Of Stocks And Bonds For Cus-Tomers

There will be little need for a department of this sort except in the largest New York City banks. However, every New York City bank which has out of town correspondents will be called upon at more or less frequent intervals to purchase and sell stocks and bonds for its customers. If the bank has no organized bond department and does not buy bonds for the purpose of selling, the loan department is the best equipped to attend to these purchases and sales in the market. National banks must buy and sell large quantities of United States bonds in this way.

The orders may be received by letter or by telegraph. Orders to buy at the ruling market prices should be entered with the brokers without delay, as a strong upward market might increase the purchase price of the stock so much that the bank would be called upon to explain why the price paid was so much higher than they or their customer expected to pay. It is much more satisfactory to receive orders to buy or sell at a definite figure or better, than to be instructed to buy at the market.

Orders for the sale of stocks or bonds should receive very careful attention. If the bonds are on deposit with the bank for safe keeping, the clerk having charge of the selling may exhibit his instructions to sell to the clerk who has custody of the securities of customers, and instruct him to deliver them after the opening of business of the day following. He may then instruct the broker to sell.

Hornblower & Hartshorne

________________________19___

Buy for our account

.................................................................................................................

.................................................................................................................

............................................

Figure 108. Order Blank.

Hornblower & Hartshorne.

--------------------------------------------19........

Sell for our account

.................................................................................................................

.................................................................................................................

............................................................

Figure 109. Order Blank.

If the country bank instructs to sell by telegraph and says that the securities will be forwarded, the New York bank should enter its order "Seller three." This expression means that the seller will not be able to deliver the securities for three days, but wishes to contract for their sale at the ruling market price. In a normal market, there will be no trouble in effecting such a sale.

The necessary records for this work are very simple. The first requisite will be two order pads for each broker. They will be glad to supply them free of charge. These order pads are exhibited in Figures 108 and 109 on page 227.

A carbon copy should be taken and attached to the instructions received from the correspondent. The order for the broker should be initialed by an officer, after he has compared it with the instructions. Instructions to the broker to alter the rate or previous instructions in any particular, should be in writing and a carbon copy retained. An order to alter the rate should be made by cancelling the old order and entering a new one. New York brokers are accustomed to act quickly on instructions and rarely make mistakes. An erroneous order given by the bank may cost it hundreds or thousands of dollars to rectify, when the market is active, and it is impossible to be overcautious in this respect. If a great deal of this sort of business is done, it will be well to have separate books for records of buying and selling. If the business is moderate in size, the two may be combined in one volume, using the first half of the book for one and the last half for the other. This book should be small, for ease in handling. Suitable rulings are shown in Figures 110 and 111 on page 229.

Buy

Figure 110. Record Of Purchases.

Sell

Figure 111. Record Of Sales.

Reports will be received from the brokers later in the day, if the order is at or within the market price and the correspondent should be advised. Here again forms may be used, if the business warrants; if not, typewritten letters should be sent. Delivery is made on the day following and another appropriate letter written advising of charge to account if a purchase and credit, if a sale. The broker's charge is one-eighth of one per cent. The bank may add a fee if it is deemed advisable, but the granting of the favor gratis will be readily recognized as a good advertisement.

It is the custom among brokers to check up with their customers the unexecuted orders to buy below the prevailing market price and to sell above at regular intervals. They will send a list of the orders on their books. These should be checked up promptly with the records and errors noted and corrected.