It is a singular fact that great numbers of people speculate in mining and other shares, and yet they are not only ignorant of the nature and value of the stock or share they buy and sell - depending in innumerable cases upon the opinions of friends, puffs in newspapers, or tips from 'touts' and bucket-shop-keepers - but they do not even know how a bargain is actually transacted. They may know what a broker is - that is, the man who buys and sells the shares for them - but of how he buys and sells and to whom and from whom he does so, they haven't the faintest idea. They hear and read of dealers and jobbers, but what class of men they are and what their particular business in life is they haven't the faintest notion. Therefore, as I am writing this book for the help not only of those who have already speculated and invested, but also for the benefit of speculators and investors to come, it is essential that I should devote a chapter to an explication of the manner in which bargains are transacted on the Stock Exchange.
Most men who buy a share know that they must, in the first place, hire a broker to do this little business for them. Naturally, however, knowing nothing of brokers, they either go to a friend to recommend one, or write to some editor to recommend one, or go to their bankers for advice. There are in the land two classes of brokers - the inside broker and the outside broker - the first meaning that he is a member of the Stock Exchange, and the latter that he is no member of an institution of the kind. The Stock Exchange is governed by a committee chosen from amongst its own members, and its laws and regulations are very strict; so that, though the Stock Exchange is associated in the popular mind with an inferno of gambling and vice, there is really no institution in the country where the rules so strongly insist upon the most honourable dealings between its members. The most scrupulous honesty is insisted upon, so that the public need have no qualms in engaging a member of such an institution, for, though they are by no means saints, they are hedged around with so many restrictions that dishonourable and disgraceful conduct in their dealings is next to impossible. The committee has the power of expelling or suspending a member for any culpable conduct of this kind, and as this is a terrible penalty for any member to pay, they have to walk very warily indeed. Members are also expelled when they are not able to meet their liabilities, no matter whether it is their own fault or that of other people. The rule is drastic and is never departed from, and the punishment is made all the greater by the names of the defaulters being published in the House and likewise sent to the press to be made widely known amongst the public. Another strict rule is that no member of the Stock Exchange is allowed to advertise for business; so that those who do advertise are outside brokers, or 'bucket-shop-keepers,' as they are satirically and reproachfully called.
It does not necessarily follow, however, that because a man is an outside broker, or a 'bucket-shop-keeper,' he is therefore dishonest. Many are undoubtedly honest men, but, nevertheless, the public is not protected so strictly and guardedly as in the case of inside brokers, and personally, therefore, I would prefer to employ a member of the Stock Exchange, where the scope for dishonesty and fraud is restricted. Moreover, even though the outside broker may be an honest man, he is necessarily limited in his scope of action. He cannot altogether do without the Stock Exchange, and his facilities for dealing are not so many and so free as in the case of him who does everything through that institution.
Therefore, having engaged our broker and commissioned him to buy, say, 300 Modderfonteins, he straightway goes to what is known as the South African market in the Stock Exchange, which is no particular place railed off, or built off, but is merely a spot or a corner where the dealers in South African shares take up their stand, and where they will invariably be found. There is thus a section in every part of the 'House' devoted to some particular market - to Home Rails, for instance, American Rails, Foreign Government Securities, West Australian shares, etc., and instead, therefore, of wandering all over the building to find someone who has Modderfonteins to sell, the broker goes straight to the place where he will be certain to find the man he wants, and who will supply him with those commodities. He goes to the jobber, or the dealer, two words signifying one and the same class of man, and who is identical with the wholesale merchant in our trade and commercial transactions.
For instance, if a tradesman wants to buy a certain class of goods, he does not go round to other tradesmen for them, but he goes direct to the wholesale manufacturer or merchant, where he knows he will get any quantity he wants. A broker, therefore, when he is commissioned by his client to purchase certain shares, say Modderfonteins, does not go round to other brokers to ask if they have any Modderfonteins to sell, but goes at once into the Stock Exchange to the mart where such shares are dealt in. Thus, we find the jobber to be nothing more or less than the wholesale merchant, who has a supply of these particular shares on band, as it were, or will get them for us eventually. The broker will ask him to name a price for Modderfonteins, without telling the jobber whether he wishes to buy or sell them. The jobber, of course, may refuse to give a price, but if he does, then he is bound either to buy or sell those shares at the broker's option. He always gives two prices - that at which he is prepared to buy, and that at which he is prepared to sell - and this explains why in the lists of prices which we see in our. newspapers two prices are invariably given. For instance, he may answer that he makes the price in Modderfonteins ll 11/16 - 11 13/16 meaning that he is prepared to sell at the higher price and to buy at the lower, so that the broker being a buyer of the shares would have to give 11 13/16..