In the first place, in London there are two classes of brokers: The " outside broker," who may or may not be a responsible party, the term including what we know as "bucket shop brokers," "curb brokers," or, in fact, any broker not an accredited member of the exchange. The " inside broker " who belongs to the stock exchange, members of which are not allowed to advertise for business.
Let us suppose that an order is given one's broker to buy and sell a security. He goes to the stock exchange. If the security happens to be one of the English railway shares he goes to what is known as the "Home Railway Market;" which is a particular part of the exchange where securities of that class are dealt in, not making it necessary to wander all over the building to find some one who deals in the security sought. The broker goes to the "dealer" or "jobber," meaning one and the same, who correspond much to the wholesale merchants in commerce. The broker will ask the jobber to name a price on the security, without telling whether a purchase or sale is desired. The jobber may refuse to make him a price if he sees fit, but if a price is named he is bound by the rules of the stock exchange to buy or sell the security referred to at the option of the broker. Thus two prices are always named by the jobber, one at which he will sell and the other at which he will buy, which explains why the newspapers give two quotations, as, for instance, 128 1/2 - 129, meaning that the lesser price is the one at which the jobber will buy, and the higher, at which he will sell. The half of one per cent, represents the jobber's profit and is called the " jobber's turn." As he has to buy or sell at his own risk - close one transaction before closing the other - he naturally demands a larger percentage than would our American broker, who buys and sells on orders. The London jobber, after naming a price at which he will sell a stock, must take his chances upon buying from another jobber at a price which will show him a profit. When the newspapers give but one price, that is termed the "middle price," by which it is understood that the buying or selling prices must be respectively a little more than or a little less than the price given if a transaction is desired.
After the "bargain" is completed, the broker will wish to know when payment is to be effected. If the customer desires to pay cash for a purchase, that may be done at once, or, if not, he may wish to carry it forward to the next settlement, which is the usual custom. Purchases for cash call for slightly higher prices than the current quotations, hence it is rather better to buy for the settlement. This method of completing transactions is explained under " Fortnightly Settling-days." (See also "London Orders.")
"Bargains in Bonds and Debentures include the accrued interest in the price, except in the case of British and Colonial Treasury and Exchequer Notes or Bills, Rupee Paper, Indian Railway Debentures, and certain Securities of a like character, which are dealt in so that the accrued interest up to the day for which the Bargain is done is paid by the Buyer." 2