The general classes of security dealers correspond to the classes of dealers in merchandise, as follows:

1. Wholesalers.

2. General retailers.

3. Retail specialists.

It will quickly appear that these three classes are not clearly defined; nevertheless it is usually possible to classify a given banking or brokerage house as belonging to one of these groups. The wholesale dealers are interested only in the largest issues and make little effort to sell in small lots direct to individuals. In the United States, J. P. Morgan and Company, Kuhn, Loeb and Company, Speyer and Company, and a number of other firms not quite so well-known constitute this group. When a house of this type undertakes to sell a large issue, it usually proceeds to form an underwriting syndicate composed of firms which belong wholly or partly in the second group and which are equipped to sell the securities direct to the purchasing public.

The second group includes such houses as Spencer Trask and Company; Harris, Forbes and Company; White, Weld and Company, which maintain large organizations of bond and security salesmen and keep comprehensive and valuable lists of people who are known to have money available for investment. Such houses, when they are members of underwriting syndicates, are prepared to assume a large share of the burden of actually disposing of the securities offered. They may also take up smaller issues of securities wholly on their own account without forming an underwriting syndicate and may dispose of these issues to the public. There is no sharp line between houses in this group and houses in the first group.

The third group, consisting of specialists in the different classes of securities, is more clearly defined. It is distinguished from the second group by the fact that the list of prospective buyers in a specialty house is made up exclusively of people who have shown an interest in the specialty and is not merely a general list of people who have money to invest. The difference is much the same as between a department store and a retail shop which specializes in one line of goods. These specialty houses again differ from the stock exchange brokerage firms which are described a little later in this chapter. It would be impossible to list all of the specialty houses. One deals exclusively in oil stocks; another in the securities of the powder companies; another in equipment bonds and car trusts; another in the first mortgage bonds of public utilities; another in bank, trust company, and insurance company securities.

We may also include in this third group a large number of small banking and brokerage houses scattered over the country which specialize in local securities. Every city of any size has a considerable number of successful corporations the securities of which are from time to time bought and sold. These local firms handle business of this type. Usually they are also the correspondents and representatives of New York houses and are in position to help sell the big security issues in which New York is interested.