stocks and bonds; the Consolidated Stock Exchange of New York, which deals chiefly in stocks. New York has also a Produce Exchange (established in 1862), dealing in agricultural products; a Cotton Exchange, for cotton; a Maritime Exchange; a Metal Exchange; and several others.

These exchanges have become a necessity in modern business. The New York Stock Exchange, after its organization in 1817, dealt at first in bank, canal, and industrial stocks. Later it took up railroad stocks and bonds, and more recently it has become a market for the stocks and bonds of industrial concerns. Government bonds, and the stocks and bonds of railroads and industrial corporations, now form the principal objects of trading in the New York Stock Exchange. Since the invention of the telegraph and the laying of the transatlantic cable, the New York Stock Exchange has become a world market surpassed only by the London Stock Exchange.

The enormous scope of the business of the Exchange may be realized when it is known that the shares sold there have reached in some years 200,000,000 in numbers, with a value of over twenty billions of dollars. (Financial Review, 1912, p. 45.)

The New York Stock Exchange has 1100 members. These members alone have the right to enter on the floor of the Exchange and to engage there in buying and selling transactions.

In order that stocks and bonds may be bought and sold on the floor of the New York Exchange, they must first be admitted to either the listed department or the unlisted department. The Exchange does not guarantee the value of the securities traded in. Certain precautions, however, are taken before any security is admitted. Before a security can be listed, it must be reported favorably by the Stock List Committee and the Governing Committee. A statement is required of the organization, receipts, expenditures, and earnings of the company, in a word, of its general financial standing. For the unlisted department the same rigorous examination is not required. not required. Some corporations do not desire to have their financial condition known, and will not submit to the requirements necessary for listing. There

is demand, however, for the securities of such corporations, and if they were not admitted in the Exchange, they would be traded in on the curb or in some other exchange. The rules for trading in unlisted securities are the same as for listed securities. The listed securities are accepted by the banks as better collateral for loans.

The transactions of the stock market may be carried on for investment purposes or for speculation purposes. In the former case, securities are actually bought and paid for in full and are turned over by the seller to the buyer, who keeps them for the income they yield. In the second case, shares are traded in for profit through the rise or fall of the value of the shares. Large buying orders will sometimes help to raise the price of the shares, which are then sold at the higher prices, thus securing a profit for the dealer. Or, again, shares not owned by the seller are sold with the intention of buying back later at a lower price and making a profit by the difference in the selling and the buying prices. In the regular exchanges no fictitious purchases or sales are permitted. Hence traders must be ready for the delivery of the security or commodity involved.

A "bucket-shop " is an organization engaged in the business of dealing in the differences of the prices of securities and commodities as quoted in the exchanges, without any intention of actually buying or selling.

Speculation in stocks may again be carried on by the system known as trading on margin. The customer deposits with his broker in cash a certain per cent, usually 10 per cent, of the price of the stock. The broker buys or sells the stock, as explained above, and when the transaction is closed by a corresponding sale or purchase, the customer is charged with the loss or credited with the gain, after paying the broker's commission and interest.

A great amount of trading, reaching into the millions of dollars, is done outside the regular stock market in what is known as the "Curb Market." The system is found in connection with large exchanges, in London, Paris, and New York. In

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New York, curb trading is effected on the street outside the Stock Exchange. The securities usually traded in on the 66 curb" are securities that are not entered in either the listed or the unlisted department of the Stock Exchange. The Standard Oil Company's securities are among those traded in on the curb. Trading on the curb is frequently done in securities of newly organized corporations which have not yet reached a position to be listed in the regular exchange. The prices of the shares of such corporations become fixed even before they have been actually issued. The disciplinary code that obtains in the curb market is established by custom and the consent of those engaged in the business.

The exchanges possess undoubted advantages. They afford a ready means of trading in securities and commodities. They furnish exact lists of the prices of objects and the momentary changes to which the prices may be subject owing to influences operating in any part of the world. Investors are safeguarded against fraud on the part of brokers, whose standing in the exchanges depends on their honesty and business integrity. The publicity given by means of the daily price quotations and the nature of the fluctuations in the prices of the shares make known to investors the condition of the corporation in which they contemplate investing. The flow of capital is directed along channels where the greatest productivity will result.

The prices of bonds and stocks dealt in in the Stock Exchange or of commodities traded in in other exchanges are determined by the demand and supply of these objects as expressed by the bidding of the brokers who are acting for outside investors. The prices will therefore, ordinarily, indicate the actual value of the properties, the securities of which are on the market, or of the commodities traded in. It may happen, however, that speculators may corner" the market. A corner in the market is effected when a person or a syndicate buys up the whole of any stock or the whole supply of any commodity, in order to secure a monopoly and force others to buy at a monopoly price. Or, again, stocks may be manipulated by intriguing

persons who have personal designs upon different corporations, or by speculators who are seeking a profit through a rise or fall of prices. Owing to manipulation of this kind, there will be at times a great difference between the real values of the securities or the commodities and the prices at which they are quoted in the exchanges. On May 9, 1901, the shares of the Northern Pacific railroad, which never before had reached $100 a share, were forced to the price of $1000 a share, through the efforts of rival groups of capitalists to secure the property. (Cf. G. S. Pratt, The Work of Wall Street.)

Variations of Prices. — Objects have at different times a higher or a lower money value or price. The articles of general consumption on the market will require more money for their purchase at one time than at another. A ten-dollar bill will not buy as much at one time as at another. The purchasing power of money will not be the same at all times. In other words, prices rise and fall at different periods.

We speak here not of the prices of individual objects, but of general prices. Thus, it is a fact that between 1850 and 1873 general prices rose throughout the world, and after 1873 general prices have fluctuated, at times rising, at other times falling. During the past fifteen or twenty years, prices have risen considerably.

System of Index Numbers.-The fact of a general rise or lowering of prices may be ascertained by the use of a system known as the System of Index Numbers. One hundred commodities are selected and their prices found at some given time. The sum of all the prices of these commodities is computed, and this sum will be the index number for that time. At the end of ten years, the prices of the same commodities are again computed, and the sum of these prices will give the second index number. These two index numbers are compared, and prices will be said to have risen or fallen, according as the second index is greater or less than the former.

Our present purpose is to seek out some laws for the variations of prices.

Kinds of Variations. - Variations in price may be classed under two heads:

1. Those variations in the market price which cover a long period of time and are very marked, the normal price increasing or decreasing considerably.

2. Those variations which occur from day to day and are never very great. They may be called oscillations.

To illustrate: In 1850, less than one hundred dollars would buy a house lot in the upper portion of New York City; to-day, one hundred thousand dollars would not buy the same lot. In 1873, 371 grains of silver, the amount contained in a silver dollar, cost $1.02; to-day, the same amount of silver costs somewhere near 50 or 60 cents. These are some of the great variations that extend over great lengths of time. The minor variations, the oscillations in prices, may be seen in the morning papers for the various commodities sold in the markets.

Laws of Variations in Price. - The laws regulating the first kind of variations are as follows:

1. Other things being equal, money value or price increases and decreases directly with the utility of the commodities.

This may be seen in the case of land. A lot in the center of a block is not so useful for commercial purposes as a corner lot, and the corner lot will be more valuable. A farm situated on the southern side of a hill will be more useful for the growing of grapevines than one situated on the northern side of the hill, and hence will be more valuable. Again, the utility of silver as money has diminished, through the introduction of the various instruments of credit, checks, notes, bills of exchange, and ' so the value of silver has diminished.

2. Other things being equal, money value or price increases and decreases inversely with the quantity of the commodities.

Thus, since the introduction of machinery in certain lines of industry, the quantity of articles produced has increased, with a consequent decrease in value. Again, through the occupation of land for farming purposes, the quantity of game has decreased and the value of game has increased.