THE STOCK-EXCHANGE COMMISSION.
WE do not exactly see why the Government disliked the idea of appointing a Royal Commission to inquire into the management of the Stock Exchange so much. They sub- mitted to the appointment, but they submitted only to the- force majeure of a probable defeat. It is quite true that both the mover and seconder of the address entertain, or at all events express, hopes from the Royal Commission which must prove to be quite illusory. " Time bargains," which Mr. Yorke denounces, cannot be stopped, as we have repeatedly shown, without interfering with the most ordinary operations of trade, and destroying the principal facility for the rapid transfer of Securities. " Dealing " as now understood could not continue to exist without time bargains, and every owner of Stocks who wanted to sell them would have to hunt for a buyer as he now does if he wants to sell a house. Any difficulty of that kind would lower the value of all Stocks in the kingdom, and indefinitely increase bankers' difficulties in making advances upon their deposit. Nor could any conceivable kind of legislation secure Sir Charles Russell's object, which is appar- ently to prevent simpletons from being simple. No law can pre- vent a seller of rotten loans from giving a broker an extrava- gant commission for getting rid of them, unless the Legislature is prepared to punish the extra payment of agents of all kinds whatsoever,—the land agents, for example, who are told by their employers that if they can sell at once they shall have all above a certain price. Nor do we believe that the Stock Exchange can absolutely assure itself of the bona fides of every speculation which is offered for registration on its list. The Committee may know very well that Honduras or Paraguay cannot pay the interest their representatives promise, or may even suspect that such States never intend to pay, but how can they tell that an American railway is insolvent, or that a Bank just turned into a Company has sustained a fatal loss of business, or that a new lead-mine, though it contains lead, has also a dangerous liability to be flooded with sea- water I No proof can be devised which would assure them that the promoters of a new Company for making gunpowder out of salt were absolutely convinced that their discovery was a working, and, moreover, a pecuniary success. If the Com- mittee rejected every speculation in which they would not invest money themselves, they would reject undertak- ings of high industrial value—for example, all speculative mines—and would see in a week the formation of an outer Exchange very much worse regulated than their own, which would become, by natural attraction, the centre of all swindling. It is folly to hope that specula- tion can be put down without trade being put down with it, or that a sharp line can be drawn between speculation and gambling, or that silly people can be prevented from making bad bargains on the advice of interested third parties. Sir Stafford Northcote put that part of his objection admirably, when he said that the Press, with its advertisements of pro- spectuses and the like,—and he might have added, with its City articles and leaders on Turkish, Egyptian, and Argentine finance—might equally be made use of as machinery for gambling. Nor do we see much in the argument that swindlers will be frightened by mere inquiry. It takes a good deal to frighten that class of men. Sir Charles Russell told a capital story about the Skye terrier and the fleas, but it will produce upon 'Change, we suspect, a great deal more amusement than conviction :—" He remembered a case in point which came under his notice at Windsor. One day he saw her Majesty's coachman strongly robbing a Skye terrier the wrong way, and asked why he did so. ' Oh,' said the coachman,' it's for the fleas. 'But that won't kill the fleas,' was his rejoinder. No,' re- plied the coachman, ' it don't kill them, but it frightens them amazingly." The House, of course, enjoyed the joke, but it forgot that the terrier's fleas are not paid to stay there, and the fleas of the Stock Exchange unfortunately are.
Nevertheless, though we do not expect the abolition of foolish speculation from the labours of the Royal Commission, we do expect some good, possibly much good, from its appoint- ment. Knowledge, to begin with, always benefits the public, and a knowledge of what a quotation on 'Change exactly means and how it is procured will benefit nine-tenths of man- kind with money to invest. There can be no doubt that the London Stock Exchange is one of the most important corpora- tions in the world, that it regulates an enormous mass of trans- actions in 1,300 kinds of Securities, supposed to be worth, Sir E. Watkin says, in the aggregate, at least five thousand millions sterling ; that its rules affect the fortune of every man in the kingdom possessed of personalty. To say that such a corpora- tion is a private body is the merest nonsense. It is no more a private body than the Bankers of England, who are ruled, and controlled, and hampered at every turn by positive law, are a private body. If it is fair to prevent by law Messrs. Rothschild from issuing notes payable to bearer, an enactment directly contrary to laissez-faire economics, it is fair to prevent the Stock-Exchange Committee from sanctioning or refusing to sanction particular methods of transacting business, and the argument from interference falls to the ground. Parliament interferes with private vate business every day in the name of the welfare of the community, and the propriety of any individual interference must be settled by itself, upon the fullest informa- tion it is able to obtain. In this case, Mx. Yorke only asks that it shall obtain full information in the usual way, and a prima facie case for obtaining it can certainly be made out. For example, it is by no means clear, after some recent judgments, that the rules of the Stock Exchange in cases of failure do not conflict with the positive law of the country ; whether the managers ought not, as disciplinarians, to make default a reason for permanent exclusion, and, as law-abiding men to allow every defaulter to be made a bankrupt, if his creditors choose, instead of insisting that everything shall be settled out of Court. That proviso might be a serious check on a number of speculating members, and though the Stock Exchange dissents, still its reasons for dissenting ought to be authoritatively stated and discussed. At present, as the outer world imagines, the penalties on a defaulter are in one way far too light, and in another way confound the unfortunate too completely with the guilty. A speculator who almost by accident over-trades—who, for example, is ruined by an unex- pected decree from the Sultan—and a speculator who has been deliberately playing the game of " Heads I win, tails you lose," are treated in precisely the same way, both being allowed to depart, ruined, it may be, but with no legal evidence of their ruin cognisable by all the world. That cannot be wise, and that alone would justify Parliamentary inquiry. Then there is the whole question of the responsibilities of Brokers to the public, to the dealers, and to each other, which is really a division of the law of contracts, which is materially affected by Stock-Exchange rules, and may be found to need rearrange- ments such as the Legislature alone can sanction. Then there is the whole question of the securities taken from members of the House. They are certainly insufficient, and we do not see why it should be considered that a Legislature which licenses every auctioneer in the country, and passes laws specially binding on his trade, is bound to abstain from insisting that traffickers in Bonds should be responsible and respectable persons. At all events, the recommendation of a Royal Commission that members of the Stock Exchange should give better security for their solvency, as we believe the members of Lloyd's do, would have great weight both on opinion and on the managers of the House, who, to do them justice, are getting tired of the in- trusion of mere adventurers. And finally, there is the greatest question of all, whether the roles of the Exchange, influencing as they do the fortunes of so vast a number of persons, should be subjected to the same kind of control as the bye-laws of a Railway Company now are. It is true the Stock Exchange is not, like a Railway, a monopoly constituted by Act of Parlia- ment, and therefore obliged to surrender a portion of its freedom, as it were, in payment ; but then it is a monopoly which has arisen, which is of vast influence and importance, and which, therefore, it may be as much the duty of the State to watch as it is its duty to watch any other powerful combination. Precedents for such watchfulness exist in abundance on the Continent, and although the Continental practice is foreign to our ideas and may be bad in itself, still a thorough investiga- tion of the existing lawlessness can only be beneficial, and will greatly strengthen the hands of the stricter party within "the House" itself. It is they who must ultimately work a reform, and their influence will certainly not be diminished if the Royal Commission should end in a Report that they, and not their adversaries, are substantially in the right. Sir Stafford Northcote was therefore wise in his unexpected surrender, and we rather wonder that he did not surrender with a little better grace.
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