Victorian London - Finance - Stock Exchange

STOCK EXCHANGE, CAPEL COURT. The ready-money market of the world. It stands immediately in front of the Bank of England; had its origin in the National Debt, and its first Hall in Jonathan's Coffeehouse, in Change-alley. The first stone of the present Hall was laid May 18th, 1801, and the building opened in March, 1802. Capel-court, in which it stands, was so called from the London residence and place of business of Sir William Capel, ancestor of the Capels, Earls of Essex, and Lord Mayor of London in 1504. The members of the Stock Exchange, about 850 in number, consist of brokers and dealers in British and foreign funds, railway and other shares exclusively ; each member paying an annual subscription of 10l. A notice is posted at every entrance that none but members are admitted. A stranger is soon detected, and by the custom of the place is made to understand that he is an intruder, and turned out. The admission of a member takes place in committee, and is by ballot. The election is only for one year, so that each member has to be re-elected every Lady-day. The committee, consisting of thirty, are elected by the members at the same time. Every new member of the "house, as it is called, must be introduced by three members, each of whom enters into security in 300. for two years. An applicant for admission who has been a clerk to a member for the space of four years has to provide only two securities for 250l. for two years. A bankrupt member immediately ceases to be a member, and cannot be re-elected unless he pays 6s. 8d. in the pound from resources of his own. The usual commission charged by a broker is one-eighth per cent, upon the stock sold or purchased; but on foreign stocks, railway bonds and shares, it varies according to the value of the securities. The broker generally deals with the "jobbers," as they are called, a class of members who are dealers or mid- die men, who remain in the Stock Exchange in readiness to act upon the appearance of the brokers, but the market is entirely open to all the members, so that a broker is not compelled to deal with a jobber, but can treat with another broker if he can do so more advantageously to his client. The fluctuations of price are produced by sales and purehases,by continental news, domestic politics and finance; and sometimes by a fraud or trick like that ascribed to Lord Cochrane and others, in 1814, when the members were victimised to a large amount.

source: Peter Cunningham, Hand-Book of London, 1850

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Stock Exchange. - The London market for the purchase and sale of public stocks, shares, and other securities of a similar class is situated in Capel-court and Shorter's-court, close to the Bank of England. Certain transactions in connection with some of the great bubbles of the last speculative era directed considerable outside attention to the Stock Exchange and its members, and the public impression that there must be something wrong in its system and mode of transacting business became so strong, that in 1877 a Royal Commission was appointed to "enquire into the origin, objects, present constitution, customs, and usages of the London Stock Exchange, and the mode of transacting business in and in connection with that institution, and whether such existing rules, customs, and mode of conducting business are in accordance with law, and with the requirements of public policy." A great quantity of evidence was collected during the sittings of the Commission, and the result was not unfavourable to the Stock Exchange; the report of the Commission remarking that on the whole the existence of the institution and the action of its rules had been salutary to the public interests, that its laws had been administered uprightly and honestly, and that under them the enforcement of fair dealing and the repression of fraud were often more promptly and satisfactorily obtained than would be the case in courts of law. The earliest minutes bearing upon the origin of the Stock Exchange are those of 1798 (although in them mention is made of a similar association as having existed in 1773), and from them it appears that the business of stockbrokers and jobbers was conducted towards the end of the eighteenth century partly in the Rotunda of the Bank of England, but chiefly in rooms at the Stock Exchange Coffee House in Threadneedle-street, to which admission could be obtained on payment of sixpence. At the beginning of this century the greatly increasing business became too much for the rooms, and the indiscriminate admission of the public was calculated to expose the dealers to the loss of valuable property. Accordingly, a body of gentlemen acquired a site near Capel-court, raised a capital of £20,000, and erected a new and spacious building for the accommodation of the new undertaking. A Committee for General Purposes was formed, and new members elected by ballot at a subscription of £10 10s. The objects of the undertaking are described by Mr. Levien, the secretary to the General Purposes Committee, to be (1) to provide a ready market, and (2) to make such regulations as would ensure the prompt and regular adjustment of all contracts. The administration of the Stock Ex change is in the hands of two bodies with distinct functions. The Managers represent the shareholders (the 400 shares have now been subdivided into 4,000), and are the executive of the proprietors of the building, but have no control over the business transacted by the members. All matters belonging to this department are in the hands of the Committee for General Purposes, who represent the subscribers or members of the Stock Exchange, and are elected by them annually. The subscriptions of members (who also have to be elected annually) are taken by the Managers, and constitute, in fact, the rent paid for the building. Candidates for election as members must be recommended by three members of not less than four years' standing, who must have personal knowledge of the applicant and his circumstances, and who engage to pay £500 each to the creditors in case the member so recommended be declared a defaulter within four years from the date of his admission. The entrance fee in this case is £105 and the subscription £22 1s. If the candidate has been a clerk in the Stock Exchange for four years previous to his application, he requires two sureties only for £300 each for four years, his entrance fee is £63, and subscription £22 1s.      The members are divided into brokers and jobbers or dealers; the former buying and selling for clients, the latter being always ready to "make a price," and to buy and sell almost any quantity of current securities, looking for their profit to the difference between the price they can obtain, and that at which they can buy. There is no official tariff for commissions, this being a matter which is left for arrangement between brokers and their principals. It should be noted that, although all brokers necessarily take out a license from the Corporation (under a penalty of £105), the possession of such a license, which costs £5, carries with it no right of admission to the Stock Exchange, which is entirely in the hands of the Committee. It should be borne in mind that the Committee of the Stock Exchange strictly forbid any members to advertise. Members unable to fulfil their engagements are publicly declared defaulters by direction of the chairman, deputy-chairman, or any two members of the
committee. Defaulters are only eligible for re-admission when they have paid at least one-third of the balance of the loss caused by their failure, independently of the security money, or when they have recouped the sureties one-third of the amount paid by them when the debts have been less than the amount secured. Further, they must have failed in one of two classes: the first for failures arising from the default of principals, where no bad faith or breach of rules has been practised, and where the operations have been in fair proportion to the defaulter's means; the second for cases which have been marked by indiscretion and the absence of reasonable caution. Re-admission is entirely in the hands of the Committee for General Purposes, by whom also are settled all disputes between members, and between members and non-members, if the latter be willing. The names of defaulters are now officially communicated to the daily papers. The members of the Stock Exchange number about 2,200 (of whom 860 are brokers) and 1,120 clerks. Some of the clerks are members; in these cases they are not allowed to transact business for themselves. The total revenue accruing to the managers is some £70,000 which leaves a net balance of some £52,000. The shares are valuable, and the building account having been cleared off will probably be still more so. Strict privacy is maintained on the Stock Exchange, and visitors are not admitted.

source: Charles Dickens (Jr.), Dickens's Dictionary of London, 1879

see also James Grant in The Great Metropolis, 1837 - click here