"To the Members of the New York Curb Market Association:
"GENTLEMEN:
"It has been decided that the improvement in the general financial situation has removed the necessity for restrictions over trading in unlisted stocks, therefore you are hereby notified that the New York Curb Market will officially resume business on Monday, November 16th, 1914, at 10 o'clock A.M.
"This action on the part of the Chairman of the New York Curb Market Association has received the approval and sanction of the Committee of Five of the New York Stock Exchange.
"E. R. MCCORMICK, "_Chairman_."
On November 13th, the Committee of Five ruled that:
"Unrestricted trading in Listed Municipal and State Bonds for domestic account may now be resumed, but that all transactions for future delivery must be submitted for approval, as heretofore, to the Sub-Committee of Three on Bonds at the Clearing House of the New York Stock Exchange."
On November 16th, Mr. Frank W. Thomas, Vice-President of the Chicago Stock Exchange and also Chairman of their "Trading Committee,"
appeared before the Committee of Five and stated that it was the intention of the authorities of their Exchange to meet on the coming Wednesday to discuss the advisability of opening on Monday, November 23rd. He asked for information regarding the attitude of the New York Stock Exchange in the matter of securities listed on both exchanges.
The Committee requested him not to permit dealings in Chicago, in such securities, at prices below the minimum prices established in New York.
Thus one after another came the evidences of a sudden transformation in the financial conditions and of a consequent movement toward the resumption of business, all of which rested fundamentally on an immense increase of our exports and the resulting favorable movement of foreign exchange.
Encouraged by these happenings the Committee of Five actively took up numerous plans for letting down the bars. There had been for some time considerable pressure exerted by those members of the Exchange who were distinctively bond brokers, to have the bond business transferred from the Clearing House to the floor of the Exchange. They thought that this step would make a wider and more satisfactory market for bonds and that the supervision of the Committee of Three could be exerted in one locality as well as in the other. In view of the rapid improvement in conditions, and the fact that unlisted bonds had been given an unrestrained market by the dissolution of the Committee of Seven, it was thought that the moment had come for taking this step in advance. Preparations were at once set on foot to restore the restricted bond market to the floor and thereby insure that partial opening of the doors of the Exchange which would be the entering wedge to ultimate resumption.
Unfortunately the plans of the Committee in this regard were not sufficiently safeguarded. Through some unforeseen leak the news of their intentions got abroad, and brought on some awkward consequences.
The first of these was the appearance of a private banker, the same one who early in August had predicted a long period of suspension, to protest against greater freedom in bond dealings. He foresaw terrible results if this rash act were permitted and claimed to have information that European holders of bonds were awaiting this chance to swamp the market. The Committee were not much alarmed by this gentleman's warnings and were proceeding with their nefarious scheme when a further warning was addressed to them. There was a certain member of a Stock Exchange firm who was on friendly terms with some of the Washington authorities, and who seems to have felt it his duty to see that the Exchange did nothing to give offense in these high quarters. When this individual learned what the Committee had in mind he sent word that it would be prudent for them to let a particular government officer know their plans before putting them into execution. Thinking that this warning must be based on some special information the Committee at once authorized this gentleman to inform his friend in the Government of their plan. This was on Wednesday, November 18th, and the intention of the Committee was to place the bond market upon the floor of the Exchange on the following Monday. On Thursday this well meaning but somewhat misguided go-between reported that he had communicated with Washington and that his friend there had expressed the desire to see some member of the Committee before any further steps were taken.
This news hit the plans of the Committee somewhat after the manner of a submarine torpedo. They had everything in readiness for Monday, and the newspapers, which had also got wind of their intentions, had already announced to the public unequivocally that a restricted bond market would be started on that day. With such limited time to act in there was nothing to resort to but postponement and a notice was immediately given to the press in the following words:
"The Special Committee of Five states that while the plan outlined by the newspapers concerning a further extension of the present method of dealing in bonds was substantially that under consideration by the Committee, the magnitude of the interests affected has led to unforeseen difficulties which will necessitate further consideration. When a decision is reached ample notice will be given to the public officially."
A letter was at once sent to the Government official notifying him of the readiness of the Committee to visit him at his convenience, and the following day, Saturday, he very courteously sent them a telegram explaining that the suggestion of an interview had in no way emanated from him but that he had misunderstood the intermediary (who had communicated by telephone) and supposed that the interview was being sought by the Exchange. So this mighty tempest in a tea pot resulted from the excessive zeal of an outsider who while trying to pilot the Committee into safe waters succeeded in running it on a reef of his own creation.
Immediately on ascertaining the true situation the following notice was sent out on Saturday:
"The Special Committee of Five announces that having consummated its plan for bond transactions on the Exchange under certain specified restrictions, the same will, in accordance with the Constitution of the Exchange, be submitted to the Governing Committee at the regular meeting to be held on the 24th inst. If the recommendations of the Special Committee are adopted by the Governing Committee the plan will go into operation at an early date."
Some of the newspapers having announced positively that this new move with regard to bonds would take place on Monday, the 23rd, they were very indignant that it should be postponed without supplying them with a good and sufficient reason. The Committee, on its part, feeling that it was undesirable to publish the details of an awkward misunderstanding with a public official, who would not want his name dragged into a matter that he had in no way concerned himself with, refused to furnish the reason. This at once let loose upon them those vials of reportorial wrath which, up to that time, they had been fortunate in escaping. One journal amicably stated that this incident merely emphasized a fact which had all along been obvious, namely that the Committee were, and had been from the start, totally incompetent to perform the task intrusted to them.
While a gentle shower of epithets fell upon their devoted heads the Committee proceeded with their work and, having obtained the necessary authority from the Governing Committee, they sent out the following ruling on November 24th:
"That so much of rule No. 21 as applies to dealings in listed bonds through the Clearing House be rescinded, to take effect at the close of business on Friday, November 27th, 1914. Beginning on Saturday, November 28, 1914, dealings in bonds listed on the Exchange will be permitted on the floor of the Exchange between the hours of ten and three o'clock each day except Saturday, when dealings shall cease at twelve o'clock noon. Such dealings to be under the supervision and regulation of the Committee, and to be for 'cash' or 'regular way' only and not below the minimum prices as authorized by the Committee from time to time. Transactions at prices other than those allowed by the Committee, or in evasion of the Committee's rules, are prohibited. All rules of the Exchange governing delivery and default on contracts covered by this resolution shall be in force on and after Saturday, November 28th, 1914, but the closing of contracts 'under the rule' shall be subject to the foregoing provisions."
Thus on Saturday, November 28th, the doors of the Stock Exchange were once more thrown open and a restricted market in listed bonds was established on the floor under the watchful eye of the Committee of Three. There was some hesitancy at first as to whether these bond transactions should be quoted on the ticker in the accustomed way, but before the day of opening came it was decided to report them as usual.
By requiring that all trades should be for "cash" or "regular way"
and, in a subsequent ruling, by instructing all purchasers of bonds to report to the Committee when such bonds were not delivered by 2.15 P.M. on the day following the purchase, it was hoped to impede any sudden or violent liquidation of foreign securities.
The restoration of the bond market to the floor was a complete success, and at about the same time a general revival of public confidence showed itself in a rise in prices first in the street market and then in the Stock Exchange Clearing House itself.
Encouraged by these symptoms the Committee of Five at once formulated a plan for carrying the reopening a step farther. A list of stocks which were not international in character was made out and submitted to the Bank Clearing House Committee, and with their concurrence it was decided to place these upon the floor of the Exchange to be traded in at or above certain prescribed minimum prices.
At a meeting of the Governing Committee on December 7th the following resolution was adopted: "That the Committee of Five is hereby empowered to permit dealings on the floor of the Exchange in such stocks as it may designate under restrictions prescribed by it. That the Committee of Five is hereby authorized to enforce stock loan contracts whenever in its judgment it may deem best so to do, and that the resolution of July 31st, 1914, be modified in this respect."
A list of minimum prices was fixed upon that averaged some two or three points below the closing prices of July 31st, and on December 11th the Committee issued a ruling prescribing the conditions for the partial resumption of stock dealings on the Exchange. We here present it in full:
"The Special Committee of Five rules that Rule 13 be rescinded, in so far as it applies to stocks admitted to dealings in the Exchange from time to time by the Committee of Five, said rescission to take effect at the close of business on Friday, December 11, 1914.
"Beginning on Saturday, December 12, 1914, dealings in certain specified stocks listed on the Exchange will be permitted on the floor of the Exchange between the hours of ten and three o'clock each day except Saturday, when dealings shall cease at twelve o'clock noon.
"Dealings in such stocks as shall be specified by, and be under the supervision and regulation of the Committee, shall be for 'cash' or 'regular way' _only_ and not below the minimum prices authorized by the Committee from time to time. Transactions at prices below those allowed by the Committee, or in evasion of its rules are prohibited.
"A list of stocks to be admitted to dealings on the Exchange accompanies these rulings. Minimum prices on same will be announced on December 11, 1914.
"All stocks quoted on July 30th at or below 15 per cent., or $15 per share, may be dealt in without restriction as to price, but are included in the list for your guidance, and will be marked 'Free' in the price column.
"All stocks admitted to dealings as above, which were being cleared through the Stock Exchange Clearing House at the close of business on July 30, 1914, will be similarly cleared from the opening of business on the 12th day of December, 1914.
"All stocks admitted to dealings, which were being dealt in 'Ex-Clearing House' at the close of business on July 30, 1914, will be similarly dealt in from the opening of business on the 12th day of December, 1914.
"Stocks admitted to dealings on the Exchange will cease to be dealt in through the Stock Exchange Committee on Clearing House.
Stocks not so admitted will continue to be dealt in through the Committee on Clearing House until further notice.
"All rules of the Exchange governing delivery and default on contracts covered by these rules shall be in force on and after the 12th day of December, 1914, but the closing of contracts 'Under the Rule' shall be subject to the foregoing provisions.
STOCKS LOANED
"The Loan Market for stocks will reopen at ten o'clock, A.M. on the 12th day of December, 1914, for such stocks _only_ as are admitted to dealings on the Exchange, from and after which date all rules of the Exchange governing the borrowing and loaning of such stocks shall be in force, but the closing of contracts 'Under the Rule' shall be subject to the foregoing provisions.
"The above rule shall apply to stocks borrowed and loaned prior to and since July 30, 1914.
"Borrowed and loaned stocks will be cleared as before July 30th last, but only in cases where such stocks are admitted to dealings on the Exchange.
"Loans of stocks _not_ admitted to dealings on the Exchange will continue to stand until further notice, unless otherwise agreed to by both parties to the contract."
On Monday, December 14th, the next business day after the limited list of stocks had been placed upon the floor of the Exchange, it was reported to the Committee that the volume of transactions taking place in the Stock Exchange Clearing House, in the stocks not yet admitted to the floor, had risen to such proportions as seriously to embarrass that institution. As this activity was taking place on a rising market and signs of increasing confidence were constantly multiplying, the Committee quickly resolved, on the same day, to transfer all stocks to the floor on the following morning, and notice to that effect was at once sent out. The unexpected appearance of this notice on the tape was greeted with cheers of approbation in the Exchange, and on December 15th the long hoped for reopening of the entire market had become a reality.
The Committee of Five by this act brought their own rule to a close.
Arbitrary power had been put in their hands to be exercised while the Exchange remained closed, but now that it was reopened authority naturally returned to its legitimate channels. The Committee therefore presented the following report to the Governing Committee on December 15th:
"The Special Committee of Five beg leave to report that in as much as the crisis that existed on July 31st, 1914, has passed, and financial affairs in this country have resumed a practically normal condition, the necessity for the Committee's continuance no longer exists and hence they request to be discharged. Before being discharged they desire to express their appreciation of the trust and confidence placed in them by the Governing Committee.
They also wish to express to the members of the Exchange their appreciation of the manner in which their rulings have been respected, even though in many cases it involved great sacrifices.
Resolved, That the report of the Special Committee of Five be received, and the Committee be discharged."
Thus, like the sudden and unexpected shifting of a dream, the Committee of Five who so recently had almost despaired of fixing a date for reopening the Exchange, found the Exchange open and themselves a memory of the past. The abruptness of their exit was tempered, however, in the following manner. As above described, the reopening was accompanied by the restraint of certain arbitrary minimum prices below which securities could not be sold. It was felt that, owing to the critical and indecisive state of the war, there was a continuing possibility of some news that might renew a crisis in the market. While this possibility lasted the maintenance of minimum prices furnished an automatic check upon sudden panic which would avoid raising the question of a second closing of the Exchange. In order to regulate these minimum prices and so change them from time to time as to keep in accord with normal supply and demand, it was necessary to appoint a Committee, and the original Five were continued in office with this sole regulative power. As bonds were similarly restricted, the Committee of Three also lingered on the scene for the same purpose. The two Committees performed this unusual function up to the first of April, 1915, when the very marked improvement in conditions led to the abandonment of this last vestige of artificial restraint.