You and Your Broker; Your Duties and Rights as Customer, His Obligations to You as an Agent (Paperback)

Purchase of this book includes free trial access to www.million-books.com where you can read more than a million books for free. This is an OCR edition with typos. Excerpt from book: CHAPTER III Loaning Rates on Securities Unless one has been actively engaged in all phases of the brokerage business, the question of interest rates is usually an enigma. Furthermore, it is difficult to explain in just ordinary words because so many technical features enter into the subject. The subject had best be divided into three captions and each one discussed separately: Call and Time rates, Stock rates, and the Brokers' rates. Call Money The so-called renewal rate for call money which is published in the daily newspapers, has really very little to do with the actual situation except to determine a sort of clearing rate for the day. Money may open, be lent, on the Stock Exchange at about 11130 a. m. at 2 per cent, and possibly a million dollars may pass from the bank to broker at this rate. The renewal rate is then established and communicated to all those interested. The broker may be borrowing from ten to fifty million dollars from many financial institutions, and he at once tries to renew his call loans at 2 per cent. If these loans had been standing at 3 per cent, the day previous, it is barely possible that one million out of ten will reduce to the renewal rate. The rest of the loans continue to stand at above 3 per cent., or 3 per cent., or may be 2/2 per cent. But, if the broker's customers are carrying many industrial stocks, he will have to make special loans, and all industrial loans average from y2 per cent, to i per cent, above the renewal. The banks all know that it would be impossible for the broker to pay all loans which do not renew at the renewal rate, and even if the broker tried to pay them, the sudden demand for money would force the rate up higher than before. In addition to this feature, many financial institutions do not loan above 6 pe..