Part 10

=13.= To _corner the market_ is to offer to buy and be prepared to carry out your offer, for an amount more than is offered for sale, thus causing the price to advance. Sometimes this is done by large operators to their advantage and sometimes, in spite of their large purchases, which encourage a rising market, the prices fall before their deals are consummated, and they are left high and dry with a considerable loss instead of a large profit. The _bull_ who tries to run a corner has a strong foretaste of what it means to advance sensationally, a staple article of consumption. Stocks and bonds may be hoisted ever so high; real estate may be boomed to far beyond its intrinsic or even potential worth—the public has no objection; the process is, in fact, rather pleasing to it. A lift in cereals or cotton above the normal lines encounters many protests and the higher the lift, the more savage the protest. This of course does not include the farmer or planter, unless he has disposed of his output; then he willingly enough joins the chorus of protestation.

VALUE OF THE WIRE

=14.= The telegraph is a very important factor to the grain and stock broker, as a large majority of their business is done by wire. Many of their clients are distributed through the country and keep close watch of the fluctuations of the market, sending their orders by wire, at what they consider an opportune time.

Most brokerage firms have a number of customers outside of the city, and these customers as well as those in the city who are large buyers, keep a considerable deposit on hand with the broker at all times. This deposit is frequently augmented by advantageous sales or decreased by losses, commissions, and interest charges. Reports of the condition of customers' accounts are made with frequency and any customer who finds that he has more money in the hands of the broker than is considered necessary, can secure part of the same by asking, or if he desires to close all transactions, the total amount due him is paid over at once. All amounts thus deposited are credited to customers' accounts and properly taken care of through the bookkeeping department.

SETTLEMENT OF CONTRACTS BY OFFSET

=15.= To quote from the rules of the Chicago Board of Trade:

In case it shall appear that the delivery of any outstanding trade or contract between members of the association may be offset by some other corresponding trade or contract, made by the parties with other members of the association; and the parties to such trade or contract, or their authorized agents, consent to such offset, such trade or contract shall be deemed to have been settled; any balance between the current value of the property covered by such trade or contract, and the several contract prices shall be due and payable immediately by the party from whom such balance may be due, to the party entitled to receive the same under his contract.

This is the rule applying to ring settlements hereinbefore described. To quote further:

"MARKET VALUE TO BE POSTED

The current market value of the property contracted for shall be conspicuously posted, at a stated hour each day, under the direction of the Board of Directors, in the Exchange Hall and in the Settlement Room of the Board, which posting shall serve as a basis for the adjustment of all contracts settled, as herein provided on that day.

"ADJUSTMENT OF BALANCES ON SETTLEMENT

In order to facilitate the operation of this section, each member is required to keep a _settlement book_, in which shall be entered the names of parties with whom settlements have been made and the dates and terms of the trades included in such settlement, and the terms of such settlements, and the prices at which the commodities were originally sold or purchased, and the amounts due to or from him or them on each separate settlement, also the net amount due to or from him or them on all settlements.

"CLEARING HOUSE AND REPORTS

The Board of Directors is hereby authorized to provide a suitable office, with the necessary employes, to which members shall be required, at stated hours each day, to make reports, showing the net balance due to or from each member, as shown by such settlement book, and also the general balance due to or from him or them upon all such settlements; each report to be accompanied with an acceptable check for the balances, if any, due from him or them on the contracts so settled; whereupon, if said report is found to be correct, as compared with other reports rendered him, the person in charge of said office shall, at a stated hour each day, pay to each of the parties making such report any balances which he may have collected, and which shall appear to be due to them by said reports, less such charges as shall be prescribed by the Board of Directors as compensation for the services of said office.

"CONFIRMATION OF TRANSACTIONS FOR FUTURE DELIVERY, ETC.

It shall be the duty of each member or firm making a transaction for future delivery of grain or flax-seed in five thousand or one thousand bushel lots, lard and pork in two hundred and fifty or fifty package lots, and D. S. short ribs and D. S. extra short clears in lots of fifty thousand or twenty-five thousand pounds, under the Rules of the Association, to confirm such transaction by sending to the clearing house a memorandum of the same by 6 o'clock P. M. of the day on which it is made; such memorandum shall be in writing, and shall state on its face the date of the transaction, the quantity and kind of property covered by the same, the month of delivery, the price, and the name of the party to whom sold or of whom bought, and shall be signed by the party or firm making the same. All transactions of the same date made with any member or firm may be included in one memorandum, and all such memoranda shall be sent to the clearing house by the member or firm making the same, in unsealed envelopes addressed to the member or firm with whom such transactions were made. It shall be the duty of the clearing house manager to assort and have ready for delivery by 8 o'clock A. M. of the following day, and to deliver, on application, all envelopes containing such memoranda as are left with him in compliance with this section.

There is a fine imposed upon any member failing to comply with the above provisions.

"FAILURE TO DELIVER OR RECEIVE ON CONTRACT

In case any property contracted for future delivery is not delivered at maturity of contract, the purchaser may, if he shall so elect, consider the contract forfeited; or he may purchase the property on the market for the account of the seller, by 1:15 o'clock P. M. of the next business day, notifying him at once of such purchase; or he may require a settlement with the seller at the average market price on the day of maturity of contract, and any damages or loss due to the purchaser, by reason of such purchase or declared settlement, shall be due and payable by the seller immediately.

In case any property contracted for future delivery is not received and paid for when properly tendered, it shall be the duty of the seller, in order to establish any claim on the purchaser, to sell it on the market at any time during the next twenty-four hours, at his discretion, after such default shall have been made, notifying the purchaser within one hour of such sale; and any loss resulting to the seller shall be paid by the party in default.

DEPOSITS TO SECURE THE FULFILLMENT OF TIME CONTRACTS

=16.= The rules of the board of trade provide that on time contracts, purchasers shall have the right to require of sellers as security, a deposit of ten per cent, which amount is based on the contract price of the property purchased; they are also further allowed to demand security from time to time to the extent of any advance in the market value above selling price. Sellers shall have the same right on property sold, and, in addition, any difference that may exist or occur between the estimated legitimate value of any such property and the price of sale. It is required that all securities shall be deposited with the treasurer of the association or with some bank duly authorized by the board of directors to receive such deposits. The board requires in each instance a memorandum which shall state the name of the depository, the date on which the deposit is made, the name of the depositor, and also the name or names of the party or parties in whose favor the deposit is to be made, together with the amount of such deposit in detail and also in the aggregate. The left-hand part of the memorandum is retained by the depository selected, the right-hand portion thereof being taken by the depositor after being duly signed by the person authorized to receipt for the said deposit, and without delay this memorandum must be placed in the office of the clearing house. A detail of this memorandum is shown in Fig. 1.

Upon the fulfillment or settlement of any contract or upon the closing of any contract—deposits upon which have been made—when the full adjustment of all differences relating to the same shall have been effected, the deposit shall be paid to the party depositing.

COMMISSIONS ALLOWED BY BOARD TO BROKERS

=17.= The commissions to be collected by brokers from customers are fully prescribed by the board of trade in each city and do not materially differ. While it will not be possible to give all the rates of brokerage or the charges allowed for buying, selling, or accounting, the commissions allowed on the Chicago Board of Trade for buying _or_ selling, or for buying _and_ selling, are as follows:

For the purchase, or for the sale, or for the purchase and sale by grade alone of wheat, corn, or oats, to be delivered in store, either for immediate or for future delivery, one-eighth of one cent per bushel.

For the purchase, or for the sale, or for the purchase and sale, by grade alone, of rye, barley, or flax-seed, to be delivered in store, either for immediate or for future delivery, one-quarter of one cent per bushel.

For the purchase, or for the sale, or for the purchase and sale of lard, six cents per tierce.

For the purchase, or for the sale, or for the purchase and sale of pork, five cents per barrel.

For the purchase, or for the sale, or for the purchase and sale of D. S. short ribs, or D. S. extra short clears, twenty-five cents per thousand pounds.

The minimum rates allowed upon the above transactions made for the account of members of the board are one-half of the foregoing minimum rates.

BOOKS AND FORMS USED

=18.= There are a number of ordinary forms, such as checks, drafts, receipts, requisitions, etc., that are common with most lines of business and used in the brokerage business, which will not be necessary to reproduce. Most brokers have all such forms printed or lithographed for their especial use with their name and address prominently displayed thereon.

ORDER BLANK

=19.= The first form of importance in connection with the accounting department of a brokerage firm is the _order_ of the customer. This must invariably be in written form with the signature of the customer and the order must be expressed in the plainest terms so that there is no possibility of misconstruction. As these orders are frequently received by wire, or often dispatched by wire to New York or other branch office for execution, blanks for the purpose, as shown in Fig. 2, are furnished to customers, those used for buying orders being printed in black and those used for selling orders being printed in red. These orders are made out by the purchaser or his authorized agent and should not only show the date of the order but also the time of the day it was given, which is frequently of great importance in an active market. Whatever margin is required by the broker upon the deal must be deposited by the client at the time the order is given, as without this protection, the broker will not proceed to execute the order. It is sometimes the custom for brokers to accept collateral covering a certain amount of margin, in which case the broker gives the customer a receipt in due form, holding the collateral as trustee until settlement of account. All orders are executed at the earliest possible moment after their receipt. Legitimate brokers are members of the board of trade often in various cities and have their representatives on the floor, during the business hours of the board, to buy or sell as ordered.

DEBIT AND CREDIT SLIP

=20.= As soon as the transaction is accepted by the broker, he gives to the customer a debit or credit slip showing the nature of the transaction, or it is sent by mail, as soon as possible after business hours; the charge or credit depend upon whether it is a purchase or a sale. The blanks for this purpose, as shown in Fig. 3, should be printed on different colored paper; the debit blank is usually on white and the credit blank on buff or yellow paper. If a client buys, the amount of his purchase appears as a debit to his account, with the commission added. He receives credit for whatever amount of margin he deposits, and the account stands thus until delivery, when the entire balance must be paid. If a sale is made by the client before the time of delivery, the amount of the sale is credited to his account, less the commission due for selling and any other charges. The difference in the account, whether it is an amount due from the broker to the client or from the client to the broker, is paid in cash as soon as the deal is closed.

DAILY RECORD SHEET

=21.= As a most perfect record must be kept of every transaction, the daily record sheets, as shown in Fig. 4, are of the greatest importance. This book is called the _daily journal_ as frequently as it is designated the _daily record_.

This book is most convenient when kept in loose-leaf form, as a small number of leaves may be kept in the binder for current use, and after the sheet is filled, it may be filed away for future reference. The size of the sheet is usually 16 by 14 inches, and it is ruled and printed to show date, remarks, shares, stock, price, charge stock account, commission, credit account of, and folio. The _purchase blank_ for this record is exactly the same with the exception that it is used to credit stock account instead of charging, and to charge customers' accounts instead of crediting. There should also be a _grain sales sheet_ and a _grain purchase sheet_, which differ slightly in the column headings but not necessarily in the ruling—_number of bushels_ taking the place of the column headed _shares_, and _kind of grain_ taking the place of _stock_, as shown in Fig. 5. There should also be a _sundries sales and purchase sheet_ for recording orders upon other commodities than grain or stock. Its form is the same as that shown with the exception that _amount_ takes the place of _shares_, and _commodities_ the place of stock in each form.

As soon as an order is received, it is entered upon the proper record with all of the particulars, and the postings to customers' accounts are made daily, but the posting to the general ledger accounts need not be made more frequently than once a month, unless it is desired to take off a general ledger balance at more frequent intervals.

GRAIN COMMISSION JOURNAL SHEET

=22.= In this connection it is advantageous for the student to study the journal form used by an exclusive grain commission company, Fig. 6. This form is used for recording the sales as they are made in a manner similar to that described in the daily record sheet. The form is loose-leaf and may be 11 by 14 inches in size, or if preferred could be made 16 by 14 inches, giving the advantage of a longer page. The necessity for a long or short page is determined altogether by the amount of business done by the house in one day, as it is the intention with this record to use one full page or more for each day's transactions. This journal bears the day and the date at the top of the page, and is ruled and printed to show columns for folio, names, number of sale, net proceeds, insurance, sack rent, freight and charges, commission, and total. The entries in this journal are made from the sales sheet, and the total amount is posted to the ledger for customers from this medium.

ADVICE OF PURCHASE OF SALE

=23.= A very important document used by commission merchants and brokers is the _advice_ or _notification to customer_ of their action in filling his orders. This advice is rendered daily to each customer and should be checked by him carefully, so that there may be no errors in the deals and no differences in opinion between the client and his broker. The advice would begin with the date and read something like this: "Mr. Geo. Bronson, Milwaukee, Wis.: We have this day bought for your account and risk, 100 shares American Car and Foundry (preferred) at 111⅛; 200 shares Canadian Pacific at 177; 100 shares Pullman at 187." On the lower part of the form, as shown in Fig. 7, are printed the rules of the house in regard to the order and it should be signed by some one in authority. If the customer accepts the same, it is an evidence that the transaction is according to orders.

STOCK RECORD

=24.= Owing to the fact that a very large amount of stock of various companies is being bought and sold continually by a brokerage firm, no book kept in the accounting department is of greater importance than the _stock record_. Not only is the broker's business with customers but it is also very largely with other brokerage concerns as he is buying and selling continually. Every share of stock which is bought or sold must be recorded in the stock record. This record shows: Record number, date, number of certificate, number of shares, from whom received, in name of, record number, number of shares, to whom delivered, and date of delivery, as in Fig. 8. It is not necessary in this book, to keep a record of either the price paid or the price at which sold, as this register is intended merely to show the disposition of the certificates of stock and whether they are still in the house, or if disposed of, to whom they have been delivered. It is needless to point to the necessity for the greatest care in keeping this record, as any errors might make it very difficult to trace the paper and result in loss, or at least considerable trouble for the house.

CASH BOOK

=25.= The general cash book for a brokerage firm in loose leaf should be sheet size 14 by 14 inches. In a bound book, it would not be necessary to have it more than 12 inches wide. In this particular business, it is not desirable to carry the general cash debit on one sheet and the general cash credit on another, although it might be advantageous in certain cases to run the grain in the general cash book and to keep a subsidiary cash book for the stocks, which might be run upon similarly ruled sheets, the total of the day's transactions being brought into the general cash at night. By doing this the posting clerk could be using one of the cash books while the cashier was working on the other.

At the heading of the general cash sheet appears the sheet number and either the date (providing one sheet or more is used for each day), or the month with an extra day column, next to the margin. The columns are ruled and printed to show stocks, grain, and general ledger on the debit side and the same on the credit side, with the posting columns and sufficient room for the names of customers in center, as in Fig. 9. In this cash book should be entered all payments for margin on purchases of either grain or stock, all deposits by customers, which should be carried into the column indicated by their account—if they deal in grain their account is in the grain ledger and if in stocks their account is in the stocks ledger. All items of receipts or expenditures, not from or to customers, should be entered in the general ledger column, except as shown in the subsidiary cash sheet called _office cash disbursements_. Cash book sheets should always be paged consecutively when made, and each sheet accounted for, if loose-leaf cash books are used.

The best binder to use for a loose-leaf cash book is a flat opening spring back holder, in which may be placed enough leaves to last for the month, to be used for the current work, and when the new month is started the sheets for the previous month are placed in a reserve binder—which should be of the sectional post variety—for reference. If the back of the binder is labeled as the front and the leaves are reversed when placed in the transfer binder, they will run consecutively as to pages and dates.

At the end of the month the totals of the grain ledger and stocks ledger are brought into the general ledger column and posted to the controlling account for that ledger.

OFFICE CASH DISBURSEMENTS

=26.= As there are a number of disbursements for office help, advertising, telegraph, etc., that should be kept separate from the general cash, it is very desirable to establish an _office cash fund_. This fund is started by charging to office cash in the general ledger a definite amount, say $500.00, which amount is drawn from the bank or set aside for special checking for the payment of all miscellaneous bills or drawings of principals on account of salary, also the drawings of salaried employes. This account may be as large as is required for the purpose, and when the office cash becomes depleted, more is drawn which can be added to the account. At the end of the month, a statement is made of the totals of the different columns which should be a duplicate of the office disbursement sheet. These totals are entered in the general cash posted therefrom, a check given for office cash disbursements for the amount of the interest, say $500.00, and credit given the account for the difference in the amount spent as shown by the statement.

The office cash disbursement sheet, shown in Fig. 10, should be 14 by 16 inches in size, with _sheet number_ and _month of_, in the heading. The box headings are as follows: Day, item, posting, general ledger, salaries, office help, advertising, private wire, tickers, telephone and telegraph, special commissions, rent, and sundries. The office cash balance should be kept independent of the general cash balance and, preferably, by another clerk.

Entries should be made as money is disbursed, with the proper vouchers for the same, to be turned in with the report.

The totals of the different accounts, having been entered in the general cash, are posted to the debit of their respective accounts in the general ledger.