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We suggest that this Authority be composed of two members appointed by the President; two Cabinet officers, who might well be the Secretary of the Treasury and the Secretary of Commerce; one person appointed by the Open Market Committee of the Federal Reserve System; and two persons representing stock exchanges, one to be designated by the New York Stock Exchange and the other to be elected by the members of those exchanges in the United States, other than the New York Stock Exchange, that primarily offer a market place for securities. Such an Authority would not only represent the interests of the public but would have the benefit of the opinions and advice of two Cabinet officers, and through its connection with the Open Market Committee of the Federal Reserve Systern would be in close contact with credit conditions throughout the United States. It would also include men who had detailed technical knowledge of exchange operations.

We suggest that this Coordinating Authority be given plenary power to control the amount of margins which members of exchanges must require and maintain on customers' accounts; and further, that it should have plenary power to require stock exchanges to adopt rules and regulations preventing not only dishonest practices but also all practices which unfairly influence the price of securities or unduly stimulate speculation. Without attempting to define, at this time, the scope of these powers, we believe that they should include the power to fix the requirements for the listing of securities; the control of pools, syndicates and joint accounts and also options intended or used to influence market prices; the power to control the circulation of rumors or statements calculated to induce speculative activity, the use of advertising and the employment of customers' men or other employees who solicit business; to the end that all practices which may tend to create unfair prices may be eliminated. This authority should also have power to study, and, if necessary, to adopt rules in regard to those cases where the exercise of the function of broker and dealer by the same person is not compatible with fair dealing and to adopt rules in regard to short selling, if it should become convinced that regulation of this practice is necessary.

These suggestions represent the considered view of the New York Stock Er. change and I have been authorized to present them by the Governing Committee of the Exchange. I can say confidently that the Exchange will cooperate fully in attempting to prevent unwise or excessive speculation and abuses or bad practices affecting the stock market.

I appreciate the courtesy which the Committee has extended to me in affording me this opportunity to state fully the position of the Exchange in regard to this bill. I trust that the Committee will feel free to ask for any information which it may desire from the Exchange or its officials. I can assure you that all of the records of the Exchange of every character and nature will be made fully available to you and, in addition, not only the officials of the Exchange but all of its technical experts are at your disposal.

COMMITTEE Exhibit No. 116, FEBRUARY 26, 1934 Mr. Chairman, as I stated in my opening remarks, the New York Stock Exchange has constructive suggestions to make in regard to the pending legisla. tion for the regulation of stock exchanges. These suggestions are naturally subject to the question of the constitutional power of Congress to enact legislatioa regulating the business of stock exchanges and their members.

The purposes to be accomplished by such legislation are: First, the preventiva of fraudulent practices affecting stock exchange transactions; Second, the prevention of the use of an excessive amount of credit for security speculation; ani Third, the elimination of practices which, though not fraudulent, permit the manipulation of security prices.

The most important question in regard to any gulatory gislation is the determination of what body shall exercise the regulatory power. Obviously this body, whether it be called a commission or an authority, must include persous who are familiar with credit conditions throughout the United States and also persons who are fully conversant with the technical problems connected with the operation of stock exchanges. In addition, a majority of the members of such a body should be outstanding individuals who would represent the public. Having this in mind, we suggest the creation of a Stock Exchange Coordinating Authority to consist of seven members.

We suggest that this Authority be composed of two members appointed by the President; two Cabinet officers, who might well be the Secretary of the Treasury

and the Secretary of Commerce; one person appointed by the Open Market Committee of the Federal Reserve System; and two persons representing stock exchanges, one to be designated by the New York Stock Exchange and the other to be elected by the members of those exchanges in the United States, other than the New York Stock Exchange, that primarily offer a market place for securities. Such an Authority would not only represent the interests of the public but would have the benefit of the opinions and advice of two Cabinet officers, and through its connection with the Open Market Committee of the Federal Reserve System would be in close contact with credit conditions throughout the United States. It would also include men who had detailed technical knowledge of exchange operations.

We suggest that this Coordinating Authority be given plenary power to control the amount of margins which members of exchanges must require and maintain on customers' accounts; and further, that it should have plenary power to require stock exchanges to adopt rules and regulations preventing not only dishonest practices but also all practices which unfairly influence the price of securities or unduly stimulate speculation. Without attempting to define, at this time, the scope of these powers, we believe that they should include the power to fix the requirements for the listing of securities; the control of pools, syndicates and joint accounts and also options intended or used to influence market prices; the power to control the circulation of rumors or statements calculated to induce speculative activity, the use of advertising and the employment of customers' men or other employees who solicit business; to the end that all practices which may tend to create unfair prices may be eliminated. This authority should also have power to study, and, if necessary, to adopt rules in regard to those cases where the exercise of the function of broker and dealer by the same person is not compatible with fair dealing and to adopt rules in regard to short selling, if it should become convinced that regulation of this practice is necessary.

These suggestions represent the considered view of the New York Stock Exchange and

I have been authorized to present them by the Governing Committee of the Exchange. I can say confidently that the Exchange will cooperate fully in attempting to prevent unwise or excessive speculation and abuses or bad practices affecting the stock market.

I appreciate the courtesy which the Committee has extended to me in affording me this opportunity to state fully the position of the Exchange in regard to this bill. I trust that the Committee will feel free to ask for any information which it may desire from the Exchange or its officials. I can assure you that all of the records of the Exchange of every character and nature will be made fully available to you and, in addition, not only the officials of the Exchange but all of its technical experts are at your disposal.

STOCK EXCHANGE PRACTICES

FRIDAY, MARCH 16, 1934

UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met at 11 a.m., pursuant to call of the chairman following adjournment on Monday, March 12, 1934, in room 301 of the Senate Office Building, Senator Duncan U. Fletcher presiding. Present: Senators Fletcher (chairman), Bulkley, Bankhead,

)

, Adams, Goldsborough, Townsend, Carey, Couzens, and Kean.

Present also: Roland L. Redmond, counsel to the New York Stock Exchange.

The CHAIRMAN. The committee has been in executive session, but we will now hold an open session for a few minutes to receive some data from the New York Stock Exchange. Mr. Whitney, do you wish to make a statement before the committee with reference to some of these records requested by the committee?

Mr. WHITNEY. Yes, Mr. Chairman.

STATEMENT OF RICHARD WHITNEY, PRESIDENT OF THE NEW

YORK STOCK EXCHANGE Resumed

The CHAIRMAN. You may proceed, Mr. Whitney.

Mr. WHITNEY. I will be very brief, Mr. Chairman. What you see before you on the committee table are compilations taken off the originals now in your hands, of the remaining aircraft stocks. As you will recall we turned in to you the first compilations of United Aircraft & Transportation Corporation stock on Monday last. Now we turn in to you compilations of additional stocks, these compilations, as I have said, having been taken from the original records in your hands: Aviation Corporation of Delaware common stock.

The CHAIRMAN. The compilation will be received and marked for identification.

(The compilation covering Aviation Corporation of Delaware common stock was received and marked "Whitney Exhibit No. 31 for identification, Mar. 16, 1934 ", and the same will be kept in the files of the committee.)

Mr. WHITNEY. Next is the compilation of Bendix Aviation Corporation.

The CHAIRMAN. The same will be received and marked for identification.

(The compilation of Bendix Aviation Corporation stock was marked “Whitney Exhibit No. 32 for identification, Mar. 16, 1934 ", and the same will be placed in the files of the committee.)

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Mr. WHITNEY. Next is the compilation of Curtiss-Wright common stock.

The CHAIRMAN. The same will be received and marked for identification.

(The compilation of Curtiss-Wright Corporation common stock was marked " Whitney Exhibit No. 33 for identification, Mar. 16, 1934 ", and the same will be retained in the files of the committee.)

Mr. WHITNEY. Next is the compilation of Curtiss-Wright class A stock.

The CHAIRMAN. The same will be received and marked for identification.

(The compilation of Curtiss-Wright class A stock was marked “Whitney Exhibit No. 34 for identification, Mar. 16, 1934 ", and the same will be retained in the files of the committee.)

Mr. WHITNEY. Next is the compilation of Douglas Aircraft Co.

The CHAIRMAN. The same will be received and marked for identification.

(The compilation of Douglas Aircraft Co. stock was marked

Whitney Exhibit No. 35 for Identification, Mar. 16, 1934 ", and will be retained in the files of the committee.)

Mr. WHITNEY. Next is the compilation of National Aviation Corporation stock.

The CHAIRMAN. The same will be received and marked for identification.

(The compilation of National Aviation Corporation stock was marked “Whitney Exhibit No. 36 for Identification, Mar. 16. 1934 ", and will be retained in the files of the committee.)

Mr. WHITNEY. The next compilation is that of North American Aviation, Inc., capital stock.

The CHAIRMAN. The same will be received and marked for identification.

(The compilation of North American Aviation, Inc., capital stock was marked " Whitney Exhibit No. 37 for Identification, Mar. 16, 1934 ", and will be retained in the files of the committee.)

Mr. WHITNEY. Next are two supplemental compilations of United Aircraft & Transport Corporation stock.

The CHAIRMAN. The same will be received and marked for identification.

(The first supplemental compilation of United Aircraft & Transport Corporation stock was marked “Whitney Exhibit No. 38 for Identification, Mar. 16, 1934 ", and the same will be retained in the files of the committee.

(The second supplemental compilation of United Aircraft & "Transport Corporation stock was marked “Whitney Exhibit No. 38-A for Identification, Mar. 16, 1934 ", and the same will be retained in the files of the committee.)

Mr. WHITNEY. The last is a compilation of Wright Aeronautical Corporation stock, which completes the compilations to be filed.

The CHAIRMAN. The same will be received and marked for identification.

(The compilation of Wright Aeronautical Corporation stock was marked "Whitney Exhibit No. 39 for Identification, Mar. 16, 1934 ", and the same will be retained in the files of the committee.)

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