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be submitted to the Commissioner such data as will enable him to determine whether the sale of such security will be fair, just, and equitable to the buyer thereof. Such securities must be approved for trading by the Commissioner.

Rules further provide the procedure and requirements of approval for trading. So you may see that, although our exchange has no full listing stock requirements, we have at all times been comprehensively regulated by California's “blue-sky” law and the State corporation department. Most emphatically, may I say, we have been regulated by a governmental authority and because of that reason, we have not pressed our corporations for full listing.

No member of the San Francisco Curb Exchange has had his license revoked or suspended by the Commissioner, nor have any verified or written complaints been lodged against any member of our exchange for the period investigated.

Our exchange provides a regulated market for local stocks, which would have no other than the usual unsatisfactory street market. Many companies do not formally list, because of their utter indifference to the market for their securities, after having completed their public financing. Others cannot afford the listing fees. I think the most frequent reason to be given is that of indifference. Several issues listed on major markets in the East are also admitted to trading. Only such stocks as have a genuine local public interest are so admitted to trading. This trading is demanded, due to the time difference between eastern markets and the Pacific coast, where, during daylight saving, the New York market closes at 11 o'clock. A business man on the Pacific coast hardly arrives at his office when the New York market is closed. The afternoon market in San Francisco, which lasts until 2:30 o'clock, gives him ample time in which to consummate the purchase or sales of securities without having to wait for the next day.

As a matter of interest, on days of important announcements from the President, or important announcements from corporations, we have had orders from all over the world coming in to the afternoon session in San Francisco.

The question may arise as to why we continue to admit a stock which has become inactive over a long period. I shall attempt to give a good reason.

The Argonaut Mining Co., one of California's famous gold mines, with 43 years of operation behind it, has been listed since 1929. There were no sales until 1930, when its price range was $1.30 to $1.35. In 1931 and 1932 there were no sales; 1933 witnesses the revaluation of gold and a tremendous increase in the earnings of this mine. Earnings were nil in 1932; $1 a share net in 1933 and it is estimated that $2 may be earned in 1934. The stock enjoyed a trading volume of 20,145 shares in 1933 and a price increase from $1.75 to $4.25. The trading this year so far has been very substantial and its current market is around $8. The company has always been well financed, having at present current liquid assets of 10 times its current liabilities, and we could see no reason in the past to remove such a stock, merely because its current earnings were negligible or that its market was dead.

We believe we have well served the public in retaining this stock and many others in the same category, without listing fees, which, in its years of no earnings, it would not have felt justified in paying.

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In an over-the-counter market transaction, one, acting as a dealer or principal, pays what he feels inclined to pay and sells for what he can get. The spread is often notoriously wide. The opportunity for verifying a specific transaction is most difficult. An excellent example is the present over-the-counter market in eastern banks and insurance company stocks. In these stocks, valued at prices ranging from $10 to $50 a share, the spread runs from 1% points ($150 on 100 shares) to 2 points ($200 on 100 shares). Do you relize, gentlemen, that in many of these stocks that spread is more than the yearly dividend?

I am attaching a clipping from the Washington Herald of March 2, giving the over-the-counter New York bank stock market of the preceding day. Most illuminating-reading, in part, as follows:

BANK STOCKS

NEW YORK, March 1 (I.N.S.).—Quotations on the following securities are obtained from the Security Dealers Association of New York. There are no official quotations. This is a bid-and-ask market, and the actual sale of securities is often subject to negotiations.

It is our decided opinion that it is in the public interest that trading in the so-called unlistedsecurities should be permitted on an organized exchange, where sufficient data is on file to give the investor substantial information in respect to the securities in which he may be interested.

We wish to make most plain the fact that we do not oppose regulation if it be borne in mind that acts regulating the sale of securities are comparatively new in the law, that it is only through trial and error that regulation may be developed to the point of giving maximum protection to the investor, and that only a minimum burden should be imposed upon legitimate business. We must of necessity voice our opposition to the bill in its entirety, as it would destroy our exchange and throw our stocks to the costly system of the over-the-counter market.

Therefore we propose the following amendments, which will permit the ultimate presentation to the Federal Trade Commission of the curb exchange right to maintain an unlisted market under proper regulation.

The curb exchange requires two amendments peculiar to its transactions and apart from amendments required by stock exchanges, namely, with respect to dealing in unlisted securities covered by the first amendment and to the dealing in registered New York securities covered by the second amendment. They are as follows:

First, at the very beginning of section 11 (a), page 22, add the words "except as prescribed by the rules and regulations of the Commission.

Second, at the end of section 11, page 25, add new subsection entitled (d) [reading]:

Nothing herein shall be deemed to prohibit transactions on any national securities' exchange, if permitted by its rules, in securities not registered thereon, but for which a registration is effective on any other national securities' exchange.

We also endorse the spirit of Mr. Whitney's plan for the creation of a Stock Exchange Coordinating Authority to exercise regulatory power. Such a plan would permit the flexibility to deal fairly with differing conditions in different parts of the country.

BANK STOCKS

New YORK, March 1 (I.N.S.).—Quotations on the following securities are obtained from the Security Dealers Association of New York. There are no official quotations. This is a bid and ask market and the actual sale of securities is often subject to negotiations.

Two-thirty p.m. bid and as prices with Wednesday's closing bid price for the leading bank stocks follows:

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CHICAGO, March 1 (I.N.S.).—Hogs 15,000; 5@10c higher; top, $4.70; bulk, $4.25 @ $4.60; heavy, $4.25@4.65; medium, $4.35@4.70; light, $4.30 @4. 70; light lights, $4.25@4.60; packing sows, $3.75 @4; pigs, $2.50 @3.50. Holdovers, 5,000.

Cattle—7,000; steady. Calves, 2,000; steady. Beef steers, good and choice, $6@7.35; common and medium, $4@6; yearlings, $6.50 @7.50. Butcher cattle: Heifers, $3.50@6.25; cows, $2.75 @4; bulls, $2.50@4; calves, $4@7.50; feeder steers, $3.50@5.25; stocker steers, $3@4; stocker cows and heifers, $2.50 @4.

Sheep—10,000; steady. Lambs, $9@10; common, $5@7; yearlings, $7@ 9.50; feeders, $7@8; ewes, $3@5.50.

CLEVELAND LIVESTOCK

CLEVELAND, Ohio, March 1 (I.N.S.).—Hogs-Receipts 1,000; opening trade active; steady to 10c lower; good to choice, 150-220-pound hogs moving to Government buyers at $5; pigs and roughs steady.

Cattle-Receipts 250; supply largely common to medium steers and heifers, bulk selling at $4@5.50; few good steers, $6.25; cows, steady trade slow.

Calves-- Receipts 400; trade slow; 50c lower on all grades; top and bulk choice vealers, $8; medium to good kind, $6@7.50.

Sheep-Receipts 1,000; opening trade slow; fat lambs 10c lower; extreme top, $10.25, paid for choice wool lambs; sheep active and steady.

BUFFALO LIVESTOCK

EAST BUFFALO, N.Y., March 1 (I.N.S.).—Hogs, 1,400; holdovers, 1.77. Market not fully developed; scattered sales, 240–260 lb. selections, around steady at $5.25; holding bulk, desirable 160-240, around $5.25; few bids, $5.10 @ 5.15.

Cattle-125, mostly cows; steady. Cutter grades, $2 @ 3.

Calves—75. Vealers, strong to 50c higher; good to choice, $8; sparingly, $8.50; common and medium, $4.50 @ 6.50.

Sheep-200. Lambs unchanged. Good to near choice woolskins, $10.25; common and medium, $8.25 & 9.50; shorn lambs held $8.75; mixed sheep, $3.50 @ 5.

SILVER MARKET

NEW YORK, March 1 (I.N.S.).—Handy and Harman quoted foreign bar silver in New York at 4644 cents, off Yo cent, and domestic silver at 6478 cents, unchanged. Bar silver in London was quoted at 20 9-16 pence, off y penny.

Mr. PETTENGILL. Mr. Chairman, one brief question.
The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. You say that all brokers holding membership in your exchange receive a license from the State of California ?

Mr. JOHNSON. Yes, sir.
Mr. PETTENGILL. Together with a penal bond?
Mr. JOHNSON. Penal bond?
Mr. PETTENGILL. A security bond.
Mr. JOHNSON. A security bond; yes, sir.

Mr. PETTENGILL. To whom does that bond run; to the State, or the customer or broker?

Mr. JOHNSON. I believe that the customer is indemnified to the amount of the bond, which is $5,000.

Mr. PETTENGILL. And what does the bond cover?

Mr. JOHNSON. Well, in case of fraud on the part of the broker, the customer could be indemnified up to the amount of the bond, which is $5,000.

Mr. MAPES. Mr. Chairman
The ChairMAN. Mr. Mapes.

Mr. MAPES. I wish you had time, Mr. Johnson, to tell us something about what the provisions of the California law are and how you are restricted by that law; but without going into detail, I would like to ask how long the law has been in effect?

Mr. JOHNSON. The present law was enacted in 1931 and is an improvement upon the law which was in effect at that time; much more drastic. I have a copy of it that I would be very glad to leave with the committee.

Mr. MAPEs. The present law is much more drastic than the old one? Mr. Johnson. Yes, sir; than the preceding law.

Mr. MAPES. Has your exchange found that it was unduly limited in its activities by the enactment of the law?

Mr. Johnson. No, sir.

Mr. Mapes. Have you any particular criticism to make of the California law as it restircts your movements?

Mr. JOHNSON. No, sir.
Mr. Mapes. Have you found it unduly hampering in your business?

Mr. JOHNSON. Not at all, sir. We are trying to conduct our business in the public interest and have not found it at all restricting.

Mr. Mapes. Well, you approve of some such law as the California law?

Mr. Johnson. I do not fear any reasonable regulation at all in the public interest.

Mr. MAPES. You think this California law is in the public interest? Mr. JOHNSON. Yes, sir.

Mr. MAPES. And something of that kind you certainly approve of, as I understand you?

Mr. JOHNSON. Yes, sir.

Mr. LEA. I understand your exchange does not license corporations on their own initiative, but only on the initiative of a member of your exchange.

Mr. Johnson. Mr. Lea, we have no provision whereby a corporation might come to us. A corporation might come to a member and that member can make application. And, on the other hand, if any Pacific coast security is dealt in on the street in any volume whatsoever, a member may go to the corporation and get the information on that security and list it without the permission or the desire on the part of that corporation to list, our theory being that we can protect the

public interest by having a regulated market for those securities. The CHAIRMAN. We are very much obliged to you, Mr. Johnson. Mr. JOHNSON. I also with to submit this for the record:

ADDITIONAL SUGGESTED AMENDMENTS TO THE NATIONAL SECURITIES EXCHANGE

ACT OF 1934

In addition to the amendments previously suggested by the writer in the interest particularly of the San Francisco Stock Exchange and its members and member firms, including bank and associate members, and likewise in the interest of the San Francisco Curb Exchange and its members, the following additional amendments to the National Securities Act of 1934 are suggested:

Subdivision 10 of section 3, containng the definition of "security”, should be amended by striking out the words “any direct obligation guaranteed as to principal or interest by the United States”, appearing in lines 8 and 9, on page 7, and by the addition of the words “any security issued, or guaranteed as to principal or interest, by the United States or any Territory thereof or by the District of Columbia or by any State of the United States, or by any political subdivision or municipality of a State or Territory or by any public instrumentality of or in States or Territories exercising essential governmental control, or by any corporation created and controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States; or any security issued by or representing an interest in or a direct obligation of a Federal Reserve bank.”

This definition is largely an adaptation of subdivision 2 of section 3 of the Securities Act of 1933 except that we have not included in the securities excluded these of any National or Štate bank. The reason for the amendment is quite apparent in that (1) a market must be created for these securities; (2) the securities are considered as prime collateral and should not be in the class of unregistered securities or in the class of securities upon which 60-percent margin is required, and (3) the whole tenor of the act would be to preclude registration of any of these securities inasmuch as the States, municipalities, political subdivision, etc., could not comply with the provisions of sections 11 and 12 of the act with respect to registration. An examination of the requirements of registration as set forth in these sections immediately discloses that the enumerated securities could not be registered.

Section 6 (a) should be amended by the addition at the end thereof, page 12, line 8, of the following: ", except as prescribed by the rules and regulations of the Commission." This amendment eliminates the present proposed absolute prohibition against loans being made on unregistered securities and would permit loans thereon by a member, but only subject to the rules of the Commission.

Subdivision 6 (d) should be amended by striking out from lines 16 and 17 on page 13, the following: “the time within which initial and subsequent payments shall be made by the custɔmer.'

Under the provision as now written the Commission must prescribe by rules and regulations the time when the first payment and all subsequent payments must be made by a customer in the purchase of securities. This is an unnecessary regulation in view of the loan restrictions of the act, even as amended, and the Commission's power to regulate the loans. If these words were to remain in the act it is possible that they would automatically exclude any purchase and sale of securities except for investment.

Section 8, subdivision (5) should be amended by striking out the words commencing with "and does not prove” page 17 line 1 and ending with the words "false or misleading;” page 17 line 3, and inserting in lieu thereof, “and if such person knows, or in the exercise of reasonable care should know, at the time of circulating or disseminating such information, that the same is false or misleading.".

This amendment is in accord with normal rules of law that the burden of proving neglect or intentional misrepresentation should rest upon the party

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