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61ST C O N G R E S S )

2d Session

)

OTTMATI?

SENAIE

/ DOCUMENT

\

N o . 573

NATIONAL M O N E T A R Y COMMISSION

The History and Methods of
the Paris Bourse

BY

E. VIDAL

Washington : Government Printing Office

1910




NATIONAL MONETARY COMMISSION.

NELSON W. ALDRICH, Rhode Island, Chairman.
EDWARD B. VREELAND, New York, Vice-Chairman.
JULIUS C. BURROWS, Michigan.

JOHN W. W E E K S , Massachusetts.

E U G E N E H A L E , Maine.

ROBERT W. BONYNGE, Colorado.

PHILANDER C. K N O X , Pennsylvania.

SYLVESTER C. SMITH, California.

THEODORE E . BURTON, Ohio.

LEMUEL P . PADGETT, Tennessee.

HENRY M. TELLER, Colorado.

GEORGE F . BURGESS, Texas.

HERNANDO D. MONEY, Mississippi.

ARSENE P . P U J O , Louisiana.

JOSEPH W . BAILEY, Texas.

ARTHUR B . SHELTON, Secretary.

A. PIATT ANDREW, Special Assistant to Commission.




TABLE OF CONTENTS.
BOOK I.
Page.
3

GENERALITIES

BOOK II.
T H E B O U R S E . — T H E T R A D E R S . — T H E OPERATIONS

First
Division:
Bourses.—Merchandise
brokers.—Stockbrokers.—Curb brokers.—Securities
Second Division: The operations for cash
Third Division: Operations for future delivery
Fourth Division: On Exchange.—Concerning the negotiation
of bills of exchange and precious metals
Fifth Division: Bourses in the Departments

21

23
33
45
76
85

BOOK III.
JUDICIAL CONSIDERATIONS ON THE MONOPOLY OP STOCKBROKERS.

89

BOOK IV.
HISTORICAL AND ECONOMIC CONSIDERATIONS

First Division: The exchange market.—Origin of public credit.
Second Division
Third Division: The Council's decisions of 1724 to 1788.—The
financial market on the eve of the revolution
Fourth Division: The financial market during the revolution
Fifth Division: The nineteenth century

I

in

114
124
142
148
162




THE HISTORY AND METHODS OF
THE PARIS BOURSE.
By E. VIDAIV.

BOOK

I.—Generalities.
Page.

i. Transferable securities are products of industry, subject to the
general conditions of the production and exchange of wealth.
3-5
2. What is meant by a financial market?
5
3. Difference between fairs, markets, and the Bourse. Merchandise.
brokers and stockbrokers {courtiers et agents de change)
5-6
4. The Bourse is a public place, a public mart. Commerce in
France is free, but in the right belonging to the authorities to
keep order in a public place originated the right to regulate
the Bourse. Under the old regime, the selling of the right to
work was mainly the cause of the establishment of merchandise brokers and stockbrokers
6-9
5. The revolutionary period. The freedom of the market. Stockjobbing (agiotage) and its causes
9-16
6. Laws now governing the French financial market
16-17
7. Brief considerations on the "reorganization" of the French
market, effected in 1898
17-18
8. The grounds for the present organization have disappeared,
but the organization remains
18-20

(1) The author of the present work deems it necessary,
first of all, to connect the study of a financial market with
that of the totality of elements belonging to the field of
political economy.
Are the emission of fiduciary values and the trading
therein special phenomena? Or are they, on the contrary, subject to the general conditions of the production
and exchange of wealth?
Beyond a doubt, fiduciary values, more generally known
in France as valeurs mobilieres, i. e., transferable secu3




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ities,® are wealth created by m a n ' s industry, a n d circulating b y virtue of t h e general causes which create and
dominate commerce.
The producer extracts the raw material or transforms
it, in order to render it suitable to t h e requirements of t h e
consumers; the tradesman conveys the manufactured
product, or, as merchant, as commission agent, as broker,
or even as money lender, causes it to circulate. In t h e
same way there are producers, traders, and consumers of
transferable securities.
T h e producers of transferable securities are t h e financiers,
who negotiate with borrowing governments or with representatives of provinces or cities desirous of borrowing.
They decide upon t h e rates of interest, t h e conditions of
sinking funds, and the m a t u r i t y of the coupons. They
prepare and arrange the emissions; they do the same for
borrowing stock companies. Often, they even create
these stock companies; they lay down their by-laws, and
they secure for t h e m the executive and professional staffs.
They have as auxiliaries t h e guaranty syndicates and t h e
bankers—genuine dealers in transferable securities, who
b u y and sell for their own account. Dealers are likewise
those auxiliaries of commerce who are represented b y t h e
a
Article 516 of the Code civil: "All wealth (biens) is either transferable or ^transferable."
ART. 529. Transferable are, by the determination of the law, bonds and
shares which represent monetary claims or movable effects; the shares or
interests in financial, commercial, or industrial companies, even when the
real estate used in these undertakings belongs to the companies. These
shares or interests are deemed transferable with regard only to each partner,
as long as the company exists. Perpetual or life annuities paid by the
state or by individuals are also deemed transferable wealth according to law.

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History and Methods of the Paris

Bourse

brokers and commission merchants in securities, and who
trade for account of third parties in the public marts.
The capitalists, and even the speculators, are the consumers of transferable securities. Thus we see producers•,
dealers, and consumers in the domain of transferable
securities, just as may be seen producers, dealers, and
consumers in any other field of commodities.
(2) By a financial market, in the widest sense of the
word, is meant the totality of elements, either universal
or regional, which cooperate in the issuing and circulating
of transferable securities.
In a limited sense, we understand by a financial market
the public place in a city where dealings in securities are
carried on—the public place specially set apart for these
dealings. That public place is the Bourse.
Thus, the Bourse is a public place. This fact should be
constantly borne in mind. Only thus is it possible thoroughly to understand not only its history but also, in certain cases, aggregate of regulations and laws which control
its workings.
(3) Bourses differ from fairs and markets in that, according to the accepted usage on the bourses, articles need
not be exhibited to the buyer at the time the contract is
made, whereas the customary procedure at fairs and markets is different.a
The bourses themselves are divided into commercial
exchanges proper (bourses de commerce), where merchandise is dealt in—such as wheat, flour, spirits, sugar, etc.—
a
Thaller, Droit Commercial, 2d ed. No. 824.—Lyon-Caen et Renault,
Traite de Droit Commercial, T I, Nos. 20 and 328.

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and stock exchanges (bourses des valeurs), where securities
are dealt in.
On the commercial exchanges the brokers formerly
traded in merchandise, coins, bills of exchange, and deeds,
which are in some way the predecessors of modern securities. The commission agents operating on the bourses
were called brokers in exchange, provisions, and merchandise (les courretiers de change, denrees et marchandises).
Thus, a decree of Charles IX, of June, 1572, is called, " A
decree concerning brokers in exchange and provisions, as
well as cloths, silk, woolens, linens, leather, and other
kinds of merchandise, wines, wheat and other grains,
horses and all other kinds of cattle." a It is only since the
year 1639 that the functions of stockbrokers and merchandise brokers seem to have been separated. 6 Indeed, a
decree of the King's council of April 2, 1639, gives to the
brokers in exchange the name of agents de change (stockbrokers) . c
As we stated, it is the fact that the Bourse is a public
place which has determined its regulation. It is now
important to enlarge upon this statement.
(4) In France commerce is unfettered, and yet the
administration of stock exchanges is so overridden with
regulations as to constitute, in that regard, an exception,
a considerable derogation from common law.
Article 7 of the law of March 17, 1791, says: "Every
one shall be free to carry on such business, or to practise
such profession, as he may see fit, subject, however, to
such police regulations as have been or may be made."
a Manuel des Agents de Change, p. 7.
& Lyons-Caen & Renault, TraitS de Droit Commercial, T. IV, No. 872.
c
Manuel des agents de change, p. 15.
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History and Methods of the Paris Bourse
On September 17, 1807, Regnaud de St. Jean d'Angely,
when he tendered the draft of commercial law establishing a Code, expressed himself as follows:
" A t t h e beginning of Book I and under t h e title of
'General Provisions,' the drafters had laid down rules,
some of which are purely theoretical and superfluous.
Some others have been found more fit to belong elsewhere.
Thus, for instance, we have not thought it necessary to state
that in France everyone had the right to trade * * * ." a
Thus no one disputes t h a t t h e principle of freedom of
trade remains to-day one of the rights of man (except in
t h e politico-economical school which causes personal rights
to be swallowed up b y common rights). The principle
of freedom of t r a d e is a positive right, and is, in some way,
confirmed b y our constitutional laws. Indeed, one m a y
read in t h e preliminary draft of t h e constitutional laws of
1875 t h e following sentence, characteristic of M. Lepere's
style: "We have enacted a series of constitutional
provisions, without endeavoring to promulgate principles any
more than to formulate philosophical
statements.
Our
principles are known.
They are the principles of 178gy
which all succeeding governments have recognized.''b
However, notwithstanding the principle of freedom of
trade, the French financial market is not free. T h e profession of stockbroker (agent de change) is, as will be seen,
a monopoly. I t is not a State monopoly, like t h a t of
t h e sale of tobacco, gunpowder, matches, or of carrying
a
Expose" des Motifs du Code de Commerce. Corps Ligislatif.
i°Septembre, 1807, Archives Parlementaires, 1807.
b Session of February 17, 1875. Annates de V Assemblee Nationale, T.
X X X V I , p. 619. The principle of freedom of trade, started in 1791,
belongs to the principle of freedom to work proclaimed in 1789. (Ducrocq)
Droit Administratis T. I l l , p. 574.

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t h e mails; it is a monopoly held b y certain persons for
their own benefit. I t is a question of a private monopoly
intrusted to individuals.
W h a t is t h e origin of this phenomenon? W h y this exception? We have found this question quite brilliantly
elucidated in t h e pleadings of an eminent barrister, Dean
d u Buit, during a famous financial lawsuit. a
" T h e Bourse," said he, " i s a public m a r t where bills
and securities are purchased, just as fairs are public m a r t s
where grain and cattle and all kinds of merchandise are
purchased. These public marts, these bourses, are always
spontaneously and gradually formed, by one and t h e same
process—either in answer to requirements, or through
habits, or b y the cooperation of populations.
" T h e r e is, for instance, in a given place, a center for
gatherings, and, b y and by, as it becomes known t h a t
purchasers will be found there, everyone brings to this
center what he has to sell. Customs and regulations are
also spontaneously here established. The way to buy, or
t o sell, is learned; and thus is formed w h a t commercial
laws designate as local usage {Vusage de la place).
"Finally, t h e market is established; it develops, and,
as is necessarily t h e case with all t h a t is human, abuses
gradually make their appearance. These abuses become
glaring; stockjobbing sets in; quarrels, brawls, and disorders take place; and t h e central power investigates.
" T h e authorities interfere and t a k e t h e market in hand.
There are abuses, t h e y say; we are going to correct t h e m ;
a In the matter of the People and the Association of Stockbrokers v.
Messrs. de Buzelet & Perriere. Tribunal de la Seine 22 Fevrier 1907.
Compte rendu de la Cote de la Bourse et de la Banque du 24 Fevrier} 1907.

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History

and Methods of the Paris Bourse

there are fraudulent middlemen—we shall replace t h e m
by middlemen whom we ourselves shall appoint. We shall
m a k e regulations; they will be carried out in t h e market;
and t h u s we shall fix as a regulation t h a t when a p a r t y
desires to enter t h e market to dispose of securities, instead
of trusting himself to one of these intermeddlesome middlemen, who bring business into disrepute, he will address himself t o t h e middlemen whom we shall appoint.
Through t h e m alone he will be bound to t r a d e . "
Thus spoke Maitre du Buit; and it can not be denied
t h a t it is from t h e police authority t h a t the power of regulating t h e Bourse as a public place originates. B u t t h e
authorities have found some advantage in t h e exercise of
t h a t power of regulation. Under the old regime t h e Government considered itself as t h e master of persons, as t h e
owner of their right to work. Accordingly, it sold it to
them. I t often occurred t h a t it bestowed monopoly and
privilege on certain people who bought their benefits. The
traffic in charges, employments, offices, which was the
plague of t h e old regime, w^as practised also on t h e professions of merchandise broker and of stockbroker.
The monopoly of agents de change, in reality, was purchased from t h e Government under the old regime.
(5) The revolution takes place.
The law of March 17, 1791, which suppressed offices,
charters, and wardenships of t r a d e companies, also abolished the monopoly of the agents de change, which had
been established by a series of successive royal decrees
from 1724 t o 1788—decrees by which the privileges of
monopoly h a d been by turns bestowed, modified, withdrawn, restored, or confirmed.
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But the disturbances at home and abroad at the time of
the French Revolution, and the financial policy which, in
the domain of private property, manifested itself in the
suppression of stock companies,0 and, in the domain of
public credit, assumed the form of the emission of assignats, forced loans, and bankruptcy—all this caused a
terrible repercussion on the financial markets.
When the Bourse was closed for the first time (from
June 27, 1793, to April 25, 1795) and stock companies
were suppressed, rentes disappeared from the market. 6
It was not rentes and shares of stock companies that
attracted speculation, and for very good reasons. Instead, people dabbled in metals and in bills of exchange,
owing to two causes: The decline in the value of assignats,
and the scarcity of metallic currency.
It could not be otherwise. The phenomenon was
inevitable, and so it actually took place. Let us explain it.
If you piace in a safe 1,000 francs in napoleons, and
if you cause these 50 pieces of 20 francs each to be represented by 1,000 sheets of paper, these 1,000 sheets of paper
will theoretically, and yet quite accurately, be worth 1
franc each. If, instead of 1,000 sheets, 2,000 sheets are
issued, the value will normally have to fall to 50 centimes.
If 4,000 are issued, the value will fall to 25 centimes, and
so on. It may happen that the party who emits them
(especially if it be the Government) should become indignant because of the decline, and, in its ignorance, assign
the reasons for the decline to stockjobbing. But, whatever
a Decree of August 24, 1793.
b Because interest was paid in paper which was gradually shrinking in
value.
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History and Methods of the Paris Bourse
it may do, the paper will always tend to be worth
exactly that which it represents. If the Government
threatens those it holds responsible for the decline with
the worst punishments—the carcan, the pillory, death
even—it will be all in vain; the paper money will tend
to be worth only that which it represents. Perhaps
the paper may fall even below its intrinsic value, owing
to the endeavors of the issuing party to boost it; but
it will not really be the merchants who have caused the
paper to fall, nor even those in whose hands the paper is
found. The author of the phenomenon is the very party
issuing the paper.
The scarcity of metal currency is a corollary to the
decline of the paper. When paper declines, those who
have gold do not care to exchange it for paper steadily
depreciating in their hands. In consequence, they demand for a little gold a great deal of paper. Paper
declines, gold rises.
Finally, when a country is in the throes of a revolution,
home production of produce and of the most ordinary
objects of utility diminishes for the very reason of the
existing troubles. What is wanting, must be drawn from
abroad; but how should payment be made for it? In
gold, in coin used abroad—that is to say, in foreign bills
of exchange. This is a new reason for the rise in gold and
for a rise in the rates of foreign exchange which represents
gold. These grounds for a rise will be still greater when
the country is at war with one or several foreign nations.
Such is, in some way, the physiology of the double
economic movement—the decline of paper, and the rise
of metal. The speculations of the revolutionary times did
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not cause the decline of paper, nor the rise of metal; they
merely gave expression to the double phenomenon.
On this occasion the complete history of the French
Revolution can not be given; the domestic strife, the riots,
the famines, the wars of the Republic at its birth, need not
again be narrated. But what is very well known is that,
after a first issue of assignats for 400,000,000 French
livres, in pursuance of the decree of December 19, 1790,
other issues followed and successively brought up to
45,000,000,000 livres the amount of assignats issued. And
the first form of the double phenomenon made its appearance—the decline of paper.
The rise in metallic currency followed, aggravated by
the state of war between France and nearly the whole of
Europe combined. Famines occurred, and the Convention
authorized the supreme executive councils in the Departments to fix the maximum prices. Thereupon the merchants ceased to sell, and the manufacturers to produce, as
the maximum had taken no account of the cost price.
Stockjobbing assumed fabulous proportions. In order to
procure food, people disposed of their belongings. The
possessor of gold and silver or of bills of exchange dictated
the prices. a
The convention took alarm at the rise of the metallic
currency that accompanied the decline of the assignats—a
rise still more aggravating the situation at home and the
a

Rambaud. Histoire de la Civilisation Contemporaine en France, p. 291.
See also in the Magistral of M. Emile Levasseur, L'Histoire des classes
ouvrieres depuis 1789 a 1870 (7\ I, Ch. Les Assignats), the verification of
the repercussions caused by the decline of assignats. In 1795 a bushel of
potatoes was worth 200 livres in assignats; 1 pound of butter, 560 livres;
a new coat, 15,000 livres; and a " clean" hat, 500 livres (p. 224).

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History and Methods of the Paris Bourse
wars abroad. The convention attributed the rise of the
metal to stockjobbing, which, it should be borne in mind,
had thrown off all restraint. Thus, two laws were promulgated—the law of 18 Fructidor, year III (April 30,
1795), forbidding the selling of gold and silver anywhere
save on the Bourse, and that of 28 Vendemiaire, year IV
(October 20, 1795), on the regulations of the Bourse.
The law of 18 Fructidor, year III, provided the following in article 1:
" ARTICLE I . It is forbidden to anyone in Paris or in all
commercial cities where there is a bourse, to sell gold or
silver, either coined, or in bars or ingots, or manufactured;
or to make trades having these metals for basis, in public
places or premises other than the Bourse. All offenders
shall be sentenced to two years' imprisonment, to be exposed to public view, with a sign board on the chest bearing the word lagioteur' (stockjobber), and by the same
process all his property shall be confiscated for the benefit of the Republic.''
As to the law of 28 Vendemiaire, year IV, on bourse
regulation, it contained the following provisions:
" A R T . 6. The committees of public safety and of finance
shall appoint, within twenty-four hours, 25 stockbrokers;
20 of them shall be assigned to banking operations and
negotiations in foreign bills in Paris; the remaining 5 shall
be assigned to the purchase and sale of coined metal, and
gold and silver bullion; all of them shall be called 'agents
de change' (stockbrokers).
" A R T . 7. They shall be invested with a commission,
which shall be delivered to them at once by the committees

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of public safety and of finance, for the exclusive exercise
of the functions which are conferred upon them."
Thus the law of 28 Vendemiaire, year IV, reestablished
the stockbrokers, suppressed in 1791, as merchants vested
with a monopoly. The law reestablishes their power only
with regard to dealing in bullion and foreign bills.
Concerning bullion, article 13 of Chapter I stated:
"No statement concerning the sale or purchase of bullion shall be admitted in court except when made by the
5 appointed stockbrokers (Aucune declaration . . .
ne sera regu en justice que celle des cinq agents choisis
. . .),and no bargain shall be considered valid unless
transacted through their agency."
Concerning the negotiating of bills of exchange, article 8
of Chapter II stated:
"No statement concerning the negotiation of bills of
exchange, notes, or other commercial instruments shall be
admitted in court except when made by the 20 appointed
brokers, and no bargain shall be considered valid, unless
transacted through their agency."
It is, therefore, quite evident that the lawmaker of
Vendemiaire, year IV, was not guided by any respect for the
principle of freedom of trade; that there existed at that
time no principle but that of public safety. The life, the
liberty, and the property of citizens, were of little moment.
When the law of 28 Vendemiaire, year IV, was promulgated,
the amount of assignats outstanding was 17,879,337,898
French livres, and the total number issued during the last
three months was for the amount of 5,541,194,037 livres.0
a J. M. Fachan, Historique de la Rente Frangaise et des valeurs du Tresor,
p. 107.

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The assignat of i livre had declined during these three
months from 0.304 to 0.136.° A forced loan without
interest had been levied on " t h e rich, the selfish, and the
indifferent."6 Terrible famines had afflicted the country
and provoked bloody insurrections (12 Germinal, year III,
1 Prairial, year III, 13 Vendemiaire, year IV). England
had determined to fight France in every way; she did not
limit herself to merely organizing the Quiberon expedition.
The Marquis de Puysage had convinced Pitt of the advantages to be derived from flooding French territory with counterfeit assignats which the best engravers of Holland were
to manufacture with such consummate skill that " Cambon
himself would have accepted them." c A first issue of
these counterfeit assignats had taken place, and from
Berne 3,000,000,000 livres of these had been let loose.0
Meanwhile, on the 13 Fructidor, year III, a law which we
have already mentioned forbade the sale of gold and silver
elsewhere than on the Bourse, and almost immediately
after that, on the 28 Vendemiaire, year IV, another law on
bourse regulation declared valid, as far as bullion and
foreign bills of exchange were concerned, only such trades
as were made through a stockbroker. d
Let us now resume our account:
It is a settled fact that in France commerce is free.
This, however, does not apply to matters of brokerage
in securities, under the old law, the old monarchical
regime, because the Government considers itself entitled
a Ibid, p. 108.
b
Ibid, pp. i n and 115.
c Michelet, Histoire du XIX e siecle. Directoire in the chapter Quiberon.
d See further Ch. Gomel, Histoire financiere de la Legislative et de la Convention, Vol. II, Chap. II.
903120—10

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to dominate the public place where the Bourse is kept, and
to sell the right to work. That state of things ceased with
the revolution.
During the revolutionary period speculation was turned
to bullion and bills of exchange.
The convention then reestablished the monopoly of
stockbrokers, which had not long ago been suppressed,
because it ascribed the responsibility for the occurrences
to speculation. The monopoly was applied to bullion
and bills of exchange only.
(6) The laws which have in some way reconstituted the
legal prerogatives of bourse operations are: The law of
28 Ventose, year IX; the decree of 27 Prairial, year X,
and the Code de commerce, in 1807; the first two provisions
under the Consulate, the third under the Empire.
To-day they still govern the matters forming the subject
of the present work.
The law of 28 Ventose, year IX, and the Code de commerce of 1807 conferred on stockbrokers a monopoly of
trade in government and other securities susceptible of
being quoted.
By the law of April 28, 1816, stockbrokers, as well as
notaries, barristers practising before the Cour de cassation (highest court of appeal in France), lawyers, court
clerks, bailiffs (huissiers—officials who protest bills, notes,
etc.), merchandise brokers, and appraisers, acquire the
right to introduce their successors, in consideration of
additional surety bonds aggregating about 40,000,000
francs for the totality of these ministerial offices. As
to the stockbrokers, their bond, which had then been
100,000 francs, was increased to 125,000 francs. The
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interest on all these bonds was reduced from 5 per cent
to 4 per cent.
The stockbrokers become by that fact the owners of
their offices. The right to introduce a successor to the
Government is sold by the holder when he withdraws
from business. It is only thus that a stockbroker may
sell his office.
The law of 1816 has always been severely criticised.
The State can give back freedom to the trade in securities only by purchasing the commissions or indemnifying
the holders of these commissions. Well, as time goes on,
securities become more and more numerous, and consequently the commissions of stockbrokers must become
more and more valuable. Moreover, the more the State's
budgets tend to become complicated and to increase, the
less easy it becomes, in consequence, for the French Government to place the financial market on a footing consistent with the principle of freedom of trade.
Thus the Bourse in France rests legally on the basis of
these old laws of the years IX and 1807.
(7) Several attempts have been made to modify the
legal status of the Bourse, but they have failed for sundry
reasons. The last attempt took place in 1897. Two
Senators, MM. Trarieux and Boulanger, presented the draft
of a law which caused a discussion of the finance law of 1898.
During this discussion a question was raised relating to
the mode of collecting the tax on bourse operations, in
answer to which the Government declared, that, taking
for a basis the laws then in force, it would modify the
status of the financial market simply through decrees.

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Indeed, on J u n e 29, 1898, t h e Minister issued three
decrees, which, respectively, increased the number of
stockbrokers in Paris from 60 to 70, fixed a new table of
brokerage, and modified some articles in the decree of
October 7, 1870, concerning t h e number of members of
t h e Chambre Syndicate and concerning t h e time allowance
for settlements. The most striking modification was t h e
new provision of article 55 of t h e decree of October 7, 1890,
which created w h a t has been called the Solidarity of
Stockbrokers.
The totality of these measures received t h e n a m e
"Reorganisation du Marche Financier"
(reorganization of
t h e financial market), an incorrect designation, since
these decrees have brought no modifying element in t h e
bases of the bourse organization, as t h e present organization is no other t h a n t h a t of t h e year I X . B u t t h e use of
these terms aimed to cut short all endeavor toward a new
organization, a n d to suggest to public opinion t h e consideration t h a t it would be unwise t o demand new reforms
when a reorganization had b u t recently been effected.
(8) I t behooves us finally to call attention to one of t h e
most singular phenomena connected with the age of t h e
provisions governing t h e bourse.
None of the reasons which influenced t h e establishment
of the monopoly of stockbrokers exists to-day. No doubt,
other grounds have arisen to warrant their preservation,
b u t none the less singular is t h e phenomenon presented
by an institution outliving all the considerations which
determined its establishment.
Indeed, in t h e year I X , in t h e year X , and in 1807, a
fundamental consideration quickened t h e legislator—the
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History and Methods of the Paris Bourse
discredit fastened upon speculation. Operations for future
delivery were considered, if not as tabooed, at least as
having become impossible.
Thus it was that the broker was enjoined to have in his
hands at the moment of the trade both the securities of
the seller and the money of the buyer. (Art. 13 of the
decree of 27 Prairial, year X.) Finally, speculations were
directed toward bills of exchange and government securities; and, because it was considered necessary for the
economic welfare that official intermediaries be appointed
for the negotiation of bills of exchange, bullion, and government securities, article 76 of the Code de commerce
declared that the stockbrokers (agents de change) alone
could trade for account of others in bills of exchange,
or transact dealings in bullion brokerage and French
government securities. The official quoting of foreign
securities remained forbidden, in pursuance of the Council's
decree of August 7, 1785.
At present the prohibition restraining a stockbroker
from giving his services to short sellers has entirely disappeared. It was abolished by the law of March 28, 1885,
concerning contracts for future delivery. That same
law declared these kinds of contracts legal, even when
settled by paying the difference. On the other hand,
stockbrokers no longer negotiate a single bill of exchange.
The bullion brokerage, which could be concurrently carried
on by stockbrokers (agents de change) and merchandise
brokers (courtiers), either class by itself having the right
to trade, is free since 1866.
Further, as to government securities, and with especial
reference to French rentes, which represent government
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securities par excellence, it remains to be said that free
trading in them is tolerated, although not legally recognized, as will be seen later. Finally, it should be noticed
that a royal ordinance of November 23, 1823, abolished
the interdiction to quote foreign securities.
The monopoly of stockbrokers has, therefore, lost all its
grounds for subsisting.
Nevertheless, it still exists in law, and is, moreover,
sustained by it more strongly than ever.
This is a consideration which will acquire its full value
when the subject of the present work shall have been
treated in full.

20




BOOK

II.—The Bourse—The traders—The operations.

F I R S T DIVISION.—Bourses—Merchandise
brokers—Stockbrokers—Curb
brokers—Securities.
i. Commercial exchanges {Bourses de commerce)—Stock exchanges
{Bourses des valeurs)
2. The brokers on the commercial bourses—Stockbrokers {agents de
change) are the traders on the Bourse des valeurs
3. The functions of the stockbrokers
4. The curb brokers {coulissiers)
5. The exchange brokers {courtiers de change)
6. Which are the securities traded in on the Bourse—Government
loans—Certificates of private enterprises—Certificates for
stocks and bonds fully paid in and partially paid in
7. Certificates for stocks and bonds registered, registered as to
principal only, " to bearer"—Transfer and its mechanism, conversion of certificates " t o bearer" into registered certificates,
and vice versa

Page.
23
23-24
24-25
25-28
28

29-30

30-32

SECOND DIVISION.—The operations for cash.
8. Operations for cash {Operations au comptant)
9. Orders a t a fixed price {a cours fixe), at best {au mieux), at the
average rate {au cours moyen), on the floor {au Parquet)10. How orders for cash are given on the Coulisse {au marche en
Banque)
11. What amounts can be traded in for cash?—How long are orders
in force?
12. The quotation list, official quotation list, curb quotation list
{cote en Banque)
13. Settlement of operations for cash—Irregular, counterfeit, lost,
stolen certificates
14. Concerning interest accrued on certificates traded in
15. Certificates must be in order as regards stamps and taxes
16. Expenses—Concerning brokerage with the stockbrokers (on the
parquet), with the bankers {en coulisse)
17. The t a x on bourse operations—Receipt stamp—Fee for recording on the statements the numbers of the certificates purchased
18. Transfer and transmission fees

21

33
33 - 34
35
35-36
37-38
38-39
39
39
40

40-41
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Page.

19. Delays in delivering registered certificates. _
42
20. On the right of " execution*' (buying-in, or selling-out)
42-43
21. Delays in delivering certificates " t o bearer," on the right of " execution."
43-44
2 2. On deliveries and '' execution'' on the '' Coulisse "
44~45
THIRD DIVISION.—Operations for future delivery (a terme).
23. Operations for future delivery—Definition—Taking up securities—Delivering securities—Differences
24. Reports (loans for "carrying-over" operations)
25. Operations in certificates " when issued "
26. Options
27. Single options
28. Option against non-option
29. Non-option against option
30. Option against option
31. Usefulness of combinations above described
32. P u t and call (stellage)
33. Settlements—Option declarations—The clearing system
34. Mechanism of the clearing system—The making-up price (clearing price)
35. Some practical remarks—Nature of bourse orders
36. How long do orders remain in force?
37. Covers
38. On the amounts that may be dealt in
39. Discounting privilege (faculty d'escompte)
40. Small options
41. W h a t the quotation list shows
42. Fortnightly and monthly settlements
43. State of securities delivered on settlement days
44. Defaulting of brokers or of customers
45. Expenses—Transfers—Brokerages

45~47
47~49
49
49-51
5I-54
54~55
55~56
56-57
57~58
59-62
62-63
63-66
66-67
67
68
68
69
69
69-70
70-7 2
72
7 2 ~74
74-76

FOURTH DIVISION.—On Exchange—Concerning the negotiation of bills of
exchange and precious metals.
46.
47.
48.
49.
50.
51.
52.
53.

Generalities
Mission of the bill of exchange; its value as commercial currency.
Exchange fluctuations—"Gold p o i n t "
How the bill of exchange is made negotiable
Exchange quotations
" S h o r t p a p e r " and " l o n g p a p e r "
Special functions of the " l o n g p a p e r ; " its "pensioning"
Different methods of quoting; units quoted

22

76
76-77
77-78
78-79
79-80
80-81
81-82
82-83




History and Methods of the Paris Bourse
Page.

54. How quotations are
55. How exchange is negotiated
56. Dealings in precious metals.

fixed

F I F T H DIVISION.—Bourses in the

83
83-85
85

Departments.

57. Generalities
58. Bourses " a parquet," and bourses without " parquet"

85-86
86-88

F I R S T DIVISION. Bourses.—Brokers, stockbrokers {agents de change), curb
brokers (coulissiers).—Kinds of securities dealt in.

(1) The Bourse is a public market for merchandise and
securities. It is the meeting place for those having to
deal in merchandise or securities, either for their own
account or for the account of their constituents. In the
case of merchandise proper—wheat, flour, spirits, etc.—
the bourse is usually called Bourse de Commerce (a commercial bourse). In the case of securities the bourse is called
Bourse des Valeurs (a stock exchange).
The operators on the Bourse de Commerce are merchandise brokers {courtiers en marchandises). The profession
of merchandise broker is free, but this has not always
been the case. It was a monopoly under the old regime.
It was made free in 1791, monopolized again in the
year IX of the Republic—that is, at the time when the lawmakers established commercial exchanges (28 Ventose),
as well as the institution of stockbrokers—then freed
again by the law of July 18, 1866.
(2) The operators on the Bourse des Valeurs are stockbrokers {agents de change), whose profession is monopolized.
It was monopolized under the old regime, like the profession of merchandise broker, with which it was long confounded. It was made free by the law of March 17, 1791,
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a n d monopolized again by t h e law of 28 Ventose, year I X .
B u t while, in 1866, t h e law again freed merchandise
brokerage, t h e profession of stockbroker remained a
monopoly. I t is so still.
(3) The stockbrokers {agents de change) are not t h e
only ones to operate on the Bourse as brokers, as will be
seen later. The following, however, are t h e prerogatives
of t h e stockbrokers:
1. As brokers they have t h e exclusive right t o t r a d e in
government or other securities susceptible of being quoted.
(Art. 76 of t h e Code de commerce) .a
2. As brokers, they have also t h e exclusive right to
negotiate bills of exchange, notes, and all commercial instruments. (Art. 76 of t h e Code de commerce.)
3. To verify t h e quotations of these securities. (Art.
76 of t h e Code de commerce.)
4. Before t h e law of July 18, 1866, they divided with
t h e merchandise brokers {courtiers) t h e privilege of dealing in metals. Brokerage as regards mechandise having
become free, the privilege of t h e stockbrokers disappeared
on t h a t account. B u t they alone have t h e right to verify
t h e quotations of metals. (Art. 76 of the Code de commerce.)
5. The stockbrokers give t h e necessary certificates for
transfers of rentes, on the terms provided for b y t h e
a I t should be borne in mind that stockbrokers are not permitted to reveal
the names of their customers. (Art. 19, decree of 27 Prairial, year X.)
Therefore, in contradistinction to the merchandise broker proper, who
places the parties in personal contact and then withdraws, the stockbroker
brings them into relation, but hides their identity. The stockbroker is,
therefore, to be more accurate, a commission agent., According to article
94 of the Code de commerce, a commission agent is a party who binds himself
in his own name between the parties.
24




History and Methods of the Paris Bourse
decree of 27 Prairial, year X, royal ordinance of April 14,
1819, and t h e decrees of July 12, 1883, and J u n e 10, 1884.
(Decree of October 7, 1890, art. 76.)
6. They are intrusted with t h e publication of t h e Official
Bulletin of Oppositions to t h e Negotiation of Securities
" t o Bearer.'' (Law of June, 1872, art. n . ) °
7. They m a y be commissioned b y the courts to negotiate securities—especially, pledged securities. Art. 93 of
the Code de commerce ; art. 70 of t h e decree of October 7,
1890.)
8. They m a y be commissioned by t h e courts t o dispose of t h e property of minors within t h e terms prescribed b y t h e law of February 27, 1880.
The stockbrokers in Paris number 70.
speak of stockbrokers in t h e provinces.)

(Later we shall

They form an association, and a p a r t of them, chosen
by ballot, form t h e syndical chamber, composed of a syndic and eight members, and intrusted with t h e carrying
out of disciplinary measures, along with all general m a t t e r s
concerning t h e collective welfare of the corporation. The
stockbrokers are named b y decree of t h e President of the
Republic; they are placed under t h e disciplinary rule of
t h e Minister of Finance. (The stockbrokers in t h e Departments (provinces) are in some cases under t h e Minister of
Finance, and in others under t h e Minister of Commerce.)
(4) Stockbrokers alone have t h e right, according t o
0 By this law, the dispossessed owners of lost or stolen certificates are
given the means of obtaining duplicates of the same after a certain delay.
They must declare their protest against (faire opposition) the negotiation
of their certificates, and publish a note to t h a t effect in the "Bulletin
officiel des Oppositions"
All negotiations made in disregard of this publication are rejected, without affecting the protesting party. (See note to
No. 13.)—Translator.
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Commission

law, to trade in government and other securities susceptible of being quoted. It is understood, however, that
securities which have not been explicitly admitted on the
official quotation list, either because the stockbrokers did
not care to adopt them, or because the securities did not
fulfill the required statutory conditions, may, nevertheless,
be dealt in outside the Bourses
There exist for this purpose free intermediaries, called
bankers (oftener "coulissiers"—curb brokers), who deal
on the bankers' market (marche en banque), known as the
" coulisse," in securities called bank securities, or curb
securities {valeurs en banque on valeurs de coulisse).
Frequently, one may hear on the Bourse these two
words pronounced in opposition to one another: the
Parquet (the floor), the Coulisse (the curb). By Parquet
is meant the stockbrokers' market, on account of the
parquet floor on which they stand. The Coulisse (equivalent to the New York curb) is thus called, owing to the
fact that formerly the bankers congregated in a narrow
passageway called La Coulisse.
The number of curb brokers (coulissiers) is not limited.
Anyone can become a curb broker who wishes to establish himself as such, to employ sufficient capital for meeting the requirements of the business, to pay the license,
and to style himself banker. But a certain number of the
bankers club together, form a syndicate, agree upon common rules, and elect a syndical chamber authorized to
see to it that the professional discipline is lived up to.
Thus there are three categories outside of which, we must
o Decision of the Cour de cassation of July i, 1885.
1885, 1. 257.

26

Recueil de Sirey,




History and Methods of the Paris Bourse
again repeat, the profession remains free. They are the
syndicate of bankers dealing in securities for cash (Syndicat des Banquiers en valeurs an comptant), the syndicate
of bankers dealing in securities for future delivery
(Syndicat des Banquiers en valeurs a terrne), and the curb
for French rentes {la Coulisse des rentes francaises).
It should be noted that, although, according to law,
dealings in French rentes are the prerogative of the
monopoly of stockbrokers, and any intrusion into the
business reserved for them is an offense punishable by
fine,a nevertheless curb brokers are tolerated as dealers in
French rentes, alongside of the stockbrokers—thus becoming their powerful competitors. No suit is brought against
them for interfering with the business of the stockbrokers, but their operations are not valid in court. For
that reason the curb for rentes does not take the name of
0Article 8 of the law of 28 Ventose, year IX. The penalty is very
severe. I t is a fine which amounts to not less than one-twelfth of the
amount of the surety bond, and not more than one-sixth. Which is the
bond t h a t shall be taken as a basis? Shall it be the one of the year I X
(60,000 francs)? Is it the present bond (250,000 francs)? The Cour de
cassation took as a basis the bond at the time the offense was committed.
(Aug. 28, 1857, S 1857-1879; Jan. 14, i860, S i860, 1, 481, Trib. correctionnel de Lyon; Mar. 12, 1906, Journal VInformation of May 9, 1906.)
That decision is sustained by M. Boistel {Droit Commercial, p. 431) and by
M. Ruben de Couder. {Dictionnaire de Droit Commercial, V. Agent de
Change, 112.) But it is sharply criticized by most authors (Buchere
TraitS des Operations de Bourse No. 114, Lyon, Caen & Renault, Traits de
Droit Commercial, vol. IV, No. 904; Mollot, Bourses de Commerce, No. 15,
Dalloz, Rep. V, Bourse 164; Rolland de Villargues, Rep. du Notariat, v.
Bourses de Commerce; Albert Broussois, Du Mono pole des Agents de Change
et de sa Suppression, p. 88). No extenuating circumstances are allowed
when there is interference with the functions of a stockbroker.
{Tribunal
correctionnel Seine, June 24, 1859; and on appeal, Paris, August 2, 1859,
S i860, 1, 481); Mollot, Bourses de Commerce, No. 16.—Ruben de Couder.
Dictionnaire de Droit Commercial, No. 115.—Buchere, TraiU des Operations de Bourse, No. 119.

27




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Monetary

Commission

Syndicate. Indeed, professional syndicates are recognized by law, and may bring actions and sue in court. It
is not possible, therefore, to recognize under the name
of syndicates associations of persons carrying on an unlawful business. The toleration enjoyed by the curb
market in rentes originates from the consideration that
the credit of the State is benefited if dealings in rentes are
as free and extended as possible, in spite of the fact that
the law intrusts the stockbrokers alone with the transactions in government securities.
(5) Finally, another category of bankers busies itself
with dealings in bills of exchange and treasury bonds.
The law likewise reserves for the stockbrokers the negotiation of these instruments, but, owing to the expansion
of securities, and owing to the fact that the negotiation
of commercial bills of exchange is little remunerative, the
stockbrokers relinquish that part of their prerogatives to
free commerce. They never negotiate a bill of exchange;
they merely receive the list of quotations prepared by the
bankers and insert it in their official list. The free
dealers of this last category are called bankers and exchange brokers {courtiers de change). The word "coulissier" is never used to designate them.
Let us mention that these bankers—traders in bills of
exchange—sometimes indorse the bill of exchange which
is the object of the operation; they then negotiate the
bill of exchange through themselves and for themselves,
becoming parties to the contract. When they only
transfer it to the buyer without indorsing it, they positively act as brokers, dealing for account of others.

28




History

and

Methods

of the Parts

Bourse

(6) We shall now briefly review the nature of the
securities negotiated by stockbrokers and curb brokers.
We shall look into the mechanism of operations for cash,
and the mechanism of operations for future delivery.
Comparing the two, we shall see the! differences in the
manner they are traded in, either on the Parquet (stockbrokers' market) or on the Coulisse (bankers' market), in
the manner of quoting, and in the modes of settlement;
and, finally, we shall look into the dealings in bills of
exchange.
The operations on the Bourse are purchases and sales.
They bear upon:—i, the certificates of loans of states, cities,
counties (departements), and territories of foreign countries having an organization distinct from the state, such
as provinces and states united by federal bonds; 2, the
certificates of private or public enterprises constituted as
stock companies—that is, the shares of companies called
shares of common stock, shares of preferred stock, dividend
shares, profit shares, or founders' shares (parts de jondateur), and the certificates of indebtedness—bonds,
debentures, etc. The rules for operations are, some of
them general ones, referring to the ordinary commercial
conditions; the others are of a special character, relating
to the traffic in securities on the Bourse. We shall take as
a guide the rules of the Paris financial market.
Certificates are either fully paid in or partially paid in.
They are fully paid in when the owner, whether he be the
original subscriber or the assignee, has no further assessment to make on the certificate. For instance, one share
of 100 francs of a company is said to be fully paid in, when
the 100 francs of money it represents in the stated capital
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have been paid in full. The certificates are partially paid
in, when there remain one or more assessments to be made,
before the certificate is fully paid in. For instance, one
share of ioo francs is "25 francs paid in." That means
that there remains a sum of 75 francs due on that certificate, to be effected in one or more payments.
(7) Securities are issued registered, mixed (registered as
to principal only), or " to bearer."
The registered certificate {litre nominatif) bears the
name of its owner, and the interest or dividends are payable on presentation of the certificate itself. The mixed
certificate (titre mixte) is different from the preceding one
in that the coupons for interest and dividends may be
cut off from the certificate, and are payable to bearer.
The certificate " t o bearer" {an portenr) does not bear
the name of the owner; the holder is supposed to be the
owner, and the coupons are, as in the preceding case, payable to the party presenting them.
The delivery to the purchaser of registered or mixed
certificates can be considered good delivery only when the
latter has been entered as titulary on the registers of the
debtor concern, and when a new certificate has been issued
in pursuance of that operation. That operation is called
transfer.
There are three kinds of transfers—the transfer "reel,"
the transfer " d'ordre, " and the transfer " de garantie. "
The actual {reel) transfer is effected by means of a request
of the titulary of the registered certificate, addressed to the
debtor concern, aiming at the cancellation of the existing
certificate and at the creation of a new one in the name of
a third party. The transfer is a deed in itself; it may be
30




History and Methods of the Parts Bourse
t h e consequence either of a gift or of a sale. I t is subject
to a t a x of 0.75 per cent.
The transfer "d'ordre" or "de forme" has for its object
any alteration in t h e wording of the registration of a certificate, resulting from a deed different from the transfer
declaration—whether the title remains vested in the
name of t h e same titulary, with a modification of his
social state, or it is transferred to a new titulary (deed of
gift, income granted b y deed before a notary).
These transfers are free of tax, because they are made
in pursuance of deeds, which are themselves free of t a x ,
or of deeds for which the t a x has been paid.
Transfer "d'ordre" also applies to an operation now
obsolete, t h e object of which was to safeguard professional secrecy b y the stockbrokers {agents de change); the
stockbroker signed a first transfer in the name of his
fellow-broker, the buyer, who effected t h e transfer in t h e
name of his customer; the intermediate transfer is called
transfer " d'ordre" and is free of tax.
This latter transfer, like the transfer "reel" has become
very rare, stockbrokers making a practice of delivering to
one another only certificates " to bearer." {Droit de 1890,
art. 47.)
The purpose of the transfer " de garantie" (provided for
by art. 91 of t h e Code de commerce) is to establish the
pledge of certificates the transmission of which is effected
by a transfer on t h e books of the company; it is free of
tax, because it does not carry with it a change of ownership.
Conversion is the act of causing a registered or mixed
certificate to be transformed into a certificate " to bearer,"
90312 0 —10

3

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National

Monetary

Commission

or a certificate " t o b e a r e r " into a registered or mixed
certificate.
The transfer following a transaction is effected as follows: The seller signs a transfer blank, b y which he
requires t h e company whose certificate is being sold (be
it a government or private corporation) to transfer his
status of bondholder or shareholder to the purchaser.
On the other hand, the purchaser signs another sheet,
called transfer acceptance blank. The seller then hands in
a t t h e public or private counter (i) his transfer blank,
(2) the certificate, and (3) t h e transfer acceptance blank.
When t h e operation is closed b y the entries made within
t h e debtor establishment, t h e transfer has been executed. A new certificate, bearing the n a m e and profession of the purchaser, is handed to him. Usually it is
t h e intermediary of t h e seller (stockbroker or banker)
who demands t h e transfer in t h e n a m e of his customer.
Many corporations will not effect transfers, unless a
stockbroker {agent de change) guarantees t h e signatures,
even when the sale has been effected without t h e help of
a stockbroker. Especially, so far as transfers of registered certificates of French rentes are concerned, t h e
signature of ,a stockbroker is always required.
A certificate " to bearer " is delivered to the purchaser by
merely being handed over to him. Article 2279 of t h e
Code civil says: " W i t h regard to chattels, possession
is as good as title." These words mean t h a t t h e holding
of a certificate of personal property leaves it for granted
t h a t the holder is the owner thereof. The simple handing
over of a certificate " t o b e a r e r " transfers the ownership
thereof.
32




History

and

Methods

of the Paris

SECOND DIVISION.—Operations for cash {operations au

Bourse
comptant).

(8) Bourse operations are m a d e for cash or for future
delivery (au comptant ou a terme). The operation for
cash is an operation to be settled immediately or after a
very short delay—certificate against cash, cash against
certificate. The operation for future delivery (operation
a terme) is to be settled within a period fixed in advance.
We shall first consider operations for cash.
I t is very easy to understand the mechanism of operations, if we follow in their logical order the successive stages
of execution. How is a bourse order given ? Let us follow
t h a t order to the market and let us see how it will be executed. When executed, how will it be checked by the
p a r t y who gave it; how will t h e operation be settled;
what expenses are to be borne b y t h e p a r t y who gave the
order; t h e delays it shall be subjected t o ; w h a t are t h e
means of recourse in case of delay or default of t h e p a r t y
who received t h e order; for w h a t is the p a r t y who gives
an order liable, when he infringes the essential conditions of
the contract? To all these questions the following explanations will give an answer, showing at the same time t h e
workings of t h e financial market.
(9) Orders are given to stockbrokers either a t a fixed
price (a cours fixe), or at best (au mieux), or at t h e average
price (au cours moyen).
Instance of an order at fixed price:
" Please b u y 1 bond of t h e Credit Fonder 1895 a ^ 4^5
francs;" or " P l e a s e sell 3 shares of t h e Edison Company
at 1,100 francs;" or "Please b u y 3 francs French R e n t e
3 ^ % at 98 francs."
An order at best shall be worded in the same way; but
no price shall be fixed, because t h e stockbroker will b u y
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or sell a t t h e price a t which he will be able to b u y or to
sell. For an order at the average price, t h e indication of
price shall be replaced b y t h e words " cours moyen " (average price), or simply by the letters " c . m . "
"Cours moyen'1 (average price) is a price halfway between the highest and the lowest prices quoted.
"Avant
bourse" (before t h e opening), t h a t is to say, before t h e
opening of t h e session, t h e stockbrokers and their clerks
meet in a special room. Some offer, and others ask for,
securities a t the average price. Neither know w h a t the
price will be; t h a t will be decided during t h e session.
When an offer and a demand coincide, t h e transaction is
closed. Only t h e price is missing. A ring of the bell announces the opening of the bourse session; t h e stockbrokers and their clerks leave t h e special room and proceed to t h e public hall around the railed inclosures.
The session begins. As the dealers execute orders, they
give t h e prices to a marker, whose entries will serve to
m a k e u p the quotation list. The quotation list having
been m a d e up, t h e parties who have traded on t h e basis of
t h e average rate, will be able t o ascertain t h a t average, by
merely taking t h e highest and the lowest rates.
If only one price is quoted, t h a t single price shall take
t h e place of t h e average price.
If there are no quotations, t h e operations are considered
as "non faites" (not executed).
I t m a y happen t h a t an order given at the average r a t e
is not executed. The stockbroker (agent de change) m a y
h a v e been unable t o find a counterpart. The p a r t y giving
t h e order can make no claim on t h a t account.

34




History

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Methods

of the Paris

Bourse

(10) I n t h e bankers' market, t h a t is to say, "en coulisse" (on the curb), orders are received either at -fixed
prices or at best. The bankers do not t r a d e on t h e basis
of average price. The p a r t y giving an order and the
banker may, however, contract t h a t a certain operation
shall be executed at t h e average r a t e ; b u t in such cases
the banker will have contracted a personal obligation, and
the operation contracted with his client will be distinct
from t h e one closed in the public m a r k e t s
( n ) Later, when we t u r n to transactions for future delivery (operations a terme), we shall see t h a t such transactions can not be made for less t h a n 25 shares or for less
t h a n a certain number of francs of government rentes.
B u t it should be borne in mind t h a t for cash the minimum
to be traded in is one unit; t h a t is to say, one share, one
bond, one debenture, etc. Some bonds, especially t h e
bonds of t h e city of Paris or of the Credit Fonder (Mortgage-loan Society), are divided into quarters and into
j&fths. Then such portions bear t h e name " q u a r t e r of a
b o n d , " "fifth of a bond."
Orders remain in force according to agreement between
the parties. An order may be given, good for t h e day's
session, or until canceled—that is to say, up t o t h e time
when the p a r t y giving the order shall have expressed the
a

The stockbroker {agent de change) can not personally make a contract
with his customer. Article 85 of the Code de commerce forbids him dealing
for his own account. The result is, with a bourse order in hand, he can not
enter into a private agreement with the party giving the order concerning
the execution of same. However, article 85 of the Code de commerce was
especially intended for the stockbroker; the banker (curb broker) may enter
into a personal agreement and act for himself. In practice, when he personally becomes a party to the contract, he must notify his client of the
fact. In certain cases the personal intervention of the broker is the result
of circumstances.
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Monetary

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desire to withdraw it, if it has not been filled. However,
t o avoid errors, stockbrokers and bankers often stipulate
t h a t , unless notified to the contrary, every order is considered as remaining in force until canceled. But even
orders, good until canceled, can not remain in force for an
unlimited period. Therefore, it is often understood t h a t
if an order, good until canceled, has not been executed
during t h e first week, it shall be considered as canceled, so
that, within each banking house or each stockbroker's
office, new orders are issued every Monday. This condition is often mentioned on t h e printed forms of stockbrokers and bankers, who thus protect themselves against
any eventuality.
When, after t h e closing of the Bourse, t h e stockbrokers
and bankers return to their respective offices, they s t a r t
checking. They sort out t h e trades they have m a d e
with their colleagues, and send to one another confirmations of the closed transactions, in order to avoid all
possible errors. I t is very apparent t h a t during t h e
scramble and noise errors m a y occur. One has bought
instead of selling, another has bought or sold too much.
I t happens, also, t h a t a figure has not been correctly understood, or erroneously entered on t h e blotter. In short,
operations having been verbally contracted on the Bourse,
it is necessary t h a t this fiduciary process be replaced b y
a safer one. The checking includes, also, the entering on
t h e books, of t h e transactions effected, as well as of t h e
names of the parties who had given t h e orders, and for
whose account they were executed. Notice thereof is a t
once sent to them.

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History and Methods of the Paris Bourse
(12) The p a r t y who gave the order, can control the
notice he receives by means of the quotation list. He
must be advised of the execution of his orders at quotations within the limits of published prices. No doubt,
in some cases he m a y rightfully claim more favorable
prices t h a n those reported to him, although the prices at
which his orders were executed have actually prevailed.
I n such a case, his representative has been disloyal. I t
m a y be realized t h a t in t h a t line of reasoning it is impossible to foresee t h e nature of t h e discussions t h a t may
ensue. The p a r t y who gave t h e order, will t h e n apply
for redress to t h e Syndical Chambers of stockbrokers or
bankers (aux chambres syndicates des agents de change
on banquiers), and, if need be, to the courts. The fact
remains t h a t in most cases t h e controlling means is furnished b y t h e quotation list.
The prices of securities listed b y the stockbrokers,
(agents de change) are published on a sheet called "Cote
Ofjicielle" (official price list).
The prices of curb securities (Les cours des valeurs de
coulisse), listed by the "Syndicat des Banquiers au comptanV1 (syndicate of bankers trading for cash), are published in a special list called "Cote du Syndicat des Banquiers en valeurs au comptanV1 (price list of t h e syndicate
of bankers trading in securities for cash).
The prices of curb securities which are not listed by
any syndicate, and which are traded in owing to the
natural phenomenon of offers and bids for securities
tending to concur to t h e same place, are recorded on free
quotation lists. These last, besides, publish t h e quotations of all other securities; those of the official market,
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Monetary

Commission

and those of t h e curb syndicates. The best known are
" Le cours de la Banque et de la Bourse (cote Desfosses) "
and " L a cote de la Bourse et de la Banque (cote Vidal)."
On t h e official list of t h e stockbrokers (Cote Officielle
des agents de change) the prices are given in the order of
transactions. The "Cote du Syndicat des Banquiers en
valeurs au comptant" gives only t h e lowest and highest
quotations. The free quotation lists, however, give also
t h e closing prices of t h e curb securities.
(13) When a stockbroker or banker, buying for account
of a p a r t y who gave an order, has received the securities,
t h e settlement is effected when he has delivered t h e m and
received t h e cash. The same applies to t h e stockbroker
or banker selling, in his intercourse with the p a r t y who
gave t h e order.
The securities m u s t be " good delivery," free of all opposition to their negotiation, and with the interest agreed
upon.
The stockbroker or t h e banker who should happen t o
deliver counterfeit securities, or lost or stolen securities,
with an opposition existing to their being negotiated,
would find himself exposed to have his deliveries refused,
or sentenced to deliver securities of good delivery and free
from defects. a By application of t h e same principle, the
a

The owner deprived of his securities " t o bearer" has the right to make
opposition to their being negotiated, and to the interest and dividends and
principal demandable being paid, by means of a special process provided
for by the laws of June 15, 1872, and February 8, 1902. He thus puts
himself in a position to obtain duplicates of his securities after a certain
time. Unfortunately, this sort of proceeding does not apply to securities
dealt in abroad. I t would be desirable that an International Congress
should prepare a similar clearing in every country, and thus insure the safeguarding of owners against the loss and theft of securities " t o bearer."

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History

and Methods

of the Paris

Bourse

stockbroker or banker is not allowed to deliver bonds
drawn for redemption or subject to certain conditions. a
(14) The " jouissance"
(interest accrued) is t h e right
to t h e interest or t h e dividends. I t starts from t h e date of
the last payment. Instance: On October 19, 1908, French
rentes 3 per cent were quoted for cash 95.40 francs, jouissance October, 1908. These last words mean t h a t the
purchaser is entitled to t h e interest coupon following t h e
one of October, 1908. This latter one has been cut by
the owner, who had t h e benefit of his property.
For shares of corporations, the coupons are numbered.
They are traded in, for instance, "ex-coupon" 6 or 7, which
means t h a t t h e purchaser shall only be entitled to the
dividend coupons subsequent to coupon 6 or coupon y.b
Securities which are irregular as to the interest accrued,
m a y be rejected. However, within the m o n t h preceding
maturity, if t h e owner has detached the coupon, he may
sell and m a k e a good delivery, b u t the purchaser will
deduct t h e a m o u n t of t h e missing coupon when settling.
This option applies only to French securities.
(15) Finally, securities dealt in are supposed to be in
order with the internal revenue concerning the payment
of s t a m p taxes to which securities are subjected.
a
To avoid all trouble in this regard, the transactions in securities subject
to drawings are made on the stock exchange "ex droit" (minus the right) to
the advantage obtained by the drawing, a few days before it takes place
(art. 45 of the regulations of stockbrokers of Jan. 30, 1899); five clays
before, for bonds "to bearer, 5 ' and seven days before, for. registered bonds.
6 On the Paris Bourse the coupons of French rentes are considered as
detached fifteen days before their maturity. French rentes 3 per cent
certificates are provided with coupons maturing January 1, April 1, July 1,
and October 1. They are dealt in "interest accrued from January, beginning from the preceding December 16; interest accrued from April, beginning from the preceding March 16; interest accrued from July, beginning
from the preceding June 16, and interest accrued from October, beginning
from the preceding September 16 "

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Monetary

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(16) The expenses to be borne by the p a r t y who gives
t h e orders, are t h e brokerage, t h e d u t y on bourse operations, the receipt stamp, and, in some cases, t h e fee for
entering t h e numbers of certificates on the statement; also
t h e transfer fee on registered certificates.
The brokerage (courtage) of stockbrokers (agents de
change) is o.io per cent of t h e net amount of t h e transaction, with a minimum of 0.50 francs on each statement.
The fee is raised to 0.25 per cent of t h e a m o u n t on transactions resulting from matters in litigation. These rates are
binding on all stockbrokers. 0
The rates of brokerage on the Coulisse are unrestricted.
However, in most cases, there is a charge of 25 centimes
for certificates worth less t h a n 250 francs and of 0.10 per
cent for certificates worth more t h a n t h a t . The minimum
charge is 50 centimes.
Two orders executed at the same session, one for a
purchase and one for a sale, occasion b u t one brokerage
(what is called t h e "franco").
The brokerage is figured
on the transactions either on t h e side of sales or on t h e side
of purchases—whichever gives rise to t h e larger fee.
B u t in order to obtain "franco," t h e transactions m u s t
have taken place in t h e same market. In other words,
there is no "franco" between securities dealt in b y t h e
stockbrokers and securities dealt in b y the bankers.
(17) The t a x on bourse operations is, for each p a r t y t o
the contract, 5 centimes per 1,000 francs, or fractions
thereof; t h a t t a x is reduced to one-quarter (0.0125 francs
per fraction of 1,000 francs) on all transactions in French
rentes. (Law of Apr. 28, 1893, and Dec. 31, 1907.)
a

They have been fixed by a ministerial decree of July 22, 1901.
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Methods

of the Paris

Bourse

Statements containing receipts for securities or receipts
for money, are subject to the special receipt s t a m p of 10
centimes, established by the lav/ of August 23, 1871.
Any purchaser of securities m a y require his stockbroker to enter t h e numbers on the delivery statement.
This record is subject to a fee of 5 centimes for each certificate. (Art. 13 of the law of J u n e 15, 1872, and art. 11
of the law of Apr. 10, 1873.)
(18) The transfer of a registered or mixed certificate,
and t h e conversion of either into a certificate " to bearer,"
are subject to a special t a x called "droit de transmission"
(transfer t a x ) .
T h a t t a x is 0.75 per cent n e t — t h a t is to say, exempting
income of later maturity. (Laws of J u n e 13, 1857, J u n e
16, 1871, J u n e 23, 1872, and Dec. 26, 1908.)
T h e transfer t a x is borne by the purchaser. It is collected b y t h e corporation for account of t h e treasury
(pour le compte du Tresor) a t the time t h e transfer is
made. Disbursed by the banker or stockbroker, for
account of t h e purchaser, it must be reimbursed at once
by t h e latter.
Transfers of French rentes, resulting from sales, are
free of the 75-centime (0.75 per cent) tax.°
o> There is a transfer tax on securities " to bearer." That transfer tax is
paid by the corporations and various establishments; but these have recourse against the holders of their securities at the time the interest and dividends are paid. That fee is 25 centimes per 100 francs (0.25 per cent) without extra tithes (secondary fees). (Art. 3 of the law of June 29, 1872, and of
Dec. 26, 1908.) It is a yearly and obligatory tax, figured on the capital of
all securities, appraised on their average price during the preceding year, or,
for want of a rate, by appraising according to the rules provided by article
16 of the law of 22 Frimaire, year VII. There is no transfer charge on
certificates " to b e a r e r " of French and foreign rentes. The conversion of
certificates " to bearer" into registered certificates is free of taxes, according
to the law of December 26, 1908.
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(19) The time for delivery differs in the cases of registered certificates or certificates " t o bearer/'
Registered certificates that have been purchased must
be at the disposal of the party who gave the order, the
very next day after they have been received at the office
of the stockbroker. If, after the twentieth session following the one when the transaction was effected, the securities have not been handed to the party who gave the
order, the latter may call upon the stockbroker to fulfill
the contract, and give notice of said notification to the
Syndical Chamber of Stockbrokers (Chambre syndicate des
agents de change), which shall take the necessary measures
to insure the carrying out of the contract, at the risk of
the stockbroker. In Paris the Syndical Chamber can not
decline to effect that execution (then it is said that the
stockbroker is "executed") even if the syndical chamber
has to bear the consequences.
(20) The stockbroker, buying, who has not received the
securities from his fellow-member, selling, may, at the
fifteenth session following the session at which the transaction took place, disclose said fellow-member, seller, and
call upon the Syndical Chamber of Stockbrokers to purchase ("buy in") the securities for account of said seller,
and at the risk of the latter.
The proceeds from sales of registered securities must be
placed at the disposal of the party who gives the order,
on the day following the completion of the transfer.
Having waited until after the twentieth session following the transaction, the party who gives the order to sell,
may have recourse to the same measures which, we saw,
the purchaser may resort to—that is to say, cause the
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and Methods of the Paris Bourse

" e x e c u t i o n " of the stockbroker. On his side, t h e stockbroker, selling, may, at the fifteenth session following t h e
one of t h e transaction, demand the " e x e c u t i o n " of his
fellow-member through t h e Syndical Chamber.
The above-mentioned delays are increased by eight days
for securities, the transfers of which are subject to t h e
approval of the boards of directors.
(21) Securities " t o b e a r e r " must be placed at t h e disposal of the buyers, on the very day following t h e delivery
effected b y t h e sellers. I n their intercourse between themselves, t h e stockbrokers must deliver securities before t h e
t e n t h session following t h e transaction. After t h a t time
they m u s t exact t h e " b u y i n g i n " for account of the stockbroker, seller, through their Syndical Chamber. On his
side, the p a r t y who gave the order, may, after the fifteenth
session following the one of the transaction, and after
having called upon the stockbroker to effect delivery,
give notice of this call to the Syndical Chamber of Stockbrokers, within twenty-four hours of the same, b u t must
not use legal formalities. The Syndical Chamber will
take the necessary steps, and, if need be, it will itself
insure the proper execution of the contract. (Art. 55 of
decree of J u n e 29, 1898.)
The proceeds from sales must be at the disposal of t h e
p a r t y who gave the order, two days after the securities
have been handed to the stockbroker. I t should also
be noted t h a t the stockbroker, selling, when dealing with
a fellow-member who does not accept delivery, may enforce purchase through t h e Syndical Chamber for account
of his fellow-member, buying, after the t e n t h session following the transaction. The p a r t y giving an order of
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M o n et ar y

Commission

sale, who has not received a settlement after the fifteenth
session, may apply to the Syndical Chamber of Stockbrokers, as has been said concerning t h e p a r t y giving
purchasing orders,
(22) Dealings on the curb are not subject to the same
delay in respect to deliveries. In theory, we m a y conceive t h a t a buyer or seller for cash may exact the delivery
of his securities or payment immediately after the transaction, provided he can on the spot fulfill the obligations
of t h e purchaser or seller, which consist in paying the
purchase money or delivering the securities sold, as the
case may be; however, a certain delay is unavoidable on
account of the banker, who acts as an intermediary, and
who is, in fact, himself subjected to delays. The Associated Bankers of the City of Paris (Les Banquiers
Syndiques du marche de Paris), united in a professional
syndicate within the provisions of the law of May 21,
1884, established the rule t h a t securities " t o b e a r e r "
m u s t be delivered by the seller before the seventh session
following the transaction. After t h a t delay the buyer
m a y make a demand on the seller by registered letter, at
the same time notifying the Syndical Chamber of t h a t
syndicate. The latter effects the " b u y i n g i n " for account
of t h e defaulter at the tenth session following the day
when it will have received the advice.
The party giving an order may also be " e x e c u t e d . "
A stockbroker is not bound to accept an order if, previous to all trading, he has not received the securities to be
disposed of, or the funds intended to settle for t h e
amount. But he m a y have been led to grant credit to
t h e p a r t y giving the order. I n such a case, if, after
44




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and

Methods

of the Paris

Bourse

notice by registered mail, the p a r t y who gave the order,
has not, within three days from t h e time t h e letter was
sent, come u p with the securities or t h e cash, t h e " buying
i n " of t h e securities sold, or t h e ''selling o u t " of the
securities purchased, may be proceeded with immediately.
THIRD DIVISION.—Operations for future delivery (a terme).

(23) An operation for future delivery is one engaging
the parties from the day of the contract, b u t the execution
of which is p u t off to a m a t u r i t y fixed in advance. 0 For
instance: Peter buys on the 1st of the m o n t h 100 shares
for the 15th of the current m o n t h at 100 francs. b On the
15th of t h e month, date of m a t u r i t y — t h a t is, t h e day of
settlement—the winding up of the operation will take
place. Peter must accept delivery of the stock and pay
t h e price—10,000 francs. 0
On t h e other hand, if he has sold 100 shares at 100
francs, he will have to deliver on settling d a y — t h a t is, on
the 15th of t h e month—100 shares, and receive 10,000
francs. ^
Hence, t h e first settlement following operations for
future delivery is the taking up of securities bought by
t h e purchaser, and the delivery of securities sold by the
seller.
I t m a y happen t h a t the purchaser for future delivery
does not wish to take up t h e securities purchased. In
such a case, he will resell t h e m for the same maturity,
and these two operations will show a difference, which,
o Art 1185 of the Code civil,
& In the instances mentioned no account is taken of taxes or brokerages,
this is done for the sake of simplicity.
c
Art 1650 of the Code civil.
d Article 1603 of the Code civil.
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according to circumstances, will cause him to be debtor
or creditor.
Instance: Peter, buyer of ioo shares at ioo francs,
resells t h e m at n o : Debtor of 10,000 francs, creditor of
11,000, he retires with a balance in his favor of 1,000
francs.
On the other hand, if he has* resold with a loss, for
instance at 90 francs, then, being a debtor of 10,000
francs and a creditor of 9,000 francs, he retires with a
balance against him of 1,000 francs.
To purchase with a view of reselling at a higher price,
is called to speculate for a rise (etre a la hausse).
To speculate for a fall (etre a la baisse) is to make t h e
reverse operation, t h a t is, to sell first with the hope of
buying in later at a lower price. a Let us take up t h e
various instances, by illustrating them with the accounting which results from these transactions, in order to
comprehend better their working.
When Peter has bought with the intention to resell, and
then has resold, or when he has sold with t h e intention
to repurchase, and then has repurchased, the result on
a
S o m e people experience difficulty in understanding the " s h o r t " sale
{yente a decouvert) which is the original transaction of speculation for a fall.
I t is often considered as illegitimate. The following anecdote will explain
and justify it.
" M Boscary de Villeplaine, deputy syndic of the association of stockbrokers, was conversing with Napoleon regarding the discussion in the
council of state of article 422 of the Penal Code (now repealed)
* Your
Majesty,' said M, Boscary de Villeplaine, 'when my water carrier is at the
door., would he be guilty of stellionate (selling property one does not own or
selling the same property to two different parties) if he sold me two casks
of water instead of only one, which he h a s ? ' 'Certainly not, because he is
always sure of finding in the river what he lacks.' ' Well, Your Majesty,
there is on the Bourse a river of rentes."' (Memorial of the stockbrokers
addressed to the Minister of Finance, 1843, p. 44, footnote.)

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History

and Methods of the Paris Bourse

striking a balance will show him creditor or debtor,
owing to the balancing of his debit with his credits
Instance: Settling account of Peter, who had purchased
ioo shares at ioo francs, which he resold at n o francs:
Dr.

Cr.
Francs.

ioo shares at ioo francs
Credit balance

10, ooo
i, ooo

Francs.

ioo shares at 110 francs

11, ooo

v

11, ooo
11,ooo

Profit, i,ooo francs.

(24) Operations for future delivery give rise to "reports " ("carrying-over" operations, "continuations ").
It is in place here succinctly to explain their object and
mechanism.
Object.—Let us suppose, in the instance above mentioned, that Peter, buyer for the 15th instant of 100
shares at 100 francs, wishes, when the 15th arrives, to
extend his maturity until the 30th of the month.
Mechanism.—On that same day, the 15th instant, he
will resell the securities at a special price, called " cours de
compensation" (making-up price or clearing price 6 ), and
will rebuy, at the same time, for the end-of-the-month
maturity at the same making-up price, increased by an
amount called "prix du report" (cost of carrying over,
"contango"). Let us suppose that n o francs is the
making-up price, and that the cost of carrying over is 1
franc. You find below the transaction on two accounts.
Let us first give the first account.
a

Articles 1289 and 1290 of the Code civil.
&The clearing price is an accounting process with a view to unifying
"carrying-over" operations. I t is fixed by an agreement in the public
market. The syndical chambers fixes that rate.

903120—10

4

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Monetary

Commission

Peter, his settlement account for t h e 15th instant:
Dr.

Cr.
Francs.

100 shares at 100 francs
Credit balance

10,000
1,000

Francs.

100 shares at n o
(clearing price)

11,000

francs
11,000
11, 000

Profit, 1,000 francs.

Now, this is t h e second account for t h e end of t h e month.
Peter, his settlement account for the end of t h e m o n t h :
Dr.

Cr.
Francs.

100 shares at 111 francs ( n o
francs plus i)

Francs.

Sales

_
•

None.

ii,ioo

The two accounts are thus established: One, which includes a settled transaction, showing the operator as
creditor or debtor, as t h e case m a y be, for an a m o u n t to
collect or to p a y ; t h e other, showing a new operation,
which, at the following settlement, will be t h e object of a
liquidation—that is to say, another winding up, either by
taking up or reselling t h e securities, or by a new "report"
(continuation). The continuation has, therefore, the
same result as a renewal of m a t u r i t y .
Capitalists wishing to m a k e temporary investments p u t
their money out in "reports" (loans for carrying over,
investments in continuations). On settling day they purchase, on the stock exchange, securities from buyers
who desire to prolong their operations; they resell them
to t h e same parties for t h e next m a t u r i t y at the clearing
price increased by t h e price of carrying over (contango).
On settling day these operations are easy, owing to t h e
abundance of funds available for continuations (capitaux
reporteurs).
If there is no superabundance of funds, and
if t h e engagements for a rise (engagements a la hausse)
are not very numerous, continuations are cheap.
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History and Methods of the Paris Bourse
If money is plentiful a n d purchases are few, continuations are a t par.
I n case securities are wanting in comparison with the
money available, the sellers will pay a premium in order
not to m a k e deliveries; this is called "deport"
(backwardation) .
For instance: Peter, seller of ioo shares a t ioo, finds
himself unable to effect a delivery. He will pay, for
instance, i franc per share for "deport" (backwardation),
and his settling account will carry a repurchase a t the
clearing price (cours de compensation).
His account at
the following m a t u r i t y will carry a sale at t h e clearing
price, less i franc.
(25) Some operations for future delivery (a terme) are
contracted for uncertain dates, though the m a t u r i t y is
foreseen. Such are transactions in securities " a remission"
("when .issued"). Speculators undertake to deliver an
issue of securities in perspective—when they are issued.
Hence, operations lia remission"
are transactions subject to settlement a t a time when certain formalities will
have been accomplished, and in a place where t h e delivery
of t h e securities will be actually possible.
Some emissions of securities are subject to reductions in
t h e allotments when the subscription lists are closed.
T h a t phenomenon gives rise to special operations called
"ventes de resultats"
(sales of percentage of securities
obtained, or sale of allotments). One can sell, or purchase, t h e results of subscriptions for 3,000 francs rentes,
for instance, or 100 shares, etc.
(26) Among operations for future delivery there are
special ones called " operations a prime " (options). These
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are purchases concerning which t h e purchaser reserves
for himself t h e right to abandon t h e trade, in consideration of a certain sum fixed in advance. For instance,
Peter buys for t h e 15th instant 100 shares a t 120 francs
" dont" 5 francs. a The transaction is entered as 120/5.
At a time fixed during the settling operations, called
"reponse des primes"
(option declaration)—this is the
session preceding the day devoted to " c o n t a n g o " operations (reports)—Peter must announce whether he will t a k e
up the stock at 120, or whether he abandons the trade,
b y giving up 5 francs for each share to the seller.
As a rule, t h e prices for transactions in options are as
much higher as the premium to be forfeited is smaller.
Instance: A stock is worth 100 on the average. Let us
suppose the rate is 120 francs "dont" 5; then we can take
the rate as 125 francs "dont" 2.50; also we can take it as
127 francs "dont" 1.
There is no absolute rule for these differences, the
same as there is no absolute rule for prices in a general
way. Offers a n d bids cause the variations.
The m a t u r i t y also plays a p a r t in the option prices.
Thus a transaction in options maturing in a m o n t h or six
weeks or two months costs more t h a n an option a t a
nearer date.
I t is thought t h a t transactions in options have been
carried on in France from the time of a special operation
made b y George Law in 1718, in order to make an impression on people, and foster purchases of shares in his bank.
« The expression "dont" serves to indicate the sum to be forfeited.
It
implies the undertaking thus expressed. Peter buys securities at 120
francs, "dont" (of which) he shall forfeit 5 francs if he does not take up the
securities.
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He bought 200 shares deliverable in six months for an
a m o u n t greater by 40,000 livres t h a n the price they were
worth then (300 livres)—it being understood t h a t if, after
six months, t h e shares were not worth 500 livres, he would
forfeit t h e 40,000 livres to his seller. This was a real
option transaction, and by entering upon such a.contract,
Law confirmed his faith in the rise of his shares. Numerous purchases by the public then took place. (See
E d m o n d Guillard, Operations de Bourse, p. 24.)
(27) Option transactions give rise to manifold combinations at the pleasure of the operator. We shall name
the principal ones: [a] "operations a primes
isolees"
(plain options); [b] "operations a prime contre ferme"
(operations of " o p t i o n against non-option"); [c] "operations ferme contre prime'1 ("non-option against o p t i o n " ) ;
[d] operations a prime contre prime" ("option against
option " ) .
[a] Plain options.—The plain option {operation a prime
isolee) is the option transaction in its simplest form.
Thus a capitalist or a speculator wants to b u y stocks, b u t
fears a decline, and prefers, in case the fall should be too
severe, to reserve for himself the right to forego t h e trade,
in return for a small sum. He will purchase, as we saw
in the above instance, by supposition, a t 120/5.
By keeping to t h a t supposition, the following will
happen: J u s t as it m a y be to t h e advantage of t h a t purchaser to forego his trade at the cost of 5 francs for each
share, so, on the other hand, his advantage m a y demand
t h a t he carry out his contract. I n the latter case, as
already stated, his transaction will be a fixed transaction
(operation ferme).
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Monetary

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Below you will find two instances illustrated by an
account.
Instance of a transaction when t h e option is abandoned.
T h e rate a t t h e option declaration having been, let us
suppose, 114 francs:
Peter, his settling account on t h e 15th instant.
Dr.

I

Cr.

Francs.

100 shares at 120/5
Option abandoned
Loss, 500 francs.

v

Francs.

Nil. Sales
500 | Balance due

Nil.
500

On t h e other hand, if we t a k e for granted t h a t t h e quotation at the option declaration was such t h a t Peter found
it advantageous to carry out the transaction, he becomes
a non-optional buyer. Naturally, he may t a k e up his
securities, resell them, or have t h e m carried over—this
goes without saying. Having, indeed, become fixed, t h e
transaction will be governed by t h e general principles
enumerated above for fixed transactions. Such is t h e
second case. Let us dwell upon it one moment more, in
order to see t h e effect t h a t a subsequent fixed sale will
have on an account.
If we suppose t h e transaction on option carried out and
wound up by a sale at a price wrhich we will suppose to be
130 francs, a Peter's account will be made out as follows:
Peter, his settling account on the 15th instant.
Dr.

J

Cr.

Francs.

100 shares at 120/5
Credit balance

Francs.

12, 000
1, 000
13,000 I

100 shares at 130

13, 000
13,000

Profit, 1,000 francs.
a The price of 130 is hypothetical. Let us remark that, provided the
price is above 115, our option purchaser finds his advantage in selling, even
if the price is below 120, and he, consequently, sells at a loss.
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History and Methods of the Paris Bourse
Thus, during the half month, the option operator has
had t h e opportunity to sell non-optionally (ferme), if
events led to an advantageous transaction.
The above transaction illustrates a fixed sale taking
place after a purchase on option. But, instead of a fixed
sale, a sale on option m a y be made. In t h a t case, t h e
transaction becomes a combination of option against
option, which we shall investigate later in t h e combination [d].
We shall now proceed with t h e investigation of sale on
simple option.
I t has been said t h a t " o p t i o n " is a purchase which the
purchaser could abandon. The case can not be reversed.
The seller on option can not waive the contract; he is
bound to t h e buyer.
The sale on "simple o p t i o n " is suitable t o t h e holder
of securities who, in order to sell better, desires to take
advantage of t h e difference existing between t h e rates of
fixed transactions and t h e rates for options. For instance:
A security is quoted "ferme" (without option) ioo, the
price of options is 120/5. Peter sells 100 shares at 120/5.
If t h e purchase is taken u p by t h e buyer, Peter has indeed
sold profitably, since he sold his securities at 120, while
they were worth 100 "ferme."
If the purchase is abandoned, Peter keeps his securities, b u t the 500 francs premium which he collects, reduce, relieve, allay the loss
which he experiences on the securities he owns.
Options therefore are not, as superficial minds formerly
stated, a gambling operation.
T h e gambler is bold. On t h e other hand, t h e one who
guards himself when he buys, the one who limits his loss
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Commission

beforehand, like t h e one who, when selling, insures himself
against danger, manages his property and acts cautiously.
(28) [b] Transactions at "option against
non-option'1
(prime contre ferme)—We saw in t h e preceding instance
a purchaser of options who made a fixed sale some time
after his purchase. The combination, linked in some way,
may be planned and carried out within a very short time,
the same day, almost at t h e same moment. The operator
devises t h e transactions simultaneously.
Let us imagine, therefore, t h a t Peter buys 100 shares
for t h e 15th instant at 120/5, and t h a t simultaneously he
makes a fixed sale at 100 francs.
Peter has at once registered a paper loss—the difference between 120 and 100, t h a t is to say, 20 francs per
share. B u t if a heavy decline occurs, and if the purchase
on option is abandoned on t h e day of option declarations,
Peter will find himself in the position of a speculator for a
fall (bear), who sees the expected phenomenon happening,
and who has limited his possible loss in case of a rise.
Below you will find the supposed outcome of the exercising and of the abandoning of the purchased option.
Let us take for granted t h a t , on the day of option
declaration, the option is exercised. The statement appears as follows:
Peter, his settling account on t h e 15th instant.
Dr.

Purchases.
100 shares at 120/5

Cr.

I

Francs.
12, ooo

Sales.
ioo shares at ioo
Debit balance

12, 000 I
Loss, 2,000 francs.

54

Francs.
10,000
2, 000
12,000




History and Methods of the Paris Bourse
On t h e other hand, t h e decline may have occurred to
such an extent t h a t Peter found it advantageous to
abandon his trade a t 120/5, a n d to repurchase "ferme"
(non-optionally); let us then imagine a rate of repurchase of 80 francs, for instance. The account of
Peter will be as follows:
Peter, his settling account on t h e 15th instant.
Dr.
Purchases.

100 shares at 120/5
Option abandoned
100 shares at 80
Credit balance

[
Francs.

Cr.
Sales.

Francs.

Nil. ioo shares at ioo
500 |
8,000
1, 500

10,000

10,000 I

10, 000

Profit, 1,500 francs.

The combination of ''option against non-option" with
regard t o t h e speculator for a fall (bear) is based on a desire
to limit his loss by insuring him against a rise, without limiting his profit. For t h e holder of securities, t h e combination permits t h e p a r t y who sold, and m a y be led to regret
his sale on account of a very high ulterior rise, to accept a
loss, b u t to keep his securities in order to sell t h e m more
advantageously, if the opportunity presents itself.
(29) [c] The operation " non-option against option " (ferme
contre prime)—This operation tends to cover and t o limit
t h e risk of a fixed purchase.
A non-optional purchaser is indeed exposed to a decline
without limit. Peter bought 100 shares at 100 francs
for 10,000 francs. If his shares decline to 90, 8oy 70, etc.,
he loses on t h e m 1,000, 2,000, 3,000 francs.
I n order to diminish his possible loss, or because he
estimates t h a t the rise, if it occurs, is not likely t o a m o u n t

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t o much, our non-optional purchaser, who m a y have
bought ioo shares at ioo francs, will, let us say, sell on
option ioo shares a t 120/5. His account, in case t h e
option is exercised, will then be as follows:
Peter, his settling account for 15th instant:
Dr.
Purchases.

I

Cr.

Francs.

100 shares at 100
Credit balance

Sales.

10, 000
2, 000

Francs.

100 shares at 120/5

12, 000 I

12,000
12, 000

Profit, 2,000 francs.

On the other hand, if t h e option were abandoned, Peter
would face a fixed purchase; and if he should wind it u p
later b y means of a sale at 90 francs, for instance, t h e
account would appear as follows:
Peter, his settling account on t h e 15th i n s t a n t :
Dr.
Purchases.

100 shares at 100

I
Francs.

10,000

Cr.
Sales.

100 shares a t 120/5
I Option abandoned
100 shares at 90
I Debit balance

10, 000 I

Francs

Nil.
500
9,000
500
10, 000

Loss, 500 francs.

Peter has, therefore, diminished his loss b y 500 francs.
Indeed, if he had purchased non-optionally at 100 francs,
without protecting himself by an option, he would have
lost 1,000 francs when he resold at 90. On t h e contrary,
having protected himself by t h e sale of a call, he saved
500 francs on t h e loss he experienced.
(30) [d] Operations in "option against option"
{prime
contre prime)—If t h e fact is borne in mind t h a t quotations
for transactions in options are as much higher as t h e costs
of t h e options are smaller, t h a t difference of prices m a y be
utilized through a combination.
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History

and Methods of the Paris Bourse

Let us, therefore, imagine t h a t a purchaser of ioo
shares at 120/5 for the 15th instant resells t h e m a t
125/2.50 for t h e same date, and let us see how t h e
account will show, in case the options are exercised, and
in case they are abandoned.
If t h e options are exercised, the account is as follows:
Peter, his settling account for the 15th instant:
Cr.

Dr.
Purchases.

Sales.

Francs.

100 shares at 120/5
Credit balance

Francs.

100 shares at 125

12, 000
500
12,500 J

12,500

12, 500

Profit, 500 francs.

If t h e options are abandoned, the account is as follows:
Peter, his settling account for t h e 15th instant:
Dr.
Purchases.

100 shares at 120/5
Option abandoned

Loss , 250 francs.

Cr.
Francs.

Nil.
500

Sales.

100 shares at 125/2.50
Option abandoned
Debit balance

500

Francs.

Nil.
250
250
500

This combination tends to limit either t h e profit or
the loss.
I t m a y happen t h a t one option will be abandoned
and t h e other taken up. For instance, t h e r a t e at the
option declaration is 121 francs. The " c a l l " he purchased will be exercised, while the " c a l l " he sold will be
abandoned. In this case, Peter becomes t h e non-optional
purchaser of ioo shares at 120 francs, and his purchase
price is lowered by the amount of the premium he has
received.
(31) Therefore: [1] The " p l a i n o p t i o n "
(h prime
isolee) suits the purchaser wishing to limit his loss, as
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Monetary

Commission

well as t h e capitalist, t h e holder of securities, who, by
becoming a seller of options, wishes t o lessen the lower
value he m a y have t o stand.
[2] The operation of "option against n o n - o p t i o n "
{prime contre ferme) suits the capitalist, the holder of
securities, who, having sold them, resolves to pay a
difference in order to sell more advantageously at a later
date. I t suits also the " s h o r t seller" who wishes to
secure himself against an excessive rise. I t limits his
loss without limiting his possible profit.
[3] The operation "non-option
against o p t i o n " (ferme
contre prime) suits t h e purchaser who wishes to reduce
his possible loss. I t fixes t h e profit without limiting
t h e loss, b u t lessens t h e latter by the amount of t h e
premium.
Finally, [4] t h e operation of " o p t i o n against o p t i o n "
(prime contre prime) suits the speculator wishing to limit
both t h e eventual profit and the eventual loss.
No doubt, there are other combinations, such as t h e
fixed sale of a certain amount against a purchase on option
for double the q u a n t i t y (operation called a cheval, " s t r a d dle") ; such are purchases and sales of options at different
dates, notably " t h e scale " (Vechelle), an operation through
which a purchaser sells an option for t h e present account,
and at t h e same time buys another option for the following account. All these combinations are the result of
reflection and are suggested by events.
There is, however, one special operation in options which
is of interest—namely, t h e " stellage" (spread); we intend
to describe and explain its working, although it is b u t
little used.
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and

Methods

of the Paris

Bourse

(32) The "stellage" is an operation through which a
party, called buyer of the "stellage" (spread), must at a
certain date declare whether he is buyer or seller of a
certain a m o u n t of stocks, as against another p a r t y to the
contract, called seller of the "stellage." This operation is
b u t t h e synthesis of two supposititious operations, which
present themselves, in the case of the purchaser of t h e
" stellage" as a purchase on option of a certain amount of
securities against a non-optional sale of half t h a t amount,
and, in t h e case of the seller of the " stellage," on the contrary, as a sale on option of a certain amount of securities
against a non-optional purchase of half t h a t amount.
For instance, a stock is quoted for the account of the
15th, 100 francs, while the option at 5 francs ("dont" 5
francs) for the same maturity is quoted 120. If Peter purchases the " call " o f 100 shares at 120/5 against the nonoptional sale of 50 shares at 100 francs, he would, in
case he decided to exercise his right at the time of option
declaration, appear as a purchaser at a cost price which
would be 140 francs. But in case he should abandon the
option, t h e selling price, lessened by the premium of 5
francs per share abandoned on the side of the purchaser,
would a m o u n t to 90 francs.
Indeed, let us imagine an account in which Peter is
buyer of 100 shares at 120/5, a n ( i seller of 50 shares at
100. He exercises the option, and in the result he becomes
a buyer of 50 shares. In figures, he comes out a debtor
for 7,000 francs. The 50 shares cost him, therefore, 140
francs each (7,000 : 50 = 140).
If he abandons the option, he comes out as a seller of
50 shares. The price of his sale (5,000 francs) is lessened
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by t h e amount of the premium of 500 francs he owes. H e
will therefore be a seller at 90 francs (4,500 : 50 = 90).
If, now, instead.of buying the " call " of 100 shares 120/5
against the non-optional (ferme) sale of 50 shares a t 100,
Peter buys a " stellage" (spread) at a price, expressed as
follows: 140/90, he will have the privilege of becoming
a purchaser of a number of shares a t 140 francs; b u t a t
t h e latest, on t h e day of option declaration, he will h a v e
to declare himself either purchaser or seller.
In case of a great advance or heavy decline, Peter, as
buyer of " p u t " a n d " c a l l , " is sure of a profit. At the price
of 140 francs and above, he becomes b u y e r — h e ' ' calls.'' A t
t h e price of 90 francs and below, he becomes seller—he
"puts."
B u t let quotations stand still, the variations remaining
a t a figure between 140 francs and 90 francs, and Peter
will be loser. T h a t loss, however, in the present case
would be, a t most, 25 francs per share, The loss, indeed,
can not exceed for each share one-half of the difference
between the figures of the " p u t " and " c a l l " (140 — 90 = 50;
50:2 = 25).
Indeed, if on t h e day of option declaration 90 is quoted,
Peter, who is bound to declare himself, will certainly not
" c a l l " a t 140 for stock which he can resell only a t about
90. H e will declare himself seller, and the rates a t t h e
declaration will leave him neither gainer nor loser.
Seller a t 90, buyer a t 90, his account balances, without
gain or loss.

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History and Methods of the Paris Bourse
But if the price is 91 francs, he will declare himself seller
and—
will lose 1 franc on each share;
if 92 francs, he will lose 2 francs on each share;
if 93 francs, he will lose 3 francs on each share;
if 94 francs, he will lose 4 francs on each share;
if 95 francs, he will lose 5 francs on each share;
and so on. As the price at the declaration of options rises
above 90 francs, Peter will find it to his interest to " p u t "
at that price rather than "call," and yet he will be loser.
Thus, at a price at the option declaration of 115, Peter,
declaring himself seller at 90, will lose a difference of 25
francs on each share.
However, it should be noted that when the price at
option declaration is 115 francs, Peter might just as well
declare himself purchaser at 140 francs as seller at 90
francs. Indeed, if he becomes purchaser at 140 and he
resells at the price of the option declaration, 115, he will
lose 25 francs on each share, as in the other case.
Above 115 francs it will be to Peter's advantage not to
exercise the "put," but to "call;" that is, to purchase
rather than sell.
Indeed, if the quotation is 116 francs, then, by becoming
purchaser at 140,—
he will lose 24 francs on each share;
if 117, he will lose 23 francs on each share;
if 118, he will lose 22 francs on each share;
if 119, he will lose 21 francs on each share;
if 120, he will lose 20 francs on each share.

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The nearer the rate of the option declaration rises
toward 140, the less will the loss become. At 140, Peter
will experience no loss; above that rate, profit wTill begin.
Thus the two ends of a " siellage" (put and call) present an ascending and descending scale of losses, the
apex of which will be the average rate between the two
extreme limits. That average rate will' determine the
maximum loss to which the buyer of a "stellage" may be
subjected.
It remains for us to look into the position of Paul, seller
of the " stellage. "
At every intermediate rate, between 140 and 90, he
will have a profit in the same proportion as Peter will
experience a loss. But, in case of a considerable rise or
fall, his loss is limited only by the limit of the fluctuations. Above 140, he runs the risk of being called upon
to take up delivery at that price; he is also exposed, if the
shares fall below 90, to have to deliver them at that price.
Peter, buyer of the " spread," has in his favor the big
bourse fluctuations, and against him their slight variations, while Paul, seller of the "spread," has in his favor
the comparative stagnation of prices, and against him the
great fluctuations.0
(33) How are the accounts liquidated? To liquidate
is to audit, to settle. The purchaser who exercises his
"call" liquidates through the "call."
In the same way for the seller who "puts."
The purchaser who has resold, has liquidated his transaction. But that operation, like the one of the seller
a

Yves Guyot & Raffalovitch, " Dictionnaire du Commerce; de I'Industrie
et de la Banque" under the word "stellage,'' by Emmanuel Vidal.
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History

and

Methods

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Bourse

who rebuys, only shows liquidation when t h e accounts
have been established. The same applies to t h e p a r t y
who loans money for the account, and the p a r t y who
borrows for t h e account.
Parties dealing between themselves on the Bourse—
stockbrokers between themselves, bankers between themselves—fix a time, called " declaration of options," when
they declare w h a t they decide to do. One day later the
liquidation proper begins.
Purchasers who do not care to exercise their " c a l l , "
resell or have their purchases carried over until the
next settlement; sellers who do not wish to deliver, rebuy
or carry over.
After t h a t , in a common office, the work of central
liquidation begins.
(34) To understand the machinery, it is proper t o recall
t h a t t h e " m a k i n g - u p " price is a price fixed b y agreement,
intended to facilitate deliveries and settlement on t h e
bourses and markets.
W i t h this in mind, we shall suppose five people—Peter,
Paul, Jack, Will, and Ernst, operating on a hypothetical
market.
Peter sold on the Bourse 100 shares to Paul, a t 100
francs—that is to say, for 10,000 francs—Paul resold
t h e m t o Jack at 101, for 10,100 francs; Jack resold t h e m
to Will at 102, for 10,200 francs; Will resold t h e m
to E r n s t at 103, for 10,300 francs. W h a t happens at
m a t u r i t y in case there is no clearing?
Peter delivers the 100 shares to Paul, the latter paying
him 10,000 francs. Paul, holding these 100 shares,
brings t h e m to Jack, who pays for t h e m 10,100 francs;
90312 0 —10

'5

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Monetary

Commission

Jack calls on Will, hands him t h e ioo shares, and collects
10,200 francs; finally, Will betakes himself to E r n s t ,
who disburses 10,300 francs and keeps the securities.
This causes considerable disturbance to m a n y people,
numerous bookings, carrying around of funds and carrying around of securities.
The clearing system, otherwise called the central liquidation service, has for its object t h e obviating of all
these disadvantages.
I t works as follows: Peter, Paul, Jack, Will, and E r n s t
are requested by the chief of the common service called
central liquidation, to settle all their engagements at a
rate called clearing price (cours de compensation), fixed, let
us say, at 101.50.
Thanks to this service there will be no successive deliveries of securities to Paul, Jack, and Will. The delivery
of securities will be made from Peter to Ernst exclusively,
passing by Paul, Jack, and Will.
T h e liquidation then centralizes t h e deliveries of securities between sellers and purchasers. Moreover, it can
also collect differences due from t h e debtors, and p a y t h e
creditors, while attending to t h e handling of the securities.
The account of each p a r t y results as follows: Peter
sold 100 shares to Paul, and delivers t h e m to Ernst on
the indications of t h e central liquidation, at the clearing price, 101.50. H e is credited with 10,000 francs,
selling price to Paul, and debited with 10,150 francs,
" m a k i n g - u p " price—giving a balance of 150 francs to his
debit.

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History and Methods of the Paris Bourse
T h e accounts of Paul, Jack, and Will, will be as follows:
Paul's

account.
Cr.

Dr.

Francs.

Francs.

Purchased of Peter at ioo_ _ 10, ooo
Cleared at 101.50
10,150

Cleared at 101.50
Sold to Jack at 101

20,105
Result: A balance in favor of Paul of 100 francs.^
Jack's

10, 150
10,100
20,250

account.
Cr.

Dr.
Francs.

Purchased of Paul at 101... 10, 100
Cleared at 101.50
10,150

Francs.

Cleared at 101.50
Sold to Will at 102

20, 350

20, 250
Result: A balance in favor of Jack of 100 francs.
Will's

10,150
10,200

account.
Cr.

Dr.

Francs.

Francs.

Purchased of Jack at 102 __ 10, 200
Cleared at 101.50
10,150

Cleared at 101.50
Sold to Ernst at 103

20,350

10, 150
10,300
20,450

Result: A balance in favor of Will of 100 francs.

Finally, E r n s t disburses 10,150 when taking u p the
securities of Peter.
H e bought from Will at 103, owing 10,300 francs, and
t h e clearing takes place at 101.50, totaling 10,150 francs.
He, therefore, still owes 150 francs on t h e purchase price.
a The two clearings at 101.50 appear in the account. As they are even
in the debit and the credit, they could, they even ought, for the sake of good
accounting, be taken off the account; but we let them remain, in order to
show all that happens within the central liquidation office. Paul has
purchased securities for a sum of 10,000 francs, which he owes; he delivers the securities to the central liquidation and receives 10,150 francs.
He is credited for it. He sold the shares at 101, for 10,100 francs. He
purchases them at the central liquidation at the clearing price, and pays
over 10,150. He is debited for it. The same applies to the other accounts.

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National

Mon

etary

Commission

Hence, the situation in the central liquidation office will
appear as follows:
DEBTORS.

CREDITORS.

Francs.

Peter..
Ernst..

•--

Francs.

Paul_
Jack_
Will..

I50

300 j

__

IOO

__

IOO

__

IOO

300

W i t h the 300 francs which Peter and Ernst pay, t h e
central liquidation office pays Paul, Jack, and Will.
The clearing price has, therefore, served t h e following
purposes: (1) To facilitate, through the central liquidation, deliveries between dealers in a public m a r k e t ;
(2) to permit this central service to fulfill t h e functions
of collector and distributer of money.
The clearing prices are also used for the "carryingo v e r " operations through loans to the next settlement
(reports); they also facilitate operations of parties giving
orders through different houses.
On the Paris Bourse the clearing price is fixed on t h e
settling day b y t h e syndic of the stockbrokers (syndic des
agents de change) for securities officially quoted; and b y
a member on d u t y in the Syndical Chamber of Bankers
dealing in securities for future delivery, for securities in
the open market.
(35) In order t o give the above remarks a practical
import, it is necessary to follow t h e transactions from t h e
standpoint of the p a r t y who gave t h e orders.
How are orders given? How long do they remain in
force? How can they be controlled b y the quotation
list? On what conditions are orders given in most
cases? How can certain special orders in small options
66




History and Methods of the Paris Bourse
be followed up ? Which are the settling days ? W h a t expenses is t h e p a r t y who gives orders subjected to? W h a t
happens in case of default, either on the part of t h e p a r t y
receiving orders or the p a r t y giving orders ?
For securities negotiated in the official market, purchases and sales m a y be effected either a t t h e opening
price or t h e closing price, at a fixed price or a t best.
Trading a t t h e average rate, like trading for cash, is not
done without previous special arrangements.
B u t just as in the trading for cash stockbrokers operate before t h e opening of the session a t the average rate—
t h a t is to say, a t a rate unknown at the moment they are
dealing, b u t which will be determined b y t h e quotations
entered on t h e quotation list—in exactly t h e same way
these ministerial officeholders deal for the account, on the
basis of t h e opening price, before it becomes known.
Later, when business opens, t h e first price entered on
t h e official list will determine the price they traded at.
This mode of procedure is not practised in t h e bankers'
market {Coulisse).
I n the Coulisse orders are given a t a fixed price or at
best (au mieux).
One m a y also indicate the moment when
his order is t o be executed—that is to say, at t h e opening
of t h e session or at the closing of the session.
(36) According to agreement, orders remain in force for
t h e day, for a week, or until the next settlement, inclusive.
I t is customary for stockbrokers and bankers to state in
their letters of advice t h a t orders " a revocation" (good
until canceled, " g . t. c " ) remain in force for t h e week,
and m u s t be renewed on the following Monday, for want
of which t h e y will be considered as lapsed.
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(37) In m a n y cases the accepting of orders is subordinate to the deposit of cover (couverture).
The cover is a sum deposited b y the buyer as an
anticipated p a y m e n t for the taking up of securities
to be bought, or for the difference which m a y occur b y a
resale, or deposited b y t h e seller to safeguard his delivery
or pay the difference in case of repurchase. When it is
deposited in t h e shape of securities " t o b e a r e r " (au porteur), the p a r t y giving the order must, when he deposits
t h e securities, sign an order for t h e sale of same, should
it be necessary.
T h e stockbroker or banker m a y reserve for himself t h e
right to demand additional cover (margin), in case events
should render the original a m o u n t insufficient, and, for
want of this being furnished, the right to close o u t the
undertaken transaction for the account. B u t for this
purpose a distinct stipulation is necessary.
Especially in purchases on option (a prime), t h e intermediary has the right to exact t h a t an additional cover be
handed to him on t h e day of option declaration (au jour
de la reponse), for t h e event in which the option should
be exercised and t h e purchase declared a fixed bargain,
and t h a t , for want of t h a t request being met b y t h e
party giving the order, the transaction be closed out a t
t h e expiration of the time allowed him for t h a t purpose.
(38) The minimum q u a n t i t y allowable for transactions
for future delivery is determined b y t h e kind of rente.
Thus, for rentes 3 per cent it is 3,000 francs rentes, or
one-half, say 1,500 francs; for rentes 4 per cent, 4,000
francs rentes, or one-half, etc. For other securities t h e
minimum quantity is 25 units, shares or bonds.
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and

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of the Paris

Bourse

(39) The purchaser for the account has t h e privilege
of demanding delivery before m a t u r i t y by tendering the
money. This is w h a t is called "faculte
d'escompte"
(privilege of discounting). B u t it should be noted t h a t
t h e same does not occur when the seller has paid " deport "
(a premium on borrowed stock) at the last liquidation;
t h a t is, has paid a certain sum (backwardation) freeing
him from immediate delivery by putting off its m a t u r i t y
for a future date. (See No. 24.)
(40) On the curb for rentes {coulisse des rentes) options
are frequently dealt in a t 10 centimes for each 3 francs
rentes and a t 5 centimes for each 3 francs rentes for t h e
next day; t h a t is to say, by risking 50 francs for each
purchase of 1,500 francs 3 per cent rentes when operating " d o n t " 10 centimes, and 25 francs for 1,500 francs
rentes 3 per cent when operating "dont"
5 centimes.
These operations are commonly spoken of as "dont deux
sous pour demain" (option 2 centimes till to-morrow),
"dont un sou pour demain" (option 1 centime till tomorrow) . The option declaration takes place a t 2 o'clock.
(41) The Official Quotation List of the Stockbrokers
{la Cote officielle des agents de change) establishes only
four quotations for transactions for future delivery
{le terme): The opening {le premier), the highest {le plus
haut), t h e lowest {le plus bas), the last {le dernier); b u t ,
nevertheless, business is done a t intermediate rates {a des
cours
intermediates).
The prices of options {les cours des primes) appear in
the columns reserved for the prices of fixed bargains {cours
du ferme), and below these prices; b u t their appearing in
this or t h a t column does not indicate a t w h a t moment
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they are dealt in. The b a n k (curb) quotations (les cotes
en banque) give t h e quotations for the fixed bargains in
the following order: Opening, lowest, highest, last (debut,
plus bas, plus haut, dernier).
Dealings are also m a d e a t
intermediary rates. For options two prices are published,
t h e lowest and t h e highest, without indicating t h e time in
either case.
(42) In t h e Paris market operations for future delivery
are made either for t h e semimonthly (a quinzaine) or t h e
monthly settlement (a fin de mois).
On t h e stockbrokers' market (an marche des agents de
change) they deal for t h e semimonthly settlement, except
in French rentes and in shares of the Credit Fonder (a
French national mortgage loan society, see § 72 of Book
IV.—Translator), of the Banque de France, and of t h e
railroads, which are dealt in for the end-of-the-month
settlement. Options are dealt in for semimonthly or
monthly settlement, and in extreme cases for t h e third
liquidation. For securities subject to a single monthly
liquidation the m a t u r i t y of options can not extend beyond the second liquidation. Often dealings are m a d e
in options a t 10 centimes per 3-franc rentes for the next
day (say, 50 francs for 1,500-franc rentes, t h e minimum
of transaction), b u t no options a t 5 centimes, as on t h e
Coulisse. The option declaration for t h e morrow is
effected on t h e day indicated a t 2 p . m.
I n t h e bankers' market (au marche en banque), i. e., on
t h e Coulisse, all transactions for future delivery (operations a terme) are m a d e for m a t u r i t y a t t h e end of t h e
m o n t h (h Vecheance de fin de mois).
Options are dealt in
for one, two, or three months. The latter case rarely
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History and Methods of the Paris Bourse
occurs. T h e small operations in options on t h e coulisse
des rentes have been mentioned above. (See No. 40.)
Following is t h e order of t h e fortnightly settlement
{la liquidation de quinzaine):
On t h e 14th (or t h e 13th, if t h e 14th is a holiday) option
declaration takes place a t 1.30 p . m . The 15th (or t h e
day following, if t h e 15th is a holiday) is for liquidation of
operations. T h e next day, for making up and forwarding
accounts. On t h e day following t h e debtors m u s t settle.
Two days later t h e creditors' accounts are paid.
The end-of-the-month (ultimo) liquidation is carried on
as follows:
The day before t h e last day of t h e month (or two days
before in case of a holiday) option declaration takes place
a t 1.30 p . m. The last day of the month (or, if t h a t is a
holiday, t h e first session of t h e following month) is set
for liquidation, sales, purchases, and carrying-over operations, or continuations (reports). The following day, for
making up and forwarding accounts. The day after, for
payment of debtor accounts. Two da}^s later, for paym e n t of creditor accounts.
I t should be noted t h a t , while t h e option declaration
preceding liquidation is effected at 1.30, t h e declaration
of options for t h e next day takes place a t 2 p . m. However, on t h e day of option declaration preceding liquidation t h e declaration takes place a t 1.30 for all options
given for t h a t maturity, including those m a d e t h e day
before.
On t h e day of liquidation some trades are made for the
running account (en liquidation courante) and some for t h e
next account (pour la liquidation prochaine); t h e rates for
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transactions m a d e for the next account include t h e cost
of carrying over. The p a r t y giving an order m u s t therefore specify whether his order, given on settling day, shall
be executed for t h e running account or for t h e next account. In the absence of precise instructions t h e order is
executed for t h e running account.
(43) As far as possible, parties giving orders m u s t see
t h a t their instructions for t h e liquidation be received
before t h e " jour des reports" (contango day).
"Reports"
(continuations) being transacted on t h e last bourse day
of t h e month, t h e instructions referred to m u s t be
received on t h a t day before noon a t t h e latest. I t is
better b y far t h a t they be given t h e day preceding. I n
case of deliveries of securities, they m u s t reach t h e intermediary agent, a t t h e latest, a t t h e fourth session of t h e
following month. All cases for t h e account, buying or
selling, for which instructions (to t a k e u p or carry over
purchases, to deliver or carry over sales, or t o clear) are
not received before t h e bourse opening on t h e morning of
t h e "jour des reports" (contango day), m a y be officially
extended until t h e next liquidation.
The remarks we m a d e as to t h e condition of securities
t o be delivered, when we spoke of operations for cash, are,
of course, also applicable to operations for future delivery. W e shall now show what happens in case of default
on the p a r t of an intermediary or of a p a r t y giving orders.
Then we shall speak of expenses occasioned b y operations
for future delivery.
(44) In case of default of an intermediary, t h e syndical chamber of the corporation or syndicate to which
he belongs immediately takes t h e measures rendered
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History and Methods of the Paris Bourse
necessary b y t h e circumstances. I t purchases back t h e
securities he sold, it resells t h e securities he purchased,
and t h e creditors can then enter their claims against cash
assets. This is called "execution"
(buying-in or sellingout). The parties having given orders, on finding themselves thus liquidated, must file their claims.
The p a r t y who gives orders, when he defaults in his
engagements, m a y also be " e x e c u t e d " {execute). The
effect of failure on a business m a n is loss of t h e advantages of dealing for t h e account. The same thing h a p pens if, owing to any act of his, he reduces t h e guarantees
given t o his intermediary, or, likewise, if he declares
himself insolvent, and so demands his own " e x e c u t i o n . "
However, t h e delay which a speculator makes in settling
his " l i q u i d a t i o n " account (compte de
liquidation—the
account to be settled on liquidation days) does not, in
principle, cause him t h e loss of t h e advantage of future
delivery; b u t if on t h e last day of " l i q u i d a t i o n " a speculator whose transactions h a d been carried over has not
settled his account, the stockbroker has t h e right t o
liquidate his affairs. After t h a t date t h e stockbroker no
longer has t h e right to proceed to "execution," unless he
has notified t h e giver of the order t h a t he would carry him
over only in case he was ready to settle within a given
time.
While t h e right of " e x e c u t i o n " during t h e liquidation
is granted t o t h e stockbroker (agent de change) b y
article 69 of t h e decree of October 7, 1870, t h a t right is
denied t o t h e curb broker (coulissier).
B u t nothing
prevents t h e banker from making an express agreement
with his client t o carry his stocks over only on condition
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Commission

of immediate settlement of the "liquidation'' account of
previous transactions.
(4.5) Expenses for transferring registered certificates
taken up during the settling days are borne by the purchasers. As explained, when speaking of operations for
cash, they amount to 0.75 per cent of the amount of the
trade.
Transactions are subject to brokerage or commission
charge, a table of which follows. The present rate of
brokerage of Paris stockbrokers dates from July 22,1901;
it was decreed by the Minister of Finance, under whose
direction are the stockbrokers trading on bourses provided with "parquets." The rates are as follows:
12.50 francs for 1,500 francs. Rente
3 per cent perpetual or amortisable.
Funds of foreign countries dealt in, 25 francs for the smallest denomination negotiable for future deamounts of principal or in rentes.
livery, and so on in the same proportion.
Shares and bonds:
For shares and bonds when 25 centimes for each share or bond.
their price is below 250
francs.
For shares and bonds when 50 centimes for each share or bond.
their price is between 250
and 500 francs.
For shares and bonds when One-tenth per cent of the amount
their price is above 500
of the bill.
francs.
Operations in "Reports" (continua- 12.50 francs for 1,500 francs of 3
tions) in French rentes.
per cent rente, perpetual or amortisable, and for 1,750 francs of
rente 3 ^ per cent.

French rentes

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History and Methods of the Paris Bourse
On all other securities:
For securities subject to bi- One-twentieth per cent of the
monthly settlement.
amount of the bill.
For securities subject to month- One-twelfth per cent of the amount
of the bill.
ly settlement.
An exception made for foreign 15 centimes for the smallest denomination negotiable for future desecurities, the price of which
livery, and so on in the same
is above 60 francs.
proportion.
For the smallest amount dealt 25 centimes.
in for future delivery on foreign securities.
For securities, the price of 25 centimes per certificate.
which is less than 200 francs.
For securities worth from 200 50 centimes per certificate.
to 400 francs.
For securities worth above 400 One-eighth per cent (12.5 centimes
per 100 francs) on the amount of
francs.
the bill.

The above prices apply to all certifications of signatures
given b y stockbrokers, even when not attached to a
purchase or a sale.
For securities not fully paid in, t h e fees given above
are figured only on t h e net a m o u n t of t h e bill, after
deduction of t h e p a r t not yet paid in.
Two transactions during the same session, one purchase
and one sale, are subject to a commission, calculated
only upon t h e item giving t h e larger figure. The '' franco,''
however, does not apply in the case where one transaction
is for cash and the other for future delivery.
On t h e Coulisse (marche en banque), the usual commissions are as follows: For French rentes: 12.50 for each
1,500 francs of 3 per cent rentes.
For t h e smallest amount negotiable for future delivery
in foreign state securities, 25 francs.
For securities the price of which is below 50 francs, 25
centimes per certificate
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For securities the price of which is between 50 and 400
francs, 50 centimes per certificate.
For securities the price of which is above 400 francs,
one-eighth per cent (12.5 centimes per 100 francs) of the
amount of the bill.
The commission is reduced by one-half for abandoned
options "dont" 10 centimes (of which 10 centimes shall
be forfeited) on French rentes.
Continuations are subject to full commissions, and not
to the special rates of commissions for continuations on
the Parquet.
FOURTH DIVISION.—Exchange—Concerning the negotiation

of bills of ex-

change and precious metals.

(46) Article 76 gives to stockbrokers the privilege of
alone negotiating bills of exchange for account of others.
For a long time the stockbrokers have given up that prerogative, and, in fact, they do not negotiate a single bill
of exchange; that branch of business is carried on, unrestricted, by a group of special brokers, whose transactions
fix the rates, the stockbrokers intervening only to give
them the official trade-mark.
It is proper to investigate that business: we should
indicate in a few words what is the bill of exchange; and,
because it is treated like a commodity, subject to the
fluctuations of bids and offers, we should ascertain what
useful purposes have been served by its transformation
into a thing fungible to the highest degree.
(47) We need not study here the exchange contract
from a theoretical standpoint. It will suffice for us to say
that, created for the settlement of private claims, the
bill of exchange in its circulation becomes endowed with
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History and Methods of the Paris Bourse
the functions of insuring international settlements without
regard to persons. Hence, there results the more or less
active quest for that money, giving rise to the advance
or decline in its purchase price, within limits which we
shall have to determine.
How does the letter of exchange, originating in private
relations, turn out to be an object of trade?
Let us suppose that Peter, of Paris, is indebted to Louis,
of London. Is he going to settle in metallic currency or
bank notes, by taking upon himself the heavy cost of
freight and insurance? It is simpler to purchase a bill of
exchange, drawn, for instance, by Paul, in Paris, on
Lucien, in London. He will indorse it to Louis, who will
collect it from Lucien, so that, simultaneously, and without the transmission of metallic currency, Peter will have
settled with Louis, and Lucien with Paul.
Let us note that in Paris both Peter and Paul will have
found profit in the transaction—the one by paying his
debt, the other by collecting his claim—without the transfer of metallic currency.
Therefore, the seller and purchaser of bills of exchange
find it advantageous to meet. It is then the business of
the broker to make their offers and bids coincide.
(48) The debates on offers and bids fix the quotations. If Paris has made large purchases in London,
and London, on the contrary, is but slightly indebted to
Paris, bills of exchange on London will be high; in the
opposite case, they will be freely offered, and their price
will fall. But whether rising or falling, exchange rates
have a limit; when rising, it is the point where the debtor
would find it more profitable to insure payment in cash
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Monetary

Commission

t h a n to buy paper at too high a price; when falling, it is
t h e point where t h e creditor, rather t h a n sell his paper at
a low price, would find it advantageous t o effect t h e collection in his debtor's home country; in b o t h cases, t h a t
limit is w h a t is called t h e "gold p o i n t " — " e x p o r t " point
of metallic currency in t h e first case, and " i m p o r t " point
in the second.
(49) Such are t h e principles which govern t h e rates of
exchange. We leave aside considerations having reference to t h e relations between exchange quotations and
t h e general economic condition or t h e monetary condition
of any given country.
Having established the principles, we shall ask ourselves only one question: How can securities, which
differ from one another either b y t h e signatures bringing
t h e m into existence, or b y t h e interval between t h e
moment of t h e negotiation and t h e time of payment, be
brought to a common trading basis; or in other words,
how can the bills be measured in terms of each other,
how are t h e exchange quotations made?
W h a t is purchased by the p a r t y who becomes possessed
of a bill of exchange? He purchases t h e right to collect
t h e face value of t h e bill, b u t only after a certain time.
Besides, it should be noticed t h a t t h e certainty of p a y m e n t
is subject to t h e solvency of t h e vouching signatures.
Hence, these two consequences, t h e second of which has
b u t a theoretical value: (1) The purchaser, in consideration of t h e discount up to t h e time of collection, will be
entitled to an allowance on t h e face value; (2) two bills
drawn for t h e same face value, and payable within t h e
same length of time, should be quoted a t two different
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History

and

Methods

of the Parts

Bourse

rates, in accordance with the rating of the signatures.
We shall see that, in fact, this second consequence does
not occur on the Paris market.
(50) These remarks permit us to explain the exchange
quotations as published by the Union des Banquiers.
Below you will find the quotation list of October 17,
1908:
Check payments,
short paper.

Three months'
paper.

Discount
abroad.
Per cent.

London
25/8 to 25/11__
Germany
1 2 2 ^ to i23__.
Belgium
99^10995^...
Spain
446 to 451
Holland
207H to 2o8/B_
Italy
99 rs to 99ff
New York
5*3% to 516K
Portugal
451 to 461
St. Petersburg
2 6 3 ^ to 2 6 5 ^
Switzerland
99}!- to 99^1
Vienna
j io4T9s to io4i§Discount street rates:
Paris
London
Brussels
Bank of France discount
Interest on advances
Treasury bonds:
One to three months
Three months to one year

25/10K to 25/133
I2 2 i | t O I23T3g
99 5A to 99 K
444 to 449
208 to 208 XA
99 K to 100
512K to 515K--.
449 to 459
262 K to 264 K--.
997/ito 100
io4T9B to 104^?

4
3
AJA
3
5
6
6
5JA
4
2H
iH
2 y&
3
3TA

The rates are fixed for sight a exchange—that is to say,
as if the payment was demandable immediately; but on
a
The quotation at sight has been in use since May 1, 1907; previously,
a difference was made as to whether bills were negotiated at sight or a t three
months. In the first instance, an allowance was made, as nowadays, to
the benefit of the purchaser, for the time that he might have to wait; in
the second case, on the contrary, the rates having been established by
figuring on the delay of three months, if the time to run until maturity was
less, it was the seller who got the benefit of the discount for the difference;
in the first case the rate was given less discount, and in the second case the
rate was given with discount.

903120—10-

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these rates the purchaser is allowed for each bill, on
account of the time he has to wait, a deduction of interest
for the time the bill has to run, in accordance with the
rate of discount ruling in the country where the payment
is to be effected; that rate is given for each place in the
column on the right.
One can see that the rates given swing between two
extreme limits; for instance, three months' paper on
London is quoted between 25.10^2 and 25.13X per pound
sterling. These indications do not correspond, as the
rates given for bourse securities do, to rates actually
traded on during the session, but to extreme limits,
between which the average rate is fixed. Some authors
state also that quotations vary between these limits,
according to the status of the signatures; but, in fact, on
the Paris market, dealings are made as if all signatures
were equally good.
(51) The exchange quotation list comprises two divisions, under two series of different rates; one devoted to
"short paper," the other to "long paper."
"Short paper" is paper payable within one month;
'' long paper'' is paper which has more than one month to run.
Given that a deduction of interest is made on the exchange rate of every bill according to the time elapsing
until its payment, it would appear that a single quotation
would be sufficient, since the delay is compensated for, day
by day, by a reduction in price. However, the necessity
for double quotation is caused by a real duality of markets
for "long paper" and for "short paper."
From an economic standpoint, indeed, these two categories of bills do not play the same part. The function
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History and Methods of the Paris Bourse
of the " short paper " is restricted to t h a t of an instrument
of p a y m e n t ; its value is, therefore, solely regulated b y
local conditions.
When, on balance, Paris is London's debtor, paper on
London is sought; if, on t h e contrary, London is shown
to be a debtor, t h e rates on London will fall. I n t h e first
case t h e exchange is said to be unfavorable; in t h e second
case it is called favorable.
(52) Offers and bids for " long p a p e r ' ' are influenced, not
only b y local conditions, b u t also by other causes.
First of all, there are purchasers who b u y paper as an
investment.
" T h e rate of interest is, therefore, their
chief concern. The rise of t h e discount rate on one place,
above t h e rates prevailing on t h e other places of t h e
same order, will instigate a more active demand for long
bills, and will tend to cause t h e price to rise." a Especially, railroad companies often invest their idle funds in
purchases of bills of exchange.
Secondly, " long paper " comprises a speculative element
which is missing in t h e " short paper " ; t h a t element is t h e
profit which t h e purchaser m a y realize by getting his
paper discounted privately at a rate lower t h a n t h e official rate prevailing in t h e country where t h e p a y m e n t is
t o be effected. T h a t is, there will be a profit which will
a m o u n t t o t h e difference between t h e discount deduced
b y inference from t h e exchange rate (official discount),
and t h e actual discount at which he will have t h e bill
discounted privately; t h e profit will naturally be greater
as t h e m a t u r i t y is further removed.
0 See article on Exchange, by M. Aug. Arnaune, in the
d'Economie Politique of Leon Say.
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Monetary

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Guided by t h e same considerations, bankers often
undertake what is called the " p e n s i o n i n g " (umise en
pension") of " long paper." For instance, they b u y exchange on London at 2*/& and then " p e n s i o n " it until
m a t u r i t y in one of t h e large banks, which retains 2 per
cent. They get t h e benefit of one-eighth, which is the
difference between t h e rate of discount applied in the
m a r k e t and t h e " p e n s i o n " rate. As to t h e large banks
where paper is " pensioned," if they do not t a k e it for their
own account, it is because they m a y have reasons for portioning out their risks and for scattering t h e responsibility, in consideration of a trifling difference. Moreover, they have t h e advantage of not running any risk
as to exchange. The bills are not indorsed to t h e m ;
they hold t h e m on deposit and surrender them at m a t u rity to t h e depositor, who undertakes the collection or
negotiation.
Thus, " s h o r t b i l l s " and " l o n g b i l l s " are two distinct
kinds of merchandise, answering different requirements,
t h e prices of which vary under distinct influences; hence
t h e two series of quotations.
(53) We shall have done with these short notices on
t h e exchange quotations, after saying t h a t in Paris they
quote " rincertain"—that
is to say, they quote in national money t h e r a t e of a fixed quantity of foreign money.
This is t h e general rule, and among foreign cities there are
b u t London and St. Petersburg where t h e " c e r t a i n " is
quoted—that is to say, where the price of a fixed sum in
national money is quoted in foreign money.
Except London, for which t h e price quoted is t h a t of
t h e pound sterling, and Spain, where t h e quotation price
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and

Methods

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Bourse

of 500 pesetas is given, the Paris market quotes t h e price
of 100,units of foreign money—100 florins for Holland,
100 marks for Germany, 100 crowns for Vienna, 100
rubles for St. Petersburg, 100 dollars for New York, and
100 francs for Belgium, Switzerland, or Italy.
(54) Each day the quotation list, decided upon b y a
committee of bankers and brokers, is transmitted to t h e
Association of Stockbrokers (Compagnie des Agents de
Change), who publish it below t h e Official Quotation List.
Indeed, as we stated in the beginning, the stock brokers
(agents de change) have not only long ago given up their
monopoly in this sphere, but do not negotiate bills of
exchange even in competition with t h e free merchandise
brokers (courtiers).
The negotiations are made on the
bourse for securities (bourse des valeurs), either directly
between bankers or through the mediation of exchange
b r i k e r s (courtiers de change).
(55) How are the transactions carried out?
Every day at bourse time t h e brokers and representatives of bankers gather in a hall specially reserved for
them. Transactions which could not be settled in private,
are brought out before the gathering (rather restricted,
however), where quotations are established by auction,
just as before the large crowds of t h e market in securities.
Merchandise brokers selling paper may mention t h e
name of their principal, or, if t h e latter considers it to his
advantage not to disclose himself, they do not divulge his
name to their purchaser until after the meeting. Here,
again, a difficulty would present itself concerning t h e
specification of t h e thing sold, if custom did not solve it
in a general way; indeed, it may happen t h a t such and
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such a house has always declined t h e acceptance, or now
declines t h e further acceptance, of thist>r t h a t signature,
which it does not trust, or of which kind it has already a
sufficient number on h a n d ; b u t then, either t h e broker
knows beforehand t h a t his paper will not be taken by this
or t h a t fellow-broker who is a buyer, or, if t h e trade is
concluded and the paper not taken, t h e m a t t e r is settled
through a fellow-broker by means of t h e "passage de
noms" (passing of names).
Generally, the broker deals for his own account, a n d
t h e n settles with his client a t the average rate, taking his
profit in the r a t e ; certain houses, however, content themselves with closing the transaction a t t h e actual rate,
reserving for themselves a brokerage, which, while not.
officially fixed, is nevertheless established by custom (for
instance, one-half to one-fourth centime for exchange on
London; one-sixteenth to one thirty-second centime for
exchange on Berlin).
In his intercourse with his fellow-dealers the broker
binds himself only to deliver the paper; if his principal
does not deliver it, he must procure it, losing perhaps t h e
difference in price. But he is not responsible for payment at maturity, as he has not indorsed the paper.
The loss falls on the principal who agreed to take t h e
signature.
Exchange business is acquainted with " s h o r t " sales.
One can sell 1,000 pounds sterling at such and such a rate,
deliverable in eight days; he has then eight days within
which to procure the paper. Transactions for future
delivery are made for rather short periods—eight, fifteen

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History and Methods of the Paris Bourse
days. Transactions are sometimes made for a longer
period, but rarely for three months.
Contracts are always followed by deliveries. Contracts to be settled by payment of differences are not
customary.
(56) Gold and silver are dealt in in bars 1,000 fine—that
is to say, absolutely free of any alloy.
Gold.—Prices are quoted on so much per 1,000 premium
or loss, and are based on the value in money of a kilogram
of gold, after deducting coinage charges, say net 3.437
francs for 1 kilogram.
Silver.—Since January 2, 1901, prices are given in
francs; this means that the official quotation list expresses in francs and centimes the cost of the kilogram
silver fine.
F I F T H DIVISION.—Bourses in the

departments.

(57) In examining the bourse system, one has chiefly—
almost exclusively—in mind what relates to the Paris
Bourse. However, the French financial market also comprises provincial bourses, the importance of which has
greatly diminished as business centered on the Paris
market, but whose activity is still maintained by transactions in local securities.
The monopolizing of business by the Paris market has
given rise to recriminations, which have been taken up
by the newspapers. Sundry remedies have been recommended for the purpose of giving a new lease of life to
provincial bourses, which complain of painfully vegetating. It is not this phase of the question which we have
to pass upon here, we desire only to indicate in a general

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way some of t h e interior regulations by which these
bourses differ from the Paris institution.
(58) Provincial bourses are divided into two categories:
The bourses with " p a r q u e t s " {bourses a parquet), and t h e
bourses having n o ' ' p a r q u e t ' ' (bourses sans parquet). '' Parquet " means a slightly raised floor surrounded by railings
and reserved for the stockbrokers, which permits t h e
public t o find t h e m and keeps t h e m isolated while they
trade.
The provincial bourses provided with a " p a r q u e t " are
those of Lyon, Bordeaux, Marseille, Nantes, Toulouse,
and Lille. The Nice " p a r q u e t " was done away with in
1887. According to t h e terms of article 14 of t h e decree
of 1890, bourses comprising at least six offices m a y b y
decree, and after fulfilling certain formalities, be provided
with a " p a r q u e t . " At present Dunkirk is, in fact, the
only place which has more t h a n 6 stockbrokers and is
not provided with a " p a r q u e t ; " it is true t h a t t h e 11
agents who trade there, are, a t t h e same time, insurance
brokers and ship-brokers-interpreters (courtiers interpretes
et conducteurs de navires).
The differences between bourses ilh parquet"
and
t h e bourses without a " p a r q u e t " are not important.
First of all, in the first category, stockbrokers depend
upon t h e Minister of Finance (decree of July 2, 1862),
while in the second category they depend upon the Minister of Commerce (or upon the Minister of Colonies when
they carry on business in* a French possession). (See
ordinance of July 3, 1816, and April 6, 1834.)
I n the " p a r q u e t " bourses a syndical chamber m u s t
be elected each year, the number of members varies,
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History and Methods of the Paris Bourse
according to t h e number of members in the corporation.
(Art. 17 of decree of 1890, modified by decree of J u n e 29,
1898.)
I n t h e bourses without a " p a r q u e t , " the general meeting of stockbrokers and t h e tribunal of commerce exercise
the same corporate privileges which, in t h e " p a r q u e t
bourses," are exercised by the syndical chamber (introduction of successors, honorary memberships, etc.).
I t is questionable whether the consent given by a syndical chamber to the nomination of an unworthy stockbroker m a y entail its responsibility toward wronged third
parties. I t is clear t h a t the same question does not exist
with regard to t h e general assemblies which in the
bourses without " p a r q u e t " fulfill both functions. But
as far as syndical chambers are concerned, the question
does not seem to us to be definitely settled in t h e m a t t e r of
responsibility. a
Syndical chambers have, in addition, disciplinary
powers. All syndical chambers, since the decree of 1890,
have t h e power to impose penalties. Before t h a t decree
only t h e syndical chamber of Paris had t h a t power
conferred upon it by an ordinance of May 29, 1816.
According to the terms of article 23 of the decree of
1890, t h e penalties which may be pronounced by the syndical chamber are disapprobation, censure, and interdiction to enter t h e Bourse for one month. I t expressed
its opinion on graver penalties (suspension and revocation).
F r o m t h e standpoint of discipline, the stockbrokers of
bourses without a " p a r q u e t " are placed under the authority
of t h e mixed syndical chambers, established in accordance
a Lyon, Caen & Renault.

Traite de droit commercial, vol. 4, No. 883.
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with t h e decree of J a n u a r y 5, 1867, and which are t h e
same as those for insurance brokers, and for ship-brokersinterpreters.
Let us add t h a t in all corporations having a syndical
chamber there is established a common fund, t h e management of which is intrusted to the syndical chamber.
(Decree of October 7, 1890, art. 26.)
We may mention also t h a t in the " p a r q u e t bourses'"
t h e decree of October 1, 1862, adds to the qualifications
demanded from candidates for the office of stockbroker,
t h a t they produce a certificate of fitness and respectability signed by t h e heads of several banking or commercial houses.
Finally, several decrees have conferred on stockbrokers
acting on " p a r q u e t b o u r s e s " t h e right to certify the
transfers of registered certificates of rentes of t h e
sundry types made payable in t h e treasury office of t h e
department where they do business, provided these transfers are for other registered certificates. (See especially
for the rente 3 per cent t h e decree of May 28, 1896.) A
decree of December 24, 1896, has extended their sphere
to all registered rentes, without distinction, and whatever
m a y be the department in which t h e arrears are ordered
to be paid.

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III.—Judicial considerations on the monopoly of
stockbrokers.
Page.

i. What is meant by bourse transactions?—The advantage of
making a distinction between private transactions in securities among individuals, and bourse transactions proper _ _
2. Bourse transactions are mostly orders executed in a m a r k e t .
3. Commercial bourses—Unattached brokers—Bourses for securities—Privileged stockbrokers—Why that difference?
4. Stockbrokers are intermediaries, bound to secrecy, not allowed
to operate for their own account—They are commission
agents (commissionnaires)
5. Is it necessary, even on the Bourse, to resort to an intermediary?—The Report of Alexandre to the Tribunate, in
year I X
6. Article 76 of the Code de commerce
7. What transactions are referred to in article 76?
8. Why the words "for account of others'' in reference to negotiations of bills of exchange?
9. What is meant by lieffets publics" (Government securities)?.
10. What is meant by ''other securities susceptible of being
quoted?"
11. Do the securities mentioned in the second part of the official
quotation list come within the prerogatives of stockbrokers?
12. Securities not susceptible of being quoted may be freely
dealt in by unattached intermediaries, as well as by stockbrokers
13. First penalty for violation of the monopoly, operations void_
14. Second penalty for violation of the monopoly, fine in police
court, without prejudice to damages
15. Third penalty for violation of the monopoly, internal revenue
fine
16. Concerning brokerage for transactions in metals

89-90
90-91
9I-92

92-93

93~94
94~95
95-96
96-97
97-98
98-101
101

101-102
102-105
105-109
109-110
no

(1) By the words "bourse transactions1' are meant
transactions in a public market.
When a party enters a money changer's office and purchases from him or sells to him for cash or future delivery one or more shares or bonds, he does not exactly
conclude a bourse transaction, but a transaction in
bourse securities.
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On t h e other hand, if he gives a bourse order, which t h e
receiver of the order will carry or cause to be carried t o
the market, the execution of t h a t order is a bourse
operation.
If a banker, to replenish his stock, goes to t h e Bourse
and purchases this or t h a t quantity of securities for cash or
for future delivery, non-optionally or by means of options;
if a speculator, noticing a difference in price of a certain
security in a foreign market and on the French market,
undertakes an arbitrage by buying and selling alternately in one and in the other, or vice versa—these are
bourse transactions.
Often, however, in the ordinary business conversation,
we call bourse operations not only those effected on t h e
Bourse itself, b u t those t h a t bear upon bourse securities.
I t is not a rare thing to hear people who have purchased
securities in an office and resold them there, declare
t h a t they have made bourse transactions. I t is because
t h e object of t h e contract is confused with the premises
where the transactions are effected. I t is therefore the
d u t y of those who are called upon to arbitrate difficulties arising from transactions in securities, to ascertain
whether the transactions were trades made privately, outside the Bourse, or were transactions in a public market.
I n private trades the contracting parties are bound b y
their agreements. In bourse transactions t h e laws and
bourse customs govern the transactions and their customers.
(2) The first way to transact business in securities is
t h e one which presents itself naturally to t h e mind: it is
t h e direct trade, privately concluded; it is the one t h a t
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History and Methods of the Paris Bourse
has for a main condition the relation between buyer and
seller, who know each other.
Peter enters Paul's banking house; he purchases 10,
20, 100 shares or bonds. This is the direct trade, privately concluded.
B u t if Peter has given an order to Paul, if Paul, who
receives t h e order, transfers it to the Bourse, where it is
carried out apparently for him, b u t in reality for his client,
P e t e r — t h a t has been a commission trade. Most of the
bourse transactions are commission trades.
(3) Bourse transactions are, therefore, such transactions as are carried out on all public markets in all kinds
of merchandise. Indeed, in every market they trade for
cash and for future delivery, non-optionally and on options,
and we see there buyers who declare themselves ready
to t a k e u p merchandise, sellers who declare themselves
ready to deliver, purchasers who resell, sellers who buy
back, buyers who borrow for the account, and sellers who
carry over the execution of their contract until t h e next
settlement.
Whether it be a question of securities or merchandise,
the mechanism of transactions is the same. Only the
organization of the markets differs in the two cases.
While, in the case of merchandise, brokers enjoy no
privileges whatever, the stockbrokers, who are commission agents operating on the Bourse for securities, enjoy
a monopoly. They alone m a y negotiate government
securities and other securities susceptible of being quoted.
Merchandise bourses differ from bourses for securities,
not only by the nature of the articles dealt in, b u t also by
the fact t h a t the carrying on of t h e commission business
is untrammeled in the former and is not in the latter.
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There existed, indeed, a monopoly of commercial
brokers, which had been established for merchandise,
prior to the Revolution, at the same time as the privilege
of the stockbrokers, and which, together with the latter,
had been suppressed in 1791 and reestablished in year
IX of the Revolution. But the commercial brokers'
privilege was suppressed by the law of July 12, i866. a
Whatever may be the strength of the reasons broached
for or against the discrimination, the monopoly of stockbrokers still exists, in law and in fact. We should now
investigate its nature, its scope, and the laws protecting it.
(4) Stockbrokers are intermediary agents.
Article 74 of the Code de commerce expressly ascribes
to them that character: "The law," says the article
a MM. Lyon, Caen & Renault, in their treatise "Droit
Commercial/'
Tome IV, note under No. 1035, call attention to the fact that in 1866
nobody demanded the suppression of the stockbrokers' monopoly. Sundry
reasons were advanced in favor of its preservation. Their part is not
limited to negotiating stock-exchange securities; they certify to the identity
of persons and the correctness of signatures for the transfer of government
and other securities; they are necessarily depositaries of large sums and
numerous securities for a certain length of time; everyday they verify the
prices of securities and especially government securities. Thanks to the
monopoly of stockbrokers, the Treasury can enjoy a perfect safety for transfers where its responsibility is drawn upon; transactions are effected with
great rapidity; and the interests of inexperienced persons who have
to deliver securities and money are protected. Such is the summary
of the reasons given by the Government in the explanatory statement of
the law of July 18, 1866 (V. J. Bozerian, De VInstitution des agents de
change)* MM. Lyon, Caen & Renault answer: " T h e arguments advanced
in favor of the stockbrokers' monopoly are not conclusive. The mediation
for the negotiation of securities has in itself no official character. Besides,
it could be imagined that freedom prevailed in this matter, and that,
without any monopoly, measures could be taken for the verifying of
quotations and avoiding the most serious abuses. Moreover, there are
numerous States where there is no monopoly, either for brokerage in merchandise, insurance, or freight, or for the mediation in the matter of
negotiating securities, and yet the freedom does not appear to give rise to
complaints."
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referred to, " t a k e s cognizance of intermediary
agents,
* * * the stockbrokers."
They must keep secret the name of parties for whom
they operate. The obligation of secrecy is imposed upon
t h e m by article 19 of the decree of 27 Prairial, year X .
They are not permitted to operate for their own account.
Article 85 of the Code de commerce forbids it to them.
The result is t h a t apparently they deal under their own
name, and in reality for account of their customers.
If one stops to think for a moment of the nature of
a transaction of a qualified intermediary, who is not
permitted to reveal the name of his principal and
not allowed to deal for his own account, he will easily
recognize t h a t the transaction presents all the signs
of commission. Article 94 of the Code de commerce, moreover, says expressly: '' The commission agent {commissionnaire) is one who acts in his own name, or under a firm
name, for account of a principal."
(5) The law says (art. 74 of the Code de commerce)
t h a t it takes cognizance of intermediary agents.
B u t is one really bound to engage an intermediary
when he wishes to transact bourse operations, even on the
Bourse?
No; t h e law has never said t h a t .
Everyone is free to buy, even on the Bourse, for his
own account.
Thus it was t h a t Tribun Alexandre, who in t h e year I X
was reporter of the law of 28 Ventose, said in his r e p o r t : 0
" N o doubt, nothing prevents two citizens, who trust
each other, from making contracts between themselves,
a Archives Parlementaires,
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and without intermediary, concerning a m a t t e r mutually
satisfactory. But it would show a poor knowledge of the
spirit of w h a t we call business, to infer from t h a t fact
t h a t stockbrokers are useless. I t happens frequently t h a t
he who, for private reasons, or owing to necessity, determines upon selling the security or the merchandise he
owns, does not want to be known, and t h a t the one who
has funds for investment, does not wish to be known
either. From t h a t results the necessity of an intermediary to facilitate the sale to one and the purchase to t h e
other."
The law forces no one to apply to a stockbroker. B u t
a n y banker, any receiver of orders, who has obtained a
bourse order or instructions to carry out a commission,
m u s t apply to a stockbroker, since only a stockbroker
can seek a purchaser for his seller and a seller for his
purchaser.
The stockbroker has a privilege of monopoly as " commissionnaire"
(commission agent). No one can exercise
t h e functions of " commissionnaire " on the Bourse or outside the Bourse except the stockbrokers.
(6) The extent of the monopoly is fixed by article 76
of the Code de commerce. I t is of moment to recall t o
mind the full text thereof:
" T h e stockbrokers, organized in the manner prescribed
b y law, have alone the right to negotiate government securities and other securities susceptible of being quoted; to
negotiate for account of others bills of exchange, notes,
and all other commercial instruments; and to verify t h e
quotations thereof.

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History and Methods of the Paris Bourse
"Concurrently with merchandise brokers, the stockbrokers may attend to negotiations and brokerage for
sales or purchases of metals. They alone have the right
to verify the quotations thereof."
The Code de commerce dates from 1807.
In reality, it is not that text which gives the stockbrokers their privilege.
The text which gives that privilege is a prior one,
articles 6 and 7 of the law of 28 Ventose, year IX (19
March, 1801), thus expressed:
" A R T . 6. In all cities where there is a Bourse, there
shall be stockbrokers and commercial brokers appointed
by the Government.
" A R T . 7. These stockbrokers and commercial brokers,
who shall have been appointed by virtue of the preceding
article, shall alone have the right to exercise the profession,
to verify the quotations of exchange, the quotations of
government securities, merchandise, gold and silver bullion, and to testify before courts and arbiters to the truth
and to the quotations of negotiations, sales, or purchases."
When the Code de commerce was compiled, the attention of the lawmaker was not occupied with the idea of
expanding the functions of the stockbrokers, but only
with the idea of specifying them.
(7) "Stockbrokers alone have the right to make negotiations," says the Code de commerce.
What negotiations are meant? Evidently, negotiations
of intermediaries and commission agents, since the law
has qualified stockbrokers as intermediaries, and has
made it their duty to transact business apparently for
themselves and in reality for their customers.
90312 °— 1 o

7

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I n other words, t h e lawmaker gives to t h e stockbrokers
t h e monopoly of t h e negotiations he intrusts t h e m with.
H e did not wish t o say t h a t every commercial transaction
in securities should be made through a stockbroker. H e
wanted to say t h a t , having created intermediaries who
alone have t h e power to act as such, negotiations of
mediation should be exclusively reserved for them.
(8) While carefully reading article 76 of the Code de commerce, one becomes aware of a difference in the wording
relative to t h e negotiation of government and other
securities, on t h e one hand, and negotiations of bills of
exchange, notes, and commercial instruments, on the other.
Article 76 of the Code de commerce says, indeed, t h a t
stockbrokers alone have the right to make negotiations in
government and other securities susceptible of being
quoted, and to make, for account of others, negotiations
in bills of exchange, notes, and commercial instruments.
W h y these words for acco'unt of others?
A suspicion crosses one's mind. W h y has the lawmaker
t a k e n the trouble to say t h a t t h e stockbroker, so far as
bills of exchange, notes, and commercial instruments are
concerned, acts for account of others, and did not say t h a t
for other securities? Is it with a view to lay down t h e
rule implicitly t h a t for t h e other securities he alone m a y
m a k e all negotiations, and t h a t , consequently, private
individuals can not act for their own account?
This would be making a big mistake. The lawmaker
never enjoined, and never would enjoin, upon anyone to
have recourse to an intermediary—could not have wanted
t o do so b y means of a mere difference in wording, b y some
sort of subterfuge.
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Moreover, this difference in wording m a y be rationally explained. In t h e m a t t e r of bills of exchange there can be
no secrecy. The indorser of a bill of exchange will necessarily be known to the purchaser. In consequence, the
stockbroker, not being able to indorse the bill of exchange
himself, since he could not be responsible if unpaid, is
bound to make the name of the seller known to t h e purc h a s e r s The negotiation, therefore, in itself already
carries with it t h e pointing out of t h e p a r t y for whose
account it is made.
Consequently, there is no cause to dwell upon t h e argument drawn from t h e words " for account of others " with
a view to maintain t h a t the cooperation of a stockbroker
is always necessary for the purchase or the sale of
securities.
B u t t h e stockbroker has a monopoly of operations
belonging to an intermediary, and it remains true t h a t
most transactions in bourse securities (excluding those
m a d e over t h e counters of money changers and bankers
in their offices) are made under the commission system
and imply t h e resorting to an intermediary, and, consequently, m u s t be m a d e through stockbrokers.
(9) However, is it necessary to employ a stockbroker for
the negotiation of all transferable securities, whatever they
maybe?
a
According to the terms of article 10 of the decree of 27 Prairial, year X,
the stockbroker can not indorse a bill of exchange. According to the terms
of article 25 of the decree of 27 Prairial, year X, the negotiation of a bill
of exchange makes its examination a necessity. Therefore the stockbroker
states for whose account he is trading.
It should be recalled that in practice stockbrokers never negotiate bills
of exchange.

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No; article 76 of the Code de commerce includes within the
privilege only government and other securities susceptible of
being quoted.
What is meant by " efjets publics" (government securities) ? There is no legal definition as to what securities
may be thus termed. We can only refer to authors. We
refer to Volume IV of the Traite de Droit Commercial of
MM. Lyon-Caen & Renault. 0
" In the category of l effets publics f they say, " are
reckoned the securities issued by the duly constituted
authorities (especially the rentes of the French Government or of foreign Governments, securities issued by the
departments or townships, French Treasury bonds, which
form the floating debt, etc.), or issued by permission of
the authorities (shares and bonds of railroad companies,
shares and bonds of corporations created with the authority of the Government by virtue of article 37 of the Code
de commerce). On the other hand, similar securities issued
by private corporations, not subject to preliminary authorization, are not "effets publics."
(10) What is meant by the words "and others susceptible of being quoted?"
The words "and others susceptible of being quoted,"
which appear in article 76 of the Code de commerce, have
given rise to several interpretations.
a
No. 890. MM. Lyon-Caen & Renault themselves call attention in a
footnote to the fact t h a t their solution is in accordance with the one given
by Mollot (Bourses de Commerce, Nos. 123 et seq.); Buchere (Traite' de
Valeurs Mobilieres, No. 68); Bozerian (La Bourse et ses Operations, Nos. 45
and 412); Ruben de Couder (Dictionnaire de Droit Commercial, under the
words "agents de change," Nos. 91 and 92); and Pour V'Ancien Droit,
Nouveau Denisart, under "effets publics."

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History and Methods of the Paris Bourse
According to some authors a these words apply t o all
securities which, owing to their intrinsic nature, are, a t any
moment, without distinction whatsoever, qualified t o be
quoted on t h e bourse list. According to other a u t h o r s 6
we should estimate the prominence attached to a n y given
securities, and consider as susceptible of being quoted only
those which, by their importance and their great number,
would be likely to attain a wide circulation, leaving out
negotiable values t h a t are little known in the market and
have no pretension to being quoted.
Finally, a third system highly praised b y MM. Lyon-Caen
& Renault in their "Precis de Droit Commercial"
and
given up b y t h e m in their " Manuel" and in their " Traite,"
decided t h a t those securities were not susceptible of
being quoted which, either on account of their intrinsic
n a t u r e or on account of any legal or reglementary interdiction, can not be admitted on t h e official list.
T h e court of cassation (Cour de cassation), b y means of
three decisions, of July i, 1885 (S. 1885, 1. 257, D. P.
1885, 1. 386), February 10, 1886 (Dr. fin. 1888, p . 222),
and March 9, 1886 (S. 1886, 1. 222, D. P. 1886, 1. 266),
has sanctioned a fourth system, including in t h e expression "securities susceptible of being q u o t e d " only those
which were declared qualified to be placed on t h e bourse
quotation list b y t h e Syndical Chamber of Stockbrokers—
t h a t is to say, which fulfill the conditions exacted for t h a t
purpose, without, however, the necessity of discriminating
whether they have actually been quoted or not. The
a
Mollot, Bourse de Commerce, No. 123; Badorride, Bourses de Commerce,
Nos. 204 et seq.
& Boistel. Precis de Droit Commercial No. 683. Buchere, Traitt des
Operations de Bourse, No. 140; L,abb6. Note, Sirey, 1881, 1. 289.

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words "securities susceptible of being q u o t e d " are therefore synonymous with the words "securities admitted on
t h e quotation list.'' This interpretation has reconciled t h e
authors. a
Hence, by "securities susceptible of being quoted,"
are m e a n t securities which have been acknowledged by
the stockbrokers as qualified to be placed on the official
quotation list of the bourse.
Furthermore, we must also t a k e into account t h a t there
are two categories of securities which can not be quoted —
those against which there is a permanent prohibition,
resulting from a s t a t u t o r y text, and those which lie under
a temporary restriction by the Minister of Finance.
A decree of December 3, 1893, prohibits the official
quotation of shares of foreign corporations, the par value
of which is not on a plane with the par value of shares
sanctioned by French law.
Now, the law of August 1, 1893, on stock companies,
directs t h a t the par value of shares shall be 100 francs
minimum. For companies having a capital of less t h a n
20,000 francs, the par value of shares must be 25 francs
minimum.
Article 5 of the decree of February 6, 1880, empowers
t h e Minister of Finance to prohibit the official quoting of
a foreign security.
W e shall now sum up the results obtained relative to
this special point. Excepting securities against which
there is an interdiction—either general, through t h e decree
of December 3, 1893, or special, through t h e Minister of
Finance—securities susceptible of being quoted are those
« T . 1, No. 1481.
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which stockbrokers have decided to carry on their list,
called the "Cote Officielle" (Official Quotation List).
Consequently, every time a syndical chamber of stockbrokers (une chambre syndicate d'agents de change) admits
a security on its official quotation list, the chamber itself
proclaims for t h e benefit of its members t h e exclusive
right to negotiate the same.
( n ) Stockbrokers have the privilege of carrying certain securities in a special place on their list, called the
"non-official p a r t " (partie nonofficielle).
(Decree of Oct.
7, 1890, art. 20.)
They can not carry, in t h a t part,
securities which they have been prohibited from quoting
for t h e reasons mentioned above. They enter thereon
securities comparatively rarely dealt in. I t would be
more correct to say t h a t t h a t portion of t h e quotation
list is not permanent.
The securities admitted on t h a t
p a r t of the quotation list are subject to t h e privilege of
t h e stockbrokers. 0 ^
(12) As t h e privilege of stockbrokers applies only to
government and other securities susceptible of being
quoted, all other securities may be freely negotiated by
unattached intermediaries. 6 These are the coulissiers
(curb brokers).
a Trib. correctionnel de Lyon, 12 mars, 1906. Journal VInformation of
March 9, 1906.
b Regarding the right to use agents other than stockbrokers for unlisted securities or securities not susceptible of being listed, the following
authorities may be referred to: Trib. civ.: Seine, 23 April, 1898 {Journal le
Droit, of 6 Oct., 1898); Paris, 21 Oct., 1900 {Pand, jr., 1901, 2.209); Paris,
24 Oct., 1900 {Le Droit, of 1 D e c , 1900); Paris, 19 Jan., 1901 {Gazette du
Palais, 7 June, 1901); Paris, 28 March, 1901 {Gaz. des Trib. of 14 Sept.,
1901); Trib. corr. Marseille, of 29 June, 1903 {Rec. Marseille, 1903,
1.328); Cour de Paris, 7 Feb., 1906 {Cote de la Bourse et de la Banque,
21 Sept., 1906).

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B u t t h e stockbrokers can also negotiate securities
which they have not t h e right t o quote. 0 However,
t h e y have no privilege, as stated above.
(13) T h e penalty for transactions m a d e in violation of
t h e monopoly of t h e stockbrokers m a y be threefold: I t
is, first of all, the nullity of the transactions. I t has been
invariably imposed by the courts (notably, t h e decisions of t h e Cour de cassation, Ch. crim., J a n . 19, i860,
a n d Feb. 21, 1868; Chambre des requetes, F e b . 28, 1881;
Chambre civile, Apr. 22 and J u n e 29, 1885; cassation,
F e b . 8, 1888 and 1892, Feb. 22, 1897). b
I n spite of t h e weight which decisions of t h e court of
cassation (Cour de cassation) carry, t h e nullity is not adm i t t e d b y all theorists.
The nullity of transactions is very debatable. No
passage of law pronounces the nullity. However, t h e decree of 27 Prairial, year X, is framed as follows: " In conformity with art. 7 of t h e law of 28 Ventose, year I X , all
negotiations made through unqualified intermediaries are
declared void." In conformity with article 7 of the law
of 28 Ventdse, year IX
* * *. By referring t o t h e law
a
Lyon, 2 May, 1888 (Droit Financier, 1888, p. 264); Trib. civ.: Seine,
18 June, 1899 (Journal la Loi, of 31 July, 1899); Lyon, 27 March, 1902
(Gazette Palais, 1902, 1.715); Lyon, June 22, 1902 (Dr. Fn.} 1902, p.
422); Trib. corr.: Seine, 8 June, 1904, p. 342. (See also Cote de la
Bourse et de la Banque, of 21 Sept., 1906.)
& Recueil de Sirey:
i860
1. 481
1868
1. 168
1881
1. 289
1885
1. 250
1885
1.273
1888
1. 312
1892
1. 294
1897
1. 185

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of Ventose, not a word is found therein permitting one to
say that operations are void.
M. A. Wahl a thinks that there may be doubt as to
nullity. "We admit," he says, " t h a t the natural sanction of a prohibitory law is the nullity of deeds infringing
upon it, but only when no other penalty for its transgression exists; here, however, criminal actions are sufficient
protection for the stockbrokers.''
MM. Baudry-Lacantinerie and Wahl b are of the opinion,
that it is untrue that every interdiction of public interest
is sanctioned by nullity. "On the contrary, it is certain
that, in general, nullity is not inflicted on an infraction to
a monopoly." The case is different when a solemn contract is exacted in order to safeguard the free consent of
the contracting parties—as, for instance, a donation or a
marriage contract. But the monopoly of stockbrokers
has been established only for effecting transactions; the
consent of parties remains uncontrolled even when they
apply to other agents than stockbrokers. The only right
that is ignored is the privilege of the stockbrokers. Well,
for this the penal restraint suffices. "No one has even
thought of asserting that an auction sale of chattels,
made without employing an auctioneer, would be void."
Are the former Council decrees of September 24, 1724
(art. 18), and November 26, 1781 (art. 13), to be antagonized? MM. Baudry-Lacantinerie and Wahl call attention to the fact that these decrees were repealed by the
law of March 17, 1791, which abolished the monopoly of
a
TraiU thiorique et pratique des Titres au Porteur francais et etrangers,
1891, T. 2, 969.
b TraiU th6orique et pratique de Droit Civil. Du Mandat.
No. 423.

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t h e stockbrokers. Article 2 of t h e law of September 15,
1807, has, moreover, repealed " a l l ancient laws regarding commercial matters, on which the Code de commerce
had been legislating." Besides, the law of 1886 on timebargains has particularly repealed the council decrees of
1724, notwithstanding the previous repeal, because t h e
administration of justice persisted in applying it. And
t h a t repeal applies not only to t h e provisions coming
under the law of 1885, b u t to t h e entire decision. The
authors, therefore, decide against nullity.
M. Daniel de Folleville" and M. Salzedo
negotiation is not subject to nullity.

b

claim t h a t

MM. Lyon-Caen and R e n a u l t c admit nullity.
These
authors maintain t h a t the ancient laws, so far as an
infringement upon the monopoly is concerned, m a y have
survived, because article 2 of the law of September 15,
1807, repeals only the laws regarding matters on which
the Code de commerce legislates. Well, the Code de commerce is not treating of infringements on the monopoly.
Besides, MM. Lyon-Caen and Renault call attention t o
the fact t h a t the reasoning t h e y dispute, would lead to an
inadmissible conclusion; t h a t is to say, t h a t there is no
penalty for unwarrantable interference.
B u t it m a y b e objected, it seems to us, t h a t , t h e interference with the functions of stockbrokers being an offense—
and, as such, punishable—it is not correct to state t h a t
interference is bereft of penalty. The law of 28 Ventose,
year I X , of which Chapter V of the Code de commerce
a

De la Possession des Tiires au Porteur. No, 295.
b La Coulisse et la Jurisprudence, p. 89.
cTraite de Droit Commercial.
T. IV, note under No, 906.

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is t h e successor, erects infraction into a misdemeanor.
Hence t h e former provisions of 1724 and 1781 appear
as having possibly been repealed by the law of September
15, 1807.
Therefore, it appears to us inadmissible t h a t transactions
effected through unqualified intermediaries should be void.
Consequently, a customer could ratify transactions made
without t h e cooperation of a stockbroker, and the engagements undertaken in regard of these transactions
would be valid. B u t this solution is purely theoretical,
since t h e administration of justice, as we stated, declares
void all transactions made by intermediaries other t h a n
stockbrokers, when t h e negotiations refer to securities
with regard to which t h e stockbrokers have reserved the
privilege for themselves, by listing t h e m on t h e official
quotation list.
(14) We come to the second sanction of the monopoly
of stockbrokers. Those who practise the profession of
stockbrokers or meddle with the privilege reserved for
these ministerial appointees, are liable to a fine in a
police court, without prejudice, of course, to damages
due t o t h e stockbrokers.
This fine m a y be not more t h a n orfe-sixth of t h e stockbroker's bond and not less t h a n one-twelfth.
Article 8 of t h e law of 28 Ventose, year I X , says:
" I t is forbidden to all individuals other t h a n those
appointed b y t h e Government, to fulfill t h e functions of
stockbrokers and merchandise brokers, under penalty of
a fine, which shall not exceed one-sixth of the stockbroker's bond, nor be less t h a n one-twelfth.

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" T h e fine shall be imposed b y an inferior court b y way
of correction, enforceable b y arrest, and the money shall
be applied to t h e foundlings' fund."
W h a t does t h e unwarrantable interference with t h e
functions of stockbrokers consist of?
I t consists of acts belonging to these functions; t h a t is
t o say, of acts of mediation.
Hence, the acting as intermediary between purchasers
and sellers, as a commission agent would do, is t h a t which
constitutes t h e offense.
This, moreover, was expressly stated in a decision of t h e
Cour de cassation, rendered in a lawsuit brought against
26 coulissiers (curb brokers) in 1859. The decision says:
" W h e r e a s acting as intermediary, in consideration of a
commission or brokerage, between sellers and purchasers
of government securities and other securities susceptible of
being quoted, or, which is the same thing, bringing together
sellers and purchasers, preparing and carrying out t h e
formalities tending to the effecting of the purchases and
sales, constitutes making negotiations in these government
a n d other securities. * * * " a
W e should mention, however, t h a t a suit for unwarrantable interference was recently brought against some
bankers for effecting private dealings—direct operations
without intermediary.
These transactions are positively lawful. B u t it is selfunderstood t h a t t h e stockbrokers ardently wish this were
not the case.
a Gourde cassation. Jan. 19, i860. Sirey, i860. 1.
bre criminelle.
Feb. 21, 1868. Dalloz, 1881. 1. 9.

106

481.

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The decision of the First Correctional Chamber of the
Seine Court {^Tribunal de la Seine) on April n , 1907, proclaimed t h a t article 76 of the Code de commerce establishes the privilege of commission agents for t h e benefit
of the stockbrokers; t h a t freedom of trade is one of t h e
essential principles of our modern law; t h a t t h e general
provisions governing sales, which form the m a t t e r of
chapter 6, book 3, of the Code civil, contain no restricting disposition concerning t h e purchase and sale of
securities; t h a t direct transactions in securities quoted
or not quoted are therefore lawful, without distinction as
to whether t h e purchases and sales are for cash or for the
account, fixed or on option, refer to securities in specie or
in genere, or whether the seller is or is not the owner a t the
time of t h e contract.
However, t h e court established the fact t h a t t h e bankers
had m a d e sales and purchases for clients-purchasers and
clients-sellers a t t h e same price. Therefore there was unwarrantable interference, since it was a case of agency.
The prosecuted bankers were fined 25,000 francs.
When t h e case came before the Cour d'appel (court of
appeals), the prosecuted bankers offered to prove t h a t the
inferior court h a d made no audit or verification, and t h a t
they had never matched sales with purchases and purchases with sales.
Were t h e proofs missing? The court of appeals, by its
decision of April 9, 1908, sentenced the appellants without citing any case of agency. The decisions mainly rested
on t h e fact t h a t article 76 of the Code de commerce provides
differently for transactions in government and other securities, on t h e one hand, and transactions in bills of exchange,
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on t h e other, in making in t h e first case t h e mediation
of a stockbroker always necessary, while not so in t h e
second; t h a t this difference of t r e a t m e n t results from t h e
words "for account of others" inserted in article 76 concerning bills of exchange. Finally, according t o t h e Cour
d'appel, t h e direct transaction is one where t h e owner of
the securities delivers them to the purchaser. B u t a sale
in which t h e seller does not hold the securities, can not
be direct; the mediation of a stockbroker is necessary for
the sale.
These views have stirred up very violent criticisms. 0
An offense—that is, a punishable act—can not be construed, a monopoly can not be granted an excessive
range, b y forbidding direct transactions, and even punishing t h e m — a n d this b y reason of a difference in wording, which, moreover, is readily explained by t h e different
way of negotiating securities of different character. (See
above, No. 8.)
As t o t h e prohibition forbidding t h e seller who is short
in securities to sell by himself or to undertake to make
deliveries without t h e agency of a stockbroker—it rests
on no law and is purely arbitrary. After all, it is rather
the mediation which constitutes t h e unwarranted interference..
The decisions of the Cour d'appel are, at t h e present
time, before the Cour de cassation.
Is t h e fine imposed b y t h e law of the year I X to be
calculated on the security bond of t h e year I X or of the
a Vide Dalloz, 1908, 1-153, for the text of the decision, and a very important critical note by M. Percero, professor at the Faculte de Droit in
the University of Dijon.

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time when t h e offense was committed ? The Cour de cassation in i860 took as a basis the security bond a t t h e time
when t h e offense was perpetrated. This solution, supported by M. Boistel a and by M. Ruben de Couder, is
violently criticised by others, like MM. Buchere, Mollot,
Lyon-Caen and Renault. 6
There are no extenuating circumstances when it comes
to unwarrantable interference with t h e offices of stockbrokers. 0
(15) Finally, we reach t h e third penalty imposed b y the
law upon infringements on t h e monopoly of stockbrokers,
namely, t h e internal-revenue fine. T h e law of April 13,
1898 (art. 14), does not allow the p a y m e n t of t h e t a x on
bourse transactions in securities mentioned on t h e official
list of stockbrokers, t o be made t o t h e internal-revenue
office b y anyone except t h e stockbrokers. The result is
t h a t when a banker, who is bound to keep a register for
the p a y m e n t of t h e t a x , enters thereon a transaction
reserved for t h e stockbroker, and pays t h e a m o u n t of
t h e t a x t o t h e administration, his acts constitute a violation of t h e internal-revenue law, punishable by a fine of
100 to 5,000 francs according to article 32 of the law of
April 28, 1893.
The monopoly of stockbrokers is t h u s protected b y a
triple wall—(1) t h e nullity of transactions; (2) a fine in a
police court; (3) an internal-revenue fine, t h e latter
°Boistel, Droit Commercial, p. 431.
b Buchere, Traite des Operations de Bourse, No. 114.
Commerce, No, 15. Lyon-Caen et Renault, Traite de
T. IV, No. 904.
cC'our de Paris, Aug. 2, 1859. Sirey, i860, 1. 481.
Commerce, No. 16. Ruben de Couder, Dictionnaire de
under "Agent de Change," No. 15.
109

Mollot, Bourse de
Droit Commercial,
Mollot, Bourse de
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imposed by administrative proceedings; that is, without
trial.
According to the terms of the instructions No. 2956,
issued by the general direction of the registry office, that
provision does not refer to direct transactions.
But the administration of the registry office regards as
direct transactions only those which are made for money,
securities against cash. That solution is quite vulnerable.
(16) We shall close the inquiry into the extent of the
stockbrokers' monopoly by a special consideration of
metal transactions.
Article 76 of the Code de commerce divides the monopoly of such transactions between the merchandise brokers
and the stockbrokers.
Now, in 1866 (see above, No. 3) the functions of merchandise brokers had left the range of monopoly. The
trade is free. The result is that transactions in metals
are free.
However, the stockbrokers alone have the right to
certify the quotations.

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BOOK IV.—Historical and economic

considerations.

F I R S T DIVISION.—The exchange market—Origin of public credit.
Page,

i. The financial market in antiquity
114-115
2. In the Middle Ages. In 1304. The exchange market a t the
Grand Pont. Money changers, jewelers, bird dealers
115-117
3. The first bourses
117-118
4. The sundry sites of the Paris Bourse from 1304 to the present time
118-119
5. How corporations were established
119-120
6. Edict of 1572. Brokerage raised to the dignity of office
120-121
7. Edict of 1595. No one obliged to engage the services of a
broker
121-122
8. Edict of 1598. The office of broker subjected to taxation
122
9. Decision of the King's council of 1638. The brokers are called
u
agents de change"
122-123
10. In 1705. The loan notes. Securities on the Bourse must be
negotiated by the " agents de change1'
123-124
SECOND DIVISION.

11. General observations on public credit under the old regime. _ 124-125
12. Philip the Fair and his successors. The Superintendents
Enguerrand de Marigny, Jacques Coeur, and Semblancay__ 125-128
13. Francis I. The rentes of the Hotel de Ville
128
14. The successors of Francis I, Henry IV, and Sully. L o u i s X I I I . 128-129
15. Louis X I V and Fouquet
129-131
16. Colbert. The chamber of justice. Colbert's "Terror"
131
17. The successors of Colbert. The lotteries. The tontine
131-132
18. Creation of offices. Pontchartrain. Samuel Bernard
132-133
1
19. The stock companies
33~^35
20. Companies under Louis X I I I
_
•
135-136
21. Companies under Louis X I V _ .
136-138
22. Under the regency. Law. The Bourse in the rue Quincampoix
138-140
23. After the system's downfall. In 1724. The Bourse is transferred to rue Vivienne. .
140-142
THIRD DIVISION.—The CounciVs decisions of 1724 to 1788—The
market on the eve of the revolution.
24.
25.
26.
27.
28.

The Council's decision of 1724. Its aim.
Council's decision of 1733
Council's decision of August, 1785
Council's decision of March, 1786
Council's decision of July 14, 1787
90312 0 —10

8

in

financial

Decision of i726__ 142-143
143
143-144
144
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Page.

29. Council's decision of J u n e 10, 1788
144-145
30. vSecurities on the eve of the revolution
145
31. A glance a t t h e condition of public finances under Louis XVL
Agiotage (stockjobbing)
145-147
FOURTH DIVISION.—The financial market during the revolution.
32. Suppression of offices. Suppression of "agents de change"
148-149
33. Mistake frequently made concerning the results of the financial
market's independence. To it is ascribed t h e stockjobbing
that took place a t the time of the revolution
149
34. The real cause of stockjobbing during revolutionary times.
Physiology of stockjobbing
149-151
35. Condition of the public debt in 1789
151-152
36. Creation of assignats. Economic disturbances caused b y their
decline. The reason for the decline
152-153
37. Closing of t h e Bourse
153-154
38. Stockjobbing outburst. There is no more Bourse
154
39. Draconian measures. The rise in prices
154-155
40. The Bourse reopens. Taw of the 13 Fructidor, year I I I . T h e
assignat keeps on declining
155
41. The law of 28 Vendemiaire, year IV, on the bourse regulation. 156-157
42. Considerations on what occasioned these two laws
157
43. Forty-five billions of assignats. The territorial drafts. The
rise of gold
158-159
44. The great ledger of the public debt
159
45. Bankruptcy threatens
159
46. Bankruptcy
159-161
47. The law of the 28 Ventose, year I X
161
48. The decree of 27 Prairial, year X
161-162
49. Dealing for future delivery not forbidden to private individuals.
162
50. The bourse quotation list in 1800
162
F I F T H DIVISION.—The nineteenth

century.

51. Three kinds of events constitute the history of the financial
market: Expansion of public a n d private credit. Development of dealings for future delivery a n d their being recognized as legal. T h e struggle of t h e " P a r q u e t " against the
"Coulisse"
162-163
52. Public credit develops transferable securities. Transferable
securities develop public credit
163-164
53. Condition of securities a t the end of the nineteenth century. _ 164-169
54. The evolution of credit and the public debt
169-170
55. T h e financial trouble a t the time of the bankruptcy until 1801Foundation of the Bank of France
170
56. The perpetual debt, from 18 Brumaire, year V I I I , to the beginning of 1909
171
57. The rente certificate made popular
171-172
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History and Methods of the Paris Bourse
Page.

58.
59.
60.
61.
62.
63.
64.
65.
66.

The emission proceedings. Loans placed by contracts
172-174
Loans of departments and of municipalities
174
Loans of colonies and protectorates
174-175
Stocks of foreign governments
£
175-176
Insurance stocks
176-177
Railroads, and first speculation in railroad shares
177-178
The Revolution of 1848, and a great tumble in railroad shares-178
From 1852 until the agreements of 1883
178-179
The agreements of 1883. The Government guarantees dividends to shareholders
179
67. Railroads of local interest
180
68. Foreign railroads and the French financial market
180-181
69. Lump statistics of railway securities
181
70. Creation of sundry companies from 1822 until 1852
181-182
71. The Comptoir d'Escompte de Paris
182-184
72. The Credit Fonder.
The Cridit Agricole
184-186
73. The Credit Mobilier
187
74. Other credit companies
187-188
75. The part played by the Bank of France in the movement of
securities
188
76. The downfall of the Union Generate
189-191
77. Present preponderance of a few large banks
191-192
78. The financial institutions and the securities circulating in
France in 1908
192-193
79. The part of the financial market in the circulation of securities
193-194
80. The French financial market has fulfilled its mission, b u t it
has only been able to do so by ridding itself of the shackles
fastened on it by the laws of the year I X . The " Coulisse's"
rivalry gives to the market the necessary freedom
194-196
81. In i 8 i 6 t h e " agents de change" become owners of their offices- 196-198
82. Ordinance of November 23, 1823
198
83. In 1862 the "agents de change" are authorized to take
special partners
198
84. The law on transactions for future delivery. I t s economic
importance
198-201
85. The first consul and Count Mollien
201-204
86. The bourses and dealings for future delivery under the First
Empire. The Code de commerce of 1807
204-206
87. The Forbin-Janson lawsuit. The Parere (merchants' petition)
of 1824
206-209
88. In 1833. The Harle proposition. Speech of Garnier Pages. 209-210
89. The Parere of 1842
210-211
90. In 1867
211
91. After the downfall of the "Union GSnSrale." Public opinion
is stirred up. The Paris Chamber of Commerce passes a
resolution
,
.
211-213
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92. In the Chamber. M. Alfred Naquet. M.Lagrange. A special
commission is appointed. M. Lyon-Caen
213
93. The law of March 28, 1885
213-215
94. The quarrel between the " P a r q u e t " and the "Coulisse." The
origin
215-217
95. Under the First Empire
217-218
96. Under the Restoration. Under the July Monarchy
218
97. The lawsuit .of 1859
218-220
98. The "Coulisse" reappears
220
99. After the war of 1870. Quieter times on the Bourse
220-224
100. Contentions start afresh in the market in 1892
224-225
101. In 1893. The t a x on bourse transactions. M. Tirard's p l a n . 225-228
102. Adopted in the Chamber, the Tirard plan is thrown out in the
Senate. The system is adopted
228-230
103. The Transvaal gold mines on the Paris Bourse
230-233
104. The "agents de change" act. They endeavor to profit by the
movement. The Graux proposition and the 25 franc shares. 233-235
105. The Lacombe and Fleury-Ravarin amendments. Return to
the Tirard system
235-237
106. Reorganization of 1898
237-240
107. Unusual circumstances under which the discussion was started
in Parliament. The bill taken away from the Senate. The
arguments brought to the rostrum. Reorganization and
the Dreyfus affair
240-245
108. The attitude of the " Coulisse "
245-247
109. The professional syndicates of the " Coulisse"
247-249
110. Strange position of the curb brokers (coulissiers)
249
i n . The strengthening of monopoly not equitable from the standpoint of public rights
249-254
112. Neither from the economic point of view. The advantages
of monopoly. Public credit.
The quotation list and
private credit. Joint liability of intermediaries
254-268
113. The reorganization of 1898 made light of the State's interests. 268-270
114. The arrangement of 1901
270-274
115. Final considerations
274-276
F I R S T DIVISION.—The exchange market—Origin of public credit.

(1) The history of the French financial market is closely
connected with the history of commerce. From a more
particular point of view, it is closely connected with the
history of corporations, as well as with that of public
credit.
Very little information can be found in the works of
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History and Methods of the Paris Bourse
the ancients, concerning the organization of commercial
bourses (bourses de commerce) and the transactions there
carried on. A kind of public market existed in Rome
during the Consulship of Appius Claudius and Publius
Servilius—that is to say, five hundred years before Christ.
It was called the Collegium mercatorum (assembly of
merchants) .a
(2) Up till the Middle Ages, trading on the fairs affected
only wares. The payments, however, which the sales
necessitated involved transactions in exchange. To the
fairs of Brie and Champagne, to the fairs of Lyon, Beaucaire, and MontpelHer, there thronged a multitude of
foreign traders, who sold wares, or bought wares in order
to resell them in their own countries. There one would
see Italian, German, Brabantine, Spanish, Portuguese,
Barbarian, and even Egyptian traders—and in an unbroken line there stood " the money changers, whose tables
glittered with gold and silver coins and with money from
every country." 5
a
M. Edmond Guillard (Les Banquiers ath&niens et romains, trapizites et
argentarii, Paris 1875, Guillaumin) explains that some freed Greek slaves
were the first ones at Rome to carry on the banking business and to practise money changing. He points out that the argentarii (bankers) were
doing business at the beginning of the eleventh century before Christ. Independently of the offices which they had inside their establishments, they
occupied branch offices (tabernce) on the forum, where they could be found
every day at a specified hour. It was the hour which the merchants, the
manufacturers, and the capitalists of Rome also chose for assembling.
Two centuries later, when the riches of the world became concentrated in
Rome, the bustle which this kind of bourse presents is so great that the
author compares the scene in the forum with that in La rue Quincampoix
in Paris at the beginning of the eighteenth century.
Plautus (Truculentus, Act 1, scene 1) alludes to the crowd of merchants
and bankers in the public square, among whom there mingled also the
courtesans.
& See Amans Alexis Monteil, Histoire des Frangais des Divers Etats, vol. 1.
The Epistles of Brother Jehan, Franciscan friar, to Brother Andre\ friar of
Toulouse, Epistle CXXIV: The fair of Montrichard.

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In the commercial towns, operations of exchange as an
established function—that is to say, outside of those which
took place at the fairs—could, in fact, be executed only
in a specified place. An Ordinance of King Louis VII,
dated 1141, the original of which seems to be lost, had
assigned the Grand Pont of Paris to the business of exchange, and made it an offense to practise it elsewhere.
But the text of the ordinance of 1304, issued under Philip
the Fair, and having almost the same purpose, has been
preserved.a The specified place has since then borne
the name Pont-au-Change.h As early as 1423 those who
a Philippus Deo gratia Francorum rex: notum facimus universis tarn
proesentibus quam futuris, quod nos ad ea, que pro bono communi utilius
expedire videntur aciem considerationis dirigere,, et propter hoc eorum qui
facto cambii Parisiensis ingruunt statum et usum in melius ordinare studentes, duximus ordinandum. Quod cambium Parisiense erit et tenebitur
super nostrum magnum pontem solummodo, a parte gravie, inter ecclesiam
beati Leofredi et majorem archam, sive deffectum ipsius Pontis, pro ut Hactenus ante corruptionem pontis, ejusdem quondam lapidei extitit consuetum.
Item quod nulli omnico liceat alibi, quam in loco illo cambiare, seu cambium
tenere Parisus, aut infra banleucam, et quod si contra hujusmodi ordinationem nostram secus fieri contingat in posterum, et reperiri, pecunia seu
resilla quoe alibi quam in loco ad hoc per nos ordinato, cambiare fuerit,
vel ad cambiandum fuerit ordinata nobis cedet penitus in commissum.
Item, quod si per aliquem habentem sedem seu locum in cambio praedicto
commissum hujusmodo, delatum fuerit volumus, et ne frusta se in hoc
laboresse doleat, ei concedilus, quod cum pecunia, seu res ilia per gentes
nostras fuerit tanquam comissa judicata nobisque applicata, quatuor partibus illius pro jure nostro retentis, ipse habeat quartam partem residuam
sibi pro salario et labore suo, per gentes easdem de speciali gratia liberandum. Quod ut firmum permaneat in futurum, salvo in omnibus jure
nostro et etiam alieno, presentibus litterio fecimus nostrum apponi sigillum.
Actum Parisiensus anno domini millesmo trecentesimo quarto mense Februarii. (De Lauriere. Ordonnances des Rois de France.
Imprimerie
Roy ale 1723, Tome 1 Page 426).
b There were two Grands Fonts, one which had become the Font au
Change, the other, the Pont Notre Dame. The latter was in fact the Pont des
Planches du Mibray (Bridge of Boards of Mibray). (See: de Menorval.
Paris depuis ses origines jusqu'a nos jours, t. 1, p. 241. A. Robida.
Paris
A Travers UHistoire, p. 678.) The Grand Pont, built of wood ages ago,
and several times burned or carried away by the streams, became loaded
with houses around the eleventh century. The wheels of mills revolved
beneath its arches. To the millers' houses were added goldsmith shops.
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were engaged in money-changing carried on their business
with permission of the King.
(3) It is at Bruges that the Bourse was for the first time
called by that name. a In Holland bourses were established at a very early date. So far as this country is
concerned, a long debt of gratitude is due to the Jews for
these useful institutions; the persecutions, furthermore,
which these courageous and untiring merchants experienced in Spain after the expulsion of the Moors, were the
cause for their establishment in the Netherlands.
The Bourse of London, the establishment of which came
after the foundation of the Bank of England, was likewise
instituted by these bold merchants who came to Great
Britain in the retinue of William of Nassau.
In France the first bourses to be legally instituted were
established, first at Lyon, then at Toulouse, in July, 1549,
under Henry II, then at Rouen, around 1565, and, later,
at Bordeaux, in February, 1771, under Charles IX. The
names by which these meeting places were known varied
considerably. At Rouen the market place was called
Only one arch was used by passing boats. It was considered the property
of the Hanse des Marchands (Merchants' League). This bridge, assigned
to the use of the exchange merchants was also the bridge of the bird
sellers {Pont des Oiseliers). The bird merchants had obtained the privilege of setting up there and of hanging their cages beneath the awnings
of the exchange shops, provided they furnished birds which were to be
released, as a manifestation of rejoicing, whenever a king or a queen passed
by. This privilege was the cause of frequent quarrels between the exchange merchants and the bird merchants, and sometimes of truly mockheroic brawls. Thus we see the origin not only of the name Pont au Change
but also of quai des Orjevres (Goldsmiths' wharf) and of rue des Lombards
(Pawnbrokers' street)—names of localities near by. As for the bird sellers,
one may still see them, especially in these sections, plying their trade on
the wharves of the Seine, even as late as the twentieth century.
« It seems that at Bruges the merchants would come together in the
house of one of their number, known as van der Burse. According to
others, the house where the meeting took place had three purses {bourses)
carved on its gable (I/yon-Caen et Renault. Traite de Droit Commercial,
t. IV, No. 859).
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Convention.® At Lyon, at Antwerp, and in other towns
t h e market place was called change (exchange), estrade,
loge, college, or bourse. A number of cities actually have
each a rue de la Loge (market street), the n a m e coming
from t h e fact t h a t t h e street led to the m a r k e t place.
(4) The Bourse of Paris existed fully complete, as we
have seen it, as early as in the reign of Philip t h e Fair
(February, 1304); it was situated, as we have said, on
Pont au Change (Exchange Bridge), called at t h a t time
the Grand Pont (Great Bridge), near the Greve, between
t h e great arch and t h e church of Saint-Leufroy.
At a
later date, it was transferred to the large court of t h e
Palais de Justice, beneath the Galerie Dauphine (Dauphin
balcony), near t h e prison; thence it was moved to the
famous street, rue Quincampoix, afterwards to the Place
Vendome, then to t h e rue Louis-le-Grand, and then to
the Hotel de Soissons (to-day the Bourse de Commerce),
where it was situated when it was closed by t h e decree
of t h e King's Council, October 25, 1720.
September 24, 1724, another decree of the King's Council
legally instituted the Bourse and assigned to it, as an
habitation, the Hotel de Nevers (at present t h e Bibliotheque
Nationale).
I t was situated there till J u n e 27, 1793,
t h e day of its closing. I t was reestablished on May
10, 1795, in the Louvre (on t h e ground floor beneath t h e
Galerie d''Apollon—old a p a r t m e n t s of Anne of Austria,
and a t present the Musee des Antiques).
B u t during the
interval (from 1793 to 1795) some rather heavy speculations in coin and assignats were carried through in the
a
From the Latin cum venire, since it is used of persons assembling and
coming together from various places.

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Palais Royal, in the place called le Perron; that is to say,
where rue Vivienne begins.
Closed on the 9th of September, 1795, the Bourse was
opened again January 12, 1796, and established in VEglise
des Petits-Peres. On October 7, 1807, it was transferred
to the Palais Royal in the balcony called de Virginie;
thence, on March 23, 1818, it was moved to the grounds
of the convent of the Filles Saint-Thomas, on the site
at present occupied by the Chambre de Commerce and by
the buildings adjacent to the place occupied by the Bourse.
The entrance was through rue Feydeau, facing rue de
Montmorency.
A shed, floored with boards badly joined together,
served as a meeting place for closing speculations which
resulted from the financial contrivances of the Government
of Louis XVIII. Finally, on November 6, 1826, the
building at present known as the Palais de la Bourse was
inaugurated. The edifice was enlarged in 1901, and the
new premises were opened to the public in 1903.
(5) The economic history of our country shows to a
marked degree the influence of the perpetual struggle of
the guilds, whether it was against individuals who were
trespassing on their privileges, or against other guilds
who were in competition with them. This constant
struggle was the inevitable effect of the organization of
labor under the old regime. The organization of labor,
in its turn, corresponded to the general conditions of the
period. "Each province or even each canton produced
almost all the things necessary for its own consumption.
The fields furnished agricultural products, the producers
of which themselves consumed the largest share; the
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industries which supplied materials for clothing, housing,
and t h e manufacture of arms and utensils, concentrated
in towns and cities which in most cases were fortified.
The natural hindrances of distance to which was added
t h e lack of security, in thus restricting the markets, limited them to local producers only. For t h a t reason there
resulted a kind of organization of industry which is found
in the oldest societies, in E g y p t , in Chaldea, and in India,
and which has existed up to modern times—the organization by guilds or by closed castes.
" T h e serfs or subjects of a seigniory, who had acquired
t h e knowledge of a trade, obtained from their lords t h e
right of plying t h a t trade for their own benefit. Thrown
together in t h e same neighborhood, in t h e same section,
in the same street, where they were soon forced into
competition, it did not take t h e m long to learn t h a t they
would find it to their advantage to combine, in order to
m a k e themselves t h e masters of prices; for t h u s t h e y
might raise t h e m to a point far above t h e one to which
they were compelled by competition to reduce t h e m . " a
Such is, in short, the genesis of guilds.
(6) An edict of June, 1572 (under Charles I X ) , raises to
office " a l l brokers (courtiers) who at t h e present time are
carrying on the business of brokerage, whether it be in
exchange and money; or in silks, woolens, linens, hides,
and other kinds of merchandise; or in wines, corn, a n d
all other kinds of grain; or in horses and all other cattle;
provided t h a t the brokers t a k e out, in two months from
t h e date of the edict, letters of commission (lettres de
provisions).''
a
G. de Molinari.
233 et 234.

Questions

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History and Methods of the Paris Bourse
This edict of 1572 shows us how the brokerage of
exchange, practised simultaneously with the brokerage
of merchandise, came to be recognized as a commission,
t h a t is to say, a public service. There were in France
during this period commissions of justice, of finance, and
of war; t h e practice of purchasing commissions began
under Charles V I I I , and was continued by his successors.
(7) Although the brokers had certain privileges, religious
dissensions and wars were not over favorable to the practice of this profession, nor to the respect for the prerogatives granted to those who pursued it. Accordingly, in
1595, Henry IV renewed the edict of Charles I X .
The edict of April 15, 1595, prohibits any person, at
t h e risk of corporal punishment, of being charged with
forgery, and of being compelled to pay 1,500 livres, from
performing t h e services of exchange broker {agent de
change) or merchandise broker {courtier), before having
taken letters of commission from the King. The edict
ends t h u s :
" I t is not t o be understood, however, t h a t anyone is
compelled t o employ the said brokers for the aforementioned transactions, if it does not seem best to him to
do so."
Thus a principle was formulated which people expressed
in the following saying: " N e prend courtier, qui ne veut"
(He who does not desire, needs n o broker to hire).
The broker (courtier) was a m a n who ran (couraii), who
sought a seller for a purchaser, or a purchaser for a seller.
When t h e first laws of their profession were being formulated t h e idea did not occur to anyone to compel sellers

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or buyers, who were in a position to transact their own
affairs, to have recourse to an unnecessary intermediary.
B u t it happens, t h a t the question of commissions was
of minor importance, as compared with the question of
money. In other words, when the King created commissions, he made t h e m yield revenue. This system was in
vogue under Francis I, and was extended more and more
under the reigns of his successors. We see w h a t is, perhaps, its extreme development under Louis X I V .
Now, every corporation which pays, demands favors.
Often when t h e King needs money, he alters the s t a t u t e s
of a corporation, takes away some rights formerly granted,
in order to sell t h e m again, or gives to it some new ones
for ready cash. F r o m t h a t time on, it will be seen, t h e
brokers benefit from extensions and redemptions of privilege, corresponding to profitable financial transactions on
t h e p a r t of t h e royal exchequer.
(8) A decree of t h e King's Council of May 17, 1598,
explicitly subordinates to t h e exchequer the brokers of
exchange, of money, of cloths, of silk, of woolens, of
leather, and of other kinds of merchandise.
(9) I t is in 1638 t h a t , by a decree of the Council of t h e
King, t h e name " agents de change et de banque " (commissioners of exchange and of banking) was given to t h e
exchange brokers).
" T h i s denomination, for which t h e Government m a n aged to be well paid, a did not deprive them, however, of
the right to sell merchandise. The separation of duties
was effected a good deal later.b
a

Manuel ales agents de change, page 17, note 2,
& By the decree of the King's Council, October 25, 1720.
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At t h a t time the agents de change numbered thirty.
An edict of February, 1645, created six new official
brokers, in consideration of ready cash.
(10) U p to t h a t time t h e exchange broker had dealt only
in precious metals, foreign gold pieces, commercial bills,
and merchandise. But in 1705 a decree of t h e King's
Council m a d e much of their prerogative as negotiators of
certificates of loans made jointly by companies.
The edict of 1705, under Louis X I V , was issued in one
of the most unfortunate periods in the history of French
institutions. I t is known that, after Colbert, the King's
extravagances and the wars placed the exchequer in such
a bad plight t h a t 40,000 offices were sold from 1691 to
1709. This is a period notorious for the creation of t h e
most ludicrous offices t h a t can be imagined.
By this edict, the King, after having concluded t h a t the
present offices were rather cheap, suppressed all the
offices of exchange brokers, bank brokers, and merchandise brokers t h a t had been created all over t h e Kingdom.
A financial reimbursement, to be sure, was promised t h e m ;
b u t it was only a promise, and was never fulfilled. At
t h e same time t h a t t h e King decided tipon the abolition,
he announced the creation of 116 new offices of agents
de change, 20 of which were for Paris and the others for the
rest of France.
" W e wish," says the decree, " t h a t all certificates of
loans contracted jointly by companies should be negotiated through the agency of the said stockbrokers and
signed by one of them, who shall certify t h a t the signatures
are valid, in default of which we prohibit all judges from
granting judgment against those who have signed them, in
case, at m a t u r i t y of said bills, p a y m e n t is defaulted/'
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I t is seen t h a t t h e agency of t h e stockbrokers {agents de
change) is obligatory in 1705.
I t appears evident t h a t the maxim, Ne prend courtier
qui ne veut, has been broken. Negotiators are obliged to
have recourse to a stockbroker.
This great favor granted to stockbrokers is explained
by the financial scheme which t h e King is now hatching.
The old stockbrokers will be reimbursed later, b u t in t h e
meantime one must allure other brokers, or persuade t h e
old ones to pay new sums of money.
The decree of 1705 said: " W e wish t h a t all certificates
of loans made by companies * * * ." Those were t h e
first obligations.
W h a t in fact were these borrowing companies? I t is
important to know this, for the history of brokers and of
t h e bourses is inseparable from the history of public and
private credit.
SECOND DIVISION.—General observations on public

credit under the old

regime.

(11) Public credit must be considered under two denominations: Public credit properly so called, made up of loan
securities of the Government or of artificial persons emanating from the Government, and the credit of private
institutions, in the form of securities issued to the public
by special companies.
The early kings obtained their ordinary subsidies
through taxes, the enumeration of which, and the explanation of how they were levied and administered,
would take us beyond the scope of our subject.
B u t the extraordinary resources of the early kings were
obtained by processes which in no way show—nay, far
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from it—the voluntary consent of those who supplied
them. Public credit was brought into being by the extortion of the Prince. The King occasionally would ask for
assistance from his faithful subjects, and whether one was
willing or not, one certainly had to help the King. Now
and then (under various pretexts), the King would resort
to profitable confiscations, as for instance, to the recoinage
of money, or even its debasement, to the sale of offices
and of titles of nobility, and, as a last resort, to borrowing.
To the "system" of the sale of offices there was added,
in a similar way, the loan-raising, which the authorities
awarded in lump to the farmers of the revenue (traitants).
This process was in vogue especially in the seventeenth
century. The contractors became rich, but their profits
were merely the consequence of the financial regime which
resorted to their cooperation. Their risks were very great,
for, from time to time, there were some awful and noisy
law suits which would succeed in making them disgorge.
Richelieu, in his political Testament, speaks of the restitutions which each court of justice effected to the advantage
of the exchequer, as of a normal and regular resource.
The insecurity of the public credit, the serious troubles
due to the distress of the royal exchequer, the empirical
and often spoliating methods by which it was sought to
remedy these troubles, contributed to the list of causes of
the French Revolution. Moreover, they were not among
the least potent.
(12) We shall pass over Dagobert and his finance minister, St. Eloi; we shall likewise pass over their successors,
in order to make special mention of Philip the Fair, the
maker of bad money.
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Philip the Fair established an unusual tax of one denier
on the sale of all goods. People called this tax the Maltote,
the bad tax (from the Latin male, bad, and tollere> to tax).
Jews, Lombards, and Templars suffered from his exactions. His methods have remained famous.<* His successors imitated him, and from time to time they condemned their superintendents. Thus died Enguerrand de
Marigny, 5 Gerard de la Guette, Pierre Remy, Jean de
Montaigu, Pierre des Essarts, in order that the King
might lay hold of their fortunes which they acquired more
or less regularly during the exercise of their public functions. King Charles VII, who was as much a maker of
bad money as was Philip the Fair, imprisoned his Minister
of Finance, Jacques Coeurc and Francois I had Superintendent Semblan$ay hanged.
«Vide, Ch. Gomel. Les causes financieres de la Revolution
francaise,
Paris, 1842.
& Marigny, chamberlain and treasurer to Philip the Fair, had doubtless
drawn up or inspired the splendid ordinance enfranchising the serfs, in
which are found those beautiful words—a daring declaration of war to the
lords: '' Inasmuch as every human being is free by natural right, and inasmuch
as this liberty is blotted out by abhorrent servitude, to such an extent that
living men and women are treated as if dead, and at the end of their dreary
and wretched lives can neither dispose of nor bequeath the goods which God
has granted them during their life in this world, . . ." This was a challenge. He paid for it with his life. Accused of the most diverse crimes—
of having embezzled the exchequer, of having stolen 30,000 livres from
the pope's deniers, of having had his statue placed in the palace near
those of the kings, and, to cap the climax, of being devoted to witchcraft—
he was dragged from the dungeons of the Louvre to those of the Temple,
then to those of Vincennes, and condemned, without having been given a
hearing, and hanged at Montfaucon, on the gallows for thieves, on the Wednesday, Eve of Ascension, of 1315.
c Jacques Coeur, born at Bourges about 1400, was a prominent merchant.
Minister of Finance to Charles VII, he was the King's creditor, which
resulted in his downfall. Confined in Beaucaire, he succeeded in running
away, and enlisted in the service of Pope Calixtus I I I . In the history of the
city of Montpellier by Charles d'Aigrefeuille, Doctor of Theology, Canon in
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We know the lines of Clement Marot:
" L o r s q u e a Maillard juge d'enfer, menait
A Montfaucon Semblancay l'ame rendre,
A votre avis, lequel des deux tenait
Meilleur maintien? Pour vous le faire entendre,
Maillard semblait homme que mort va prendre,
E t Semblancay fut si ferme vieillard
Que Ton cuidait partout qu'il menait pendre
A Montfaucon le Lieutenant Maillard."
the Cathedral of St. Pierre (Montpellier MDCCXXXVII, at the printing
house of Jean Martel, royal printer), the following statements are found:
"Opportunity was taken of every public office which he had held to accuse
him of various frauds; it was said that as chancellor of the exchequer he
had committed many embezzlements in Languedoc. It was claimed that,
as director of the mint, he was guilty of having coined silver pieces known
as Gros de Jacques Coeur, on which he made exorbitant profits, and, because
he conducted a large business in the Bast, he was accused of having made
transportations of gold and silver to places outside of the kingdom and of
having furnished arms to the Turks in Alexandria. Here, also (so the statement goes), one of his galleys, called the St. Denis, took on board a Saracen
child who wished to become a Christian; and the Patron, Michalet, a dyer,
brought it to Montpellier, whence Jacques Coeur, from fear that his galleys
would suffer as a consequence, had the child brought back to Turkey and
returned to its master, where it again renounced its faith.
" Upon these accusations he was arrested at Taillebourg, transferred from
there to Montils les Tours, where he was condemned to pay, as a fine,
100,000 crowns to the people whom he had oppressed, and 300,000 to the
King; the penalty of death was changed to that of a public apology, and of
imprisonment until the entire payment of the aforesaid sums would be
made; after this he was to be banished from the kingdom, declared unfit
to hold any public office, and all his property was to be confiscated.
" T h e years 1454 and 1455 contain nothing of note to our city of Montpellier; but in the following year, 1456, King Charles VII made an extraordinary gift to the merchants of this city, by granting them the lodge which
Jacques Coeur had caused to be built there, at the cost of 1,869 livres 13
sous and 4 deniers. This piece of work is still perfect, as if it has just come
out from the hand of the maker, without a single stone having been changed.
Ornaments were not spared there; and the chemists who wrote so much
about the wonders of the philosopher's stone took advantage of the puzzling figures which are to be seen there to persuade us that Jacques Coeur
knew the secret of making gold."
There is still at Montpellier a street by the name of "rue de la Loge."
a When Maillard, Judge of Hell, conducted Semblancay to Montfaucon
to take his soul, which of the two, in your opinion, carried himself the bet903120—10

9

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Jacques Coeur and Semblangay promoted t h e sciences
and deserve t h e gratitude of t h e poets, as later F o u q u e t
deserved t h e gratitude of t h e good La Fontaine. a
(13) Francois I is considered to be t h e originator of our
system of t h e public debt. I t is to him t h a t t h e creation
of t h e perpetual rente dates back. 6
These are t h e rentes de VHotel de Ville (rentes of t h e
town hall).
(14) Under Francois I I , under Charles I X , and under
Henry I I I , t h e religious wars, the dissipations of t h e
court, and the squanderings of t h e courtesans almost
each year necessitated t h e establishment of rentes, 0 t h e
rate of which varied from the "denier t w e l v e " to t h e
"denier seventeen" (du denier douze an denier dix-sept).d
A t t h e begining of the reign of Henry IV the debt was
enormous. Agriculture and commerce had been ruined
b y t h e religious wars. Out of 150,000,000 livres in taxes,
there hardly came in 30,000,000 livres, and after t h e
wretched administration of Superintendent d'O, who died
in 1594, the King asked for Sully's assistance; t h e debt
which at t h e beginning of his reign had reached 337,620,252
livres, was reduced by more t h a n ioo;ooo,ooo livres.
ter? So as to inform you, Maillard looked as one whom death is going to
take, and Semblancay was so strong an old man that it was everywhere
thought that he wras going to hang at Montfaucon Lieutenant Maillard.
o See in the works of La Fontaine, L'Elegie aux Nymphes de Vaux.
& Edict of October 10, 1522.
c
Leon Say. Dictionnaire des Finances, at the word "Dette Publique"
by MM. E. de Bray and Alfred Neymarck.
d
T h e expression "denier douze" signifies that for every twelve deniers
borrowed, the borrower will give as interest one denier. A loan " au
denier douze" is then a loan at 8.33 per cent. A loan "au denier dix-sept"
is a loan at 5.883 per cent. A loan " a u denier vingt" is a loan at 5 per cent.

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Under Louis XIII, not only were the efforts of Richelieu
inadequate to reduce the debt, but his struggles with
foreign countries and the Protestants considerably increased it. a
(15) Under Louis XIV, up to the time of Colbert, public
credit continued to be in a bad condition. After the
disgrace of Fouquet, Colbert tried by several means to
restore it, only a few of which will be mentioned.
Nicolas Fouquet, born 1605, after having bought the
office of attorney-general at the Parlement de Paris (a
higher court of justice), obtained the superintendence of
the finances, thanks to Mazarin to whom he had remained
faithful during the Fronde. The treasury was empty, and
the duties of the superintendent became encumbered with
those of the trouveur d1argent (money finder).6 The loans
were so onerous that an issue in 1658 of 400,000 livres of
rentes, representing a loan of 7,200,000 livres, brought
back an actual return of 1,200,000 livres, on which the cost
of administration was 400,000 livres. If it is true that
Fouquet was rich prior to his term of office, then it is certainly true that he became fabulously rich while in office.
Louis XIV paid Fouquet the remarkable honor of accepting an invitation to the Chateau de Vaux, a splendid
palace, costing, according to Voltaire 18,000,000 livres.
Innumerable invitations, says Voltaire, were sent out to
all parts of France and Europe, and, on August 17, 1661,
thousands of splendid carriages swarmed the road from
Paris to Melun. The King, the Queen mother, Monsieur
and Madame, and the entire court were not so much
a
L£on Say. Dictionnaire des Finances,
blique."
b I^avisse, Histoire de France, t. 7, p. 80.

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dazzled as shocked by this fabulous fete, which surpassed
a hundredfold what t h e Sovereign himself could at t h a t
time have given. All the details contributed to this
feeling: t h e comedy Les Fdcheux, improvised by Moliere
on a signal from t h e castle keeper, and presented in t h e
park at the lower end of the alley of firs; t h e gardens,
t h e waters, t h e ballet, t h e fireworks, t h e statues, t h e bronze
figures, the furniture, the scenic effects, and the supper
service of massive gold. The Queen mother could hardly
restrain her son from having t h e Superintendent arrested
on t h a t very night, in the very place which, by itself,
was evidence of his embezzlements.
Eighteen days had hardly elapsed, when, as soon as
t h e King was on his way to Nantes in order there to inspect
t h e States of Brittany, Fouquet was arrested, September
5, in coming out from the Council sitting, by d'Artagnan,
captain of the musketeers. H e was brought to t h e castle
at Angers, then in t u r n to Amboise, Vincennes, Moret,
and lastly to the Bastille, where he was immured J u n e
18, 1663. Fouquet, in spite of his protests, was tried,
not by the Parlement de Paris, b u t by a special court of
justice (Chambre de justice), instituted by an edict of 1661;
it assembled at the arsenal, and was composed of Sequier,
t h e chancellor, de Lamoignon, the first president, and of
twenty-two members chosen from every Parlement (higher
court) in the kingdom. Nine voted in favor of death,
and thirteen for exile and confiscation of property; t h e
King, who felt much provoked, increased the penalty t o
life imprisonment. Sentence was pronounced December
20, 1664, and three days later t h e unfortunate Fouquet,
atoning for his malversations " which had been nothing
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more t h a n pomp and generosity, " departed for the fortress
de Pignerol, where he arrived J a n u a r y 10, 1665, and where
he was destined to die March 23, 1680, after fifteen years
of strict captivity. a
(16) The Chambre de justice which had heard and condemned Fouquet, tried more t h a n five hundred cases for
embezzlement. They examined, going back to 1635,
every loan transacted, and reduced the interest on each.
Public credit suffered considerably as a consequence; b u t
this consideration did not in the least restrain Colbert,
who was thoroughly convinced t h a t there was absolutely
no occasion for borrowing. Frauds in connection with
the taxes were mercilessly followed up. " F o r t y thousand
treacherous nobles deposit at the treasury taxes which
they have unlawfully evaded. T h e prisons are overflowing
with farmers of the revenue, and the most guilty ones are
being hanged; others have been freed only upon payment
of a large ransom. This period is known under t h e name
Terreur de Colbert."h
In four years Colbert raised the net revenue from about
22,000,000 to almost 37,000,000 livres. B u t t h e lavishness
of his master, the King, very soon p u t to n a u g h t the
results of the wise financial policy of Colbert.
(17) I t is, of course, known t h a t after the death of Colbert
(1688), t h e superintendency went over to Claude Le
Peletier, who, in turn, was succeeded by Pontchartrain.
The latter with great difficulty began some operations
for credit, the most important of which were issues of
rentes. B u t credit was dead. There was, so t o speak,
a

De M6norval, Paris depuis ses origines jusqu'a nos jours, j
b J. M. Fachan, Historique de la Rente frangaise, p. 32.

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no public market for royal securities. They were r e p u t e d
to be intransferable, and it was not considered legitimate
t h a t t h e security be negotiated for less t h a n its face value.
I t was only some time later, at the beginning of the eighteenth century, t h a t transactions in royal bonds began to
take place on t h e bourse.
The decline of public credit gave rise to the utilization
of special methods for stimulating it. In 1689, Pontchartrain resorted to an issue of tontine a life annuities, aggregating 1,400,000 livres. The operation succeeded and
was successfully resorted to again in 1696.
Simultaneously with the issue of t h e tontines (from t h e
n a m e of their inventor, the Italian financier Tonti), issues
of lotteries were brought into fashion in France by Italian
financiers who had come over in the retinue of Catherine
de Medicis. I t is under Louis X I V t h a t they appear in
all kinds of forms—benefit lotteries, special and commercial lotteries, charity lotteries, government lotteries, etc.
(18) I t was quite necessary, besides, to resort to sales
of offices, and it is during the reign of Louis X I V t h a t the
most peculiar offices are created. " S i r , " said Pontchartrain, " e v e r y time t h a t Your Majesty creates an office
God creates a fool to b u y it." Every imaginable contrivance was utilized not only b y Pontchartrain, b u t b y
his successors, de Chamillard and Desmarets. B u t during the latter p a r t of the King's reign, royal loans benefited very much from the assistance of Samuel Bernard,
financier, who was money lender, speculator, and intim a t e adviser of the King.
a
T h e tontine principle consists in dividing the part of the benefits of
the dying to the survivors, until the last one, at whose death the rente goes
over to the State.

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In the system of the organization of offices the increasing of salaries played a large part. The salaries were
the stipend given by the King to the officer. This stipend was generally the interest on the money which had
been paid for the office. The King allowed an increase in
salary, provided an increase in money be given to him.
It was not a disguised loan, but a forced one, for if the
officer could not pay, some other person desirous of getting such an office could be found; then the old holder
of the office would be reimbursed, unless both were
allowed to continue in office together, in which event
numerous difficulties had to be faced. From 1689 the
practice of increasing salaries was much in vogue. The
most important offices in the kingdom, those which required learning and skill, were made hereditary. The
judiciary bodies, the parlements, the chamber of accounts,
and all assistants were one way or another for sale at
auction. The same was true also of municipal offices.
The industrial and commercial professions were monopolized under the most peculiar conditions. Stackers of
wood, testers of salted butter, inspectors of wigs, overseers
of the roast meats, examiners of pigs' tongues, searchers
of fresh butter, testers of cheese—all these were government officers. The King, ''who is anxious that abundance should reign in his good town of Paris, has noticed
that three or four individuals have so monopolized the
oyster business that his subjects can get only as much as
it seems proper to the oyster merchants to sell." And
the King makes officers of caterers or sellers of oysters.
(19) It is now in place to pass to the public credit which
was established by private companies with or without gov133




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ernment aid. We shall see how the share and the bond
assume their form.
The ancients seem to have been unacquainted with
associations having their capital divided into shares.
Greek authors very rarely referred to associations of more
t h a n three or four persons, and we can with reasonable
certainty advance the opinion t h a t shares never existed
in Greece. As regards the Romans, the question is more
difficult, for they had vast companies, notably the societies vectigalium publicorum, whose object was the exploitation of the farming of the t a x . According to certain
commentators, notably Orelli and Becker, these companies had been formed on the basis of shares. However,
if some transferable parts were ever provided for in any
of these companies, it is very probable t h a t it was done
only exceptional!)^ and without modifying their general
character. a
At Toulouse there was a mill, named du Basacle, which
was given in the twelfth century by the prior of la Daurade
t o a company, the members of which were known as
pairiers, whose parts, real transferable shares, did not
entail the personal responsibility of the holders.
Some stock companies were in existence in Italy and
Germany at quite a remote period; among them we find
the Bank of St. George, at Genoa, which best displayed
t h e general traits of the stock company.

In 1407 it was

reestablished with a capital divided into 20,400 shares,
according to information

given by Scaccia.

All were

of equal value, carrying no personal responsibility and
withholding from the members the privilege of negotian See Ed. Guillard. Les operations de bourse, p. 12.
t
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tion. There was a general assembly and a board of
supervision.
At the beginning of the seventeenth century all civilized
nations of Europe are acquainted with the principle of
share holding. In 1602 there is instituted in Holland the
Netherland East-Indian Company. In England a similar
company is established in 1613.
Under the old regime, maritime commerce was not conducted under the same conditions as it is conducted today. The reasons for it are obvious. It presented at
that time too many perils and entailed too many expenses
for individuals to be able to engage in it. Therefore
licensed companies were organized upon which, in exchange for great advantages and an exclusive monopoly,
quite onerous conditions were imposed.
" Henry IV, intending to follow the example of the Dutch
in the Far East, authorized in 1603 a certain Gerard de Roy
to form a company which, being granted a monopoly for
fifteen years, should take in hand the trade with the East
Indies. But the Provinces unies (United Territories) pointed
out to him the harm this company would do their company
of the East Indies (established March 20,1602), and induced
him to turn his endeavors to the West Indies. Henry IV
later returned, but without success, to the project of the
East-Indian Company. Amsterdam watched over its
monopoly on spices." a
(20) Under Louis X I I I Richelieu took this idea up again,
which, to be sure, had never been abandoned. In 1625
there was founded the company du Morbihan for coma
Ernest Lavisse. Histoire
Revolution, T. V I - I I , p. 82.

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merce with New France, Moscow, Norway, Sweden, and
H a m b u r g ; the company de la Nacelle de
Saint-Pierre
Fleurdelysee, for negotiating and transacting business in
all countries not hostile to t h e crown; t h e company des
Cent associes (of one hundred partners), for colonizing New
France (Canada); and some others—notably, two companies, for trading with the East Indies. Because of lack
of funds all of these companies went t o ruin.
The failure of these companies is the characteristic
event in the colonial and commercial history of the reigns
of Henry IV and Louis X I I I . The companies in t u r n
disappear, reappear, and vegetate. Outside of t h e religious world the colonies were not popular. The French at
t h a t time were a saving people, modest in their tastes,
and leading a stay-at-home life, and preferring, as Montchretien has already remarked in his Traite
d'Economie
Politique (1615), to live sparingly a t home in any employment, t h a n to seek fortunes in the colonies or in a foreign
country.
(21) Under Louis X I V , t h a n k s to t h e influence of Colbert, there were established (1) t h e West-Indian Company
(des Indes Occidentales), started in 1664, which alone had
t h e right to do business in our settlements in North
America, t h e Antilles, Guiana, and Senegal; it had its
center in Le H a v r e ; (2) the E a s t - I n d i a n Company (des
Indes Orientates), started in 1664 a which had the monopa In the History of France by M. Ernest Lavisse, T. V I - I , pp. 238-239,
are found interesting details about the formation of the East Indian Company. The beautiful and costly armorial emblems presented to the company on the day of the granting of its privilege, the grand advertising of the
affair, and the great enthusiasm displayed, under the influence of Colbert,
by the King, the Queen, the official world, judges and prominent civilians,
both in subscribing themselves and in exhorting others to subscribe to the
funds of the company, are described in a lively and fascinating style.
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oly of commerce over t h e broad ocean from t h e Cape of
Good Hope to t h e Strait of Magellan, thus including our
settlements in Madagascar, in t h e Isles of France and of
Bourbon, and in Hindostan; it h a d its center at Lorient;
(3) t h e company du Levant (of t h e Levant), started in
1670, which contended with Venice, England, and Holland
for t h e t r a d e with Turkey, Asia-Minor, Syria, Egypt, and
t h e B a r b a r y States—it had its center at Marseille; and
(4) the company du Nord (of t h e North), started in 1669,
which traded, b u t without exclusive rights, with Holland,
Northern Germany, Sweden, Denmark, Russia, and
Poland; it had its center in Dunkirk.
The first two of these companies exercised complete
royal authority over the colonies already founded or to be
founded. They installed governors and judges, h a d the
right of peace and war in their relationships with t h e
natives, and flew t h e white colors on their ships. They
enjoyed t h e sovereign authority similar to t h a t which the
English company in t h e Indies exercised over all Hindostan u p until the mutiny of 1857.
The company des Indes Occideniales disappeared in
1674; from its remains were formed the companies du
Senegal, de la Guinee, d'Acadie, du Canada, de la bale
d'Hudson, de Saint-Domingue, and especially t h e company
du Mississippi, so famous during t h e period of the financial
policies of Law. The company du Nord succumbed about
1672; t h e company du Levant in 1690; t h e company des
Indes Orientates lingered on till 1718. F r o m a p a r t of its
possessions was formed, twice (in 1700 and 1712), t h e company of China (de la Chine). When one of these companies
dissolved, t h e colonies again became directly responsible
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t o t h e king, and once more commerce was free for individuals. In 1719 t h e company des Indes was reconstituted.
(22) John Law, by letters p a t e n t of May 2, 1716, procured the privilege of establishing a bank. I t was called
Banque Generate, and had a capital of 6,000,000 livres,
divided into 1,200 shares of 5,000 livres each.
The 5,000 livres were to be paid in as follows: A fourth,
1,250 livres, in specie, and t h e remaining three-fourths
in government notes. The government notes were t h e
result of a loan of 250,000,000 livres at 4 per cent, previously issued b y the Regent's Government; the loan had
met with only middling success, and it was not long before
t h e notes lost four-fifths of their value. This ability
of t h e subscribers to pay for their shares in government
notes explains t h e favor which Law gains in the eyes of
t h e Regent. I t did not take long before t h e Banque Generale was transformed into the Banque Royale.
Toward the end of August, 1717, a trader, Crozat, had
procured a license to do business in Louisiana. Crozat
granted t h e license to Law, who formed a company under
the name Compagnie d'Occident, having a capital of
100,000,000 livres payable in government notes; various
monopolies were conceded to this company, notably t h e
monopoly of tobacco.
Soon after Minister d'Argenson h a d granted the lease of
t h e imposts and duties to t h e Paris Brothers, who h a d
formed a stock company with this lease as a basis, Law
succeeded in having the Banque Generate declared Banque
Royale, and in amalgamating all t h e trading companies

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which existed at that time with the company d'Occident.
The new company was called Compagnie des Indes.
This company, having become very wealthy, was instrumental in causing the withdrawal of the lease of the
imposts and duties from the Paris Brothers and the transfer of the grant to itself. The series of policies which had
been put into practice at this occasion was given the name
of Law's System.
At the end of October, 1719, Law issued in securities
" t o bearer," 300,000 shares of the company des Indes,
at the prevailing price of 5,000 livres each. (To Law,
as originator, is due this form of security.) The proceeds of this issue were to be a billion and a half livres,
which the company des Indes was supposed to loan to
the Government at the rate of 3 per cent. The State
owed him, then, for this principal an annual interest
of 45,000,000 livres. On the other hand, however, Law
owed the State the price of the lease of the duties and
imposts, which amounted to 52,000,000.
The overtaxed emissions and the difficulties' experienced
by the company des Indes in maintaining the shares at
a high price led to their fall. The bank met with ruin
in repurchasing its own shares. The intrigues of the
Court completed Law's doom. In May, 1720, the license
was withdrawn from the bank, and Law ran away,
completely ruined. He died in misery in Venice, 1729.
From 1716 to 1720 the rue Quincampoix had been the
scene of one of the most whimsical frenzies of stockjobbing which has ever taken hold of the people. The
Court, the clergy, and the town gave themselves over
to the most stupid speculations in securities of the com139




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pany des Indes. Such and such a servant became master, and by habit rode behind his coach instead of getting
inside. A widow by the name of La Caumont realized
70,000,000 in profits. The Duke of Bourbon realized
enormous profits, which enabled him to rebuild the castle
of Chantilly with a royal magnificence. This beautiful
estate, which is at present occupied by the Institut de
France, owes much of its splendor to the speculations let
loose by John Law.
(23) After the breakdown of Law's policy, it was
thought necessary in some way to reorganize the financial
market, which had fallen into extreme disorder. The
financial market had been, to a certain extent, shaping
itself out into some sort of anarchy. An ordinance of
March 22, 1720, which henceforth prohibits any assembling
in the rue Quincampoix, states that " several dishonest
dealers, taking advantage of the tumult and confusion
which resulted from the meeting of unknown people, a
few of whom were even without residence and social recognizance, have often embezzled and misappropriated the
property of those who have had opportunity to deal with
them; that a large number of servants and artisans have
left their masters and their occupations, either themselves
to carry on transactions or to help and act as broker for
other people who did not dare to make their appearance." The Government goes on to consider that the
stockbrokers (agents de change) will assure the commonwealth against the return of the excesses which took
place, forgetting that the cause of those excesses was
other than a certain organization of the market, and
that what is intended henceforth to mitigate speculation,
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is the lack of nourishment, the complete breakdown of
the system, its crisis. Another ordinance followed a few
days later (March 28, 1720). All persons, with the exception of stockbrokers, are prohibited from assembling in
any place or section whatsoever, and from keeping an
office for t h e negotiation of paper; t h e penalty for violating this law is imprisonment or 3,000 livres fine. Speculators moved away and established themselves, instead, on
Place Louis-le-Grand, known to-day as Place Vendome.
" On July 20, 1720, a royal ordinance orders t h a t t h e transactions of shares of the company des Indes and the negotiation of bills of exchange or other negotiable certificates
shall be carried on in the garden of the Hotel de Soissons"
The Hotel de Soissons, we learn from the Manuel des
agents de change, was situated almost exactly in the
very place where the commercial bourse has recently
been erected, in the guar tier des Holies. The entrance
is through t h e rue des Deux-Ecus.
On August 30, 1720, a
decree of t h e Council of State suppresses the sixty existing offices of stockbrokers created by the edicts of the
m o n t h of August, 1708, and of November, 1714, and
orders t h a t there be established sixty new stockbrokers
by special appointment. By article 9, all persons are
prohibited from meddling with the duties of stockbrokers
" o n penalty of paying 3,000 livres fine, and even of imprisonment and greater punishments, if servants, apprentices , workmen, laborers, or vagabonds are t h e offending
parties." A few days later, however, October 25, 1720,
a decree of the Council of State orders also the shutting
up of the bourse established in the Hotel de Soissons,
and no assemblage is allowed anywhere at all.
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Finally, on September 24, 1724, another decree of the
Council of State, in its first article, ordered that there be
immediately established in the city of Paris a place called
la Bourse, the principal entrance to which shall be through
rue Vivienne.
THIRD DIVISION—The decrees of the Council from 1724 to 1788—The
financial market on the eve of the Revolution.

(24) From 1724 to 1788 a series of decrees of the Council
led to the modification of the regime of the Bourse.
In 1724, according to the phraseology of the decree of
the Council of September 24, recourse to the agency of
stockbrokers was strictly obligatory for the negotiation
of royal bills and negotiable paper.
In January, 1723, there were created 60 offices of stockbrokers, and the report was spread that those who wished
to take up the offices, that is to say, to declare themselves purchasers, would have to pay in a sum of money.
To insure the buying out of the offices created, mention
was made in the decree of 1724 of the privileges and
advantages attached to the incumbents of these offices.
But no purchasers appeared.
The decree of September 24, 1724, was then revoked.
The decree of the Council of State of February 26, 1726,
ordered that the business of negotiable paper and other
bills be made more free on the Bourse. Notwithstanding
the provisions of the decree of September 24, 1724, "all
merchants, traders, bankers and others who have been
or shall be admitted to the Bourse," are, by the terms
of the new decree, allowed to deal among themselves in
shares of the company des Indes, said in other securities
and negotiable paper, in the same manner as bills of
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exchange, bills ' ' t o bearer,'' promissory notes, and merchandise are dealt in.
(25) I n 1733 there is a sudden change. Purchasers of
offices begin to appear.
The decree of 1726 is revoked, and in accordance with
t h e decree of September 24, 1724, t h e King orders t h a t
transactions in shares of the company des Indes and in
other securities and negotiable papers shall be m a d e only
through t h e agency of two stockbrokers.
(26) August 7, 1785, a new decree of the council of the
King is issued:
A R T . 3. " H i s Majesty wishes t h a t , in accordance with
the provisions of articles 17 and 18 of the decree of September 24, 1724, t h e negotiation of royal and other
public securities should be considered to be valid only
wThen stockbrokers have acted as intermediaries, and t h a t
such negotiations shall t a k e place nowhere b u t on the
Bourse, where t h e price of the securities will be quoted,
according to the terms of the regulations, by two stockbrokers." Certain specified merchandise brokers are also
allowed to go to t h e Bourse and to negotiate bills of
exchange and bills " to bearer."
A R T . 4. Stockbrokers must not list on the Bourse other
t h a n royal securities and the price of exchange.
A R T . 5. They must not negotiate royal securities or other
negotiable paper for their personal account, the penalty
being removal and the payment of a fine of 3,000 livres.
A R T . 7. Time bargains in royal or other securities without actual delivery, or even without the deposit of said
securities a t t h e very moment of the signature of the
contract, are declared null and void.
90312 0 —10

10

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A R T . 8. This shall not be interpreted as prejudicing t h e
right of merchants, dealers, bankers, and others admitted
to t h e Bourse, to deal among themselves in bills-of-exchange
notes " t o b e a r e r " or " t o order," shares of t h e new comp a n y des Indes, and other commercial effects, without t h e
mediation of stockbrokers.
(27) On March 19, 1786, a royal ordinance raises t h e
number of stockbrokers to sixty, thus annulling t h e
decree of December 22, 1733, which had diminished their
number to forty.
(28) On July 14, 1787, a decree of the Council of S t a t e
withdraws from t h e stockbrokers t h e monopoly of the
negotiation of securities other t h a n royal securities and
of shares of la Caisse d'Escompte (a national discount b a n k
established by Turgot in Paris in 1776).
(29) B u t on J u n e 10, 1788, a decree of t h e Council of
S t a t e renews t h e provisions of t h e decree of 1785 and ratifies a resolution of the stockbrokers, in which they declare
t h a t they will waive 270,000 livres in annual salaries
attached t o their offices.
I t can be seen from t h e preceding t h a t t h e Governm e n t would grant privileges to t h e stockbrokers which
it would later withdraw in order t o grant t h e m again, a n d
somewhat later once more to withdraw.
nobody is required to take a broker.
ferent.

Thus, in 1595,

I n 1705 it is dif-

Individuals must resort t o a stockbroker for t h e

negotiation of loan certificates.
observed.

B u t t h e prescription is not

A decree of 1724 reenforces it.

I t is repealed

in 1726, b u t in 1733 a return to the principles of 1724 is
made.

In 1785 and 1786 t h e monopoly of stockbrokers

once again gains more power.
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b u t in 1788 t h e stockbrokers giving up the interest on
their security, t h e King agrees to revert to t h e principles
laid down b y t h e edicts of 1785 and 1786.
(30) Let us rapidly examine t h e condition of t h e transferable security on t h e eve of t h e Revolution.
There existed royal securities (effets royaux).
They
were loan certificates issued by t h e King, rente contracts,
lottery tickets, and exchange notes.
In 1785 there existed a few stock companies. The
company des Indes and t h e Caisse d'Escomple (Discount
Bank) were t h e best known among them. Then came
the company des Eaux, founded by the Perier brothers
(ancestors of Casimir P drier) for t h e purpose of furnishing Parisians with water from t h e Seine. Mirabeau
in his pamphlet (Denonciation de l'agiotage an roi 1788)
cites a number of companies, among which m a y be mentioned t h e Glass Company of Saint Gobain, t h e Rubber
Company of Senegal, and several fire-insurance stock
companies. I n 1789 t h e transferable securities on the
Bourse numbered seventeen.
(31) Let us cast a glance on t h e condition of government finances on t h e eve of the Revolution.
When Louis X V I gave over to Calonne t h e management of t h e finances (November 3, 1783), there was a
deficit of 80,000,000 in the ordinary budget, and there
remained 580,000,000 of debts to be funded. a The new
Controller-general first of all m a d e t h e King sign an
edict authorizing a loan of 100,000,000, which turned
out to be a success. Soon after he undertook a loan of
a
Charles Gomel, Les causes financieres de la Revolution francaise, Paris,
1893; The last controllers-general, p. 80.

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125,000,000. T h e administration of Louis X V I at t h a t
time h a d already borrowed almost 1,200,000,000 livres. a
The expenses increased so much t h a t t h e deficit in
1785 was about 102,000,000, and the expenses of t h a t
financial year which remained unpaid were 72,000,000.
The decline in royal securities frightened t h e Minister.
Besides, t h e public took up t h e stocks of a Spanish bank,
la Banque de Saint Charles, founded in 1782 by a French
financier, Cabarrus. The extreme fondness which capitalists showed for it, displeased Calonne. H e considered it bad t h a t a foreign security should come to compete
with our public capital, and since some loan securities
issued by him in December of 1784 were about to t a k e
their rank among other securities, Calonne decided to
prohibit b y an edict the negotiation in France of foreign
securities. Mirabeau, having received Calonne's permission and financial backing, published a virulent diatribe
against t h e Banque de Saint Charles and its director,
whom Mirabeau compared to Law, and whose private life
he h a d t h e indelicacy to attack. The stocks fell from
750 livres t o 400 livres, and speculation, which t h e
Government switched over to royal securities, increased.
When t h e Government wishes people to speculate in
rentes, t h e phenomenon has always been, and is now,
t h e same. I t intends to have rentes rise on t h e market.
If they fall t h e Government does not hold itself responsible for t h e fall, b u t blames those who have suffered.
Dealing in rentes for future delivery, which a t t h a t time
was a common practice, was blamed for t h e actions of
M. de Calonne.
a
Charles Gomel, Les causes financieres de la Revolution Jrancaise, Paris,
1893, p. 165.
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History and Methods of the Paris Bourse
" T h e King is informed," says t h e preamble t o t h e decree of the Council of August 7, 1785, " t h a t for some
time there has existed in the capital a kind of transaction
or m u t u a l agreement, as dangerous to sellers as to buyers,
by which one p a r t y engages to furnish, on long terms,
securities which he does not possess, and the other p a r t y
consents to pay for t h e m without having the necessary
funds."
I n the meantime the zeal of Calonne had taken him too
far. H e was forced by many complaints and t h e exigencies of the Exchequer t o change his tactics. The decree
of October 2, 1785, mitigated t h e severities of the preceding decree. By a decree of September 22, 1786, Calonne fixed the m a x i m u m time for bargains at two months.
Calonne noticed t h a t when certain securities rise the
prices of rentes resist all causes for a decline which are
likely to affect them. a
The example of England, he wrote later to the King,
is sufficient proof t h a t a wise government should be prepared, when t h e time requires it, to maintain by secret and
indirect methods t h e price of t h e public stocks, and, in
time of need, t o m a k e certain sacrifices t o raise their price. b
This operation cost t h e Exchequer 14,600,000 livres. c
a
Leon Say: Les Interventions du Tresorala bourse depuis cent ans, Annales
de VEcole des sciences politiques.
Annee 1886, pp. 6 a 9.
&Ch. Gomel, loc. c , p. 254.
c I t is at this period—1787—that the celebrated speculations of the
Abbe d'Espagnac took place, and a little later Mirabeau published his
virulent denunciation of stockjobbing. Calonne and Necker were not
spared by the author. The pamphlet cost Mirabeau . . . a lettre de cachet
ordering his arrest. But he was not arrested, Calonne having apprised him
through the Abbe Perigord. D'Espagnac was brought before the revolutionary tribunal, April 3, 1794, condemned, and executed the same day on
the Place de la Revolution.

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FOURTH DIVISION.—The financial market during the Revolution.

(32) The Revolution found t h e stockbroker's profession, as well as a number of other professions, raised to
t h e dignity of an office. The venality of offices and t h e
b a d speculations originated by t h e Government were
among the most objectionable features of the old regime;
t h e legislature endeavored t o remedy these m a t t e r s . a
" Nature makes no j u m p s , " says an adage. W h a t t h e
naturalists and the anthropologists say of the phenomena
of animal and vegetable life, is equally true of social
phenomena. The French Revolution marks by a violent
furrow the change in t h e political, economic, and social
regime in Franee; b u t the work of the philosophers, t h e
acts of the royal authority, its necessary concessions to t h e
new ideas, had accomplished revolutionary phenomena
even before certain facts, which history p u t s to t h e
account of the Revolution, had been accomplished.
Turgot, the Minister of Louis X V I , of whom his colleague
in t h e ministry, Lamoignon de Malesherbes, said " H e has
the head of Solon and the heart of 1'Hospital," dared ask
of the King to m a k e t h e nobility subject to taxes. On
J a n u a r y 5, 1776, Turgot presented to t h e Council t h e
drafts of various edicts which were to suppress t h e corvee
(statute labor) and t h e police regulations of Paris on
grains, offices, wardenships, and masterships. 6
All of these edicts met with an active opposition in t h e
inner circles of t h e Council. Nevertheless, they were
accepted. The edict involving t h e suppression of wardenships and masterships was passed March 2, 1776.
aSalzedo. La Coulisse et la jurisprudence,
b Turgot, by L. Robineau.
148

p. 29.




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and

Methods

of the Paris

Bourse

But after the fall of Turgot, in May, 1776, t h e edicts, which
it had cost him so much trouble t o have passed, were
again annulled.
The legislative assembly, however, again suppressed
all offices, masterships, and wardenships. "Beginning
with the coming April i s t , " says article 2 of t h e law of
March 10, 1791, " t h e offices of wig makers, barbers, b a t h
keepers, bagnio keepers, as well as those of stockbrokers,—are all equally abolished." The legislative
assembly placed all offices on a basis of freedom.
(33) We are compelled, although we have hardly arrived
at the threshold of our study of t h e revolutionary period,
to warn the reader against a widespread error regarding
the effects of the freedom granted to the profession of
stockbrokers.
An unprecedented outburst of stockjobbing took place
a t t h a t time, and it is concluded t h a t the fault lies in the
freedom of commerce in transferable securities. a
Stockjobbing was caused, however, by the troubles
arising from t h e foreign political situation, by t h e wars,
and by domestic troubles—that is to say, riots, insurrections, t h e cessation of all production, the irregular payment of rentes in assignats, the excessive issue of assignats,
the law of t h e maximum, etc.
(34) Stockjobbing is the result of political and financial
disorder. When the sources of production have been
stopped, and when the necessary commodities for consumption are paid for with a depreciating currency, there
must necessarily be inaugurated a passion for speculation
which will keep on increasing so long as the originating
a
See Crepon, counsellor of the Cour de cassation: De la Nigociation
efjets publics et autres, p. 8.

149

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Commission

evil continues to grow. It is somewhat important to
explain the physiology of this phenomenon.
A paper currency is circulated by a government. It is
circulated in such quantities that it depreciates in the
minds of those who receive it. With this money, too, it
will be necessary to buy the most essential necessities, and
the purchasers of these necessities will find themselves
facing sellers.
If, by hypothesis, the seller of commodities is obliged
to specify the price in a paper money whose depreciation
he is fearing, how will he protect himself? By raising his
price so that he will have much paper, with the result that
this paper will guarantee him by its quantity against the
consequent effects of depreciation.
Whence the first phenomenon with its double aspect:
The rise in the price of commodities along with the fall of
paper.
Now, if the seller whom we have seen receiving much
paper, sees that it depreciates again while in his hands,
it will not be long before he will notice that gold is the
metal with which one pays abroad for purchased commodiites, and that he who holds gold, is safer than the
holder of bills, which depreciate while in his hands. He
will then make haste to change his paper for gold, and
through this operation he will make two good bargains;
he will protect himself against the future decline of his
paper, and he will have in his possession some gold, which
will continue to be in demand as long as the Government continues to issue paper. This gold he will be able
to sell again against paper, or he will buy merchandise
abroad for which he will settle in gold. As a holder of
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History mid Methods of the Paris Bourse
merchandise, he will be in a position to begin again the
same operation—to sell against paper; to buy gold with
this paper; to buy foreign merchandise with this gold.
Whence the second phenomenon: The emigration of
gold.
Thus there is manifested the law known as Gresham's
Law: Bad money drives out good money.
Both phenomena took place during the Revolution.
Assignats depreciated in proportion to the quantity
issued; the price of all things rose. Gold rose. The
bill of exchange on the foreign market, which represented
gold, was in demand. Speculation was not the cause of
these phenomena, but an inherent condition. It could not
be otherwise. The abolition of the monopoly of stockbrokers was not the cause, and monopoly, if it had existed, would not have been able to prevent it. Besides,
when it was reestablished, the phenomenon of economic
gravitation could not be prevented from asserting itself.
What follows will prove our assertion with perfect
clearness.
(35) From the very first days of the Revolution the
financial situation was a critical one. On June 17, 1787,
the national assembly declared the creditors of the Government to be under the protection of the honor and
loyalty of the French nation. Immediately after, Necker
resorted to two loans, one on August 7, and the other on
August 27—both of which were without success. He later
resorted to a patriotic contribution of a fourth of the
income of each citizen exceeding 400 livres, and of 2%
per cent of their silver plate, jewelry, and coined silver.
It was not in this way that one could raise credit and
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Monetary

Commission

money. At this time the total debt was 208,027,242
francs. Besides, the debt represented only a small p a r t
of t h e needs of t h e Government.
(36) I t was at this time t h a t a decree of December 21,
1789, placed on sale some of the royal domains and a p a r t
of t h e ecclesiastical property in order to raise t h e sum of
400,000,000 francs. At the same time 400,000,000 assignats were created, which were to be redeemed by the
proceeds from the sales. They paid an interest of 5 per
cent.
Four months after the creation of these assignats, by
order of the law of April 17, 1790, their interest was
reduced to 3 per cent. According to the terms of this
law, t h e assignats were to be received as specie in public
and private cash offices.
The assignat, which had depreciated about 2 per cent
almost immediately after its creation, was quoted in April
i t 94. I n other words, 100 livres in paper were given
, >r 94 livres in metallic money.
In August, 1790, an issue of 800,000,000 assignats was
voted for by the assembly. These new assignats which were
created as a result of the decree of September 29, 1790,
bore no interest, and by a decree of October 10 t h e 3 per
cent interest on t h e assignats of t h e first issue was cut off.
F r o m this time on, it may be said, the assignat depreciated in the public estimation.
On October 1, 1791, t h e quantity of assignats in circulation was about 1,151,500,000 livres, and they lost 16 per
cent of their value. Fourteen months later, J a n u a r y 1,
1793, t h e quantity of assignats in circulation rose t o
2,825,906,618. They lost 50 per cent of their value.
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History

and

Methods

of the Paris

Bourse

Then came a series of decrees all tending to t h e depreciation of t h e assignat. A decree of April 11, 1793, imposed
some severe penalties on any person who should b u y or
sell assignats for less t h a n their nominal value in money,
or should make any distinction in t h e prices of his merchandise according to whether p a y m e n t would be made in
paper or specie.
B u t t h e prices were to be stipulated in assignats, so t h a t
no law could prevent anyone from asking for a higher price
for his merchandise.
When a government employs empirical processes with
a view to sustain t h e public credit, it produces discredit.
Public t r u s t resides in t h e citizen's state of mind. A
state of mind can not be decreed, especially when it has
to exercise itself upon t h e valuation of commodities.
B u t governments, inspired by a misapprehension of t h e
conditions of public credit, do not easily yield to evidence.
The more discredit is created, the more do they entangle
themselves in their own errors. When a government
issues depreciating paper money, if it investigates the
cause of the fall, it is necessary t h a t it should without bias
decide whether it is the fault of the stockjobbers or its
own fault. B u t the Government never hesitates. For
it t h e decline is caused by the stockjobbers. The Bourse
is t h e only place where it originates.
(37.) I n t h e m o n t h of June, 1793, t h e assignat lost 64 per
cent of its value. I t was worth 36 per cent. A decree
of J u n e 27, 1793, ordered the closing of t h e Bourse.
During t h e time t h a t the Bourse was closed, negotiations in coin and bills of exchange were transacted in t h e
Palais Royal, or as it was now called Palais Egalite, in
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National

Mon

etary

Commission

t h e place known as Le Perron. The stockbrokers, removed
in 1791, immediately organized into a free company, consisting of 80 members forming a syndicate, with the purpose of avoiding all conflict with t h e free, newly come
stockbrokers; it seems t h a t at t h a t time there was not
much occasion for complaint at the new condition of
affairs. a
But, nevertheless, the scarcity of coin and t h e decline
of assignats were attributed to t h e Bourse. The stockbrokers were arrested and their goods confiscated, and a
decree of the 2 i s t - 2 4 t h of August, 1793, ordered t h a t
associations known under t h e n a m e of caisse d'escompte
(discount b a n k ) , life-insurance companies, and in general
all those companies whose capital is made u p of shares
" t o bearer," of negotiable bills, or of book registrations
transferable at will, were abolished.
(38) These measures did not in a n y w a y cause t h e assign a t t o rise in value. I n July, 1793, it again lost 13 per cent
of t h e J u n e price. I n other words, it was worth only 23
per cent of its book value.
Frantic stockjobbing raged at t h a t time; it wras not
t h e free market which generated it, b u t t h e causes which
we have just examined, and the very absence of a market.
Stockjobbing was in a feverish state which t h e slightest
event could only increase.
(39) W h a t could t h e Convention do? On August 1,
1793, and on May 10, 1794, decrees were passed imposing,
as t h e case might be, heavy fines, imprisonment, or even
death, on anyone who should in any way discriminate
against t h e assignat.
a
Eugene Leon.
Page 31.

£tude

sur la Coulisse et ses operations.
154

Paris, 1896.




History

and

Methods

of the Paris

Bourse

This measure did not prevent the sale of the most essential commodities at a raised price in assignats. A decree
of September 4, 1793, extended to various necessities the
decree of May 3, permitting the directories of the districts
to fix a maximum price for grain and flour. But, besides
that it was practically impossible to have this provision
executed, a large number of commodities escaped the
category of those specified.
(40) The Convention, having observed that the absence
of the public market was detrimental to public credit,
ordered its reopening on the 6 Floreal, year III, upon the
request of Jean Bon-Saint-Andre; going from one excess
to another, the Government which had before wished to
suppress the Bourse, promulgated on August 30, 1795
(13 Fructidor, year III), a law making it an offense to sell
gold and silver anywhere else than on the Bourse. It
was declared an offense, also, by this same law, to sell,
in any public place other than the Bourse, any kind of
merchandise not shown at the place of the sale, and
to sell goods and securities which one does not actually
own when making the sale. The penalties for either of
these offenses were imprisonment for two years, public
exposure of the offender with an inscription on his breast
of the word " agioteur" (stockjobber), and confiscation of
his property for the benefit of the Republic.
It was at this time that the assignat lost 97.25 per cent
of its value. It continued to decline and was worth no
more than 2 per cent, having lost 98 per cent.
The convention closed the Bourse again, September 1,
x
795 (25 Fructidor, year III), eight days after having
reopened it; and the assignat still kept on declining.
October, 1795, it was worth 1.36.
155




National

Monetary

Commission

(41) A new law on t h e Bourse was promulgated October
20, 1795. I t is t h e law of 28 Vendemiaire, year IV..
Since t h e time of t h e Legislative Assembly, t h e assignat
had become the only credit and loan instrument of t h e
Revolution. 0
I n 1792, t h e maker of a bill to bearer was made liable
to t h e death penalty. 6
I n the year IV (October, 1795) the number of assignats
in circulation represented 17,879,337,898 livres, and during
t h e last three months of t h a t period 5,541,194,037 livres
had been issued.
During t h e year IV the manufacture of assignats rose
to 70,000,000 daily. The less they were worth, t h e more
of t h e m was required; or, rather, t h e more of t h e m t h a t
were made, t h e less they were worth.
Terrible famines afflicted the country and provoked
bloody insurrections. England undertook to fight France
b y every way possible. She did not limit her hostilities
to t h e expedition of Quiberon. Marquis de Puissage persuaded P i t t of the advantage of inundating the enemy's
country with counterfeit assignats, to be fabricated b y
t h e best engravers of Holland " w i t h such skill t h a t
Cambon himself would accept t h e m . " c
I t is under these circumstances t h a t the law on the
police regulations of the Bourse, 28 Vendemiaire, year IV,
was passed.
a
Leon Say (Dictionnaire des Finances, under the words Public Debt,
p. 1, 425. Charles Gomel, Histoire financiere de la Legislation et de la Convention. Paris, 1905, Guillaumin, editor. 2 vol.
Passim).
& Albert Wahl (Traite tkeorique et pratique des litres an porteur, Parist
1891; Rousseau, edit., t. 1, No. 145).
c Michelet, Histoire du XIX siecle. Directoire. Chapter Quiberon.

156




History and Methods of the Paris Bourse
Twenty-five stockbrokers were to be appointed, twenty
of whom were to carry on banking and negotiate paper
on the foreign market, and the remaining five were to
deal in coin and bullion. No transaction was legally
recognized or valid which had not been made through
the agency of these twenty or of these five stockbrokers,
wherever their respective agency was required.
Further, t h e law prohibits the stockbrokers from
negotiating exchange bills on t h e foreign market for their
own account, and from any trading whatsoever in exchange
upon the foreign market for future delivery cr on option,
under penalty of being reputed stockjobbers and being
punished as such, according to the law of 13 Fructidor,
year I I I . (See No. 40.)
(42) These laws of year I I I and year IV show us tendencies opposite to those of 1791. After a period of
absolute liberty, there followed a period of regulation,
strict, rigid, a n d extremely menacing. The Bourse was
m a d e responsible for disturbances in the prices which
were caused by the political and economic troubles of t h e
period.
I n t h e years I I I and IV the fundamental principles of
public right counted for nothing. If the life and liberty
of the citizens were not respected, would t h e principle
of liberty in commerce be respected?
I n this way are explained t h e Draconian measures of
years I I I and IV. These laws were enforced with difficulty, and when circumstances permitted it, and peace
was restored, a new legislation was ushered in more humane and more moderate.

*57




N at ton a l

M on etarv

Commission

(43) I n August, 1796 (Thermidor, year IV), t h e q u a n t i t y
of assignats in circulation represented 45,578,810,040
livres. They fell t o 0.36 per cent and even t o nothing a t
all. A law of 28 Ventose, year IV (March 18, 1796),
ordered their exchange for territorial drafts in t h e proportion of 30 for 1. Twenty-four billion assignats were
exchanged for 800,000,000 drafts (or t o be more exact,
promises for drafts), to the p a y m e n t of which were assigned the proceeds from the sale of 3,785,000,000 livres
in territorial property. In spite of this change, t h e
assignats continued t o remain in circulation u p to t h e
time when t h e law of 22 Pluviose, year IV (February 10,
1797), ordered t h e complete canceling of those which
should not be presented for exchange on the following first
Germinal.
The territorial drafts also were paper money and had a
forced price from t h e day of their creation. On the very
d a y of the issue, in spite of penal prescriptions which were
intended t o keep the price at par, t h e promises for drafts
fell from 100 livres to 18 livres. The law of 29 Messidor
(July 17, 1796) granted freedom to transactions and suppressed t h e forced price of the drafts which anyhow was
of little account, as even the Government accepted their
value only according to the current market prices. The
surrender of t h e national property into the hands of the
bearers raised t h e prices for awhile; b u t in the following
December they again suffered a decisive relapse, before
there h a d even been a chance to change the promises of
drafts for real certificates. The law of 16 Pluviose, year
V (February 4, 1797). withdrew t h e m from circulation. 0
a

J. M. Fachan.

Historique de la Rente jrancaise.
158




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History and Methods of the Paris

Bourse

I n order t o get an idea of t h e rise of gold in comparison to assignats, let us give t h e following examples. I n
August, 1795, the gold louis was worth 1,020 livres in
paper; in September, 1,200; in October, 3,000; in December, 5,100; in J a n u a r y and February, 1796, 8,600 livres.
The accompanying illustrations show t h e forms of
assignats of different denominations.
(44) While the convention was proceeding with measures which belong to t h e field of political history and also
with financial measures which we have just examined,
t h e Grand Livre de la Dette Publique (Great Book of t h e
public debt) was established. This document contains
the totality of the government liabilities constituting the
registered debt. The desire of Cambon was t h a t all the
government debts should be capable of being placed on
t h e Grand Livre.
This plan was incompatible with t h e
wide range of liabilities which the State was led t o contract. Therefore when one speaks to-day of t h e Grand
Livre one merely means t h e book open to the registration
of rentes.
U p t o 28 Pluviose, year IV (February 17, 1796), rentes
were paid for in assignats at their nominal value.
The
holders of government rentes were reduced to beggary.
I n t h e year IV, like government employees, they received
for a certain time a daily ration of bread and meat.
(45) The more the assignat depreciated, the heavier the
debt became, since the Government received assignats at
their nominal value and delivered t h e m at their real value.
The Treasury was placed in an impossible position, the
only means of escape being nothing less t h a n bankruptcy.
(46) The distress of the Treasury was such t h a t the
90312 0 —10

11

159




National

Monetary

Commission

_
government of t h e Directory went into b a n k r u p t c y , 9
Vendemiaire, year VI (September 30, 1797).
The law passed on t h a t day ordered the inscription of
rentes in t h e Grand Livre reduced by two-thirds. The
third inscribed took t h e n a m e of the "funded t h i r d "
{tiers consolide).
The interest was fixed at "denier vingt"
(the twentieth denier), t h a t is to say, a t 5 per cent. The
other two-thirds were reimbursed in bonds " t o b e a r e r "
(bons an porteur) called "Dette publique mobiliere" (Floated
public debt). These securities h a d no value, and tumbled
almost immediately to zero.
Subsequently, on Ventose 30, year I X (March 21, 1801),
t h e Consular government passed a law entitling t h e bonds
" to bearer " of the two-thirds to be converted into perpetual rentes, in t h e proportion of one-quarter per cent of
t h e quantity brought for exchange. In this way a million of 5 per cent perpetual rentes were created. On the
22d of February, 1806, the collection and burning of t h e
bonds of t h e two-thirds were ordered. Their liquidation
was achieved by means of their being funded a t 5 per cent
(Loan of September 15, 1807).°
The financial operations of t h e year VI consisted of an
issue of 40,216,000 francs of 5 per cent rentes. At t h e end
of t h e eighteenth century t h e total of the French funded
debt amounted, in round numbers, to 46,000,000 of rentes,
representing a capital of 920,000,000 francs. 6
Let us recall t h a t these issues were registered. R e n t e
securities " t o b e a r e r " exist only since the ordinance of
April 29, 1831. France reestablished her credit when she
a

Vide Fachan: Historique de la Rente francaise et des Valeurs du Trisor,

p . 132.
6

Iveon Say.

Diclionnaire des Finances.
J 60

Under " Dette

Publique"




History

and Methods of the Paris Bourse

went into b a n k r u p t c y . This statement seems paradoxical,
but, nevertheless, nothing can be more true.
(47) T h e great legislative work of t h e Consulate affected
t h e Bourse as well as a number of other institutions, and we
owe to the legislation of this period the fundamental law
of 28 Ventose, year I X , in regard to commercial bourses.
Three principal considerations seem t o have actuated the
legislator of t h e year I X : (1) To establish order on the
bourses; (2) t o reconcile the provisions necessary t o assure public order, with a proper regard for t h e principle of
freedom of t r a d e ; (3) t o preserve t h e institution of stockbrokers from t h e risks of speculation and stockjobbing.
I n order to insure the a t t a i n m e n t of these ends the law
requires t h a t t h e stockbrokers be appointed for their
public t r u s t by the Government, which shall be guided in
their choice by their moral character and their professional
knowledge, and shall, besides, demand the pledging of a
p a r t of their fortune with t h e State as a guarantee of
their good conduct and of proper expiation for their errors
or failures. The law also emphasizes the principle of the
freedom of commerce, expressly stating t h a t nobody is
obliged t o have recourse to an intermediary, if he does
not desire it.
(48) Further, the stockbrokers were subjected to several
regulations with a view t o prevent speculation and stockjobbing. Thus, they were obliged to keep a journal;
their books were to be marked and signed by t h e President
of t h e Tribunal de commerce; they could not t r a d e nor
carry on banking for their own account; no one who had
been in b a n k r u p t c y was allowed to assume t h e duties
of a stockbroker. The law also makes t h e stockbroker
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responsible for t h e delivery of t h e securities sold a n d for
t h e p a y m e n t of t h e sums stipulated, even before either
have been received b y him from his clients—his security
being appropriated for this pledge if need be. This responsibility was intended as a check upon transactions for
future delivery. All these regulations were embodied in
t h e decree of t h e 27 Prairial, year X .
(49) Transactions for future delivery, however, were n o t
prohibited t o private individuals. B u t still this kind of
operations could n o t benefit from t h e security guaranteed
by t h e law for transactions through an intermediary.
(50) A t this time t h e scope of action for stockbrokers
was very narrow. T h e official quotation list was wholly
contained upon t h e recto of an octavo leaf, t h e largest
p a r t of which was given t o gold a n d silver. I t contained
only t e n kinds of securities, a n d no quotations for t h e
account. I t is only in 1844 t h a t t h e official quotation list
assumes its present form, with columns for cash {du
comptant), for future delivery {du terme), for continuations {reports), a n d for options {des prime).
F I F T H DIVISION.—The Nineteenth

century.

(51) T h e history of t h e French financial market during
the whole of t h e nineteenth century, is filled with three
groups of events of unequal importance.
1. The operating of the Bourse itself. T h e financial
market has benefited b y the progress of public credit, and,
in its turn, has given further impulse t o t h a t progress.
2. A special event. The acknowledgment, in 1885, of t h e
legality of " marches h terme " (dealings for future delivery)
displayed a tendency on t h e p a r t of t h e French lawmaker
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to include transactions in securities within the scope of
commercial transactions under common law.
3. Another special event. The struggle of the "agents
de change" (stockbrokers) against the " coulissiers" (curb
brokers)—that is to say, privilege against freedom,
monopoly against competition—ended, after sundry vicissitudes, in t h e course of which t h e principle of upholding t h e curb (Coulisse) h a d prevailed, in a retrogressive
movement in 1898—that is to say, in t h e strengthening
of t h e stockbrokers' monopoly.
(52) The needs of the States impelled their governments
to resort to credit. In order to do so, they h a d recourse
to issues of securities—certificates of rentes or loans in
sundry forms. To insure success for their operations,
a wide m a r k e t was required. And the market gave
t h e m t h e benefit which results from the existence of some
sort of constant source of credit.
Any progress in the industrial line must necessarily
have its origin either in an invention, in a mere improvement, or in a stroke of genius. B u t t h e inventor's
genius itself is not sufficient. T h a t social power "invent i o n " needs another power which should, in some way,
give it t h e necessary impulse to cause it to leave t h e
purely scientific realm. T h a t other power is organization. I t includes the consolidating of capital, t h e determining of t h e rights of the owners, the directing, the
financing, a n d t h e installing of machinery. I t is easily
understood, however, t h a t organization, so far as it
concerns an appeal to the forces of capital, requires
liberal corporation laws and well equipped
financial

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markets, where transactions in securities are easy, quick,
a n d safe.
When a country is conscious of t h e existence of such a
market, the budding out of an enterprise, t h e shares of
which have circulated on the Bourse, is a p t t o give rise
to another enterprise, and thus is proven t h e law found
in t h e natural order of things as well as in t h e sociological
order, t h a t t h e function creates the organ a n d t h e
organ hastens t h e function.
Thus, the development of securities in France has
been the expression of the development of public credit,
especially of the credit of t h e French State, of the
Departments, and of commerce; the expression of the
parallel movement above referred to, which took place
abroad and which manifested itself—especially during the
second half of the nineteenth century—in a considerable
influx of foreign securities into France; and, finally, the expression of the incorporation of numerous limited-liability
companies in shares {societes anonymes) in i m p o r t a n t
industries and in powerful commercial enterprises, rendered easier and easier by t h e more and more liberal
corporation laws, t h e establishment of large credit institutions, and the development of dealings for future delivery.
(53) In 1900, during the World's Fair, an " International Congress of Securities " was held. We take pleasure
in selecting t h e following remarks from the report on t h e
organization of t h e Congress, presented b y M. Alfred
Neymarck:
" Since the beginning of t h e nineteenth century, a n d
more particularly in the second half, there have been created a n d issued in Europe alone more t h a n 400,000,000,000
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of pieces of paper called certificates of rentes, shares and
bonds, dividend shares, lottery bonds, etc., designated
under the generic name of "valeursmobilieres"
(transferable securities).
" T h e s e securities yield yearly 15,000,000,000 to
20,000,000,000 francs and are distributed among 15,000,000
to 20,000,000 holders of certificates, capitalists, and
'rentiers' (private holders of government bonds). Now,
the aggregate circulation of metallic currency a n d b a n k
notes, all over t h e world, hardly reaches 5 per cent of the
a m o u n t of 400,000,000,000—that is, 20,000,000,000. On
December 31, 1899, the total a m o u n t of paper money,
in all t h e European banks of issue, amounted in round
numbers t o 15,000,000,000 francs
(to be exact,
14,992,000,000); t h e gold reserve kept on h a n d b y these
banks, amounted to 7,859,000,000, while t h e holdings of
silver were 2,585,000,000—making a total of 10,444,000,000
francs. The aggregate of paper money and cash on h a n d
amounted t o 25,000,000,000 francs.
" F r o m t h e discovery of America up to the present time,
t h e total value a t par of all the silver and gold which,
during four hundred years, has been extracted from
the bowels of the earth, m a y be estimated to be
between 100,000,000,000 and
110,000,000,000—nearly
50,000,000,000 gold and almost 60,000,000,000 silver;
while the aggregate of transferable securities created and
circulated in Europe exceeds 400,000,000,000.
" T h i s creating of negotiable instruments, and their
distribution throughout all countries of the world, is surely
one of t h e characteristics of modern times. * * *

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"The creating and successive issuing of this mass of securities, always easy to purchase and to sell on the Bourse,
have been the real cause of credit expansion. They were
instrumental in accomplishing real marvels in France and
abroad. As personal property increased, endeavors have
been made to render exchanges easy, and to make transfers as little expensive as possible; transferable securities,
owing to their denomination, their form, their mode of
maturity for the payment of interest, their conditions for
redemption, and the ease with which they are negotiated,
have been brought within the reach of all purses, and
have thus developed the spirit of saving.
"The consolidation of capital, under the form of stock
.companies, issuing shares and bonds that everybody can
obtain, encompasses on all sides the civilized nations of
the world.
"We may say, with Paul Leroy-Beaulieu, that now,
owing to capital being accumulated in the shape of
negotiable instruments, it is the stock company which
takes us on a journey; often it provides us with food
and lodging, sells us coal and light, makes up our clothing and even sells it to us; it procures news for us and
inspires our newspapers. Further, it insures our lives
and our dwellings; it feeds the unassuming Parisian in
the 'Bouillons' (cheap cook-shops) and feasts the stylish
Parisian in the fashionable wine taverns.
"The distribution of all these securities has materially
contributed to the formation of small inheritances. It
has influenced the development of savings institutions,
mutual benefit societies, pension funds, and insurance;
it has thus rendered invaluable service in the public role
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it has fulfilled. Thanks to it, these companies multiply
a n d increase as the capitalization of their funds is made
easier.
" I t has also had another result. I t has shown t h a t there
is no longer a plutocracy, b u t a veritable financial democracy; when these thousands of millions of certificates are
minutely segregated, there are only found atoms of certificates of stocks and bonds, and atoms of income—so
great is the number of capitalists and independent individuals who divide these securities and these incomes
among themselves.
" A t the beginning of the year 1800, the securities negotiable on the Paris Bourse included certificates of 'Rentes
des tiers consolides' (French government stock reduced to
one-third, September 30, 1797, see No. 46), certificates of
the ' caisse des rentiers' (office for the paying of rentes to
independent individuals), shares of the Banque de France,
a n d 3 per cent English consols—in all, about seven or
eight kinds of securities, representing about 40,000,000
francs in rentes, and less t h a n 200,000,000 francs in capital
or other property. The first bourse quotation list dates
from the second Vendemiaire, year IV (September, 1795).
I t gave the foreign exchange quotations: Amsterdam,
H a m b u r g , Madrid, Cadiz, Genoa, Leghorn, Basle; then,
under the pompous headings of ' Public Securities and
Gold and Silver Bullion and Coins,' it gave the prices of
Louis, Ecus, fine gold, silver bars, registered rentes, and
bonds to bearer.
" Louis were quoted 1,165 livres; other coins, registered
rentes, and bonds to bearer, were entered ' No quotation.'
" Now, on February 28, 1900, the official quotation list
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contained: (i) not less t h a n 442 stock companies, t h e
shares and bonds of which, numbering 90,909,250,
represented, a t the market prices of t h a t day, a capital of
42,000,000,000 francs; and (2) 203 loans of governments,
departments, a n d cities, amounting to 56,000,000,000
francs..
"Adding 26,000,000,000 francs in French rentes to t h a t
a m o u n t , we find the capital of securities entered 011 the
official quotation list on February 25, 1900, reaches
almost 125,000,000,000 francs.
" On a corresponding date, viz, March 15, 1900, t h e quotations on t h e coulisse (marche en banque) were as follows
according to the official bulletins of the Syndicat
des
banquiers en valeurs a terme (Syndicate of Bankers in
Securities for t h e Account) and t h e Syndicat des banquiers
en valeurs au comptant (Syndicate of Bankers in Securities for Cash), acting near t h e Paris Bourse: For future
delivery, 4 kinds of government issues, 3 kinds of railroad securities, and 47 mining and sundry securities;
for cash, 386 different kinds of securities, of which 38 were
issues of different States, 57, of gold mines, 38, of other
mines, 26, of railroad and transportation lines, and 35, of
metal industries; the balance was in sundry securities,
including 77 kinds of bonds, of which 22 were railroad
bonds, and 22, gas and electricity bonds.
" I t m a y be said t h a t the total number of transferable
securities quoted on the Paris Bourse and t h e sundry
French markets, comes u p to about 2,000 denominations,
representing a capital not far from 135,000,000,000 francs.
Of these 135,000,000,000, 80,000,000,000 to 85,000,000,000
francs belong to our French capitalists and
'rentiers/
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and t o insurance and sundry companies, yielding, on an
average, an income of 4,000,000,000 to 5,000,000,000
francs.
" S u c h is, in a general way, the situation of t r a n s ferable securities during the nineteenth century.''
(54) We shall trace the history of the development of
public credit, following the genesis of each important
phenomenon, its growth and development, u p t o its attainment of its present state. This will in some way reflect
also t h e plan of a history of the Bourse, of the transferable
securities, and of the financial institutions of the nineteenth
century. For this purpose we shall start with t h e public
credit, properly so called—the public loans.
Public debts are ordinarily divided into four important
categories:
1. The perpetual debt.—The borrower is not compelled
to pay back t h e principal. H e is liable only for the
interest. B u t he has the privilege to pay the principal if
he wishes to, although this is not required.
2. The amortisable debt.—The borrower agrees to pay,
besides the interest, a part of t h e capital, until t h e entire
principal is paid.
3. The floating debt, comprising time loans of relatively
short duration necessitated by needs of the exchequer.
4. The life debt, consisting of rentes which expire on the
death of t h e beneficiary, and originating in the majority
of cases in pensions of retired veteran soldiers and servants
in t h e civil service. These last two categories in the
French public debt do not concern us, for we are investigating only t h a t part of the debt which is represented by
securities circulating on the Bourse. I n this respect, the
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last two categories play only a nominal p a r t on the Bourse.
I t is different, however, in the case of the perpetual debt and
t h e amortisable rente. These are the life substance of t h e
market for French rentes. We shall scan their histoty briefly.
(55) The bankruptcy of two-thirds of t h e debt in the
•year V I of t h e Republic did not entirely solve the financial
problem.
F r o m the time of the creation of assignats, budgets
ceased to be made. Every m o n t h the balance between
the receipts and t h e expenses was filled by a previous
deduction from t h e reserve of assignats. No bookkeeping records were kept since the convention. The disorder which needed to be straightened out was so great
t h a t not until 1801 was it found possible to make a budget.
The Cour des Comptes (audit office) was instituted September 16, 1807. The Bank of France was reorganized
in 1806; it was founded in 1800. 0 There was no public
credit worth speaking of.
^The Banque de France was founded on the 24th Pluviose, year V I I I
(February 13, 1800). At the beginning it was a free credit company with
the right of issuing notes, formed by an association of persons high in the
political and financial world of Paris. The capital consisted of 30,000,000
francs, divided into 30,000 shares of 1,000 francs each. The Amortization
Office was authorized by a decree of the 28th Nivose, year V I I I , to subscribe for 5,000 shares. The total placing was slow, and ended in 1802
According to the terms of its original statutes, the bank had for its object:
i°, bank operations, such as discount, collections, advances, and deposits;
2 0 , the emission of ' ' b e a r e r " and " s i g h t " notes. The issues were to be
made in such a proportion that, with the cash reserve in its vaults and the
maturity of the paper in its portfolios, the bank could in no case be
exposed to the necessity of deferring the payment of its engagements.
The law of the 24th Germinal, year X I (April 14, 1803), conferred upon
its statutes a legal character, and made the bank the only association having the right of issuing notes. Its organization, functions, and powers
were modified and completed several times by special laws. The capital
of the Banque de France a t present amounts to 182,000,000 francs. The
number of its shareholders is 31,249.
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(56) At the beginning of the nineteenth century the
funded debt amounted to 50,000,000 francs of 5 per
cent rentes, representing a nominal capital of a billion
francs.
On April 1, 1814, the perpetual debt was 63,307,637
francs of rentes.
On July 31, 1830, the amount of the perpetual debt
was about 202,381,180 francs of rentes.
At t h e time of the revolution of 1848, the perpetual debt
was about 244,287,266 francs of rentes.
On December 31, 1851, the perpetual debt amounted
to 242,774,478 francs of rentes; this means t h a t during the
second Republic there was a decrease of 2,000,000 francs
of rentes, due to an excess of abrogations over issues.
During t h e second Empire, t h e sum total of the perpetual debt rose t o 402,977,516 francs (December 31,
1870).
Although t h e financial operations of t h e Third Republic
have been enormous—having h a d t o liquidate t h e debts
of t h e Second Empire and t h e charges of t h e war of 1871,
amounting t o 9,000,000,000 francs—yet t h e total increase
of t h e funded debt u p t o the present, owing to successfully conducted extinctions, amounts only to 254,695,999
francs.
On J a n u a r y 1, 1909, the amount of t h e perpetual debt
was 657,673,515 francs of rentes, represented uniquely by
3 per cent perpetual rente securities. The amortisable
debt amounted t o 107,629,800 francs.
(57) One of t h e phenomena which are conducive to t h e
establishment of public credit is t h e democratization of
the transferable security.

The more easily accessible t h e

»
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transferable security is to all, t h e more extensive will p u b lic credit be, and t h e larger the clientage of t h e Bourse.
The Restoration—by establishing in the treasuries a
supplementary Grand Livre (great book for t h e inscription
of rentes, see No. 44); the Government of Louis Philippe—
b y authorizing t h e creation of securities " t o b e a r e r "
through an ordinance of April 29, 1831; and t h e Second
Empire and t h e Third Republic—by reducing t h e figures of
t h e minimum a m o u n t of coupons (there exist coupons for 3
francs rente) and, especially, by having resorted to issues
b y public subscription—have to a marked degree extended
t h e clientage of t h e French rente.
I n 1848 there were 291,808 entries of rentes; in i860,
1,073,801; in 1870, 3,580,805; in 1903, 4,631,857. In
1900 t h e number of rentiers was about 1,500,000.
(58) The question of t h e methods of t h e emission of
rentes is intimately connected with t h e study of t h e conditions of t h e working of a financial market. Aside from
t h e fact t h a t a direct appeal is sometimes m a d e t o t h e
Bourse, by immediately offering t h e created rentes for sale
on its market, it is often also t h e place where special negotiations are created before t h e issue, properly speaking,
takes place—negotiations "for t h e i s s u e " (a V emission),
or negotiations for t h e results. Once t h e emission has
been realized, wholesale subscribers and even guarantee
syndicates undertake diverse operations on t h e market.
Finally, t h e securities having more or less taken rank, they
become the regular merchandise of t h e market in transferable securities.
The Revolution did not have recourse t o public loans
in t h e modern sense of the term. Its a t t e m p t s t o m a k e
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patriotic and forced loans completely failed. It obtained extraordinary resources through paper money
guaranteed by national property, assignats, territorial
drafts, etc. The First Empire could make no use of
the financial market for its needs, both on account
of the insecurity of the resources of the State, and on
account of the dwarfed condition of the banking business and the impoverishment of France in general, owing
to the constant state of war and revolutions lasting
for twenty-five years. And although the Restoration
did raise loans by public subscription, yet even these
were not loans in the real sense of the word, owing to
the undemocratic conditions requiring only wholesale
subscriptions with a minimum of 5,000 francs and the
presentation of guarantees. A loan of 9,585,220 francs
of 5 per cent rentes was placed in 1821, by contract, in
the hands of a consortium, in which the firms of Hope, Hottinger & Co. and Baguenault, Delessert & Co. took part.
On July 10, 1823, a loan of 23,114,516 francs of 5 per cent
rentes was contracted with the Rothschild Brothers for
89.55. From that time on until the Second Empire the
Rothschilds had the monopoly of these issues of rentes.
The process of public subscription began really to
be used in France only since 1854. Napoleon III, obeying political considerations, endeavored to democratize
credit. He relied on the mass of the populace, whom
he considered stronger than the bankers. From that
time on, during the whole of the nineteenth century
emissions of rentes by public subscription rapidly increased in volume, in number of subscribers, and in popularity. This is true both of perpetual and amortisable
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loans, which were introduced in 1878, and have been
negotiated on t h e Bourse through t h e mediation of
t h e syndicate of stockbrokers (syndicat des agents de
change) by t h e general paying treasurers of t h e Departments.
(59) There are other debts, besides those of t h e State,
which have t h e character of public debts; these are debts
of departments and municipalities, which give rise t o a
large circulation of securities upon t h e market. The
departmental debts, directly concluded and, consequently,
not including engagements for guaranteeing profits to priv a t e companies, t h e annual charges on which a m o u n t
to 50,000,000 francs, are valued at 700,000,000 francs.
The communal debts are more important t h a n those
of the departments. They rise approximately to a figure slightly above 4,095,000,000, of which 2,545,000,000
fall to the account of the city of Paris alone.
On
December 31, 1869, there were on the official quotation list in Paris 14 different stocks of departmental
and municipal loans, representing a capital of 808,600,000 francs.
Their number at present (1909) is
58, and they represent 2,300,000,000. The obligations
of t h e city of Paris form t h e majority of municipal bonds figuring on the list, and belong to different
loans of t h e period between i860 and 1906. All other
loans of this and earlier periods have been amortised. The
number of certificates in circulation is 4,618,205, representing a capital of 2,090,107,200 francs. The majority of
these are lottery bonds.
(60) The scope of this publication allows us only t o m a k e
brief mention of t h e loans of colonies and protectorates.
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They began with that of Tunis in 1892. Since then, there
were loans issued by Algeria, Guadeloupe, Indo-China,
Madagascar, Martinique, Occidental Africa, the Reunion,
the protectorate of Annam and Tonkin, and Tunis. The
number of bonds at present in circulation rises to 2,286,573,
representing a capital of 816,166,500 francs.
(61) Brief mention should be made also of foreign
credit, which France has favored to a considerable degree,
although its development is only recent. Till 1823 there
existed a prohibition against the dealing of stockholders in
any other but royal bonds. All dealings in foreign securities in Paris was done' only by curb brokers. In December, 1830, there were only 11 different stocks entered upon
the official list.a
Under the Second Empire there were already many
important foreign issues figuring on the quotation list.
Turkey, Austria, Spain, Hungary, Egypt, Russia, and
Italy were among the borrowing governments of that
period whose securities prevailed on the Paris market.
The emissions of public funds of foreign countries became still more numerous during the period between 1870
and the present time. Egypt, Hungary, Russia, and even
Japan and England, are among those that issued heavy
loans, and whose bonds are among the securities prevailing
on the Paris Bourse.
In a communication to the International Congress of
Transferable Securities, named Les Valeurs Mobilises en
France, M. Thery claims that it is impossible to give a
precise estimate of the number and capital of foreign
securities held by French capitalists. He ascribes the
a

Claudio Jannet, Capital, speculation et finances au XIX*
903120—10

12

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reason t o t h e fact t h a t these same foreign securities are
traded in on m a n y international great markets of Europe,
besides Paris and their original countries; t h a t these
securities are in constant movement on account of their
offering of great inducements of arbitrage, and because of
real demands and offers of French capital—and t h u s constantly escape every control.
B u t yet an estimate has been tried. Leon Say p u t s t h e
capital of t h e foreign securities a t between 10,000,000,000
and 12,000,000,000 francs. Paul Leroy Beaulieu p u t s it a t
between 12,000,000,000 and 15,000,000,000. Neymarck
estimates it at 20,000,000,000. However, it is of little
importance to know t h e exact proportion of t h e French and
foreign funds prevailing on t h e French market, provided
t h e institutions of t h e country are such as to give free
scope to indigenous demands, and provided t h a t these
demands are satisfied.
(62) The first appearance of shares of insurance companies on the official quotation list of the stockbrokers in
Paris dates from t h e time of t h e Restoration. The first
insurance company was authorized by an ordinance of
April 22, 1818, under the name of Compagnie royale
d? assurances maritimes,
which has since become t h e
Compagnie d'assurances generates maritimes.
Soon after,
in 1819, there were formed b y special ordinances one
general fire insurance and one general life insurance company,. I n 1830 we find already 7 insurance companies
on t h e official quotation list.
The insurance companies have followed during t h e nineteenth century t h e general progress in insurance a n d in
t h e laws upon joint stock companies. Article 66 of t h e
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law of the 24th of July, 1867, exempts insurance companies (excepting m u t u a l and fixed-premium companies)
from government supervision or authorization, and leaves
t h e m free to form themselves, subject only to the general
regulations of public administration.
According t o a memoir by M. le Chartier, submitted to
t h e International Congress of Transferable Securities of
1900, out of 327 fire insurance, life insurance, accident
insurance, and maritime insurance companies t h a t have
been founded in France during t h e nineteenth century, 209
ceased operations, and the capital lost is estimated at
692,825,000 francs, while the 118 companies existing in
1900 had a lump capital of 485,840,000 francs. This does
not include t h e reserve funds.
According to a report of M. Neymarck to the International Institute of Statistics, a t the meeting of 1907, the
insurance values figuring on the official list on December
31, 1906, were represented by 402,930 certificates and by
a nominal capital of 4,643,618,100 francs. The Coulisse
had a t t h e beginning of 1909 seven different insurance
stocks, representing a nominal capital of 54,000,000 francs.
(63) The establishment of railroads in France, as in
other countries, was the signal for a prodigious economic
movement. The money market was the crucible in which
was molded the capital permitting of the formation of
railroad companies.
I n 1832, when the advantage of railroad concessions was
first understood, m a n y railroad companies were formed.
After a law h a d been passed in 1842, permitting temporary
concessions and establishing the eight great t r u n k lines
whose construction was very important for t h e whole
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country, there ensued a veritable fever of railroad building
and speculation. In six years 6,000 kilometers of railroad tracks were granted in concessions, of which more
than 1,250 had been constructed. Speculation increased
so much that a law was passed on July 15, 1845, prohibiting the sale of promises for railroad shares.
(64) The following revolutionary period of 1848 was a
difficult one for all kinds of enterprises. Receipts fell off.
The Government had to intervene and buy back the ParisIvy on road; many companies went into receivers' hands.
A panic ensued when the population had demolished a
great number of railroad stations and bridges, and doubts
arose as to the intentions of the Provisional Government
with regard to the rentes of railroad companies. A great
tumble in the values of railroad stocks was the result.
(65) Under the Second Empire, prompted by uniform
concessions for a period of ninety-nine years, the then
existing 27 lines, with concessions of different duration,
were united into six principal great regional trunk lines.
In 1859 the existing concessions contained 14,756 kilometers, and the roads in exploitation covered 9,074
kilometers. But, following a commercial panic which
raged in 1857, the public was frightened by the large funds
engaged. The Government decided to fund the indebtedness of the companies, and the agreements of 1859 were
concluded.
By those agreements the Government guaranteed 4 per
cent interest upon each of the less productive new systems,
and a minimum of revenue upon each of the old systems
of railroads. Besides, in virtue of new traffic procured for
the old systems by the creation of the new ones, a part of
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the receipts of the old lines was reserved for t h e new
systems.
The credit of t h e companies rose rapidly, and they
could easily place their bonds at advantageous rates.
F r o m 1859 t o 1870, t h e length of exploited lines was increased b y 8,365 kilometers, and the ceded lines passed
from 16,441 to 23,440 kilometers.
After t h e crisis of 1870 the national assembly, in spite
of the difficulties in which the country found itself, continued t h e work of construction, and from 1870 to 1875
granted not less t h a n 4,680 kilometers of railroad lines.
Then comes t h e construction of the government railroad
system, as a consequence to the taking over of t h e seconda r y companies t h a t failed. Then also comes the Freycinet
plan of t h e creation of 3 per cent amortisable rentes.
The plan was too vast for accomplishment, since it was
evident t h a t t h e Government was unable to build 10,000
kilometers in the presence of the lines t h a t had been given
r a n k b y t h e law of July 17, 1875.
(66) Then came the famous agreements of 1883, so much
decried, which, however, permitted t h e railroad industry
to begin its ascent to the heights on which it stands
to-day.
By these agreements, the six great companies were declared t h e grantees of 12,687 kilometers of railroad tracks—
under exploitation, in construction, and to be constructed.
The distinctions between old and new roads were suppressed. The receipts a n d expenses were kept in one
account. F r o m the receipts t h e companies h a d previously
to deduct t h e sum necessary to assure t h e interest on
their loans and the p a y m e n t of dividends guaranteed b y
the Government to their shareholders.
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(67) By the side of t h e great systems, there were formed
a large number of systems of local interest, whose aim
was to connect localities of secondary importance with
one another or with t h e great lines. The development
of these secondary lines was promoted first b y the law of
1665 which granted state, departmental, and municipal
subsidies; b u t to a much greater extent b y t h e law of
1880 and t h e supplementary decree of 1881, which
replaced the subsidies, t h a t promoted speculation a without development, by mere guaranties of profits in case
of actual exploitation of the roads in question.
At t h e same time in t h e interior of the cities there developed the use of mechanical traction, replacing animal
traction. Paris set the example, and t h e formation of
its system of tramways called " d e penetration" gave birth
to a great number of large companies. These traction
companies extend their activity also to t h e province, a n d
t h e creation of affiliations and trusts, toward the end of
t h e nineteenth century, was t h e occasion of a considerable
issue of paper.
A t present t h e official quotation list mentions not less
t h a n 60 secondary railroad or t r a m w a y companies for
F r a n c e and its colonies.
(68) The French financial market was to a very great
degree concerned with foreign railroads. In 1837 there
appeared for t h e first time on t h e Coulisse, and later on
t h e Parquet, shares of a foreign railroad company. T h e
political and financial order of events, as well as t h e condition of affairs on t h e Bourse at t h a t time, did not permit
a very great development in transactions in securities of
a See an article by M. Gomel in the Dictionnaire d'Economie Politique of
L£on Say.
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foreign railroads. But the Rothschild firm was interested
in the first railroad companies for the development of the
north Italian and south Austrian regions, which later
formed the Compagnie des Chemins de fer Lombards > whose
shares appeared on the quotation list in 1856. From now
on, under the impulsion of the newly formed Credit Mobilier, the financial market becomes more and more interested in a large number of foreign railroads. In 1858
a decree of May 22 announced the conditions which foreign
railroad companies have to fulfill, in order to become admissible to the official quotation list of the stockbrokers.
(69) According to a report by M. Alfred Neymarck to
the International Institute of Statistics (session 1907), the
securities of railroads and street railways, figuring upon the
official quotation list on December 31, 1906, represented a
capital of 20,167,834,000 francs, in 5,843,608 shares.
There were in all 71 companies, 32 of which were for foreign railroads, and represented a capital of 7,541,329,600
francs.
(70) We have dwelt on the creation and development
of railroads, because they have marked in a very strong
way the industrial progress of France and the development of credit in its relations to the Bourse. Besides, also,
numerous companies were formed, from 1820 to 1852, for
the exploitation of iron mills and various manufactories,
of mines, and of transportation. The Credit Fonder and
the Credit Mobilier were among these associations. Both
of these companies, in cooperation with many other contemporary ones, considerably developed the transferable
securities. From 1830 to 1838 many limited-liability
companies in shares (societes anonymes) were formed by
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a sort of degeneration of the "commandite" form of
company {societe en commandite), in which the managers,
or active partners, were under unlimited liability.a The
securities of the companies formed on this new basis appeared on the Bourse in great numbers since 1832.6
The most diverse industrial enterprises were thrown into
this form of company. The promoters of doubtful enterprises put at their head men of straw, in order to avoid
personal responsibility. The shares of certain enterprises
reached fantastic prices (over tenfold their par value),
owing to exaggerated expectations of shareholders. Stockjobbing was rife on the Bourse. But most of these insecure undertakings were swept away by the crisis of 1838.
The formation of lottery combinations also belongs to
that period.
(71) We come now to the era of the great credit associations.
The Comptoir d'Escompte (national discount bank)
dates from the period of turmoil of 1848. Its powers
a The French law at present recognizes four forms of commercial companies : 1. The partnership (la societe en nom collectif), in which the partners
are responsible for debts contracted by the company to the whole extent
of their personal estate. 2. The "commandite " form of company (la societe
en commandite), in which one or several members are responsible with the
whole of their estates, while several others are responsible only up to a sum
which they announce in the contract. The second category of partners
take the name bailleurs de fonds, or commanditaires (sleeping or silent partners). 3. The " c o m m a n d i t e " in shares (commandite par actions), in which
the commandite members are shareholders in the ordinary commercial
sense, involving liability only to the amount of their shares. The member
or members responsible with all their estates are called grants (managers,
directors). 4. The limited-liability company in shares, in which all the
members are only shareholders, liable to the amount of their shares, and
which are managed by one or several administrators by proxy (mandataires
des actionnaires).
&M. Jannet. Le Capital, la Speculation et la Finance, page 510.
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spread t o such an extent t h a t at t h e present time it is one
of those establishments which are known as t h e great financial magazines, and the most conspicuous of which are the
Credit Lyonnais, t h e Societe Generate, and t h e Credit Industrial et Commercial, all of which were founded during
the Second Empire. The principle which governed the
founding of t h e Comptoir d'Escompte goes back t o a period
previous to 1848.
After a commercial panic in 1827-28 an a t t e m p t was
made to found a discount bank in Paris, intended to serve
as an intermediary between the public and the Bank of
France. Large sums of money were advanced to it b y the
treasury and t h e Bank of France; it was thus able to discount bills of two signatures. B u t this institution failed
in April, 1832, practically before it had time to work.
The deplorable condition of t h e financial market in 1848,
and t h e m a n y financial catastrophes caused b y t h e revolutionary turmoil, induced the Provisional Government to
establish a number of discount banks all over France, under t h e general name of Dotation du petit commerce. The
basis and t h e main statutory provisions governing t h e m
all were as follows: Private persons, the State, and municipalities were called upon to furnish each one-third of
the capital of the banks. The third coming from private
persons was to be fully paid in and represented b y shares;
the other two-thirds were to be represented b y treasurybonds and municipal obligations deposited in t h e treasury
of the bank. Besides this capital, t h e banks received from
t h e State at t h e time of their formation a subventitious
loan in specie, at t h e interest of 4 per cent for the State's
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ing t h e first three years. The chief purpose of all these
banks was discount; they could, however, add to this all
operations tending to facilitate t h e circulation of notes, such
as t h e collection of bills of correspondents, t h e collection
of debts for departments or foreign states, t h e opening of
accounts, etc. The city of Paris, naturally, was t h e first
to be endowed with this institution; a decree of March 7
created t h e Comptoir National
d'Escompte
de Paris.
Many towns soon followed suit and gave birth to similar
institutions. Their number was 67, and they represented
a capital of 130,449,500 francs in shares. The Paris institution was reconstituted under t h e old name, after liquidation in 1889, owing to mismanagement of its directorgeneral, M. Denfert-Rochereau.
T h e original capital of 40,000,000 francs, divided into
80,000 shares of 50 francs, was now increased to 80,000,000
francs. Later it was successively reduced to 75,000,000,
increased to 100,000,000 (1895), and to 150,000,000 (1900).
Only recently (1909) it was increased to 200,000,000.
(72) We come now to the founding of t h e Credit Fonder
and t h e Credit Mobilier.
Both of these associations were
founded in 1852.
Simultaneously with t h e construction of railroads in
France, which was t h e occasion of an extensive demand for
credit, people decided to resort to credit also for t h e exploitation of landed property and the development of agriculture.
Real estate a t t h a t time experienced t h e greatest
difficulties in procuring capital a t moderate rates of
interest. The main reasons were the uncertainty of t h e
real estate regime, and t h e inability of t h e borrower t o
p a y off a t short m a t u r i t y .
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The solution of the problem consisted in putting an
intermediary between the lender and the borrower, who,
on the one hand, had powerful means of investigating
the validity of the proposed mortgage, and, on the other
hand, could substitute himself for the borrower in the
emission of securities at long maturity.
With this aim in view, as formulated by the decree
of February 28, 1852, there was founded in Paris (with a
charter for twenty-five years, under the jurisdiction of
the Cour d'appel) the Banque Fonciere de Paris, Societe
de Credit Fonder (Real Estate Bank, Mortgage-Loan
Company) with a capital of 25,000,000 francs.
In December, of the same year, the Paris institution
amalgamated with similar institutions which had been
established earlier in the same year in the various departments, and formed one company, known as the Credit
Fonder de France. This new company received a subsidy
of 10,000,000 francs from the Government; its capital
increased to 60,000,000 francs, and it bound itself to
advance loans under certain conditions. A first loan of
250,000,000 francs was issued, which met with but middling success.
By two decrees, of 1853 and 1856, respectively, the
great institution was granted certain privileges, and placed
under the strict supervision of the state. From that
time on the Credit Fonder rapidly developed. In i860
it founded the Credit Agricole, having for its object the
furthering of the progress of agriculture. But the new
company undertook imprudent transactions which led
to its absorption by the Credit Fonder (1877). Later,
in 1882, the institution bought up another company,
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t h e Banque Hypothecate,
which had been established
three years previously with t h e purpose of doing t h e
same kind of business as t h e Credit Fonder, b u t without
possessing t h e same privileges. At t h e end of t h e ninet e e n t h century t h e Credit Foncier considerably developed
its activity, and its capital was successively increased to
30,000,000 (1862), 60,000,000 (1862), 90,000,000 (1869),
130,000,000 (1877), and finally, in 1882, as a result of
t h e amalgamation with the Banque Hypothecate,
to
200,000,000 francs, a t which figure it now stands.
The operations of the Credit Foncier are of two kinds:
1, loans for short term, reimbursable in ten years a t most,
and 2, loans for long term, payable by annuities. I n
case of communal loans (where the borrower is a city
or a department) the social capital m u s t equal onetwentieth of the bonds in circulation.
F r o m 1853 to 1908 theCredit Foncier has granted 152,622
hypothecary loans for a total of 5,698,000,000 francs, of
which some are for a term of fifty to fifty-nine years, and
others, of sixty to seventy-five years. The communal
loans since i860 have been 38,128 in number, for a sum of
1,094,000,000 francs. In t h e total we obtain, since 1853,
190,740 loans for t h e sum of 9,501,000,000 francs.
Of this total sum there remained unpaid on December
31, 1908, t h e sum of 2,118,348,000 francs of t h e
hypothecary loans and 1,852,783,000 francs of t h e communal loans.
The a m o u n t of real estate bonds for t h e same period
was 2,480,000,000 francs, and of communal bonds,
1,712,000,000,

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(73) While the Credit Fonder de France was being
established, there was formed in Paris a Societe Generate
de Credit Mobilier.
A decree of November 18, 1852,
authorized t h e creation of this incorporated joint-stock
company; it was entirely free from all government
connections.
The object of this general credit institution was to
establish industrial and financial companies. I t subscribed shares and bonds of different industrial and financial enterprises, and in disposing of them in t h e way it
could, it brought t o bear the publicity and mechanism of
bourse operations. I n issuing bonds, in order to work
out its own programme, it had to contribute powerfully
to the development of transferable securities. I t was
constituted with a capital of 60,000,000 and with t h e
power of issuing bonds for 600,000,000 francs.
Between 1852 and 1867 the Societe Generate de Credit
Mobilier succeeded in establishing and aiding numerous
influential and powerful companies. Among these were
railroad, gas, maritime, loan, and insurance companies,
banking institutions, etc. I t was reconstituted in 1871
under t h e n a m e of Societe de Credit Mobilier.
I n 1902
it combined * with the Office des Rentiers, and another
company was then formed,, by the name of Credit Mobilier
Francais, with a capital now amounting to 45,000,000
francs.
(74) Upon the model of the Credit Mobilier numerous
other companies and discount banks have been established since t h a t time. The Credit Industriel et Commercial,
the Credit Lyonnais, and the Societe Generate, with t h e
original capitals of 60,000,000, 20,000,000, and 120,000,000
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francs, respectively (at present 100,000,000, 250,000,000,
and 400,000,000), are types of these institutions. All of
t h e m little by little went over to t h e practice of issuing
securities and participating in financial operations on a
grand scale.
(75) The impetus given to transferable securities b y t h e
commercial credit institutions, as they were t h e n known,
ought not to make us lose sight of the valuable work
done in this respect b y t h e Banque de France.
(See note
to No. 55.)
Its services to national commerce have become m o r e
a n d more valuable in t h e same measure in which its
powers and privileges have been gradually broadened
a n d extended since 1808. I t advanced money on p u b lic notes remitted for discount; it loaned money on
deposits of French rentes, of shares and bonds of railroad companies, of the bonds of t h e city of Paris. Later
it undertook to issue and t o dispose of bonds for account
of French railroad companies, which has brought t h e m
in an amount of 1,200,307,500 francs. Finally, it is
known t h a t t h e bank undertakes the safe-keeping of
securities. This service, which in i860 was utilized b y
18,226 depositors for securities representing 916,000,000
francs, has not stopped growing. I n 1890 there were
46,558 depositors for a q u a n t i t y of securities representing 3,988,000,000 francs. At t h e end of 1908 there were
94,998 depositors, and 7,646,000,000 francs in securities
were deposited. In 1895 t h e Banque de France decided
t o accept bourse orders, which it would transmit t o t h e
financial markets for account of its clients. I n 1908 it
t r a n s m i t t e d 98,721 orders for 500,000,000 francs in capital.
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(76) The great impetus which was given to the financial activity of the period between 1876 and 1881 by
the successful loans launched by the French Government for the paying of its war indemnity of 5,000,000,000
francs, and which expressed itself in the establishment
of many powerful financial institutions of a private
character, was stopped by the crash of the Union Generate.
The Union Generate was founded in 1878 with a financial, political, and religious programme. The political
programme, it may be said, was carried out. But the
commercial enterprises set on foot by the Union Generate
were not all of the most fortunate kind; only a few
succeeded and became prosperous. The political and
religious programme consisted in supplanting the Jewish
and Protestant financiers upon the field of financial emissions, and in serving at one and the same time the
royalist cause in France, and the papal cause in Italy.
The pursuit of this plan involved the need of large
funds rapidly acquired, and the Union Generate undertook a campaign for a rise upon its own shares, in order
to realize an increase of its capital and dividends by
forcing the prices of its stocks as high as possible. It
tried to do this by buying up its own securities, for which
the funds of the depositors were freely used. In this
way the capital of the Union Generate was increased
from 25,000,000 to 100,000,000 francs, and, as the new
funds served to further pursue this campaign for a rise,
the shares rose to unwarrantably high prices. People
of all conditions eagerly bought and sold again the stocks
of the Union Generate and of the enterprises it created,

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until their aggregate value surpassed t h e billion mark.
The mania for investment spread t o all financial circles.
Finally, however, a reaction set in. Shares of t h e
Union Generate began to fall. On J a n u a r y 10, 1882,
t h e shares were listed 3,020 francs; on J a n u a r y 16,
2,750 francs; on J a n u a r y 18, 2,400 francs; on J a n u a r y
19, 1,300, and on J a n u a r y 27, 900 francs. On t h e 28th
of J a n u a r y p a y m e n t was suspended, and t h e shares
fell to 600; on t h e next day they were 450. On J a n u a r y
30 the administrative board asked the court t o appoint
a trustee. On February 1, MM. Bontoux and Feder—
t h e former president of the administrative board and
t h e latter a director—were arrested.
Failure of t h e Union Generate had grave consequences.
T h e P a r q u e t of t h e stockbrokers of Lyon was unable
t o pay. Out of 30 stockbrokers, 14 owed 65,000,000 francs
to their associates. Debtors and creditors alike were in
great straits. A judicial liquidation took place, and t h e
creditors received bonds which t h e Syndical Chamber of
Lyon sells every year a t auction. The stockbrokers of Nice
were also caught in t h e panic, and their P a r q u e t was suppressed by a decree of t h e 29th of J a n u a r y , 1889. At Paris
t h e situation was extremely serious. The stockbrokers
owed 175,000,000 francs to their clientage. The gravity
of t h e situation was enhanced b y t h e resulting threatening
condition of t h e treasury. The conversion of the 5 per
cent rentes h a d long since been under consideration; b u t
in this disorganized condition of t h e m a r k e t t h e bankers
a n d t h e commercial credit associations could not proceed
with a single emission. They had invested large sums in

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" c o n t i n u a t i o n s " {reports). W h a t was going t o happen
if t h e carried-over securities should remain on their hands?
T h e Banque de France then advanced 80,000,000 francs
to t h e Syndical Chamber of the stockbrokers. The State
also intervened, and effected "continuations'' for t h e
sum of 165,000,000 francs for t h e February settlement.
Stocks were carried over from m o n t h to m o n t h during a
period of seven months. a As a result of this event t h e
market was so completely disorganized t h a t for some
months, and even for some years, hardly any transactions
of a certain speculative range could be carried through.
The total loss in values of listed securities of t h a t period
is estimated at 4,000,000,000 francs.
(77) W i t h the downfall of the Union Generate there
began a series of failures, liquidations, and reorganizations of financial companies and banking institutions,
which ended in t h e elimination of a great number of such
as were weak either on account of unwarranted speculation and mismanagement, or on account of irregular
constitution and distribution of fictitious dividends.
Toward t h e beginning of the twentieth century there
remained only t h e very strongest, which withstood t h e
storm of t h e crisis by virtue of powerful resources and
prudent management. These succeeded in immensely
increasing their funds and their means of activity. They
solicited deposits, established branch offices in t h e provinces a n d even abroad, and practised extensively discounts
of commercial paper, opening of accounts, investing of
their funds in " continuations/' and especially issuing of
a
Vide Leon Say, Les interventions du T res or a la Bourse depuis 100 ans;
Annates de VEcole des Sciences Politiques, 1888.

90312 0 —10

13

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transferable securities. They have supplanted t h e small
banker and discounter, who would charge exorbitantly for
their services t o commerce. B u t yet they have not entirely
displaced t h e smaller banking institutions, nor t h e large
private banker, doing business on his own personal account.
These are still doing a vast a m o u n t of business independently. I t is true t h a t there is a preponderance
of large companies, b u t this preponderance does not exist
through a legal monopoly. I t has been claimed t h a t t h e
four large credit companies, t h e Comptoir d'Escompte, t h e
Credit Lyonnais, t h e Societe Generate, the Comptoir Industriel et Commercial, to which are joined for this purpose
t h e Banque de Paris et des Pays-Bas, t h e Banque de V Union
Parisienne, and t h e Banque Francaise pour le Commerce et
Vlndustrie, are enjoying a monopoly as a m a t t e r of fact.
This is not so, however, for numerous issues are m a d e outside of these large companies. A number of smaller
banks and credit companies, not included in t h e above
list, handle some very important issues, even if t h e y are
secondary.
(78) A t t h e end of December, 1908, t h e n u m b e r of
French credit companies listed on t h e financial market was
about 37, representing a nominal capital of 1,492,000,000
francs.
M. Alfred Neymarck, in his report to the I n s t i t u t International de Statistique, session of 1907, estimated at 155,000,000,000 francs the value of the transferable securities
in negotiation in France on December 31, 1906. One
hundred and fifty billions belonged to t h e Paris m a r k e t
alone, of which a b o u t 65,000,000,000 were in French
securities, 67,000,000,000 in foreign securities on t h e
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official market, and 18,000,000,000 on the Coulisse (marche
en banque).
Of home securities—the value of French
rentes is estimated at 24,000,000,000 francs; of bonds
of t h e city of Paris, of treasury bonds, including those of
Departments and colonies, at 3,069,000,000; insurance
securities are valued at 702,000,000; those of t h e Credit
Foncier, at 4,447,000,000; of banks and credit companies,
at 3,101,000,000; of the great railroad and navigation
companies, a t 24,268,000,000; of railways and t r a m ways, at 2,200,000,000; of electricity, iron mills, foundries, and coal mines, at 2,463,000,000, etc. Of the
foreign securities, Russian securities are valued a t about
10,000,000,000; divers other government funds, at
47,000,000,000; railroad securities, at about 6,000,000,000.
In 1880 the total of t h e transferable securities circulating
in France could be estimated at 70,000,000,000, made u p
as follows: Forty-iive billion five hundred million of
French securities, 15,000,000,000 of foreign securities, and
10,000,000,000 of securities from the departmental markets and from t h e Coulisse. The rapid expansion of
transferable securities after t h e crisis of 1882 did not
t a k e place without serious setbacks from t h e depreciation in value of a great number of securities, following
each new failure or liquidation. T h e movement was
interrupted and checked in 1889, 1890, 1895, a n d in 1901.
(79) As we have seen, public credit was the outcome of
t h e call for capital. And the agreement entered into b y
the borrower—State, or private enterprise—and t h e
lender, was made manifest through a deed—the transferable security. The transferable security, in its turn,
owing t o t h e ease with which it can be distributed, de193




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veloped t h e public credit. But, in order t h a t t h e double
phenomenon be easily produced, it was necessary t h a t
there should exist a public m a r k e t where t h e one who
wishes to sell his securities and t h e one who desires t o
b u y t h e m might, meet each other. No doubt t h e seller
and t h e purchaser do not necessarily require a public
market, and, in practice, it happens t h a t some trades are
carried on without t h e merchandise being offered or asked
for on an exchange. B u t public markets are none t h e less
useful, and their accessory functions plainly stimulate t h e
production and circulation of wealth.
The bourse des valeurs (stock exchange) is for securities
w h a t t h e bourse des marchandises (commercial exchange),
t h e fair, or t h e market, is for traffic in merchandise.
The financial m a r k e t is an accessory organ, because it
has no p a r t in the phenomenon of the creation of securities, OT in t h e contract which p u t s t h e m in circulation.
W h e n a State borrows, it issues a certificate to anyone
who brings it money. T h e same is done by any financial
institution which brings out an issue. The accessory
organ is nevertheless useful in a high degree, because if it
did not exist, t h e public would decline to subscribe for
securities, which it could not easily dispose of in case of
need of money.
(80) This consideration leads us to t h e examination
of t h e French financial market, taken as it is. Is it a
tool destined to facilitate t h e distribution of securities?
Does it fulfill its mission well?
I t can not be denied t h a t it has fulfilled it, but it is
quite clear t h a t it could fulfill it only on account of enjoying t h e widest freedom.
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T h e financial m a r k e t was instituted in t h e year I X of
t h e Republic, under such conditions t h a t , if it h a d preserved its shackles, there would either have been no financial m a r k e t , or t h e financial m a r k e t would have instit u t e d itself in spite of t h e law.
Is it possible to imagine a financial m a r k e t resting
upon 60 men, appointed by the Government, who are
forbidden t o do business for their own account, t o have
partners or representatives, to guarantee their clients'
transactions, to negotiate securities without having first
received t h e securities from t h e sellers and t h e money
from t h e buyers, and to quote foreign government securities? One of two things: Either t h e public m a r k e t will
establish itself outside of these 60 men, or these 60 men
will prevent t h e establishment of t h e public market.
I t is t h e first of these two phenomena which occurred.
On t h e one hand, the Coulisse injected into the public
m a r k e t t h e activity it required, and on t h e other hand,
t h e corporation of t h e stockbrokers (agents de change),
profiting b y t h e activity, gradually obtained t h e "liberties," without t h e granting of which it would have disappeared. The curb brokers (coulissiers) dealt for future
delivery for their own account and for t h e account of
their customers; they could negotiate foreign securities.
They transferred their gatherings from the boulevard to
t h e Bourse and from t h e Bourse to t h e boulevard at any
hour of t h e day, or even of the evening. They charged
less for their services to their customers t h a n t h e stockbrokers. The latter protested.
The Governments let t h e m protest; then, as b y degrees
the stockbrokers, taking p a t t e r n from t h e coulissiers, also
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began t o transact time bargains and to deal in foreign securities, t h e authorities granted t h e m all t h a t h a d earlier
been forbidden to them, without, however, granting t h e m
t h e abolition of t h e Coulisse. I n 1898, however, a retrogressive phenomenon took place. W e shall explain it a n d
ascertain its meaning later.
Thus is explained, how the Coulisse was tolerated during
t h e nineteenth century, and what led to t h e successive
laws which somewhat altered in the details of certain
operations t h e work of the lawmaker of the year X .
(81) B u t first we must make mention of a special measure passed in 1816 for the benefit of t h e stockbrokers.
At t h a t time they became the owners of their offices, as
they were prior to the revolution. Since the year I X they
h a d been appointed b y the Government and had held a
commission subject to repeal. The law now intended t o
permit them to introduce their successors with the consent
of t h e Government.
The right of introduction is practically an article for
sale. The stockbroker, on retiring, does not sell his office,
b u t he sells to his successor the right of introduction.
This measure was brought in under t h e following conditions: T h e budget for the year 1815 having shown an
excess of expenses of 133,433,000 francs, the Government
of t h e restoration had to look around for resources t o
meet them.
Therefore, b y t h e law of April 28, 1816, t h e stockbrokers, as well as notaries, barristers practicing before
the court of cassation (avocats a la Cour de cassation),
lawyers, court clerks, bailiffs (" huissiers," those who protest commercial paper, serve writs, etc.), commercial
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brokers, and appraisers, acquired the right of introducing
their successors in consideration of an additional suretybond, aggregating 40,000,000 francs for the totality of
these ministerial offices.
It is that right, conferred on ministerial officers, to
present their successors—a right which the beneficiaries
may sell—which has been considered as a return to the
system of vendibility of government offices. That system
has been the object of much criticism. Notably, it has
the grave defect of placing the State in a position where
eventually it may have to indemnify the holders in a proportion ever increasing, unless it permit the evil to be
perpetuated on account of its inability either to indemnify the holders or to redeem the offices.a
The law of 1816 can not be placed among those which
were intended to render the financial market flexible.
a To this Rossi has called attention in a masterly way. (Cours d'Economic Politique, t. i, p. 309.)
" T h e more we advance," he said as far back as 1840, " t h e more the
evil increases. On the day the Government wishes to recover its full
freedom of action, it would have but two serious disadvantages to choose
from—some sort of revolutionary spoliation, or else an enormous sacrifice
of the public treasury; and this, on account of having permitted the transformation of a personal function into a transferable property, and of having permitted, in part at least, and under another form, the revival of an
old custom, which had been born from the miseries of the royal treasury
under Francis I, and should have remained buried forever with the fee estates,
the wardenships, the entails, and the serfdoms of the old regime. The increase of surety bonds, which took place in 1816, did not warrant that
return toward the past."
Therefore, t h a t strange compensation was, it seems to me, more a pretext than a motive for that partial restoration of an old abuse, against
which, even under the old regime, powerful voices arose.
'" It is a gangrene,' exclaimed the Duke of St. Simon, in speaking of the
venality of military appointments, ' which for a long time has been preying upon all classes and all parts of the State, and to which it is bound
to succumb, b u t which fortunately is not known, or b u t little known, in
all other European countries.'"
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To raise a profession to a ministerial office is n o t t o
modernize it. B u t t h e provisions of 1823, 1862, a n d 1885
were different.
(82) A royal ordinance of November 12, 1823, authorized the stockbrokers to quote foreign government
securities.
(83) A law of July 2, 1862, authorized stockbrokers
doing business on "bourses with p a r q u e t s " to take capitalists into partnership (bailleurs des fonds), t h a t is to say,
silent partners
(commanditaires).
A law of March 28, 1885, recognized as legal all transactions for future delivery (marches a terme)—even those
which are settled by paying the difference—and removed
those special obligations imposed upon stockbrokers which
were of a n a t u r e rendering such operations impossible.
Finally, a law of April 14, 1898, was t h e crowning
point of what was improperly called t h e reorganization
of t h e financial market.
Concerning the law of 1885 and the law of 1898, it is
necessary to make a special study of t h e conditions which
led to their formation.
The first law has an economical importance reaching
beyond t h e realm of the Bourse. All transactions for
future delivery are recognized as legal.
The second is specifically intended for t h e financial
market.
(84) T h e law on time-bargains (marches a terme) is very
i m p o r t a n t from an economic standpoint. Not only does
it indicate a social progress, in t h a t it removed t h e monstrous immorality which was formerly widespread, a n d
which consisted in permitting speculators to decline to p a y
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their differences b y presenting the plea of gambling, b u t it
indicates, besides, a philosophical progress—a progress in
t h e general trend of thought. T h e time-bargain is not
simply a contract t h e settlement of which is postponed to
a certain date, one which works itself out in time and
space; it is a contract upon generalized merchandise.
We know t h a t Bourse operations, whether they apply
to merchandise or securities, bear upon things in genere
which can be replaced b y each other—one being as good
as t h e others, a n d reciprocally. To be sure, it is easy,
even very easy, to conceive of a trade bearing upon a
specific object, since it is always so in retail trading:
Goods against money, money against goods, be it for
cash or on credit. Peter sells to Paul this or t h a t object,
payable immediately, or Peter sells to Paul this or t h a t
object, for 100 francs payable in three m o n t h s ; it is
a time-bargain {marche a terme) bearing upon a specific
object.
B u t t h e vast majority of time-bargains of commerce
bear upon things fungible (interchangeable)—things in a
generalized a n d not in a specialized sense.
A speculator calls upon a commission merchant; he
buys from him 100 casks of alcohol and 100 bags of sugar.
Those 100 casks of alcohol and those 100 bags of sugar
are not in t h e hands of the commission merchant. This
merchandise, these quantities which t h e commission
merchant sells, are not necessarily in his stores. The
contract calls for merchandise of a certain type, which
the seller shall deliver on the date fixed.
Well, if it is a question of alcohol, sugar, wheat, flour,
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stood t h a t t h e goods will always be of a current type,
applicable to all contracts.
T h e same applies to securities. a
I n this way, all securities are m a d e fungible (equivalent,
interchangeable). On t h a t principle, Peter goes to Paul,
t h e banker, a n d purchases from him 25 shares Credit Fonder for t h e end of t h e month. I t m a y happen t h a t t h e
transaction is specific, b u t in most cases he does n o t b u y
25 shares, numbered 1 to 25 or 25 t o 50 or 50 to 75. H e
purchases 25 shares, no m a t t e r which, provided t h e y be
shares of the Credit Fonder.
This condition is the regular
one on the Bourse.
I t is this fundamental condition, necessary, we m a y
say, for transactions for future delivery, which leads certain people to conclude t h a t t h e y are non-existent and
fictitious.
Where w^as t h e merchandise a t t h e time of sale?
Where were t h e securities at t h e time of contract ? They
are not found, and thereupon is based t h e non-existence
a n d fictitiousness of contracts. B u t this merchandise is
not found, because it can not be found; because, we repeat,
t h e contracts have aimed at things in genere, and because
t h e n a t u r e of t h e operations is such t h a t specification
has been done away with for t h e very convenience of t h e
transactions. There can be seen, indeed, where lies t h e
error of those who deprecate dealings for future delivery.
An operation bears upon things assumed as equivalent
and fungible (choses fongibilisees), and people exercise
ingenuity to t r e a t it like a transaction bearing upon
a l t is by application of t h a t principle t h a t article 46 of the decree of
October 7, 1890, states t h a t " the transactions have bearing only upon certain quantities, without any specification of the securities negotiated by way
of indicating their numbers or otherwise."
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specific objects. I t is not surprising, then, t h a t when one
looks into a contract for something which can not be
found in it, one is led to conclude t h a t t h a t object does
not exist, and t h a t t h e contract is therefore fictitious.
No doubt, before 1885, t h e validity of transactions bearing on fungibles (choses fongibles), or even on securities
in a general form, was recognized; b u t whenever a judge
could see no merchandise moving, whenever there were
presented to him only accounts of differences, a psychological process took place in his mind which caused him to conclude t h a t t h e transaction was fictitious. All of this
rests on no basis of reality, he thought. And if one of the
speculators stood u p for t h a t argument, which was freely
current elsewhere in popular centers, the gambling plea
advanced b y t h e debtor was freely accepted.
Article
1965 of t h e Code civil states t h a t t h e law grants no action
for a gambling debt. Thus, a time bargain closing with a
difference was considered a gambling debt. But, since
1885, it has been established t h a t a transaction for future
delivery (marchea terme) is legal, and if the operator means
to gamble he m u s t bear the consequences of his acts.
(85) For a long time financiers, economists, and business
men, clamored for legal recognition of dealings for future
delivery, and even of speculative bargains, " s h o r t " or
" l o n g " of stocks (operations a decouveri), or of such t h a t
close by paying the difference.
As early as in 1801 Count Mollien, while talking with
t h e first consul, told him: a " I t is true, General, t h a t these
transactions (marches a terme) were proscribed before t h e
Revolution b y a council's decision; b u t when it is seen
a

Memoires

d'un Ministre du Tresor Public, T. I, pp. 251 to 273.
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t h a t they have never been more numerous t h a n since t h a t
time, we might ask ourselves whether it is t h e law or t h e
dealings for future delivery (marches a terme) which are
t o be found fault with. W h e n we then consider t h e
course of all civil transactions, we see everything resolved
into transactions for future delivery; through t h e m towns
are supplied, armies are maintained; on t h e m are based all
great commercial combinations; we praise t h e cleverness of
t h e merchant who purchases provisions for a sum tenfold
his capital, because he has so well gauged t h e requirements
of consumption t h a t the sale of his goods is assured him
before reaching t h e m a t u r i t y fixed for the p a y m e n t .
" W h y should not t h a t principle, which is held in esteem
in all European centers, be recognized in t h a t place called
t h e Bourse? Will anyone object t h a t on t h e Bourse transactions for future delivery are not always bona fide?
Should we then give u p bills of exchange because dishonest
merchants m a k e ill use of them?
" I f abuses have been introduced into Bourse transactions, the blame should be laid on the administration
of justice, which places these transactions beyond t h e
reach of t h e law; if they break public faith, the less should
t h e courts refuse to t a k e cognizance of this fact. Their
d u t y is to search for and punish t h a t breach.
" W h e n a free m a n has involved himself in reckless
engagements, it is in their fulfillment t h a t he m u s t find
t h e penalty for his folly and his b a d faith; t h e efficacy
of t h e penalty is to be found in the warning it leaves;
and, surely, to declare the object of the offense void for
t h e benefit of the more guilty person, was not a salutary
warning given by the jurisprudence of 1786?
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" Bourse transactions have a peculiar character, in t h a t
the two contracting parties, unknown to one another,
bind themselves, through the mediation of a stockbroker, who is t h e representative of the law (I'homme de la
lot); he is responsible before t h e law for all his actions;
therefore, the law should not decline to pass upon any of
these actions.
" T h e common objections t o bourse contracts are:
One can not sell t h a t which one does not own, and t h e
law can not recognize a bargain which should never
have been made. In the main, these objections are
merely begging t h e question; it seems to me t h a t the law
should not protect that, which it can not punish; it should
not prohibit in Paris a mode of dealing sanctioned through
long practice in London and Amsterdam.
" I do not claim t h a t time-bargains (marches a terme)
are free from abuses, b u t I demand that, in order to
repress these abuses, the contracting parties be judged
according to common law on contracts."
The transactions for the account on t h e Bourse were,
nevertheless, if not prohibited, a t least m a d e impracticable, through the texts of t h e old ordinances on the
Bourse—the Council decisions of 1774, 1785, a n d 1788.
T h e decree of 27 Prairial, year X, exacted t h a t t h e stockbroker should have on hand t h e securities to be disposed
of a n d t h e funds necessary for purchases. No doubt, to
meet t h e requirements of the times, transactions for t h e
account were considered as allowable, provided they were
made in good earnest. A t a n y rate, if they were not
m a d e good b y depositing t h e securities or the cash, they
were illegal.
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I t was thus t h a t the stockbrokers understood t h e decree
of t h e 27 Prairial, year X, on day following t h e publication. Indeed, on the 10th Fructidor, year X, they m e t
and decided t h a t they should deliver securities to one
another on the day following the contract.
(86) The Code de commerce added nothing t o t h e provisions of the organic law of the Bourse, b u t it brought in
preciseness. From the draft of the code, it followed t h a t
t h e " s h o r t " sales and " l o n g " purchases (marches a terme
a decouvert—literally,
" u n c o v e r e d " time-bargains)—that
is to say, the real time-bargains, implying credit as
regards both merchandise and money—were prohibited to
stockbrokers. Private individuals were permitted t o deal
in them. No doubt, so far as they were concerned, it
might be gambling or not, according to circumstances;
b u t no t e x t prohibited any person from binding himself
toward another to deliver securities a t a given time. I t
was only by a special provision, t h a t the stockbroker could
n o t undertake to be responsible for t h e operations in which
he acted as intermediary. Such was t h e provision of article 86 of the Code de commerce, so t h a t if he acted as intermediary in a transaction for future delivery, he violated
article 86 and ran the risk of a fine and removal.
(Art. 87.)
T h e report on Title V of t h e Code de commerce of 1807
is explicit on t h a t point. T h e reporter, J a r d Panvillier,
expressed himself as follows, when speaking of t h e ''agents
de change:"
11

Moreover, t h e law honors their profession, in declaring
t h a t it can not be exercised b y a m a n who has failed, unless
he has been rehabilitated; and, with a special foresight
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in their behalf, it safeguards t h e m against t h e possibility
of exposing themselves to a case of exclusion on t h a t
account, by forbidding them, under penalty of irrevocable removal, to transact commercial or banking operations for their own account and to render themselves
liable for the carrying out of transactions in which they
act as brokers.
" T h e kind of perfect confidence which must be granted
t h e m b y those who avail themselves of their services,
renders this measure necessary. They m u s t not be
allowed to expose themselves to the danger of compromising the interests of their clients, b y compromising
their own fortune in a risky or unfortunate enterprise.
" This is w h a t the law wanted to guard against through
a provision which some of t h e m m a y find too severe, b u t
which will meet with t h e approval of all those who are
wise and act in good faith; this provision is more t h a n
ever necessary nowadays, when gambling in public securities has become a mania, causing, the ruin of a large
n u m b e r of individuals, without any advantage t o the
Government or t o the owners of state rentes who consider
t h e m in t h e light of real property and property to be held.
" T h e g u a r a n t y which some stockbrokers, enticed b y a
more or less heavy rate of commission, do not hesitate
to give for a t r a d e in effects t h a t neither buyer nor seller
possesses, and t h a t often t h e tenfold of their actual possessions could hardly realize—this g u a r a n t y compromises
not only their own fortunes and personal honor, b u t also
t h e reputation of their association, which the honest men
composing it are interested in preserving unblemished.
Let us hope t h a t t h e fear of being prosecuted as bank205




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rupts, in case of failure, will deter those whom their own
self-interest properly understood has not been able so far
t o restrain from entering into such risky engagements;
and let us hope, also, t h a t for w a n t of finding solvent
guarantors, t h e foolhardy or inconsistent men who have
drawn from t h e English t h e baneful mania of w h a t is
commonly known as 'agiotage' (stockjobbing), will forego
t h a t dangerous game, in order t o apply themselves to more
respectable and more useful occupations."
T h u s t h e stockbroker, practically, can not act as intermediary in transactions for future delivery. Individuals
wishing to deal for their own account, as t h e English do (as
stated b y J a r d Panvillier), are free to do so. In any case,
they will not find any stockbrokers t o guarantee their
operations.
W e have seen t h a t under t h e First Empire and u p t o t h e
time of t h e Restoration the French financial market was
weak; public loans were granted to London and Amsterd a m houses. At t h a t t i m e it was necessity which drove
t h e stockbrokers t o transact bargains for t h e account.
Speculators dispensed with them. I t was therefore a
question of either violating t h e regulations, or observing
t h e m and, thus, condemning oneself t o being wiped out
in short order.
(87) A famous lawsuit, t h e case of "agent de change"
Perdonnet against M. Forbin Janson, reminded t h e stockbrokers of t h e severity of t h e regulations they violated.
The Cour de Paris and t h e Cour de cassation (August
11, 1824) declared in force t h e old decisions of t h e Council under t h e old royalty, and t h e decree of t h e 27 P r a i rial, year X , and decided t h a t t h e plea of gambling was
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opposable to intermediaries who undertake bargains for
t h e account in public securities, without previously exacting t h e deposit of t h e securities or of the funds required
for t h e p a y m e n t .
The higher Parisian commerce was stirred up. I t drew
u p a " Par ere" (memorial of merchants on m a t t e r s of
commerce) which we reprint from M. Alfred Naquet's
report, in 1885, on t h e draft of t h e bill, now law, on dealings for future delivery: a
11

Par ere" OF 1824.

" W e , t h e undersigned bankers, merchants, tradesmen,
a n d capitalists, certify:
" 1 . T h e form of contract stated below b is the only
one in use for transactions made on the Bourse under
the designation of fixed transactions (marches jermes) or
operations for future delivery (marches a terme).
" 2. T h a t in all these operations, without excepting any,
it is only t h e seller t h a t grants time to t h e purchaser, and
t h a t t h e latter m a y exact delivery of the securities purchased a t his first requisition.
" 3 . T h a t t h e operations in question are settled through
the delivery of t h e securities sold, whether they are in
aChambre des Deputes. Documents parlementaires, session 1882, No.
1196.
& This is the form referred t o :
" B o u g h t (or sold) of Mr.
(number of certificates) with
accrued interest, deliverable on liquidation of (maturity), or sooner, at the
discretion of the purchaser, against payment of the sum of
4
' Issued in Paris, in duplicate, the
(date).
" (Signature)
"
The words "sooner, a t the discretion of the purchaser" (plutot a la
volonte oVacheteur) show the discount privilege {faculte oVescompte) granted
to the purchaser.
90312 0 —10

14

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the hands of the seller at the moment the purchaser demands delivery, or the seller causes them to be purchased
in order to effect the delivery.
"4. That in all cases, there is always, on one side, the
purchase of an object which must be paid for, and on the
other side, the sale of an object which must be delivered;
therefore, it is not permissible to regard these kinds of
operations as betting on the quotations of public securities.
" 5 . That dealings for future delivery, called 'marches
fermes' (fixed transactions), as they are practised nowadays
on the Paris Bourse—that is to say, restricted to a period
of sixty days, and subject to the condition that delivery is
expected when exacted by the purchaser—are advantageous both to the Government and to commerce; to
the Government, because the State could not carry out
the transactions in rentes made necessary by the financial system now sanctioned, without the assistance furnished by these forms of trade, and yet the financial system based on credit, is one of the principal conditions of
the strength and power of modern government; to commerce, because these transactions present to holders of
rentes a sure, expeditious, and cheap method of obtaining, whenever they wish, the funds they need, by giving
as guaranty these selfsame rentes; that, on the other
hand, capitalists find in these transactions the means to
place their funds for as short a time as they choose, and
with the certainty of being able to call them in at will.
Thus, on the one hand, rentes become a real representative
sign, increasing the bulk of capital, and, on the other
hand, all the idle funds find employment for as long

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or as short a period as is suitable to the owners. This
increase in the number of representative signs and in the
bulk of circulating funds necessarily tends to reduce their
price—that is to say, the interest—and thereby renders
to commerce the most useful of all services.
"For this reason the undersigned hold that the transactions in question are indispensable in the present situation of France, and that the jurisprudence adopted by
the King's court (which rests on ancient Council decisions, given at a time and under circumstances that
can in no way be compared to those prevailing in our
times) is in opposition to the true political and commercial interests of our country.
" (Signed)
" J . LAFFITTE.

ARDOIN-HUBBARD.

"MALLET FR^RES.

OPPERMANN.

" ROUGEMONT DE LOWEMBERG.

MANDROT.

" P ^ R I E R FRE)RES.

TliURET.

" PILLET-VILL.

JONAS HAGERMANN.

" G U £ R I N DE FRONCIN.

ANDRE; COTTIER.

" L. DURAND.

A. VASSAL.

" J . LBFEVRE.

A. ODIER.

" DECHAPEAUROUGE.

J. A. B L A N C - C O L L I N .

"CI£SAR DE LAPANOUZE.

G. CACCIA.

"GOULARD.

GABRIEL ODIER.

" J . F. CHEVALS.

J. LABAT."

(88) The administration of justice persisted in the
same direction for nine years; but when it exhibited some
tendency toward more liberality, M. Harl6, in the
Chamber of Deputies, asked the "July Government"

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for measures to repress speculation. Gamier Pages
answered him (session of January 23, 1833):
" If you admit, together with M. Harle, that the seller for
future delivery must deposit in advance his certificate of
rentes, you would often render actual operations impossible; this is true of rentes, as of all other merchandise.
"One instance will permit you to grasp more easily
what I have in mind. I will suppose that Antwerp,
Amsterdam, or London quotes the rente at a higher price
than Paris—a thing which happens everyday; well then,
if a banker has given an order to purchase in London,
in Amsterdam, or Antwerp, and is in the meantime unable either to deposit the rente which he has not yet
received, or even to indicate its number, by wThat right
would you prevent him from selling that rente, for
delivery as soon as it will arrive?"
To prevent him from effecting that operation, would be
forcing him to gamble, since you would make him run
the chances of a rise or fall which may occur between the
time of purchase at the foreign exchange, and the moment
the security will reach his hands.
The Harle proposition was rejected.
(89) On July 12, 1842, MM. Bagnenault, Hottinguer,
De Rothschild, Fould, Ch. Laffitte, Larien, and Lavareille
addressed the following memorial (parere) to the Government :
"We, the undersigned bankers and capitalists, after
having taken cognizance of the declaration made in 1824
by the principal houses in Paris, are eager to confirm
it in the most explicit manner, believing it our duty to
call the attention of the Minister to the difficulty, nay,
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t h e insurmountable obstacles, which the great financial
operations connected with public credit would experience
if this method of dealing, sanctioned by custom and t h e
requirements of t h e market, should be interfered w i t h . "
(90) I n 1867 t h e Imperial Government appointed a
commission to inquire into t h e question of time-bargains. M. L. Chevallier, a member of the commission
of 1867, m a d e a remarkable report on the subject, concluding in favor of t h e necessity t h a t t h e law recognize
dealings for future delivery.
(91) After t h e disaster of the " Union Generate"
in
1882, the scandal was enormous; the Bourse had presented a frightful spectacle. The stockbrokers h a d completely violated t h e regulations of their profession.
But
it m u s t be said in their defense, t h a t , since t h e beginning of the century, they had been obliged to violate them,
and t h a t t h e different administrations, by overlooking
their actions, while t h e merchandise brokers had been
placed under t h e direction of the Minister of Finance,
were partly responsible for the fact t h a t certain regulations h a d not been followed. However, if the saying " est
modus in rebus ,y (there is a mean in all things) is kept
in mind, it becomes certain t h a t in granting credits to
clients, t h e stockbrokers lacked judgment. The spectacle presented b y this very clientage was not less scandalous. Many persons occupying a certain social standing
did not hesitate to refuse to meet their obligations.
T h e administration of justice which admitted the plea of
gambling as regards time-bargains settled by a difference,
permitted t h e m to t a k e t h a t stand.
Public opinion was aroused.
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On February 8, 1882, the Paris Chamber of Commerce
passed a resolution calling on the Government for a modification of the existing laws, M. Gustave Roy preparing
the report.
In concluding, that report expressed itself as follows:
"An administration of justice which would permit a
speculator to carry on two deals of equal importance with
two different brokers, one for a rise and the other for a
fall, and, while collecting from one the profit he had
made, to advance the plea of gambling toward the other,
in order to avoid paying the loss which the operation
showed—such an administration, I say, could not hold
any longer; that fact alone would condemn it.
" Experience shows that the plea of gambling has never
protected anybody but those of bad faith, and has only
encouraged the excess of speculation, as was stated by
M. Andrieux in his report presented to the Chamber in
1877, in the name of the seventh Commission of Initiative.
" Prompted by these reasons, and considering that the
present legislation, far from preventing gambling, encourages it; considering that bad faith finds protection in
the jurisprudence sanctioned; and further considering
that in commercial affairs, as in any other, it behooves
to allow every one his full freedom, as well as to hold him
responsible for his actions—I beg to suggest that an
address be sent to the Minister of Commerce, confirming
the letter of the Chamber of Commerce of November 25,
1877, and requesting the Government to introduce a bill
in the Chambers, declaring that article 1965 of the Code
civil does not apply to debts resulting from dealings for

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and Methods of the Paris Bourse

future delivery, and t h a t articles 421 and 422 of t h e Code
penal are repealed.
(92) I n t h e Chamber of Deputies two members, MM.
Alfred Naquet and Lagrange, introduced a joint proposition tending to recognize dealings on the " l o n g " and
" s h o r t " accounts {operations a decouvert) as legal. The
Government, on its part, appointed a special commission
t o study t h e question. I t was composed of MM. J.
Bozerian, senator, chairman; Charles Ferry, d e p u t y ;
Clamegeran, councillor of s t a t e ; Monod, councillor at t h e
Cour de cassation; Laew, public prosecutor at t h e Tribunal de la Seine; Gay, director-general of government
funds; Pallain, director of audits in t h e finance departm e n t ; Girard, director of interior commerce; Gonse,
chief of t h e division of civil matters in t h e ministry
of justice; Lyon-Caen, professor at t h e Toulouse facu l t y ; Vavasseur, barrister at t h e Cour d'appel a t Paris;
Baudelot, former president of t h e Tribunal de commerce
of Paris; Moreau, syndic of the stockbrokers of Paris;
Lecomte, stockbroker; Alphonse Mallet, regent of the
Banque de France; Girod, manager of t h e
Comptoir
d'Escompte; and Durrieu, manager of the Credit Industriel
et Commercial.
This special commission appointed as its reporter Professor Lyon-Caen (to-day Dean of t h e faculty of law of
Paris), and it was t h e elaborate work of this eminent
reporter which was used as an explanatory s t a t e m e n t for
the bill presented by t h e Government.
(93) The reporter in the Chamber was M. Alfred
Naquet. When t h e bill was voted upon, M. Naquet,
who in t h e meantime h a d become a senator, was intrusted
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with t h e preparation of t h e report before t h e higher
legislative assembly. After being argued in t h e Senate,
t h e bill, slightly amended, was returned to t h e Chamber,
and t h e report was then made b y M. Peulevey.
The law on dealings for future delivery {marches a terme)
was promulgated on April 8, 1885. Having been finally
voted upon on March 28, it is generally known as t h e law
of March 28, 1885. Dealings for future delivery are recognized as legal. They were legal before; on t h a t point t h e
law aimed only t o do away with t h e surrounding uncertainties, which resulted from t h e special regulations m a d e
for stockbrokers. Thus, in the terms of t h a t law, no one
can, in regard t o operations for future delivery, plead
article 1965 of t h e Code civil, according to which t h e law
grants no recourse to a p a r t y for the p a y m e n t of a gambling debt or a bet. Article 1965 of the Code civil is not
repealed, b u t it can not be applied t o transactions closing b y a difference.
I t should be noted, however—as a result obtained from a
discussion within the senate commission a—that if t h e contracting parties have in advance made a written contract,
agreeing t h a t they would not exact delivery, they will
not enjoy the provisions of the law.
Finally, the law repeals t h e former provisions which
m a k e it obligatory for the stockbroker to have on h a n d
t h e securities for sale, as well as the cash for purchase, a n d
forbid him to hold himself guarantor for transactions in
which he acts as intermediary.
Let us note, in conclusion, t h a t the law of 1885 h a s a
wide range. I t applies to operations in merchandise a n d
a

Senat.

Documents parlementaires, 1884, No. 161, p. 12.

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in securities negotiated through intermediaries other t h a n
stockbrokers.
As to securities negotiated through stockbrokers, they
could always be sold direct for cash by private individuals.
They could likewise be sold direct for future delivery, b u t
operations settled by differences were subject to being
barred as gambling. Since the law of 1885, this last plea
can no longer be brought in, b u t the privilege of the stockbrokers is still invoked for these operations. According
to a legal argument, which is very disputable {Cour de
cassation, March 23, 1893, Sirey, 1893, 1.240), transactions for future delivery, closed by differences, can not
be m a d e the objects of direct operations. This solution is
against the express wish of the lawmaker. The direct
transaction, even when made for future delivery, and
closed b y a difference, was permissible before 1885. I t
should derive benefit from the law of 1885. To forbid it
through indirect ways is to antagoni2:e not only the wish
of the lawmaker of 1885, b u t also t h e wish of t h e lawmaker of Ventose, year I X . a
(94) Having inquired into the law on transactions for
future delivery, we shall proceed to look into the state of
things since 1898.
In 1893 a ^ a x G n Bourse operations was established.
At t h a t moment occurred a particularly acute phase of the
many centuries old straggle between the stockbrokers
{agents de change) and the curb brokers {coulissiers).
This occurrence led to what has been very improperly
called the "Reorganization of the financial market of
1898." I t is important, therefore, to recite summarily
°See note of M. Lyon-Caen.
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Mon etary

Commission

t h e history of t h e struggle of t h e stockbrokers of the " Parquet' ' against t h e curb brokers of the "Coulisse."
T h e "coulissiers" were men who illegally served as
intermediaries in t h e public market.
According to M. Fremery, 0 t h e words " c o u l i s s e " and
" coulissiers" originated from t h e fact t h a t , in t h e old
premises devoted to the Paris Bourse, the parties operating
without t h e services of the " agents de change1' met in a
separate passageway or hallway {couloir) separated by a
breast-high partition from the place where the dealers
assembled. T h a t passageway was called "La
Coulisse''
(the Coulisse).
B u t if t h a t name has not been very long in use, the
institution—though we can hardly give such a name to a
gathering so unorganized, and, we may say, formless—
is very old.
T h e brokers, or money changers, who did business a t
t h e fairs in the middle ages, are the predecessors alike
of t h e merchandise brokers, of t h e stockbrokers, and of
the curb brokers.
B u t an ordinance of Philip the Fair, in February, 1304,
directed, as we saw, t h a t the "Change de Paris''
(the
exchange traffic of'Paris) shall be held on the Grand Pont'
(the great bridge on the Seine); it was forbidden, to do it
elsewhere. Sundry royal edicts, in 1305, direct t h a t no
one " shall dare traffic in exchange " (" oser tenir change ")
if he has not obtained " r o y a l assent and permission"
{"assentiment et conge royal").
I t appears, therefore,
t h a t those who in Paris engaged in money-changing elsewhere t h a n on the Grand Pont, and outside of Paris
a

Des operations de Bourse, p. 494.
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History and Methods of the Paris Bourse
elsewhere t h a n a t the "tables" (royal exchange premises),
" w i t h o u t assent or permission" (and some such there
surely were), were t h e first " coulissiers."
A t all times, whenever there have been privileges, some
men have been found to oppose them. Of course, these
men are not theorists, or p e d a n t s ; they are simply men
whom this or t h a t privilege prevents from working freely,
and who represent the manifestation of t h a t mysterious
force of things which tends toward freedom of trade.
Commercial law owes its birth only to these protestations
of practical men in apparent revolt against the laws, which
become t h e unconscious shapers of future legislation.
F r o m the day when there was an "agent de change1' there
was a " coulissier"
T h e first called t h e second a thief,
because he encroached upon his privilege. The second
hurled back the compliment, because t h e privilege robbed
him of his natural right. We have seen numerous
council decisions under the old regime forbidding private
individuals the unwarrantable interference with the function of stockbrokers. T h a t it was repeatedly forbidden
is proof certain t h a t the offense was constantly committed.
(95) Under the First Empire, the curb brokers were
already organized; there were conditions for their admission and introduction. The authorities closed their eyes.
T h e stockbrokers complained, and requested t h a t t h e
unwarranted interference be forthwith referred to the
courts. This request was denied b y advice of the Council
of S t a t e of May 17, 1809. " I t must be acknowledged,"
said t h e learned M. A. Buchere, in his treatise Operations de Bourse? " t h a t some of them (curb brokers)
°No. 33.
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effected their transactions in the most honorable way,
and, in some cases, even for account of stockbrokers, who
considered it safe to intrust them with certain risky or
somewhat irregular operations."
(96) Under the Restoration, speculation, which was
considered by many as necessary for the upholding of
public credit, greatly expanded. The Coulisse was tolerated—almost encouraged. In 1824, M. de Villele publicly
refused to take measures against the Coulisse.a In 1835,
a new attempt of the stockbrokers was followed by a
complete defeat. 0 In 1842, M. Delessert, prefect of police,
sent a report to the Minister of Finance, 6 who, in pursuance of a complaint of the stockbrokers, had instructed
him to make a thorough inquiry into the methods used
by the Coulisse. The conclusion of the report was that
there was no ground for prosecution, as the stockbrokers
themselves were guilty of the same practices with which
they reproached the curb brokers.
On February 17, 1843, the stockbrokers, in order to have
the Coulisse broken up, presented a voluminous memorial
to the Minister of Justice, who, however, did not recognize
their request as justifiable.
(97) In 1859, a complaint made by the Syndical Chamber succeeded in changing the state of affairs; the curb
brokers were prosecuted, found guilty, and expelled from
the Bourse building. c
Much of contemporary evidence establishes the fact
that this measure had the most disastrous effect upon the
a

Eugene Leon. Etude sur la coulisse et ses operations, p. 44.
& Alfred Neymarck, Le Rentier, March 17, 1898.
c
Tribunal correctionnel, June 25, 1859; Cour de Paris, August 2, 1859;
Cour de cassationt January 19, i860; Dalloz, i860, 1.40.
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credit, b o t h public and private; the "Temps"11 borrows
from a financial publication of t h a t time t h e following
statement:
" T h e stockbrokers, who hoped t h a t t h e suppression of
t h e Coulisse would bring back business to t h e Parquet,
were mistaken. The business of the Coulisse has disappeared with t h e Coulisse itself. The m a r k e t has
been hit and destroyed, b u t has not been transferred.
The Government, which expected t h a t , by suppressing the
Coulisse, it would raise the level of the public credit, has
not realized its expectations."
This decline was testified t o b y t h e "Revue des deux
Mondes"h
in an article from t h e pen of M. Poujard'hieu,
published after t h e failure of t h e Fould conversion scheme:
" T h e discussions which have taken place in t h e legislat u r e , " said the author, " h a v e called public attention to
t h e measures which the Government thought proper to
resort to, in order to foster its undertaking, in the
face of t h e impotence resulting from the practice of
monopoly. I t is safe to say, t h a t all t h e means employed
have only succeeded in laboriously hoisting up t h e 3 per
cent rentes to 71 francs, in order to see t h e m soon again
lagging in t h e neighborhood of 69 and 70. And yet t h a t
painful effort caused too glaring disasters in t h e markets
not t o h u r t t h e government's undertaking."
F u r t h e r t h e author calls attention t o t h e fact t h a t this
fall of 2 francs in a restricted market has h a d worse consequences t h a n a fall of 14 francs in 1848, or a fall of 8
francs in 1859, because, the risks being then divided
o Bulletin Financier du "Temps,"
& June, 1862, p. 740.
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amongst a greater number of intermediaries, t h e m a r k e t
felt more secure t h a n in 1862, following t h e lawsuit of
1859.
The result was t h a t t h e Coulisse reappeared.
(98) On November 4, 1861, t h e Minister of Finance, M.
Fould, granted to t h e Bourse t h e permission t o suppress
t h e turnstiles, and, if the reestablishment of the Coulisse
can not be a t t r i b u t e d directly to this measure, we m a y
yet be permitted to make use of an image and say t h a t
t h e curb brokers came back through t h e open door.
They soon formed serried ranks. Nor was it long before
affairs became enlivened. Some banks had been founded
about this time, having launched some securities. I n
1855 the six great railroad companies had been formed;
in 1852 there had been established the Credit Fonder
(national mortgage loan society) and numerous banking
institutions.
These corporations required a broad market, and t h e
market widened in spite of t h e narrow sphere prescribed
t o it by law.
In 1863, the Credit Lyonnais is founded; in 1864, t h e
Societe Generate.
The law of July 24, 1867, concerning
joint-stock companies, replaces the law of 1856—governm e n t authorization for limited-liability companies in
s
shares (societes anonynies) being done away with. A new
era was near a t hand, when t h e war of 1870 broke out.
(99) After 1870, the payment of the war indemnity,
a n d the enormous expenses necessary to rehabilitate t h e
country occasioned great credit operations. The S t a t e ,
as well as private enterprises, appealed to public savings. Considerable activity reigned on the Bourse, as
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Bourse

everywhere else. M. Thiers never ceased to congratulate
himself on the help received from the open market at
the time of the emissions upon whose success depended
the liberation of French territory.0^
a
M. Alfred Neymarck, in the course of a discussion at a meeting of the
Societe d'Economic Politique, recalled the services of the Coulisse; he showed
that M. Thiers and M. Teisserenc de Bort, interim functionary of finance, had
applied to the curb brokers, and had obtained information from them concerning the condition of the market. " T h e Coulisse," said M. Neymarck,
"brought subscriptions to our loans for liberation; it kept up the rente,
which, issued at 82.50 and 84.50, rose to 119 and 120. At t h a t time, stockbrokers, merchandise brokers, and curb brokers all rendered services not
to be easily forgotten." (Sociele d'Economie Politique, Seance du 5 avril,
1893, Journal des Economistes, 1893, n. p. 95.)
In that regard, let us also mention those eloquent lines of M. Anatole
Leroy-Beaulieu: " T h e confession may be painful, but patriotism makes
it a duty for us to acknowledge the fact that the Bourse represents one of
the live forces of France. I t has been for France an instrument of regeneration after defeat, and it remains for us a powerful tool in war and in
peace. Let us recall the already remote years of our convalescence, after
the invasion, years at once sorrowful and comforting, when with the gloom
of defeat and the suffering of dismemberment, mingled the joy of feeling
the revival of France. Whence came our first consolation, our first vindication before the world? Whether glorious or not, it originated on the
Bourse.
" T h e Paris market came out unscathed from the ruins of the war and
of the 'commune'—and straight from the hardly ratified peace and quelled
insurrection, it threw itself into the work for France's regeneration; because
it was, indeed, for France's regeneration that the stockbrokers and merchandise brokers worked under Thiers and MacMahon. In the worst days
the Bourse had the uncommon merit of showing an example of faith in
France. When more than one political skeptic and discouraged thinker
allowed themselves to write down upon the crumbling walls of our burneddown palaces ' F i n i s Gallice,' the Bourse kept its faith in France and her
fortune, and that faith in France was spread by it all around, at home and
abroad. Speculation was patriotic in its way; it has exhibited a confidence
in our resources which the discretion of many a wise man rated as foolhardy. Flave we already forgotten our great loans for liberation? Without the Bourse, these colossal loans, the amount of which exceeded the
dreams of financiers, wrould never have been subscribed for, or, if ever, it
would have been only at rates much more onerous for the country. Without the Bourse, our French rentes would not have taken such a rapid flight;
our credit, restored even more quickly than our armies, would not have
equaled that of our victors, on the very morrow of our defeat. In that

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It should be noted that during that period of activity,
the struggle between the stockbrokers and the curb
brokers almost ceased. The hostile brothers seem reconciled. But when business shall begin to slacken again,
when events shall have shaken the public's confidence in
the monopoly, then both sides will resume the fight.5
The curb-brokers will exclaim against the oppressive
monopoly and demand the broadening of the market,
while the stockbrokers, in their appeals to the authorities, will say of their competitors that they represent
anarchy, robbery, and stockjobbery in its worst form,
regard, all that justice demanded us to say previously of the higher banking
institutions may with right be repeated concerning the Bourse.
" T o those who lived through that pale dawn of France's recovery, that
rush of the Bourse and of capitalists to offer us the thousands of millions
which we required exceeded the eagerness and boldness of speculation.
But even if we were to consider it but gambling and betting for speculation, such speculation was betting for France's regeneration; it bravely placed
its bet on the vanquished. Those national and foreign financiers, who
have been accused of pouncing upon her like birds of prey, brought to the
noble wounded their dollars and their credit, and if they reaped a profit
thereby, are we to reproach them for it, when they helped us to reconstruct our armies, our fleet, and our arsenals? If France regained her rank
among the nations of the world so quickly, the credit for it should be
mainly given to the Bourse. And to its services in war, we should, if we
wanted to be just, also add its services in times of peace. Without the
extensiveness of the Paris market, and the stimulus given to our capitalists through speculation, how many things would have remained unaccomplished in the recklessly overdriven condition of our finances?
We
should have been unable to complete our railroad system, or renew our
national stock of tools, or create beyond the seas a colonial empire which
shall cause France to be again one of the great world powers. When the
Bourse is on trial, such credentials should not be overlooked. Before condemning it in the name of morality and private interests, a patriot should
give due consideration to its services rendered for the national weal; if
all its defects and misdeeds be heaped up on one scale tray, then services
of like importance will easily counterbalance them."
(Anatole LeroyBeaulieu, La Regence de I'argent, "Revue des deux Mondes."
February 25,
1897, pp. 894 and 895.)
& A proverb says: "Lorsqu'il n'y a plus de join au ratelier, les chevaux se
battent" (when there is no more hay in the manger, horses fight).
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Bourse

and that the members of the open market are a mob
of cosmopolitan speculators as dangerous for the State
as for public savings.
Following a fit of speculation in shares of the Union
Generate, which had taken place in 1882, the Lyons stockbrokers were unable to meet their engagements. The
Paris stockbrokers were compelled to borrow 80,000,000
francs. Monopoly was seriously injured in public opinion,
so that at the time the Government brought in a bill
on operations for future delivery, M. Menard-Dorian, also,
brought in a bill, February 23, 1882, making the profession
of stockbroker free to everyone.
The question was divided within the parliamentary
commission, for the problem of reorganizing the market
was more complicated than that of recognizing dealings
for future delivery, and was, therefore, in a position to
prevent the solution of the latter. Yet, though clearly
set, the problem at issue was not solved, as has happened
many a time in the case of other problems.
The downfall of the Union Generate, the need felt by the
Bourse to avoid being spoken of, and the grave threat which
M. Menard-Dorian's proposition constituted for the stockbrokers' association, produced the result that the official
intermediaries and their competitors, the unattached intermediaries, refrained from asking that the question of the
financial market be solved in Parliament. The republican
dogma was not at all favorable toward monopolies, and the
Third Republic was at that time quite apt, in the eyes of the
stockbrokers, to solve the question of monopoly—by suppressing it. The heavy depreciation which the panic produced in the value of seats, would have made the operation
903120—10

15

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Commission

an easy one so far as it concerned the Treasury. Thus it
happened that for about two years no complaints of
stockbrokers against the curb brokers (coulissiers) were
registered.
(ioo) On September 21, 1892, the syndics of the stockbrokers of Paris, Lyons, Bordeaux, Nantes, Toulouse,
and Iyille collectively asked the Minister of Finance to
demand the suppression, by every legal means, of the
" petite bourse1' (curb meeting) which took place every
night at 9 o'clock in the hall of the Credit Lyonnais.
They claimed that any depreciation in the prices of
government securities that might show itself on the
market would instigate a general panic.
The surprised curb brokers called attention to the fact
that the rente 5 per cent had fluctuated between 18 and
40 francs in 1800, and that in 1892 it had reached 106
francs. They added that the 3 per cent rente, which had
been quoted at 60 in 1825, and which had fluctuated
between 50.30 and 58.45 in 1871, was quoted at 100 in
September, 1892, on the very day when the stockbrokers
sent in their petition, after having been quoted at 95 in
the beginning of the year.
The ground invoked against the Coulisse was certainly piteous, but it was nevertheless true that the
stockbrokers were within their right when they demanded
that the "little bourse" be suppressed.0
They undertook to forbid the Coulisse to gather during
the evening in the place where it used to meet—that is
to say, in a covered inclosure in the hall of the Credit
a

To hold meetings of merchants or bankers elsewhere than on the
Bourse, and at the appointed hours, is forbidden by article 3 of the law of
27 Prairial, year X.
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History and Methods of the Paris Bourse
Lyonnais; but they could meet on the highway in the
Galerie d'Orleans. That victory of the stockbrokers was,
therefore, only a " paper " success. The question of taxing
bourse operations was again going to fan the flames.
(101) On several occasions—notably, on December 15,
1891, November 14 and 15,1892—bills due to parliamentary
initiative were introduced on the subject of taxing bourse
operations. On December 22, 1892, a bill of that sort,
introduced by M. Jourde, was thrown out by 281 votes
against 232, upon the remarks made by M. Tirard, the
Minister of Finance, and M. Rouvier, a former Minister
of Finance. The speakers had demonstrated how difficult it was to collect such a tax. Were they to tax the
operations of the stockbrokers exclusively? That would
be giving the curb brokers an advantage. Were they
to tax the operations of the curb brokers? That would
mean to recognize them, they thought. Then, should
the Coulisse be suppressed? This could not be
thought of. Should it be recognized? That was a grave
question. In any case, the question was to be studied
by itself, independently of the tax question.
However, the Minister of Finance had declared that, in
principle, he was not opposed to the taxation. The
difficulty which it presented was the only thing that
restrained him. It did not restrain him long, however.
On January 14, 1893, M. Tirard introduced a bill
having in view the establishment of the tax. The new
provisions were to be introduced in the finance law of
1893, which had not yet been voted on. The difficulty
was removed in the manner of the cutting of the Gordian
knot by Alexander; the Coulisse was to be suppressed.
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Indeed, according to the terms of the bill, every bourse
operation was t o be subject t o a t a x reckoned off on a
journal, every article of which, for t h e securities admitted
on t h e official quotation list, was t o specify t h e name and
address of t h e stockbroker through whom t h e . t r a n s action had been effected. The t a x could be paid only
b y t h e stockbroker, and, consequently, every infringer
would not only be guilty of unwarranted interference
with the functions of a stockbroker, according t o t h e old
legal conditions, b u t would also be guilty of infringing
t h e revenue laws. E a c h infringement would be subject t o
a fine equal to one-twentieth of t h e value of t h e securities.
The Coulisse itself would have been permitted t o p a y
t h e t a x only on unlisted securities. Their number was
very limited. Rio Tinto, which before long was t o be
dealt in on t h e Parquet, the Alpine, Tharsis, and De
Beers, were really t h e only securities which had a considerable circulation, without, however, being of sufficient volu m e t o supply the needs of such a market, as was t h e
bankers' market. The struggle was on. Viewed from t h e
standpoint of t h e parties interested, the belligerents
seemed both t o be wrong in accepting t h e principle of
t a x a t i o n ; and M. Tirard, Minister of Finance, took advantage of t h a t fact before Parliament.
"Gentlemen," said t h e Minister, " y o u have just been
told, with good reason, t h a t a t first all were opposed to
t h e tax, claiming t h a t it would greatly disturb the Paris
market, and t h a t it would give an advantage t o t h e
foreign markets. And then, after due reflection, t h e
stockbrokers said to themselves: ' Perhaps t h e Government, in order to collect t h e s t a m p t a x payable upon
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History and Methods of the Paris Bourse
the memorandum account, will be forced to apply to us,
because it could not through its finance law approve an
illegal and unlawful act. We should thus obtain a more
formal acknowledgment of the rights which we have up
to this day rather precariously exercised through our own
fault/ On their side, the curb brokers, no doubt, said to
themselves: ' It is quite possible that the Government will
shrink before the severity of the proposed collection of
the tax it intends to create and that, on that account,
it may permit all those doing bourse operations to pay
the stamp tax, without inquiring whether they be lawful
or illegal operations.'
"Then, what was at the beginning a source of trouble
and worry—the fear of placing a large portion of the Paris
business in jeopardy—all that disappeared, in the hope
that the respective condition of both parties would be
benefited through the tax levy.
" I have, therefore, concluded that when people have no
anxiety about the general welfare, because they feel at
ease concerning their personal welfare, it is to be supposed
that the general welfare was not compromised" (very good)
and that the trifling tax we propose levying on bourse
operations is not calculated to be detrimental to the
French market."
Thus spoke the Minister of Finance. a
" Let the tax strengthen our monopoly," said the stockbrokers, "and our operations alone will be legal." "Let
the tax free the financial market," replied the curb brokers.
"If the redemption of the offices is the main obstacle
a
Chambre, DSbats Parlementaires, 23 et 24 fSvrier, 1893.
24 et 25 fevrier.

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to an open market, wx>uld it not be just that the yield
of the tax be appropriated for that redemption ? If we
are to be taxed, well and good, but let the money we
pay in be used in freeing us. Let the tax pay the cost
of reform. This is its object after all, and the only
vindication for it."
Had they only been satisfied with the use of such
arguments! * * * But such was not the case.
The controversy was exceedingly bitter. Pamphlets,
newspaper articles crossed each other. Libels followed
one another with astonishing rapidity. Adversaries challenged one another, like Homer's heroes, while in Parliament there began a debate which was marked by a good
deal of passion.a
(102) M. Tirard's bill was adopted by the Chamber
of Deputies on February 24, 1893. But in the Senate,
through the intervention of the reporter-general of the
finance commission, M. E. Boulanger, it was thought
that the question of organizing a financial market was
too important to be settled one way or another, through
a vote on the budget. The severance of that project
from the finance law was voted on March 28, 1893.
Two days later, on March 30, the Minister, who had
been unable to carry the Chamber on a question of severing
from, the budget a plan of reform on the taxing of bever«The following took part in the debate: MM. Tirard, Minister of
Finance; Poincare, Reporter-General; Gauthier (de Clagny), Jourde—all
speaking in favor of it; Yves Guyot, who advocated the nominating of a
special commission for the purpose of inquiring into sundry plans in regard
to bourses; Naquet, against the very principle of tax; Felix Faure, who
advocated a counter plan, first accepted and then discarded by the budget
commission, which plan allowed the payment of taxes by affixing stamps;
Jullien, in opposition to the Government's bill.

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ages, withdrew, and M. Peytral succeeded M. Tirard as
Minister of Finance. The new Minister proposed a waiting
policy to Parliament. The bourse tax was to be collected without making it necessary for t h e Government
to trouble itself about t h e legality of t h e transaction.
All those subjected to the keeping of a bourse record
would have to deposit in the registration office copies of
said record on fixed dates, and heavy fines would be
imposed upon all infringements or frauds.
The bill was passed.
of April 28, 1893.

I t was placed in the finance law

I n J a n u a r y , 1894, t h e conversion of t h e \Y2 per cent rentes
into 3 X per cent rentes was decided upon. The operation
was entirely successful. I n 1895 t h e Minister of Finance,
M. Doumer, having stated t h a t t h e t a x was as much of a
burden on t h e open market transactions as on those of t h e
official market, demanded t h a t t h e t a x on transactions in
French rentes be reduced b y three-quarters. a The demand
was soon granted, in pursuance of a favorable report b y
M. Georges Cochery, reporter-general for the budget of 1896.
B u t t h e solution reached on April 28, 1893, w a s > a s we
stated, only provisional. M. Tirard, while praising his
system, which had not prevailed, had promised t o inquire
into a reorganization of t h e market within a short time,
and M. Felix F a u r e answered h i m : " I trust t h a t when we
shall occupy ourselves with the organization of t h e financial market, we shall succeed in suppressing monopoly." 6
a
Chambre des DipuUs.
Journal Officiel, 14 Decembre, 1895. See also
Maurice Jobit: Les Titres etrangers et la loi fiscale, 1896. Annexes p. 116
{surVart. 8, de la loi de finances du 27 dec. 1895).
bChambre des D6puMs, Seance du 24 Fevrier, 1893. Journal Officiel du
25 Fivrier.

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The system presented b y M. Peytral having prevailed, M.
Peytral, as Minister of Finance, undertook t h e same t a s k
as his predecessor. " W e acknowledge,there is need t o
proceed with t h e reorganization of the French market.
W e intend doing it by means of a complete plan, establishing a legal organization which shall be based on
freedom, but without excluding regulation. Such a plan
is under advisement." a
Well, t h a t plan has never been submitted to consideration, for w h a t reasons is not known. And meanwhile
there broke out w h a t has since been called the " g o l d
mines boom."
(103) About t h e middle of 1894 most publications treating of economic questions described t h e great industrial
development brought about in the Transvaal b y t h e gold
seekers. Gold mining in t h e Transvaal during t h e ten
previous years h a d given rise to speculation on t h e Transvaal and English bourses. This speculation, like everything else in this world of ours, h a d its good as well as
its b a d sides. I n the south of Africa, not far from t h e
mines, bourses were opened, and there took place some
skyrocketing of quotations, followed b y violent breaks.
These fluctuations above and below t h e real value which
is, moreover, quite difficult t o ascertain, bring to your
mind t h e air bubble near t h e water level, which oscillates
in t h e neighborhood of t h e spot where it is going to settle.
Some have since endeavored to compare t h e speculation
to which t h e South African mines have given rise, t o t h e
" tulipomania " which raged in Holland about 1634, and
to those " m a n i a s " of which M. Leon Say speaks in his
a

Ibid., 28 Avril, 1893, Journal Officiel du 29.
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work " Sur les Interventions du Tresor a la Bourse," or also
Bagehot, in his book on the " Money Market." To be sure,
there was a good deal of extravagance in the speculations
which took place, but the criticisms drawn up against the
mining companies and those who brought out their securities, have likewise been singularly extravagant. Thanks to
the Transvaal mines, roads and railroads have been built,
cities have sprung up, profiting at one stroke from all the
modern improvements in the art of construction. Industry has opened South Africa and preserved it for European civilization, and, all in all, there has been an increase
of wealth, of which the English and German capitalists
alone seemed at the first moment to have the immediate
profit.
But in the course of 1894 English houses commenced
some advertising in Parisian newspapers, and soon there
was noticed a pretty strong stream of bourse orders toward
the London market. Some bankers thought that the
French market should share in the profit derived from
this stream, which the London Stock Exchange seemed
to have monopolized; they opened negotiations with
English bankers, and discussed the terms on which the
Transvaal mining securities could be introduced on the
Paris market. It was mostly in the bankers' market
that they were introduced.
On June 30, 1894, o n l y 3 kinds of gold-mining shares
were dealt in on the market for future delivery of the
bourse for securities (marche a terme de la bourse des
valeurs)—including the Robinson, already dealt in before,
and the Randfontein. Six months later—on December
31—there were 7, of which, however, 1 was American.
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There were 12 on June 30, 1895. On December 31, 1895,
32 kinds of securities of gold mines, real estate companies, and colonial exploration companies were negotiated
for future delivery in the Coulisse. At that same date
there were dealt in for cash {au comptant) 66 kinds of
gold-mining, coal, colonial exploration companies, among
which, of course, should be numbered the 32 entered on
the market for the account {marche a terme). In the
London market these securities were counted by the
hundreds and represented thousands of millions.
The Coulisse was not quite alone in fostering the
movement. If it operated in Transvaal mining shares,
it was because the shares of these enterprises were of a
nominal value of 25 francs, and the decrees of February
6, 1880, and December 1, 1893, did not permit securities
to be admitted on the official quotation list, if the par
value of their shares was less than that authorized for the
French companies by the laws of July 24, 1867, and
August 1,1893. The stockbrokers' association {compagnie
des agents de change) later admitted on the official list the
shares of " Treasury " and " Robinson Banking." It had
such a good opinion of the Transvaal gold mines that
it led its customers into large speculations in Modderfontein.® Through the attorneys for the offices many
stockbrokers had become interested in the Nevmann syndicate, whose object was to place mining stocks in Paris
and London. (We know that the head of the Nevmann
syndicate subsidized the Jameson expedition.) Finally,
a See the report of M. G. Graux on his bill having in view the creation
of shares of 25 francs. Chambre des Deputes, Seance de 1896, No. 1950, in
the appendices, p. 31. Hearing of the well-known M. de Verneuil, syndic
of the association of stockbrokers.
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on November 15, 1895, a Banque Francaise de VAfrique
du Sud (French Bank of South Africa) was established,
a n d t h e president was none other t h a n the well-known
M. Herbault, syndic of the Stockbrokers' Association of
Paris {Syndic de la Compagnie des Agents de Change de
Paris), who had resigned his office in order t o become
president of the new bank. a
At a n y rate, on J a n u a r y 1, 1896, the Transvaal was
invaded b y a troop of volunteers under the command of
Doctor Jameson. When it was ascertained t h a t this
expedition—this raid, as it was called—had failed and t h a t
the relations between t h e Governments of President
Kruger a n d of England were much strained, a sudden
depreciation took place in Transvaal securities, and the
previous boom was succeeded b y the gold-mines panic. If
t h e disaster of the Union Generate had not swept away t h e
Compagnie des Agents de Change (saved by t h e slowness
of parliamentary procedure), the disaster of t h e gold
mines was going to carry off the Coulisse, which through
clever manipulations was to be alone held responsible
before Parliament for t h e decline a n d t h e damages resulting therefrom.
(104) The gold-mining boom h a d incensed t h e Compagnie des Agents de Change. No doubt t h e y h a d shared
in t h e negotiations of mining securities, b u t not in the
measure they would have liked. The "Bulletin de Statistique et de legislation comparee duMinistere des Finances" b
showed t h a t from 1893 to 1895, inclusive, of t h e 35,596,000
a

Economiste Frangais of January 27, 1900. The Nevmarm syndicate
was liquidated and reorganized under the name of "Association
Miniere"
the shares of which are quoted on the Official List March 6, 1905.
& January, 1898, p. 52.
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francs yielded b y t h e t a x on bourse operations there h a d
been collected outside of Paris 1,707,291 francs, and in
Paris, through the stockbrokers 11,758,542 francs, while
all other parties subject to t h e t a x — c u r b brokers, money
changers, credit institutions, bankers—had paid in
22,130,167 francs, i. e., double the amount.
First t h e stockbrokers t h o u g h t of taking t h e gold mines
away from t h e Coulisse, or at least of taking advantage of
an exceedingly timely offer m a d e to t h e m through a truly
providential chance by M. Georges Graux, a deputy, with
whom M. Meline associated himself. On October 26, 1895,
M. Georges Graux introduced a bill tending to authorize
t h e creation of 2 5-franc shares in French stock companies (the law permits t h a t denomination only for companies
having a capital of 200,000 francs or less). On the day when
French companies could be organized with 25-franc shares,
no principle would stand in t h e way of admitting foreign
25-franc shares on t h e official list. M. Georges Graux was
appointed reporter of his bill. H e handed in his report
on J u n e 22, 1896, and, though t h e gold-mine panic was in
full swing at t h e time, t h e worthy reporter urged t h a t
his bill be adopted, t h e result of which would have caused
t h e gold mines to be transferred to t h e Parquet.
The stockbrokers would then be in a position to benefit
b y t h e recovery in mining stocks.
The report was never brought to debate. To tell t h e
t r u t h , t h a t document was of such little substance t h a t
it could not have survived the first words in an open
debate. a The author, in view of the comments, which were
not spared in t h e special organs, failed to uphold his work,
a Chambre des Deputes, session 1896; Documents Parlementaires, No. 1950.
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History and Methods of the Paris Bourse
in spite of t h e evident parliamentary influence, and in
spite of the fact t h a t t h e Honorable M. Meline h a d indorsed
his proposition.
As we have seen, the rise in gold-mining shares had
awakened the envy of the stockbrokers—a feeling no
doubt quite justified, since commercial competition has
no other incentive. The decline which followed was to
be taken advantage of by their supporters in Parliament
at a propitious opportunity. And t h a t propitious opportunity presented itself.
The reorganization promised by the Minister, M.
Peytral, h a d been neither studied nor prepared in t h e
Ministry of
Finance. Two worthy senators, MM.
Tarieux and Boulanger, on June 29, 1897, introduced a
bill relative to t h e exercising of the profession of stockbroker. A summary report of M. Pauliat advocated
t h a t the bill be taken up for consideration. A commission
was appointed; stockbrokers and curb brokers appeared
before it. The Senate was called upon to inquire into the
matter. At t h a t time a desire to drop the m a t t e r became
manifest.
(105) During the discussion of t h e budget of 1898 in
t h e Chamber, two deputies, MM. Lacombe and FleuryRavarin, each introduced an amendment, worded almost
identically, with the exception of the final paragraph.
Later, M. Lacombe withdrew his amendment in order to
associate himself unconditionally with his colleague.
T h e provisions of t h e Fleury-Ravarin amendment were
worded as follows:
" Whoever makes it a business to t a k e u p bids and
offers on bourse securities must, whenever called upon to
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do so by the Registry Office agents, when it is a question
of securities admitted on the official quotation list, exhibit stockbrokers' statements or give particulars of the
numbers and dates of statements, as well as of the names
of the stockbrokers from whom they emanate, amd, when
it is a question of securities not admitted on the official
quotation list, personally pay the amount of the tax."
This was merely returning to the scheme of M. Tirard.
The Minister of Finance, the Honorable M. Georges
Cochery, stated before the budget commission that he
would assent to that amendment, and that the Government, represented by the Honorable M. Meline, concurred
in this, in order to preserve for the Bourse the existing
legislation, save for the modifying of certain petty details
through decrees. This procedure would, of course, result
in putting a check upon the proposition submitted to the
Senate; but, said the Minister, the Stockbrokers' Association (Compagnie des Agents de Change) had brought in
a complaint before the courts against the curb brokers,
and it was necessary that the financial market be not
disturbed by the incidents of a lawsuit such as was
certain to be started. a
° Should the Government have ever given in under such pressure?
How can the State prevent the stockbrokers from applying to the courts,
if they consider themselves wronged? This is their inalienable rightThe Government had only to let them act; the interested parties would
certainly have looked after their own interests, and finally the stockbrokers,
when better advised, would not have persisted in their original intention.
The judges would have weighed and decided according to the law and
the facts; if the law had favored, and, let us say, does favor, the
agents of the monopoly, facts would have been stronger than the law,
and would have found them to be wrong. In their own interest the
stockbrokers and the curb brokers would a t last have come to an understanding. The State had no reason to interfere. (Alfred Neymarck,
Journal Le Rentier, March 17, 1898.)
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T h e Fleury-Ravarin amendment was voted on in t h e
Chamber and even in t h e S e n a t e s
(106) The Fleury-Ravarin amendment became article
14 of t h e law of April 13, 1898, and three decrees, dated
J u n e 29, 1898, were published in the "Journal
OfficieV
of J u n e 30, in view of t h e reorganization of t h e financial
market promised by t h e Minister of Finance during the
debate on t h e budget.
Through t h e first decree, articles 17, 55, and 56 of the
decree of October 7, 1890, were modified. Article 17
treats of t h e composition of t h e syndical chambers of
stockbrokers. Articles 55 and 56 express the conditions
under which t h e syndical chambers are bound to execute
a t r a d e in place of a defaulting stockbroker. Thus was
the solidarity of stockbrokers established. 6
a
In the Chamber of Deputies the following took part in the debate:
Session of March 7, 1898: MM. Lhopiteau, Fleury-Ravarin, Georges
Cochery, Minister of Finance; Viviani, Gauthier de Clagny, Gabriel
Dufaure, and Ribot.
Session of March 8: MM. Krantz, Viviani, Georges Cochery, Minister
of Finance; Gauthier de Clagny, and Fernand Cremieux.
Vote: In favor of, 333; against, 136.
In the Senate, on April 2, 1898, the following took part in the debate:
MM. Raynal, Eugene Guerin, Gouin, Georges Cochery, Minister of
Finance, and Prevet de Lamarzelle.
The severance of the amendment was put aside by 142 votes against
131, and this was passed by a vote of hands.
&The solidarity was established under the following circumstances: On
March 8 M. Viviani caused the Chamber of Deputies to adopt two amendments—one establishing the solidarity of the stockbrokers, the other
that the books of the stockbrokers should be audited by treasury inspectors. The Ministry of Finance caused these two provisions to be set aside
by the Senate, after which the solidarity of stockbrokers was established
by the decree of June 30, 1898, as stated above. The legality of the proceeding is very debatable. According to article 1202 of the Code civil,
solidarity (outside of solidarity by mutual agreement) can be declared
only by law.

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T h e second decree increased t h e number of stockbrokers
of t h e Paris Bourse to seventy, and t h e third decree
treated of t h e brokerage rates, modifying those previously established by t h e stockbrokers themselves.
I n general, t h e new rate prescribed was o.ro p e r c e n t ,
where the old one was 0.12X per cent, and t h e brokerage for t h e transactions in French rentes was fixed
a t 12.50 francs for the one-half unit of speculation, 61 while
the old rate was 20 francs. On t h e other hand, the private
regulations of the stockbrokers of December 3, 1891, were
modified. The m a x i m u m number of chief clerks was increased to six (it was previously four). Provisions were
m a d e t h a t the settlement of cash transactions in certificates t o bearer be effected before t h e fifth bourse session
following t h e session when the operation was made. However, from J a n u a r y 30, 1899, this delay was extended until
the t e n t h Bourse, and t h e obligation for the stockbroker
with unadjusted claims to " e x e c u t e " (buy-in or sell-out,
compel settlement by) his fellow-member in arrears was
replaced by the right of recourse to t h e procedure of " e x e cution." Finally, on July 12, 1901, a new tariff, raising
brokerage rates, was established by M. Cailloux, Minister
of Finance. The minimum of 50 centimes was fixed. T h e
brokerage fee was increased to 0.25 franc for each share
or bond worth less t h a n 250 francs and 0.50 franc for
securities the prices of which range between 250 and 500
francs.
The reorganization of the financial m a r k e t had therefore been " b o t c h e d u p " under t h e queerest circumstances. They had come back to the Tirard system
a See Nos. 16 and 38, Book II.—Translator.
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through the Fleury-Ravarin amendment, we said; but
M. Tirard himself, although in favor of the stockbrokers'
monopoly, had agreed that the question of organizing a
public market was one of those whose solution could
not be improvised and which could not be withheld
from public discussion. Answering M. Nivert, M. Tirard
said, on February 24, 1893: "After a vote has been taken
on the bill submitted to your deliberation, I have in
mind to place the consideration of this question before
the Council of State, and to prepare a bill which shall
have the advantage of having been thoroughly studied."
Well, the question proposed in 1898 was the same as in
1893. Monopoly or freedom of brokerage, or, also, a
mixed system, admitting of regulated freedom. Two
senators spoke for freedom. In the meanwhile an
amendment to the budget changed the mode of collecting
the tax; and there you are. By means of decrees a
Minister revises brokerage rates, arranges for the appointment of ten stockbrokers, institutes a solidarity of doubtful legal standing, and calls that operation a "reorganization." Legally, even the very word "reorganization"
can not be used. Laws can not be modified by decrees;
and, as decrees are based on laws already existing, it
would be more correct to say that there was a suppression of the question of reorganizing the financial
market, which had been proposed by two senators after
the Government had failed to do so. It is hardly possible to understand at present how a question which in 1893
required such an extremely exhaustive study in the eyes of
M. Tirard and of all others, could be touched upon and
decided in the circumstances detailed above—that is to
90312 0 —10

16

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say, under the most unwonted circumstances and the
most contrary to precedent.
(107) For what reasons was the bill announced by M.
Peytral never submitted to consideration? For what
reasons was the bill proposed by the two senators in some
way withdrawn from the Senate? For what reasons did
the Meline ministry in 1898 entangle itself in that strange
procedure, contrary to all precedents in legislative matters? These are points which have never been cleared
up, and concerning which the parties most interested seem
to desire to avoid all discussion.a Some explanations of
that little financial and parliamentary coup d'etat have
been furnished, but the moderation necessary for the
present study does not allow our reproducing them here. b
The following reasons may be substituted for or added
to the above: We know that in matters of political economy the regime of commercial treaties was superseded by
the regime of tariff maximum and minimum in 1892. A
strong protectionist current had become apparent in the
political spheres since 1878. M. Meline was the leader
thereof. In the newspaper world some writers had made
themselves the champions of international bimetallism
and protectionism, especially MM. Edm. Thery and Jules
Domergue. The Stockbrokers' Association (Compagnie
des agents de change) expressed its fellow-feeling at an
early date, and gave its support to the bimetallist and
protectionist movement, either from economic conviction or through design, thinking that economic parties
a
Congres International des valeurs mobilieres de 1900 a Paris.
6 juin, 1900. Compte-Rendu (Paul Dupont, imprimeur.)
b Journal VAction of November 7 and December 12, 1903.

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become political parties and t h a t political parties have
their expression, when they are successful, in executive
power. The Meline ministry was, therefore, in power
in 1898; it rewarded those who had supported it, while
the protectionist and nationalist papers directed a
virulent campaign against the Coulisse. The time had
been admirably chosen. We know what painful strife
had taken place in the country concerning the Dreyfus
affair. In 1898 the question of knowing whether there was
ground or not to review the military trial of 1894 was
obscured b y passions. If anyone wanted to see the trial
reviewed, he was a traitor to his country, an opponent of
the army, an enemy of order, a conspirator against the fair
name of France abroad, and even against the credit of the
State. On the other hand, if anyone else opposed t h e
review of the trial, he was a pretorian (meaning a mercenary soldier), he was a reactionist, retrograde; the shouts
of " L o n g live the a r m y ! " ' ' D e a t h to the Jews!" and
" D o w n with the priests!" were heard in the streets and
a t meetings. Men of t h e most incongruous spheres of
society combined or contended with one another.
I t so happened t h a t some of the curb brokers (coulissiers) who brought to our market orders from Frankfort, Berlin, Madrid, London, Vienna, and Constantinople,
were foreigners. Some of them were Jews. I t is easy
to guess w h a t powerful assistance the Dreyfus affair
brought to the stockbrokers. The Coulisse was the
victim. The nationalist and protectionist papers managed the campaign, reproached some of the opponents
with their origin, and the Parliament resounded with the

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saddest discourses ever uttered in the glorious French
rostrum.
To-day one can not read the debates without experiencing deep astonishment at the wretchedness of the
arguments that animated all this debate, which, moreover, was altogether foreign to the budget discussion. The
author of the amendment, the keystone of the reorganization, M. Fleury-Ravarin, pleaded that there had been tax
frauds in the open market; 0 to-day it seems to be an
established fact that there were none. 6 M. Gauthier de
Clagny called to account the foreigners in the Coulisse.c
But nevertheless, they permitted the " Rente Coulisse'' to
stay; so that, as far as public credit alone is concerned,
there are Frenchmen of ancient stock who negotiate
Ottoman bank shares, Turkish rentes, and exterior Spanish. The same speaker, concluding from the particular to
the general, charged the Coulisse with the emission of a
security, "La Watana, " which he called a swindle, an
emission in which two curb brokers were interested. d In
the Senate, M. de Lamarzelle reproached the Coulisse
with having introduced the gold-mines securities,6 but
there was no question of taking away from the Coulisse
the gold-mines securities in which it was dealing, and these
securities will remain there. The Minister of Finance, M.
Cochery, carried off the vote in the Senate by maintaining
o Session of March 7, 1898; Journal Officiel of the 8th.
& Cote de la Bourse et de la Banque; ann6e 1898, Nos. 141. 144, 255, 278.
c Session of March 8, 1898; Journal Officiel of March 9.
d Proceedings were instituted against the issuers, which resulted in their
being fully acquitted. (Police court of the Seine, eighth chamber, June
21, 1901. Le Droit, June 23, 1901.)
e Session of April 2, 1898; Journal Officiel of the 5th.

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that on two occasions the curb brokers had attempted to
depress the prices of French rentes and Russian rentes,
both of which were dealt in only on the " P a r q u e t " by
the stockbrokers. a The fact is substantially incorrect.
a
H e r e are the very words uttered by M. Cochery, Minister of Finance.
They were taken from the Journal Officiel of April 3, 1898, in the report
of the session of April 2:
" J u s t now a singularly painful event was recalled to our memory. On
two occasions, while in France everyone rejoiced when the journey of
the Russian Emperor in France and the journey of the President of the
Republic . . ." [Shouts and interruptions.]
M. DE> L A M A R Z E I X K . — " B u t this is quite correct."
The MINISTER.—"Gentlemen, I wonder at these protests. [Speak, speak.]
I am bringing with me particulars for the information of the Senate, and
with no thought in mind but the public welfare.
" I say t h a t on two occasions, at a time when events gave France
more confidence in herself and in the future, at a time, consequently, when
it seemed t h a t an upward movement in the securities of the two allied
nations was due, there occurred in the market—not in the official market, but in the open market—tactics calculated to cause a considerable
decline."
Well, the Russian rentes were dealt in on the open market neither in
1896, when the Russian Emperor visited Paris, nor in 1897, when M. Felix
Faure went to St. Petersburg. They were dealt in exclusively on the official market, so t h a t it was materially impossible for tactics to be set at
work in the open market against the Russian rentes.
As to the French rentes, we give below the comparative rates in the official and the open markets, according to the Official Quotation List for the
former and according to the "Cote de la Bourse et de la B a n q u e " for the
latter.
(a) Prices of French rentes, 3 per cent, from October 3 to October 8, at
the time of the Russian Emperor's trip to Paris:

October 3
October 4
October 5
October 6
October 7
October 8

Official market.
Open market __
Bourse closed.
Official market
Open market. _
Bourse closed.
Official market
Open market _.
Official market
Open market __

101.80

101.65

101.57

101.80

101.57

101.55

101.70

101.53

101.71

101.70

101. 6 7

101.75

101.50

101.68

101.72

101.50

101.67

101.75

IOI.SS

101.68

243

101.60

101.78

101.73

101.53

101.70
101.70
101.55
101.50
101.55
101.53




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Monetary

Commission

However, he permits the "Coulisse des rentes" to
remain in existence. The same Minister advanced as a reason for supporting t h e Fleury-Ravarin amendment, t h a t
t h e Stockbroker's Association had entered a complaint
against the curb brokers. a Thus he desired to avoid the
disturbance which might have befallen t h e financial
market, and he fulfilled the expectations of t h e stockbrokers before they obtained such fulfillment by legal
means. This time t h e m a t t e r was taken out of t h e
court's hands, as it had been taken out of the Senate's.
All is chaos and anarchy in t h a t discussion and in those
irregular proceedings. MM. Lhopiteau, Viviani, and
Ribot called the Chamber's attention to t h a t fact, 6 and
notably M. Ribot, who, however, declared himself in
favor of t h e stockbrokers' monopoly. M. Gouin, in the
Senate, president of the commission appointed to look
into the Trarieux-Boulanger proposition, vainly protested. c Inconsistency in arguments; illogicalness in solu(6) Prices of French rentes, 3 per cent, from August 23 to 27, at the time
of President Faure's trip to Russia:
August 23 _
August 24 _
August 2 5 .
August 26.
August 27_

Official market
Open market __
Official market
Open market. _
Official market
Open market __
Official market
Open market __
Official market
Open market _ _

104.87

104.90

104.82

104.93

104.93

104.83

104.92

104.85

104.90

104.82

104.87

104. 87

104.88

104.93

104.83

104.90

104.85

104.92

104.85

104.90

104.87

104.93

104. 8 7

104.90

104.84

104.87

104. 6 0

104.60

104.90

104.91

104. 62

104.63

104.75

104.77

104.60

104.65

104.78

104.78

104.60

104.70

a

Senate, session of April 2, 1898; Journal Officiel of the 3d.
& Chamber of Deputies, session of March 7, 1898; Journal
the 8 th. '
c
Senate, session of April 2, 1898; Journal Officiel of the 3d.

244

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and

Methods

of the Paris

Bourse

tions. What of it? The vote on the budget of 1898,
which was to take place before the end of the year 1897,
is away behind time; elections are approaching. There
is need to hurry. Minds are disturbed. Once more the
Dreyfus affair is in full swing. The ministry obtains
what it asked for.a
(108) The curb brokers resorted to libels in answering
the attacks they were subjected to in the newspapers.
But the discussion gained neither in broadness nor in
theoretical interest. The two parties fired their grievances at each other, and it must be admitted that if the
Stockbrokers' Association did not deserve victory, the coulisse party deserved defeat. Hardly had the law of 1893
permitted them to deal publicly in listed securities when
the curb brokers entirely lost sight of the fact that that
state of things would only—nay, could only—be temporary. To trade, to buy, or to sell—that was all that
concerned them. The gold mines engrossed their attention. They lacked entirely the sense of professional
° T h e Honorable M. Cochery, who presided at the Congres International
des valeurs mobilieres (International Congress of Transferable Securities)
in 1900, condescended to acknowledge to the author that the arguments
brought forward in favor of the freedom of the market (in the session
of June 6 of said Congress) were mostly new to him; that it was a matter of regret for him that, for some inexplicable cause, these arguments
had never come to his notice; and that, if he had been aware of them, he
would have hesitated in extolling the prevailing system in its totality.
These words do great honor to the Minister. Moreover, the Honorable M.
Cochery in his closing speech of the Congress—a speech bearing the stamp
of great elevation of mind—made plainly known the emotion he had expe. rienced during the session devoted to the inquiry into the organization of
bourses: "Relating to the market organization, the debate at one time
assumed a truly passionate aspect . . . .
but passionate in the right
way—the passion resulting from the wish to protect common interests."
[Loud applause.] Stenographic report of the Congress, C. I. P., 308,
P. Dupont, printer.

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orientation. Many looked upon their profession as some
sort of tolerated condition, to cease the day it would
suit the stockbrokers to have it cease. They had no
idea of a n a t u r a l right to be transformed into a positive
right, and it was the lack of this notion t h a t caused
their reply to be so little interesting. " W e represent
such an a m o u n t of taxes, licenses, such a number of
telegraphic messages, we employ so m a n y clerks,"—
this was t h e level to which t h e discussion rose, unless
once in a while there happened an argument " ad
homines''' in answer to those aimed a t them. The one
who evoked an economic principle was called a theorist,
a transcendental metaphysicist. Moreover, there was no
discipline on t h e Coulisse. Its president, M. Alphonse
Lange, who died shortly afterwards, undoubtedly should
be given credit for wanting to offer energetic resistance.
Personally very wealthy, he might have, like m a n y
others, said t o himself t h a t , if conquered, the defeat
m e a n t b u t little to his own personal interests. Y e t he
p u t up a really good fight, b u t he was little adapted for
such discussions; moreover, no one among the curb
brokers—a thing unheard of—seemed prepared for them.
Besides, had not t h e announcement been given out t h a t
t w e n t y new offices of stockbrokers were to be created ? °
Many of t h e curb brokers intended t o be candidates for
these new offices. I t was, therefore, necessary t h a t t h e
opposition of the crowd should not be too fiery, lest all
of the candidates be rejected; and these, being more or
less clear-sighted, stood in t h e way of a too energetic
a The Minister of Finance confirmed t h a t item of news in the Chamber of
Deputies, March 8, 1898, Journal Officiel of the 9th.
246




History and Methods of the Paris Bourse
action for the defensive or the offensive. But a group
of professional men, whoever they may be, containing,
in spite of its immense resources, such elements of
weakness, is incontestably destined in advance to defeat.
Financiers make the great mistake of not sufficiently
taking into account that moral force and professional
dignity are worth more than gold. However strong may
have been the cause of the Coulisse, its advocates failed
in their efforts on its behalf, and it was no easy matter
to champion it in Parliament, because its defenders were
badly treated in certain publications.
Now, if the curb brokers had to be defeated—if, as a
special group, they deserved the defeat they had experienced—was not their cause superior to, did it not go
beyond, the individual members; were there not sufficient
grounds to watch against the strengthening of the monopoly ; was it not necessary to beware of having recourse
to surreptitious means in proceeding to a reorganization
of the market; was it not necessary that the Bourse
should be either free or regulated?
It seems that the act of reorganization should have
been prompted by considerations superior to the interests
of the stockbrokers or of the curb brokers. At any rate,
let us see what took place within the Coulisse on the
day following the reorganization.
(109) After the " reorganization," the Coulisse remained
composed of the following elements:
The llcoulisse des rentes" (Coulisse for rentes) remained
the same as before. It keeps on in a state of being
tolerated.

247




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The "'coulisse des valeurs" (Coulisse for securities) does
not any longer exist in a state of being tolerated. Curb
brokers deal freely, as intermediaries or otherwise, in
securities not susceptible of being quoted, whether these
securities be such that the stockbrokers do not care to
quote, or such that they are not allowed to quote. In
the latter category are found the foreign securities, in
denominations of 25 francs, which the French law does
not permit for French corporations. (Law of August 1,
1893; decree of December 1, 1893.)
Under these conditions, a number of bankers who
make it a practice to deal among themselves in the Paris
market, established two professional syndicates, under
the terms of the law of March 21, 1884, concerning syndicates : one for the bankers dealing for future delivery
(h terme), and the other for the bankers dealing for cash
(au comptant). Of course, one may belong to the profession without being connected with either of the syndicates. There is nothing to prevent a banker from purchasing certain securities from another banker, whether
he belongs to a syndicate or not, but members of syndicates
constitute groups only among themselves.
The Coulisse is not officially known under that name.
The professionals on the bourse who are not stockbrokers {agents de change) are called bankers (banquiers).
The curb brokers (Coulisse members) in rentes form the
"groupe des Banquiers en Rentes FranQaises." The
groups for other securities are formed by the members
of the "Syndicat des Banquiers en valeurs au comptant1''
(syndicate of bankers dealing in securities for cash), and

248




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and

Methods

of the Paris

Bourse

of the "Syndicat des Banquiers en valeurs a terme" (syndicate of bankers dealing in securities for future delivery).
A special group is formed by the ''Union des Banquiers"
(Bankers' Union), which deals in commercial bills. The
1
'Union des Banquiers" has always kept out of the
quarrel.
(no) Truly it would be judging superficially, to conclude from the above that conditions are satisfactory.
The condition of the Coulisse for rentes is necessarily
precarious. To be tolerated is neither a prosperous nor
a progressive condition.
As to the Coulisse for securities, according to the
decision of the Cour de cassation of June i, 1885,° a s
soon as a security is admitted to the Official Quotation
List, the dealings in the same become an attribute of the
monopoly. In that regard, therefore, there is yet a relative condition of toleration. The same applies, in a strictly
legal aspect, to securities concerning which an agreement
was reached in 1901 between the Stockbrokers' Association and the bankers dealing in securities for future
delivery. Finally, as to foreign securities which can not
be officially quoted, because their denomination is inferior
to the par value of French shares, a mere reduction of
the limit fixed by French lawmakers would result in
rendering available for quotation on the ''Parquet" the
25-franc shares of foreign corporations. This change is
eagerly sought by the Stockbrokers' Association.
( i n ) As to the stockbrokers' monopoly (monopole des
agents de change), it reigns supreme, as sovereign master,
outside the restricted sphere in which the Coulisse operaSirey, 1885^.257.
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Commission

ates. This is equitable neither from the standpoint of
public justice, nor from the economic point of view, nor
from that of the State's interests.
The principles of public justice, belonging to the natural or civil order, refer to the rights of individuals. They
include personal liberty, civil equality—that is to say,
equality before the law, the right of assemblage, the freedom of labor, of commerce, and of industry. Proclaimed
by the Declaration of the rights of man and of the citizen
{Declaration des droits de Vhomme et du citoyeri), on August
26, 1789, they are to-day the foundation of French public
rights, and have been mentioned either explicitly or implicitly in all constitutions:
"Of all monopolies intrusted to ministerial officers,''
said M. Ducrocq a "there are few which are more disputed or more disputable, from the standpoint of principles, than the stockbrokers' monopoly. Their office,
indeed, is one of those in which the character of public
office has the least share, and in which, on the contrary,
the professional and even the commercial character
occupies the most important place. The negotiating of
bourse securities, in return for a compensation, is no
more a public function than the selling of any other
kind of merchandise
"We can conceive of no serious reason, drawn from the
interests of public credit, to maintain the market for
bourse securities within the hands of a close corporation.
This dealing in bourse securities is indeed the essential part
of the vocation of the stockbroker; his other duties are
0 Cours de droit administratif
No. 4, 215.

et de legislation francaise des finances T. I l l ,

250




History and Methods of the Paris Bourse
mere accessories. Well, there is no doubt that, in order to
give to t h e trading in securities the moral and material
safety which is indispensable for public credit, there is no
necessity t o t u r n it, contrary to its nature, into a public
function. I t is sufficient t o regulate and to control t h e
profession, which thus becomes reconciled, within t h e
measure demanded by public interest, with t h e principle
of freedom of labor and commerce.
" The other duties of stockbrokers—the verifying of quotations and t h e certifying of transfers—are accessories of
which t h e stockbrokers might be relieved, so as to remain
invested only with their principal and essential r61e—the
role of dealers in securities. There would be no more pret e x t for monopoly. A few real officials could be intrusted
with the d u t y of certifying transfers and drawing up the
quotation lists. At any rate, if, instead of proclaiming t h e
markets absolutely free, t h e law were to suppress t h e
monopoly, and to regulate the profession by the indemnity
system applied to merchandise brokers b y the law of July
18, 1866 (No. 1208), could not then the new syndical chamber continue to provide for those two features, in a wideopen corporation, under requirements of legal qualifications, morality, and solidarity? The fixed time and place
for holding the Bourse, its publicity, the trading in
a loud voice, are such sure bases of genuineness for establishing the quotation list t h a t the regulation of the profession should certainly suffice to allow it to continue
attending to the m a t t e r b y itself. Does not t h e syndical
chamber of t h e stockbrokers (chambre syndicate des
agents de change) content itself with merely registering
the quotations of the prices set u p b y t h e exchange and
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Monetary

Commission

metal brokers, though legally it should be prepared b y
t h e syndical chamber itself? I t is therefore not necessary, for the verification of quotations, t h a t there exist
'agents de change,' holders of ministerial offices.
" F r a n c e is about the only country whose financial market is in the hands of intermediaries who are, in fact, t h e
owners of their offices, invested with absolute monopoly.
There are even countries where t h e freedom of the m a r k e t
is complete, as in England, wThere the Bourse, called t h e
Stock Exchange, is a private institution, elective a n d
subject to its own by-laws; in t h e United States, where
t h e organization is the same; in Belgium, since the law^ of
December 20, 1867, which proclaimed the free exercising
of the functions of merchandise brokers and stockbrokers;
in most of the Swiss Cantons, excepting, however, Basle,
Geneva, and Zurich, which have monopolies; and in t h e
South American Republics (Argentine Republic, Brazil,
and Paraguay). In all other countries, the financial market system is built up on the principle we recommend,
of the freedom of the profession combined with its regulation. Such are the legal provisions of the German
Empire, Austro-Hungary, Russia, Italy, Spain, Portugal,
Holland, and the Scandinavian S t a t e s . "
MM. Tyon-Caen and Renault point out with t h e same
clearness, t h a t mediation in negotiating securities possesses
in itself no a t t r i b u t e of a public function. We quote :a
" I t should be noticed t h a t in 1866 nobody asked t h a t
t h e stockbrokers' monopoly be suppressed. Sundry reasons have often been brought forward in favor of its
being maintained. Their p a r t is not limited to trading
aTraiti de Droit Commercial, T.IV, No. 1035.
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History

and Methods

of the Paris

Bourse

in bourse securities; they guarantee the identity of parties
and t h e genuineness of signatures for the transfer of government and other securities; they are necessarily, for
a certain time, depositaries of important sums and
numerous securities; every day they verify the quotations
of securities, especially government securities. Thanks to
the stockbrokers' monopoly, the Treasury enjoys perfect
security as to the transfers involving its responsibility;
transactions are carried out with great rapidity, and the
interest of inexperienced people, who have to h a n d in
their securities or their money, is protected. Such is the
summary of the reasons given b y the Government in
t h e explanatory statement of t h e law of July 18, 1866.
(J. Bozerian. De VInstitution
des Agents de Change.)
These arguments advanced in favor of the monopoly held
b y the stockbrokers are not decisive. Mediation in negotiating securities has nothing in itself constituting a public
function. Moreover, one could conceive t h a t freedom was
allowed in this matter, and that, without monopoly, measures had been taken for the verification of quotations and
for the avoidance of the worst abuses. Besides, there are
m a n y countries where there is no monopoly either for t h e
brokerage in merchandise, insurance, and freight, or for
t h e mediation in negotiating securities, and yet the freedom does not appear to stir up any complaints. See,
especially, t h e Belgian law of December 30, 1867; the
regulation attached to decree of December 14, 1882, given
out for t h e execution of the Italian commercial code of
1882; a n d t h e Hungarian code (art. 524 et seq.) The
German commercial code (art. 66 et seq.) authorizes official
brokers, leaving to private individuals t h e right to do
353




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etary

Commission

brokerage as private brokers. This code reserves the
right for each S t a t e to establish a monopoly for t h e benefit of official brokers (art. 84).
" N o n e of the States, however, has availed itself of this
privilege, while Bavaria, Wurttemberg, and H a m b u r g have
each abolished the monopoly there existing. In Bremen
(1867) and in H a m b u r g (1871) the official brokers have
been suppressed. In Austria t h e law of April 1, 1875,
has sanctioned t h e monopoly; b u t t h e law has shown
no results. The private brokers remain in fact, and
operate as commission men with t h e brokers themselves.
(V. Endeman, Handbuch des Deutschen Handelsrechts, I I I ,
pp. 135 and 137O"
(112) Leaving now the critical analysis of jurists, a n d
passing to t h e examination of the question of t h e stockbrokers' monopoly from the economic standpoint, we can
not b u t condemn it in the most unequivocal terms.
Let us observe, however, t h a t public justice and political economy have such affinities in m a n y respects t h a t ,
when t h e economic principles have passed into the domain of law, it is impossible to distinguish between t h e
considerations depending upon t h e one or t h e other
science. Moral and political sciences, moreover, are not
separated b y impenetrable walls, and t h e divisions set up
b y men for t h e accommodation of their reasoning in
no way interfere with t h e community of principles on
which t h e y depend. Thus we m a y say t h a t the considerations of public justice we have just expounded serve as
an introduction to those which are to follow.
The modern doctrine of monopoly does not derive it
any longer from a royal or state prerogative. The right
254




History and Methods of the Paris Bourse
to labor belongs to all. Certain lines of work are subject
to special conditions in France—the practice of medicine,
or the practice of pharmacy, for instance; but inquiring into the conditions for recruiting professional men
for these practices, we see that there is no monopoly on them. All those who meet certain conditions
may be physicians or pharmacists. Monopoly exists
when the State exercises certain public services, or carries on a certain industry, or again, when it deprives certain people of the right to labor, granting it to others in
consideration of a fee or gratuitously. In the first case
it is a public monopoly, in the second it is a private
monopoly. Well, the stockbrokers' monopoly is exercised by ministerial officers, not for account of the State,
but for their own account. This is a private monopoly,
to which all economists are strongly opposed.
"Like all monopolies, but more justly than many
others, the stockbrokers' monopoly is furiously attacked.
It may be impossible to give decisive reasons in its favor,
though in the last resort it may be acknowledged that
the Bourse intermediaries should be bound to furnish
personal guarantees."
Thus expressed himself M. Paul Cauwes,a professor in
the Law Faculty of the Paris University.
M. Courcel-Seneuil expressed himself as follows:6
"The monopoly, giving rise to exceptional profits,
creates an entirely artificial property, built up at the
public expense and for the benefit of the first holders, a
property acquired without labor, growing without labor
a

PrScis d'Economie Politique, T. i, p. 648.
& Trait6 d'Economie Politique, 1801, T. 2, p. 125.

90312 0 —10

17

255




National

Monetary

Commission

with the increase in population and general wealth, and
having no justification."
At the congress of 1887 of the Association Frangaise
pour V avancement des sciences M. Arthur Raffalovich expressed himself as follows, in a lecture on the Paris
Bourse : a " In spite of the increasing value of transferable
wealth of the transactions effected daily at the Bourse,
France presents the "strange phenomenon of a legislation
relatively stationary, of an old-fashioned regulation,
which is not in keeping with the requirements of the
times * * *. The monopoly of the stockbrokers
seems to me doomed to disappear; it does not exist in
any of the great European markets."
The Traite d'Economie Politique of M. Joseph Gamier, 6
after having expressed the view that (No. 191) "all artificial monopolies in favor of individuals" are contrary
to justice, detrimental to production, and have a tendency to assume the character of "abusive and iniquitous" privilege, declares that those are the vestiges of
the guild system that have to be eradicated. The author expressly aims at the ministerial offices of stockbrokers—after having shown that in March, 1858, the
"Butchers' Guild" (corporation) had been suppressed, in
1863 the "Bakers' Guild/' and in 1866 the "Commercial
Brokers' Guild." (Footnote under No. 196.)
It would not be difficult, however, to find also a good
many complaints in the literature of the time coming
from those whose privileges were to be suppressed.—"If
the butchers and bakers were no longer constituted as a
< Comptes Rendus de 1887, Masson, editor, p. 984.
*
b Edition of 1889, brought up to date by M. Andre* Liesse.
256




History and Methods of the Paris

Bourse

privileged corporation, everybody was to die of hunger!"—
"As for free brokerage, it would be even a much greater
calamity. A lot of vagabonds would undertake to work
as brokers, and would prostitute commerce."—The legislature of 1866 took no notice of these arguments, and nobody
wants monopoly any longer. It was, moreover, what had
already happened a century before. When, in 1776, all
corporations were threatened, the six principal trades
unions addressed petitions and requests, and explained
that wardenships, masterships, and guilds secured for consumers integrity in contracts and quality in merchandise.
The arguments in favor of the "agents de change'1 are
exactly the same as those of the guilds of the seventeenth
century and of the holders of privilege of 1866.
The Societe d'Economie Politique in 1859 a discussed
the monopoly of stockbrokers. MM. Reybaud, Wolowski,
Michel Chevalier, Courcelle-Seneuil, P. Coq, Courtois, Dupuit, de Parieu, and J. Gamier took part in the discussion, which terminated in condemning the monopoly.
In 1893 the same discussion presented itself and concluded in the same way. The following took part in the
discussion: MM. Courtois, Brandts, and Alfred Neymarck.
The latter expressed himself energetically against the
monopoly of stockbrokers, and M. Gide declared " t h e
institution as entirely undeserving of interest." h In 1898,c
right before the "Reorganization," the Societe d'Economie
Politique expressed itself again energetically against the
monopoly of stockbrokers. Only M. Manchez upheld it;
aJournal des Economistes, April 15, 1859.
*> Journal des Economistes, April 15, 1893.
c Journal des Economistes, June 15, 1898

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National

M on et ar y

Commission

but those who spoke against it were MM. de Montplanet, J. Siegfried, Neymarck, Emmanuel Vidal, and
Frederic Passy. The latter, who closed the debate,
expressed the opinion that the monopoly, when held up
as the means of guaranteeing the genuineness of quotations, carried in itself the denial of such genuineness.
The Paris Chamber of Commerce expressed an opinion
unfavorable to the stockbrokers' monopoly/ 1 and the
Tribunal de commerce de la Seine, when asked for advice
concerning the expediency of creating new offices in
completing the ''reorganization" scheme, declared itself
against the measure. 6 So we see, it is not alone the
economists who are opposed to the monopoly, but also
the business men, who every day struggle with realities.
It has often been claimed that the stockbrokers' monopoly was necessary for the welfare of the national
credit. But facts singularly deny that assertion. Why
was it necessary in 1898, that, simultaneously with the
upholding of the usefulness of bolstering up the stockbrokers' privilege by the Honorable M. Cochery, he should
undertake to tolerate the existence of the Coulisse, placing it, in fact, under the exclusive supervision of the
Stockbrokers' Association (Compagnie des Agents de
Change) ? No argument could be more flatly contradicted.
Moreover, how could the "agents de change" support
the country's rentes? It should be borne in mind that
in the countries whose rentes enjoy the best reputation
among the investing public in London, Berlin, and New
York, there are no ministerial officers for the negotiation
a

M a y 14, 1898, Cote de la Bourse et de la Banque of May 17.
& May 25, 1898, Cote de la Bourse et de la Banque of May 26.

258




History and Methods of the Paris

Bourse

of securities. Moreover, the stockbrokers in France can
not undertake bourse operations for their own account,
according to article 85 of the Code de Commerce. But
one can uphold the price of a merchandise or a security
only by buying it and by meeting repeated and persistent
offers by bids of equal force, able to counterbalance them
and force the short sellers to cover. We have seen before
£tiat, on the contrary, the French national credit was built
up on the freedom of transactions.
Some imagine that to be admitted to the official quotation list is a guarantee to the public of the intrinsic value
of the enterprise the securities of which are quoted.
This is erroneous. Public savings derive no benefit of
increased safety from the stockbrokers' monopoly. This
is no reproach to monopoly. It essentially could not be
otherwise.
Below we cite the opinion on that subject given in
1875 by the Syndic of the stockbrokers, Moreau, at the
General Assembly of his colleagues.a
" I t is to be much regretted that our duties are so
little understood by the public, that some of our proceedings are charged with a function they do not possess,
and which they never did possess. Often some people
wrongfully imagine that the admission of a security on
the official quotation list, is a kind pf indorsement given
that security, a testimonial in its favor, an introduction
by the syndical chamber.
"Nothing is further from the truth.
"The quotation list is simply the verification of the
prices at which a security has been dealt in. Whenever a
a

Semaine Financiere of February 7, 1875, p. 137.
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Commission

certain number of capitalists choose to effect a sufficiently
large number of transactions in any given enterprise,
whether good or bad, it is for them, and not for us, that
the delicate task of price-fixing is reserved; and, if it is
done within the conditions exacted by the revenue laws,
and allowing sufficient competition and publicity, we can
not refuse to serve them, since we are in possession of a
monopoly, and we are bound to execute orders.''
Existing theory is in unanimous agreement with this
opinion.
" I t should be noticed," said Mollot,a "that, although
the Syndical Chamber is intrusted by law with the duty
of verifying quotations of securities, it can not guarantee
their value. It is not called upon to inquire into their
merit, whether as to their form or as to the solvency of
the debtors. The value of the securities may vary ad
infinitum, without ever making the Chamber responsible
for it. It is for those who operate to investigate the
nature and soundness of enterprises. They buy at their
own risk."
In his Dictionnaire de Droit Commercial* M. Ruben de
Couder expresses himself as follows:
"The Syndical Chamber does not guarantee the value
of the securities the quotations of which it verifies. It
is for those who operate to satisfy themselves as to their
soundness."
In the " Dictionnaire universel de la Bourse et de la
Banque" c we read: " I t is not correct to imagine that
a Bourses de Commerce, No. 479.
b Under "Agents de change."
c Uncompleted work published under the management of M. J. Boz6rian
under "Admission a la cote" (ComitS des Publications scientifiques et industrielles, 5, ciU Palgalle).
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admission of a security to the quotation list is some sort
of sanction given to that security, like a testimonial in
its favor, a reference of the Syndical Chamber."
M. Buchere a limits the responsibility concerning the
admission to the quotation list, to the case when securities
have not been regularly issued. This is common law;
this is not the principle of a special responsibility pertaining to the stockbrokers. No matter whether one is
the issuer of the stock, or only aider and abettor, he incurs
the same responsibility.
M. Abel Valdmann is explicit on that point:
"The statement of all the qualifications as to form,
making a security fit to be quoted officially, does not
involve—in fact, has no connection with—the statement
of its merchantable qualifications; that is to say, of those
relating to the intrinsic value of the security." 6
And later the same author adds:
"There has never been found, and there never will be
found, a court that will countenance the absurdity, that
the admission to the quotation list guarantees to the
buyer that he is making a good investment. Well might
we ask what guaranty the syndical chambers would then
give to the seller, w^ho is likewise one of the contracting
parties in every trade, and quite as interested as the
purchaser." 0
To be sure, no foreign security can be admitted on the
quotation list without the positive permission of the Minister of Finance, but this in no wise renders the Minister
liable.
a

TraitS des valeurs mobilieres, No. 1108.
& La profession d* Agent de Change, No. 313.
cNo. 329.
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Since 1837 the Chambre Syndicate des agents de change
has asked the Minister of Finance to undertake to give an
opinion in last resort on the admissions of new securities
to the quotation list. The Minister, M. Lacave-Taplagne,
declined all responsibility, acknowledging, nevertheless,
that the responsibility should not fall upon the Syndical
Chambers Never since has any minister accepted such
responsibility. By the way, the right the Minister of
Finance has to forbid a foreign security from being admitted to the quotation list is independent of the
question of monopoly, and that right may be maintained
whatever be the regime of the financial market.
The actual financial power of the Paris stockbrokers
is put forward as an argument, and it is affirmed that our
financial market is the first in the world. In our opinion, even granting that this is true, which is far from
having been proven, the cause is confounded with the
effect. When a country, owing to its geographical locat i o n , ^ climate, and the character of its inhabitants, possesses numerous natural riches, and even moral riches,
they cooperate in increasing its wealth; when it has the
advantage of certain political and economic conditions,
when it enjoys a monetary and commercial organization
which promotes, instead of paralyzing, human activity
in most, of its manifestations, then that country is rich
and deserves to be rich. And it may then happen that
some organization, defective in itself, and the source of
manifold vexations, is nevertheless prosperous, as much
on account of certain facts of adaptation as because it
a

Dictionnaire
Cote."

universel de Bourse et de Banque, under "Admission

262

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unavoidably lies within the reach of the rays of national
wealth. It reflects that wealth. But the Paris Bourse
does not owe its prosperity to its organization. Seventy
ministerial appointees intrusted with the negotiation of 130
billions of transferable securities are powerful personalities. They would be more powerful if they were but 35.
They would be more powerful if there were but 20 of
them, or 10 or 5, or even *i—if there were in the market
but 1 autocrat, a single arbiter of securities, centralizing
bids and offers, and the king of the Bourse, just as we see
in America an oil king and a steel king. In such a case
the soundness of a market is more seeming than real. If
that system had been applied to provisions and merchandise, infinitely more necessary for consumption than
rentes or shares in companies, the market for wine,
bread, and meat, appropriated by a few barons, might,
perhaps, be stupendously high, but in this respect experience speaks in favor of freedom of trade only. It seems
therefore necessary that public and private credit should
enjoy the benefit of an organization more pliable and more
in harmony with the general condition of a country's
commerce. Let us therefore beware of mistaking the
appearance of force for force itself—a deception that
should impress us no more than the sight of the effigies
of iron-clad warriors, standing on rich trappings in a military museum. If our financial market were opened to
all who have funds and understand the profession, it
would be stronger still. If the market's favorable situation were distributed among several hundred individuals, the division of risks would render the market more
stable, competition would secure for our market the
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desired elasticity, and, if wanted, regulation under the
supervision of the Minister of Finance would create a
condition half way between unlimited freedom, which,
with more or less reason, scares so many people, and
monopoly, which is an old outfit, in no way suiting our
customs, and disturbing the harmony of our laws without
rendering the services expected frQtn it.
As another argument in favof of a monopolized market
the joint liability of the brokers is pleaded. It is indisputable that when the public is told: "The agents de
change are conjointly liable," it receives a pledge on
which it rests its faith, and yet it is certain that the joint
liability of the stockbrokers is perhaps the most detestable
of all measures passed in 1898.
It must be admitted that M. Cochery, the Minister of
Finance, energetically contested the measure of the stockbrokers' joint liability. He called attention to the fact
that the result would be to weaken in the stockbroker
the care for his personal responsibility.
Then, yielding to the objections of some deputies, who
disliked to strengthen the monopoly without some redeeming features, M. Cochery inserted in his decree of June 29
a provision establishing the joint liability of stockbrokers,
in a way not incontestably legal, for again it may seem
strange that a decree is made to do the service of a law.
M. Cochery was apparently correct as far as the stockbroker in normal times is concerned; but events have
demonstrated the defects of joint liability in times of financial panics; in such times it causes a real suspension of
the market. (February, 1904.)

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We find, then, two defects of the joint liability when we
examine its effects upon the stockbroker.
But is the joint liability useful so far as the public is
concerned? This is another side of the question of joint
liability.
The customers of stockbrokers are divided into three
categories: Givers of cash orders, speculators, and investors in continuations (reporteurs).
Those giving orders for cash have no use for the stockbrokers' joint liability. The transaction for cash includes, so to speak, no serious risk for the customer. Indeed, in giving an order, he deposits a small cover. A few
days later he is informed that the securities are at his
disposal, or that he may bring the securities sold. He
calls, settles, and leaves either with the cash or with the
securities. However, not all operations have that immediately interchangeable character. But, as a matter of
fact, the risk, independently of the joint liability, is reduced to a minimum. Should that minimum be yet too
high, it would not be difficult in a proper system of
bourse organization to endeavor to prefer certain creditors,
without having to resort to such an empirical means as
brokers' joint liability.
Let us pass to the speculators. The most interesting
are those who purchase for future delivery to take up
securities, or who sell for future delivery to deliver. But
the settlement of these transactions is made at liquidation; that is, the moment when the settlement for cash is
effected, money against securities, securities against cash,
within a very short time.
We can refer these operations to transactions for cash.
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Now, all these transactions for cash or for future delivery which we have considered thus far are ordinary commercial transactions, such as are customary for wheat,
oil, iron, wool, and other merchandise. These, consequently, the lawmaker protects neither through monopoly nor through joint liability. We are thus able to
say that it is not in pursuance of reasons applying to
commerce in general that the stockbrokers' joint liability
was established. It is in view of conditions peculiar to
the profession. Each stockbroker has a considerable
following of customers trading for future delivery, who
settle their transactions by paying the differences. It
is even that class of customers which is most prized; it is
the most profitable class. It is for their benefit and for
the benefit of " contangoers " (reporteurs) that the joint
liability was established.
Speculators speculate either for a rise (sont places a la
hausse), in which case they are buyers, or for a fall (sont
a la baisse), in which case they sell short (sont vendeurs a
decouvert).
The joint liability is therefore a measure which aims
to make the stockbrokers liable for the defaults of one
or more of them in times of panics; that is to say, when
there is a general decline in the value of securities.
Who are the creditors of the stockbrokers at such
times? Not the bulls (speculateurs a la hausse; they are
the debtors of the stockbrokers. It is the bears (speculateurs a la baisse) who are the creditors. They are the
ones who have the benefit of the joint liability. Can
anything more illogical be imagined? The main effect of
the joint liability is to protect the speculator for a fall,
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whom the lawmaker of the year III punished with imprisonment, forfeiture of property, and exposure to public view with a sign on his breast bearing the inscription
"agioteur" (stockjobber); against whom, until recently,
article 422 of the Code penal was directed, and against
whom there still exists to-day the " faculte d'escompte"
(right of purchaser to demand his stock at any time by tendering the money). This is a striking instance of aberration in the authors of the law of 1898, which again demonstrates that when the lawmaker starts from false premises,
he is bound to be unceasingly tossed about and to fall into
all sorts of follies, intended in his mind to justify him, but
which succeed only in causing his errors and nonsense to
blaze out with greater force.
If we examine the usefulness of the joint liability for
continuations {reports), we reach conclusions just as much
disappointing from an economic standpoint.
Peter is buyer for the 15th instant of securities worth
100,000 francs. Paul is seller of these same securities.
Then comes the fifteenth. Paul brings his securities, but
Peter has not the funds; this does not concern Paul; he
has sold; he delivers. At that moment enters the "contangoer" {reporteur)—Jack, we will say—with 100,000
francs. He takes up the securities and resells them to
Peter for the next settlement. All this takes place at the
stockbrokers', and Peter, Paul, and Jack do not meet.
Now, Jack's transaction is very simple. He takes up
securities which he resells at once at a slight profit. He
makes a temporary investment and, as a result, keeps the
securities as long as he is not repaid. He is well insured
against risk.
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Capitalists, "contangoers," "takers-in," are, therefore,
useful, but—may we be pardoned for our license of
speech—they are, of all workers, the workers that work
the least. They make temporary investments and remain
"covered". Well, when we see common commercial
contracts resting on trust; when we see thousands upon
thousands of tons of merchandise delivered, and the seller
merely holding three months' acceptances; when every
kind of labor means risks; when every bold capitalist runs
all sorts of dangers, the law favors the most timid and the
best secured of capitalists. This is not only a violation
of justice, it is also a bad economic measure.
Therefore, from an economic standpoint, the stockbrokers' joint liability is not in itself a beneficial measure.
It is useful only to the stockbrokers intrenched behind
this apparent advantage. It intends to fortify a monopoly in public opinion, but, in so doing, it helps to
preserve an institution resting on an obvious error of the
lawmaker, by a process which is unnatural, useless—nay,
even dangerous.
Moreover, if it is necessary that the stockbrokers be
jointly liable, is the joint liability conditioned on monopoly? Is it not possible to conceive of a system of
broader association, regulated, as said before, in a proper
measure, and propped by the establishing of special guaranty funds through obligatory contributions from those
exercising the profession?
Public safety, then, does not make the monopoly an
absolute requirement.
(113) Is the monopoly of the stockbrokers an advantage for the State? The State faces a financial cor268




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poration, wtiose power it has itself created, and of which
it can rid itself only by indemnifying it.
But the longer we wait, the more will increase the
value of negotiable securities, and the more must the
seats of the agents de change rise in value.
In 1800 there were only six kinds of securities mentioned
on the official quotation list. There were eight in 1807.
In 1823 a royal ordinance (of November 21) authorized
the quoting of foreign securities. The monopoly was by
that much increased in value. The great industrial movement resulting from railroad building found its financial
expression in the creation of numerous certificates " t o
bearer." The value of the monopoly was by that much
increased again. In 1867, on July 24, the French law
proclaimed the freedom of the limited-liability company
in shares. Shares, bonds, and parts start at once multiplying ad infinitum.
The monopoly is thereby once
more increased by that much. In 1885 a law on
transactions for future delivery is promulgated, which
recognizes as legal the very transactions the interdiction of which seems to have necessitated the institution of the agents de change. In 1893 the corporation
law becomes still more liberal. Thus, gradually, as the
economic movement manifests itself, and the lawmaker
enacts measures of more liberal scope, the monopoly
—ipso facto—is found to expand the field of its privilege,
taking advantage of the economic movement of an
entire country and of the lawmakers' liberalism—standing by, a passive onlooker of that movement, and watching the value of its offices climbing up, as a result of a
progress in which it takes no part.
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And it was under these conditions that, in 1898, they
proceeded to a reorganization which strengthened the
stockbrokers' monopoly. No doubt, in 1898, ten new
offices were created. But the ten titularies had to indemnify their new colleagues, and the total market value of
all the offices remained the same, keeping its tendency to
rise, 0 as much from the fact of the expansion of the
securities, as from the weakening of the Coulisse.
No doubt, in 1898, brokerage rates were lowered, but
they were slightly raised again in 1901, and a lively press
campaign was started in latter times to demand their
restoration. b
Let us proceed to the last events.
(114) On July 22, 1901, the Compagnie des agents de
change of Paris entered into a treaty with the curb
brokers, according to the terms of which the latter may
obtain the stockbrokers' statements of their own transactions {bordereaux dy agents de change) in consideration of 20
per cent of the brokerage, when these transactions bear
on Turkish or Servian securities and relate to operations
balancing each other.
a The first office sold was valued a t 30,000 francs; about 1830 they rose
to 850,000 francs. After the July revolution they fell to .250,000 francs
and rose again to 950,000 francs before 1848. They declined at t h a t time
to 400,000 francs and reached again in 1857 2,400,000 francs. They declined to 1,400,000 francs after the war, and were unable to rise for some
time after the failure of the Union G6n£rale. (V. Courtois, Operations de
Bourse, 13 6d., p. 239.)
The value of each of the offices on the day following the Reorganization of the financial market was placed a t 1,600,000 francs, representing
for the 60 offices 96,000,000 francs. The ten new titularies each paid
1,372,000 francs to their combined colleagues, t h a t is to say, 13,720,000
francs, so t h a t the 70 offices were worth 96,000,000 francs as a grand
total.
& Semaine financiere du ''Temps," September and October, 1908.
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I n order t o fully understand t h a t clause, let us imagine
a banker, Peter, receiving t h e order from a client, Jack,
to b u y Turkish rente, and another banker, Paul, receiving
an order from another client, Louis, to sell.
Peter and Paul, bankers, meet on t h e Bourse and deal
together. They visit together a stockbroker, and ask
him for a sale and purchase s t a t e m e n t in t h e name of
one of t h e two. Together t h e y will t a k e all t h e necessary
measures, in order t h a t each m a y show his client b y means
of the said s t a t e m e n t t h a t t h e operation was legally
carried out.
I n t h a t respect it will be rather interesting t o cite an
important notice published on the subject by t h e "Annates
de Droit Commercial" managed by M. Thaller, professor
a t t h e law school of t h e Paris University:"
" People living at a somewhat remote distance from
t h e Bourse have still in mind the conditions under which
t h e Paris market was reorganized in 1898. They fancy
t h a t now t h e parquet des agents de change (the stockbrokers' parquet) strictly enforces t h e privilege established for
listed securities by article 76 of the Code de commerce; it
has even been said t h a t the coulisse de la rente (the rente
coulisse) has been spared. B u t it now happens t h a t a
compromise of wider scope, entered into with t h e syndicate of bankers dealing in securities for future delivery,
causes t h e public no longer t o understand anything of t h e
system of transactions and of t h e tutelage t h e law exercises over it.
" T h e safeguard which t h e personal mediation of t h e
stockbroker was t o give to t h e execution of bourse orders,
a

90312 0 —10

18

August, 1901, p. 225.
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is transformed into some kind of tithe, which he collects on
transactions concluded without him. The name 'remisiers'
is given to those who make contracts by themselves, with
the only proviso that they shall daily have their trades
recorded on the pad of an ' agent/ who, in return for a
percentage of the brokerage, will hand them an official
contract. And the members of the Parquet have lent
themselves to this playing of the part of a machine. In
order that the stockbroker shall run no risk, it was stipulated that the transactions countersigned by him should
be booked at once to balance one another—that is to say,
the transactions reported on the pad as purchases should
immediately be counterbalanced by recording a s^le to
the same customer, the same curb broker, at the same
price. b
"So far it has been naively believed: (i) That the
transactions by application were subjected to regulation
limits, such as the verification of whether there had been
more advantageous bids or offers (decree, October 7, 1890,
art. 43); (2) that a transaction by application that had
been immediately carried out had no validity; (3) that
the stockbroker held an indirect means of restricting
prices, because it was in his power to determine the amount
of cover to be exacted, and that wherever his agency does
not require him to exact cover, he ceases to be in a position to repress the market's outbursts. It was taken
for granted that all the bourse regulations were dependent
upon public order. But it rather seems that they were
at the mercy of a contract entered into by two corporations anxious to treat each other gently."
a See Le Marche Financier du ''Journal
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However, it is necessary to remark t h a t this agreement
was forced upon t h e stockbrokers. The Waldeck-Rousseau
Ministry was t h e n in power and was deeply shocked at t h e
way t h e financial market h a d been reorganized. The
economic principles of M. Caillaux, the Minister of Finance,
did not seem to him of a n a t u r e to admit t h a t a broad
market should be based on a monopolized organization,
which is necessarily narrow. In 1898 M. WaldeckRousseau had become counsel for the Coulisse after
t h e death of M. Clauzel de Coussergues; b u t t h e eminent
statesman, t h e Advocate-Prime Minister, was too highminded and conscientious to let his client's affairs
interfere with his government position. Moreover, any
legislative modification with a view to reorganize t h e
financial market, in the manner of the reorganization
of 1893, would have been a very serious proceeding,
a meaningless formula characteristic of his predecessor,
who h a d been his friend * * * before the "Dreyfus
Affair," and in opposition to whose policy t h e new
ministry was called " t h e Ministry of Republican
Defense." The members of t h e Coulisse were aware of
their lawyer's high-mindedness; they had the good sense
to understand it, and they abstained from asking the least
favor of him; b u t Waldeck-Rousseau, better t h a n anyone
else, knew t h e extent of the injustice done in 1898. The
stockbrokers knew it also, and when M. Caillaux, Minister of Finance, exacted t h a t they enter into an arrangem e n t with t h e curb brokers, they obeyed, being thoroughly convinced t h a t to resist would be of serious consequence, and t h a t the monopoly would not be worth a rap
t h e day a Minister made u p his mind to m a k e an end of it.
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Moreover, the stockbrokers are no theorists; not to a n y
greater extent t h a n t h e curb brokers are. One does not
feel embarrassed by considerations of public justice when
one is benefited by a privilege in becoming p a r t y to a
business. On the other hand, if one enjoys a monopoly,
he defends it t o t h e best of his ability. If t h e Governm e n t requires t h a t t h e monopolist give in, he m u s t give
in in order to hold on to whatever he can save. A n d
this is why t h e stockbrokers, when urged to enter into
an arrangement with t h e curb brokers, came t o terms,
yielding, however, as little as possible.
(115) In short, t h e French financial market was able
to fulfill its mission only by taking t h e liberties which
t h e law refused to grant to it.
The official m a r k e t of the stockbrokers, spurred on by
t h e competition of t h e curb brokers since t h e beginning of
t h e nineteenth century, has been transacting dealings for
future delivery. The laws gave in. They allowed t h e
stockbrokers to do t h a t which was forbidden t o t h e m .
They allowed t h e m to have sleeping partners (bailleurs
de fonds).
They allowed t h e m to deal in foreign securities. A t
t h e present time t h e stockbrokers are legally unable t o
close a deal with their clients, to have representatives in
a m a r k e t other t h a n t h e one with which they are connected. These interdictions are t h e very corollary of
their condition. They are ministerial officers, appointed
t o transact business in one market. To expand their
means of action can not be t h o u g h t of.
B u t are the curb brokers permitted to undertake w h a t
is forbidden t o t h e stockbrokers?
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On securities not listed by the stockbrokers—yes.
On securities listed by the stockbrokers—no.
If the curb brokers were to operate in officially listed
securities, they would encroach on the stockbrokers' monopoly, and would be liable to administrative fines for
want of being able to enter the name of a stockbroker
on the register prescribed for the payment of taxes on
bourse transactions; also to prosecutions in police courts,
and to see, besides, their clients plead the transactions
null and void.
The coulisse for rentes {coulisse de la rente) is tolerated.
The Registry Department enters no complaint against
its members, because the stockbrokers provide the curb
brokers in rentes (coulissiers a la rente) with special documents, valid only as regards the internal revenue—not
valid so far as the clients are concerned. And the clients
may plead against the curb brokers nullity of the transactions made for their account.
Credit companies and bankers may purchase or sell
listed securities over the counter. But they can not
apply purchases to sales. In such a case this would be
acting as intermediaries, and would fall under the ban of
the law of 28 Ventose, year IX, which punishes unwarrantable interference with the functions of the stockbrokers
(immixtion dans les fonctions des agents de change).
Besides, there exists a judicial tendency, whereby a sale
over the counter, even if carried out as a commercial
transaction free from any act of mediation, might be
considered as a case of unwarrantable interference with
the functions of the stockbrokers.

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In this way dealings in securities are subject to grotesque and incongruous legal regulations.
A reorganization of the financial market appears necessary. That of 1898 was not a reorganization. Its principal aim was to prevent the passage of the measure
which was then paramount in everybody's mind, and
which was to be founded on freedom, without excluding
regulation.
The freedom of the market—that is to say, free access
for everyone to the exercise of the profession of broker in
securities, freedom modified by a system of regulation
in the exercise of the profession—certainly would offer a
desirable compromise between the system of monopoly
and the system of absolute freedom.
But the French Government does not seem inclined to
study the question seriously: first, because the stockbrokers would have to be indemnified; and secondly,
because the stockbrokers themselves are desirous of holding on to their present monopoly. As time passes, the
securities, continually on the increase, tend to increase
their profits. A financial power has been created whose
existence, whose ever spreading influence, form the subject of a serious economic problem, which some day may
turn out to be an even more serious political problem.

&

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