Business & Finance: Exchange Seats

Many a U. S. citizen whose birthday coincided with the beginning of the Twentieth Century includes among his childhood recollections hours spent in operating, despatching, wrecking Lionel toy trains. There were engines, cars, tracks, tunnels, bridges, signals—everything but the Interstate Commerce Commission and a valuation wrangle. Early trains ran by a wound-up spring, but toy-train makers took readily to electrification and Lionel Corp. has for some years been known as the world’s largest maker of electric toy trains. It was founded in 1901 by Joshua Lionel Cowen, who apparently did not like the Joshua (he is known as J. Lionel) and who christened the company with his middle name.

Youngest Member. Last week the New York Stock Exchange got a new member, Lawrence Cowen, 21, Street “Baby.” He paid $585,000 for his seat. As he is the son of J. Lionel Cowen, it was presumably from toy train earnings that the seat was purchased.

Idle Members. It would doubtless be an injustice to suggest that Youngest Broker Cowen will be anything but an active, busy, hard-working member of the Exchange. Many an idle son, however, has been bought an Exchange membership by a rich father and has continued idle. There are also more than 100 extra-New York members who have no floor representatives. Additional memberships are held by such men as John D. Rockefeller and J. Pierpont Morgan who occupy seats to save the commissions which nonmembers must pay. From 300 to 400 of the 1,100 members are classed as inactive, leaving all the work of the Exchange to some 70% of its membership. When, as during last December’s bull market, nearly 7,000,000 shares change hands in a day, floor members become wilted and haggard; rooms in Manhattan hotels are engaged for their night-working clerical staffs. The long-standing necessity for more members became acute last December, when tickers were running more than an hour behind actual prices. The market has been comparatively quiet during January, but with some observers predicting that a ten-million-share day will eventually be recorded, it has become constantly more necessary to take some measure of precaution against the resumption of heavy trading.

More Members. Therefore, last week, the Board of Governors of the Exchange recommended the addition of 275 new Exchange members, a 25% increase which would bring the total membership to 1,375. Present members must vote on this recommendation but it seemed certain to pass perfunctorily. Each of the 1,100 members will be given a quarter-interest in a new seat. The record seat price (established last week) was $625,000, but the addition of 275 new seats will somewhat reduce each seat’s value. The quarter-interest will probably be worth about $125,000, assuming a $500,000 price for each of the new seats. Thus the new membership program is somewhat like the declaration of a stock dividend, the Exchange members dividing among themselves some $137,500,000. Inasmuch as the new members will be competing with the old, it was necessary to distribute the profits on the new seats among the old members, otherwise they would hot be likely to vote for a measure which would increase the number of traders dividing the day’s commissions.

Exchange History. The Stock Exchange was formed in 1792 when 24 brokers gathered under a buttonwood tree, not far from the present Exchange site, and agreed on methods of trading. In 1817 the Exchange acquired a charter; it also moved indoors to a trading room at No. 40 Wall St. It was not until 1868 that seats were considered valuable enough to sell; 1868-69 prices ranged from $3,000 to $7,500. In 1869 the 533 Stock Exchange members joined with 173 Government Bond Department Members and with 354 members of the Open Board of Brokers, formed a Stock Exchange with 1,060 members. In 1879 the Exchange needed money to buy additional real estate, sold 40 seats. Since this sale the membership has not increased, members in 1925 voting down a 25-member increase because they felt that the value of their own seats would be impaired by the arrival of newcomers.

Almost every week in the last few months has seen a new high record for a seat purchase. From its $3,000 valuation in 1868, a seat rose to $16,000 in 1879, to $34,000 in 1885. Then came a 15-year slump with seats quoted at around $20,000. In 1899 the bull movement in seats resumed, during 1901 the price reached $80,000. But not until 1919 did a seat sell for $100,000 and even in 1925 there was a $99,000 sale. There are at present 25 members who purchased seats before 1890. Two who have seen their seats increase vastly in value are William B. Wadsworth (seat purchased May 3, 1869) and Mitchell C. Bouvier (seat purchased June 25, 1869). Their seats are worth more than 100 times the purchase price.