It is of course impossible to give a detailed account of Stock Exchange operations within the limit of a single chapter, but a short explanation of the terms in general use may be of interest to the student.

No one is allowed to do any business on the London Stock Exchange unless he be a member, or the authorised clerk of a member. The class of men called "outside brokers" either do business through a member of the "House," or else they buy and sell shares for their customers without making use of the Stock Exchange at all.

The members of the latter are divided into two classes, stock "jobbers" or "dealers" and stock "brokers," an arrangement peculiar to this country. All orders to buy or sell securities are given by the public to a stock broker, who goes to the House and makes a bargain on the required security with a jobber. The broker makes his profit by charging a commission to the general public; the jobber makes his, by quoting a double price for all securities in which he deals; the higher price is the one at which he is willing to sell, the lower that at which he will buy. If the broker wishes to deal, he, without telling the jobber whether he is a buyer or a seller, asks him to quote a price, and, once having quoted a price, the jobber is, by the rules of the House, bound to do business at the price up to an amount which in most cases is fixed at £1,000, though, in the case of shares, usually less. Say the jobber quotes 99 to 100 as the price; the broker, if he is satisfied, mentions the amount he wishes to buy or sell, and the bargain is duly entered; but he may think the margin between the two prices is too large, in which case he will ask for a "closer" price. If the jobber consents to this he may quote 99 1/4 to 99 3/4, or perhaps 99 1/2 to 100. The extent of the margin between the two prices quoted depends upon the volume of the transaction in the particular security. If it is one which is being constantly bought and sold, the difference will be small, as, for instance, in Consols, where the difference is rarely more than one-eighth. If, on the other hand, it is a security in which few transactions occur, and which therefore the jobber may find difficult to deliver or to sell again, the difference will be much greater, and quotations of securities such as local brewery stocks may be found at, say, 88 to 91.

The securities which are dealt in on the Stock Exchange may be divided into three main classes - stocks, shares, and bonds.

The capital of a company or the amount of a government or corporation loan is sometimes issued so as to be divisible more or less at the will of the purchaser, in which case it is called "stock." Some stock, such as that of the Consolidated Fund, can be dealt with in any sum, so long as fractions of a penny do not occur, whilst other stocks can only be bought or sold in multiples of a pound or five pounds, and so on. English stocks are always quoted on the Stock Exchange for the £100 of stock.

In other cases the capital of a company is divided into a number of fixed and usually equal portions which cannot be divided, in which case these portions are called "shares."

A debenture bond is a promise to pay a certain sum of money with interest, usually in English companies £100 or multiples of £100, but occasionally for smaller sums. They are redeemable either at a fixed period or at a time which shall be determined by the public drawing of lots; in other cases they are irredeemable. Many debenture bonds are secured by a "floating" or specific charge over the general effects of the company, but this is not a necessary qualification of a debenture.

British Government Stock is "inscribed" or registered in the books of the Bank of England. The owner's title is evidenced by the entry in the books, and no document of title is issued, the stock receipt given at the time of purchase being of no use except as evidence. All transfers of stock have to be made by the personal attendance at the Bank of England of the proprietor or of a legally appointed "attorney." In the case, however, of most railway and other companies, a stock certificate is issued, which is prima facie evidence of title and which must be produced whenever the stock is transferred to another holder. Similar certificates are issued to the proprietors of shares, and in the case of a transfer of the share from one proprietor to another, the company require the production of a duly executed transfer deed before registering the title and issuing the new certificate.

Some American Railroad certificates have a blank form of transfer on the back, and in order to expedite their negotiability in this country it is the custom for the registered holder to sign the transfer in blank and for the certificates to be dealt in as if they were bearer securities negotiable by delivery. The registered holders are usually certain well-known firms in London who are willing to undertake the class of business, but the real owner is the possessor of the certificate. Dividends are paid to the registered holders, and are handed on to the real owner on production of the certificate, a small commission being usually charged for so doing.

A bond is usually payable to bearer, and if so, is transferable by mere delivery, with the least possible delay and formality. Most of the international securities, such as foreign government loans, are issued in the form of bearer bonds, in order to facilitate their transfer from one country to another. Attached to the bearer bond is a sheet of paper slips called "coupons," each of which entitles the holder to interest for a certain period, either three months, six months, or a year. The coupons are distinguished by numbers, corresponding to the number on the bond, as well as a number indicating the order of payment. The company, of course, has no knowledge of the ownership of the bonds, and pays the coupons to the individual presenting them. No bonds will be dealt in on the Stock Exchange unless all the coupons are attached, and when these are exhausted and the bond is not yet due for payment, it is necessary to send the latter to the officers of the company or the agent of the government, as the case may be, in order to obtain a fresh sheet, unless there be attached to the bond a slip called a "talon," the production of which entitles the individual presenting it to a fresh supply of coupons.