Foreign Securities

The Governors of the New York Stock Exchange have contended with these facts: 1) U. S. investors have more money than U. S. industries, railroads, public utilities and governmental subdivisions want to borrow or are willing to trade for stock shares. 2) In consequence U. S. investors have turned to foreign securities. Last year they bought $1,212,689,000 of foreign bonds. 3) The Exchange lists 76 foreign bond issues, worth $6,000,000,000 at par. 4) The Exchange lists 12,000,000 shares of 22 foreign stock issues only by subterfuge. New York state law forbids the Exchange listing them directly. 5) Uncounted U. S. money is buying foreign stocks through private bankers. Much of this foreign stock is sound. But much also is unsound, could not pass the Stock Exchange's rigid tests of reliability. 6) Thoroughly reliable foreign stocks at present have no ready trading market in the U. S.

The Governors pondered. By admitting foreign stocks for listing under stringent Exchange rules, most of these problems would be solved. The Exchange could handle them, because it intends to increase its floor space by onefourth; and the members are eager for them, because they would increase exchange transactions by $1,000,000,000 yearly, yielding large brokerage fees.

But the big obstacle is the New York law. All stocks admitted to York law. All stocks admitted to the Exchange listings must be registered; and most foreign stocks are made out to "bearer." That is, they may be traded around like U. S. $1 bills. To leap over this law, investment bankers have adopted this subterfuge. They deposit foreign stock with a trust company, which in turn issues trustee certificates against the escrowed stock. Such stock is U. S. stock, and is passable on the Exchange. So the Governors last week had a draft made for proposal to the New York Legislature--that "bearer" stocks, as well as "registered" stocks be made legal for Exchange trading.

The original plan was to ride the proposed law through the Legislature in an unobtrusive gocart. But Senator Bernard Downing, Democrat leader, heard of it at Albany; cried: "The State Senate will give such a proposition a great deal of serious attention."