Hooked Fisherman

Expert fly-fishermen regard dandified little George Michel Lucien LaBranche as their foremost U. S. authority. His Dry Fly and Fast Water is an angler's lexicon. Occasionally, for reasons which his friends have never been able to discover, he goes fishing in hipboots, cutaway, light waistcoat, wing collar. Fisherman LaBranche is also a stockbroker, and a rich one. He learned his trade at the swift hand of an authority as revered among brokers as is Mr. LaBranche among fishermen. For years he was secretary to the late great Speculator James R. Keene, whom J. P. Morgan the Elder hired to make the market for his newly-issued U. S. Steel.

While casting this season in the fast waters of the New York Stock Exchange, Fisherman LaBranche hooked himself badly. From the rostrum of the Exchange it was announced last week that George Michel Lucien LaBranche had been suspended for two years "for conduct or proceedings inconsistent with just and equitable principles of trade."

LaBranche & Co. is a firm of "specialists" who, acting for other brokers, keep a record ("book") of orders placed above or below the market. When the market price reaches the prices fixed in the orders, the specialist executes them. Because the specialist thus knows the supply & demand factors better than anyone else, the Stock Exchange has passed very strict rules forbidding the specialist to use this inside information for his own gain. Offenses are called "trading against the book."

While acting as the specialist in Atlantic Refining, Fisherman LaBranche had received orders to sell a total of 3,500 shares at $31 a share. On his book he had orders to buy 5,000 shares of Atlantic Re fining at that price. Instead of matching the 3,500 sell orders with 3,500 of the buy orders, Fisherman LaBranche bought for his own firm 2,000 shares at $31, thus filling only 1,500 of the buy orders, not 3,500 shares as he could have done. Presumably those people whose orders went unfilled had to pay higher than $31 to get their stock. Likewise while the specialist in American-La France & Foamite, Broker LaBranche, aware that there were orders to buy large blocks of stock, had guided his personal trading accordingly. The firm of LaBranche & Co. was not affected by its senior partner's fouled casts.

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