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yh E surging mass of shouting traders on the floor of the Toronto Stock Exchange gives the impression of confusion without meaning. But the apparent confusion covers the hard- headed operation of a number of markets. And these markets operate on the same principle as an auction sale on a farm. The floor traders represent the buyers and sellers who, by placing orders through the member brokers, are either bidding or asking a price. It has often been said that if stock ex- changes did not exist they would have to be dnvented, for the facilities of the Stock Ex- changes afford a ready market and an indica- tion of the value of stocks at any given mo- ment, Imagine the problems of a man settling an estate if a ready market for the securities did not exist. He would be forced to ask for bids on them without any real idea as to their value. He might even find it necessary to shout his wares on the street until joined by others seeking to buy or sell their shares. This, of course, is how stock markets came into being; and such actual street markots existed in London or New York around the turn of the century, What is now known as the American Stock Exchange was once called the Curb market because trading took place along the street curbs, The hand signals used by modern day floor traders had their origin there for in that bygone day the brokers' clerks hung out the office windows and wig- wagged instructions to buy or sell to the brokers trading in the street below, Besides serving the investor who may wish to buy or sell, the Stock Exchange also serves the traders and speculators whose trading activity helps provide a broader and more stable market in which orders can be executed quickly. Controlled confusion on the floor of the Exchange. One of the classic definitions of the stock, market is that it is a place where buyer and seller meet and agree on the price of the transaction. A better definition is that the stock exchange is a place where buyer and seller conduct a transaction, one believing that money is of greater value than the stock and the other believing that the stock is of greater value than money. Obviously, one of the parties has to be wrong for if the seller's judgment is correct, the buyer will be dis- appointed in seeing the price of the stock decline, Conversely, if the buyer has been more astute and seen an evident bargain in the stock, the seller will blame himself for his lack of foresight, ; In this complex industrial world of ours, the investor simply cannot keep abreast of all the changing factors that affect stock prices. While he may readily see that large imports of compact cars will have a direct effect upon the sales volumes and profits of domestic manu- facturers, he may not have the information available to judge the impact that the dumping of Russian oil into world market will have on gasoline prices in Canada, Thus, the stock broker must be an adviser as much as an agent to his clients and the larger brokerage houses maintain statistical depart- 'ments to assemble and assess such data. The stock exchange has another major function that is an integral part of our capi- talistic system. The financing of major projects . such as pipe lines, steel mills or oil refineries takes very large amounts of capital. To amass such capital it is necessary to find sufficient. people with money to join as. partners in the venture. The simplest method of doing this is to capitalize the company with several million shares and make these shares available to those members of the investing public who are in- terested in participating in the venture. We use the word "venture" advisedly here, for until a project is completed and in opera- tion, no definite indication of the earning ability can be made, Those who seek capital profits must also be prepared to take risks with their capital, And, if the venture is suc- cessful, the investor is awarded by seeing the price of his shares advance in the stock exchange quotations, The word venture is also used advisedly when applied to companies hoping to locate commercial oil or mineral deposits, The ratio of risk to reward is always very high, for no one knows whether a profitable operation will develop until a considerable mount of money has been spent in exploratory drilling, Success, or even partial success, can generate such op-: timism that the stock in such a venture sells far above its real value, which is determined, in the final analysis, by what can be earned 'per share over a period of years, The great bull market in uranium stocks was a case in point, ; Conversely, when speculative activity has. long been absent from the markets, 'stocks are selling at very good yields and the mining and oil stocks show little activity, the exchange reflects the indifference we see now. This is another function of the stock market. It is a mirror reflecting the attitudes of all who come to trade in it. These attitudes spread far beyond the stock exchange, They are the attitudes of consumers as well. In the consumers' decisions to buy or not to buy awn' outboard motor, an automobile, some new furniture or even a garden hose lies the trend of general business activity, The stock market can be viewed as taking a continuous poll of public opinion and its role as a forecaster has often been vindicated by later events, In its many roles the stock exchange has. CONTINUED ON PAGE 27 «