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r own behalf the business they are so eager to
transact for others for a Consideration--the trifling brokerage of 1/16 per cent.
If the real nature of the transaction were described, none but very foolish persons would enter on so transparently dangerous a course.
The stockbrokers of the particular class we are considering (for, of course, many stockbrokers are thoroughly respectable men) say to the moths, 'By risking so much you may gain large sums.' If they told the truth they would say, ' By paying in so much you enable me to purchase or sell such and such an amount of stock, at such and such sure profit through brokerage, without any risk.' The cover system has been devised to protect the stockbroker, not to profit ' the speculator.
Consider the position of the stockbroker in the case just described, after the sum of 10/. 12s. 6d. has been paid in. He purchases 1,000/. Great Western Railway Stock for his client, and watches the telegraphic tape.
If the stock rises in value his client is able to close the account at a profit, and in that case will start a new account, with fresh brokerage, and be profitable to the stockbroker. Therefore it is better for the broker to have a lucky client, or even to give occasionally a useful hint in the beginning of a new client's career. But if the stock falls in value, the stockbroker, at the moment when the loss is equal in amount to the cover, closes the account, without loss to himself, and is the gainer by the brokerage.
But 'the brokerage is only 1/16 per cent., and that is
a mere nothing.' If the brokerage were 1/16 per cent. on the money risked by the speculator that might more reasonably be urged. It is, however, 1/16 per cent. on a hundred times that amount. That is to say, it is not one but one hundred 16ths per cent., or 6 1/2 per cent. on the speculator's money.
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