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Short-selling has not caused the rash and extravagant gumbling of the past few years; it has not given rise to the heavy losses, that have been incurred, to the ruin that has been caused; to the crimes that have been committed. If it has had any effect it may have aggravated the losses, but it has certainly not given rise, either to the gambling or to its results, and the coming into operation of Mr. Keswick's Ordinance will neither stop gumbling in the future, nor in any way mitigate its effects. It may very possibly aggravate them enormously. The share market is operated on by both Bulls and Beurs. They nuntually counteract and restrain each other. The unrestrained success of either leads to a crisis and a loss. If Mr. Keswick's Ordinance stops, as is hoped, the operations of the speculators for a fall, those operating for a rise will hold unchecked sway, and the fall will come and come inevitably from the very success of their dealings.
Your Memorialists subinit therefore that Mr. KESWICK's Bill will not in any way succeed in checking the admitted evil of which he complains, rash and excessive speculation and heavy consequent losses and ruin to many. Short-selling is not the cause of, nor one of the cases, nor even a
principal feature, in the disaster and short-selling may be said to be, while buying on time and for the rise is unchecked, a necessary corrective in the market.
But your Memorialists further most respectfully represent and submit that not only will Mr. Keswick's Ordinance by no means remely the evils it is brought forward to eure, but it will soriously impede all legitimate business.
In the first place the insertion of the mumbers of the shares sold in a contract for sale on time altogether changes the legal character and consequences of the document. Your Memorialists are advised that instead of an executory contract to be satisfied by the delivery of any shares of the kind named and giving rise to an action for damages only for non-delivery, a contract under the new Ordinance will become a bargain and sale by which the property in the shares mentioned in it is transferred from the date of the contract and the risk shifted and that the contract can only be fulfilled by the delivery of the precise shares enumerated. This in the peculiar circumstances of the Colony will give rise to much trouble and possible litigation.
A large business is transacted in the unst legitimate way between London and Hongkong in shares, and between Hongkong, Shanghai, Yokobama, Manila and other places. A man contracts in Loudon to buy 50 shares in any company and he can now sell these at once on the Hongkong market, taking advantage of any local improvement. When Mr. KESWICK's Ordinance comes into force he will no longer be able toxlo so. To sell here he must be able to give the numbers of his shares. He cannot know that till they are actually delivered in London on the settling day. To wire the numbers out here will cost much money, nore, probably, than the difference in price between the two places. He cannot operate, however wealthy or lowever legitimate his business. The same rule applies with greater or less force according to distance to every place with which Hongkong deals.
This largely limits the transmissibility of shares and iu so much lessens their market value.
In the local market may difficulties and much delay will arise. At present a man no matter how busy is able to direct a broker in a few words. "Sell or buy me 50 or 100 of this stock or that ut such a price." He can no longer sell without looking in his safe, or in his leger to see what shares he has and ascertaining their numbers or marks, or sending to bis Bankers to find out. These are little things in themselves, but they will check and check largely the freedom of sale and the number of transactions and will steadily lower values.
A merchant has purchased 50 shares in a company by their numbers and enters into a contract. to sell them at the next monthly settlement at an eulanced price. B to whom he sells has those shares under his control and resells for the same date to C to resell to D, and so on through the alplaint. That the same lot of shares should be dealt with in such a fashion is not unusual. If the original vendor, for any reason whatever, is unable to deliver these identical shares when the date comes, see the confusion. None of the others are able to deliver as per contract, even although ready anel willing to go into the market and bay 50 other shares. Each purchaser is able to sue for damages if the shares enumerated in his contract are not tendered aard to refuse to take delivery of any others, if the state of the markets uakes him anxions to get rid of his burgnia.
Tu many other and ster ways the action of Mr. Keswick's Ordinance will render slow and difficult of management the operations of the share market, a market in which of all others spendy action is necled. This will diminish sales and transactions and steadily lower prices of all shares to the injury of all local companies and of business generally.
In conclusion, your Memorialists most respectfully submir-
(1.) That this Bill of Mr. Kaswien's has been pressed through Comeil in opposition to your Lordship's instructions, that it is opposed to a greater or less extent by three of the Luofficial Members of Council, and that a fourth is absent and has been absent during the delates; that it is opposed by the Chamber of Commerce and by the general feeling of this Commercial Community.
(2.) That no public interests are at stake or are involved in the Ordinauge. but only the relief and protection of private individuals, who have only themselves to blame for their losses.
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(3.) That it is aimed, confessedly aimed, at one or two individuals and that it is not even
alleged that short-selling is general or generally practised.
(4.) That the evil complained of-rash speculation in shares and the consequent losses-are not the rash speculations and losses of short-sellers, but the rash speculations and losses of impecunious purchasers for a rise and that the prohibition of short sales will neither prevent persons animated by the gambling spirit from speculating for the rise at any time hereafter when things look promising, nor will it prevent the conse quent reaction, heavy fall and serious loss that must always follow on such opera- tions whether there is or is not short-selling to aggravate the position.
(5.) That short-selling, if it has had any part in recent losses, has had but a small part and that these losses can easily and well be accounted for by well-known facts in the history of the past three years.
(6.) That the rule of law now introduced will seriously hamper all legitimate dealings in shares and change the legal character of the contracts for the sale of shares on time, will stop all dealings with places outside of the Colony, and will impede the local business, to the injury of investors, dealers and brokers alike, to the diminution of the value of the shares in local companies and to the injury of the trade and prosperity of the Colony.
(7.) That it is a serious and one-sidled interference with the freedom of trade in a business now universally recognised and practised, unauthorized by any precedent in the Legislation of Great Britain or of her Colonies and condeaned by the experience in the past of England, America, France and Germany.
Your Petitioners therefore humbly pray your Lordship--
(1.) To take this their respectful Memorial and Petition into your earnest consideration. (2.) To advise Her Most Gracious Majesty the QUEEN to disallow the Ordinance introduced by the Honourable J. J. KESWICK and passed by the Legislative Council of Hong. kong entitled An Ordinance to amend the Law in respect of the sale of Shares in Companies registered under the Companies Ordinances 1865 to 1886 and in other Joint Stock Companies.
(3.) If your Lordship should deem any legislation on the subject of Shares and Share Dealing desirable, to direct a Commission of Inquiry to take evidence and report on the subject.
And your Petitioners as in duty bound will ever pray, &c., &c., dc.
Other agnatures
not kept.
· FOR THE CHARTERED MERCANTILE BANK OF I I DON CHINA.
DA, DANA 360 A HONGKONG,
FOR THE CHARTERED BANK OF INDIA
AUSTRALIA AND CHINA
MWhiteheadANGER HONGKONG, I havey &.C.
The J
Audeffries.
hukeasterberg & Lothascomb
Thewan 6.
Muchud The Tomok
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