This outline of the procedure at a settlement is a general one, and applies to the bulk of Stock Exchange bargains. It has exceptions, however. For instance, securities to bearer are dealt in without any passing of tickets. But the main principles remain the same in all bargains done for the account; and it needs no further explanation to demonstrate how greatly the fixed fortnightly settlement facilitates Stock Exchange transactions. Briefly it means that all sellers of stock agree to deliver on the same day, upon which the buyers are prepared to take it up and pay for it; and that when there have been many dealings between members in the same stock, it is only the balance that has to be transferred.
Bargains in the scrip and securities of a new loan or company are consummated at what is called the "special settlement." Members of the Stock Exchange can buy and sell between themselves and outsiders to their hearts' content, but although there may be mutual arrangement for payment of money and delivery of stock, from the point of view of Stock Exchange law no payment need be made and no shares delivered until the special settlement. The Stock Exchange Committee appoints the special Settling day on the application of members interested in bringing about a completion of the bargains. Before it will fix the day, the company, the bargains in whose shares have to be settled, has to comply with certain formalities to the satisfaction of the Committee. The Committee requires certain documents showing that the company has been incorporated, on what terms the shares have been issued, how many have been issued to the public in proportion to the amount of the company's capital, and so on. It has also to be shown that the share certificates have been issued, or that they are, at least, ready for issue, for obviously it would not do to compel the delivery of and payment for share certificates which have not yet appeared.
The formalities seem simple enough, and yet there is very frequently considerable delay, giving rise to much protest, in the granting of a special settlement. In the majority of cases, this delay seems to arise from the desire of some of those connected with the company to put off the day of reckoning. They may have been buying the shares heavily in order to make the company cut an attractive figure in the public eye at its outset, and may not be over-anxious for the settlement day to arrive before they have had an opportunity of unloading the shares they have bought. At all events, the difference between the long time it takes to obtain a special settlement in the shares of some out-of-the-way mining company, and the short time it takes to obtain one in the case of some great Government loan not subjected to manipulation, is often remarkable. Generally speaking, bargains in the shares of new companies and loans are done for the special settlement, and if no special settlement is granted, these bargains are off; but the instances in which the Stock Exchange Committee refuses a special settlement are very rare indeed. When once a special settlement has been granted and taken place, bargains in the securities are settled at the ordinary Stock Exchange settlements as they occur; in fact, a special settlement is merely a first settlement.