Chicago Curb Exchange

The Chicago Curb Exchange was an organized securities market established in Chicago, Illinois, during the expansion of American securities trading in the late 1920s. It was incorporated in 1927, formally organized on February 6, 1928, and began business in July of that year. The market was also referred to as the Chicago Market and was created in competition with the Chicago Stock Exchange. Its principal purpose was to provide a trading venue for securities of new companies, smaller concerns, and other issues that were not listed on the principal organized exchanges. The exchange emerged during a period when curb markets served as relatively flexible venues for securities that did not meet the listing practices or commercial focus of larger exchanges. At its organization meeting, members elected officers and adopted a constitution and bylaws. Frank L. Schreiner, associated with the Chicago Board of Trade, was selected as the first president named during the organizational process, while John G. McCarthy became treasurer and James A. Cavanaugh secretary. August C. Babize subsequently served as the exchange's first president in active operation. Broker Adolph Kempner was described as an important force in establishing the market and served as president from 1928 to 1929. The Chicago Curb Exchange initially performed strongly. In 1928 and 1929 it attracted substantial activity, with one 1929 session recording turnover of 175,800 shares and total annual volume reaching 6,645,635 shares. Its business centered on equity trading and related securities transactions rather than on a broad range of modern exchange products. The market also became involved in questions concerning dual listings, including a 1930 dispute involving Walgreen Company and Standard Oil Company of Indiana. Some members objected to what they viewed as conflicts involving the exchange's governors and the development of the securities market operated by the Chicago Board of Trade. During the 1930s, the exchange faced both commercial deterioration and a more demanding regulatory environment. It adopted measures intended to support corporate financing while providing investor protections, and it sought relief from provisions associated with the newly created Securities and Exchange Commission. The SEC also examined allegations concerning possible manipulation in the stock of Paducah Cooperage Company. In February 1935, the agency expanded its investigation into the exchange and planned a hearing on the exchange's request for exemption from federal requirements. The market's financial and operating position weakened as the decade progressed. It reported deficits in 1934, 1935, and 1936. Although the exchange approved new and additional listings in 1936 and obtained exemptions in several states, its trading volume fell sharply. In 1937 it recorded only 560,584 shares of stock trading and approximately $26,000 par value of bond transactions. By February 1938, membership had declined to 77, and many members were also active on other exchanges. The exchange leased trading space in the Postal Telegraph Building rather than operating from a large independent market complex. On February 4, 1938, the members voted unanimously among the recorded votes to liquidate the organization and apply to cancel its registration as a national securities exchange. The stated reasons were declining membership, a four-year deficit, and insufficient listing and transaction volume to justify continued operation. The SEC approved the application on February 26, 1938, and permitted withdrawal of the exchange's registration two days later. Trading moved to a cash-only basis on March 7, and permanently ended at 2 p.m. on March 15, 1938. The board was then dissolved, and the exchange ceased to exist without a closing ceremony.

The Chicago Curb Exchange was founded as a Chicago securities market during the expansion of curb trading in the United States. The organization was incorporated in 1927 and formally arranged on February 6, 1928. At that meeting, members elected officers, adopted governing rules, and established a board of directors. Frank L. Schreiner of the Chicago Board of Trade was named president in the organizational account, with John G. McCarthy as treasurer and James A. Cavanaugh as secretary. The exchange began actual business in July 1928. It was intended to trade securities of new companies and smaller concerns and operated as a competitor to the Chicago Stock Exchange. The market was also known as the Chicago Market. August C. Babize was the first president associated with the exchange's operating period, while broker Adolph Kempner was identified as a major force in its establishment and served as president between 1928 and 1929. The exchange's early years coincided with strong speculative and investment activity. Trading was particularly successful in 1928 and 1929; one session in 1929 produced turnover of 175,800 shares, and the year's reported volume reached 6,645,635 shares. Its business consisted principally of securities trading and listings for issuers that were smaller, newer, or otherwise outside the main exchange market. The exchange encountered governance and market-structure disputes as it developed. In 1930, members objected to the dual listing of Walgreen Company and Standard Oil Company of Indiana. Thirty of the exchange's 200 members signed a petition seeking the resignation of three governors whom they viewed as active in developing the Chicago Board of Trade's securities market. The dispute reflected competition among Chicago trading institutions and concerns about whether the curb exchange's leadership was adequately independent. The onset of the 1930s brought a more formal federal regulatory framework. Under President Clarence G. Troup, the exchange adopted measures in 1931 designed to assist company financing while protecting investors. After the creation of the Securities and Exchange Commission, it sought an exemption from newly applicable provisions. The exchange also requested an SEC inquiry into alleged manipulation involving Paducah Cooperage Company stock. In February 1935, SEC officials announced that their Chicago investigation would be broadened. The expanded proceeding covered both the allegations concerning the stock and the exchange's application for exemption from SEC requirements. The available account does not establish a final finding of wrongdoing against the exchange. By the middle of the decade, the exchange's operating position had weakened. Its deficit was reported as $17,931 in 1934 and $17,271 in 1935. In 1936, it reported profits of $23,358 against expenses of $29,597, producing another deficit; net assets at the end of that year were stated as $74,652 in cash and government bonds. The exchange continued trying to sustain its listing business. Its governors approved 14 new listings and four additional listings in 1936, and the market obtained exemptions in Texas, Kentucky, Oklahoma, and Kansas. Two memberships changed hands during the year, at reported prices of $1,000 and $1,250. Membership stood at 82 in January 1937. The efforts were not enough to reverse the decline. In 1937, the exchange handled only 560,584 shares and approximately $26,000 par value of bonds. By February 1938 it had 77 members, many of whom also participated in other exchanges. It leased trading quarters in the Postal Telegraph Building, indicating the relatively modest scale of the institution compared with major national markets. On February 4, 1938, the membership voted to liquidate the exchange and apply to the SEC to cancel its registration as a national securities exchange. Sixty-five members voted for dissolution and none voted against it in the reported ballot. The application cited declining membership, four consecutive years of deficits, and a level of listings and transactions too low to justify continued operation. The SEC approved the application on February 26, and the exchange was allowed to withdraw its registration two days later. Trading was placed on a cash-only basis on March 7. At 2 p.m. on March 15, 1938, trading permanently stopped, the board was dissolved, and the Chicago Curb Exchange ceased to exist without a formal closing ceremony.

• 1938

  Liquidation and closure

  [1]Chicago Curb Exchangeen.wikipedia.org

  Members voted to dissolve the exchange in February; trading ended permanently on March 15.

• 1935

  SEC investigation expands

  [1]Chicago Curb Exchangeen.wikipedia.org

  The SEC broadened its investigation to cover the exchange's exemption request and alleged manipulation involving Paducah Cooperage Company stock.

• 1930

  Dual-listing dispute

  [1]Chicago Curb Exchangeen.wikipedia.org

  Members challenged dual listings involving Walgreen Company and Standard Oil Company of Indiana and questioned exchange governance.

• 1929

  Peak early trading activity

  [1]Chicago Curb Exchangeen.wikipedia.org

  Annual share volume reached 6,645,635 shares, with one session recording 175,800 shares.

• 1928

  Formal organization and opening

  [1]Chicago Curb Exchangeen.wikipedia.org

  Members adopted a constitution and bylaws on February 6, and the exchange began trading in July.

• 1927

  Incorporation

  [1]Chicago Curb Exchangeen.wikipedia.org

  The Chicago Curb Exchange was incorporated as a proposed organized market in Chicago.

A regional curb market positioned as a flexible trading venue for new companies, smaller businesses, and securities outside the principal Chicago exchange listings.

• Securities trading · 1928

  Unlisted securities

  The exchange's core business was trading securities that were not listed on the principal organized exchanges. Its curb-market structure gave investors and brokers a venue for issues that did not fit the listing practices or scale of larger markets.

• Equities · 1928

  Small-company equities

  The market specialized in shares of new companies and smaller concerns. These listings represented the exchange's role as a regional venue for emerging issuers and securities outside the main Chicago exchange market.

• Fixed income · 1928

  Corporate bonds

  Bond transactions were part of the exchange's securities business, although the reported 1937 activity was limited to approximately $26,000 in par value of bonds.

• 1935

  SEC investigation and alleged Paducah Cooperage stock manipulation

  The exchange requested an SEC investigation into alleged market rigging involving Paducah Cooperage Company stock. The SEC subsequently expanded its Chicago inquiry to include the exchange's application for exemption from federal securities requirements. The available source does not state that the allegations resulted in a final finding against the exchange.

  Source

Read more

• 1938

  Decision to liquidateStrategy

  Background

  The exchange had declining membership, four consecutive years of deficits, and insufficient listings and transactions to support continued operation.

  Action taken

  On February 4, members voted to dissolve the organization and apply to cancel its registration as a national securities exchange.

  Aftermath

  The SEC approved the application on February 26, trading became cash-only on March 7, and all trading ended on March 15, 1938.

  Source

• 1935

  Application for exemption from SEC requirementsOther

  Background

  The newly created Securities and Exchange Commission introduced federal requirements that affected national securities exchanges.

  Action taken

  The Chicago Curb Exchange sought an exemption and became the subject of an expanded SEC investigation and hearing process.

  Aftermath

  The regulatory process continued during the exchange's later decline; its registration was ultimately withdrawn in 1938 when the market liquidated.

  Source

• 1931

  Adoption of investor-protection and financing measuresStrategy

  Background

  The exchange was seeking to remain useful to issuers while responding to concerns about investor protection during a changing securities-market environment.

  Action taken

  It adopted measures intended to facilitate company financing while also protecting investors.

  Aftermath

  The exchange continued operating, but later faced federal scrutiny, persistent deficits, and declining transaction volume.

  Source

1. 1Chicago Curb Exchangeen.wikipedia.org