In the discussion of the settlement, mention has been made of those who do not desire to settle as the time comes round. These are mainly Bulls and Bears. To use the time-honoured definition, the Bull is one who buys what he does not want, and the Bear is one who sells what he has not got. The terms were used in their Stock Exchange sense long before the Stock Exchange came into existence—a hundred years before, in fact. At all events, they were in full use when the eighteenth century was in its teens, when dealers in stocks and shares were wandering homelessly about Change Alley. This is shown by the literature of the time. And soon after the middle of the eighteenth century we find Horace Walpole writing to ask a political friend if he knew what a Bull and a Bear and a Lame Duck were. "Nay, nor I either," wrote Walpole, anticipating the answer, "I am only certain they are neither animal nor fowl, but are extremely interested in the new subscription."

Walpole seems to have been a little weak in his Stock Exchange zoology. It was more probably the Stag rather than the Bull or the Bear who was interested in the subscription of the Government loan which he had in hand. It is the Stag who applies for an allotment of a promising new loan when it is issued, in order that he may sell it immediately for a profit. The ordinary applicant who is not a Stag applies for it, of course, to keep as an investment When the loan is likely to be in great demand, the Stag frequently applies for an allotment infinitely larger than he could possibly pay for. He assumes, generally correctly, that he will be allotted only a small proportion of his application and, if he can sell at a premium, the more he is allotted the better he likes it. The existence of the Stag explains the apparent anomaly of a steady decline in the price of a loan soon after it is issued, although at the time of issue the demand was enormously in excess of the supply. A loan may be subscribed thirty times over, and yet within a few months of its issue may be bought in the market at a lower price than that at which it was obtainable by subscription. The fall is caused, of course, by the steady selling of the Stags, who created a fictitious demand.

However, it is easy to answer Horace Walpole's question as to what constitutes a Bull and a Bear. The Bull buys stock that he does not want, in the hope that he will be able to sell it at a higher price before it comes into his possession, pocketing the difference. The Bear sells stock that he has not got, in the hope that he will be able to buy it at a lower price before he has to deliver it. The Bull is optimistic, he believes the price will rise; the Bear is pessimistic, he believes it will fall.

If the advance which the Bull desires has not occurred before the time of settlement arrives, he would be in a quandary but for the organisation which exists in the Stock Exchange to meet his case. Having bought what he does not want, he certainly does not desire to pay for it, and he is enabled, instead of so doing, to continue his bargain. The actual process of arranging this consists in selling out the security and then repurchasing it, both the sale and the repurchase being effected at the "making-up price" already mentioned—it is fixed at each settlement by the Clerk of the House, in accordance with certain rules. In the case of the British Government, Indian, Corporation, and Colonial Government inscribed stocks, it is the average price ruling during certain hours of the settlement; in the case of other securities, it is the actual market price at a defined moment. If the making-up price is lower than that at which the Bull purchased, he has, of course, to pay the difference, besides certain charges, mentioned presently. In the case of the Bear, having sold stock he has not got, he certainly does not desire to deliver it at the settlement, and just like the Bull, he is able to continue his bargain. If, in spite of his desire, the price of the stock has risen, he has to pay the difference between the price at which he bought and the settlement making-up price, and further, to enable him to go on to the next settlement, he has, as it were, to borrow the stock.

It is obvious that a purchaser who carries over his bargain gains considerable advantage by being allowed to defer payment for the security purchased until the following settlement, and for this he has to pay a rate known as "contango." This rate is quite distinct from the difference which he has to pay if the making-up price at which he sold out, in the carrying-over arrangement, is less than the price at which he originally purchased the security. The contango rate is sometimes referred to as a rate of interest, but it is not wholly in the nature of interest; for the carrying over does not consist simply in deferring payment of the purchase money, it also postpones delivery of the stock. Moreover, it sometimes happens that the security is in such short supply, that instead of receiving a rate from the purchaser, the seller is prepared to give some consideration to the purchaser. This consideration, the allowance made by the seller to the purchaser, is known as "backwardation" or "back." If the demand of the buyers for loans to pay for the stock they have bought is balanced by the demand of the sellers for the same stock which they have undertaken to deliver, there is neither a contango rate nor a backwardation rate. Neither buyers nor sellers of that stock have to pay anything for carrying over; the rate is called "even."

Without the Bulls and Bears, life in the Stock Exchange would be a dull affair, for the anxiety that stocks and shares should rise and fall within a short period, before too many rates have been paid, naturally leads to excitement, and undoubtedly causes the promulgation of many rumours and the exaggeration of actual news. The very existence of a big Bull account, or of a big Bear account, naturally has a most important effect upon the market—the former in weakening it, and the latter in strengthening it. Every Bull is, of course, a potential seller, and every Bear a potential buyer. While the Bulls are buying prices may rise, and while the Bears are selling they may fall; but the time comes when their operations, however successful, have to be completed, and the movement in the opposite direction naturally sets in. Good news is frequently followed by a sharp relapse in prices, because of the selling by Bulls anxious to take advantage of it. Bad news is frequently without effect, or followed by a rise, because the Bears see their opportunity of buying back the stock they have sold, and thus support the market. Thus it comes that the rates at the settlement are eagerly watched, that some indication may be obtained as to whether a Bull account or a Bear account exists.

The Bulls may have it all their own way, and by concerted action, called a "Bull campaign," by the dissemination of stories favourably affecting the stock—true, half-true, or untrue—may bring about a "rig." This, however, is a condition of the market the artificiality of which becomes very evident when the time for selling sets in. Unless the delicate position is managed with extreme skill, there will be left after the unloading a residue of Stale Bulls—Bulls who are compelled to close their accounts at a loss. On the other hand, the Bears may have it all their own way. By concerted action they may "bang the market," indulge in a "Bear raid," and bring prices down to a level much lower than is warranted by the intrinsic merits of the security which they have attacked. The talk is all gloom. At the end of the raid, however, the position of the Bear is an exceedingly dangerous one; he may find it impossible to obtain the stock which, having sold, he has undertaken to deliver. Prices begin to rise again, and the "Bear covering," or buying back, only enhances the upward movement. In time it may become impossible to buy back at any price; there is no stock obtainable; the Bears are "cornered." Unless a Bear so situated can make terms with the one to whom he has sold the stock, or with someone who will let him have it, he stands in the position of one who cannot meet his engagements, or, to use another term of Stock Exchange zoology, applied to all members struggling against imminent difficulties, he is a Lame Duck.