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business upon a grain exchange, which is one of the startling and mystifying things to the average layman, he can not understand the rapidity with which we make contracts. That is all the board of trade is.

Operations upon the board of trade by its individual members, performing their duties in the way of service for the people who employ them, is a different proposition. I can give you no better definition, gentlemen, or make it broader as to what the board of trade is, or a grain exchange, than the answer given by Mr. George F. Stone, who has been secretary of the Board of Trade of the City of Chicago covering a period of more than twenty years. The question was propounded by Senator Peffer, of Kansas, chairman of the committee, at a hearing before a committee of the United States Senate. The question propounded by Senator Peffer was as follows:

Then I will ask you first, Mr. Stone, to state in a general way what are the objects of boards of trade; what part they play in the commerce of the country, just briefly? The answer:

The primary function of boards of trade is to bring the buyers and sellers together in the interest of fairness and equity and to facilitate the marketing of products and merchandise and to provide the means for their distribution to the consumers in different sections of the country and in different parts of the world. They are established to facilitate the speedy adjustment of business disputes, to inculcate the principles of equity and honor in the intercourse of merchants, and also to promote the industries of man.

In that connection I desire to say that we court investigation our book of rules governing our institution, and we defy anyone to find in it in any place any rule that is not based upon fair and square dealing between man and man.

I would quote another question:

Does the board of trade, as an organization, do any business in the way of the trading, buying, and selling, or in another form, as a single body, or is what is commonly said to be the business of the board of trade, as far as people outside are concerned, transacted by the members individually?

The answer:

The board of trade, as an organization, engages in no business whatsoever. The business which is commonly and popularly associated as board of trade business is transacted by the individual members. This is in accordance with section 12 of the act of incorporation and refers particularly to this subject of inquiry.

Another question:

Then is it true that the same freedom exists among the members of the body, one with another, as far as their individual transactions are concerned, as exists among dealers outside who act independently?

The answer:

It is perfectly true. Their position is entirely independent, and as independent and individual as that of merchants not belonging to the board of trade-merchants engaged in any department of business?

Another question:

Then you wish to be understood as stating that the benefits and advantages derived by the members from their membership are only those which come from organization

The answer:

Precisely.

As I stated before, the exchange in Chicago is the meeting place of buyer and seller, meeting there every day to transact the busines

of those who employ them to do so. Why was it necessary to get together? Why was it necessary to get together all the men in that line of business in the city of Chicago? Commerce in grain demanded it; it was of such volume that it requires rapidity of action.

Gentlemen, we are a nervous people; we are a trading people; we are not given much to sitting still; and, probably, for the great good of this country, we differ in opinions as to facts, as to time in which we wish to do things, in fact in everything.

Somewhere, some spot, some place in this great broad grain-growing United States some day in every year, some hour in every day, and I might almost say some minute in every hour, somebody wants to sell some grain. If it is not the farmer over here in Pennsylvania it is the man that lives out in Oregon, and if it is not the man in Oregon it is somebody who lives in Kansas. And somewhere in this broad world every hour in the day and every minute of the hour somebody wants to buy some grain. It is commerce, gentlemen, grain commerce. It is the natural spirit of trade; that spirit is in all of us unless, perhaps, we are professional men. That indicates one thing, a great multitude of sellers and a great multitude of buyers, and there must be a common meeting place. If the merchant in Liverpool to-day, if the importer in Budapest, or if the grain dealer in Spain wants to buy to-day a hundred thousand bushels of No. 2 red winter wheat, he can get in touch with and consummate his purchase practically inside of the hour. If the man who runs a grain elevator in Kansas wants to sell his grain to-day he can do it, because they buy three hundred and sixty-five days in the year, barring Sundays.

Mr. Burleson, in his remarks, referred to the growing cotton-warehousing industry in the South, and if I correctly understood Mr. Burleson he stated that that industry had not reached yet the state of full development; do I quote you rightly?

Mr. BURLESON. That is right.

Mr. FITCH. The grain trade has reached the state of full development as far as the handling of the crops is concerned. One need but take a trip over any system of railroad, noticing at every station through which you pass two, three, and four country elevators standing there with their machinery running, day after day, to give the communities in which they are located a market for their grain. The system of warehousing grain, I might say, is practically complete; the system of the warehouse receipt, the registration of it by the State, and so forth.

And now we get along toward the question that is always the bugaboo, and that is future contracts. As I stated before, these people in the world who want to buy and these people in the world who want to sell every day in the year, want to buy and want to sell for different periods. Some man wants to sell his corn today, in February, to be delivered in May. His roads may be bad and he does not care to haul it now, and he says to the man who represents him upon the exchange: "Find out what you can do for me in the way of a price for my corn to be shipped in and delivered in the month of May." All kinds of contracts are made because they have all kinds of ideas as to when they want a contract to expire or when they want it to be fulfilled. The making of contracts of this kind is in such general use that it has worked into a system, a vast system of what you might call insurThis system has been brought about by the very activity of

ance.

the people in the world trading back and forth, the very difference of opinion as to when they want it and when they do not want it, basing their contracts for next week, or next month, or as far along as in the fall.

Some European grain dealer may look at his crop in the foreign countries and say: I want plenty of grain running to me in the month of September; I want the ships coming to our shores bringing me grain; it is good property. And he buys it for that time. Therefore I say that the difference of opinion, the difference of ideas, has worked the grain trade of to-day into one vast system of insurance, and that vast system of insurance has enabled the grain trade of this country to take advantage of it to the extent of handling the crop of this country at the lowest possible expense. I venture to say, Mr. Chairman, that without this great system of insurance that is in effect to-day the difference in the amount of tribute exacted upon a bushel of corn that leaves Hastings, Nebr., or a common point in Kansas, and is laid down in the hands of the consumer in England or in Germany or in France, if you please, were it not for the system that is in vogue now, furnishing this great possibility of insurance that may be taken advantage of, would be practically double what it is at the present time; in other words, it would cost practically double; at least 4 or 5 or 6 cents a bushel more would be paid to the men in between who performed the service for a modest compensation; yet 5 cents a bushel more would accrue to them between the point in Kansas and Liverpool than accrues to them at the present time.

The question always comes up as to intent of delivery, Mr. Chairman, and I will cite you a case that comes up every hour in the grain trade, bordering along this line of insurance. We will say that John Smith has a country elevator at Springfield, Ill., located upon the lines of the Illinois Central Railroad. The Illinois Central Railroad, as you gentlemen know, is a road that runs north and south from the Lakes to the Gulf. John Smith, a grain dealer at Springfield, a man of moderate means, in order to conduct his business gets some help from his bank to finance it, because he runs his business right. His business is that of buying grain from the farmers; he keeps his elevator open three hundred days in the year, and no matter when the farmer drives up with a load of grain he takes it and gives him the market price for it. How does he know the market price? Gentlemen, in all my experience I have never seen such progress made in any line of business, in the way of information, as has been made in the last few years in keeping the grower of grain in absolute touch with what is going on in the markets of the world. The systems of telephones and telegraphs, with the daily papers and everything of that kind, keep the grower in close touch with the markets at all times.

John Smith is buying corn of the farmers; the farmers are hauling corn, and John Smith's elevator holds 50,000 bushels, and they bring him in corn, and he writes his ticket on the bank, which the farmers take and go to the bank and get their money. He says, "I have got to make arrangements for some more money to take in this corn." He goes up to his banker and says, "I have got to take in about 20,000 bushels more of corn, and on the present price it is going to take about $12,000; I want to know if I can get $12,000." Now, if I was

a banker and I think many of them would ask this question—I would say, "Well, Smith, it is all right for you to take in the corn; I want to see you keep on doing business, but I do not like to loan much money on 60-cent corn; I can not afford to loan you that money to take in that corn and you stand there wide open on it." Smith says to him, "Mr. Banker, I have got a hedge against that corn; just as fast as I buy 5,000 bushels of corn I am selling-it is now February— I am sending up to my representative, to the broker, to the salesman. who represents me, who handles my business for me, and I give him instructions to sell somebody 5,000 bushels of corn that I will ship in May and deliver, and my man in Chicago has sold that to Brown, Jones & Co."

Were I representing Mr. Smith as the Chicago salesman I would sell his 5,000 bushels of corn, and when I have sold that for his account I have obligated myself to a firm of standing, or to a member of the same exchange, to whose rules I am amenable; I have sold to him for the account of John Smith, in Springfield, 5,000 bushels of corn, to be delivered in the month of May, and Brown, Jones & Co. have bought of me that amount of corn. I immediately send John Smith, of Springfield, a record of the sale I have made for him, giving him the name of the concern that I sold it to and the price that I sold it at and the terms of the sale, and Brown, Jones & Co. may have been acting for somebody at Erie, Pa., or for somebody in Washington, D. C., who wants the corn laid away and shipped to them in the month of May; and when you have made that agreement you can not get away from it unless you get together and settle it. Just the same as if I agree to build a house for you, Mr. Chairman, for $17,000; within a month's time or two or three months after making the agreement I come to you and say, "Mr. Chairman, I am afraid to start, I am afraid it is too big a job and I am afraid to go on, how much will you let me off for?" I have a right to buy back my contract; I have a right to substitute a contract; I have a right, if it is agreeable to you, to settle it, and turn the contract over to somebody else who will build your house and let me out, if it is agreeable to you.

Brown, Jones & Co. notify this man in Erie, Pa., that they have bought 5,000 bushels of corn for his account to come in in May, as he directed, giving him the name of the house from whom they bought the corn; the transaction can be actually traced the same as a transfer of real estate or of a horse or any other personal property. Now, there is a sale, Mr. Chairman, we intend to deliver. Now, we come along into the month of April and the steamships that are coming to New Orleans are a little short of freight going back and they reduce the price of tonnage from New Orleans to Liverpool and to other foreign ports, and the grain men and the elevator men in New Orleans say, Here is a chance for us to ship some corn;" and they start to buy corn along the Illinois Central road, and to get the corn for shipment they bid the price up; when they get to Springfield, to John Smith's place, they offer him a price for his corn; they urge John Smith, at Springfield, to make a price for the corn which he has in his elevator. So Smith says to himself, I could sell that corn to the New Orleans men who want to ship it abroad and get a good price for it, and there would be some money in it for me if I had not already sold it to be shipped to Chicago in May.

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Then he says to himself, I wonder if I might get my representative in Chicago to let me out of that contract, whether he could buy it back and get me released, and at what price. Then he wires up to his representative in Chicago and his Chicago representative informs him that he can buy back that 40,000 bushels of corn, we will say, for delivery in May, for such and such a price. He looks at it, and he says, "I sold it for 42 and I can buy it back for 48, that is 6 cents difference; but they are offering me a price"-they are bidding him what we call a premium- "over what I could deliver it for in May; I can sell my corn in New Orleans and make 8 cents as against 6 cents that I pay to be released from my contract; therefore, I will do that." And he wires up to his representative in Chicago to buy back the contract, and his representative buys back the 40,000 bushels of corn; and Mr. Smith, of Springfield, by selling his corn to the man in New Orleans, under the new transaction, makes 2 cents on the bushel, or $800 more upon his corn. Now, are we going to deny to the grain dealers of this country the right to get all they can out of the grain that they handle?

Referring once more to the question of insurance upon wheat, corn, and oats, upon which there is future trading and future contracts, it is a well-known fact-any grain man will substantiate what I have stated here, and I speak knowingly, because I have run country elevators myself, lots of them-that wheat, corn, and oats are handled from the farmer's wagon when delivered at the country elevator, upon a margin of profit of anywhere from half a cent a bushel to a cent and a half, and at the same elevator, where we are buying barley, on which there is no market whatever in the way of future markets, our margin or profit, or rather, I would rather call it insurance, is 4 to 5 to 6 cents a bushel.

The CHAIRMAN. Would it interrupt you if I should ask you a question right here? Why, in your judgment, has there never been developed a future market in barley?

Mr. FITCH. I think possibly the greatest trouble, Mr. Chairman, in developing a market for future contracts in barley would be the question of grades. There is no grain upon which the weather has such a bearing as it has upon barley. Barley is regarded for its plumpness and mostly for its color, the higher grades being used entirely in the malting industries.

Mr. Chairman, I want to say just one word in connection with that term "bucket shop." And in illustration of that, Mr. Chairman, I desire to go back again to Springfield, Ill., to John Smith, who is in the grain business. I explained to you how that 10,000 bushels of corn for May delivery were sold upon the Chicago Exchange; that John Smith was notified to whom it was sold, and the firm who bought it notified the party they represented the name of the party from whom they bought it, and so forth, making it an actual transaction. I want to show you where those methods differ from what they would have been if John Smith had stepped across the street to one of the small town bucket shops. If he had gone across the street to a bucket shop to make that sale of corn, the method would have been to look at the quotations on the board, the blackboard that these men keep there, and he writes him a ticket at the price, and the transaction ends right there. It would be just the same as if I were to go behind the

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