Mr. MERRILL. You left out provisions.

Mr. FITCH. Yes; I should add provisions-the hog products.
The CHAIRMAN. There is no future market in hay?

Mr. FITсн. No.

The CHAIRMAN. Either there or anywhere else?

Mr. FITCH. Not that I know of.

The CHAIRMAN. Can you give the committee a reason why it is not as necessary to have a future market in hay as in oats or wheat?

Mr. MERRILL. You may answer the chairman that there is a future trading in hay in Pittsburg.

Mr. FITCH. Yes; I forgot to say that there is a future market in hay in Pittsburg.

Mr. HAUGEN. And there is a future trading in flax, also?

Mr. FITCH. That is in Duluth and Minneapolis. I think we formerly had a future trading in flax in Chicago, but not now, I think. The CHAIRMAN. You smiled when I asked that question, as if you thought it ridiculous that anybody should ask if there was a future market in hay.

Mr. FITCH. No; I was thinking of my own experience years ago when I was a hay peddler, and how I ever lived to be here to-day I don't know. That is what I was smiling at.

The CHAIRMAN. Well, does there lie behind that the thought that your amusing experience grew out of the fact that there was not a future market in hay?

Mr. FITCH. Not exactly that; but I was also thinking that when it comes to the quality of hay, I never saw two men agree on how hay should be graded-what the quality of hay was.

The CHAIRMAN. And you think the impossibility of grading hay would make it impracticable to have a future market for hay, and that that is the reason of there not being a future market?

Mr. FITCH. It was sold by the bale when I was in the business. The CHAIRMAN. There is a future market in pork?

Mr. FITCH. Yes.

The CHAIRMAN. And there is not a future market in beef. Why should there not be a future market in beef?

Mr. FITCH. I would have to leave that to President A. Stamford White, who is in the provision business.

The CHAIRMAN. There are 1,700 members on the board of trade? Mr. FITCH. 1,600 and some members.

The CHAIRMAN. Is the number limited?

Mr. FITCн. The membership is unlimited.

The CHAIRMAN. What is the purpose then of buying in memberships, as I believe they said they were doing?

Mr. FITCH. We are unlimited at ten thousand, and when I say to you that the price at the present time is three thousand, you will see the object.

The CHAIRMAN. I still do not see the object of buying in the memberships if you are so far under your limit.

Mr. FITCH. Well, we are unlimited; but at $10,000.

The CHAIRMAN. You mean that anybody who is willing to pay $10,000 can secure a membership?

Mr. FITCH. I mean you can never make a close corporation out of it, because you can have members by the thousands at $10,000 each. The CHAIRMAN. Then what is the object of buying in membership?

Mr. FITCH. I think possibly to protect the price a little. What is your idea of that, Mr. Merrill?

Mr. MERRILL. Primarily, sir, to eliminate that floating element which we deem undesirable.

The CHAIRMAN. Have you no other way of eliminating an undesirable membership; have you no rules governing the admission of members aside from the payment of the price?

Mr. FITCH. Oh, yes, sir; we have the most stringent rules regarding admission as to a man's moral character and his standing in business. It is not everybody that makes application to that institution that is admitted.

The CHAIRMAN. Then I still fail to see the reason why memberships should be bought in.

Mr. FITCH. Well, it would look to me like a fairly good proposition when you can get them at $3,000 to pick up a few, even though the number is unlimited at $10,000.

The CHAIRMAN. Who picks them up?

Mr. FITCH. The membership furnishes the money. I contribute, Mr. Merrill contributes, we all contribute so much per year by action of our own vote, the majority ruling.

The CHAIRMAN. And buying somebody out so he will be eliminated and membership in that way restricted?

Mr. MERRILL. I would suggest to you that the board never pays above the price that the memberships are moving at in the market. Mr. FITCH. Something under that.

Mr. MERRILL. Yes; scarcely up to that.

The CHAIRMAN. Do your rules permit of a transaction in which the amount of the loss shall be limited on any given transaction? Perhaps I might put it in another way: Do your rules allow stop-order losses?

Mr. FITCH. We have what is known as stop-loss orders.

The CHAIRMAN. That is the expression I should have used. Do you execute orders received from anybody?

Mr. FITCH. No, sir. That is a question, Mr. Chairman, that a person like myself can only answer from a personal standpoint. I know what you mean. I get orders from fellows, from Huckleberry Center and Burning Stump, "Enclosed please find $250. You will buy me 5 May corn." "You will do this or that." Back goes what I call, in the language of my house, my "X" letter. "Herewith please find your $250 returned. We are not accepting any business whatever from those not located on our lines of wire." Of course I use that as an excuse. I am not looking for that kind of trade. And so I say, when you ask a question like that, that I must answer it from my personal standpoint.

The CHAIRMAN. Do you think your practice is a universal one among the members of the exchange?

Mr. FITCH. I think so, to a great extent. I could not vouch for them all. I know of some houses that I could name that adopt those methods.

The CHAIRMAN. Is there a fixed margin in the execution of contracts?

Mr. FITCH. There is not.

The CHAIRMAN. That is wholly a matter of individual arrangement?

Mr. FITCH. That is an individual arrangement. If you will allow me to explain

The CHAIRMAN. Yes.

Mr. FITCH. If you should come in and want me to buy for you 100,000 bushels to be delivered in May I would figure out how much money I could borrow for you on that at the bank when you come to pay for it.

The CHAIRMAN. And the completion of your answer would be that I would have to put up the difference between what you could borrow and what the contract called for?

Mr. FITCH. Most assuredly; just the same as if you went into a bank and wanted to borrow on collateral. I as a banker look into your collateral, and if it is worth $15,000 I will give you $7,000 or $8,000 on it. That is, if I am a good banker; if not, I will give you

more.

The CHAIRMAN. It seems that it has been the practice on the part of some cotton brokerage firms to maintain throughout the country what they call wire houses?

Mr. FITCH. Yes, sir.

The CHAIRMAN. You evidently understand the term. Is that a common practice in the grain business?

Mr. FITCH. It is. I have wires myself.

The CHAIRMAN. And any individual giving an order to one of your wire houses will have it executed if it comes in the regular channel, I suppose?

Mr. FITCH. My wires are confined almost entirely to the State of Illinois. They reach down through Bloomington over in the north part of the State. I have seven different connections, and by those seven different connections that I have there I reach practically the whole north part of the State with a system of telephones. I buy thousands of carloads of cash grain with those wires and telephone system, and I am in a position at all times of the day, or my office force is, to notify any farmer within several miles of the town just what he can sell his corn for that day if he wants to bring it in. It is a dissemination of knowledge to the people.

The CHAIRMAN. Have you any means of knowing what proportion of your customers are using your facilities for hedging purposes or for the purposes of actually selling or buying grain, and what proportion are using them simply for what they may get in the way of margins?

Mr. FITCH. You spoil your question by the last word.

The CHAIRMAN. Will you suggest a change; you know what the question means.

Mr. FITCH. I know what the question means, but the word "margins" does not convey the right idea. I take it to be this: What part of my personal business pertains to the hedges or this system of handling grain that I have talked about; what percentage of it is purely speculation?

The CHAIRMAN. I would be glad to have an answer to that question.
Mr. FITCH. I should say 80 per cent; possibly 85 per cent.
Mr. LEVER. Is what?

Mr. FITCH. Is the actual cash grain business, the actual grain business for which I am for a compensation performing service as elevator company's agent or miller's agent or other people's agent; as far

as I know, that is all. But I should make an allowance, and say that perhaps 15 or 20 per cent of it might creep in by some capitalist who thinks stuff is cheap, or stuff is high.

The CHAIRMAN. Do you think your experience in that respect to be a fair average for members of the exchange?

Mr. FITCH. For many houses, yes; for others, no. Perhaps the average would be lower.

The CHAIRMAN. You would hardly be willing to say, would you, that not to exceed 20 per cent on the board of trade was that kind of business?

Mr. FITCH. No, sir. I am willing to say about my own, but not about others; because I would have no way of knowing about others. The CHAIRMAN. I believe that is all.

Mr. FITCH. If you will allow me, I wish to correct perhaps something in the record. Mr. Lee asked me a question and I think Mr. Burleson asked the same question, and I would like to have it a matter of record if I quoted them correctly. They say, "Can the miller at Atlanta send up to you and have you buy for him 10,000 bushels of May wheat and get No. 2 red?" Am I right in that?

Mr. LEE. Yes; future deliveries.

Mr. FITCH. Yes. I wish to answer that in this way: Absolutely he can if he states to his agent who is performing this service for him that that is what he wants; but it must be so specified at the time the contract is made, the difference being this: That if the miller in Atlanta should say to me, "I want to buy 10,000 May wheat, future delivery May wheat; you have three varieties deliverable upon contract, but I want to be sure that when my contract is filled I get 2 red winter wheat," I would say to him, "2 red winter wheat may be a scarce article, as it now is, and the price work up." Naturally they would give him the cheaper wheat, unless he specified 2 red winter. Then he would say, "I must know that I am going to have 2 red winter wheat, even if I pay a bigger price." Under those circumstances I would get it, and instead of saying, "I will buy 10,000 wheat," I would say, "I will buy 10,000 No. 2 red winter."

The CHAIRMAN. And you execute a special contract?

Mr. FITCH. No special contract, except that there is inserted in the contract that the delivery in the future is to be specific, which one of the three varieties. The same contract, only specific in that respect. I wanted to make that plain.

Mr. MCLAUGHLIN. It is special in that it is unusual. But they do not do that in ordinary hedging operations.

Mr. FITCH. No.

Mr. LEE. If I telegraphed I wanted to buy 10,000 May wheat, you could deliver me No. 2 winter or No. 2 hard or No. 1 northern?" Mr. FITCH. Yes.

Mr. LEE. That No. 2 hard is spring wheat?

Mr. FITCH. No. 2 hard is winter wheat. There is only one spring wheat and that is the northern-grown wheat.

Mr. LEE. Is that specified here?

Mr. FITCH. Yes.

Mr. LEE. Then is it not a fact that a small mill equipped for grinding winter wheat can not grind spring wheat?

Mr. FITCH. Oh, I think they change from time to time.
Mr. LEE. They have got to change their machinery.

Mr. FITCH. I think the greatest difficulty would be in getting their clients used to working the winter wheat flour to use the spring wheat, because the question of quantity of water and moisture in the dough and everything else comes in there.

Mr. HAWLEY. Have these contracts you make on the exchange ever been tried out in the courts?

Mr. FITCH. Yes, sir.

Mr. HAWLEY. What have the courts held?

Mr. FITCH. The gentlemen coming after me will explain that feature. I don't wish to monopolize the time, because there are others who are just as well or better posted than I am.

Mr. LEVER. In your illustration this morning as to the Atlanta miller, I believe you said that the miller had the right to demand the delivery of a certain kind of grain upon the contract made. -Mr. FITCH. No, sir; he has the right to demand delivery. Mr. LEVER. Of any of three grades?

Mr. FITCH. He demands the delivery, and the one tendering the wheat to satisfy the contract has the privilege of delivering one of three grades, which is always understood year after year and never varies.

Mr. LEVER. So that the seller of the grain has the option of delivering one of the three grades upon the contract?

Mr. FгTсн. Yes, sir.

Mr. Cocks. Unless otherwise specified?

Mr. FITCH. Unless otherwise specified. As I stated a moment ago, you can specify that at the time of the initial purchase. If you were an Atlanta miller and were buying for future delivery in May, if you told me to get you any one variety of the three wheats, so as to take away the privilege from the seller as to which of the three he would deliver, you would specify that, and I would tell you what price you could get it at, and I would get it for you, and then when May comes you would get what was specified in the contract.

Mr. LEVER. If I was a grower of 10,000 bushels of wheat in this season of the year, somewhat hard-pressed for money, and desired to convert my actual wheat into money, I would sell 10,000 bushels of spot wheat and hedge against it on your exchange?

Mr. FITCH. Yes, sir.

Mr. LEVER. Upon that hedge he would then have the right to deliver one of three grades of wheat?

Mr. FITCH. Yes, sir; unless you specified otherwise.

Mr. LEVER. I understand. Your ordinary contract does not have any specification as to grade?

Mr. FITCH. No. The ordinary contract calls for the delivery of wheat, and the rules specify what the three grades are.

Mr. LEVER. Do you have a basis? We have a basis in cotton, what we call middling as the basis.

The CHAIRMAN. That has been covered, I think.

Mr. LEVER. Very well, if he has answered in regard to that.

Mr. FITCH. No, sir; standard oats or No. 2 wheat.

Mr. HAUGEN. How about corn?

Mr. FITCн. In corn, there is No. 2 corn.

Mr. HOWELL. Do the grades of wheat remain the same year after year, or is there an authority in the board to change the grades that are tenderable on contracts?