Privacy in the transmission of confidential messages and reports and directions is an important general reason for the use of such wires in place of the public telegraph, but it is doubtless of subordinate importance as compared with the matter of speed, and less important to a broker than where the wires are used to connect industrial plants. In case messages would have to be coded for transmission over public wires, this advantage merges into that of speed.

Less likelihood of errors in transmission is another advantage of the private wire. The operators are familiar with trade terms and know what is important. A slight change in the price or amount of an order may involve several thousand dollars.

A wire house is a special sort of commission house offering quicker service than can otherwise be obtained in the execution of orders on the large exchanges. It is, of course, designed to serve outlying centers of trade, both in supplying quotations and handling orders. Theoretically, it may be supposed to be used as much for cash transactions as for dealings in futures. Actually the execution of an order for the purchase or sale of actual grain is not so much a matter of minutes or seconds that a private wire is needed for the purpose. Furthermore, the volume of transactions in actual grain obtainable by a single commission house is not sufficient to support from the commissions so earned a private wire between even the most important shipping or distributing center and the biggest terminal market, provided the circuit required is of any considerable length. The use of private wires is important in the cashgrain business because prices for cash grain have come to reflect the prompt changes that occur in the naturally very sensitive futures market and, in another way, so far as the cash-grain dealer wishes to hedge as a matter of principle or by rule. It may be important that a hedge be executed promptly in order to secure the benefit of the price that is prevailing when the cash transaction is consummated.

COMPARISON OF PUBLIC AND PRIVATE WIRE SERVICE BETWEEN EXCHANGES.—Telegraphic interconnection of the important terminal markets is essential to the grain business. The volume of business to be done will keep fully occupied more than one private wire. Leasing wires for exclusive use insures the saving of time when it is of the greatest importance. These wires tend to keep prices"in line" on the different markets, as well as to convey information as

the necessity for enciphering, and the great proficiency in manual operation attendant upon handling the same class of messages day by day, are conducive to a high-class private service which the public wire can not give. The record does, to be sure, indicate as affecting the brokerage business that the public-wire service between certain commercial exchanges is at least as rapid as any private-wire service, but granting this, the former is a class of service which is available to only a few." (50 I. C. C., 741.)

to primary movements of grain, etc. Spreading, that is, buying in one market and selling in another at the same time because the operator considers the difference in price between the two abnormal and expects to obtain a profit when the difference adjusts itself, is the chief means of keeping prices in line. Spreaders between markets are evidently dependent for the success of their operations upon prompt execution, which means practically simultaneous execution upon two markets, giving the operator the benefit of existing price conditions. The spreader (or his broker) who can not get immediate execution on both the markets between which he is spreading will be likely not to complete his transactions at the desired price difference. It happens, however, that the private wire companies are not allowed to have offices on the floors of the exchanges (with some unimportant exceptions), hence must telephone their orders to the floor, which process may involve some loss of time. Public telegraph companies, on the other hand, have offices on the floor. For this reason the spreader that uses public wires is said sometimes to get as good, if not better, execution than the one who avails him-. self of the facilities offered by private-wire houses. The telegraph companies claim that the public service between the exchanges is faster than the private-wire service.

COMPARATIVE EFFICIENCY ON COUNTRY SERVICE. As regards comparative efficiency as between the private wires and the public wires, an order given in the "country" will be executed and the reply received in 2 to 5 minutes in the case of the former, while the same service would require 20 minutes to an hour for a reply to come over the public wires.1

It is quite possible, too, that the order given to a private-wire concern will receive better execution in the pit than in the case, at least, of orders given to cash commission houses. The wire houses employ experts who spend their whole time in one or another pit, often paying them very considerable salaries. The cash house with little futures business will either have its floor man who devotes most of his time to the cash work, go over to a pit and execute the order, or turn it over to a broker. A wire house may have as many as eight men in the various pits at one time, each a specialist in the particular future that he is buying and selling as well as an expert

1.The record shows a usuai message-and-answer speed of from 2 to 4 minutes between New York and Chicago, with occasional service in much shorter time. Four minutes between New York and San Francisco is a frequent record, and 2 or 3 minutes between Chicago and San Francisco. Between Chicago and a country grain station in Iowa message and answer were handled in 5 minutes.

"These are instances of the service on brokerage wires, with a trade effected between messages. It is interesting to note that the public-wire service of one respondent between Chicago and the same country grain station in Iowa shows an average record of onehalf hour each way. Brokers operating private wires solicit the grain trade and point to their highly expeditious telegraph service as a reason for preferring them to their competitors who use public wires." (50 I. C. C., p. 741.)

pit trader. As one of the prominent wire-house men says, "The whole business of the wire house is based upon giving the best service for a given rate of commission, and everything depends upon developed organization for the special work to be done." In other words, the price-that is, the commission rate-being fixed, competition is concentrated on giving the best possible service for the fixed price. Private-wire facilities are the principal feature in the wire house bid for business.

CONCENTRATION OF OUTSIDE FUTURES BUSINESS IN THE HANDS OF THE IRIVATE WIRES.—The wire house as developed in the last 30 years has become a distinct class of business concern in the grain trade. It serves customers outside Chicago and especially traders in futures. Before the private-wire systems developed, an outsider, in order to obtain prompt execution, was compelled to use the public telegraph, and confirmation was usually received by mail. With private wires available the trader in the country can telephone to the office of the local correspondent or perhaps hand in his order at that office, after consulting the blackboard, and can receive word of its execution in a few minutes. As a partner in a private-wire house puts it, the wire house "puts city service in the country" and (with reference to its use for cash grain business) gives to grain shippers "the service that the speculator has been accustomed to get." The local commission houses in Chicago that are without private wires receive very little business in futures from outside the city. Some of the older houses are able to retain a portion of the clientele that they once had that is accustomed to the use of public wires. The house may pay the cost of public telegraph messages of customers.1 On the basis of personal acquaintance the local commission houses without wires doubtless get some outside business. This statement applies to the so-called commission houses that are not receivers of cash grain.

The wire houses have come to possess practically all of the futuretrading business, except as regards trade originating in Chicago, especially "floor trade."

Section 3.-Contracts with the telegraph and telephone companies.

THE AMERICAN TELEPHONE & TELEGRAPH Co. CONTRACT.-The private wires used by Chicago Board members are leased from the public telephone and telegraph companies. The American Telephone & Telegraph Co. uses a standard printed form including various specific conditions, the first portion of the form requiring only dates and signatures to be added and apparently being applicable generally to contracts for special service, while the particular service contracted for is described in an appendix. The general part of the form provides for the termination of the service on 30 days' notice in

1 For rules covering this, see p. 137.

writing by either party, specifies the way in which rental is to be computed, covers the supplementary supply of facilities for use in telephone service subject to a termination charge if discontinued within one year, prohibits the use of the leased wire for messages for others and the assignment or transferrence of the contract, states conditions under which service may be suspended without the company incurring other liability than for the remission of rent, safeguards the rights of the company as regards its property located on the premises of the patron, etc.1 The character of the appendix is

1 The general portion of the contract is as follows:

[American Telephone & Telegraph Co., Executive Offices, 195 Broadway, New York.]

CONTRACT FOR SPECIAL SERVICE.

The undersigned, herein styled the "patron," hereby requests the American Telephone & Telegraph Co., herein styled the "company," to furnish, for use by the patron at the locations designated in "Appendix A" which is attached to and hereby made a part of this application, the service and facilities therein described and, in addition thereto, such other facilities as are required for connections with the company's system and as are necessary to enable the company to render such service, for the term beginning with the establishment of the service and ending when the contract therefor shall have been terminated by the patron or by the company by thirty (30) days' previous notice given in writing, provided, however, that such contract shall not be so terminated prior to Apr. 30, 1917; all service and facilities furnished hereunder to be supplied in accordance with and subject to the conditions herein set forth and the company's regular rules, regulations, and practices from time to time duly established.

The patron agrees to pay to the company (1) for the service and facilities described in said "Appendix A," at the rates specified therein, payable as therein provided, beginning with the first day of the calendar month following the establishment of the service, and proportionately at said rates for the fraction, if any, of the month in which the service is established or discontinued as herein provided; (2) for all service and facilities furnished on the order of the patron, in addition to or in substitution for any service and facilities specified in said Appendix A," the charges fixed by the company therefor.

It is understood that terminal facilities for use in telephone service hereunder aré furnished subject to a termination charge if such service is discontinued, for whatever cause, within one (1) year from the date of the establishment thereof, and in the event of such discontinuance the patron agrees to pay to the company a sum fixed in accordance with its regular practice for similar terminal facilities offered or furnished for a like duration of use of other patrons of the same class at the same point, upon which shall be credited any amounts theretofore paid by the patron on account of such terminal facilities.

CONDITIONS.

1. The service and facilities furnished hereunder shall be used by the patron only for the period or periods and only at the hour or hours herein specified and such use shall be subject to the reasonable rules and regulations from time to time prescribed by the company. Such service is furnished for use only in the conduct of the business of the patron and of the persons, firms or corporations mentioned in " Appendix A" or in any supplemental application for service made hereunder and accepted by the company, and shall not be used otherwise, or for any purpose for which a charge or other compensation shall be received by the patron from any person, firm, or corporation, or in the collection, transmission, or delivery of any message for others; nor shall this contract or any rights acquired hereunder by the patron be assigned or in any manner transferred. Such service shall not be used by the patron for any purpose or in any manner directly or indirectly in violation of law or in aid of any unlawful act or undertaking. No line, instrument, appliance, or apparatus not furnished by the company shall be connected with, attached to, or used in connection with the equipment, apparatus, or service furnished hereunder, unless the written consent of the company be first obtained.

2. The company reserves the right to determine whether facilities for the service herein contracted for are available at any time and, whenever not available, to suspend

indicated by the following transcript of one of a half dozen included in a contract in force at the date indicated.

Service 09380.

APPENDIX A.

Service started August 16, 1915.

INITIAL SERVICE AND FACILITIES REFERRED TO IN THE CONTRACT FOR SPECIAL SERVICE, DATED APRIL 13, 1917, BETWEEN THE AMERICAN TELEPHONE & TELEGRAPH CO. AND A. B. C. Co.

Character of service: Morse service.

Monthly rate: $968.34. Payable in advance.

One (1) set of telegraph instruments, with the necessary connecting lines and local batteries therefor, and one (1) set of telephone instruments, with the necessary station equipment, to be installed in the premises of A. B. C. Co., Building, Chicago, 1. A. B. C. Co., Board of Trade, Duluth, Minn.; D. E. F. Co., Building, St. Paul, Minn., and A. B. C. Co., of Building, Minneapolis, Minn., said sets of telegraph instruments to be connected by a telegraph circuit for use by a telegraph circuit for use by the patron daily from 6 a. m. to 6 p. m.; with the right to the patron, in lieu of the above specified use of said telegraph circuit and in substitution therefor, to obtain, on request, the use of a telephone circuit connecting said sets of telephone instruments at intervals designated by the patron between the hours of 6 a. m. and 10 a. m. and also between the hours of 4 p. m. and 6 p. m. of any day, for use by the patron between said hours only and only for one-half of the time in the aggregate included therein respectively, namely, each minute of telephone use to be deemed equivalent to two minutes of telegraph use. Provided, however, That no such telephone circuit shall be substituted for said telegraph circuit for use hereunder between Minneapolis, Minn., and St. Paul, Minn. Service central time.

There is an appendix for each circuit. Another typewritten proviso, added at the end as circumstances may require is:

This circuit to be connected to the Morse circuit furnished to the patron between and

In another case service is to be furnished to either of two offices in the same city, one in an office building and the other in the Chamber of Commerce, at the option of the patron, but the two offices are not to be connected simultaneously. The option of alternative or substitute telephone service may be stricken out of the cortract, and in fact there are some forms in which it does not appear in the

such service, in whole or in part, without liability for any damages resulting therefrom. The patron assumes all risk of errors, delays, or accidents incident to the service and, in view of the liability of the crossing of wires or misconnections, shall require the operators or other persons using the service to establish their identities as often as may be necessary when sending or receiving communications. The only liability of the company in case of error, delay, accident, or interruption to the service from any cause beyond the control of the patron, or in case service is suspended by the company or in any other event, shall be to make an adjustment of the charge for such service in accordance with its established rules, regulations and practices applicable thereto.