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otherwise, which constitute characteristic features of future trading, are described in detail in this volume.

Considerable effort has been made by the Commission to determine the quantity of future trading in grain in the United States. The general results are given here, but significant details will appear in another volume of this report. The quantity of future trading in grain varies considerably from year to year, but for some years has been above 20,000,000,000 bushels. About five-sixths of this trading is done on the Chicago Board of Trade.

In view of the magnitude of this figure, it is evident that most future trades are short lived. They often do not remain "open," in fact, for as much as a day. A "scalper" or professional pit trader operating for his own account may both buy and sell 500,000 bushels in a day and have nothing open at the close of the market because his purchases and sales cancel each other. Another class of traders looks, however, to price changes occurring during a much longer period. The effect of the trading of such a speculator, who may have 5,000,000 bushels or more open for several months, is of a different significance and of much more importance comparatively than might be inferred from the mere number of bushels involved in his transactions. The extent of "open trades" and the variation in the quantity of open trades from time to time will be considered in connection with the statistical data of future trading to be used in a later volume.

The point of chief economic interest in connection with the subject of deliveries is not the ratio of deliveries to transactions, which is, of course, small, but that delivery is contemplated as an eventuality and consequently has more or less effect on the production, price, and consumption of the commodity dealt in. These aspects will be considered in a later volume.

The technique of the making of deliveries is dealt with in the present volume; also the grades made deliverable, including especially some consideration of policies determining the choice of contract grades and varieties on the various exchanges.

Quotations of futures are regarded by the trade as a facility of the utmost importance for the grain business as now conducted. The methods by which they are recorded and distributed are described in this volume. It appears that these methods provide a prompt and wide dissemination of such quotations. With regard to the circulation of news and rumors affecting prices, the situation suggests the need of reforms.

The most important physical facility for future trading consists of the great private wire systems which make it possible to give an order for a future transaction and obtain the report of its execution

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e same quantity of futures for 10 cents less than it paid 1**********operating itself for its H-cent loss upon the actual * 10 bearing it with only its ordinary merchandising margin.

erly, only the merchandising margin of profit is left if prices go Bong, the cash grain be sold for much more than the ordinary *x* *wne the price paid for it. The point of interest as regards

g. the present connection is the fact that the hedger will not ordinarily deliver on his future sale. He will probably not wish to hold the grain long enough to reach the delivery month, and further**** the grain is likely to be of such a quality that he can get a n mism for it in the sample market" that is not obtainable delivery on the future. His future contract enables bi sper ulative risks in price, but does not neces

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a thousand or more miles from Chicago in a matter of two or three minutes. These private wire systems are very expensive and are a heavy charge upon the grain trade and other interests that use them. So far as relating to the grain trade, the systems are designed primarily to serve future traders, though of late used in promoting and serving cash grain business. The facilities offered doubtless tend to encourage speculation, though not exclusively or principally in grain. It is impossible definitely to separate the stock exchange service from the grain trade service of the private wire systems.

Speculative trading, as distinguished from investment, is often defined by reference to "margins," and while this is not exact it is not essentially misleading. The margin is both a commercial credit device and a deposit made to secure others interested against loss because of nonperformance of a future contract. The margin deposit in the case of a stock purchase may be in intent and effect a first payment toward an investment, but it is not possible to make an investment in a grain future. The use of futures for hedging, however, involves the same employment of credit and of deposits by way of security as applies to speculative trading.

Dealing in futures prior to the stage of delivery involves a good deal of bookkeeping, but not much other work. The commission house must keep track of the contractual obligations, the deposits for security, and the payments made in settlement. Because most of the work involved in future trading consists of such accounting processes, the ways in which future trading books are kept are of more general economic interest than is usually the case with ordinary business enterprises. The significance of the subdivision of the books into two classes, those relating to customers' accounts and those relating to the "street," that is, to dealings with other members of the clearing house, is duly developed in this discussion.

Some special trading devices, regular and irregular, growing out of the special handling of settlements and other bookkeeping processes-among them transfer trades, cross-trades, give-ups, etc.are also described and considered.

"Bids and offers for deferred acceptance," better known as " puts and calls" or "privileges," are described, but no attempt is made to discuss them comprehensively because such discussion is not essential to a consideration of future-trading operations. This special type of contract and form of trading demands full consideration on its own account, which it will receive in a later volume.

The subject of the legal status of future trading is naturally approached through some consideration of the nature of gambling and of the question as to how gambling may be distinguished from speculation. The nature of the legal conception of "intent to deliver" is subjected to careful examination and its application de

veloped. Speculative trades can be made with intent to deliver. Bucket-shop deals, however, because they in no case involve intent to deliver, are condemned by the common law, and the bucket-shop evil is also attacked by special prohibitory statutes in most States. The bucket-shop laws of the grain States are reviewed in the last chapter of this volume. In this connection, also, certain other statutory provisions affecting future trading are considered.

In the chapter on the legal status of future trading attention is also necessarily called to the fact that speculative exchanges are available as gambling facilities and are so used. The effect of the fact of gambling intent in the mind of the customer upon the status of the broker is developed. Whether the common law makes it a duty of the broker to ascertain that his customer is not gambling is a question not yet decided by the courts. It is at least true that the broker has not the right to ignore circumstances and methods of his customer that are indicative of gambling intent. The special legal responsibility of the broker and his possible moral obligation to abstain from speculative risks are duly noted.

One of the most important topics in connection with future trading as viewed from the standpoint of the law is that of corners. Manipulation of prices by way of corners is discussed with reference to the state of the law on this subject. Though the evil is specific and is a peculiar result of future trading technique, effective remedies for corners are not found in the present law; at least as it is actually enforced.

In the present volume of the report on the grain trade the Commission draws no conclusions and makes no recommendations. It merely sets forth the facts found as to the processes and methods of future trading. The general economic results will be considered in a later volume on the basis of comprehensive statistical data, where also will be considered remedies for economic ills that are amenable to legislative or administrative correction.

Respectfully,

VICTOR MURDOCK, Chairman.

HUSTON THOMPSON.

WILLIAM B. COLVER.

NELSON B. GASKILL.

JOHN GARLAND POLLARD.

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