THE "JOB-LOT" BOARD.-The unit of trading on the Open Board is 1,000 bushels. It is sometimes referred to as the job-lot board. The commission rates are now the same as the rates of the big Board for 5,000 lots without any addition being made to the proportionate rate on account of the trading being in small lots. Prior to 1914 the rules of the Chicago Board of Trade also made no distinction as to the rate per 1,000 as between job lots and full lots, but there was a market for job lots only in wheat futures. It appears also that the Open Board did not raise its rate from $1.25 to $1.50 per 1,000 till the close of 1915,1 although the change in the big Board rules raising the 5,000 rate from $6.25 to $7.50 appears in 1911, and the adoption of the special $2.50 rate for job lots in those for 1914.

The Open Board, it is alleged, has served as a training school for members of the big Board. This idea is repudiated by members of the latter. There certainly are cases where men have made their stake in the Open Board and then transferred their operations to the regular Board. In 1913 it was claimed by a member of the Open Board that it had sent to the big Board over 100 persons, including some of the latter's most influential members. It is said that, especially recently, newcomers on the floor are often from the Open Board.

PRICES ON THE OPEN BOARD.-There are no published quotations of the prices at which transactions on the Open Board take place. It is necessary for statistical purposes to assume that they are the same as prices on the big Board. If the normal spread is about one-eighth, the maximum may be one-eighth above the big Board high of the day and the minimum one-eighth below the big Board low. It has been said by a member of a firm that holds seats and does trading on both boards that it is often possible to make quite a bit of money by spreading between the two, prices sometimes differing several cents for brief intervals. Spreads of as much as a cent, however, have probably obtained only during conditions of a wild market, and especially around the beginning of 1917.

Referring particularly to the period of restricted trading it is said that the volume of trading on the Open Board has lately been hardly sufficient to place orders there to advantage, so that one house that was in the habit of giving a good deal of business to the Open Board-largely for sentimental reasons, because the senior member of the firm was long a member of the Open Board before he joined the other board-gave very little business to the former. Section 3.-Character and importance of trading on the Open Board.

SOURCES OF BUSINESS.-As regards the seven changers, it is possible to give job-lot business to either board unless the customer gives

1 Amendment posted Dec. 1, 1915.

Letter of A. G. Bennet (then president of the Open Board) to President Andrew, Nov. 11, 1913.

instructions as to where the trade is to be executed. Under such circumstances the broker exercises his judgment as to where conditions are most satisfactory for the execution of the order. It should be remembered that the job-lot market on the big Board has not the standing of the 5,000 market. Quotations are for 5,000 lots, and few of the men in the pit care to concern themselves with job-lot orders. They are said at times to be too busy to bother with them at all. However, the seven changers are, with one considerable exception, scalpers trading on their own account rather than commission merchants trading for customers. Hence, it may be inferred that the changing privilege is used chiefly for spreading purposes. However, some important firms outside of Chicago do submit orders that are executed on the Open Board. Included among these are considerable orders from Minneapolis, doubtless for hedging purposes. The district around Indianapolis, owing to the activities of one solicitor, has been said to supply considerable business to the Open Board, largely from farmers. Whether the price obtained on the Open Board is the best market price is a question that might well be carefully studied, statistically and otherwise.

The quality of customers attracted by the Open Board is not high, at least as rated according to external appearances of financial standing on the part of those present in offices and on the floor. As to the service that might be performed for country elevators with small lots of grain to hedge, it appears that only a very small percentage of the business is country business of any sort, though occasionally the trade of a country elevator is to be found on the books of Open Board concerns. This may not be due to any essential inferiority of the Open Board as a market for the placing of hedges in job lots. One factor is the absence of a cash market. Naturally, a shipper will either place his hedges through the commission house that acts as receiver for his grain or will use the private wire facilities that serve the big Board market. It should be said, however, that one of the members of the Open Board is a comparatively important wire house, being the changer above referred to whose books show a considerable amount of Open Board trading for Minneapolis.

DIVERSION OF BUSINESS FROM THE BIG BOARD.—The soliciting of joblot business and the giving of customers' orders to the Open Board for execution has been-or was in 1913 and again in 1916-complained of as being improperly done by members of the big Board. The rules of the latter1 might be interpreted as prohibiting any member of the big Board executing orders for futures anywhere else in Chicago if the commodity is dealt in on that Board, but the rule in question

1 Rule IV, sec. 8: "All orders

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to buy or sell for future delivery any of the articles dealt in upon the floor of the exchange must be executed in the open market in the exchange hall."

evidently does not apply to the changers. On September 9, 1913, a resolution was adopted by the directors of the Chicago Board to the effect that it was a violation of the commission rule for "any member to agree to sell or to deliver, to buy, or to receive, to or from a member of the Open Board of Trade, on the Open Board of Trade and subject to its rules, any grain or produce, where such transaction is based on and subject to a purchase or sale for an equal amount of grain or produce on the Board of Trade of the City of Chicago at a stated difference in price which shall be less in amount than the regular rates of commission." The members of the big Board who were also members of the Open Board (the changers) were the ones to be notified of this ruling. The changer could take the other end of the trades as if his own-in which case the transaction should be executed in the pit and at a definite price-and then make a corresponding trade on the Open Board. But it appears that "changing" transactions of this nature-in the case of selling orders of big Board customers-have been first executed (that is, sold) on the Open Board and then bought from the big Board house at one-eighth less, or, for 2,000-bushel orders, at one-sixteenth less; that is, on a split price. The closing order on the contract would be put through the same changer in the same way. This method is referred to as a “regular changing basis." It was used for oats and corn trading in 1916. Apparently the big Board job-lot market for wheat was satisfactory. Doubtless the customer pays or receives the price made with the changer rather than the price made on the Open Board, thus in effect paying a fraction over or under the market in addition to the commission, as is accomplished on other exchanges for job lots by various methods. The present rules of the Open Board1 provide for suspension of any member who fails to charge the regular commission to nonmembers. An eighth of a cent on 1,000 bushels is $1.25, and this was the regular commission on the Open Board till recently, but one-sixteenth is clearly less.

TRADING BY WOMEN.-It appears that brokers on the Open Board not long ago had to be restrained from seeking speculative trades of women. Women are excluded from standing in the halls and corridors of the building. Moreover, the offices of members located in the building have agreed not to take trade from women. It is stated that women have never been allowed on the floor of the exchange, thus being denied the privilege which gives the Open Board its name. These distinctions of sex, of course, do not affect the necessary apple vendors.

1 By-laws, sec. 34. Resolution of Apr. 15, 1915. Resolution of June 1, 1915.

TRADING IN PRIVILEGES.-The Open Board also trades in privileges at the same proportional rate for job lots as that of the big Board for 5,000 lots; that is, $1 per 1,000 lot, or, by way of commutation of the tax, $1.25 for offers since December 1, 1917. There is apparently no restriction of the hours of such trading, although an additional afternoon session is provided for this purpose, with hours the same as those of the big Board. On November 1, 1916, a by-law was adopted excluding such trading from the regular session (9.30 a. m. to 1.15 p. m) under penalty of a fine of $5. No such rule appears in the by-laws printed somewhat later, however, and enforcement, though attempted, does not appear to have been stringent. An inquiry was made of the secretary of the Chicago Board of Trade as to whether, by any rule, custom, or policy trading in privileges during the morning hours was prohibited and a negative reply received. In fact, however, trading in overnight privileges is said not to occur on the big Board except sporadically, out of the fixed hours, while it is alleged that it occurs "all day long" on the Open Board. It should be noted that it costs only a dollar to take a chance on a job-lot privilege.1

VALUE OF MEMBERSHIPS.-Memberships in the Open Board of Trade are valued at about one-tenth the value of memberships in the big Board. They have usually been worth $250, and $600 has been the high price occasionally reached. The secretary of the Open Board has computed average prices for memberships transferred by years, as follows:

VOLUME OF TRADING.-The volume of trading in 1917 on the Open Board has been shown in an earlier chapter. It appears that 600,000,000 bushels of grain futures may be transferred in an active year. This is perhaps one thirty-fifth of the volume of trading in futures on the big Board. The Open Board also transacts in privileges (bids and offers combined) business representing 250,000,000 bushels of potential futures, of which, of course, only a very small proportion are exercised or ripen into future contracts. This business represents a larger ratio to the volume of futures than in the case of the big Board.

1 Since the present tax on futures was imposed (Dec. 1, 1917) 25 cents is added to the price of a corn offer and 15 cents to that of an oats offer.

Ch. I, sec. 4.

Section 4.-Doubtful economic need of the Open Board.

With reference to an important difference between the two boards, the Open Board is sometimes referred to as the job-lot board. If there is a sufficient reason for its continued existence it lies here. It is an important question whether job-lot trading is sufficiently provided for or given satisfactory terms on the big Board. If it is or can be satisfactorily provided for, there is no reason why the Open Board should continue in business. The volume of job-lot trading, with regard to any economic function it has, should be concentrated and given such place as it deserves, either on one exchange or the other. The unit for the cash handling of grain as it leaves the country is the car lot. A car lot is about 1,200 bushels for corn and for most other grains, though 1,800 is the corresponding figure for oats and 1,100 for wheat, with a recent tendency to a heavier loading of cars all around. In other words, a natural unit for placing hedges originating in the country would be the job-lot rather than the 5,000 lot, which is the standard of dealings on the big Board. The recent increase in job-lot business on the big Board has been attributed to closer hedging.

The reason for the existence of the Open Board appears to be historical rather than its present functional significance. It is at least doubtful whether it has any price-determining function or effect. It is a negligible factor in the marketing of grain. Some members of the big Board are inclined to apply to it the epithet "bucket shop." A more accurate statement is that "there is no more necessity for the Open Board of Trade than there is for the bucket shops." A more forcible statement, by an officer of the big Board, is that the Open Board "is a small affair, a sort of blood-sucker on this [big Board] association, and all quotations used on it are those made on the market of this association. The Open Board receives no grain nor does it sell or ship it." At least, if better provision were made for job-lot trading on the big Board, it would seem that only the vested interests of members of the Open Board would need to be considered an objection to abolishing it entirely.

Although, as has been said above, the atmosphere of the Open Board of Trade is not one of financial substance, there appears to be no ground for suspecting low standards of commercial conduct, and there is often greater openness in the attitude of the members toward a Government investigation than in the case of the Chicago Board of Trade itself. In the latter, but not in the former, there is sometimes observable the egotism and "let me alone" reaction that may be considered symptomatic of "big business" when such big business becomes an obsession.