heavily. Reports and statements designed to influence the market in the opposite direction from one's own belief, as proved by one's action in the market, are so flagrantly dishonest that they might properly be made a felony. It does not appear that the Chicago board of directors did anything more than reprove the member apparently guilty of the conduct described.

THE USE OF PRIVATE CROP EXPERTS.-The statements of crop experts employed by some of the wire houses naturally come up occasionally for condemnation by the censorship. An announcement issued by the president's office of the Chicago Board of Trade on May 15, 1916, embodies a constructive program. It reads as follows:

worse.

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The officials of the Chicago Board of Trade propose hereafter to exercise a complete control over so-called " crop experts." Developments for several years past would indicate that many of these so-called ". experts" are incompetent or All reports sent in by crop experts" during the present season are being carefully tabulated. Later in the season, when harvest returns are available, if it is demonstrated that any of these so-called "experts' are unreliable, members of this exchange will be forbidden thereafter to distribute the reports of such experts."

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Shortly before this statement (on Mar. 3, 1916) an important wire house was admonished for publishing an estimate of farm reserves based on a too small number of field estimates; i. e., on 400 replies from correspondents.

POLICY IN RELATION TO ADVICE TO CUSTOMERS.-The situation and policy of the Chicago Board has been summed up by Mr. Griffin, at that time president of the Board, in substantially the following words:

The Board censors all market news strictly. Sending out rumors as to crop and weather conditions, and vague, false, and fictitious matter purporting to be news, or rumors of political events, is forbidden. Rumors which will influence the market must first be verified. But the Board makes a distinction between market news and market advice. The former is censored, but market advice or opinion is allowed almost unrestricted liberty. The theory is that advice from a house to its customers sent over its own wires and not to the public has somewhat the status of the professional advice given by a lawyer or banker to his clients. All significant facts should be stated correctly with conclusions involving advice or suggestion clearly put forward as mere opinion. Opinions are not considered so important as news.

The Board, however, frowns upon the giving of direct advice to buy or sell. It is possible, however, that the just-above stated summary of policy may be taken to indicate an abandonment of what was in 1916 stated "always to have been the opinion and policy of the board of directors.'

TEMPORARY PROHIBITION OF ADVICE BY WIRE OR MARKET LETTER.The liberty in the matter of giving advice, above referred to, has since been subjected, at least temporarily, to some abridgment. At

the instance of the United States Food Administration, on February 19, 1918, the following resolution was adopted by the Chicago board of directors:

That all opinions or advice expressed or implied as to the probable course of markets of corn, oats, or provisions for future delivery in market letters or on the wire-public, private, or telephone-be discontinued until April 1, 1918. Any violation by members of the provisions of the above resolution shall be deemed a grave offense against the good name of the association.

It will be noted that this was to be effective until April 1 only. There appears to have been an extension of the term of this regulation, but only to December. It was stated during the period it was in effect that this policy caused a marked lessening of the interest taken by members in the sending out of market letters. The direction to abstain from expressing any opinion as to the course of prices was felt by the members to deprive the market letters of most of their value as business getters.

STOPPAGE OF UNVERIFIED RUMORS AT THE SOURCE.-In the matter of checking rumors, it is, of course, most important that they be stopped at their source. The exchanges either singly or together— they have attempted to get together in the matter-do not appear to have power sufficient to deal adequately with the news agencies and news tickers. On March 9, 1915, a resolution of the Receivers' Association of Chicago was submitted to the board of directors, which reads as follows:

That it is the sense of this Board that the officers of the Receivers' Association communicate with the president and directors of the Board of Trade at once, calling their attention to the scandalous issuance of gossip and rumors credited by issuers' sources as due to Jones & Co., Russell Agencies, etc., and issued by members of the Board of Trade. The officers of the Receivers' Association offer in behalf of the Receivers' Association to file charges against members guilty of disseminating rumors and gossip of this character, even though the authority for the gossip be quoted therein.

No pronounced effort appears to have ever been made to remedy this situation-no such cooperative effort as, for example, was made to control the dissemination of quotations in connection with the bucket-shop evil. The Chicago Board appears to have tried to obtain the cooperation of various news bureaus in keeping out of circulation news of a highly sensational character, but it does not appear that any effective control was established. Perhaps this is because the private wires themselves are dealt with too gently in the matter of distributing rumors. If "the indiscriminate circulation of rumors over private wires" is the gist of the evil, it is not sufficient that the latter be able to give a source for the rumors they spread, though that is better than nothing. It would seem that a news censorship-or, rather, cooperative disciplinary measures relating to

news distribution-might be easier to develop and enforce than the control of the bucket shops, since all the important business interests concerned are in this case represented in the Board. Of course, it is possible that therein lies the difficulty, at least until the wire houses themselves wish a strict censorship.

It is true that the spreading of false rumors is a common-law crime. Court procedure in connection with the fixing of responsibility for dishonesty of this nature, however, could hardly be expected to be so effective a preventive of this sort of abuse of the facilities for news service as direct administrative action by the Board upon its members would be.

In the case of some wire houses, a responsible member of the firm will himself pass upon news before it is sent out, and this is sometimes done very carefully. As is usual in matters of business ethics, what is needed is the raising of all, or nearly all, to the level of the highest. One of the most important grain houses describes its service as follows:

*

We circulate about 150 market letters daily through the mails and statistical information, which we receive from the news bureaus, by wire. We also send out by wire some general information, selected for reliability * *. Our policy in regard to information distributed is to avoid absolutely anything of a sensational nature and give such information as indicates known conditions, refraining entirely from drawing conclusions or prophesies.

THE CENSORSHIP AT CHICAGO NOT EFFICIENT.-The so-called censorship at Chicago adds considerably to the duties of the Secretary as a letter writer. The lesser importance of futures and of speculation on other exchanges means that the situation is not so exacting elsewhere. Evidence of anything more than letter writing at Chicago, at least of actual punishment of offenders, as distinguished from summons before the board of directors for explanations, is lacking. In relation to one phase of the censorship, the secretary himself refers to 'the "admonitions of the market reports committee having become valueless."

Perhaps if the problem were approached from another viewpoint the censorship would be more effective. Hitherto the underlying idea has been to "ayoid giving offense to our enemies." In other words, these things are offensive to the public, and the Board tries to do some disinfecting or deodorizing. If the majority sentiment of the Board were opposed in principle to the seeking of commission earnings by its members where the presumption is that a disservice rather than a service is performed for the customer, then it might deal more effectively with attempts of commission houses to get as much as possible of such business by stimulating trade not merely through sensational news but by advice tending to keep customers moving "in and out" of the market.

Section 8.-Branch offices and correspondents.

THE BRANCH OFFICE MANAGER A "SOLICITOR."-The local or country" representative of a wire house may be a branch office manager or he may be a correspondent. If the office is conducted as a branch of the head office in Chicago, the situation calls for no extended comment. Such a branch office manager is a "solicitor" as defined in Rule IV, section 33, of the Chicago Board of Trade. As suclr he is subject to scrutiny with regard to his elegibility. A solicitor may be a member of the Board or not, but his employment in that capacity must first be approved by the membership committee and must be discontinued upon its direction. This control is aimed especially at persons having had connection at some time or other with a bucket shop. The solicitor must be employed at a fixed salary as his only compensation, and this salary must not be changed oftener than once in six months. The intent of such a rule is to prevent a too aggressive business-getting policy, but whatever effective restraint there is upon the branch-office manager does not appear to be attributable to this rule.

THE CORRESPONDENT IN BUSINESS FOR HIMSELF.-The "correspondent" is presumably a member of the Chicago Board of Trade and earns on business originating at his office a share of the commission. As a member he pays $3.75 for a 5,000 lot and charges his nonmember customers $7.50. If his customer is a member, the correspondent earns nothing on that particular business. The same principle applies to job lots, the correspondent obtaining $2.50 per 1,000 from a nonmember of which he pays to the Chicago office $1 as the member rate. The correspondent is in effect a customer of the Chicago house on behalf of the group of traders that are in turn his customers. Out of his share of the commissions the correspondent pays office rent and expenses attributable to the futures business and he sometimes has also to meet some portion of the wire expense, according to the character of his agreement with the Chicago house. Correspondents are likely to have some other business than grain futures. Some are grain dealers, maintaining the connection chiefly for their own use in making hedges and at the same time accomodating a few customers. If the correspondent is primarily a speculative broker or commission house, he takes orders for stocks and miscellaneous speculative articles as well as for grain futures. New York City stock brokers are mostly correspondents of Chicago wire houses with reference to any incidental grain-futures business that may come their way.

Some correspondents are not members of the Chicago Board. In a report to the directors of the Chicago Board submitted on July 12,

As appears in the regulations adopted under Rule IV, sec. 33.

1915, the correspondent offices were said to number about 225, of which 30 were in charge of nonmembers. Correspondents in remote parts of the country-in the South or the extreme West-charge more than the prescribed minimum rate to nonmembers and thus obtain compensation for the service. Some stock-exchange houses that submit orders in futures as correspondents have no membership at Chicago. In such a case the consideration is reciprocal business, the Chicago commission house turning over stock business to the New York house. The same situation holds as between members of different grain exchanges with reference especially to "spreading" orders. Sometimes such reciprocal business arrangements are the subjects of definite contracts stating the amount of business to be received. Such provisions are attached to contracts for the use of the wires of the Chicago house by the correspondent, perhaps providing also for a division of the wire expense.

NUMBER OF CORRESPONDENT OFFICES.-The number of correspondents mentioned in the preceding paragraph does not adequately represent the present or recent extent of such connections of the Chicago Board of Trade. As appears in section 5 of the next chapter, the number of offices of correspondents on March 1, 1918, was about 300 and there were in addition over 200 branch offices.

ACCOUNTS FOR CUSTOMERS OF CORRESPONDENTS OFTEN KEPT AT CHICAGO.-Orders received from a correspondent may be handled like those of any other member customers, and the Chicago house may have no knowledge as to who the customers of its correspondents are, or in fact as to whether his trades are not all on behalf of himself. With reference to keeping his accounts straight, however, the correspondent will probably want reports on trades, i. e., purchase and sale accounts, made so as not to match the sale of one customer with the purchase of another and he will therefore give instructions as to how to do the matching.

Commonly the special treatment by the Chicago house of business from a correspondent goes much farther than the special matching of orders on closed trades. There is a tendency for the Chicago house to carry separate accounts for the customers trading through the correspondent. Sometimes confirmations, purchase-and-sale accounts, and other notices are mailed direct to the customer acquired through the correspondent, the entire connection of the latter with the business consisting of the fact that the trade was originally obtained through him and that a share of the commission is therefore "rebated" to him. One reason for this tendency of the Chicago house to keep separate accounts for the correspondent's customersalthough they may be in effect duplicates of the accounts similarly kept by the latter-is the desirability of keeping a close watch on the