(b) Where such contracts are made by or through a member of a board of trade which has been designated by the Secretary of Agriculture as a "contract market," as hereinafter provided, and if such contract is evidenced by a memorandum in writing which shows the date, the parties to such contract and their adresses, the property covered and its price, and the terms of delivery, and provided that each board member shall keep for a period of three years from the date thereof and for such longer period as the Secretary of Agriculture may direct a permanent record of such contract for future delivery.

SEC. 5. That the Secretary of Agriculture is hereby authorized and directed to designate boards of trade as “contract markets" when, and only when, such boards of trade comply with the following conditions and requirements:

(a) When located at a terminal market upon which cash grain is sold in sufficient volumes and under such conditions as fairly to reflect the general value of the grain and the difference in value between the various grades of grain.

(b) When the governing board thereof provides for the making and filing of a record and reports, in accordance with the rules and regulations and in such manner and form as may be prescribed by the Secretary of Agriculture, showing the details and terms of all transactions entered into by the board or the members thereof, either in cash grain or for future delivery, and which record shall at all times be open to the inspection of any representative of the United States Department of Agriculture and United States Department of Justice, and such record shall be in permanent form and shall show the parties to all such contracts, any assignments or transfers of such contract, the parties to and terms of such assignments, and the manner in which said contract is fulfilled, discharged, or terminated.

(c) When the governing board thereof prevents the dissemination, by the board or any member thereof, of fake, misleading, or inaccurate reports concerning crop or market information or conditions that affect or tend to affect the price of commodities. (d) When the governing board thereof provides for the prevention of the manipulation of prices by the dealers or operators upon such board, including a reasonable limitation upon the total quantity of grain of the same kind covered by contracts unfulfilled or unsettled at any one time by or on behalf of the same person commonly called "open trades" in speculative transactions.

(e) When the governing board thereof admits to membership thereof and all privileges thereon on such boards of trade any duly authorized executive officer of any lawfully formed and conducted cooperative association of producers having adequate financial responsibility: Provided, That any such association or its representatives applying for admission to membership on a board of trade be able to and shall comply with and conform to all rules and regulations of such board if the same have the approval of the Secretary of Agriculture.

SEC. 6. That any board of trade desiring to be designated a "contract market' shall make application to the Secretary of Agriculture for such designation and accompany the same with a showing that it complies with the above conditions, and with a sufficient assurance that it will continue to comply with the above requirements. The Secretary of Agriculture is authorized to suspend for a period not to exceed six months or to revoke the designation of any board of trade as a "contract market" upon a showing that such board of trade has failed or is failing to comply with the above requirements or is not enforcing its rules of government made a condition of its designation as set forth in section 5. Such suspension or revocation shall only be after a notice to the officers of the board of trade affected and upon a hearing: Provided, That such suspension or revocation shall be final and conclusive unless within fifteen days after such suspension or revocation by the Secretary of Agriculture such board of trade appeals to the circuit court of appeals for the circuit in which it has its principal place of business by filing with the clerk of such court a written petition praying that the order of the Secretary of Agriculture be set aside or modified in the manner stated in the petition, together with a bond in such sum as the court may determine, conditioned that such board of trade will pay the costs of the proceedings if the court so directs. The clerk of the court in which such a petition is filed shall immediately cause a copy thereof to be delivered to the Secretary of Agriculture, and the Secretary of Agriculture shall forthwith prepare, certifiy, and file in the court a full and accurate transcript of the record in such proceedings, including the notice to the board of trade, a copy of the charges, the evidence and the report and order. The testimony and evidence taken or submitted before the Secretary of Agriculture duly certified and filed as aforesaid as a part of the record, shall be considered by the court as the evidence in the case. The proceedings in such cases in the circuit court of appeals shall be made a preferred cause and shall be expedited in every way. Such a court may affirm or set aside the order of the Secretary of Agriculture or may direct him to modify his order. No such order of the Secretary of Agriculture shall be modified or set aside by

the circuit court of appeals unless it is shown by the board of trade that the order is unsupported by the weight of the evidence or was issued without due notice and a reasonable opportunity having been afforded to such board of trade for a hearing, or infringes the Constitution of the United States, or is beyond the jurisdiction of the Secretary of Agriculture.

SEC. 7. That the tax provided for herein shall be paid by the seller, and such tax shall be collected either by the affixing of stamps or by such other method as may have been prescribed by the Secretary of the Treasury by regulations, and such regulations shall be published at such times and in such manner as shall be determined by the Secretary of the Treasury.

SEC. 8. That the Secretary of Agriculture may make such investigations as he may deem necessary to ascertain the facts regarding the operations of future exchanges and may publish from time to time, in his discretion, the results of such investigation and such parts of reports made to him under this Act, and such statistical information gathered therefrom, as he may deem of interest to the public.

SEC. 9. That any person who shall fail to evidence any such contract by a memorandum in writing, or to keep the record, or make a report, or who shall fail to pay the tax, as provided in sections 4 and 5 hereof, or who shall fail to pay the tax required in section 3 hereof, shall pay in addition to the tax a penalty equal to 50 per cent of the tax levied against him under this act and shall be guilty of a misdemeanor, and upon conviction thereof be fined not more than $10,000 or imprisoned for not more than one year, or both, together with the costs of prosecution.

SEC. 10. That if any provision of this act or the application thereof to any person or circumstances is held invalid, the validity of the remainder of the act and of the application of such provision to other persons and circumstances shall not be affected thereby.

SEC. 11. That no fine, imprisonment, or other penalty shall be enforced for any violation of this act occurring within sixty days after its passage.

SEC. 12. The Secretary of Agriculture may cooperate with any department or agency of the Government, any State. Territory, district, or possession, or department, agency or political subdivision thereof, or any person; and shall have the power to appoint, remove, and fix the compensation of such officers and employees, not in conflict with existing law, and make such expenditures for rent outside the District of Columbia, printing, telegrams, telephones, law books, books of reference, periodicals. furniture, stationery, office equipment, travel, and other supplies and expenses as shall be necessary to the administration of this act in the District of Columbia and elsewhere, and there is hereby authorized to be appropriated, out of any moneys in the Treasury not otherwise appropriated, such sums as may be necessary for such purposes.

Passed the House of Representatives May 13, 1921.
Attest:

WM. TYLER PAGE.

Cler's

Mr. Morrill, of the Department of Agriculture, is present. He has to leave town shortly, and I have asked him to come up here and be heard by the committee.

Senator KENYON. Mr. Chairman, is this the bill that was passed by the House?

The CHAIRMAN. Yes.

Senator KENYON. Is this in the exact form as passed by the House? The CHAIRMAN. Yes. We would like to hear Mr. Morrill now.

STATEMENT OF MR. CHESTER MORRILL, ASSISTANT CHIEF OF THE BUREAU OF MARKETS, DEPARTMENT OF AGRICULTURE.

The CHAIRMAN. Mr. Morrill, the committee will be glad to hear you discuss in your own way this bill which is now before the committee. First give your name for the record.

Mr. MORRILL. My name is Chester Morrill, assistant chief of the Bureau of Markets of the Department of Agriculture.

This bill was introduced in the House, or, rather, the bill upon which this is based, was introduced in the House by Mr. Tincher,

and the corresponding bill was introduced in the Senate by Senator Capper.

After the bill had been considered by the House Committee on Agriculture for some time, a committee substitute for the original Tincher bill was formulated, and then the Secretary of Agriculture was invited to appear before the committee to discuss future trading with special reference to the Tincher bill. He appeared before the Committee on Agriculture on May 2 and his remarks are contained in series C of the volume of hearings on future trading of the Committee on Agriculture of the House of Representatives.

Senator MCNARY. At page 325.

Mr. MORRILL. At page 325.

In view of the fact that the Committee on Agriculture had formulated a tentative bill, the Secretary addressed his remarks and suggestions to that bill, which has become the bill you have before you. Senator MCNARY. May I interrupt you to ask you a question at this point?

Mr. MORRILL. Yes, sir.

Senator MCNARY. So that we may get it into the record?
Mr. MORRILL. Yes, sir.

Senator MCNARY. I have read the testimony of Secretary Wallace and he has suggested various amendments to the committee. Were they, or at least a portion of them, incorporated into the bill, and are they to be found there now since its passage through the House? Mr. MORRILL. The amendments which the Secretary suggested were incorporated in the bill, and, I think, are all in the bill as it passed the House except that the committee, after hearing Secretary Wallace, made some slight changes in phraseology, and at least one substantial change was made on the floor of the House afterwards. So that the bill as you see it here is not precisely the bill which was under consideration by the committee at the time that Secretary Wallace appeared before the committee.

Senator CAPPER. May I ask Mr. Morrill if he can tell us what material changes were in the bill reported by the committee; that is, how does it differ from the bill that was introduced originally by me here and by Mr. Tincher in the House?

Mr. MORRILL. Yes. The bill as originally introduced by you and Mr. Tincher applied to all transactions for future delivery, whether made on or off the future exchanges; that is to say it imposed a tax upon all transactions for future delivery made either on or off future exchanges, and provided certain exemptions, which were set out in subdivisions (a) and (b) of section 4 of this bill.

Section 3 of this bill remains very largely as it was originally, with some changes in phraseology, and was designed, through the means of a tax, which would probably be prohibitive, to stop all trading in what are known as "privileges," "bids," "offers," "puts and calls," "indemnities," and "ups and downs.'

Then a second form of the tax, of the same amount as imposed upon these "privileges" and "bids", etc., was imposed upon all transactions for future deliveries of grain with the two exceptions which I have just mentioned in (a) and (b).

That tax, as I said before, was not limited to transactions in futures, or what we commonly call future trading. It applied to all sales for future delivery.

It was at this point that the Secretary suggested, as you will see in the record of the hearings, that that tax be limited to transactions at, on or in an exchange, board of trade, or similar institution or place of business, following, in that respect, the language of the cotton futures act, so as to make it applicable to future trading as such, wherever it might be conducted, as distinguished from transactions which might be made for forward delivery or forward shipment, such, for example, as an exporter might enter into obligating himself to ship a certain amount of grain three months hence, which would be a transaction for future delivery, but which the Secretary thought was not really intended to be governed by this bill. Therefore, he proposed an amendment limiting section 4 to the exchanges, and the committee adopted that amendment and redrafted it just as he proposed it.

Then, the first exception to that tax was set out in subdivision (a), and went this far. I will read as far as it went:

Where the seller is at the time of the making of such contract, the owner of the actual physical property covered thereby, or is the grower thereof, or in case either party to the contract is the owner or renter of land on which the same is to be grown,

*

*

*

The Secretary suggested an addition, which was adopted:

*

*

* or is an association of such owners, or growers of grain, or of such owners or renters of land.

In order to take care of a group, as distinguished from an individual.

Senator MCNARY. That takes care of cooperative organizations? Mr. MORRILL. That is designed to take care of the cooperative organizations; yes.

Now, the second exception was in subdivision (b), and subdivision (b) was differently worded in the original bill, but before the Secretary was heard upon it a change was made.

I do not have before me a copy of the original Tincher Bill.

The CHAIRMAN. Well, if it is important, Mr. Morrill, we can supply you with that. We have it here.

Senator CAPPER. Yes.

Senator McNARY. Yes..

Mr. MORRILL. I will not enter into that, unless you want me to continue the answer to the question on that point.

Senator McNARY. Well, that is the same bill.

Mr. MORRILL. The reason I am going on with this is because Senator Capper asked me to analyze the differences in the bill.

The CHAIRMAN. Those who want to follow Mr. Morrill can turn to Calendar No. 12. Calednar No. 12 is the bill originally introduced by Mr. Capper in the Senate, which was the same as the bill introduced in the House by Mr. Tincher.

Mr. MORRILL. Subdivision (b) in the original Capper-Tincher bill started out in this way:

That persons who are at the time of the making of the contract, regularly engaged in the business of growing, dealing, in or manufacturing grain or grain products may enter into contracts for future delivery, if such contracts are made by or through a member of a board of trade which has been designated by the Secretary of Agriculture as a "contract market," etc.

At the time that bill was under consideration by the committee, or by the Secretary of Agriculture, a change had been made, striking

out the first part, in the first four lines, so that it reads as you see it in the form you have before you now.

Senator MCNARY. What was the reason for that change?

Senator CAPPER. That change was made by the House Agricultural Committee?

Mr. MORRILL. Yes.

Senator MCNARY. Why was that change made?

Mr. MORRILL. One of the reasons seemed to be that there had been a discussion in the committee as to what was meant by "dealing in,' and they felt that probably that let in everybody, anyhow, and therefore they struck out the whole limitation.

I think that also the committee had definitely reached the conclusion that they did not want to prohibit speculation on the exchanges; at least, it was very clear in the course of the discussion that they had reached that conclusion, that they were not trying to prohibit speculation.

Now, evidently the thought behind the original language was that it would be desirable to cut out the pure speculator; that is to say, by "pure speculator" I mean a person who has no contact with the cash grain business as such. Of course it is admitted that a great deal of speculation is carried on by people who are in the grain business, and I think the committee probably reached the conclusion that they were probably as great speculators as those who were on the outside. Therefore they did not want to make any distinction or limitation.

I am merely surmising this from the discussion which surrounded the Secretary's remarks, and I was present listening to them.

Anyway, the committee had decided on this form of language. Now, the effect of subdivision (b) is to exempt from the tax imposed on contracts as now made on the future exchanges all the contracts made through members of boards of trade that comply with the five specified conditions set out in section 5. If the board of trade complies with those five specified conditions to the satisfaction of the Secretary of Agriculture, then the subsequent effect of the bill is that that future trading goes on without other restriction than that contained in those five requirements.

One thing that was pointed out by the Secretary of Agriculture in connection with the previous suggestion that the tax should be limited to the boards of trade and exchanges was that section (b) made it mandatory that the transactions for future delivery that were exempt from tax be conducted through members of boards of trade, which would take the handling of the cash grain business for future delivery out of the hands of individuals and compel them to handle their business through boards of trade.

That, I presume, was not the intention at all, but it had that effect. The CHAIRMAN. Well, that is eliminated now.

Mr. MORRILL. That is eliminated now, and the bill takes care of that situation. I am trying to develop the history of this thing and to show you just how it comes to you in this way now.

Senator GOODING. So that the boards of trade that come under the exceptions or are designated contract markets by the Secretary are practically taken out of any legislation

Mr. MORRILL. No.