ses to build up -up is building to the disinte he wire-house rations of the less important isons of open ding the ele han they have crades of this open a comculative wirene, or perhaps t than do the = statistics of volve considthem. The arious senses, des (namely, E the commis mpossible to e considered, Itimate open ke those for phs, are not are available erested. de made by s, of course, market as a obtained in and to 2,807, obtained is ades in gent, for only a market as a and 15 for uted volume only much g house and n what has - customers. of transac els of open available are for groups that contain mainly hedges or mainly purely speculative trades, the life of open trades varies correspondingly. For example, Minnesota hedges are kept open much longer than the general run of Chicago future trades, while the duration of life of open trades on the Chicago Open Board of Trade is less than on the big Chicago board. Gains and losses per bushel from future trades are, on the average, rather small. This is, of course, an inevitable result of the short time during which the trades were kept open. An estimated general average shows only two and a fraction cents as the usual loss or gain, as the case may be. The variations of these averages as between the options and as between member and nonmember, long and short, and gain and loss trades, are interesting and especially significant of the way in which speculative trades are handled. It appears generally true that gains are less per bushel than losses per bushel; that is, there is a tendency to hold on to trades showing a loss, while a gain tends to be taken rather promptly, and hence the gains are split up among a larger number of traders. The influence of the price trends of individual options upon gain and loss results for long and short trades can be definitely traced, the results for particular options being very closely correlated with computed price trends. Both gains and losses tend to increase in proportion to the duration of life of the open trades. The distribution of gains and losses per bushel, after making due allowance for the character of the period, appears to be substantially normal; that is, the most frequent gains (or losses) are the smallest and the larger gains (or losses) become less numerous as the amounts per bushel increase. The data also provide means for a classification of customers according to occupation. Information as to the occupation of the trader is about the best available statistical fact indicative of whether traders are speculating or hedging. These occupational data indicate that there is much more speculative trading in wheat than in the other grains. There is no demonstrable difference between the results of trading for comparatively noncompetent groups and the grain trade groups of traders, but this result may be due to the character of the period covered, which favored the long and comparatively outside element in the market. An attempt was made to obtain data for trades classified according to the commercial rating of the traders, with no positive results, except possibly an indication that speculative traders are on the whole comparatively well to do. Information with regard to occupations applied to the classification of traders, as distinguished from that of the trades, shows a much greater importance of nongrain trade groups on this basis than appears on the basis of quantity of trades. These figures are compared with census data of population with regard to the comparative distribution of future traders and of the population generally as regards occupation. It appears that the representation among future traders of the various elements in the population outside of those who have a business interest in futures is comparatively small, but the professional classes appear to be rather well represented among the nongrain trade groups. ble to compute the average life open and the propo open and closed on the same day for such a group for a ent from that for which the more general data were appears that such traders tend to keep their trades ope length of time than applies for the mass of traders o Board of Trade. SERVICES AND COSTS OF FUTURE TRADING With reference to the need of speculation in order th serve hedgers well and to the effect of cash future disco ing and on prices in general, it is evident that the future trading is far from perfect. Specific technica of futures indicate why some undesirable developmer how they may possibly be checked by remedial measure of stop-loss orders on the market is a specific cause Furthermore, a large volume of trading is not always b fact, a direct inference from the correlation between the of trading and daily price changes and ranges would volume is unfavorable to stability. Such data, at least, the reduction of the volume of trading by excluding so tent elements from trading would not impair the service market. The direct cost of future trading by way of commissio expenses incurred by those who use the market has a cently, it is estimated, to from $20,000,000 to $25,000,000 amount varies with the volume of trading. There are s expenses of considerable importance which can not be m as definitely as is done in such an estimate for direct ex regards the losses from unwise speculation in futures, claimed on general grounds that they are not a total gains and losses, taking the market as a whole, balance But it should not be forgotten that in gambling transa reference to gambling in general) the hardships inflict are usually greater than the benefits accruing from amount of losses and gains from grain future tradin pecuniarily is indeterminate, but it is undoubtedly a ma eral hundred millions of dollars a year. In general the in of an institution that can be used as a gambling facility a and ramify in ways that can not be adequately traced and The best that can be said of an institution that is in pa though also used for business purposes, is that the gam incidental evil and that the abolition of the particular fac not prevent the evil, but merely change the instrument thr gambling was accomplished. As regards the need of the market for traders who are gamblers, as distinguished from the competent speculator true, apparently, that their contribution to the volume of necessary, while it is true that the quality of such trade kind to help the market to function well. To the hedg not make so much difference that the gambling contributio whole the opposite of stabilizing in its effects on futures, bu - a period differ that the market counts on hedg mechanism of al peculiarities ents occur and res. The effect of instability. beneficial. L e daily volume be that large , indicate tha some incompeeability of the ions and other amounted reO a year. The some indirect measured even expenses. As it might be loss, because ze each other. actions (with ted by losses gains. The ng measured tent elements in future trading would probably not injure the market but would rather, on the whole, increase its efficiency. MANIPULATION AND ARTIFICIAL PRICES The subject of manipulated and artificial prices includes corners. The corner is not entirely a peculiar development of future trading, but its importance is greater in futures because of the nature of the contract. In the cash grain trade, under modern conditions of cheap transportation and instantaneous communication between widely separated sources of grain supply, corners no longer occur. Corners in the actual commodity do not occur, in fact, for any staple produced in large volume; but corners in futures have been at times a frequent phenomenon. It appears, however, that recently they have been much less important than formerly. This may be attributed in part to the development of anticorner rules, supported by a stronger sentiment against cornering than formerly prevailed in the grain markets. For technical reasons, grounded in the nature of the future contract, it is less easy to manipulate the market on the short side than it is on the long side, manipulation on the long side being, of course, chiefly accomplished by way of corners. The successful cornerer can make it practically impossible for the short to get grain to deliver on his contracts except by buying from the cornerer himself. There are no corresponding facilities by which the short seller can so thoroughly control the situation and, through technical conditions, exploit the "longs." But so far as heavy volume of transactions of itself may be used with a manipulative effect upon prices, such an operation is just as much open to the short seller as it is to the long buyer. Indeed, because of the predominant interest of the miscel laneous and more or less incompetent traders in the long side of the market, the temptation, apart from the possibility of cornering or squeezing the market, to manipulate on the short side may be greater for the professional trader than to manipulate on the long side. Elevator facilities can be used to exploit the futures market on either side, and the elevators have some small degree of manipulative power not equally available to large interests without elevators. During the war period prices of futures as well as of cash grain were subject to interference, first by action of the exchanges themselves and later by the Food Administration, acting through the officers of the exchanges. The latter effect was mainly a matter of restriction upon trading and the former, especially in the first instance, was a matter of decreed settlement prices. All these developments involved artificial prices. Among the devices employed, in addition to decreed settlements, were maximum price limits, daily movement limits, shortened futures, and limitation of open interests all supported by the requirement of frequent reports to the officers of the exchange especially in relation to the limitation of speculative open interests. Trading in wheat futures was suspended entirely from the middle of 1917 to the middle of 1920. atter of sev indirect costs are extensive nd measured. part so used, mbling is an acility would rough which e specifically ors, it is not f trading is is not of a gers it does on is on the ut to society e 1837-26- -3 In the conclusions and recommendations contained i it is recognized that much is still to be learned, and es the choice of administrative measures would be the su siderable difference of opinion, even among those who f sort of remedial action is desirable. The character of th and recommendations is also affected by what has b accomplished, especially through the establishment and the Grain Futures Administration. Future trading ha reputation with the general public, especially with pr this situation is not without reason. At present, howe best in some respects to remind the grain exchanges of o comings of the futures market, rather than to recommen measures which may not be sufficiently thought out. T practical result of the study of specific problems broug clusion in this report is often that there is need for fur consideration of an evil rather than a definite recomm what should be done to put an end to it. Some conclusi more, are not of a nature to involve any recommend principal conclusions and recommendations which are he marized relate mainly to grain futures, but there are certa of the trade which are common to both cash and futures. The fairness of rates of commission and of interp the commission rule relate to both cash and future The best way to deal with any question as to the fairn mission rates would seem to be to remove obstacles to t tive handling of grain at the terminal markets. The of cooperatives can not be unfairly detrimental to othe middlemen, except so far as there are excessive char service rendered. Recent changes in the rules or in the tation provide for the admission of cooperatives to ful the exchanges. Both the cash grain trade and the futures markets volved in the terminal elevator situation. A considerabl integration in the grain trade has tended to change handling grain at terminals, and in particular has la away with the service of public storage at terminal ma conditions which make it available as an auxiliary for merchant without an elevator of his own. This develo only impairs the competitive power of the grain mercha large capital but it also tends to exclude from the o economically to make or take delivery on futures the vas of those who may use the futures market in a busines either for hedging or for speculation. It would seem method might be devised by which the so-called publi would again perform a public warehousing service. Pub is properly a public-utility function and not a mere i trading in grain or in futures on a large scale. The com this connection repeats a previous recommendation tha roads themselves operate the public storage facilities, whi cases they already own, and that they operate them as facility connected with grain transportation, in much the as a terminal freight yard for other merchandise is opera in this volume especially that ubject of con felt that some The conclusions been recently activities of as not a good roducers, and ever, it seems certain shortand legislative Therefore, the ght to a conrther careful mendation of ons, further dation. The erewith sumain problems pretations of ic elevators ich in most e same way deduct from the terminal-market price an amount corresponding to the commission that would be charged if the grain were actually handled by a commission man on consignment before reaching the elevator. This does not appear to be equitable, although much may be said for the measure as a means of hindering undue concentration in the handling of grain. If grain merchants of terminal markets had the use of public storage facilities on terms that would make it possible for them to compete with the large elevator merchandisers there would perhaps be no occasion for this extension of the commission rule in a direction which appears to prevent the producer's grain from going to its ultimate destination by the shortest route and through the hands of the fewest middlemen. Future trading should be subject to comprehensive and watchful administrative supervision. The foundation for this is already provided for in the recent law resulting in the establishment of the Grain Futures Administration of the Department of Agriculture.. Short selling, especially large operations on the short side of the market, should be subjected to close scrutiny. The possible tendency of professional or inside traders to make the futures show a downward bias and to cause undue discounts calls for attention. When futures traded in many months ahead of delivery tend to show large discounts, the shortening of the term of such futures (which under such circumstances are of doubtful serviceableness to the grain trade) might well be considered; in other words, the exchanges might provide for a conditional suspension of trading in deferred, as distinguished from near-by, deliveries, when the discounts become excessive. This refers to discounts where the cash and futures relate to the same crop year. A very large discount on a new crop option may not be excessive. Recommendations relating to manipulation are naturally based largely on the desirability of removing from the market influences that are arbitrary in their nature. Adoption of the complete clearing house at Chicago in September, 1925, anticipated a recommendation that this be done, largely with a view to reducing the practice of discretionary credit (primarily between clearing members) in connection with speculative trades, both with reference to the granting of too much credit to favored individuals and to the undue control by this means over traders of small financial resources. Regular provision should be made for the inclusion of impartial outsiders in the discussion and decision of questions of great general importance, as, for example, in decisions with regard to applications of the anticorner rule, or the emergency car-delivery rule and similar matters, wherever the exercise of discretion is involved. An emergency rule relating to corners and squeezes that might well be adopted would under special emergency conditions provide for delivery on Chicago contracts outside Chicago. The stabilization of prices is generally regarded as of the greatest possible importance to both the consumer and the producer. Such stabilization of prices, of course, means not the prevention. of price changes, but merely the reduction to a minimum of useless price changes. The factors tending to stability of prices should be sustained by the elimination from the futures market of those |