as the president of the New Orleans Board of Trade remarks, "that the difficulty in the way of fixing and enforcing a uniform standard of export grades is due to the difference in the character of the grain raised in the territories contiguous to the various ports of shipment, which makes quite a difference in the value of grain technically of the same grade. At the present time (November 20, 1901) new-crop wheat from New Orleans will bring better prices than wheat from most any other port in the country."

Any effort to put into legal enactment the requirements of an export standard grade of grain would have to proceed on the basis of this inevitable influence of producing locality upon commercial quality. Allowing for this, there does not appear to be any good reason why each important kind of grain might not be defined for export purposes by weight per bushel and by characteristics of quality, such as soundness, dryness, cleanliness, and purity.

4. Speculation on the Produce Exchanges of the United States 1

The foregoing chapter has dealt with the organization of those speculative markets known as "exchanges." Speculation, however, may occur in any market. A purchase or sale, to be speculative, does not need to be at a particular place or under the control of any particular organization. Nevertheless specuulation in securities and in a few forms of produce has become of such extent that it has assumed an organized form with a special machinery. Such speculation is confined to transactions of a particular kind made under certain fixed conditions, all of which matters are regulated by the exchange on which such trading occurs. It is only with this organized speculation of the exchanges that the present essay is concerned. In examining the rules of such trading it will be convenient to begin

1 By Henry C. Emery. Reprinted, with the consent of the author and the Columbia University Press, from Speculation on the Stock and Produce Exchanges of the United States. In Columbia University Studies in History, Economics, and Public Law, Vol. VII [New York, 1896].

with the simplest methods adopted, namely, those for speculation in produce.

Speculation in produce is to-day always associated with that particular kind of contract known as a "future." The future is primarily a contract to be fulfilled at some future time, and as such is one of a large class of business transactions. Some contracts by nature require a future fulfillment. Such are all contracts for services, contracts for building, and the like. Some contracts, on the other hand, are entered into long before the period set for fulfillment merely because one of the contracting parties thinks he can secure better terms at the time of contract. He fears possible changes in the conditions affecting such a contract. If the changes in question are price changes, and the contract is for the delivery of goods, the opportunity for speculation appears. All time dealings arise from a desire to provide in the present for the events of the future. Speculative time dealings arise when an anticipated difference in the present and future prices of the commodity in question leaves room for a possible profit.

This method of speculation by means of time dealings arose later, and has been much less common, than the simple speculation of buying property outright and holding it for a rise. The latter form of speculation is found everywhere and at all times, and is entirely independent of any organization or any rules of commercial custom. Since Thales cornered the olive presses of Miletus,1 or Joseph, still earlier, cornered the grain of Egypt, such speculation has been universal. It is not unreasonable to believe that time dealings of some kind also arose wherever commerce was well developed, especially as a highly advanced form of such dealings seems to have occurred in securities, at least, in the days of the Roman Empire.

It is only, however, in the last few centuries that unquestioned evidence appears of "future dealings" of a well-developed kind. In Holland, early in the seventeenth century, time

1 See Aristotle, Politics (Jowett's translation, London, 1885), I, 11, § 8. It is interesting to note that Thales, being a man of moderate means, worked his corner by securing options on the use of the presses at the next harvest season.

transactions took place in the products of the whale fisheries. The great uncertainty of the industry and the consequent fluctuation of price led dealers to sell the products of any particular voyage long before its result became known. The tulip speculation of this period, 1634-1637, is famous. In 1698 time. dealings in grain were forbidden in Antwerp. Much more important than this early dealing was the business which had grown up in the first years of the eighteenth century, and which was described in 1722 by Ricard, in "Le Négoce d'Amsterdam." At this time practices almost identical with those of the modern speculative market were common in the trade in grain, coffee, cocoa, saltpeter, and other commodities,2 being particularly advanced in form in the case of coffee.

It was not until the present century, however, that the system became widely developed, and not until the great expansion of foreign trade in the last fifty years that it became of great importance.3

The beginnings of the development are found in the case of articles of foreign trade, though these earlier time dealings were very different from the improved practices of to-day. They were sales" for forward delivery," but for the delivery of some particular lot of goods, and were made on the basis of samples forwarded or sometimes on the basis of a fairly recognized standard, with allowance made in the payment for any variation in quality when the goods were delivered. These sales arose from the desire of the dealer to take advantage of a favorable

1 For the best account of these early dealings see Jacobson, Termin handel in Waaren (translated from the Dutch, Rotterdam, 1889). Cf. also Fuchs, Der Warenterminhandel, p. 5, reprinted from Schmoller's Jahrbuch, Vol. XV, Heft 1.

Kohn, Der Getreideterminhandel, p. 28 [Leipzig, 1895], quoting Roscher, says that sales of grain before it was threshed, or of herring before they were caught, were forbidden in the Hanse cities in 1417. Cf. a similar local ordinance in England in 1357, Cunningham, English Industry and Commerce, I, 296.

2 See Jacobson, op. cit. footnotes to pp. 77, 79, for typical forms of "futures" and of "puts and calls," taken from Ricard.

8 Tooke, for example, writing about 1840, speaks of the speculation that occurred in certain spices in 1825, which consisted simply of successive purchases on a rising market without intermediate deliveries, as a "very rare occurrence in the markets for produce." History of Prices, III, 159.

price before his goods were ready, as was the case in regard to the whale products in Holland. An importer of cotton from this country into England, for example, would fear to await the arrival of his cargo before selling, and would sell the cotton "in transit," or "to arrive." The goods might even be sold abroad before leaving the southern ports, in which case the contract would read as a sale of so much cotton "for shipment." Closely connected with these methods was the development of the so-called "ports of call," which are still of importance in export trade. These are central ports to which goods are originally shipped, and where orders are received fixing their ultimate destination. Before arrival the consignee at the port of call sells the goods in the best market for the moment, and on its arrival gives orders for the vessel to proceed to the port where the goods have been sold.1 Dealings for forward delivery were practiced in the domestic trade almost as early as in the export trade. In the case of lake and canal shipments, grain was largely sold ahead by sample "to arrive" and "for shipment." These are still regular methods of trading; for example, much wheat" to arrive" is bought by the miller, or cotton "to arrive" by the spinner; but to-day these transactions are merely for the matter of convenience of delivery. Their old importance as insurance against fluctuating prices has disappeared with the advent of the improved methods of the speculative market.

It was only with the development of the warrant and grading system, however, that the real future became possible. The use of warrants began in England in 1733 in the business of the East India Company. Their possibilities so quickly became evident that at an early date complaints appear of welldeveloped abuses through fraudulent issues. The function of the warrant was to transfer ownership without any actual transfer of the goods. Secondarily it facilitated advances of capital against the goods held. Both these advantages gave a

1 For example, goods may be consigned "to Cork for orders," with stipulation in the shipping contract concerning the right of further delivery; thus "privilege U. K." means that the ship must proceed to any port in the United Kingdom designated by the consignee. Cf. also Kohn, op. cit., p. 29.

stimulus to trade, and there arose an active business in warrants of a more or less speculative nature. They passed easily from hand to hand and frequently bore many indorsements before finally being presented for the goods. In these cases, however, the warrants were special receipts; that is, they represented specific lots deposited, and no established grades were fixed in terms of which sales for forward delivery could be made; hence the speculation in them was limited to the kind of speculation that might take place through buying and selling the goods themselves. It was only in the case of the metals that a grading system and general warrants came into use. Until this method was adopted no one could sell goods before purchasing them, so no organized speculation for future delivery could arise.

In the case of metals, especially iron, the warrant system received an important extension. The warrant became a general warrant, that is, a receipt for no particular lot deposited, but merely a transferable order for an equal amount of the given commodity of the same grade. This was made possible by a fixed system of grading, all the iron of the same grade being stored in bulk to be taken out on presentation of the warrants. Thus the ordinary warrant for Scotch pig read for 300 lbs. of No. 1 and 200 lbs. of No. 3 pig iron, and was made good by a delivery of those amounts and qualities, without reference to the specific iron deposited.

In England warrants issued in terms of recognized grades were extended gradually to other commodities. In the United States they developed independently in the case of the great agricultural staples. What the import trade did for England in developing these methods was done for this country by the export trade on the one hand and the internal trade on the other. The striking increase in the grain and cotton business in the United States during the last fifty years has been accompanied by the growth of commercial practices that are of great interest to the student. Untrammeled by business traditions of past centuries, or by the tendency to fit new conditions to old methods, the trade of this country has unconsciously