690 ANNUAL REPORTS OF DEPARTMENT OF AGRICULTURE. 



sion as being in effect an authority for and not against the enactment 

 of the i^resent law. 



Ten exchanges in all have been designated as "contract markets" 

 under the present act. These are the Board of Trade of the City of 

 Chicago and the Open Board of that city, Milwaukee Chamber of 

 Commerce, Minneapolis Chamber of Commerce, Duluth Board of 

 Trade, Kansas City Board of Trade, St. Louis Merchants' Ex- 

 change, Baltimore Chamber of Commerce, Grain Trade Association 

 of the San Francisco Chamber of Commerce, and Los Angeles Cham- 

 ber of Commerce. The designation for San Francisco is limited to- 

 barley and that for Los Angeles is limited to barley, corn, and 

 sorghums. The action upon these applications by the department 

 was facilitated by its experience and knowledge gained under the 

 future trading act. 



In substance, the provisions of the grain futures act correspond 

 with the provisions of the future trading act, with the exception 

 that section 3 of the former statute, which contains the tax on " puts 

 and calls" and like transactions, and which was not held invalid 

 by the Supreme Court and therefore remains in effect, was not reen- 

 acted. The place of this section was taken by a new section 3, which 

 constitutes a finding by Congress of the relation of grain future 

 trading to the cash grain business and the necessity for national reg- 

 ulation. This section was vigorously attacked in the suit to test the 

 constitutionality of the statute, but the Supreme Court held that 

 Congress w^as justified in making such a finding and enacting the 

 statute. 



Section 4 of the grain futures act prohibits the use of interstate 

 instrumentalities in connection with the execution of contracts for 

 future delivery of grain with certain specified exceptions. In this 

 connection, the act expressly provides that contracts of sale of cash 

 grain for deferred shipment or deliver}^ are not to be regarded as 

 futures. The most important of the exceptions made by the statute 

 is that which permits transactions made by or through members of 

 boards of trade which hold designations by the Secretary of Agri- 

 culture as " contract markets " through compliance with conditions 

 set out in section 5. In substance, these conditions are (a) that each 

 such " contract market " must be located at a terminal market where 

 cash grain of the kind specified in the contracts of sale of grain for 

 future delivery to be executed on such board is sold in sufficient 

 volumes and under such conditions as fairly to reflect the general 

 value of the grain and the differences in value between the various 

 grades of such grain, and where there is available to such board of 

 trade official inspection service approved by the Secretary of Agri- 

 culture for the purpose ; (h) that the governing board of the '' con- 

 tract market " must provide for the making and filing of reports 

 showing certain information as to cash and future transactions by 

 the board members and for the keeping of certain records; (c) that 

 the governing board must provide for preventing the dissemination 

 by the board or its members of false or misleading or knowingly in- 

 accurate reports concerning crop or market information or condi- 

 tions that affect or tend to affect the price of grain in interstate 

 commerce; (d) that the governing board must provide for the pre- 

 vention of manipulation of prices or the cornering of any grain on 

 such board; and (e) that membership in such boards must not be 



