ON FUTURE DEALINGS IN RAW PRODUCE. 423 



not unnecessary to recall such facts, inasmuch as some confusion frequently 

 arises in reference to the relation of 'futures' and 'speculation.' 



As stated, then, the problem which needs investigation is not the 

 influence on price movements of forward contracts, such as the purchase 

 and sale of a cargo of wheat actually on passage which may be sold in 

 anticipation of its arrival, but of an entirely different class of contracts. 

 In these contracts one leading feature is that the goods bought and sold 

 are not dealt in by sample, but their quality is determined by reference to 

 certain standards established by some responsible organisation. In wheat 

 the standard may be, for example, as in London (for American wheat), 

 No. 1, Northern, or, as is usual in Liverpool, No. 2, Winter (or Spring) ; 

 in cotton, it may be what is known as middling uplands when American 

 cotton is in question, ftdly good fair for Egyptian, and similarly in re- 

 gard to other commodities. The buyer need not be able to discriminate 

 between good and bad wheat, he may conceivably not be capable of dis- 

 tinguishing wheat from bai-ley, but the quality of the wheat to which he 

 becomes entitled is nevertheless determinate. Rules are laid down by the 

 Associations of Grain Dealers in leading centres such as Chicago, Duluth, 

 New York, Liverpool, <fcc., for maintaining the standard according to 

 which any actual parcel of wheat is determined to be of standard gi ade or 

 not, the American centres further grading into several classes, under 

 Government supervision. One distinction between dealing by sample 

 and dealing in standard grades is that in the former case slight differ- 

 ences would be likely to exist between the qualities to which any two 

 bargains had reference ; in the latter case all bargains in a standard 

 grade are on the same level in the matter of the quality of the produce 

 which is capable of being used for their fulfilment. Further, by custom 

 or by rule, the quantity dealt in on any contract is, if not the same, 

 always a multiple of a standard quantity, e.g. 4,800 or 5,000 centals of 

 wheat in London and Liverpool respectively. 



If, then, the date named for delivery be the same for any two con- 

 tracts (and the custom of naming, not a day, but a month, or two 

 months even, within which delivery may be made, helps to produce ready 

 coincidence in this matter), the only point of difference remaining is the 

 price. Different contracts for the delivery in one and the same month of 

 the same number of units (of wheat or cotton or other produce) of the 

 usual standard grade will, except in the matter of price, be as nearly 

 identical and as interchangeable for all practical purposes as two bonds of 

 a municipality for equal amounts, if not as much so as two Bank of England 

 notes of the same denomination. To the man who has bought and sold 

 equal amounts of the same grade for the same period of delivery there 

 remains no concern in the actual goods ; he is concerned merely in the 

 relation of the prices of the sale and purchase. 



But a further development of the organisation of markets whei-e this 

 class of business is largely transacted is also of importance, as affecting 

 the facilities for carrying on such dealings, namely, the establishment of 

 Clearing Houses, and the introduction of a system of periodical settle- 

 ments. These are effected daily in some cases, weekly in others, while in 

 some markets no settlement takes place before the term of the bargain 

 has expired. 



To indicate the purpose and operation of clearing-houses and short settle- 

 ments, reference to a hypothetical example may be made. Suppose that 

 in January A sells 50,000 centals (or, say,10,000 quarters) of wheat to B, 



