I 



ON FUTURE DEALINGS IN RAW PRODUCE. 425 



the profit (if any) they may make, has been used to cast odium on the 

 system of short intermediate settlements. It is true that the system does 

 offer facilities for speculation in mere price- movements as distinct from 

 dealing in commodities, but the other fact must also be borne in mind 

 that it serves to check wild speculation by weak dealers unable to meet 

 the losses which they were nevertheless very ready to face before the 

 system was introduced. 



The example of direct dealing between two persons, which has been 

 used, will not serve to give an accurate idea of the situation. It is 

 common to have a large number of persons involved in such transactions. 

 Not only have we A selling to B, but B to C, C to D, and so on for a 

 score of links perhaps. The liquidation of such a transaction is greatly 

 facilitated by bringing the first seller and the last buyer into direct relations 

 with each other, since the intermediate dealers are concerned (unless in 

 case of a failure to fulfil contracts) only with the differences between 

 the prices at which they have bought and sold respectively. Thti 

 unravelling of the complex series of payments and passing of delivery 

 orders, &c., which, in a long series, involved delay and difficulty when 

 no organisation for the purpose existed, is, in many leading markets, 

 accomplished through the medium of a clearing-house. It is unnecessai-y 

 to describe the organisation in any detail,' though the existence of these 

 facilities must be borne in mind, inasmuch as purely speculative transac- 

 tions, as well as the process of dealing in which actual delivery of goods 

 takes place, appear to profit by them. In particular, one feature has 

 attracted some attention and provoked adverse criticism, namely, that 

 where the necessities of business bring about a state of things in 

 which the original seller becomes in turn a buyer of the same delivery, 

 the series of dealers, A, B, C, D, ikc, ends as well as begins with A, and 

 the passing of any warehouse receipt or other form of claim to a specific 

 lot of goods becomes a mere form. The interests of all parties in such 

 a closed ring are confined to price differences. The settlement of such 

 transactions by the process of ' ringing out,' when an invoice and a formal 

 tender are passed round the ring, appears to some to indicate an objection- 

 able facility afforded to those who practically bet on price-changes, and 

 it is apparently desired in some quarters to suppress these facilities in 

 order to suppress the transactions thus described. 



The result of the elaborate organisation of markets for dealing in 

 futures in commodities is that it has become possible to buy or sell for 

 future delivery without difficulty, and at prices publicly and regularly 

 quoted. Those who desire to ensure supplies of any commodity for 

 which a market so organised exists can do so without difficulty, while 

 those who desire to secure themselves against future fluctuations in the 

 price of raw produce, whether as buyers or sellers, are provided with 

 the means of doing so. 



Attention must be particularly given to the use of dealings in 

 futures in providing insurance against price-changes, for no small 

 amount of importance attaches both directly and indirectly to this. 

 It accounts, in part, for the fact, so troublesome to some critics, that far 

 larger amounts of produce are sold for future delivery than could possibly 

 be delivered. The tenderable quality is determinate, and though there 



' For details as to cotton dealings in Liverpool, cf. Ellison's Cotton, Trade of Cheat 

 Britain, chap. iv. 



