430 



REPORT — 1900. 



Law. It should be added that there has been no change in the customs 

 duty on wheat or rye to nullify the comparison. 



Reference may also be made to the fact that the active operation of a 

 market in futures has not in every case been accompanied by a declining 

 level of price. A conspicuous example to the contrary is coffee. 



The second, and in some sense alternative, suggestion as to the effect 

 of dealings in futures, is that they result in greater unsteadiness of price 

 than would exist without them. Here what may be called the theoretical 

 presumption is rather of an opposite tendency. In the weeks following 

 harvest, the pressure of abundant supply is likely to depress prices less, 

 when, on the demand side, the provision for the whole season is regularly 

 influencing buyers through the operation of a well-organised machinery ; 

 while a secured provision for future needs through the same means seems 

 likely to modify the pressure of buying in a market which for some reason 

 is temporarily short of supplies. An active market will show more 

 numerous small fluctuations, but the greater movements will, in the 

 majority of cases, be reduced in intensity as the natural result of active 

 dealings in futures. Corners are not excluded, but the growing magni- 

 tude of operations is, as experience sufficiently shows, rendering successful 

 manipulation of corners more and more difficult. An active market is 

 frequently a senisitive market and subject to scares, but it is able to 

 recover from these scares more completely and rapidly than an inactive 

 market. The world wide range of operations is a constant influence in 

 restraint of manipulations contrary to the general movements which the 

 actual state of supply and of demand tends to set up. The dealers who 

 sell short in anticipation of a fall, or attempt to control supplies in order 

 to profit by a rise, must either possess such large resources as to be able 

 to force the market to move as they wish (and this, as stated, is becoming 

 increasingly diflicult on any extensive scale), or they must gauge correctly 

 the movements before they set in. If dealers persistently opposed the 

 trend of prices as resulting from actual supply and demand, they would 

 as persistently lose, which would, in the long run, mean their disappear- 

 aace from the market. In anticipating a movement which would in any 

 case be realised, the force of the movement is likely to be modified. 



The attention of the Committee has been given to the possibility of 

 measuring the comparative degree of stability of prices before and since 

 the creation of the great trading in futures. For the purpose of gauging 

 the relative degrees of fluctuation, in different markets and at different 

 times, two indices have been worked out. One is the well-known Stan- 



