324 CORN 



would have to do in this case, and assuming the average price to be 45 

 cents, each party would collect and pay out $2,250; in other words, 

 they would handle $4,500. So that the aggregate received and paid 

 out would be $13,500 to settle these three transactions in which the 

 difference might be a very small sum. But the delivery spoken of 

 would not occur for the simple reason that Smith would wait for 

 Brown to deliver the corn to him so that he (Smith) could deliver il 

 to Jones, while Brown would wait for Jones to deliver the corn to him 

 so that he (Brown) could deliver it to Smith. 



It will be seen that delivery on these contracts is not only unneces- 

 sary, but also impossible, except by borrowing the cash corn for the 

 purpose of going through an idle form. 



Before showing how these trades are finally settled, we will carry 

 the illustration a little further. The case of Brown, Jones and Smith 

 can be extended so as to involve a large number of brokers. It i& 

 frequently discovered that as many as twenty brokers are in the same 

 position in one transaction as Brown, Jones and Smith were ; that is, 

 they must settle without actual delivery, as every one of them has it 

 bought and sold and each is waiting for the party he has bought it 

 from to deliver it to him. If they should fail to investigate and discover 

 the true state of the trades, every one of the twenty brokers would 

 default on his contract by reason of their all waiting for an impossible 

 or at least, improbable delivery. 



To escape the possibility of becoming involved in trades that 

 would result in default, to facilitate their business by discovering and 

 settling these unnecessary contracts, and to collect and pay all differ- 

 ences on these closed contracts, every broker in Chicago who trades 

 in futures, employs a clerk whose duty it is to watch the transactions 

 closely and see that they are settled immediately, in case it develops 

 that delivery on the contract is unnecessary for the reasons just 

 described. 



Every trade for future delivery made on the Chicago Board of 

 Trade (unless the seller defaults on the contract, and defaults are 

 very rare), is finally settled by the delivery of the commodity con- 

 tracted for, except such trades as get into a position that renders deliv 

 ery unnecessary, as in the cases already set forth. 



Having noted "when delivery is unnecessary" and settlements are 

 effected by the payment of the differences between the contract prices, 

 we will now give a short explanation of how deliveries are made ; for 

 on all contracts for future delivery, there is an actual delivery (de- 



