THE CHICAGO BOARD OF TRADE 1. Why Chicago has the largest market.—Chicago is the world's foremost clearing house for grain, and the largest shipping point for wheat. Not only. does the grain business form a large portion of its commer cial activities, but Chicago's enormous trade in many products which depends upon the cereals, such as live stock, cured and dressed meats, pork, lard, hides, cheese and butter, is due to its dominance in the grain trade.
Chicago is close to the great wheat and corn states. It is centrally located for rail and water transporta tion. Naturally the most important produce trans actions in wheat far exceed the country's actual crop; in addition to the trading in wheat, are transactions involving hundreds of millions of bushels of corn and oats. Trading in excess of the crop is made possible thru speculation in futures which assures dealers the world over an opportunity at all times to buy or dis pose of any quantity of grain, wheat especially.
Thus the Chicago Board of Trade has become the foremost speculative market in the world for grain, and next to the market of Liverpool, tends to dom Mate the prices for this produce. Some idea of the importance of the Board of Trade may be had when we reflect that the volume and the value of the grain crops have an immense influence upon railroad ;traf fic and earnings, upon money rates and prosperity generally.
The country miller of Illinois, the grain buyer of Iowa, the elevator manager of any center, the big Minneapolis miller, the terminal elevator company of Chicago, the exporter of New York and Argentina, and the importer of London, Liverpool, Amsterdam and Antwerp—all come here to buy or sell wheat as a "hedge" against transactions in their regular busi ness activities.
We have seen that futures play a leading part in the grain markets. These markets also have clearing houses that still further reduce the actual delivery of grain, just as the stock exchange clearing houses re duce the delivery of stocks. "Ring" processes which are described later in the chapter still further reduce actual delivery. At the same time there must always
be present within easy reach a large supply of wheat. It is estimated that the storage capacity of elevators contributory to the Chicago Board of Trade reaches fifty million bushels.
Grain houses are of three kinds: (1) the country and (2) terminal elevator companies already de scribed, and (3) the commission houses. Some of these do only cash or "spot" business, others handle only futures, still others both spots and futures. Some houses handle mostly speculative business, others buy for the big mills and for export. As on the stock exchange there are commission brokers, members who execute orders for other members, and traders, who are the professional speculators. These latter are sometimes called "scalpers." 2. Methods of trading, spot and cash.—The trans actions on the exchange are of the two general kinds: the "cash grain" business and the "future" business. Under the former come all the dealings which pertain to the actual grain—wheat, corn, oats, etc.—selling it by sample. One side of the exchange room is given up to this "cash" business. Here the samples are laid out for the inspection of the various buyers.
The rest of the exchange floor is given over to the future markets. The four points about which the buyers and sellers habitually congregate are called "pits." The pit corresponds to the "post" or "crowd" on the stock exchanges and consists of a circle of steps leading up from the outside and down into the cen tre. It is arranged so that a maximum number of people on different levels can see and hear each other in a minimum of space. Telegraph operators sit on raised platforms near the pit and transmit quotations. The word "pit" permeates the phraseology of the Board of Trade. Instead of "room" or "floor" trad ers we have "pit" traders; pit is almost a synonym for market. Business is carried on by mere gestures, single words, nods and even finger signs.