Sales involving thousands of dollars are consum mated by a single spoken word, by a nod of the head, or by a distinctive gesture; and each party merely jots down on a little card a memorandum of the transac tion. In no other business, except perhaps in stock trading on the exchanges, are such important deals made with so little bickering over details, or with such implicit confidence that the contract will be faithfully carried out.
On the floor of the exchange, there are the wheat pit, the corn pit, the oat pit and the provision pit. During the busy time the combined markets present a scene of activity, intenseness, seriousness and often ex citement that gives the impression of impending trag edy, and which is seen nowhere else except on the floor of the New York Stock Exchange. During a very active market the wheat pit is crowded with some 350 struggling, shrieking men endeavoring to execute their orders; and' at such a time every one in the exchange room seems to have a realizing sense of the impor tance of the momentous volume of business that is be ing done. It is a time when moments are valuable, and a few seconds suffice to complete transactions. This necessitates the greatest possible rapidity and alertness physical and mental that human beings are capable of, and the aid of all the mechanical appliances that may be had. Orders are continually coming to the floor by telephone and by telegraph, and mes sengers are speedily delivering them. From the time the gong sounds in the morning until it announces the close in the afternoon there is no time or thought dur ing an active market for anything but the business of the moment. What happened a minute ago is past, and that which is to be done a minute hence will be attended to when it is reached.
The orders received by the brokers in the future markets come from every conceivable source. Broadly speaking, however, these orders may be di vided into two classes. (1) Those which are sent by men who intend to receive or deliver the actual grain at some time in the future. These men take advan tage of the market which offers them an opportunity to insure themselves against loss of profits which may arise due to a change in the price of some commodity upon which their business depends. This method of insurance is termed "hedging" and has already been described. (2) There is another class of orders re
ceived, however, which the senders never intend shall be filled by receiving or delivering the actual grain. They expect to get rid of either obligation by selling on a basis of "differences." That is, instead of de livering the actual commodity which the contract calls for, the seller, for example, gives the buyer the differ ence between the price of the commodity on the deliv ering date and the price agreed upon when the con tract was made. Such orders are called speculative, as they are sent in by men who buy and sell without expecting to use the grain or even to see it. They hope to "sell out their trade" at an early date and to reap a profit by a change in price.
3. 3lethods of methods of payment in the board of trade are made to conform to the sys tem of future trading. It would be a bungling sys: tern indeed if every purchaser had to make payment in full whenever the price changed during the time the contract was running. It is possible, however, by a system of differences to make only partial payments until the final delivery is made. The amount paid over each day would therefore depend upon the price fluctuation. This is shown in the following case quoted from Professor Sparling's chapter on the Ex changes in his book on "Business Organization." Suppose on I%Iarch 10th A 1 sells B 5,000 bushels of wheat for May delivery at 95 cents. On each day thereafter this price fluctuates, and as the price rises above 95 cents, B, having the wheat, would thus be the gainer as the market advances, and A the loser ; so A would pass checks to B for differences in value figured on the basis of the closing market prices each day. As market prices go lower, B would pass checks to A for differences shown. Let us suppose that by April 20th the price had gone up to cents per bushel. Then A would have paid to B a total of 21/2 cents per bushel, and B decides to sell to C, who finds on May 1st that the price is still cents. A would then deliver the wheat to B in the form of warehouse receipts which call for the actual wheat, and for these C would give A payment for the total on a basis of cents per bushel ; but he has already paid B 21/2 cents a bushel, so, while the wheat costs C cents, A realizes but 95 cents for it, B having taken the difference.