Now, infidel, I have thee on the hip! —Merchant of Venice.

The visitors' gallery is an excellent vantage point from which to view the trading floor of the Exchange. It runs the full width of the south wall. The chairs entrenched behind the rail have acquired a slippery polish from the shiftings of countless occupants just as the wall behind has known the restless backs of onlookers who have stood for hours at a stretch.

It is here that the curious foregather—good people from every walk of life except the grain business. The tourist who is "just passing through your beautiful city" and has heard that Winnipeg has the largest primary wheat market in the world—the tourist drops in to see the sights. Friend Husband is there, pretending to be very bored by these things while fulfilling his promise to take Friend Wife "some day when there's something doing." Young girls who only know that bulls hate anything red and that bears hug people to death—they are there, thrilled by the prospect of what they are about to witness with but a very vague idea of what it will be. A dear old lady from the quiet eddies of some sheltered spot has been brought in by the rest of her party to see "goin's on" of which she does not approve because gambling is a well-known sin. She is somewhat reassured by noting a few seats away a man who wears the garb of a clergyman; presently he will take notes for his forthcoming sermon on "The Propinquity of Temptation and Its Relation to the Christian Life." The two young women who whisper together in the corner have been reading stockmarket stories in the magazines and they are wondering which of the traders, assembling on the floor below, will have his coat and collar torn off and which will break down and give vent to those "big, dry man-sobs" when his fortune is wrecked!

Not the least of the sights at the Grain Exchange is the Visitors'
Gallery!

Two tanned farmers are discussing quotations and general conditions in a matter-of-fact way. War demands, the unfavorable United States Government report and rumors of black rust are making for a bullish condition. Cables are up and the market promises to be wild this morning. The gong will go in five minutes.

"The Pit" is out in the middle of the floor. There is an octagonal platform, raised a couple of feet from the floor level. In the centre of this platform three wide steps descend to floor level again; so that the traders standing on the different steps are able to see over one another's heads and note each other's bids. On the west side of the Pit is an elevated, built-in desk like those seen in court-rooms, somewhat resembling an old-fashioned pulpit; here three men sit throughout the session. One keeps his fingers on the switch-box which operates the big clock on the north wall where the fluctuations of the trading are flashed on a frosted dial in red-light figures. At his left sits a second man whose duty it is to record the bidding on an official form for the purpose. At the right is a telegraph operator who sends the record of the trading as it occurs to other big Exchanges—Minneapolis, Chicago, New York, etc.

The telegraphic report registers in several instruments attached to the big blackboard that occupies the entire north wall. Operators with chalk and chalk-brush in hand move about the platform at the base of this blackboard, catching the quotations from the clicking instruments and altering the figures on the board to keep pace with the changing information. A glance at this great blackboard will furnish the latest quotations on wheat, oats, barley, flax, corn, etc., the world over.

Ranged along the entire east wall are the clacking instruments of the various telegraph companies for the use of the brokers and firms trading on the Winnipeg Exchange. Telephone booths at the north, seats for friends of members on the west side, weather maps, etc., beneath the gallery—these complete the equipment of the big chamber.

The group about the Pit, waiting for the market to open, grows rapidly as 9.30 approaches. Members of the Exchange saunter in from the smoking-room, swap good-natured banter or confer earnestly with their representatives on the floor. In response to the megaphoned bellow of a call boy, individuals hurry to the telephone booths. Messengers shove about, looking for certain brokers. The market is very unsteady; it may go up or down. The men are clustering about the Pit now; most of them are in their shirt-sleeves and they are on tip-toe like sprinters who wait for the starter's pistol. Some of them have instructions to dump wheat on the market; some have been told to buy. Hundreds of thousands of bushels will change hands in the first few minutes. The market may go up or it may go—

Bang goes the gong! They're off! Above the red abbreviation, OCT., at the bottom of the big clock the blood-red figure 5 indicates the opening of the market at $1.45 even. With a mad swirl the trading begins in a roar of voices. A small forest of arms waves wildly above jostling bodies. Traders dive for each other, clutch each other and watch the clock. The red figure 5 has gone out and 7/8 has in turn vanished in favor of 5/8—1/2—3/8—4—(?) Instead of going up, she's falling fast. Before the market closes the price may rebound to $1.55. Somebody will make a "clean-up" to-day and many speculators will disappear; for margins are being wiped out every minute.

To the Gallery it is a pandemonium of noise, unintelligible in the volume of it that beats against the void of the high chamber. Only one shrill voice flings up out of the roar:

"Sell fifty Oc, sev'-eights!" He offers 50,000 bushels of wheat for October delivery at $1.43 7/8 per bushel. It's that fellow down there with the blazing red tie half way up his collar. He hits out with both hands at the air as he yells. A surge of buyers overwhelms him. They scribble notes upon their sales cards and go at it again.

Down there in the mÊlÉe those men are thinking fast. With every flash of the clock the situation changes for many of them. Some pause, watching, listening; others who have been quiet till now suddenly break in with a bellow, seemingly on the point of punching the noses of the men with whom they are doing business. Lightning calculation; instantaneous decisions! "Use your discretion" many of them have been cautioned by their firms and they are using it. A moment's hesitation may cost a thousand dollars. Trading in the Pit is no child's play; rather is it a severe strain even upon those who know every trick, every firm and the character of its dealings, every trader and his individuality, his particular methods—who know every sign and its meaning, who can read the coming shout by the first movement of the lips. And always, in and out, are darting the telegraph messenger boys with yellow slips that cause upheavals.

"Why don't they take their time and do their trading more quietly and systematically?" ventures Friend Wife up in the gallery.

"And lose a cent a bushel while they're turning around, eh?" laughs Friend Husband. "On a hundred thousand bushels that'd only be a thousand dollars. Of course that's mere car-fare!"

The dear old lady from the quiet eddies of Shelterville is shaking her head in disapprobation and communing with herself upon the iniquities of gambling.

"My, oh my! What won't men do for money! Jt-jt! Just look at 'em! Fightin' like that for money they ain't earnt! An' that nice lookin' young feller with the intelligent gold specs!—Dear me, it's enough to make a body sad!"

She could not know that but comparatively few of the traders below were representatives of brokerage firms which were trading on margins for speculating clients—that most of the traders were negotiating legitimate deals in futures for firms who actually had the grain for sale, for exporters who would take delivery of the actual wheat for shipment, for milling companies who would grind it into actual flour.

Because trading for delivery in future months affords opportunity for speculation, it is not to be condemned necessarily. It is the balance wheel which steadies the entire grain business. Even the speculating element is not without its uses at times and the layman who ventures to condemn This or That out of hand will do well to make sure he understands what he is talking about; for the business of the grain dealer is so subject to varying conditions and so involved in its methods that it is one of the most difficult to be found in the commercial world.

Trading in futures finds birth in the very natural disinclination of Mr. Baker to buy his flour by the warehouseful. He does not want to provide storage for a year's supply, even if he could stand such a large bite out of his capital without losing his balance. So while the bakery man is anxious to order his flour in large quantities for future use, he is equally anxious to have it delivered only as he needs it, paying for it only as it reaches him—say, every three months.

Before contracting for the delivery of the flour on this basis Mr. Miller must look to his wheat supply on a similar basis of So-Much every So-Often and he, too, has an eye on storage and, like his friend the baker, he "needs the dough," as they say on the street, and he does not want to part with any more hard-working money than he can help. Accordingly he looks around for somebody who has wheat for sale and will sell it right now at a fixed price but defer delivery and payment to a future date. With the price of his wheat thus nailed down, Mr. Miller can set the future price on his flour to his customers, taking delivery and paying for the wheat as he requires it for filling his flour orders.

In the meantime where is the wheat? Out near the fields where it was grown, in country elevators perhaps, ready for transportation to market as the law of supply and demand dictates instead of the whole crop being dumped at once and smothering prices below the cost of production. Or perhaps it is in store at the terminal where Mr. Exporter can handle it. It will be seen that the mutual arrangement to buy and sell for future delivery simplifies matters for everybody in the grain trade.

The manner in which the legitimate trader in futures protects himself from price fluctuation is easily understood. While a deal in cash wheat would refer to a definite shipment as shown by warehouse receipts, a deal for future delivery is merely an obligation involving a given quantity of grain at a given time at a given price. Being merely a contract and not an actual shipment, the seller does not require to produce the grain immediately nor is the buyer required to hand over the purchase price when the trade is made. Thus it is possible to buy a thousand bushels to-day for October payment and sell a thousand bushels to-morrow for October delivery, cancelling the obligation. The trade can be balanced at any time before October 1st. Again, a thousand bushels of October wheat may be bought (or sold) to-day and the future switched to May 1st by the sale (or purchase) of a thousand bushels for May delivery.

Take the man with the blazing red tie half way up his collar, the man who this morning offered to sell fifty thousand bushels for October delivery at $1.43 7/8. Suppose that he represents a company with a line of elevators at country points. To his office at Winnipeg has come word from country representatives that fifty thousand bushels have been purchased for the company. At once he enters the Pit and sells fifty thousand bushels for delivery at a future date, thereby "hedging" the cash purchase out in the country. Once this future of fifty thousand is sold the company no longer is interested in market prices so far as this grain is concerned. If the market goes up, their cash grain is that much more valuable, offsetting the loss of an equal amount on the future delivery; if the price goes down, what is lost on the cash wheat will be gained on the future. So that the difference between the price paid for the grain at the country elevators and the price at which they sold "the hedge" is the only thing which need concern the grain company and it is here they must look for expenses and profits. This method of hedging enables a grain company to make purchases in the country on much smaller margins than was possible in the early days when the marketing machinery was less completely organized. It eliminates to the greatest extent the necessity of speculating to cover risks.

The speculator's opportunity comes in connection with the fluctuations of the market in deliveries. He merely bets that prices will go up or down, as the case may be. He is not dealing in actual wheat but in margins. He buys to-day through his broker, who has a seat on the Exchange, and deposits enough money to cover a fluctuation of say ten cents per bushel. If October wheat to-day is quoted at $1.45 his deposit will keep his purchase in good standing until the price has dropped to $1.35. He must put up a further deposit then or lose the amount he has risked already, the broker selling out his holding. If the speculator is on the right side of the market—if he has guessed that it will go up and it does go up—he can sell and pocket a profit of so-many-cents per bushel, according to the number of points the price has risen. If he has bet that the market will go down the situation merely is reversed.

The machinery for handling the huge volume of business transactions in a grain exchange must be complete and smooth running to the last detail, so designed that every contingency which may arise will be under control. For simplicity and efficiency in this connection the Winnipeg Grain Exchange occupies a unique position among the great exchanges of the American continent; in fact, it is a matter for wonder that its methods have not been copied elsewhere.

The Winnipeg Grain and Produce Exchange Clearing Association is a separate organization within the Exchange and to it belong all the Exchange members who deal largely in futures. Each day the market closes at 1.15 p.m. By two o'clock every firm trading on the floor must hand in a report sheet, showing every deal made that day by the firm—the quantity of wheat bought or sold, the firm with whom the trade was made, the price, etc. If on totalling the day's transactions it is found that they entail a loss, the firm must hand over a cheque to the Clearing House to cover the loss; if a gain in price is totalled the Clearing House will issue a cheque for it to the firm so gaining. Thus, if Jones & Brown have bought wheat at $1.39 and the market closes at $1.35 they lose four cents per bushel on their purchase and must settle the difference with the Clearing House. All differences between buyers and sellers must be settled each day and if the volume of trades has been heavy, the Clearing House staff work on their books—all night, if necessary—until everything has been cleared for next day's business. The firm which loses to-day may gain by to-morrow's trades, maintaining good average business health. Any private trading which may take place after official trading hours is known as "curb" trading.

The rules of the Clearing House are very strict. Any firm which fails to report by two o'clock is fined. The Clearing House assumes responsibility for all purchases and sales and, being actually liable, keeps close tab on every firm. Each firm has a certain credit on the books of the Clearing House, allotted impartially, according to its standing, and this credit forms the fixed basis of that firm's dealings. If its activities exhaust the line of credit, the Clearing House calls for "original margins" at once—a deposit of so-many cents per bushel for every bushel involved and for every point which the market drops. The amount per bushel called for is entirely at the discretion of the Clearing House authorities and if the quantity of grain reaches dangerous proportions the deposit required may be set so high that it becomes practically equivalent to cash purchase. To "corner the market" under these conditions would require unlimited credit with the Clearing House.

When Jones & Brown are "called" for deposit margins they drop everything and obey. They have just fifteen minutes to reach the bank with that cheque, have it "marked" and rushed to the Clearing House. If they fail to arrive with it the Manager of the Clearing House will step into their office and if there were any "hemming and hawing" Jones & Brown would be reported at once to the Secretary of the Exchange who would call a hurry-up meeting of the Exchange Council and Messrs. Jones & Brown would find themselves posted and all trades with them forbidden.

All clerical errors in regard to trades are checked up by the Clearing House and fines paid in for mistakes. Only a nominal charge is made for its services—enough to pay overhead expenses—but the fines have enabled the Clearing House to accumulate a large Reserve Fund which gives it financial stability to provide for all responsibilities should occasion arise through failure of any firm. All futures which have not been cancelled before delivery date are negotiated through the Clearing House and with its assistance the grain can be placed just where it should go and tremendous quantities of it are handled without a hitch and with the utmost despatch.

Excitement in the Pit is not always over wheat. It may be oats. It was Canadian Western Oats which became the storm centre in 1911 when the Grain Growers got into difficulty with the "bears." Traders who attempt to boost prices are known as "bulls"; those who are interested in depressing the market are "bears." A trader may be a bear to-day and a bull to-morrow; thus the opposing groups are constantly changing in make-up and the firm which was a chief opponent in yesterday's trading may be lined up alongside the day following, fighting with instead of against. It is all in the day's business and the strenuous competition on the floor, into which the uninitiated visitor reads all manner of animosity and open anger, is a very misleading barometer to the actual good feeling which prevails.

In recording what now took place in the Pit in connection with the farmers' commission agency it will be well to remember that the rest of the traders would have acted in the same way toward any firm which was fool enough to leave the opening for attack. It may be that as the thing developed some of those who were specially interested in the downfall of the farmers' organization seized the opportunity to ride the situation beyond the pale of business ethics and in their eagerness to be "in at the death" revealed special vindictiveness. But in view of the long struggle with this element it was only what the Grain Growers should have expected when they ran their heads deliberately into the noose.

The situation was this: Shortly after New Year's the export demand for Canadian Western Oats became heavy and it looked as if in Great Britain and all over Europe, where the oat crop had been small, there would continue to be a shortage of oats. In spite of this situation, however, no sooner was the proposed reciprocity agreement reached between the Canadian and United States governments of the day, on January 26th, than market prices began to go down.

The then Manager of the Grain Growers' Grain Company came to the conclusion that this price lowering was a local condition and that the export market for oats was too strong to justify it or sustain it.

"I'll just step into the market and buy some oats," said he. "Later on I'll sell for export at a satisfactory figure." Accordingly, one fine morning he went into the Pit and began to buy.

The Manager's motive in attempting to sustain the market may have been of the best; but it was the first time that such methods had been attempted by the Grain Growers—methods which were not at all in keeping with the avowed principles of the Company. The Board of Control had every confidence in their Manager and, although he was merely a salaried employee and not an executive officer, he had been given a pretty free hand in the conduct of the Company's operations. Apparently it did not occur to him that he should consult the Board before entering the market on a speculative basis. Had the Board known what he was about to do they would have vetoed it; but when they did discover what was afoot it was too late to prevent the situation. It developed very swiftly.

"The Grain Growers are up to the neck in May oats," was the whisper which passed about among the other traders. That was all that was necessary.

"Sell May oats! Sell May oats!"

On every side of the Pit they were being offered by thousands of bushels—five—twenty-five—fifty thousand! The idea was to load up the Grain Growers' Grain Company to the point where their line of credit with the Clearing House would become exhausted, after which every bushel would require a marginal deposit. Then when the Company could carry no further burden the Clearing House would be forced to dump back the oats onto the market, breaking it several cents per bushel. At this lower price the traders who had obligated themselves to make these big deliveries would buy back the necessary supply of oats at a profit and everything would resume the even tenor of its way—except the Grain Growers, of course. Their serviette would be folded. Their chair would be pushed back from the table! They would be through!

Up until now all the troubles of the farmers in marketing their own grain may be said to have come from sources outside themselves; but in the present instance they had nobody to blame but themselves for the predicament. It arose at a time, too, when the other grain dealers were beginning to recognize the farmers as a force in the grain market—a force which had come to stay. It was unfortunate, therefore, that just as they were beginning to acquire a standing as a solid and sensible business concern, the Grain Growers' Grain Company should find themselves driven into a corner, their backs to the wall, the focus of pointing fingers and gleeful grins.

The fact that a salaried employee, not an officer of the Company, had acted on his own initiative without the consent of the directors was no excuse for a reliable business concern to tender as such. The first question flung back at them naturally would be: "Then your 'Board of Control' doesn't control, eh?" For although the Board of Control did not know what their Manager was doing until it was too late to prevent it, they should have known. That is what they were there for—to protect the shareholders from managerial mistakes.

However, there they were. The only thing they could do was to fight it out to a finish in the Pit and, if they survived, to see that no similar mistakes occurred in the future.

All sorts of rumors were flying about the corridors of the Exchange, gathering momentum as they passed from lip to lip, swelling with the heat of the excitement until it was a general guess that the Grain Growers must be loaded with anywhere between five and eight million bushels of oats more than they had been able to sell.

It was only a guess, though, and a wild one. Many traders would have given a good round sum to know exactly how the farmers' company stood on the books of the Clearing House. Only the Clearing House and the Company itself knew the true figures and the Clearing House officials were men of the highest integrity who dare not be approached for secret tips.

Thanks to the splendid export connection which had been built up in the Old Country and to the equally solid financial relations with the Home Bank, the farmers' agency was selling oats for export very rapidly. It began to look as if they would get out from under the threatening avalanche without much loss, if any.

The Company's old-time enemies apparently saw an opportunity to undermine its credit at this crisis; for attacks began to appear in print—accusations of speculation, of official negligence and so forth. If the Grain Growers could be prevented from paying for the large quantity of oats, delivery of which they would have to take on May 1st to complete the export sales made during the winter—if they could be made to fail in filling these export orders when navigation opened, they would be smashed.

But in attacking the credit of the Grain Growers, these opponents overlooked the rapid increase in paid-up capital and the ability of the farmers to secure money outside of Winnipeg. It was not being forgotten by the Grain Growers that upon the first day of May there would be delivered to them over 2,200,000 bushels of oats.

When the day arrived, therefore, the money was on hand to meet every contingency. Every bushel was paid for immediately. Within a few weeks half of the quantity was riding the waves of the Atlantic, bound for the Old Country to fill part of the sales already made there.

Before long some of the grain companies which had sold the oats were trying to buy them back. Had the farmers' company been a speculating firm they might have turned upon the market and cornered the oats with a vengeance. It was one of those rare occasions when a corner could have been operated successfully to a golden, no-quarter finish; for the export demand was sustained and the local market could have been made to pay "through the nose" for its fun.