of grain-derived time instruments, be
they option, forward or futures contracts.
In 1892, the Hatch and Washburn Anti-
Option bills passed both houses of Con-
gress; each failed narrowly on technicali-
ties of reconciliation.
Perhaps the most colorful and persis-
tent challenge to futures trading and in
particular, the CBT, arose from bucket
shops. A bucket shop was, in the modern
parlance of sports betting, a bookmaker;
it enabled anyone to bet on the daily fluc-
tuations of commodity futures prices. In
their attempts to appear legitimate—or,
at the very least, to appear no less legiti-
mate than commodity exchanges—bucket
shops chose names such as the Christie
Grain and Stock Company and the Public
Grain Exchange. To casual observers (who
no doubt observed CBT members fre-
quenting bucket shops), bucket shops and
exchanges were one and the same.
In the 1880s, several states, including
Illinois, outlawed bucket shops. Conse-
quently, the CBT sought to distinguish
itself from these alleged imposters and,
most importantly, deny them access to
its market-clearing price quotes, without
which bucket-shop-styled bookmaking
would be impossible. The CBT, bucket
shops and the telegraph companies fought
in court for decades over the rights to CBT
price quotes. In 1905, the Supreme Court
sided with the CBT; bucket shops faded
away by 1915.
Curiously, despite the bucket shop
threat, the anti-option movement and
grassroots opposition more generally,
futures trading remained largely self-reg-
ulated until after World War I. In the late-
19th century, those who opposed futures
trading sought in vain to outlaw it; a strat-
egy to regulate futures trading was alien to
the political landscape in the Gilded Age.
In the early 20th century, relatively high
commodity prices mollified the opposi-
tion. Federal regulation began with the
Grain Futures Act (1922) and culminated
with the Commodity Futures Trading Act
(1974), which established the Commodity
Futures Trading Commission.
In the closing paragraph of The Pit,
Frank Norris chillingly describes Laura’s
bleak and disturbing last impression of
Chicago as she and her husband Curtis
leave the city, never to return. She gazes
one last time upon the:
Pile of the Board of Trade building,
black, monolithic, crouching on its
foundations like a monstrous sphinx
with blind eyes, silent, grave—crouch-
ing there without a sound, without
sign of life, under the night and the
drifting veil of rain.
Speculative malpractice enabled by this
sphinx and the futures contract it fash-
ioned destroyed Curtis Jadwin, “leaving
Death and Ruin in its wake.” More trou-
bling still, The Pit is a case of art imitating
life: recall, the very same sphinx enabled
the destruction of Joseph Leiter.
Nevertheless, the 19th-century futures
contract was, in essence, a risk-manage-
ment instrument. Trading futures con-
tracts was, in general, a far less lethal
business than classic literary depictions or
actual isolated accounts might otherwise
suggest. In truth, speculators absorbed
price risk that commercial interests,
including creditors, would have assumed
otherwise. Moreover, this transfer of risk
likely reduced the volatility of US grain
prices and interest rates. Then as now, the
futures contract afforded its willing par-
ticipants a market in which to speculate
or hedge, depending on their financial
circumstances and risk preferences.
Joseph M. Santos is a professor of eco-
nomics and Dykhouse Scholar of Money,
Banking and Regulation at South Dakota
State University, where he teaches mac-
roeconomics, monetary economics and
banking. Joe writes on US monetary and
financial history and policy.
Chandler, Alfred D. The Visible Hand. Cam-
bridge: Harvard University Press. 1977.
Clark, John. G. The Grain Trade in the Old
Northwest. Urbana and London: University
of Illinois Press. 1966.
Commodity Futures Trading Commission.
Annual Report. Washington, DC. 2003.
Ferris, William G. “The Great Corner: Joseph
Leiter and P.D. Armour Fought the Battle
of the Wheat Corner in the Pits of the Chi-
cago Board of Trade.” The Farm Quarterly,
Spring (1966): 107–123.
Hieronymus, Thomas A. Economics of Futures
Trading for Commercial and Personal Profit.
New York: Commodity Research Bureau,
Inc. 1977.
Hoffman, George W. Futures Trading Upon
Organized Commodity Markets in the
United States. Philadelphia: University of
Pennsylvania Press. 1932.
Lurie, Jonathan. The Chicago Board of Trade
1859–1905. Urbana, Illinois: University of
Illinois Press. 1979.
Odle, Thomas. “Entrepreneurial Cooperation
on the Great Lakes: The Origin of the Meth-
ods of American Grain Marketing.” Business
History Review 38, (1964): 439–55.
National Agricultural Statistics Service. “His-
torical Track Records.” Washington, DC:
Agricultural Statistics Board, US Depart-
ment of Agriculture. April 2004.
Norris, Frank. The Pit: A Story of Chicago. New
York: Penguin Group. 1903.
Peck, Anne E., ed. Futures Markets: Their
Economic Role. Washington, DC: Ameri-
can Enterprise Institute for Public Policy
Research. 1985.
Rothstein, Morton. “Frank Norris and Popular
Perceptions of the Market.” Agricultural
History 56 (1982): 50–60.
Sources Santos, Joseph M. “Commodity Futures Con-
tracts: Furnishing an Elastic Currency in the
19th Century.” Journal of Macroeconomics
25 (2003): 561–578.
Baer, Julius B. and Olin G. Saxon. Commodity
Exchanges and Futures Trading. New York:
Harper & Brothers. 1949. Williams, Jeffrey C. “The Origin of Futures
Markets.” Agricultural History 56, (1982):
306–16.
26 FINANCIAL HISTORY | Summer 2018 | www.MoAF.org