Skip to main content
SpringerLink
Log in
Book cover

The Government of Markets pp 1–49Cite as

Palgrave Macmillan

Introduction: The Interwar Coming of Age of Modern Futures Markets, Institutions and Governance

  • Chapter
  • First Online:

Part of the book series: Palgrave Studies in the History of Finance ((PSHF))

Abstract

This introduction to the story of how US government and industry co-constructed many critical modern futures institutions and governance during the interwar years begins with a scene that took place in 1922. Soon after the first (grain—especially wheat and corn) futures regulation was passed, and anti-markets rhetoric was widespread, the Secretary of the dominant exchange, the Chicago Board of Trade, wrote to the directorate stating candidly that the legislation was as pro-futures as was possible, and that it was effectively authored by the futures industry in private collaboration with the US government. This chapter introduces a new archive, now once again inaccessible, and uses that record to argue that the behind-the-scenes negotiation and end results bore no resemblance to the public story of how futures markets were modernised and then regulated.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   89.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD   119.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Notes

  1. 1.

    Julius Baer and Olin Saxon, Commodity Exchanges and Futures Trading (New York: Harper and Brothers, 1949), p. xi.

  2. 2.

    There were earlier futures markets. But none of these were anywhere near as important as wheat and corn in Chicago, and none survived into the twentieth century. For Dutch markets in the sixteenth century, see Milja Van Tielhof, The ‘Mother of All Trades’: The Baltic Grain Trade in Amsterdam from the Late Sixteenth to the Early Nineteenth Century (Leiden: Brill, 2002); Oskar Gelderblom and Joost Jonker, “Amsterdam as the Cradle of Modern Futures and Options Trading , 1550–1650,” in The Origins of Value: The Financial Innovations That Created Modern Capital Markets, ed. William N. Goetzmann and Geert Rouwenhorst (New York and Oxford: Oxford University Press, 2005), pp. 189–205. For Japan in the eighteenth century, see Shigeru Wakita, “Efficiency of the Dojima Rice Futures Market in Tokugawa-period Japan,” Journal of Banking and Finance 25 (2001): 535–554.

  3. 3.

    Other commodity futures markets existed in other centres in the US. For example, wheat and most other grain futures were traded in other Midwestern cities such as Kansas City, and New York handled the cotton futures market. See Anne E. Peck, “The Economic Role of Traditional Commodity Futures Markets,” in Futures Markets: Their Economic Role, ed. Anne E. Peck (Washington, DC: AEI Press, 1985), p. 9.

  4. 4.

    The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010).

  5. 5.

    For a description of the troubles facing the academic study of regulation, see Martin Lodge and Kai Wegrich, “The Regulatory State in Crisis: A Public Administration Moment?” Public Administration Review 70 (2010): 336–341.

  6. 6.

    See, for example, the free market view of Robert Litan, “The Political Economy of Financial Regulation After the Crisis,” in Rethinking the Financial Crisis, ed. Robert Solow, A. Blinder, and A. Loh (New York: Russell Sage Foundation, 2012).

  7. 7.

    James Barth, Gerard Caprio, Jr., and Ross Levine, Guardians of Finance (Cambridge: MIT Press, 2012).

  8. 8.

    Just before the GFC , Treasury Secretary and ex-Goldman Sachs Hank Paulson argued that ‘too much’ financial regulation would impact growth, hence the need to favour a laissez faire approach. See D. Lawder, “Paulson says strongly committed to strong dollar”, Reuters, 30 October 2007.

  9. 9.

    For the original arguments, see George Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management 2 (1971): 3–21. For a more recent accusation of state capture by the financial industry, see Simon Johnson and James Kwak, Thirteen Bankers (New York: Pantheon Books, 2010).

  10. 10.

    See, for example, the Food and Drug Administration’s approval mechanism as market transformative in Daniel Carpenter, “Confidence Games: How Does Regulation Constitute Markets?” in Government and Markets: Toward a New Theory of Regulation, ed. Edward Balleisen and David Moss (Cambridge: Cambridge University Press, 2009). For the argument that the state can foster markets, see Mariana Mazzucato, The Entrepreneurial State (New York: Public Affairs, 2013).

  11. 11.

    For an explanation of the importance of central clearing , see Chapter 4.

  12. 12.

    For the co-construction argument, see, generally, Edward Balleisen and David Moss, eds., Government and Markets: Toward a New Theory of Regulation (New York: Cambridge University Press, 2009). For the government failure argument, see James Barth, Gerard Caprio, and Ross Levine, Guardians of Finance: Making Regulators Work for Us (Cambridge: MIT Press, 2012). For an analysis of the risks of interactions between government and markets, see Rasheed Saleuddin, Regulating Securitized Products: A Post-crisis Guide (London: Palgrave Macmillan, 2015), pp. 103–127.

  13. 13.

    61 Cong. Rec. 4761, 4763 ( 9 August 1921) (remarks of Sen. Capper).

  14. 14.

    Capper quoted in Commercial and Financial Chronicle, 16 October 1920.

  15. 15.

    Letter, J.W. Barkdull, New Orleans, to Arthur F. Lindley, CBOT member, 22 September 1920. CME III.ss1.6.

  16. 16.

    CME III.ss2.653.2 Letter from the President to J. Mauff, 16 August 1921.

  17. 17.

    CME III.ss2.653.2 Letter from the President to J. Mauff, 16 August 1921. Italics added by author.

  18. 18.

    Mary Furner, “From ‘State Interference’ to the ‘Return to the Market’: The Rhetoric of Economic Regulation from the Old Gilded Age to the New,” in Government and Markets: Toward a New Theory of Regulation, ed. Edward Balleisen and David Moss (Cambridge: Cambridge University Press, 2009), p. 92. See also James Farr, “Understanding Conceptual Change Politically,” in Political Innovation and Conceptual Change, ed. Terence Ball, James Farr, and Russell Hanson (Cambridge: Cambridge University Press, 1989).

  19. 19.

    Neil Fligstein, “Markets as Politics: A Political-Cultural Approach to Market Institutions,” American Sociological Review 61 (1996).

  20. 20.

    John H. Stassen, “The Commodity Exchange Act in Perspective—A Short and Not-So-Reverent History of Futures Trading Legislation in the United States,” Washington & Lee Law Review 39 (1982), p. 825.

  21. 21.

    Richard F. Bensel, The Political Economy of American Industrialization, 1877–1900 (Cambridge: Cambridge University Press, 2000), pp. xvii–xxii.

  22. 22.

    B. Peter Pashigian, “The Political Economy of Futures Market Regulation,” The Journal of Business 59 (1986), p. S55.

  23. 23.

    Ferris admitted as much in William G. Ferris, The Grain Traders (East Lansing: Michigan State University Press, 1988), p. ix.

  24. 24.

    Gabriel Kolko , The Triumph of Conservatism: A Reinterpretation of American History, 1900–1916 (New York: The Free Press, 1963). For a more general case, see Anne O. Krueger, “The Political Economy of the Rent-Seeking Society,” American Economic Review 64 (1974).

  25. 25.

    Mary Furner, “From ‘State Interference’ to the ‘Return to the Market’: The Rhetoric of Economic Regulation from the Old Gilded Age to the New,” in Government and Markets: Toward a New Theory of Regulation, ed. Edward Balleisen and David Moss (Cambridge: Cambridge University Press, 2009), p. 92.

  26. 26.

    Lin-Manuel Miranda, Hamilton: The Musical (Milwaukee: Hal Leonard Corporation, 2014).

  27. 27.

    John Mark Hansen, Gaining Access: Congress and the Farm Lobby 1919–1981 (Chicago: University of Chicago Press, 1991), pp. 22–23.

  28. 28.

    Daniel Carpenter, The Forging of Bureaucratic Autonomy: Reputations, Networks, and Policy Innovation in Executive Agencies, 1862–1928 (Princeton: Princeton University Press, 2001), p. 11.

  29. 29.

    Daniel Carpenter, The Forging of Bureaucratic Autonomy: Reputations, Networks, and Policy Innovation in Executive Agencies, 1862–1928 (Princeton: Princeton University Press, 2001), p. 11.

  30. 30.

    Robert Lively, “The American System: A Review Article,” Business History Review 29 (1955): 81–96, p. 93.

  31. 31.

    Roberta Romano, “The Political Dynamics of Derivative Securities Regulation,” Yale Journal on Regulation 14 (1997): 279–406, p. 290.

  32. 32.

    Gary Cox and Matthew McCubbins, Agenda Power in the US House of Representatives, 1877 to 1986 (Stanford: Stanford University Press, 2002). As Woodrow Wilson stated in 1885, ‘it is not far from the truth to say that Congress in session is Congress on public exhibition, whilst Congress in its committee rooms is Congress at work’. As quoted in George B. Galloway, “Development of the Committee System in the House of Representatives,” American Historical Review 65 (1959): 17–30, p. 25.

  33. 33.

    Letter, L.F. Gates to Carey, 13 May 1924. CME III.11.10.

  34. 34.

    Two examples are Roberta Romano, “The Political Dynamics of Derivative Securities Regulation,” Yale Journal on Regulation 14 (1997): 279–406; Leon Kendall, “The Chicago Board of Trade and the Federal Government” (PhD diss., Indiana University, 1956).

  35. 35.

    Leon Kendall, “The Chicago Board of Trade and the Federal Government” (PhD diss., Indiana University, 1956), p. 1.

  36. 36.

    Ibid., p. 3.

  37. 37.

    Ibid., p. 4.

  38. 38.

    For example, see Edward J. Grimes, The Farmer and Legislation, Address given before the 26th annual convention of the Farmers Elevator Association of South Dakota. Grimes worked for Cargill.

  39. 39.

    Representative Chase, member of the House Agricultural Committee, as quoted in Bradford Evening Star, 15 May 1934, p. 9.

  40. 40.

    Chicago Tribune , “Anti-option Bills in Congress. Hearing to Be Given Wednesday,” 2 February 1892.

  41. 41.

    Jerry W. Markham, The History of Commodity Futures Trading and Its Regulation (Westport, CT: Praeger, 1987), p. 13.

  42. 42.

    Cedric R. Cowing, Populists, Plungers and Progressives (Princeton, NJ: Princeton University Press, 1965), pp. 90–91.

  43. 43.

    Chicago Tribune , “Wheat Declines on the Threat of Legal Changes,” 26 February 1926.

  44. 44.

    For example, see Jerry W. Markham, The History of Commodity Futures Trading and Its Regulation (Westport, CT: Praeger, 1987); Geoffrey Poitras, “From Antwerp to Chicago: The History of Exchange Traded Derivative Security Contracts,” Revue d’Histoire des Sciences Humaines 1 (2009): 11–50.

  45. 45.

    Mary Furner, “From ‘State Interference’ to the ‘Return to the Market’: The Rhetoric of Economic Regulation from the Old Gilded Age to the New,” in Government and Markets: Toward a New Theory of Regulation, ed. Edward Balleisen and David Moss (Cambridge: Cambridge University Press, 2009), p. 93.

  46. 46.

    William Falloon and Patrick Arbor, Market Maker: A Sesquicentennial Look at the Chicago Board of Trade (Chicago: Chicago Board of Trade, 1998).

  47. 47.

    John H. Stassen, “Propaganda as Positive Law: Section 3 of the Commodity Exchange Act (A Case Study of How Economic Facts Can Be Changed by Act of Congress),” Chicago-Kent Law Review 58 (1982): 635–656, p. 636. See also Roberta Romanlo, “The Political Dynamics of Derivative Securities Regulation,” Yale Journal on Regulation 14 (1997), p. 640.

  48. 48.

    John V. Rainbolt, “Regulating the Grain Gambler and His Successors,” Hofstra Law Review 6 (1977), p. 8.

  49. 49.

    Statement of L.F. Gates, President of the Chicago Board of Trade during 1919 and 1920, before the Committee on Agriculture, House of Representatives, Washington, 13 January 1921. CME VII.ss3.65.2.

  50. 50.

    CME VII.ss3.65.2, Statement of L.F. Gates, President of the Chicago Board of Trade during 1919 and 1920, before the Committee on Agriculture, House of Representatives, Washington, 13 January 1921 [Note: 60 pages of testimony].

  51. 51.

    Sam Peltzman, Michael E. Levine, and Roger G. Noll, “The Economic Theory of Regulation After a Decade of Deregulation,” Brookings Papers on Economic Activity. Microeconomics (1989): 1–59.

  52. 52.

    John H. Stassen, “The Commodity Exchange Act in Perspective—A Short and Not-So-Reverent History of Futures Trading Legislation in the United States,” Washington & Lee Law Review 39 (1982): 825–843, p. 826.

  53. 53.

    B. Peter Pashigian, “The Political Economy of Futures Market Regulation,” The Journal of Business 59 (1986).

  54. 54.

    Charles R. Geisst, Wheels of Fortune: The History of Speculation from Scandal to Respectability (Hoboken: Wiley, 2002), p. 74.

  55. 55.

    Charles R. Geisst, Wheels of Fortune: The History of Speculation from Scandal to Respectability (Hoboken: Wiley, 2002), citing New York Times, 21 September 1922.

  56. 56.

    Mancur Olson, The Logic of Collective Action (Cambridge: Harvard University Press, 1965).

  57. 57.

    Edward Balleisen and David Moss, eds., Government and Markets: Toward a New Theory of Regulation (New York: Cambridge University Press, 2009).

  58. 58.

    See, for example, Archon Fung, Mary Graham, and David Weil, Full Disclosure : The Perils and Promise of Transparency (New York: Cambridge University Press, 2007).

  59. 59.

    Daniel Carpenter, “Confidence Games: How Does Regulation Constitute Markets?” in Government and Markets: Toward a New Theory of Regulation, ed. Edward Balleisen and David Moss (Cambridge: Cambridge University Press, 2009).

  60. 60.

    http://www.edhec-risk.com/latest_news/featured_analysis/RISKArticle.2012-03-15.1016?newsletter=yes.

  61. 61.

    Alan Olmstead and Paul W. Rhode, “Adapting North American Wheat Production to Climatic Challenges, 1839–2009,” Proceedings of the National Academy of Sciences 108 (2011); Alan Olmstead and Paul W. Rhode, “The Red Queen and the Hard Reds: Productivity Growth in American Wheat, 1800–1940,” Journal of American History 62 (2002).

  62. 62.

    Sukkoo Kim, “Expansion of Markets and the Geographic Distribution of Economic Activities: The Trends in US Regional Manufacturing Structure, 1860–1987,” The Quarterly Journal of Economics 110 (1995); Giovanni Federico and Paul Sharp, “The Cost of Railroad Regulation: The Disintegration of American Agricultural Markets in the Interwar Period,” Economic History Review 66 (2013).

  63. 63.

    For an overview of the research on policy entrepreneurship, see Michael Mintrom and Phillipa Norman, “Policy Entrepreneurship and Policy Change,” Policy Studies Journal 37 (2009): 649–667.

  64. 64.

    Paul A. Sabatier, “An Advocacy Coalition Framework of Policy Change and the Role of Policy-Oriented Learning Therein,” Policy Sciences 21 (1988): 129–168.

  65. 65.

    Tanina Rostain, “Self‐Regulatory Authority, Markets, and the Ideology of Professionalism,” in The Oxford Handbook of Regulation, ed. Robert Baldwin, Martin Cave, and Martin Lodge (Oxford: Oxford University Press, 2010).

  66. 66.

    See, for example, Paul Tucker, Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State (Princeton: Princeton University Press, 2018).

  67. 67.

    Johan Eriksson, Mikael Karlsson, and Marta Reuter, “Technocracy, Politicization, and Noninvolvement: Politics of Expertise in the European Regulation of Chemicals,” Review of Policy Research 27 (2010): 167–185.

  68. 68.

    Leigh Hancher and Michael Moran, Capitalism, Culture, and Economic Regulation (Oxford: Oxford University Press, 1989).

  69. 69.

    For an early history, see Charles H. Taylor, History of the Board of Trade of the City of Chicago (Chicago: Robert O. Law, 1917).

  70. 70.

    Leon Kendall, “The Chicago Board of Trade and the Federal Government” (PhD diss., Indiana University, 1956), p. 63.

  71. 71.

    CBOT all rulings index 1921–1927. CME Group Collections at the Richard J. Daley Library (hereafter CME) File III.2.641.6.

  72. 72.

    J.A. Pattern and Boyden Sparkes, “In the Wheat Pit,” Saturday Evening Post (Reprint Curtis Publishing Company, 1927).

  73. 73.

    Ibid.

  74. 74.

    Charles H. Taylor, History of the Board of Trade of the City of Chicago (Chicago: Robert O. Law, 1917), p. 207.

  75. 75.

    Statement of L.F. Gates, President of the Chicago Board of Trade during 1919 and 1920, before the Committee on Agriculture, House of Representatives, Washington, 13 January 1921. CME VII.ss3.65.2.

  76. 76.

    Edward J. Dies, The Plunger: A Tale of the Wheat Pit (New York: Covici-Friede, 1929), pp. 38–39.

  77. 77.

    See, for example, William Falloon and Patrick Arbor, Market Maker: A Sesquicentennial Look at the Chicago Board of Trade (Chicago: Chicago Board of Trade, 1998), p. 58.

  78. 78.

    Dan Morgan, Merchants of Grain (New York: Viking, 1979), p. 62.

  79. 79.

    Harold S. Irwin, A Guide to Grain-trade Statistics (US Department of Agriculture No. 141, 1932), pp. 33–37.

  80. 80.

    Dan Morgan, Merchants of Grain (New York: Viking, 1979), p. 67.

  81. 81.

    Ibid., p. 70.

  82. 82.

    Ibid.

  83. 83.

    Ibid.

  84. 84.

    J.A. Pattern and Boyden Sparkes, “In the Wheat Pit,” Saturday Evening Post (Reprint Curtis Publishing Company, 1927).

  85. 85.

    Ibid.

  86. 86.

    US Chamber of Commerce , Washington Congress, 1931. “Trading in Futures, Its Aim, Functions and Legal Treatment, 1932.” CME VII.ss2.57.12.

  87. 87.

    J.A. Pattern and Boyden Sparkes, “In the Wheat Pit,” Saturday Evening Post (Reprint Curtis Publishing Company, 1927).

  88. 88.

    Author Unknown, “The Chicago Board of Trade, How to Speculate,” Circa 1890. CME VII.ss2.57.2.

  89. 89.

    What is now known as modern clearing system was not used at the CBOT until 1926. An excellent description of early ring settlement procedures is in George Wright Hoffman, Future Trading upon Organized Commodity Markets in the United States (Philadelphia: University of Pennsylvania Press, 1932), Chapters 11 and 12.

  90. 90.

    Author Unknown, “The Chicago Board of Trade, How to Speculate,” Circa 1890. CME VII.ss2.57.2; U.S. Federal Trade Commission, Report of the Federal Trade Commission on the Grain Trade, Vol. 5, Futures Trading Operations in Grain (Washington, DC: Government Printing Office, 1920), pp. 27–28.

  91. 91.

    Jose De La Vega, Confusion de Confusions (New York: Wiley, 1996 [1688]). See also Edwin Lefevre, Reminiscences of a Stock Operator (New York: Wiley, 2006 [1923]).

  92. 92.

    Stephen Craig Pirrong, “Self-Regulation of Commodity Exchanges: The Case of Market Manipulation ,” Journal of Law & Economics 38 (1995): 141–206, pp. 165, 201. See also Charles H. Taylor, History of the Board of Trade of the City of Chicago (Chicago: Robert O. Law, 1917).

  93. 93.

    Jerry W. Markham, Law Enforcement and the History of Financial Market Manipulation (London: Routledge, 2014), pp. 3–5.

  94. 94.

    Dan Morgan, Merchants of Grain (New York: Viking, 1979), p. 67.

  95. 95.

    See Frank Norris, The Pit (New York: Penguin, 1994 [1903]). US Congress, Hearings Before the Committee on Rules on HR 424. House of Representatives, 63rd Cong. 2nd Sess., 5–7 March 1914.

  96. 96.

    Dan Morgan, Merchants of Grain (New York: Viking, 1979), p. 57.

  97. 97.

    Letter, J. Griffen to J. Barnes, 7 July 1921. CME III.ss1.7.

  98. 98.

    Ibid.

  99. 99.

    Ibid.

  100. 100.

    Statement of L.F. Gates, President of the Chicago Board of Trade During 1919 and 1920, Before the Committee on Agriculture, House of Representatives, Washington, 13 January 1921. CME VII.ss3.65.2.

  101. 101.

    See, for example, Jonathan Lurie, The Chicago Board of Trade, 1859–1905: The Dynamics of Self-Regulation (Urbana: University of Illinois Press, 1979).

  102. 102.

    Report by Special Committee on Cash Grain to President Stream. August 1923. CME III.11.7.

  103. 103.

    Philip McBride Johnson, “Federal Regulation in Securities and Futures Markets,” in Futures Markets: Their Economic Role, ed. Anne Peck (Washington, DC: AEI Press, 1985), p. 301.

  104. 104.

    Julius Baer and Olin Saxon, Commodity Exchanges and Futures Trading (New York: Harper and Brothers, 1949), p. x.

  105. 105.

    Jerry W. Markham, The History of Commodity Futures Trading and its Regulation (Westport, CT: Praeger, 1987).

    For a discussion of achievable regulatory goals, see Robert Baldwin, Martin Cave, and Martin Lodge, Understanding Regulation (Oxford: Oxford University Press, 2011).

  106. 106.

    Bruce Baker and Barbara Hahn, The Cotton Kings: Capitalism and Corruption in Turn-of-the-Century, New York and New Orleans (Oxford: Oxford University Press, 2015).

  107. 107.

    George Wright Hoffman, “Past and Present Theory Regarding Futures Trading,” Journal of Farm Economics 19, no. 1 (1937): 301; Thomas A. Hieronymus, Economics of Futures Trading for Commercial and Personal Profit (Washington, DC: Commodity Research Bureau, 1977), p. 70.

  108. 108.

    Lester G. Telser, “Why There Are Organized Futures Markets,” Journal of Law and Economics 24 (1981), p. 3.

  109. 109.

    Henry H. Bakken, Futures Trading: Origin, Development and Present Economic Status (Chicago: Mimir Publishers, 1966), p. 15.

  110. 110.

    Fischer Black, “The Pricing of Commodity Contracts,” Journal of Financial Economics 3 (1976).

  111. 111.

    Stephen Craig Pirrong, “Self-Regulation of Commodity Exchanges : The Case of Market Manipulation ,” Journal of Law & Economics 38 (1995): 149. See also Linda N. Edwards and Franklin. R. Edwards, “A Legal and Economic Analysis of Manipulation in Futures Markets,” Journal of Futures Markets 4 (1984); Daniel Fischel and Stanford Grossman, “Customer Protection in Futures Markets,” Journal of Futures Markets 4 (1984).

  112. 112.

    Board of Trade v. Christie Grain & Stock Co., 198 U.S. 236 (1905).

  113. 113.

    J.A. Pattern and Boyden Sparkes, “In the Wheat Pit,” Saturday Evening Post (Reprint Curtis Publishing Company, 1927).

  114. 114.

    Statement of L.F. Gates, President of the Chicago Board of Trade During 1919 and 1920, Before the Committee on Agriculture, House of Representatives, Washington, 13 January 1921. CME VII.ss3.65.2.

  115. 115.

    Bob Tamarkin, The New Gatsbys: Fortunes and Misfortunes of Commodity Traders (New York: William Morrow, 1985), p. 125.

  116. 116.

    Jerry W. Markham, Law Enforcement and the History of Financial Market Manipulation (London: Routledge, 2014).

  117. 117.

    Transcript, CBS News Report, 8 July 1937. CME III.23.3.

  118. 118.

    While the CME (a merger of the CME and the CBOT) led in terms of volume in 2015, there are many large rivals in the developed markets and newer competitors in emerging markets. See Statista, Largest Derivatives Exchanges Worldwide in 2015, by Number of Contracts Traded (in millions). https://www.statista.com/statistics/272832/largest-international-futures-exchanges-by-number-of-contracts-traded/. Accessed on 1 March 2017.

  119. 119.

    Other commodity futures markets existed in other centres in the USA. For example, wheat and most other grain futures were traded in other Midwestern cities such as Kansas City, and New York handled the cotton futures market. From http://www.farmdoc.illinois.edu/irwin/archive/books/Futures-Economic/Futures-Economic_chapter1.pdf, p. 9.

  120. 120.

    2014 Futures Industry Association 2014 Annual Volume Survey.

  121. 121.

    Examples of over-simplifications include Julius Baer and Olin Saxon, Commodity Exchanges and Futures Trading (New York: Harper and Brothers, 1949); Jerry W. Markham, The History of Commodity Futures Trading and Its Regulation (Westport, CT: Praeger, 1987); Stephen Craig Pirrong, “Self-Regulation of Commodity Exchanges: The Case of Market Manipulation ,” Journal of Law and Economics 38 (1995): 141–206; and John V. Rainbolt, “Regulating the Grain Gambler and His Successors,” Hofstra Law Review 6 (1977): 1–27. Ideological biases can be evidenced by rhetorical flourishes in John H. Stassen, “Propaganda as Positive Law: Section 3 of the Commodity Exchange Act (A Case Study of How Economic Facts Can Be Changed by Act of Congress),” Chicago-Kent Law Review 58 (1982): 635–656; Anne E. Peck, “The Futures Trading Experience of the Federal Farm Board,” in Futures Trading Seminar Proceedings, Vol. IV (Chicago: Chicago Board of Trade, 1976).

  122. 122.

    Jonathan Lurie, “Commodities Exchanges as Self-Regulating Organizations in the Late 19th Century: Some Perimeters in the History of American Administrative Law,” Rutgers Law Review 28 (1974–1975), p. 1109.

  123. 123.

    John H. Stassen, “Propaganda as Positive Law: Section 3 of the Commodity Exchange Act (A Case Study of How Economic Facts Can Be Changed by Act of Congress),” Chicago-Kent Law Review 58 (1982): 635–656.

  124. 124.

    Hendrik S. Houthakker, “The Regulation of Financial and Other Futures Markets,” The Journal of Finance 37 (1962): 481–491, p. 482.

  125. 125.

    Philip McBride Johnson, “Federal Regulation in Securities and Futures Markets,” in Futures Markets: Their Economic Role, ed. Anne Peck (Washington, DC: AEI Press, 1985), p. 30. See Senate Report no. 93-1131, 93rd Congress, 2nd Session, reprinted in U.S. Code Congressional and Administrative News (1974), pp. 5843, 5853–5855.

  126. 126.

    Jonathan Lurie, “Regulation of the Commodity Exchanges in the 1920s: The Legacy of Self-Government,” in Farmers , Bureaucrats, and Middlemen: Historical Perspectives in American Culture, ed. Trudy H. Peterson (Washington, DC: Howard University Press, 1980).

  127. 127.

    For example, see Jonathan Lurie, The Chicago Board of Trade, 1859–1905: The Dynamics of Self-Regulation (Urbana: University of Illinois Press, 1979); Leon Kendall, “The Chicago Board of Trade and the Federal Government” (PhD diss., Indiana University, 1956).

  128. 128.

    Jonathan Lurie, The Chicago Board of Trade, 1859–1905: The Dynamics of Self-Regulation (Urbana: University of Illinois Press, 1979), pp. xii, 5. Lurie mentions the basic theories of regulation only in passing, before dismissing capture outright.

  129. 129.

    Wayne Broehl, Cargill, Trading the World’s Grain (Hanover, New Hampshire: University Press of New England, 1992); William Falloon and Patrick Arbor, Market Maker: A Sesquicentennial Look at the Chicago Board of Trade (Chicago: Chicago Board of Trade, 1998).

  130. 130.

    Thomas A. Birkland, “Focusing Events, Mobilization, and Agenda Setting,” Journal of Public Policy 18 (1998): 53–74; John W. Kingdon and James A. Thurber, Agendas, Alternatives, and Public Policies (Boston: Little, Brown, 1984).

  131. 131.

    Holbrook Working, “Prices of Cash Wheat and Futures at Chicago Since 1883,” Wheat Studies of the Stanford Food Institute, II (1934).

  132. 132.

    Ibid.

  133. 133.

    John H. Stassen, “Propaganda as Positive Law: Section 3 of the Commodity Exchange Act (A Case Study of How Economic Facts Can Be Changed by Act of Congress),” Chicago-Kent Law Review 58 (1982), p. 636.

  134. 134.

    Certain current aspects of commodities regulation such as the basics of self-regulation and section 3 of the CFTC Act on the justification for regulation date from this period. Jerry W. Markham, The History of Commodity Futures Trading and Its Regulation (Westport, CT: Praeger, 1987), pp. 14–15, 28. See also John V. Rainbolt, “Regulating the Grain Gambler and His Successors,” Hofstra Law Review 6 (1977); John H. Stassen, “Propaganda as Positive Law: Section 3 of the Commodity Exchange Act (A Case Study of How Economic Facts Can Be Changed by Act of Congress),” Chicago-Kent Law Review 58 (1982), p. 636.

  135. 135.

    William G. Ferris, The Grain Traders (East Lansing: Michigan State University Press, 1988), p. ix.

  136. 136.

    For the pessimistic side of the results of collective action , see Mancur Olson, The Logic of Collective Action : Public Goods and the Theory of Groups (Cambridge: Harvard University Press, 2009). On the other hand, groups can function in spite of their individual interests. See, for example, Russell Hardin, Collective Action (New York: RFF Press, 1982).

  137. 137.

    See, for example, Gary Gerstle, Liberty and Coercion: The Paradox of American Government (Princeton: Princeton University Press, 2015).

Bibliography

Archives

  • CME Archives at the Richard J. Daley Library Special Collections and University Archives, University of Illinois at Chicago.

    Google Scholar 

  • Records of the Commodity Futures Trading Commission (and the Former Commodity Exchange Administration and Grain Futures Administration), US National Archives and Records Administration, Kansas City, Missouri. Record Group 180.2: Records of the Commodity Exchange Administration and its Predecessors. Archival Research Catalogue Identification Number 4730947.

    Google Scholar 

  • Records of the Office of the Secretary of Agriculture, US National Archives and Records Administration, College Park, Maryland. Record Group 16.

    Google Scholar 

  • USDA History Collection. National Agricultural Library. Beltsville, Maryland.

    Google Scholar 

Bibliography

  • Baer, Julius, and Olin Glenn Saxon. Commodity Exchanges and Futures Trading. New York: Harper & Brothers, 1949.

    Google Scholar 

  • Baker, Bruce, and Barbara Hahn. The Cotton Kings: Capitalism and Corruption in Turn-of-the-Century, New York and New Orleans. Oxford: Oxford University Press, 2015.

    Google Scholar 

  • Bakken, Henry H. Futures Trading: Origin, Development and Present Economic Status. Chicago: Mimir Publishers, 1966.

    Google Scholar 

  • Balleisen, Edward, and David Moss, eds. Government and Markets: Toward a New Theory of Regulation. New York: Cambridge University Press, 2009.

    Google Scholar 

  • Barth, James R., Gerard Caprio, and Ross Levine. Guardians of Finance: Making Regulators Work for Us. Cambridge: MIT Press, 2012.

    Google Scholar 

  • Bensel, Richard F. The Political Economy of American Industrialization, 1877–1900. Cambridge: Cambridge University Press, 2000.

    Google Scholar 

  • Birkland, Thomas A. “Focusing Events, Mobilization, and Agenda Setting.” Journal of Public Policy 18 (1998): 53–74.

    Article  Google Scholar 

  • Black, Fischer. “The Pricing of Commodity Contracts.” Journal of Financial Economics 3 (1976): 3167–3179.

    Article  Google Scholar 

  • Broehl, Wayne. Cargill, Trading the World’s Grain. Hanover, New Hampshire: University Press of New England, 1992.

    Google Scholar 

  • Carpenter, Daniel. The Forging of Bureaucratic Autonomy: Reputations, Networks, and Policy Innovation in Executive Agencies, 1862–1928. Princeton: Princeton University Press, 2001.

    Google Scholar 

  • Carpenter, Daniel. “Confidence Games: How Does Regulation Constitute Markets?” In Government and Markets: Toward a New Theory of Regulation, edited by Edward Balleisen and David Moss, 164–192. Cambridge: Cambridge University Press, 2009.

    Google Scholar 

  • Cowing, Cedric B. Populists, Plungers and Progressives. Princeton: Princeton University Press, 1965.

    Google Scholar 

  • Cox, Gary, and Matthew McCubbins. Agenda Power in the US House of Representatives, 1877 to 1986. Stanford: Stanford University Press, 2002.

    Google Scholar 

  • Edwards, Linda N., and Franklin Edwards. “A Legal and Economic Analysis of Manipulation in Futures Markets.” Journal of Futures Markets 4 (1984): 333–366.

    Article  Google Scholar 

  • Eriksson, Johan, Mikael Karlsson, and Marta Reuter. “Technocracy, Politicization, and Noninvolvement: Politics of Expertise in the European Regulation of Chemicals.” Review of Policy Research 27 (2010): 167–185.

    Article  Google Scholar 

  • Falloon, William, and Patrick Arbor. Market Maker: A Sesquicentennial Look at the Chicago Board of Trade. Chicago: Chicago Board of Trade, 1998.

    Google Scholar 

  • Farr, James. “Understanding Conceptual Change Politically.” In Political Innovation and Conceptual Change, edited by Terence Ball, James Farr, and Russell Hanson, 24–49. Cambridge: Cambridge University Press, 1989.

    Google Scholar 

  • Federico, Giovanni, and Paul Sharp. “The Cost of Railroad Regulation: The Disintegration of American Agricultural Markets in the Interwar Period.” Economic History Review 66 (2013): 1017–1038.

    Google Scholar 

  • Ferris, William G. The Grain Traders. East Lansing: Michigan State University Press, 1988.

    Google Scholar 

  • Fischel, Daniel, and Stanford Grossman. “Customer Protection in Futures Markets.” Journal of Futures Markets 4 (1984): 273–295.

    Article  Google Scholar 

  • Fligstein, Neil. “Markets as Politics: A Political-Cultural Approach to Market Institutions.” American Sociological Review 61 (1996): 656–673.

    Article  Google Scholar 

  • Furner, Mary. “From ‘State Interference’ to the ‘Return to the Market’: The Rhetoric of Economic Regulation from the Old Gilded Age to the New.” In Government and Markets: Toward a New Theory of Regulation, edited by Edward Balleisen and David Moss, 92–142. Cambridge: Cambridge University Press, 2009.

    Google Scholar 

  • Galloway, George B. “Development of the Committee System in the House of Representatives.” American Historical Review 65 (1959): 17–30.

    Article  Google Scholar 

  • Geisst, Charles R. Wheels of Fortune: The History of Speculation from Scandal to Respectability. Hoboken: Wiley, 2002.

    Google Scholar 

  • Gelderblom, Oskar, and Joost Jonker. “Amsterdam as the Cradle of Modern Futures and Options Trading, 1550–1650.” In The Origins of Value: The Financial Innovations That Created Modern Capital Markets, edited by William N. Goetzmann and Geert Rouwenhorst, 189–205. Oxford: Oxford University Press, 2005.

    Google Scholar 

  • Gerstle, Gary. Liberty and Coercion: The Paradox of American Government from the Founding to the Present. Princeton: Princeton University Press, 2015.

    Google Scholar 

  • Grimes, Edward J. The Farmer and Legislation. Address Given Before the 26th Annual Convention, Farmers Elevator Association of South Dakota. 1932.

    Google Scholar 

  • Hancher, Leigh, and Michael Moran. “Organizing Regulatory Space.” In Capitalism, Culture, and Economic Regulation, edited by Leigh Hancher and Michael Moran, 271–299. Oxford: Oxford University Press, 1989.

    Google Scholar 

  • Hansen, John Mark. Gaining Access: Congress and the Farm Lobby 1919–1981. Chicago: University of Chicago Press, 1991.

    Google Scholar 

  • Hardin, Russell. Collective Action. New York: RFF Press, 1982.

    Book  Google Scholar 

  • Hieronymus, Thomas A. Economics of Futures Trading for Commercial and Personal Profit. Washington, DC: Commodity Research Bureau, 1977.

    Google Scholar 

  • Hoffman, George Wright. Future Trading upon Organized Commodity Markets in the United States. Philadelphia: University of Pennsylvania Press, 1932.

    Google Scholar 

  • Hoffman, George Wright. “Past and Present Theory Regarding Futures Trading.” Journal of Farm Economics 19 (1937): 300–312.

    Article  Google Scholar 

  • Houthakker, Hendrik S. “The Regulation of Financial and Other Futures Markets.” The Journal of Finance 37 (1962): 481–491.

    Article  Google Scholar 

  • Johnson, Philip McBride. “Federal Regulation in Securities and Futures Markets.” In Futures Markets: Their Economic Role, edited by Anne E. Peck, 291–325. Washington, DC: AEI Press, 1985.

    Google Scholar 

  • Johnson, Simon, and James Kwak. Thirteen Bankers. New York: Pantheon Books, 2010.

    Google Scholar 

  • Kendall, Leon. “The Chicago Board of Trade and the Federal Government.” PhD diss., Indiana University, 1956.

    Google Scholar 

  • Kim, Sukkoo. “Expansion of Markets and the Geographic Distribution of Economic Activities: The Trends in US Regional Manufacturing Structure, 1860–1987.” The Quarterly Journal of Economics 110 (1995): 881–908.

    Article  Google Scholar 

  • Kingdon, John W., and James A. Thurber. Agendas, Alternatives, and Public Policies. Boston: Little, Brown, 1984.

    Google Scholar 

  • Kolko, Gabriel. The Triumph of Conservatism: A Reinterpretation of American History, 1900–1916. New York: The Free Press, 1963.

    Google Scholar 

  • Lively, Robert A. “The American System: A Review Article.” Business History Review 29 (1955): 81–96.

    Article  Google Scholar 

  • Lodge, Martin, and Kai Wegrich. “The Regulatory State in Crisis: A Public Administration Moment?” Public Administration Review 70 (2010): 336–341.

    Article  Google Scholar 

  • Lurie, Jonathan. “Commodities Exchanges as Self-Regulating Organizations in the Late 19th Century: Some Perimeters in the History of American Administrative Law.” Rutgers Law Review 28 (1974–1975): 1107–1140.

    Google Scholar 

  • Lurie, Jonathan. The Chicago Board of Trade, 1859–1905: The Dynamics of Self-Regulation. Urbana: University of Illinois Press. 1979.

    Google Scholar 

  • Markham, Jerry W. The History of Commodity Futures Trading and Its Regulation. Westport, CT: Praeger, 1987.

    Google Scholar 

  • Mazzucato, Mariana. The Entrepreneurial State. New York: Public Affairs, 2013.

    Google Scholar 

  • Mintrom, Michael, and Phillipa Norman. “Policy Entrepreneurship and Policy Change.” Policy Studies Journal 37 (2009): 649–667.

    Article  Google Scholar 

  • Morgan, Dan. Merchants of Grain. New York: Viking, 1979.

    Google Scholar 

  • Olmstead, Alan, and Paul W. Rhode. “The Red Queen and the Hard Reds: Productivity Growth in American Wheat, 1800–1940.” Journal of American History 62 (2002): 926–966.

    Google Scholar 

  • Olmstead, Alan, and Paul W. Rhode. “Adapting North American Wheat Production to Climatic Challenges, 1839–2009.” Proceedings of the National Academy of Sciences 108 (2011): 480–485.

    Article  Google Scholar 

  • Olson, Mancur. The Logic of Collective Action. Cambridge: Harvard University Press, 1965.

    Google Scholar 

  • Pashigian, B. Peter. “The Political Economy of Futures Market Regulation.” The Journal of Business 59 (1986): S55–S84.

    Article  Google Scholar 

  • Pattern, J.A., and Boyden Sparkes. “In the Wheat Pit.” Saturday Evening Post. Reprint Curtis Publishing Company, 1927.

    Google Scholar 

  • Peck, Anne E. “The Futures Trading Experience of the Federal Farm Board.” In Futures Trading Seminar Proceedings. Vol. IV, 23–56. Chicago: Chicago Board of Trade, 1976.

    Google Scholar 

  • Peck, Anne E. “The Economic Role of Traditional Commodity Futures Markets.” In Futures Markets: Their Economic Role, edited by Anne E. Peck, 1–81. Washington, DC: AEI Press, 1985.

    Google Scholar 

  • Pirrong, Stephen Craig. “Self-Regulation of Commodity Exchanges: The Case of Market Manipulation.” Journal of Law & Economics 38 (1995): 141–206.

    Google Scholar 

  • Poitras, Geoffrey. “From Antwerp to Chicago: The History of Exchange Traded Derivative Security Contracts.” Revue d’Histoire des Sciences Humaines 1 (2009): 11–50.

    Article  Google Scholar 

  • Rainbolt, John V. “Regulating the Grain Gambler and His Successors.” Hofstra Law Review 6 (1977): 1–27.

    Google Scholar 

  • Robert Litan. “The Political Economy of Financial Regulation After the Crisis.” In Rethinking the Financial Crisis, edited by Robert M. Solow, A.S. Blinder, and A.W. Lo. New York: Russell Sage Foundation, 2012.

    Google Scholar 

  • Romano, Roberta. “The Political Dynamics of Derivative Securities Regulation.” Yale Journal on Regulation 14 (1997): 279–406.

    Google Scholar 

  • Sabatier, Paul A. “An Advocacy Coalition Framework of Policy Change and the Role of Policy-Oriented Learning Therein.” Policy Sciences 21 (1988): 129–168.

    Article  Google Scholar 

  • Saleuddin, Rasheed. Regulating Securitized Products: A Post-crisis Guide. London: Palgrave Macmillan, 2015.

    Book  Google Scholar 

  • Stassen, John H. “Propaganda as Positive Law: Section 3 of the Commodity Exchange Act (A Case Study of How Economic Facts Can Be Changed by Act of Congress).” Chicago-Kent Law Review 58 (1982): 635–656.

    Google Scholar 

  • Stassen, John H. “The Commodity Exchange Act in Perspective—A Short and Not-so-Reverent History of Futures Trading Legislation in the United States.” Washington & Lee Law Review 39 (1982): 825–844.

    Google Scholar 

  • Stigler, George. “The Theory of Economic Regulation.” The Bell Journal of Economics and Management Science 2 (1971): 3–21.

    Article  Google Scholar 

  • Tamarkin, Bob. The New Gatsbys: Fortunes and Misfortunes of Commodity Traders. New York: William Morrow, 1985.

    Google Scholar 

  • Taylor, Charles H. History of the Board of Trade of the City of Chicago. Vols. 1–3. Chicago: Robert O. Law, 1917.

    Google Scholar 

  • Telser, Lester G. “Why There Are Organized Futures Markets.” Journal of Law and Economics 24 (1981): 1–22.

    Article  Google Scholar 

  • Tucker, Paul. Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State. Princeton: Princeton University Press, 2018.

    Google Scholar 

  • US Congress. Senate. 61 Congressional Record 4761,4763. Remarks of Senator Capper, 67th Cong. 1st Sess., 9 August 1921.

    Google Scholar 

  • Van Tielhof, Milja. The ‘Mother of All Trades’: The Baltic Grain Trade in Amsterdam from the Late Sixteenth to the Early Nineteenth Century. Leiden: Brill, 2002.

    Google Scholar 

  • Wakita, Shigeru. “Efficiency of the Dojima Rice Futures Market in Tokugawa-Period Japan.” Journal of Banking & Finance 25 (2001): 535–554.

    Article  Google Scholar 

  • Working, Holbrook. “Prices of Cash Wheat and Futures at Chicago Since 1883.” Wheat Studies of the Stanford Food Institute II (1934).

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Centre for Endowment Asset Management, University of Cambridge, Cambridge, Cambridgeshire, UK

    Rasheed Saleuddin

Authors
  1. Rasheed Saleuddin
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Rasheed Saleuddin .

Rights and permissions

Reprints and permissions

Copyright information

© 2018 The Author(s)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Saleuddin, R. (2018). Introduction: The Interwar Coming of Age of Modern Futures Markets, Institutions and Governance. In: The Government of Markets. Palgrave Studies in the History of Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-93184-5_1

Download citation

  • DOI: https://doi.org/10.1007/978-3-319-93184-5_1

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-93183-8

  • Online ISBN: 978-3-319-93184-5

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation