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Pit Stops:
There's No Such Thing As a Free Lunch |
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There is no such thing as a free lunch, but at one time you could get one. |
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The Chicago Board of Trade, founded in 1848 to promote and facilitate Chicago commerce, started with 82 members and no special interest in the grain business. The city's grain traders and merchants had no special interest in the Chicago Board of Trade either. In the early days, the Board attracted members with free lunches. Apparently, even that was not sufficient inducement. On four days in July 1851, only one member made an appearance, and no one showed up on four other days. Traders preferred to do business on the city's streets, amid piles of wheat and oats. |
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The Crimean War of the 1850s changed all that. The war boosted demand for American grain, which meant wheat shipments through Chicago rose in volume until it became easier for grain brokers to do their buying and selling in one central place. |
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With all the talk of the global economy, it is easy to forget that buyers of our grain came from Europe to do business here before the Civil War. |
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As its prominence in the grain trade grew, the Board adopted standards for the quality of commodities, with a bottom grade of "rejected." The grading system, first established in 1856, made it possible for traders to buy and sell quantities of a certain grade of wheatnot specific sacks of wheat, which was cumbersome at best. From there, it was a short step to buying and selling contracts for the delivery of grain in the future. The trading of futures, which took off after the Civil War, quickly outstripped trading of the real thing. By 1875, the Tribune reported the city's grain trade to be $200 million. The sale of grain futures was ten times that, $2 billion. |
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And over time, the current open-outcry system of floor trading evolved and took hold. However, those days are coming to an end as computer trading gains popularity. |
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