The origin of the commercial exchange is coeval with the beginning of commerce. According to that eminent Oriental scholar and historian, Rawlinson, the city of Babylon contained several of these marts, each devoted to the sale of some particular description of merchandise, and Herodotus intimates that one of them was set apart exclusively to the sale of wheat, corn, barley, millet and sesame. Athens and Rome also had their exchanges, and during the middle ages the traders of Venice were wont to assemble in the Rialto. Marseilles boasted of a Chamber of Commerce in the fifteenth century, and as early as 1566 London merchants were accustomed daily to convene in the open air at various localities in Lombard Street, until the erection of the present Royal Exchange, and to-day exchanges or bourses are among the prominent commercial features of every great European city.
The idea of a commercial exchange germinated in the United States before the war of the American Revolution. Here, as in Europe, the basis of every mercantile exchange is a voluntary union of business men, who deem it for their mutual interest regularly to assemble in some convenient locality, for the purpose of effecting the sale of commodities[commodities] or securities, and of profiting by the fluctuations in market prices. Stock exchanges, produce exchanges, chambers of commerce and boards of trade are all essentially identical in character, the principal point of difference being the nature of the commodities bought and sold.
The New York Chamber of Commerce, founded in 1768, is the oldest organization of this kind in this country. Similar institutions were established in Baltimore in 1821, and in Philadelphia in 1833. In 1858 there were ten chambers of commerce and twenty boards of trade between Portland and San Francisco. In 1865 these bodies organized what is known as the “National Board of Trade.” In this association are represented Albany, Baltimore, Boston, Buffalo, Charleston, Chicago, Cincinnati, Cleveland, Denver, Detroit, Dubuque, Louisville, Milwaukee, Newark, New Orleans, New York, Oswego, Peoria, Philadelphia, Pittsburg, Portland, Providence, Richmond, St. Louis, St. Paul, Toledo, Troy and Wilmington.
As an institution, the commercial exchange has been productive of some good, but much harm. If restricted in its scope to the legitimate purposes of commerce, it is unquestionably of the highest benefit to the business world. When its operations are diverted into illegitimate channels it becomes a source of incalculable injury to society. As a great market place, it plays an important part in modern civilization; as a gigantic agency for the promotion of gambling in the commodities of the world, it is a snare, a delusion and a curse.
Not all the gaming hells of the country combined afford facilities for gambling equal to those furnished by these organizations. The faro dealer places a limit upon the stakes wagered; upon the floor of ’Change one may bet without limit. Not everyone can obtain admittance to the gilded salon of the tiger; the commission merchant, or broker, who does business upon the Stock Exchange or Board of Trade accepts orders from all comers. The character of the transactions in which his principals engage is to him a matter of indifference, his interest being centered in their frequency and extent.
To one who is not versed in the methods of conducting trading in the mercantile exchange, the jargon of the ordinary journalistic report of a day is unmeaning gibberish. “Longs” and “shorts,” “puts, calls and straddles,” “scalpers” and “plungers,” a “squeal,” a “squeeze,” an “unloading,” are terms as destitute of significance as though they were words from a foreign tongue. Yet the mode of doing business is not so complicated that any man of average intelligence need fail to grasp it. The author—as he has already stated in his autobiography—was once connected with a firm operating on the Chicago Board of Trade, and as such, acquired an intimate acquaintance with the modus operandi of its dealings, and he believes that his work would be incomplete should he ignore the marble palace through whose noiselessly swinging doors so many thousands have entered upon the path of shame which leads to ruin. Not that the Chicago Board of Trade is either worse or better than the score of similar institutions scattered through the country; nor is it intended to select that organization as the object of special animadversion. The methods of all commercial exchanges are, as has been said, substantially identical.
Members of these bodies may be classified on any one of several general principles. One system of classification has relation to the character of their operations; in other words, all members may be divided into two classes, the first comprising those who venture on their own account (popularly known as “speculators”), and the second embracing those who buy or sell only on the receipt of orders from outsiders (i. e., brokers). Under another system, members may be classified as those who wish to enhance the prices of commodities on the one hand, and those who, on the other, seek to depress market quotations. The former are technically known as “bulls,” and the latter as “bears.” These sobriquets are derived from the well-known propensities of the two descriptions of animals, the one to hoist and the other to pull down. A “bull” is one who seeks to advance prices; a “bear” one who strives to lower them. The distinction between “longs” and “shorts” is substantially of the same nature. A “long” is a speculator who, believing that the price of a certain commodity is destined to advance, buys freely in anticipation of a rise. It follows that he is naturally[naturally], if not inherently, a “bull.” On the other hand, a “short,” judging that quotations are destined to decline, sells wherever he can find a purchaser. He, naturally, is a “bear.” It must not be forgotten, however, that neither of these parties for a moment actually expects either to receive or deliver the articles which he buys or sells; and the reason for this apparently inconsistent statement will be explained hereafter.
With these few prefatory words of explanation, we will pursue the course of the speculator, after which will be given a definition of the slang terms used, and following this the reader will find a concise description of the adventitious agencies employed in the manipulation of the market.
