trader bought or sold not as much as 2,000,000 bushels in a single day, that the price moved in the same direction as the trading,that is, advanced on purchases and declined on sales.

Mr. DICKINSON. Do you think that inures to the benefit of the producer?

Mr. DUVEL. There are times when it does and times when it does not.

Mr. KINCHELOE. What do you mean; excessive buying?

Mr. DUVEL. I mean excessive buying at times puts the market up perhaps higher than it should be on the basis of supply and demand. Mr. KINCHELOE. But it bears the market some, you think, do you? Mr. DUVEL. There are likewise times when the market is unduly depressed; pardon me, what was your question?

Mr. KINCHELOE. I say sometimes you think it bears the market? Mr. DUVEL. Sometimes it bears the market. It works both ways. We find as a rule that men or women, whoever they might be, who trade in a large way, trade on either side of the market when they think they can make a good profit, while the general public, as a rule, enter the market on the buying side. That was very well illustrated in the 1925 May wheat future. At the time the price reached about $1.75 to $1.78, the group commonly known as professional traders began to liquidate their long holdings. They had been instrumental prior to that in advancing the price. From $1.75 to $1.78 the price was carried to $2.05%, largely by the general public and, while the price was being carried to $2.05% by the general public, the professional traders liquidated about 26,000,000 bushels of May contracts, mostly at good profits.

Mr. KINCHELOE. Is it any unusual thing for one transaction to exceed 2,000,000 bushels in a day, now?

Mr. DUVEL. In the 1925 May future, there were just eight traders whose market position reached 2,000,000 bushels or more. In the 1926 May, there were likewise eight, but not the same eight altogether. Mr. KINCHELOE. You mean in the year1 926?

Mr. DUVEL. In the 1926 May wheat future. That would start about July, 1925, and run on to the end of May, 1926-about 10 months. In the 1926 December future, there were only five traders whose position ever reached as much as 2,000,000 or more bushels. Mr. DICKINSON. Then you do not feel this is an undue curtailment of the futures-trading privilege?

Mr. DUVEL. We feel that the man who is in the legitimate grain business (the miller, producer, or dealer), who is using the market for hedging purposes, for which it was originally intended, has a better chance when prices are moving along more nearly in relation to supply and demand rather than under the influence of heavy concentrated speculative trading.

Mr. KINCHELOE. You feel, notwithstanding a few instances that exist of 2,000,000 bushels, there is a real urgent necessity for this section?

Mr. DUVEL. It seems to be the only way to control excessive trading. We have felt this to be a matter which should be handled by the exchanges themselves; but, so far they have not seen fit to do so. Therefore, we would have no objection to writing it into the amendment. While we have been very successful, through working with the business conduct committees, in preventing undue expan

sion of commitments in the market, either on the long or short side, we have no authority under the present act to limit such trading; a speculator can buy or sell as much as he likes.

Mr. DICKINSON. Do these large speculators add materially to the volume of future trading?

Mr. DUVEL. I think the committee might get a better understanding of the influence of large traders on the market by reference to these charts. I shall leave them for the record if you so desire. They relate primarly to large speculative transactions in the 1926 December wheat future. During the life of the December future there were 32 traders who at some time had a speculative interest in the market of 500,000 bushels or more. Chart A shows the combined net position of these 32 traders in comparison with the price movements. You will note that for the most part these traders as a group were on the short side of the market.

Mr. KINCHELOE. Are you speaking of section 4J now?

Mr. DUVEL. Section 41.

Mr. DICKINSON. That is on the 2,000,000 limitation.

Mr. KINCHELOE. I see 500,000 bushels below there, is the reason I asked.

Mr. DICKINSON. Yes.

Mr. DUVEL. The chart applies to the traders having a market interest of 500,000 bushels or more, which included those having in excess of 200,000 bushels. We have always been led to believe that the large speculative traders are necessary in the market in order to carry the hedges. The records show that sometimes they are on the buying side carrying the load resulting from the selling for hedging purposes and sometimes they are on the selling side adding to the depressing influence of hedging sales.

Mr. DICKINSON. Where were they in this period here to which you refer?

Mr. DUVEL. The 32 as a group were short most of the period reaching a maximum of about 26,000,000 on the short side. That was the latter part of August and the first of September, when the wheat was moving heavily from the farms. This group had been selling and, at the same time, the price declined about 12 or 15 cents. Mr. DICKINSON. When wheat was going down, they did not have much wheat?

Mr. DUVEL. They were on the short side; they had sold. Comparing the two charts, you will note that the net position curves are very similar, especially during the months of August, September, and October. The curve in Chart B represents the net position of 5 traders of the group of 32, these being the 5 whose market position. reached 2,000,000 bushels or more; but only 4 were in the December future to the extent.

Mr. DICKINSON. Of these 32 large traders?

Mr. DUVEL. That is all.

Mr. DICKINSON. These four.

Mr. DUVEL. Only four in the December future to the extent of 2,000,000 bushels or more.

Mr. KINCHELOE. That is over how long a period of time; one season?

Mr. DUVEL. That covers from the middle of May up to the end of December; but the period when they were heavily short was in late

CHART B.-Comparison of the combined net position of 5 of the 32 speculative traders with the futures prices

PRICE PER BUSHEL

August and early September when the wheat was moving freely from the country. While the net position curve in Chart B is very similar to the curve in Chart A it will be of further help to the committee to know that the character of the net position curve in Chart B was determined very largely by the transactions of two traders who at the low point held 32.6 per cent of the total open contracts on the short side of the December future.

Mr. KINCHELOE. That is just what I started to ask you-whether they ever ran over 2,000,000 and, if so, how much?

Mr. DUVEL. The two together controlled in early September 22,595,000 in the December, which was 32.6 per cent of the total open contracts in the December future, which at that time carried most of the hedges, and they were on the short side. The weight of the country hedges was being carried elsewhere.

Mr. KINCHELOE. And they had as much as Leiter had at one time, did they not?

Mr. DUVEL. I suspect they had more.

Mr. DICKINSON. From your experience, now, I would like to have you give us what you believe the influence of the speculator in the market is; whether he stimulates a higher price or whether he has any material effect on the price level for the crop season.

Mr. DUVEL. I think he does both. At times he stimulates a higher price and at times a lower price.

Mr. DICKINSON. But if he stimulates a high price, he does not stimulate it through for the crop season, does he; it can only be for the speculative period he is in the market?

Mr. DUVEL. He is always interested, of course, in his own transactions. At the particular time to which I have referred it happened to come right in August and September.

Mr. KINCHELOE. When these prices are greatly inflated by reason of that excessive speculation, does that reflect back and help the farmer much; or is it not, as a rule, that the grain is all out of the farmers hands when that time comes?

Mr. DUVEL. It usually happens later in the season after most of the grain has been moved from the farms. The higher price, as a general rule, usually occurs after November. That is not always true. The high price on the 1924 crop was in the following January. On the 1925 crop the high price was late in December. On the 1926 crop in the following May and the high price on the 1927 crop was in April, 1928.

Mr. DICKINSON. Do you want to make any comments on the question of the necessity of hedging to stabilize the price of the grain business?

Mr. DUVEL. We feel that dealers and merchandisers of grain should use the hedging facilities. We find that most men engaged in the cash grain business, especially in a large way, do hedge. We do find, however, so far as the country elevators are concerned, and with certain exceptions in the northwest that a relatively small percentage hedge. The cash market, of course, moves along generally with the futures; as the futures advance the cash will advance with it; most sales being made at so much above or so much below the future, prices being generally so quoted. Therefore, the man who is merchandising, if he has his grain properly hedged, does not