ed warehouse, unless the buyer and the
seller have a mutual understanding to deliver the coffee from dock or
ex-ship. Margins to protect the contract may be called for by either
party. The largest deposit for margins was made in 1904, when
$22,661,710 was deposited with the superintendent as required by the
Exchange rules.

The basic grade in a future sale is No. 7; but variations are provided
as follows: 30 points for Rio, Victoria, and Bahia of all grades between
7 and 1, and of 50 points between 7 and 8; 50 points is allowed on
Santos and all other coffees except between grades 1 and 2 and 2 and 3
Santos, which are allowed 30 points. Thus the buyer and the seller when
entering upon a transaction know exactly what the difference will be
between the standard No. 7 and the coffee that can be delivered. The
right to deliver any grade in a future transaction has done much to
lessen the probability of corners in coffee; but this protection is
further given by the stringent rule that the maximum fluctuations on the
Exchange can be only two cents a pound on coffee in one day and one cent
on sugar. If greater changes should threaten, the Exchange operations
would automatically cease.

False or fictitious sales are prohibited, and all contracts must be
reported to the superintendent. All contracts are binding and call for
actual delivery.

The future contract, besides being used for the delivery of coffee
during stated months in the future at a given price, is also used for
hedging purposes. As in the grain and cotton markets, dealers protect
themselves against price fluctuations by hedging in the future market.
Importers, for instance, when purchasing coffee abroad, frequently sell
an equal amount for future delivery on the Exchange. When the time for
delivery arrives, it is simply a question of calculation of the market
conditions whether it is more advantageous to repurchase the sales made
as a hedge, or as a kind of insurance to protect themselves against
loss, and free the coffee so engaged, or to make delivery of the coffee
as it comes in.

The board of managers has power to close the Exchange or to suspend
trading on such days or parts of days as would in their judgment be for
the Exchange's best interest.

The Clearing Association is a recent outgrowth of the Exchange, and is
composed exclusively of Exchange members. Every member has to bring his
contracts up to market closing every night, either by making a depo