How Much Speculation?

The nation still did not know the names of the big speculators in commodities (see NATIONAL AFFAIRS). But last week Commodity Exchange Authority Administrator J. M. Mehl told the why and the how-much of the boom on the commodity exchanges. Said Mehl: high margins on the stock exchanges (75%) had "curbed" speculation there. The money had "sought an outlet" in commodities where some margins have been as low as 10%.

How heavy was the flood? In the twelve months ended June 30, said Mehl, the dollar value of regulated commodity transactions rose to $33 billion, more than double the previous twelve-month period. Most of the trading was speculative, said Mehl. By the end of June, for example, 90.4% of Chicago corn futures accounts were speculative. Price changes, said Mehl, had been aggravated by many "weakly financed" traders. "Shorts are quickly forced to cover," while "longs are washed out by temporary reactions."

Mehl wanted the power to regulate commodity margins as the Federal Reserve Board regulates stock margins. He pointed out that since Oct. 7, when the grain exchanges had boosted their margins to 33 1/3%, speculation has "declined sharply." Commodity traders, who are dead set against any governmental control of margins, took no comfort from Mehl's report. But New York Stock Exchange President Emil Schram cried that Mehl had performed a "public service" in showing how high stock exchange margins had helped bring on the speculation in commodities. However, Schram thought that the answer was not to raise commodity margins, but lower margins on stocks.

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