36 THE WORK OF THE STOCK EXCHANGE
kets, or stock exchanges. As time went on, increasingly strict
and inclusive rules were adopted to govern the character of
trading on the exchanges, and also methods were gradually
established for periodically clearing and settling such exchange
contracts in the most efficient and economical way.
Prerequisites for the Creation of Exchanges.—Undoubt-
edly the organized exchange is the safest, the most democratic
and the most efficient sort of market known, and represents
the highest stage which the evolution of markets has thus far
attained. However, an exchange market cannot be readily
developed for many commodities or forms of property. Unless
an article is widely demanded by consumers and produced in
considerable quantities, there will not be sufficient trading in
it to justify the creation of an exchange. Moreover, unless
it can be readily graded and standardized, trading in it must
usually consist only of small retail transactions, and not whole-
sale transactions by contract on an exchange. Furthermore,
many articles, though widely produced and consumed, are too
perishable to permit of handling through a highly organized
exchange market. Other factors, too, such as the proportion
of production or consumption controlled by a single institu-
tion, etc., also have a vital bearing on whether or not an ex-
change can be readily established for the given commodity.
In the gradual and confused process which has attended
the higher development of markets, therefore, a considerable
number of articles—and in particular, perishable foodstuffs
and articles of widely varying quality and relatively small
demand—have lagged behind, and have either remained in the
old markets made in the street or else have moved back across
the sidewalks into the retail stores. Trading in such commodi-
ties is usually sluggish and speculation in them occurs on too
narrow and limited a scale to afford the fullest economic benefit
to the public. In consequence, the risks involved by carrying
them are considerable and the profit on their occasional sales
for that reason has to be comparatively large.
