The nature of risk assumption in the trading on organized exchanges

The classical theory of speculation fails to explain many of the phenomena of the trading on organized commodity and security exchanges because it does not take manipulaton and trading on price movements into account. These two kinds of trading have come to be important. Taken together, they have made up the bulk of the organized trading. (Probably manipulation in securities has been reduced decidedly by the Securities Exchange Commission.) They differ sharply from the speculation contemplated by the classical theory both in their natures and in their effects upon the public. In contrast to speculation, which tends to stabilize prices, manipulation and trading on price movements tend to unsettle the market and to widen price swings. Speculative profits may be obtained from transactions injurious to the public interest. General recognition of the presence of these two kinds of trading will facilitate their control and thus will help to increase the social usefulness of the organized exchanges.