Cash-settled index futures were barred by legal logic until decades into the century
Evidence
A futures contract was legal, the Supreme Court ruled in 1905, if it could be settled by physical delivery of a commodity such as grain. If it could be settled only in cash, it was an illegal wager. Since an index was an abstraction, there was no straightforward way in which an index future could be settled other than in cash. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 58
Categorization
- DEFINE: Clarifies the legal distinction between hedging futures and illegal wagering: physical delivery vs. cash settlement.
- XREF: connects to: Chicago futures trading diverged from material reality from its very beginnings — Aris Komporozos-Athanasiou, Speculative Communities: Living with…, 86; Cash settlement allowed index futures to evade securities regulation. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 766; The delivery test blocked cash-settled index futures as illegal in the US. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 641 (+4 more)
Related
- American law defined legitimate futures by physical delivery and outlawed cash settlement (similarity 0.93)
- The delivery test blocked cash-settled index futures as illegal in the US. (similarity 0.93)
- Physical delivery once legally distinguished futures trading from gambling. (similarity 0.93)
- Whether futures contracts count as wagers determined whether they were illegal. (similarity 0.89)
- Cash settlement allowed index futures to evade securities regulation. (similarity 0.87)
- Physical-delivery possibility, not actual delivery, marked legal futures off from gambling. (similarity 0.87)
- Cash-settled derivatives were legally classed as gambling in the US until the 1980s (similarity 0.86)
- Futures trading achieved unprecedented scale in nineteenth-century Chicago. (similarity 0.80)
Broader Connections
- The delivery test blocked cash-settled index futures as illegal in the US.
#expands(0.92) — Donald MacKenzie, An Engine, Not a Camera, 641 - Whether futures contracts count as wagers determined whether they were illegal.
#expands(0.85) — Donald MacKenzie, An Engine, Not a Camera, 638 - Cash settlement allowed index futures to evade securities regulation.
#corroborates(0.80) — Donald MacKenzie, An Engine, Not a Camera, 766 - Cash-settled derivatives were legally classed as gambling in the US until the 1980s
#exemplifies(0.78) — Donald MacKenzie, An Engine, Not a Camera, 1134