The Exchange

Important institutions used by wholesale buyers are known as Exchanges. Immediately before the second world war 2, these, the best known being the Baltic, Corn, Metal, Coal, Wool, and Hop Exchanges in London and the cotton Exchanges in Liverpool and Manchester. In addition to these, there were local exchanges in many towns where corn or other merchants congregated for the purpose of buying and selling the particular commodity dealt in. In the world war 2, most of all  these exchanges were closed down and the government became the single sole buyer and seller. The system of bulk purchase in particular of commodities from overseas was reinforced by the labour government in the post-war era(e.g raw cotton materials commission, 1948/1954). More recently, however, greater freedom has been given to a number of trades and their exchanges are functioning again. It is evident that no exchange could function for a commodity where the government was sole buyer and seller, but it does not, of course, follow that there were exchanges for all commodities for which bulk purchase was introduced. 

So, therefore, an exchange is a  market in the economic point of view because it is a place where buyers and sellers meet at close communication and prices for the commodity dealt intend to find a common ground. The opening price of the commodity for the day may be fixed by the exchange panel. It may also be based on the closing price of the previous day, but the actual price will vary from time to time during the day, according to the demand for and the supply of the commodity may vary according to pricing forces of the day. When prices are considered good, the holders of stocks will offer them for sale and business, but if prices are weak, stocks will be held back, with an expectation that better prices will be realized aftermath.

Each exchange has its own rules and all the members must abide by them. It has its own form of contract which entails other clauses as an ARBITRATION clause. This term Arbitration clause commonly finds a place in contracts because it binds all parties involved in the event of any dispute arising out of the contract to submit the point to the decision of impartial arbitrators and so avoids the expensive legal proceedings that might otherwise arise. Thus, were a buyer on change alleges that the goods delivered are of poorer quality than the sample display goods on which he/she bought, the exchange committee, through its officials compares the actual original sample with a small portion of bulk and decides whether the allegation is or never true;if really true the committee will order an adjustment of the correct price.

Public Auction-Buying by agreement between buyer and seller or it is also known as purchase by private treaty. Another method of buying via; buying at public auction. In private treaty, the seller fixes the price at auction the buyer fixes the price. In both cases either party accepts or refuses an offer but when goods are auctioned, the auctioneer has not quite the same freedom to refuse a bid as the buyer or the seller has when buying or selling by private treaty for the reason given below.

Who is an auctioneer?-From the economic point of view , an auctioneer sells goods which do not belong to him, he sells on behalf of another person termed his principal who is the owner of the goods. Under private treaty contracts, goods are usually the property of the seller, even though as has been seen a factor may sell goods of which he/she is not the owner. So therefore an auctioneer is a person man or woman licensed by the state to sell property on commission at a public auction. He has legal rights and possession for his charges and the right to sue for the price of the goods he sells; He is also in general liable to be sued by the buyer to recover the goods he sold. An auctioneer is the agent of the owner of the property to sell property, and when he accepts a bid, he becomes the agent of the buyer to sign a contract of sale. His signature binds both seller and buyer. He is bound to accept the highest bona fid but a bid may be withdrawn before it is accepted by the fall of the hammer. Sometimes  lots are reserved, this means that the owner of the goods to be auctioned  has fixed beforehand  a minimum price and the auctioneer  is instructed  not to accept any bid  below  this fixed minimum, Sometimes when the auctioneer has received an offer for goods  in advance of the auction he will himself  buy in the goods should in case no  bid exceed the previously offered price.

In some exchanges, the actual buyers and sellers come together for meetings and transact business but on others, most of the businesses transactions take place through the medium of brokers.

Who is a big time broker?- This is an agent who buys and sells goods for a principal on commission. He is distinguished from a factor chiefly in that he does not have possession of goods he sells and does not sell on his own account, whereas a factor does have possession of the goods and does sell on his own account. Big time brokers plus factors including even auctioneers are classified as Mercantile Agents.