Yes, to the best of our knowledge. 7 U.S. Code § 13-1 prohibits "contract[s] for the sale of [...] onions for future delivery [...] on or subject to the rules of any board of trade in the United States." The San Francisco Onion Futures Company is not a board of trade, defined as an "organized exchange or other trading facility". We sell contracts privately to individual buyers, and do not operate any exchange or secondary market.
Performance art against that law?
Also November onions are an absolute steal compared to the adjacent months!
I think their point is there's no "peer to peer" trading so it's not an exchange. You're always contracting futures with them, so it's more like a vegetables seller than a trading facility.
Exactly right. You're able to privately resell contract keys (and the buyer can then re-issue a new key with their delivery info, voiding the old one), but onionfutures.com doesn't facilitate it.
I mean, it kind of does, though, no? Since it is backing the contract in the first place? Why else would anyone buy those contracts if they didn't know they have value provided by onionfutures.com in the first place? Why can't I just sell a fake key, claim it'll work, and make unlimited money this way if that wasn't the case?
The specific laws do not actually ban the transfer of those contracts (tbf this is very complex and depends on your reading). And yes they do not facilitate the trading of the instruments in the secondary market but they absolutely facilitate the instruments themselves otherwise there cannot be a secondary market without any backers of the instruments.
[A] trading facility that— (A) permits trading— (i) by or on behalf of a person that is not an eligible contract participant; or (ii) by persons other than on a principal-to-principal basis; or (B) has adopted (directly or through another nongovernmental entity) rules that— (i) govern the conduct of participants, other than rules that govern the submission of orders or execution of transactions on the trading facility; and (ii) include disciplinary sanctions other than the exclusion of participants from trading.
And 7 USC § 1a(51)(A) defines a "trading facility" as
[A] person or group of persons that constitutes, maintains, or provides a physical or electronic facility or system in which multiple participants have the ability to execute or trade agreements, contracts, or transactions— (i) by accepting bids or offers made by other participants that are open to multiple participants in the facility or system; or (ii) through the interaction of multiple bids or multiple offers within a system with a pre-determined non-discretionary automated trade matching and execution algorithm.
(7 USC § 1a(51)(B) then follows with some exceptions to that definition.)
In short—an "organized exchange" is defined as a type of "trading facility". To count as a trading facility", whether of the "organized exchange" type or not, you must either accept bids or offers from other participants yourself or else deterministically match and execute those bids and offers.
A contract represents a set of (quantity, month) tuples, where quantity is an integer greater than zero; that number of yellow onions will be delivered in the corresponding month to the current holder of the contract. The mass of each onion is unspecified, as is the mean and variance of the underlying onion-mass distribution from which they are drawn.
Why was the law against onion futures passed in the first place? Couldn’t the same scheme be done with garlic, or sweet potatoes, or turnips or something?
The people behind this are a real (if silly) student organization at UChicago and Northwestern campaigning for the legalization of onion futures trading. Sometimes they will aggressively hand out free onions to passerby on campus. It's quite entertaining.
Hi! I'm the proprietor of onionfutures.com. I'm actually not a member of UChicago for Our Futures and came up with the idea independently, but we've since connected and they handle our Chicago deliveries.
Are these contract prices really "per onion"? Or are they actually per pound or per kg? Up to $9.39 seems very expensive if it's really the price for a single onion.
I thought maybe they're some sort of special exotic onion variety, but I don't see anything to suggest that.
Performance art against that law?
Also November onions are an absolute steal compared to the adjacent months!
I hate to argue but then what would they define this as, if not an organized exchange or other trading facility?
Legal defense is basically "nuh uh"
I think their point is there's no "peer to peer" trading so it's not an exchange. You're always contracting futures with them, so it's more like a vegetables seller than a trading facility.
Exactly right. You're able to privately resell contract keys (and the buyer can then re-issue a new key with their delivery info, voiding the old one), but onionfutures.com doesn't facilitate it.
I mean, it kind of does, though, no? Since it is backing the contract in the first place? Why else would anyone buy those contracts if they didn't know they have value provided by onionfutures.com in the first place? Why can't I just sell a fake key, claim it'll work, and make unlimited money this way if that wasn't the case?
The specific laws do not actually ban the transfer of those contracts (tbf this is very complex and depends on your reading). And yes they do not facilitate the trading of the instruments in the secondary market but they absolutely facilitate the instruments themselves otherwise there cannot be a secondary market without any backers of the instruments.
7 USC § 1a(37) defines an "organized exchange" as
And 7 USC § 1a(51)(A) defines a "trading facility" as
(7 USC § 1a(51)(B) then follows with some exceptions to that definition.)
In short—an "organized exchange" is defined as a type of "trading facility". To count as a trading facility", whether of the "organized exchange" type or not, you must either accept bids or offers from other participants yourself or else deterministically match and execute those bids and offers.
For those who don’t know:
https://en.wikipedia.org/wiki/Onion_Futures_Act
(which also banned box office receipt futures)
A fun thing is to go on FRED and make a graph with prices from onions and, say, corn to see the differences in volatility.
These onion prices are quite high! The novelty probably drives up prices. Too bad there isn’t a liquid market for onions
Onion soup sounds highly fungible.
How many onions / lbs does a contract represent?
Pricing is per onion. You could order some and weigh them, and report back.
A contract represents a set of (quantity, month) tuples, where quantity is an integer greater than zero; that number of yellow onions will be delivered in the corresponding month to the current holder of the contract. The mass of each onion is unspecified, as is the mean and variance of the underlying onion-mass distribution from which they are drawn.
These are 1 onion contracts? Outrageous!
hell yeah, based
Can we tokenize this or get some prediction markets going on Polymarket?
Why was the law against onion futures passed in the first place? Couldn’t the same scheme be done with garlic, or sweet potatoes, or turnips or something?
Because Vincent Kosuga.
A guy cornered the market in the fifties, caused a scandal, they made a special exception.
The people behind this are a real (if silly) student organization at UChicago and Northwestern campaigning for the legalization of onion futures trading. Sometimes they will aggressively hand out free onions to passerby on campus. It's quite entertaining.
They have a website also: https://onionfutures.org
Hi! I'm the proprietor of onionfutures.com. I'm actually not a member of UChicago for Our Futures and came up with the idea independently, but we've since connected and they handle our Chicago deliveries.
Are you really charging $9/onion? I get upset when Safeway charges $2/lb when I can get onions for a quarter that price.
US Department of Agriculture publishes a national potato & onion report (issued daily!):
https://www.ams.usda.gov/mnreports/fvdidnop.pdf
Readers may wish to skip ahead to page 4, where onions are discussed.
In an onion related note... is the "I sell onions on the internet" guy still around? I believe he was selling Vidalia onions.
It appears so! https://www.vidaliaonions.com/
I bought a box of onions from him before and they were very good. I ate those onions for a long time.
Since this may be a legal gray area, they should host it on a Tor onion site.
Why don't existing futures cover this? Are onions unique in how sturdy they are? You can use derivatives of the weather itself even.
Are these contract prices really "per onion"? Or are they actually per pound or per kg? Up to $9.39 seems very expensive if it's really the price for a single onion.
I thought maybe they're some sort of special exotic onion variety, but I don't see anything to suggest that.
They are per (normal (sometimes organic) yellow) onion. Prices vary.
(It's primarily a novelty/art thing. But I do actually delivery the onions.)
Looking forward to my 2 onions in November! Anyone have some good recipes?