CBOT’s claim that bucket shops were gambling because they didn’t engage in delivery is about as true as the claim that the US invaded Iraq to find WMD. It was a politically-useful claim, which gained traction in US courts, but I think the underlying criticism stemmed from CBOT’s desire to capture all the trading traffic, and to convince a restive populism that trading wasn’t gambling. As far as I’m concerned, intent to deliver was always a scam.

Interestingly, when I was doing research on this at the Chicago historical society, I found old correspondence between CBOT and one of its lawyers, saying that there was no real law they could write to outlaw bucket shops that wouldn’t also outlaw futures trading – perhaps not decisive, but evidence that the ‘no delivery’ claim was hit upon rather than a theoretically coherent reason. My reading of the historical record suggests CBOT traders themselves hedged their positions in bucket shops – and someplace I remember the Board decided to soap up the windows so traders couldn’t flash prices to bucket shops downstairs. So I would say that ‘contribution to price discovery’ was also one of the reasons CBOT tried, but it was not the one that could was convincing to courts.

As far as the first part of your comment, this is the heart of it. I would claim that there can be (and is, and has been) exchange without public prices, but can there really be a market? There are two elements here. First, the knowledge required to make decisions about how to price things (price ontology). How can you know if a 10% return on investment is good, bad, etc., without some answer to the question, “compared to what?” The ‘riskless rate of return’ – or for many individual people, the interest rate you can get in a savings account or something – is the answer to that question.

Second, in the high modern sense of high finance, naked positions have become relatively rare with the great exception of scalpers. So, yes, CAPM users are most likely to be both practically and theoretically tied to treasuries as a riskless instrument. But wouldn’t you say that other traders are also tied to treasuries, whether this be implicitly or explicitly?

My argument is something along the lines of Abolafia’s discussion of bond traders in the 1980s, with there being two prices – in the street and bank-to-bank. The private (bank-to-bank) market was attached to the public (in the street) prices, sometimes directly and sometimes not, but always somehow…

In the main, though, you are right that the claims don’t match the argument quite yet – it’s more of a flag-in-the-sand statement so far, which I have a notion about but am not ready to tie it together tightly enough yet.