Spirit of the age. [volume] (Woodstock, Vt.) 1845-1913, 1903-04-25
FINANCING A COTTON BOOM"
How Much Capital Is Required-Ma
chinery of Cotton Specul alton.

There has been some misgiving,
since the elimination of the rise in
cotton and the exhaustion OF surplus
tanoously, rs to whether the cotton
POOLS" position might not be scri-
Gus factor of disturbance to the money
market. This is possible. but more par
ticularly because of uncertainty as to
the outcome of any attempted conner.
Owing to the small stock Of cotton
here al present, comparatively little
money Is required to finance 4 deal
in actual cotton at the moment. The
amount of money involved in carrying
on an extensive Speculation for tao
rise in futures" however. may run
far into the millions.
The Cotton Exchange part of the
operation is as follows: In a normal
market II is the custom among the
members Of the Exchange to call mp
on each other only for margin on
the difference between the price of
initial purchase or sale. as the ease
may be. and the current market quo
tation. AS rule. a credit leeway of
$1,000 to $4,000 is given. according to
the financial standing of the broker
or firm against whom there is tAe diff
ference. These calls are made be-
fore u o'clock, and under the rules
of the Cotton Exchange the broker
"called" must leave a certified check
,,,;t 1, ,,l. Al 1n tn-
gether with memorandum as to
what trust company or bank the mon
ey is to be deposited with.
There is a rule whereby original
margin calls" ranging from 81 to S.
per bale of cotton, can be made i'm
mediately. This is, however, not cn-
forced unless in the case of new
member. whose financial standing is
not generally known, CT of one who is
weak financially, or who is trading
too heavily. In the lastnamed case,
brokers do not care to have many
contracts outstanding. "Original
margin calls started in this way
soon become rather general, ana OIL
ten at the limit of S. per hundred
bales, which is the minimum contract
dealt in. Where such cali is made,
the amount per bale is designated and
bank or trust company, and the caller
must deposit a certified check for d
similar amount with the same inStltu-
ton.
For instance, Smith sells 1000 bales
of May cotton at 10 cents per pound
to John Doe, clique broker. Smith
has already too big line with him,
and he decides to call Doe for So per
bale original margin on that trade. and
every other he makes with him. This
calls for the deposit of check from
Smith of $4,000. and if Doe does not
nut up the same amount by 3 o'clock,
Smith can have the matter brought to
the attention of the officials of the
Exchange and post Does name for his
suspension from further trading and
floor privileges.
There has been some calling for
original margins by brokers the past
week, but no estimate Of the amounts
has been made. There have been
times on similar previous occasions
Of such activity and wide fluctuations
and general uncertainty when the ag-
gregate of original margin calls and
differences deposited amounted to 3d.
100000 and $5,000,0O0, and as much as
$1O0oO.OOO. During Price January
deal, when his brokers were so heav-
lily long" of January and short of
March as a hedge" brokers COM
planned that they could not ring out"
their trades, it was estimated that full
ly $3O00,000 was tied up in margins
at that time for nearly two months.
New York Post.