Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-10-05

RELATION OF NEW YORK COTTON
EXCHANGE TO TRADE.
Address Before Nanufacturers' Asso-
ciation-VieWs of 0r. Marsh.
Eject Of Civil War.

In an address before the cotton manufac-
tIrers' convention. which was in session at
the New Willard Hotel in this city the past
two days. but which adjourned yesterday
afternoon Mr.. Marsh OF New York delv-
cred address outlining the Economic
Position of the New York Cotton Exchange
and It's Relation to the Cotton Trade.
1T is the fashion to say that New York
is not natural cotton market and that the
business of the New York cotton exchange
is mainly speculative declared Mr.. Marsh
in opening his address. The voice of the
southern agitator is heard in the land. de-
claring that the New York Cotton E:x-
change is part of the maievolent machinery
of Wall street: that it is dominated by
interruptions gamblers, and that 1t were
better for all those having legitimate
interest in cotton. whether ss producers
or consumers. if the blight of its malign
influence could once and for all be re-
moved
Conditions Outlined.
Mr.. Marsh met this statement by show
ing the real position of the New York Cot
ton Exchange in the cotton market He
said it is true that three-fourths of the
annual cotton crop of the United States is
handled by members of the New York ex-
change. But it is also true. he added, that
the yearly transactions in actual spot cot
ton are larger IN new 4Ofk imam IN any
southern market. except New Orleans and
possibly Memphis.
He gave a brief historical review Of the
manner of handling the cotton business In
the past. Before the war the cotton BUSH
ness in New York was simply one form of
commission business exactly like the bust
ness of handling molasses, sugar, hides, etc
Money was advanced for handling the CROP
either directly or through trusted southern
correspondents, and when the cotton was
picked the planter sent 1t to New York to
be sold by the commission merchants for
their account thus repaying the advance
they had received and obtaining the balance
in cash., Commissions. interest and ad-
vances were what would now be regarded
as extortionately high.
Effect of Civil War.
The civil war upset this method of doing
business. and there were no regular ship
ments Of cotton to New York from the
south. The only source of supply was from
cotton which the government from time to
time got hold of through the capture of
blockade runners through confiscation in
the south The huge profit made by some
of those who bought this cotton was the
real beginning of general speculation in
cotton in this country. Spectators began
to buy not only actual cotton, but cotton
expected to arrive at some future date.
This was the beginning of the trade in cot
ton futures, which has gradually revolu-
tionized the whole cotton business. This
suggested new way in which to handle
the cotton business.
Several years after the war this new
conception took shape in the mind of Mr.
John Rev of Liverpool. He saw that the
laying of the Atlantic cable allowed mer-
chants in Liverpool to learn of actual
prices of cotton in New York with IN
heard-of promptness. He saw that if the
price that was being bid in Liverpool for
cotton TO arrive was high enough he
could with profit buy cotton in the south
~ eel of- fry-
Liverpool two or three months later with
profit. This method permitted the cotton
merchants in Liverpool to handle cotton
on safe basis instead Of a highly specu-
lative one. Mr. Rew's great success in
these methods of doing business caused
the merchants In New York TO adopt,
them, and in 1870 and 1871 the Liverpool
Cotton Association and the New York Cot
established in the beginning was enlarged
and perfected. with the result. Mr.. Marsh
declared. OF handling cotton at prices very
much smaller than those wiifcli5it had tn
bear in the old days Of the cotton commits
sion merchant. This decreased cost of
handling the product had benefited both
the producer and the consumer
Declared Misconception.
1t is misconception of the function of
the cotton exchange, he said, to believe
that its chief business is speculative. He
was satisfied that not 25 per cent of the
transactions on the exchange are specu-
lative. The cotton exchange permits the
distribution of the enormous risks of hand
ling cotton over a vast number of men The
cotton industry means the risking of 81
600 100000 outside the capital invested in
the farms and mills. The distribution of
the risk is accomplished through the con-
tract for future delivery of cotton The
exchange also allows the legitimate user of
cotton to hedge by buying cotton for fu-
ture delivery when he may need it. and per-
mits the owner of the cotton to hedge"
by selling cotton for future delivery This
he regarded legitimate transaction.
promoting stability in business relations.
and. in fact, preventing great speculation.
All in all. the exchange, In his opinion
promotes substantial business interests, and
being based upon credit, New York, as the
great center OF financial credit, is the place
for the location of the greatest cotton ex-
change.