New-York tribune., 1908-05-04
on COTTON CONTRACTS
COMMISSIONERS REPORT
Fired Difference" System of Ne1c
York Cotton Exchange Condemned.


congress over year to investigate the cotton
exchanges Of the country with view to discover
.nE whether the methods OF dealing in future con
tracts did not ean for some radical changes has
made his first report. which deals with the meth
COS Of establishing grade differences for future
contracts Nr- Smith condemns The fixed differ
sroe- or periodic difference system employed bv
re New York Cotton Exchange and recommends
return TO the commercial difference system
phlca IS ~ use the New Orleans Cotton Ex-
change.
summing up his discussion OF the .'axed differ
.nce- system. Mr. Smith says.
The fixed difference system is indeed weak
sno ~lI'--.ite5 - 20 = sAuS l-lV I.eh oi L.1S
exists L Is not met by fixing the contract differ
fhe -sS of fluctuations IN the contract price itself
The adjustment q contract differences according
- commercial values Is not only lust and equitable
n theory but tends TO safeguard the interests Of
q x5r 81 iifTrcs -- ~ WIN 10 TIE a13seoeTr
-es6-Us-.7ent of the contract price. on the other
hard. is only lnequiJable and uncoulmerciai in
results results 80 '-'-''-' 80 - - ''''''-'''
Continuing. The report says that 1T IS an open
question whether the commercial difference sys
ZEN IN is entirety, as employed in New Orleans.
should be adopted by the New York Cotton Ex-
change OF whether some modification OF that sys-
zen should be permitted" M Smith then says:
L Is clearly incumbent upon The New York Cot
Exchange 70 readopt the commercial dif:erenee
s,rf-sxian q tte commercial difference system
N-t--1S 49, = - -. - 60 ,,,1 so-
fhe -ar-oVness OF the New York spot market. II
s t-1p7ac1iGable thus 10 use The New York quota
lions ss a hass for establishing contract differ
enres. consequently. New York must base its re
VISIONS = the main on the differences pTelalllns
= leading Southern markets Again, the distance
- CS--o-t : er5i-z-ii,- held f6- Some
I S55-l, T-C-s-i1- --ay- he taken into
account IN considering modiucaJiuns Of The com
-e-caI difference system
n regard 10 the frequency with which revisions
shall be made. NJ Smith suggests monthly basis
as re most practical He says:
With respect 10 The frequency Of revisions It
Is significant that most OF Ihose VINO OPPOSE L5V
cl@ereuces should not be subject TO constant re-
periods 4 considerable portion OF the members Of
Iae New York Cotton Exchange appear 70 favor or
possibly four revisiOns each year. An attempt
rrHsE[ i re NeT York Cotton Exchange 50 that
e1e additional revision should be hed II LeceLll
posed anlen5rleut was lost on a tie vote II IS
Unnecessary 10 discuss suggestions OF this sort
months Il j. pcssible-and indeed extremely
fe-e1ces thus hxed and the commercial differences
vision committee shall he required 70 act monthly
II support OF this proposition II = urged tnal or
ea--E cRangeS N CoI'l1er-e ~ tl,sl tt
,- ~ - . -sE-c5 - "a 80 - he foreseeT1 with
clIenta- 7rop-ety of settling contract oeliyeT!es
fere-ces. The bureau i disposed % the view that
r s. Of a. cas- aS
month. all things considered EllE1I prove as
nearly satisfactory and equitable In the case Of
H. adopted In the event OF a return 70 monthly
-srE>louS however, these TevlsiOns should be held
-Hroushou- the crop year and not merely during
re active season. since previous experience has
s1oT-n that IL j. IN the sumner months that dis
Sork and the commercial differences in Southern
markets nave been most pronounced
O. rla method OF determining what the actual
conEerc-aI differences really are, the report says
7, = probable that average OF the Official quo
s }5 - s5y -, =
allowances we're made Tor the relative importance
r-e-s-c5-s in local standards of classification The
suggestion has been made that the New York Cot
rne- IN The south FOR tho express purpose Of re
porting quotations IN those markets these experts
- b. FURNISHED with exact oup!lcaJes Of the stand
S.sr lie rr5-es which they reported Would ai7azs
he on me New York basis Of classification The
.----g-5-e Of r-s-ize-s 6- ;Ta NeTT York revision
e--es seems altogether desirable II. howeTer for
E-- reason I Is L-Tracrlcsb.e properly ad5Hsled
average cf the Official quotations for representative
markets would probably answer the purpose.
u a-sN~- 10 the argument that return [" con-
-.e-cizI differences whether revised daily or
monthly would really mean the destruction Of the
New York Cotton Exchange on the ground that
th4 Eew York market would be unable 10 main
-a-u sufficient stock ot cotton as reserve
against ics future business, Nj Smith says:
= IS difficult 10 see, however why return 10
1o-l-Tea4 d--tereEces Steild increase the CIIuILy
Ezr.lz-ce operated under 4 system Of monthly re
visions II Vae- active part q The season Under
---- system despite sCEEe abuses. the New YORK
market transacted large business in futures and
e -z-Se business II spot cotton aS u uaI1sactS
e present and t2-s vas aI IlLe WneA ce0Ci-
rt0-= other -es-eC-s not radically differ
Gil --0-2 those now existing The argument that
system q monthly reEtsl1Tls = utterly lnprac-
u-a1ie ls not therefore supported 5y ne pTact-
la- % experience Moreover the effect OF a
difference r,sIe-n upon the business Of the New
Io-E market a5one . not proper bass for fran
t-S re rTIes - an sNrLauEe- The rTst c0IsldeTa- :
non that these rules shall he equitable and
commercial / The New York Cotton t-A .i..-ll g
cannot @z-s- Euder such rLes then = has no Tlght
Al future contracts II cotton az basis cor
-s--s E g they Go not call for the delivery Of A
sgec-fc GRADE OF cotton. but allow the seller the
c----- = delivering any grade OF number OF
grades within certain wide limits. The buyer mas
cr-oa fl This respect He must receive any
deliverable grade or grades ,endered by tAe selier.
G-55ftlE' cotton s always the basis grade ana
ca 5a ds-sgered on contract a. exactly the con
r-z-- price Other grades are delivered a. prices
relative rriGCliuE 10 use the trade express
scr. - certain differences" IN price on o. O.
cve-r 1- or 81. c. under Uiddilng-
r-e present tine eighteen grades are deiv-
srs-le Lr01 contracts Of The New York Cotton TX
change These ar. Fair. strict middng fair, mid
dig fair strict good uiddlinS good nlidollrs.
st-s-- r-.d5It-g nicduE. strict low middlins, 10"
MIDI strict good ordinary. good ordinary strict
IT. --6Elf-E r-lCez good rliddllrE rngeo- strict
Eccc---E hinged. ui1cirg ltnged, strict lo" ma
cNaE 1i1Eed. IaRr mic1ln- tinged ana m.ddlinS
STAINED Tic range of grades deliverable on con-
irs- .r Eev Orleans l. about the same as mat
per-l-rred by Tie New YorE contract The Ne"