Albuquerque citizen., 1908-05-04
COMPARES SYSTEMS
OF TWO EXCHANGES
Vast Difference Between Methods
at New York and New Orleans.
and He Recommends Return
to System Employed by
Southern Exchange.

Washington, May A lengthy re-
port on the New York and New Or
leans cotton exchanges and the meth
ods employed in dealing in futures
was submitted to President Roosevelt
today by Herbert Knox Smith, COM
missioner of corporations, who was
asked in a House resolution some time
ago to investigate the cotton broker
age business.
MI Smiths report enters into an
exhaustive explanation OF the cotton
brokerage business and calls particu-
| lar attention to the vastly different
| methods employed at New York and
| at New Orleans, the two great cotton
exchanges in the country. In New
York the exchange has a so-called
f> ed difference" system, under
which a committee meets twice a year
| and establishes the respective price
differences on or off which shall ap-
| ply to the grades other than middling.
| In New Orleans a committee meets
| daily under the commercial differ
| ence' system, and upon Information
| of actual spot transactions quotes the
| prices of the various grades.
That is to say" says the report,
the New York system arbitrarily
| fixes what the differences Tor all
grades shall be for two months or
| ten months. while New Orleans fol-
lows the actual market differences for
these grades as established by daily
spot transactions"
New York Is Unfair.
| Comparing the two systems Mr..
| Smith says:
''Since the beginning of this inves-
| tigatiun there has been, both at New
York and New Orleans, a consider
| able increase of discussion of the rules
| affecting future contracts ~ the pos
sibility of Improvement
| There is at present a fundamental
| difference in conditions between the
| New York and the New Orleans mar
| Ike; which doubtless is one reason
tor the difference in system, though
| by no means an excuse therefor I'm
der modern conditions of transporta-
| ton, with the through bill of lading
available, New York is no longer a
natural spot cottCu msrkel Cotton
usually takes the cheapest route to the
mills and this route does not include
a stop-over at New York AZ a re-
suit transactions in spot cotton in
New York are quite small and thus
there is not in New York such a mar
ket in actual cotton as will furnish re-
liable quotations to be used in fixing
contract differences.
| This, however, does not prevent
The application of the commercial diff
ference principle in substance to fu-
ture contracts in New York The
| .l fa1 a ~. il,
the leading southern spot mar
| Eets can be used as a basis for con-
tract differences. 1t would not be
| strictly necessary to revise the con-
tract differences as often as changes
N such commercial differences occur.
n the contract differences were re-
vised weekly or even monthly the suO-
stantial advantages of the commercial
| difference system could be secured.
| 1T is contended by many that
| such a return To the commercial dIt-
| ference system would, because Of the
disadvantages of New York's location,
destroy the business of the New York
Cotton exchange. There Is little rea-
son TO believe that any such result
would occur. However this may be,
| the New York Cotton exchange If il
can not exist under a just and equit-
| able system, has no excuse for exist
ence at all. The present New York
| system of fixed differences Is un-
economic, in defiance of natural law,
| unfair, and, like all other attempts
to defy natural law, results in such
complex and devious effects that the
benefit of its transactions sccrues
only TO a skilled few"