The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1908-05-04

IN February the House OF Represen-
tatives ordered the Department OF
Commerce and Labor to inquire
il into and.report upon the cotton en-
changes OF the United States. In
accordance with this instruction, the
Bureau Of Corporations last night made
an exhaustive report, in which the New
York Cotton Exchange is severely con-
demned.
The letter OF Commissioner Herbert
Knox Smith to the President says in
part:
There are two great cotton exchanges
In this country-Eew York and New
Orleans-where organized future deal
ngs are conducted. All future trading
on both these exchanges Is in so-called
Basis" contracts-that Is, contracts
which permit the delivery of number
of grades" of cotton on one contract
The seller OF this contract may deliver
thereon any grade he chooses within
the range prescribed by the exchange
The buyer has no option. The proper
theory of a basis contract. however Is
that all grades shall be deliverable at
prices which will make them CONNER
cial euuiva lents of each other. Cotton
Is graded substantially on It's color and
on the amount of leaf and other foreign
ma tier. all materially affecting its mar
ket value. AT the time that this in
lvestigation started. thirty grades were
deliverable on contracts of the New
York Cotton Exchange, lcter reduced
to eighteen grades. chiefly by cutting
out intermediate grades. with little re-
duc.ion In the extreme range. The
range of grades deliverable at New
Orleans is nominally about the same.
.1,,-, lN0.
grade, the grade for which the price
lis fixed by the parties TO the contract.
The prices at which other grades are
ideliverable are determined by the So
called differences above and below
| or. in trade parlance, ON and of =
middliag.
New 1-ork Method.
There are two ways Of establishing
these differences. For the last eleven
years the New York Cotton Exchange
has had a so-called fixed differences
system. A committee of tho exchange,
commonly known as the revision COM
mittee. meets twice year. in Sep
tef1ber and in November and estab-
fishes the respective price differences
en- or off which shall apply to the
grades other than middlns. These diff
ferences. once established, can not be
changed until the next regular meet
ing. and govern all cotracts in futures.
Tho New Orleans Cotton ESchage, on
the other hand, has what is known AS
the Commercial difference" system. a
committee OF the exchange meets daily,
and. upon information Of actual spot
transactions. quotes tho prices of the
various grades. which quotations
VIRTUALLY establish the differences which
apply on future contracts. That is to
say. the New York system arbitrarily
fixes what the differences for all
grades shall be for two months or for
ten months, while New Orleans follows
,t the actual market differences for these
grades as established by daily spot
transactions.
The buyer of future contract can
not specify the grades to be delivered
thereon. Obviously, therefore. lie is
greatly concerned as to the differ
ienccs" at which he may have to ac-
jcept the various grades. lie knows
eHacey the price for one grade-that
lis, middling cotton. That price was
stipulated in his contract, the social
cd basis price. But as to the prices
which he must pay for other grades
he is dependent upon the exchange
(ContInund On Seventh Pape)