The Birmingham age-herald., 1908-05-04

 CT of corporations. on the operations of cotton exchanges. has been submitted to l the President;
 The resolution of the House of Rep | resentatives under which this investi . gation of the methods of future dealing 1 in cotton was conducted directed espe l ciRl attention to two matters-frst, the i character of future contracts used on i cotton exchanges and second tho 1 causes of fluctuations In the price of i cotton. with the particular object of ascertalning wh ether or not such huc- i tuations have resulted in whole or In 1 part from the character of such con I tracts or from any trade combinations. l The investigation has been confined to these specific features of future trad ing in cotton, and discussion of the general merits or abuses of the system as a whole has not been attempted. There is presented ere Part I of tn report, dealing with the character of future contracts, and especially with the methods of establishing grade differences" in price. Further parts will be issued in due course.
 A future transaction differs from 9 "spot" transaction in that the latter is made from goods on hand, or imm s- diately available, and calls for practi cally immediate delivery. Future trans actions may be made, and indeed are constantly made. by private agreement outside of exchanges. The organized development of such transactions by means of exchanges may, however, properly be termed the future sys tem"
 There are but two exchanges in the United States on which organized future trading in cotton is conduced-- the Nav York pOttpD axeba O0a and New Orleans cotton exchange. Abroad a large business in futures is trans acted on the floor of the Liverpool Cot tion association, and some future busi- ness is done on the Havre bourse.
 A vitally important characteristic of future contracts in cotton is that htey are basis" contracts; that is, they do not call for the delivery of specific grade of cotton but allow the seller the option of delivering any grade or a number of grades within certain wide limits. The buyer has no option in this respect. He must re- ceive any deliverable grade or grades rendered by the seller. "Middling" cot ton is always the basis grade and can be delivered on contract at exactly the contract price. Other grades are de- livered at prices relative to middling- or, to use the trade expression, at cer-
  over) or "off' ie., under) middling.
 Grades of Cotton.
 At the present time (April, 19OS) IS grades are deliverable upon contracts of the New York cotton exchange. These are:
 Fair.
 Strict middling fair.
 Middling fair.
 Strict good middling.
 Good middling.
 Strict middling. Middling.
 Strict low middling. Low middling. Strict good ordinary. Good ordinary.
 Strict good middling tinged.
 Strict middling tinged.
 Midding tinged.
 Strict low middling tinged.
 Low middling tinged.
 Middling stained.
 The range of grades deliverable on contract in New Orleans is about the same as that permitted by the New York contract. The New Orleans con tract however contains the important provision that no cotton shall be de- liverable which is of lower market ! value than good ordinary cotton of fair color.
 As a result of the sellers privilege of delivering such grades within the i tenderable range as he may choose, the method of establishing the relative values of, or differences between, mid ] ding and the other grades for delivery l on future contracts becomes a matter of extreme importance. The New York cotton exchange and the New Orleans cotton exchange em- ploy radically different methods of es 1 tablishing these grade differences to apply on contract deliveries On ths New Orleans contract, grades other than middling are tenderable at their ! actual relative values in the spot cot ton market as compared with middling on the sixth day prior to the actual delivery. These actual or commercial differences are determined in the fol- lowing manner: The committee on spot quotations meets every day and on the basis of the days actual sales in the spot market quotes prices for each of the full grades of so-called white cotton. This committee, which is changed every month, is usually made up of members of the exchange who | are actively engaged in buying and selling cotton. To guard against bias. i it has been the invariable practice to select the committee from both buyers and sellers.
 In addition Ito quoting prices for the l regular grades of cotton the spot l quotation committee also quotes tinged and stained cotton at range of dis counts off the prices for the regular | grades.
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