New-York tribune., 1908-05-29
ON COTTON EXCHANGES
Commissioner of Corporations Criti-
Cises Methods in Togue Here.


Washington. May 2s-The Commissioner of Cor
porations, Herbert Knox Smith. has submitted to
the Department of Commerce and Labor parts 2
and of his report the operations Of cotton
exchanges. which he directed by Congress
year ago to investigate, with view to
learning whether not their methods OF trading
did not car for some radical changes. The parts
just submitted deal with the methods of classf1ca-
ton cotton and with the range Of contract
grades Part l of the report. which was published
early In the present month, dealt with the meth
DDS Of establishing grade differences for future
contracts" and condemned the difference system
employed by the New York Cotton Exchange While
recommending the system In the New Or
leans Cotton Exchange In the present report MI
Smith again criticises the New York institution
and recommends a number of changes In It's meth
DDS OF classifying and grading cotton. among the
most important being that the New York certincate
of should identify each individual bale
by grade. that the receiver of given lot OF
cotton can instantly know which particular paIes
of each grade
He saws that there has been considerable over
classification, or overgradtng by the New York Cot
ton Exchange classification committee, and that the
classification of cotton here in recent years mas
been at times faulty He calls attention 10 WHAT
he terms "a specific instance of deliberate over
grading which took place in the latter part or l*o.
ION this occasion" the report says, the board OF
appeals Of the New York Cotton Exchange IN
structed the classification committee to ADMIT 10
the certifcated stock all which passeu the
preliminary and informal examination Of the as
sistant inspectors of the dock, although the same
might later have been held rejecta Die by the cassi
fcation committee its final ciasslncauoh' A"is
cotton thus forced in. was to take the lowest
grade Of the certihcated stock"
Mr Smith states that this ruling vas in direct
conflict with the bylaws Of ths exchange, and says
further:
This Certifcat!on Of cotton actually below ten
derabe grade IS especially important pecalEs s ~
ton committee 10 the dishonesty OF any lhga- a.
yidus ePoye but vas va The the hs5e Committees Of
the exchange, which should have taken every pre-
ft has been argued that although the holder of
contract could pc forced 70 accept T suSn aafton
Obviously this justification on s tnis
iassiFcation committee to certificate sawdust
Again. has been argued that the reCeoso; ion
fund But there no ground under un dhis is rLs da
.is;on In anv event the argument clearly Is I'M
n-oner The inspection fund was INTENDED 10 pro-
vide tog nreium on the deliberate certihcation
nf cotton clearly unfit for contract delivery.
He adds that this practice was stopped "hen 'he
-ress,+ rnanagement Of the exchange came into
once last June Speaking Of the methods OF Gas
,iAcation on the New Orleans exchange Mr.. Sini'h
saws that the criticism there has been that II was
entirely too severe and that cotton which was ler
chantable and properly tenderabe has been either
re ejected undergraded-
METHODS OF .CLASSIFICA 1lC-N-
Radically different methods OF classification are
er,nIoved in the New York and the New orleans
~oba1ges The New Orleans system is largely a
,r,ya+e affair between the parties the exchanse
,,.~e1, furnishing the arbitrators, who having De
fore them the price differences on or on Hllu-
ding cotton officially quoted by the exchahse' ue
rer-ofne what differences shall be apphed 10 inc
,s-fous grades New York has what IS calied a
..certiAcated stock Of cotton" and the exchange
-. oa4caIryy determines through its classifca on
committee what cotton shall be admitted 70 that
stock and its grade therein Inc Inspection l'IiL
OF the local exchange indennihes the owners oL
certjfcated cotton for MISTAKES III sIouNs " ~
classification committee.
NJ Smith saws that the fact that there mas been
considerable overgradins by the New York com
7itt.e IS conclusivey proved by the payments from
t1is fund which from 1890 to 1906 averaged less
+ba, 81 80 q year while for the year ended April
On ,os under reform management. they amounted
n almost s2T 600. This great increase ne says
shows that the previous classification must nave
hee1 far too high He adds however, that ue
b,reau does not consider the New York system OF
Classifying and certihcatinz cotton as wrong on
general principles. but. the contrary under the
conditions Of the business al New York regards II
. nroper development, capable Of proper appl-
cation.
CHANCES RECOMMENDED.
TIL. ranort saws that the principal dificulte. on
both exchanges have been with the careless or III,
---oo.- r,anner applying their rules. and SPEAK
ing Of the changes that are desirable says:
Tb. New York rules. well as New Orleans.
LdLfd eynresslv provide method by which
sRfre6,eg sR99a Perea stsPIs shoqld be def
Tbe New York certificate Of classification should
,danti,v each individual bale by grade II IS op<
;ecred that increased expense or handhhg sho .!
J.oraee would result but II seems prohahl that
his Increased EXPENSE would be no greater tnan
the expense now thrown on me acIaesfy mfxed
IN N. ~ baI.s and such identification would also
reefiv facilitate the handling Of certflcatsa col
TON and it's segregation INTO even iNlilhs iO' A'A
.baTa sbould certainly he system OF uniform
S!!o,,Id greatly simplify the business and stop
number abuses. The practical dln1culIleF IN Ile
way OF arriving ar sIch system ar - az nrasert
a. 10 make a persistent effort approach gradu-
eIIv such an ideal as near as may be-
Mr. Smith saws that tho most practical sugges-
finn for Limitation OF the present range or grades
,ba-. being now eighteen grades deliverable on
t,otb exchanges, is the so-called low mlddin2
c1a,sa which provides for the exclusion Of all
,b,,a cotton below the grade OF low middlins' and
nossbly all tirged stained Gotten Deio" 'la' III
value, and ADDS
rr.o h,reau is strongly inclined to favor such
,hsnge, II would not only eliminate numper or
- iowast grades now deliverable. Which are oo- |
.,,'irb ;hev give rise and account OF their
~, climate effect in reducing tho contract price
-, - would also tend to exclude supStailtlay an
huL !...1abIs !. cotton 1t be remem hered that
@ mount OF so-caled unspnnabl cotton wnile
cnmparatively small has dsproportloila. m -
,ror the price OF all future cohtrHctS SO ldL te
uPoIs - m. rest OF the crop by its elimination |
would be much greater than any as l1ip e0S
:. q. teIeved that BY the adoption of the low |
i.sIi,g rIausr many Of the difficulties Of eassi-
ne.tion would be removed much OF the esA OF ths