New-York tribune., 1908-03-13
INVESTIGATING EXCHANGES.

If the Commissioner of Corporations Mr..
/ Herbert Knox Smith in carrying out the Presi-
dents directions, conducts an intelligent ana un-
! prejudiced investigation into exchange specu-
lation he will be able TO dssipate lot OF log
/ from the minds of the misinformed. There is
! hardly another subject which such mscon-
| ceptlons prevail The average man thinks that
exchange speculation has no connection with
| legitimate business He Is wrong. 1t has an
! intimate important and in general, bene1cent
| relation to business. He thinks 1t causes II
rational and violent fluctuations in prices he
! is wrong What influence it exerts is in the
main toward steadyng prices and equaiZlhs
| them. The corner" which now and tnen his
so much space in the newspapers is not the
rule but the exception: as we'll judge the re-
! suits of speculation from corners as the re
| suits of the marriage relation from divorces
The idea is disseminated that speculation puts
! the producer at n disadvantage, enabling the
| spec,lator TO manipulate prices down untl DC
has made his purchases and then up wheh he
prepares to make his sales Doubtless he Wouu
J do so if he could, for he is no philanthropst'
hut he cannot to any appreciable extent. oh
tho contrary through speculation and the free
omen and active market 1t maintains the pio
,lucer is less at the mercy of the buyer ana IL
able to obtain more nearly the market value
f of his products than would he the case IL
/
! speculative markets, especially for commodi-
| ties that industrial producers are enabled 10
Iool, into the future TO make their plans ahead
and to quote close prices on articles oil manu-
factlIre months in advance And the Jooper'
too can make his prices, secured os Tue iian"
fact,Irer's promises and the retalier can al
range his plans not blindly trusting to luck
hIt with a full understanding in regard 10 the
prospective state of the market When COTTON
foII int0
70 turn out certain fabrics for the next sum
mer's trade he buys an option on cotton lor
future delivery and it is on the basis of the
nrice which he pays that he quotes his own
prices to his customers. He is secure against
, loss and does not have to quote a high price
in order TO guard against FLUCTUATIONS III ino
market for actual cotton. He may hoid MS
ontion and wait for subsequent delivery. or Ne
mav if an advantageous opportunity presents
itself blIv spot cotton and sell out his oplloh'
So too with the miller buying wheat to make
-four And the factor selling cotton OF gram
on a contract for future delivery may, ana
actualIv does. protect himself against loss
through a rise in his product before delivery
ny purchasing an option. Illustrations are nu-
merous and will occur TO any one understand
inc business. Of the intimate relation thdl lndl
DIN trading has TO actual trading, of the steady
ing effect it has upon prices and of the great
Use il is TO lied legitimate business.
The value to the community OF margin deai-
ings in stocks is not so easily made clear, but
IFS function is essentially the same. 1t gives
10 the market for stocks which with the mod
ern organization of industry is OF the utmost
importance to the country. that activity tilat
aIertness that breadth which alone make It's
ouotatjons universally acceptable. Cut out the
speculative trading. and in the vast majority OF
casas there would not be enough dealings 10
establish quotations of any real use III Tue
activities of capital. Selling stocks OF the great
industrial and transportation concerns Wouid
he like selling stocks of the obscure unllSteu
corrorations: their prices could be settled only
hy the slow process of haggling. The market
would he narrow. and wealthy manlpulators
would have vastly greater advantage over
investors than they can have in the broad and
active snecnlatiye market There is gambllnG,
+here are attempts more less successful at
maninuafion. and there are abuses on the eX-
changes Stop speculation and you cure Them
Abolish railroads and you abolish railroad accl-
dents with their frightful death roll. Germany
nrohihiteS1 dealing in futures with damaging re
sults and has now abandoned most OF her re-
strictive legislation. Exchanges have reason 10
welcome an investigation il only their true eco
nomi, function can thus be authoritatively ex-
nlained to the bewildered and misguided Pubic