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

bultA OA lilt GiOD Id1 Dttn gathered dL the time the committee met, and the known damage to the crep at that time, which was reflected in spot prices was so serious as to demand a much more rad ical revision than was actually made.
 No Standard of Revision.
 The New York Cotton exchange has no standard by which the revision commit- tee is required to act in fixing differences. It is therefore almost impossible to reach a definite conclusion as to the justice of charges of improper motives in this or in other cases. It is a common oe- currence for members of the revision com- mlttee to be short of the market, so that this fact, in itself, is no proof of dis honesty. The investigation indicates that so far as a majority of the committee was concerned the revision of November, 1906 was not the result of intentional abuse of trust On the other hand, cir cumstances point clearly to the fact that certain members of the committee were influenced by considerations of personal profit.
 It Is proven beyond question that the committee had the power to fix improper differences; that some members of the committee had very strong personal mo- tives for establishing such improper differ ences; and, further, that the result of their action did enable them to reap large profits Just as certainly as though they had deliberately intended to estab- fish false differences for that specific pur- pose. While, therefore, it can not be as- serted absolutely that the action of any members of the committee was taken with such deliberate intent, the evidence at least condemns beyond question sys- tenn which makes such abuse possible, and, indeed. extremely probable.
 Defenders of the New York fixed diff ference system have attempted to main tain that serious errors In differences have been altogether exceptional. This contention cannot be sustained. A de- tailed study of conditions in the New York market for series of years, fully presented in the body of the report. shows that the contract differences of the New l ork Cotton Exchange have frequently been at variance with the com mercial differences in southern markets and that this has frequently resulted in disturbances of the parity between the spot and the contract price. Further more, such disturbances have been much more marked since the fixed-difference system was adopted than they were be- tore that date.
 Prom 1897, when the policy of holding only two revision meetings yearly was begun, down to the present time, how ever, disparites In differences have fre- ouently been serious, and disturbances of the parity between the spot and the future price have been not only pro- nouneed but continuous over rather long periods Prices have ranged most of the time much higher than before, so that commercial differences have been greater in absolute amount and have varied more. It has been no uncommon thing during the past ten years for the margin be- tween spot and contract prices to ex- ceed 50 or 60 points. Moreover, the mar gin has not been constantly wide, but has fluctuated greatly. This is a very important point. It would be largely inn material what the margin between the two prices was if 1t were only uniform, since operators in futures could then all low for it: but with frequent and se- were fluctuations in the margin, such as have occurred> in recent years. a very unsettling element is introduced into fu ture transactions.
 These disturbances in the normal par ity between the spot and contract prices at New York have been largely attributa- ble to the fixed difference system. This is indicated by the fact that in the New Orleans market, where commercial diff ferences are applied in settlement of fu- ture contracts, disturbances of that par ity have been much less frequent and much less severe, as appears from de- tailed statistics covering many years.
 New Orleans System.
 The New Orleans system, to be sure, has by no means worked with perfec- tion. There have been temporary sr- TOTS of moderate amount in quoting com mercial differences, and these have result ed in temporary disturbances in the mar gin between the contract and the spot price. It has, however, been possible to rectify these errors promptly, so that the extent and duration of the disturbances have been limited. Thus in the season of 1906-7, the margin in New Orleans over several weeks exceeded 50 points, but the vigorous complaint which followed soon brought a re-establishment of proper differences, and the normal margin was restored Still later in 1907, the contract price was again considerably out of line with the spot price, but this error was speedily corrected.
 During the past few months the mar gin between the spot price and the price of current contracts in the New Orleans market has also been very wide, at times exceeding 70 points. Such an abnormal discount has continued for considerable time. The bureau has not made an ex- haustive investigation of this very re- cent disturbance in the New Orleans mar lxet, but apparently differences off for some low grades were too narrow. Some exceptional conditions have, how ever, also recently been in operation.
 A particular complaint against the New Orleans market Is that, instead of going to an abnormal discount, the contract price has rather frequently gone to a premium over the rpot price. It is alleged by some that this is due to tendency to undervalue cotton delivered on future contracts by means of improper grade differences and by means of an unduly rigid classification. While this cause has perhaps contributed, the occasional pre- miums in the contract price are apparent ly due in larger measure to the fact that the contract market in New Orleans is much narrower than in New York and more susceptible to squeezes. On the whole, statistics show clearly that the New Orleans system has resulted in main taining a much more nearly uniform parity between spot and contract prices than has been maintained in New York under the fixed-dfference system. More over, as already statej in the New York market itself the parity between the two prices was well maintained from 1880 to 1888, when leommercisl differences were employed there.
 There has been considerable controversy with regard to the effect of the fiXed-dif- ference system of the New York Cotton Exchange upon the quality and the quan- tity of the stock of cotton in the New York market. Some opponents of the fixed difference system assert that diff ferences have intentionally been made erroneous at times with consequent over- valuation of certain grades, for the pur- pose of attracting such grades to New York and of maintaining stock there as a reserve against future contracts. Some