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

WSIC 'lulEIlS IlldTIlCu IdoLf ulS hs s'O
home of the brides mother. Rev.
Father William r.. McISeefy officiated.
-------------S----
SCORES new YORK
COTTON EXCHANGE
Continued from First PageJ
differences The underlying principle
Of u basis contract undoubte Is that
| if the seller does not deliver mid
ding cotton he shall substitute other
grades only at their true value reIa :
tive to that of lniddling In the spot
market Mt the time of delivcry-that
liz. at the actual commercial differ
ences This clearly is the only equit-
able basis. Under these conditions. as
far as prico Is concerned a basis
| future contract is substantially the
equivalent of n contract for middling
cotton. Consequently the market price
| of basis future contracts for nlmedi-
late delivery Should be practically the
| same as che price OF mdding cottoi,
in the spot market. There Is how
ever, properly a small regular mar
| gin between the two, because some
expense liz involved In sorting out
and dsposing OF the mixed assort-
ment of grades likely to be received
lon contract.
should He Constant.
| For all interests leglfimately using
1.-THE exchange. 1t Is highly desirable
that this margin should be compara-
lively constant in amount--that Is
! that there should be a substantial
| ut ,,'B al IN tho Snnt
price of niddling cotton and the price
Of middling cotton on contracts foi
immediate delivery.
i A future contract is supposed to
represent actual cotton, and from the
very nature Of things such parity
should be preserved. The respective
merits of fixed" and 'commercial' diff
ferencas are. therefore. roughly indi-
Gated by their effect on this parity.
In general, 1t may be said that the
commensurate system main
tains this parity far better than the
fxed-difference system. This is be-
cause the commercial difference system
lis based on actual daily transactions ir
cotton, so that the same influences tina,
affect the differences In spot transac-
i lions also affect the future contract
differences and thus maintain the par.
ity between the price of future con-
tracts and the price of spot middlins
cotton. Under proper application OF
the Observation-Disclosures system the
Operator in future contracts can base
4 his calculations on the course of mid
Idling cotton, and Is able largely to dis
lregard differences for other grades
since he relies. on the exchange to keel
these constantly correct.
A Under the acknowledgements system
al, ho,, ia, l,n-
sides considering the probable course
OF the middling price, must also con
slider the course Of the prices of all
other grades. Fixed differences are al
lattempt to establish arbitrarily. ant
months In advance. the relative value!
OF grades.
!, These differences are bound to be
!. come at times erroneous, because tht
relations of values Inevitably vary un
! der the natural laws of supply a nj
/? demand. Consequently, ittithe opera
! tor believes that the fixed" differ
ences are wrong. or may become
! wrong by the time the contract ma
lures. he will, because he is bound b,
them. endeavor to offset this error b,
I modifying the basis price which he of
: fers for the contract; and this, as
8 matter of fact, constantly occures dur
= as the seller has the option Of deliver
: ing any one or all the grades, he will
of course. deliver those grades whic
are most overvalued by the existin
differences, so that the basis futur
!. tprice Will be affected not by the aver
age error in the differences, but b.
the maximum error therein. The re
suit Is that the price OF future con
tracts, thus affected by the fixed diff
ferences, will at times vary widel
), from the actual price of mlddling cot
ton in spot transactions. The extern
: of these variations will depend chief!
{ upon the extent of the errors in DIFF
ferences. In other words, these err
: rors will disturb the normal parit
above described. These disturbance
have Very far-reaching effect, es
: pecially on the distribution of specula
: tive risks.
!. Dealing In cotton must always b
!, accompanied by risk. either to TIL
i producer. the merchant middleman. TIL
spcculator. or the spinner Natura
conditions greatly affect the suppl,
8 and other conditions the demand, an
both consequently affect the price
What is the equitable distribution o
, these risks?
It is a general principle that much o
the risk should properly be borne b
!, the speculative class: that is, by thos
who neither produce nor spin cottor
but who are interested simply In max
Ling a profit out OF the rise or fall @
: its price. Whatever justification Their
may be for the speculator lies In til
), fact that he stands ready to take
share of this risk. His function is
= forecast future natural conditions af
fecting supply and demand, to obtai
. as accurate information thereon rs pos
sible, to make the price for future de
liveries based on such information, an
thus to discount In advance as far a
: possible, for the benefit of the trade |
general, the effect of such future con
ditions and thereby keep prices FIRE
from violent fluctuations Which other