New-York tribune., 1910-02-05
FUTURES TRADING
NOT 1LL KINDS BAD.
Corporation Commissioner d.
rides 1t Into Fire Glasses.
From The Tribune Bureau J


Washington, Feb 4.--The Commissioner
OF Corporations submitted to the President
to-day his report on the traffic In futures
as conducted on produce end other e1'
changes. These he divides into five classes
spot" transactions. which are enlfnehtiy
proper: INTENDED delivery transactions
which are common and necessary; "oucecC
shop" transactions. which are unquestioi.
ably evil and ifdofensble": "hedsihs
transa ctions, which he regards as "nece7-
eary and proper" and speculation
The last subject Commissioner Smith DIS
crsses interestingly and extensively III
though modestly declaring that his own
information is 'too slight to justiiJ mo
in commenting hereon." In brief, he sho" 5
speculation to include both beheficiai ana
detrimental transactions, and expresses
doubt as TO whether the one can be eI1'-
mated without the destruction OF the ethef'
In conclusion, the Commissioner expresses
the view that tax on exchange Trans
actions may we'll be considered as q %"
stitutionaI and available means OF fesaia
ton. and suggests that IL a tax Ia" ~ ~@odid
he so framed as 10 distinguish betWeeh
future transactions which are benenclai 1
and those which are not, rn0ch Sood Roulo
probably result. 49,.
"If tax law should be 50 framed Sori-
missioner Smith says, "as TO lstnsui"A
between future transactions 1hich arc pene-
ficial. which give the fullest play 10 Ihe
natural LAWS of supply and demand ana
those transactions, Oh the o:ter hand. which
are carried on under false and uneco-
non,ic system, much good probably would
result"
Information requested by the President
and az to certain future contracts I'D tafH
;oreducts led tt Mr.. Smiths report
AS to ejaculation, where neither party
intends TO deliver or receive, but where the
contract is made on a regular exchange
the rules of which make delivery and re-
e>eipt obligatory, If demanded Mr.. smith
asserts that this class OF future transactions
presents q difficult problem. It's existence
probably involves the existence OF the nut
ure exchanges themselves.
The trouble with exchange spcculation'
he SAYS is not with the theory, but VITA
the actual practice. He nelieFes that the
exchanges themselves can work ost eher
ewn salvation. Whers an exchange by ltS
own regulations or by it's own ACTON or
neglect, he says, abandons in Vhoie or III
part the beneficial functions which arc the
sole justification for It's existence, 1t places
itself in dubious position. So long as 1t
does not voluntarily eliminate the eFAs
which are easily renlediable, he declares, 1t
is properly subject of public regulation.
The Commissioner bases his comments IN
regard TO speculation chiefly on the bu-
reau's recent examination OF the cotton eN-
changes. Theoretical benefits of exchange
transactions, he says. are often nullffed by
improper conditions on the exchanges them
selves, and he cites the New York Cotton
Exchange, the basic defect of which, he
says. is it's so-calied fixed difference" sys-
TEN. The false quotations produced under
this system. he says. frequently decrease
the prices of cotton received by the farmer
When the price of future contracts Is
disturbed, as it frequently is, by this art!-
fetal regulation. he says that hedging
becomes, not protection, but source of
dAnenr :,