New-York tribune., 1919-03-06
New Law Forces
REIMBURSEMENT of
Cotton Contracts
Leading Exchanges Suspend
Trading to Avoid Con-
fusion; Officials Say Deal
ings Will Not Be Curtailed

Business on the New York and New
Orleans Cotton exchanges was suspend
ed yesterday to permit a readjustment
of contracts to conform with the new
cotton futures law, which became ef-
fectVe with the signing of the wheat
guarantee bin by the President.
Walter l.. Johnson, president of the
local exchange, expressed the opinion
that trading conditions in this market
would not be altered substantially by
the enactment of the new law. but said
it was necessary to suspend trading
for the day in order to avoid confu-
sion.
MIR Johnson deprecated the haste in
which Congress- had acted. declaring
that it was unfortunate that the
changes made became effective immc-
dintely. Explaining the meaning of tho
rider to tho wheat guarantee bill he
said:
"rhc grades which may be delivered
in fulilmcnt of the new contracts arc
the value of low middling cotton.
Seven grades arc specifically prob ibit
ed for delivery under Tie new contract
and at the present time a delivery Of
two other grades is prohibited because
their value is below the value of low
middling.
"Undcr the old contracts cotton could
be delivered which was not below the
value of good ordinary. AT present the
delivery value of good ordinary is 5
cents below the delivery value of low
middling."
Effect of New Law
Asked whether the new regulations
would tend to restrict trading in cot
ton futures Mr.. johnson said he did
not think that this would be the case.
The new law not only establishes a
new cotton exchange contract on which
seven of the lowest grades Of cotton
cannot be delivered, but it automatic
ally limits dealings in the old contract
to the liquidation of outstanding ac-
counts. AT the reopcning of the cX-
change to-day all new business will be
in the "ncw style" contract. Deliveries
of spot cotton in liquidation of "old
style' contracts will be under the old
rules and regulations
AS understood in local cotton ex-
change circles the change in the law
has been made in an effort to estab-
lish a contract that will be worth
nearer the value Of middling cotton
in the spot markets. During the past
two seasons criticism has been d-
rected at the Cotton Exchange on the
ground that it's prices for futures were
too far below the quotations for mid
ding. This has been due to an over
supply of the low grades resulting
from the fact that the South has pro-
duccd two low grade crops in success
sion and that the largest foreign buy
ers of low grade cotton have been shut
out of the market since the beginning
of the war.
Potential Deliveries Feared
Notwithstanding the abnormal dis
counts to which low grades have de-
clincd recently the possibility that
these less desirable supplies might be
delivered is presumed to have had a
depressing influence. There are only
5000 bales Of the seven grades which
cannot be delivered under the new
style contract in the local stock, and
it is said that even in a low grade
year the grades still tenderable under
the new law would constitute the
great bulk of the crop.
Local spot dealers said that the
lower grades at the present discounts
represent good value compared with
middling cotton, but it is generally
admitted that the new style contract
should be worth more than the old
and there were estimates of this in
creased value ranging all the way
from l to A cents a pound.
The board of managers announced
that there was no necessity for i'm
mediately closing out open trades and
opinions concerning the effect of
gradual evening up of the outstanding
interest on the price of the old con-
tracts were conflicting.