The New York herald., 1922-03-08
ALL COTTON TRADING
SEARCHED FOR EVILS
New York Exchange Governor
at McAdoo Inquiry Is Ques-
toned About Reports.
BUCKETING MAIN TARGET
How Hedging and Squeezing
Enliven Market Told Be-
fore 100 Brokers.
BUCKETING MAIN TARGET

A public investigation of the cotton
brokerage business in this city was
begun yesterday by Chief Magistrate
McAdoo at the request of the Ameri-
can Cotton Exchange, certain MEM
bers of which have been accused of
bucketing orders.
Magistrate McAdoo announced that
the inquiry would not be confined to
specific complaints. but would enter
into every phase of the cotton trade,
not only as transacted by the Ameri-
can Cotton Exchange but by the New
York Cotton Exchange, which is the
largest speculative cotton market in
the world.
The Magistrate instructed the Dis
trict Attorney to prepare for sweep
ing investigation, and asked that
Southern cotton planters and commits
sion merchants be called to testify as
to their actual experiences with cotton
brokers In New York. Beginning at 2
o'clock Monday daily sessions will be
held in the Criminal Courts Building.
Cases on John Doe Warrants.
The proceedings are directed against
John Doe, the John Doe Exchange,
the John Doe Clearing House, the John
Doe Company and Others" to ascertain
If various persons or corporations have
been making contracts for the purchase
or sale of cotton of bucketinS nature,
in which case arrest warrants Will be
sought.
More than 100 cotton brokers and their
lawyers were present at the opening OF
the inquiry. Albert Massey represented
the American Cotton Exchange, George
Gordon Battle represented its members,
Peter b. Smith represented the clearing
house of that exchanges. Senator Loring
Black represented the New York
Cotton Exchange and Jerome Simmons
and Benjamin f. Shredder, Assistant
District Attorneys, appeared in behalf of
District Attorney Banton.
The first witness was Arthur r.
Marsh. member of the board of COVER
nors OF the New York Cotton Exchange.
former professor of comparative litera-
ture at Harvard and a cotton expert
who has testified before many Fed
eral and State legislative committees.
Mr. Marsh said that although the last
census showed the cotton production
of the United States in 1920 was only
II 500. 900 bales the New York Cotton
Exchange alone traded In betw cen 90.
600. 900 and e0.000.000 bales. There Is, an
exchange in New Orleans which. he
said claims to do as much business a.
New York. but the New York brokers
insist that heir business is four times
greater.
Daily Reports "Inadequatc."
Mr. Battle asked why the daily sales
OF cotton were not made public, TO
which the witness replied it had been
done but was given UP as "inad equate."
Magistrate McAdoo said:
"Why should ii be any more difficult
for you to report your days tradings
than the New York Stock Exchange.
which renders daily reports?"
"Tt is difficult to get an accurate re-
port" replied Mr.. Marsh.
The court suggested that the New
York Cotton Exchange has only 432
members. and II any of them refused
to report their daily transactions they
could be expelled or panalized. to whioh
the witness responded that the advisory
committee had been restrained by court
order from examining the books of the
members.
"As a protection to the public why
don't you ask the Legislature to help
you?" said the Magistrate.
II cannot answer that" said Mr..
Marsh.
Mr.. Marsh said the statistics of busi-
ness transacted were available at the
clearing house. but kept under the
strictest injunction OF secrecy.
"The clearing house never discloses
tho business of members" he declared
"Its institution was impossible until Il
contracted not TO disclose figures"
The witness said $4,000 was the
minimum capital a cotton broker should
have before starting to trade on the ex-
change.
"In other words" commented Mr.. Nc
Adoo, "the game is so dangerous that
the cotton producers ought not play"
The witness testified that about 10
per cent. OF the business done on the
exchange was speculative and s5 to 90
per cent. was hedging" He was asked
10 define hedging" and another express
sion. Squeezing"
Hedging is virtually insurance
against price fluctuation." he explained.
ITO hedge, as In betting. Is to cover
up by taking the opposite side on an or
der, der. ). Squeeze means forcing a de-
To be squeezed" Mr.. Marsh added, is
Improbable.