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man to swear, when he gives us an order, that his intentions are so and so. In fact, I suspect that if we did call for affidavits on every order we receive the only result would be greatly to increase the amount of perjury in the United States, because a man whose character is so contemptible that he will not recognize the legal and moral obligations resting upon him in view of a plain statement made to him is contemptible enough to perjure himself.

Mr. SIMs. Mr. Marsh, in other words, do you intend for this committee and the House of Representatives to believe that in the case of all purchases or sales made on the New York Cotton Exchange by those who make them-I mean by members of the exchange, brokers or whatever they are—they all at the time honestly believe that all this cotton which is bought is expected to be received, and all that is sold is expected to be delivered, and that if any operator, any person buying and selling, does not so intend, he himself is equal in moral turpitude to a perjurer? And, if that be so, how much more important it is for us, if possible, to pass a law that will protect your honorable body from the impositions of cheats and perjurers and felons.

Mr. MARSH (laughing). Mr. Chairman, it goes without saying—I certainly do not need to say to gentlemen who are as familiar with business affairs as the members of this committee—that the essential thing in making a contract upon the New York Cotton Exchange is to recognize that it is a contract, that it is legally and morally a contract, and that it carries with it all the responsibilities of a contract. From the earliest days when contracts have been entered into, men who have entered into them have passed them on from one to another. In passing them on there is no moral obligation upon them except to make sure that the persons to whom they pass them on will fulfill them, and it makes no difference whether a contract is passed on from one moral and legal contracting party to one more or to two more or to twenty more, provided that through the entire length of that line each new contracting party takes upon himself the full legal and moral obligations of the preceding contracting party. Now, when I talk about fraudulent intentions I do not mean to say, and it would be absurd if I were to make the contention, and you would know that it is absurd if I were to make the contention, in fact it would be in absolute contradiction to the whole hedging business if I did make the contention, that it is the purpose of each of the contracting parties to every contract entered into on the New York Cotton Exchange themselves and in their own persons to deliver and to receive the actual cotton which is the subject of the contract. I say it would be absurd to contend that that is the case. You would have no hedging if that was the case. But it is the intention, Mr. Chairman, when such a contract is entered into, that those contracting parties either themselves will fulfill the specific terms of the contract or that one of them or that both of them will provide new contracting parties who will fulfill the terms of the contract, still keeping it a valid contract with the moral and legal obligation behind it of those persons who have entered into it.

The CHAIRMAN. I do not want to monopolize this examination. I will only ask one or two more questions. In that case, in your judgment, if the practice of dealing in futures in cotton were eliminated, would it be possible for the New York Cotton Exchange to exist ?

Mr. MARSH. If the practice of dealing in contracts for future delivery were eliminated, would it be possible for the New York Cotton Exchange to exist? The CHAIRMAN. Yes. Mr. MARSH. There would be no occasion for its existence. The CHAIRMAN. Are you familiar with what is known as, and before this committee as, the Scott bill? Mr. MARSH. I have read it, sir. The CHAIRMAN. In your judgment if that bill were enacted into law and its provisions were enforced, would it eliminate the futuredealing operations on the New York Cotton Exchange to such an extent as to put it out of business? Mr. MARSH. No, sir. The CHAIRMAN. So that you think that the passage of that act would have no injurious effect, speaking from your own point of view, on the New York Cotton Exchange? Mr. MARSH. It would have a disturbing effect until people saw the futility of it. The CHAIRMAN. In what way would it have a disturbing effect? Mr. MARSH. On this point let me say that necessarily in a large body of men like the members of the cotton exchange, who are performing a certain function, the majority of these men can not in the nature of the case have reasoned out the underlying principles and the underlying bases or foundations for that which they are doing. The cotton merchants as a class come into their business finding a certain state of things, certain practices in use, certain methods of conducting business in use, and without analyzing them or attempting fully to explain them they go ahead using those methods. The impression produced on the majority of men of that kind would, I th. be that the Scott bill amounted to something. It would take time for them to ascertain that it is a futile measure. The CHAIRMAN. Would you mind explaining in what way it is futile? Mr. MARSH. Well, I am not a lawyer, Mr. Scott. I am speaking as a layman and I am giving a mere merchant's judgment as to the ermanent effects of the bill. I do not wish to qualify as an expert |. or to be so regarded. The CHAIRMAN. I only asked the question because you seemed to have quite a pronounced opinion that the bill would be futile, and I thought you must have some reason on which to base that opinion and that is what I was trying, to get at. Mr. MARSH. I think the bill is unconstitutional, to start with; I think it is discriminatory, in the second place; and I think its provisions, while undoubtedly intended to apply to the real facts of the business, go slantwise from them all the way through. The provisions of the bill do not match the conditions. Now, it is no use to legislate that people shall not do a certain thing with their legs when they customarily do it with their arms, and that is my judgment as to the provisions of the bill. The CHAIRMAN. You have heard the testimony of the preceding witnesses to the effect that the present system of operation on the New York Cotton Exchange was injurious to the spinners. We have had one or two representatives of the spinners who have testified to that effect. Do you think they are right about it?

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Mr. MARSH. I can only answer that, Mr. Scott, by saying that the spinners outside the United States now universally conduct their business with reference to hedge markets; that no spinner can finance his business unless he is known so to do. When at Atlanta some three years ago there was a kind of joint convention of spinners' associations and of farmers' associations and the question was raised as to abolishing trading in contracts for future delivery, the three sections of spinners refused to participate in that, although some members of each of the sections wished to do so; but the three sections, as I understand it, refused to participate in that on the ground that although there were features of the existing system which they did not like, they saw no substitute for it and did not think their business could be ultimately carried on without it.

The CHAIRMAN. You heard the extract which was read by Mr. Parker from the proceedings of the spinners' convention, in which they quite severely criticised the practice of the New York Exchange. Do you remember that extract ?

Mr. MARSH. Well, now, Mr. Scott, there is a whole history to that.

The CHAIRMAN. I did not intend to ask for the whole history; I merely wished to inquire whether you thought that criticism was well founded, and whether you thought that the cotton exchange was likely to modify its practice in that respect.

Mr. MARSH. I do not think the New York Cotton Exchange is likely to give up being an association of cotton merchants. But, as I said, there is a whole history behind Mr. Parker's testimony. If the committee wish to have that history unfolded, I am only too willing to unfold it; but it seems to be rather immaterial and unnecessary to go into it.

The CHAIRMAN. In the absence of Mr. Parker, if anything you had in mind would be something which he would in fairness have a right to reply to, you had better not go into it. . Mr. MARSH. I think it would be, sir.

The CHAIRMAN. You spoke about a number of your members being outside of New York. Can you tell me about how many of your 425 members have places of business outside of New York ?

Mr. MARSH. My impression is that about 200 of the members are actually resident in New York; but again I have no actual figures to go by.

The CHAIRMAN. Do any other members of the committee desire to ask any questions?

Mr. BEALL. I would like to ask him a question or two. The membership of your exchange is limited to 450 ?

Mr. Marsh. Yes.
Mr. BEALL. Are those seats on the exchange sold ?
Mr. MARSH. Are they what?

Mr. BEALL. Are they sold and bought? Is the right to sit on that exchange bought and sold ?

Mr. MARSH. Yes.

Mr. BEALL. What is the ordinary price, the usual price, for which seats are purchased ?

Mr. MARSH. They have fluctuated in the past year from about $8,000 to $18,000 or $19,000.

Mr. BEALL, From $8,000 to $18,000 or $19,000. What caused that fluctuation ?

Mr. MARSH. The law of supply and demand. Mr. BEALL. At certain periods of the year there has been great demand for the privilege of being a member of your cotton exchange, and at other periods not so great a demand? Mr. MARSH. No; that is not, I should say, the fact. As we have no future system for dealing in seats on the New York Cotton Exchange, the fluctuations in the value of the seats on the exchange are very severe. If a member dies at a time when there happens to be no person desiring to become a member, and his widow wishes to realize the money without waiting, there being, as I say, no future system connected with the purchase and sale of seats, there may be a very severe break in the price. On the contrary, if some person desires to become a member and there is no seat available, he may have to bid the price up until he gets it. Mr. BEALL. What are the other conditions of membership in your cotton exchange? Mr. MARSH. What do you mean by “other conditions,” sir? Mr. BEALL. Suppose a man applies for membership in your cotton exchange, what are the requirements to entitle him to become a member? Mr. MARSH. Nothing entitles anybody to become a member of the New York Cotton Exchange. Mr. BEALL. Well, how does he become a member, then? Mr. MARSH. He applies to a committee of the exchange known as the “admissions committee,” the committee on admissions. He makes a full statement under oath of his resources, of his business history, of whether he has or has not failed in business, of his intentions in becoming a member or seeking to become a member of the exchange; in short, he attempts to justify to the admissions committee by a sworn statement his desirability as a member. Mr. BEALL. Suppose he makes a statement that is satisfactory to this admissions committee, what then is the next step 7 Mr. MARSH. The admissions committee submit his statement, with the statements of at least two members of the exchange, vouching for him and for the accuracy of what he has stated, to the board of managers of the exchange. The board of managers of the exchange then ballots upon his election, and if he receives a vote of a majority of the full board of managers he is elected. Mr. BEALL. After he becomes a member is he required to pay any dues, annual or otherwise? Mr. MARSH. He is required to pay an entrance fee of $500, and each year the exchange estimates the expenses which it will have to undergo in the collection of statistics and the maintenance of its room, and so on, and levies an assessment upon the members sufficient to provide that sum. Mr. BEALL. What would be the usual amount of that annual charge? Mr. MARSH. For several years past it has been $75. Mr. BEALL. A moment ago you stated that in your judgment—or I believe you stated it as a fact—80 per cent or more of the actual cotton produced in this country is handled by merchants who belong to the New York Cotton Exchange? Mr. MARSH. I so said. Mr. BEALL. How much of that actual cotton was bought or sold on the New York Exchange?

Mr. MARSH. There is no earthly way to tell..

Mr. BEALL, Could you form a reasonable estimate as to the proportion of that 80 per cent that was actually bought on the New York Exchange, or sold ?

Mr. MARSH. How can anyone form that? Two members of the New York Cotton Exchange, one from Greensboro, N. C., and one from Augusta, Ga., meet on the floor of the New York Cotton Exchange. The member from Augusta, Ga., says to the member from Greensboro, N. C., “What could you sell me 5,000 bales of strict middling cotton for?” The member from Greensboro, N. C., names a price which is satisfactory to the member from Augusta, Ga., and the member from Augusta, Ga., says, “All right; I will take it.”

Mr. BEALL. You call that a sale on the New York Cotton Exchange?

Mr. MARSH. Certainly; if it took place. I am supposing that it took place.

Mr. BEALL. In your judgment, what per cent of this 80 per cent of the entire crop was sold under a contract of the New York Cotton Exchange?

Mr. MARSH. What kind of a contract ?

Mr. BEALL. The ordinary contract, such as you have on the exchange ?

Mr. MARSH. We have at least three ordinary contracts there, sir.

Mr. BEALL. I would be glad to have in the record a statement as to the kinds of contracts that you have on the New York Cotton Exchange.

Mr. MARSH. We have a contract covering or describing the terms of a sale of cotton in the port of New York, on the spot; we have a contract covering the terms of a sale of cotton to arrive in the port of New York, an f. o. b. contract; and we have a contract covering the terms of a basis delivery in some future month, commonly called a future contract.

Mr. BEALL. Take the contract that is ordinarily referred to as the New York Cotton Exchange contract; that gives to the seller the option of delivering certain grades of cotton ?

Mr. MARSH. Yes.
Mr. BEALL. At so much on or off the middling price of cotton ?
Mr. MARSH. Yes.

Mr. BEALL. Could you give an estimate of the proportion of this 80 per cent which was sold under that sort of contract on the New York Cotton Exchange?

Mr. MARSH. Every contract for the future delivery of cotton is that kind of contract, and every time a contract for the future delivery of cotton is sold against an equivalent amount of actual cotton anywhere it is a contract of that kind.

Mr. BEALL. Ordinarily, the members of your New York Cotton Exchange, in making sales of this actual cotton that they have, make them to spinners? Those sales are usually or frequently made to spinners, are they not?

Mr. MARSH. Frequently; yes, sir.

Mr. BEALL. And of the amount of cotton that is bought by spinners from the gentlemen who are members of your cotton exchange, can you form an idea, an estimate, as to the proportion of the amount that was bought under the ordinary New York Cotton Exchange

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