Mr. MARSH. It is undoubtedly a necessity to perform that function. When I said it was not a means I was using the word "means" in the exact sense of the word. A means is an instrument, it is something employed as an instrument. Now, the instrumentalities by which cotton is distributed are the contracts which members of the exchange enter into with each other, with cotton producers, with interior merchants, and with spinners. Those are the means, the instrumentalities; but the cotton exchange, though not in the strict sense of the word a means, is none the less, in my opinion, an absolute necessity.

Mr. BROOKS. Mr. Chairman, just one question. You think it merely a coincidence, then, that the cessation of publishing the volume of business on the exchanges followed the agitation in Congress of the Hatch bill?

Mr. MARSH. I think it merely a coincidence. But, perhaps, I might say this, that every agitation leads the cotton exchange to examine more scrupulously every detail of its activities; every agitation leads members of the exchange to ask themselves whether this or that is provable, is so reliable and accurate that there can not be any question about it.

Mr. LEVER. Mr. Marsh, there is not any more hubbub on the cotton exchange than there is on the New York Stock Exchange, is there? Mr. MARSH. There is not more what?

Mr. LEVER. More hubbub, excitement?

Mr. MARSH. I have never been on the floor of the New York Stock Exchange in my life.

Mr. LEVER. I understood you to say that you do not keep any statistics of transactions on the cotton exchange?

Mr. MARSH. Yes.

Mr. LEVER. I call your attention to the fact that on the New York Stock Exchange the amount of sales is kept.

Mr. MARSH. But there is, Mr. Lever, a very important difference between the transactions; there are means of checking the transactions on the New York Stock Exchange because every share of stock which is traded in is actually delivered the next morning.

Mr. LEVER. That is a very important difference. And on the New York Cotton Exchange contracts are not delivered?

Mr. MARSH. On the New York Cotton Exchange a contract for May delivery, entered into to-day, is not deliverable until May.

Mr. LEVER. But you would have a record of the transaction; you could have a record of the transaction?

Mr. MARSH. Yes; possibly a record of the transaction might be devised which would be accurate, but the difficulties, the mechanical difficulties are very great.

Mr. LEVER. You do record, however, the fact of the transaction taking place during the day; that is, the number of transactions? Mr. MARSH. No, sir; we record simply prices.

Mr. LEVER. Let me ask you to explain this. It is from one of these New York papers, the Commercial, of Friday, February 11; "Prices on the New York Cotton Exchange, between first and second calls"I understand your first call takes place at 10 a. m.-and I find that May is down at 15.04 and 15.03, and so on. Now, that represented a transaction, a sale or purchase, did it?

Mr. MARSH. There was a sale and a purchase at that price. However, there may have been a dozen or 20 transactions.

Mr. LEVER. Do you keep any record of that whatever?
Mr. MARSH. We do not.

Mr. LEVER. I notice in the Journal of Commerce, I think it is, taking May, for instance, that between the first and second calls there were 110 transactions. What time elapses between your calls?

Mr. MARSH. The first call is at 10 o'clock and the second at quarter of 12.

Mr. LEVER. So that during a period of one hour and three quarters you had at least 110 transactions, and that does not include July and the other active months?

Mr. MARSH. Yes.

Mr. LEVER. Now, do you have any knowledge as to the average amount or number of bales carried in a sale?

Mr. MARSH. There is absolutely no way of arriving at that. Mr. LEVER. So that on May, for an hour and three-quarters, you transacted 11,000 bales of cotton?

Mr. MARSH. At least.

Mr. LEVER. At least; isn't it your judgment that that represented a great deal more than that, as a matter of fact?

Mr. MARSH. Unquestionably.

Mr. LEVER. What, in your judgment, would be about a fair estimate of the number of bales transacted for May during that period? Mr. MARSH. I have absolutely no means of estimating it.

Mr. LEVER. No means at all?

Mr. MARSH. It would be impossible for any one who was not on the floor to estimate the volume of those transactions.

Mr. LEVER. Yes, it would be impossible for any one not on the floor; but you are on the floor?

Mr. MARSH. I was not at the time mentioned; I was here in Washington.

Mr. LEVER. That is very true, but you have had so much experience on the floor and been there so much you ought to have a fairly accurate idea of the bigness or littleness of the transactions that took place as represented by these different prices here?

Mr. MARSH. I have no idea; why, I have not heard whether the market was active or quiet on that day.

Mr. LEVER. Suppose it had been an active market, what would you think about that?

Mr. MARSH. Well, I have no way of answering that question, Mr. Lever.

Mr. LEVER. I notice that this paper estimates the sales for "yesterday," this paper being dated February 11, "were 350,000 bales;" would you call that an active or inactive market?

Mr. MARSH. I should call that a fairly normal market.

Mr. LEVER. If it had been a million bales you would have called it an active market?

Mr. MARSH. Very active.

Mr. LEVER. Then your sales for May, between the first and second calls, would very probably have averaged from 500 or 1,000 bales to the transaction?

Mr. MARSH. Well, I have no way of answering that, Mr. Lever.

Mr. LEVER. I would like to ask if, in your judgment, your standard of an active market would be a million bales a day?

Mr. MARSH. Why, I should call a day, when I thought a million bales had changed hands, an active day; I can not say that I have any standard for an active day.

Mr. LEVER. You would call that an active day?

Mr. MARSH. It certainly would be an active day.

Mr. LEVER. Three hundred and fifty thousand bales, you think, would be a rather normal day?

Mr. MARSH. Yes, sir.

Mr. LEVER. You have two or three large commercial papers in New York, one the Journal of Commerce, and the Wall Street Journal, and the other the New York Commercial. Are these papers in good standing? Or don't you care to answer that?

Mr. MARSH. I shouldn't be able to answer it, Mr. Lever.

Mr. LEVER. Would you think that a paper that had in it Hubbard Brothers & Co.'s advertisement would be a fairly decent kind of a paper?

Mr. MARSH. You are getting in rather deep for me, Mr. Lever.
Mr. LEVER. You would think that, though?

Mr. MARSH. That would be my assumption, yes.

Mr. LEVER. So that if it was a fact that Hubbard Brothers advertised in the New York Commercial you would think that that would give this paper some standing before the committee, wouldn't you, as to accuracy and correctness of its figures?

Mr. MARSH. I do not think, Mr. Lever, that any secondhand or thirdhand statement, whether in a newspaper, no matter how reputable, or not, ought to have any weight with this committee whatever. Mr. HOWELL. Are there any newspaper representatives on the floor of the exchange during this time?

Mr. MARSH. There are.

Mr. LEVER. I understand this newspaper has a representative on the exchange?

Mr. MARSH. It has.

Mr. LEVER. And he would be there to get news?

Mr. MARSH. Yes.

Mr. LEVER. You are not willing to say that his reports of the transactions on the exchange are inaccurate, are you?

Mr. MARSH. I am; exceedingly.

Mr. LEVER. Exceedingly inaccurate?

Mr. MARSH. Yes, sir; but that doesn't mean to say that he does not sometimes hit the truth; I have never yet known a reporter who did not occasionally get the facts.

Mr. LEVER. You wouldn't be willing, however, to say that his reports are colored against the exchange?

Mr. MARSH. I should say not.

Mr. LEVER. And when he tells us that the sales for a day were 350,000 bales, you would say that was a normal market and that you gentlemen did not have much excitement that day?

Mr. MARSH. I should.

Mr. LEVER. And if the transactions were a million bales, you would say that was a pretty good day for you?

Mr. MARSH. Yes.

Mr. LEVER. That market was pretty active?

Mr. MARSH. Yes.

Mr. LEVER. So that, Mr. Marsh, if you had 100 normal days in a year you would transact on the exchange 105,000,000 bales during that year, wouldn't you?

Mr. MARSH. How is that?

Mr. LEVER. If you had 100 normal days on your exchange the amount of cotton handled through the exchange would amount, in the course of a year, to 105,000,000 bales of cotton, wouldn't it? 300 working days I should say?

Mr. MARSH. If we had 300 normal days-that is a mere matter of arithmetic, just multiplication.

Mr. LEVER. How many holidays do you usually have during the course of a year?

Mr. MARSH. Well, I do not carry the calendar in my head; seven or eight I should think.

Mr. LEVER. So that if you have 340, or about 340 working days on the exchange

Mr. MARSH. No, we do not work on Sunday.

Mr. LEVER. Less the Sundays, 320 days.

The CHAIRMAN. About 300.

Mr. LEVER. Say 300.

The CHAIRMAN. That would be 13 holidays aside from the Sundays.

Mr. MARSH. And Saturday is a half a day with us.

Mr. LEVER. Mr. Marsh, would you tell us again, if you have already told us, a little something, briefly, of the origin of the exchange?

Mr. MARSH. The first exchange that was established in the form of a formally-organized exchange was the Liverpool Cotton Exchange; that was established in its incipient form about 1868, if my recollection is correct, and it took its final shape in 1870, the shape which it has maintained down to the present time. The New York Cotton Exchange was organized by the cotton merchants of New York in

1871.

Mr. LEVER. What, if any, special reason do you give for the organization of the Liverpool Exchange-what brought it about?

Mr. MARSH. It was brought about by the obvious desirability of uniform contractual terms. A very large cotton business was being transacted in Liverpool; cotton was being imported by a variety of people; it was being bought from the importers by what are called spinners' brokers, it was being sold by these spinners' brokers, either for their own account or the account of the merchants, to spinners, and the very multiplicity of the transactions and the possibility of misconstruction of terms made it practically imperative that those merchants should form an exchange and should give uniformity to the rules under which they did business with each other. Mr. LEVER. Now, will you tell us how the matter of dealing in futures had its origin?

Mr. MARSH. The matter of dealing in futures, so far as I can learnthe very origin of it is somewhat obscure-but so far as I can learn the dealings in futures arose first in connection with cargoes of cotton which were at sea coming either from the United States or from India; the importers of these cargoes of cotton found that persons in Liverpool, who were not importers, but who desired to trade in cotton, were willing to buy this cotton when it should arrive-that is to say, if a ship was

on its way from New Orleans to Liverpool with 10,000, or I had better say 2,000 bales of cotton for those days, on board, the importer of that cotton found that before the ship arrived in Liverpool it could be sold by him "to arrive," and inasmuch as the average length of a voyage was fairly calculable it was sold to be delivered when the ship arrived in the future. The uncertainty of a sea voyage, however, is the real explanation of the fact that in Liverpool the trading for future delivery is in what we call coupled months; in Liverpool the contract for future delivery is made not for a single month, as in this market, but for two months; for instance, January-February or May-June or July-August. Now, the reason for that was that a ship might be ninety days or she might be one hundred and ten days, and there was an element of uncertainty as to her arrival which made it necessary to give a longer chance to the seller of the cotton.

Mr. LEVER. And out of this speculation, as to the time and the fact of the arrival of each cargo of cotton, grew the system of trading in futures?

Mr. MARSH. So far as I can ascertain; yes.

Mr. LEVER. And out of that grew the New York Cotton Exchange? Mr. MARSH. And out of that, as modified by the conditions in this country and the particular conditions in New York.

Mr. LEVER. Isn't it a fact that the New York Cotton Exchange grew out of the desire, the inherent desire of mankind to speculate? Mr. MARSH. It is not; it is absolutely untrue that it did.

Mr. HUBBARD. Mr. Lever, I was not present at the organization of the exchange, which took place in 1870, but my business career extends from before the time of the filing of the articles of incorporation, and I shall be glad to answer that question when I appear on the stand, if you will make a note of it.

Mr. LEVER. I would like to ask you whether on one occasion you did not say, "And, curiously enough, it was out of this wild speculation of the time of the civil war that the entire modern method of handling the cotton business was evolved?"

Mr. MARSH. I should say that is correct; but that speculation took place in Liverpool.

Mr. LEVER. The New York Cotton Exchange did not grow out of that speculation?

Mr. MARSH. No; it did not.

Mr. LEVER. But the dealing in futures grew out of wild speculation? Mr. MARSH. I should say so.

Mr. LEVER. So that the origin of dealing in futures does grow out of the desire of humankind to gamble?

Mr. MARSH. I should say that the way was blazed for a new economic function by speculators.

Mr. LEVER. Now, Mr. Marsh, I would like to ask you a question. or two as to other points. I believe you said the other day that the New York Cotton Exchange, that is, the membership, handled 80 per cent of the cotton crop in the United States. Does it follow, therefore, that the price of cotton in the United States is made by the membership of the New York Cotton Exchange?

Mr. MARSH. No more than it follows, sir, that the price of dry goods is made by the dry goods merchants of New York.

Mr. LEVER. You handle 80 per cent of the business, and you are merchants?