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this letter seems to be merely an expression of opinion. It does not attempt to state a fact, and the committee would certainly take that into consideration. Mr. SIMs. In other words, the weight to be given it will be judged. Mr. HEFLIN. I e with the chairman that it is perfectly competent for the gentleman to write his opinion, give his views. The CHAIRMAN. That matter is disposed of. I would like to ask Mr. Marsh a question or two. I would like to call attention to the value of the property owned by the Cotton Exchange of New York. Can you give me an estimate of its value? Mr. MARSH. My impression is it is worth about a million dollars. The CHAIRMAN. Could you give me any idea aside from a mere guess as to the credits that are carried by the members of the exchange in the form of balances due their various customers throughout the country? Mr. MARSH. There is no way to do that, Mr. Chairman. Those are matters of individual competing firms, and naturally no such information can be available. The CHAIRMAN. I believe you said in reply to a question the other day that no fixed sum in the way of a margin was required. M. MARSH. Yes; I so stated. The CHAIRMAN. So that the volume of business done on the exchange, if that could be obtained, would throw no light on the question of the amount of money that was thus tied up 2 Mr. MARSH. Not the slightest. Mr. BEALL. I would like to ask a few questions. Ordinarily, when does the new-crop cotton begin its movement? Mr. MARSH. We have artificially divided the crop years, as you know, at the end of August and the beginning of September. There commonly is, however, some small movement at the end of August. Mr. BEALL. During the months of August, September, October, and November is when the bulk of the crop is in the hands of the producer or passes out of the hands of the producer? Mr. MARSH. Yes. Mr. BEALL. I understand that in this particular year there has been a constant advance, that there was a constant advance in the price of cotton even from the beginning of the season. Mr. MARSH. Yes. Mr. BEALL. Almost up to the present time? Mr. MARSH. Yes. Mr. BEALL. I will ask you if that experience was not a little out of the ordinary, if the ordinary rule has not been during those months as the supply of cotton has increased there has been a tendency for the price of the cotton to go down during the heavy part of the marketing season. Mr. MARSH. On the contrary, though this is not the current opinion, the statistics show that in an overwhelming majority of the seasons for many years past the fall months, the months when the producer is selling his crop most heavily, have shown the highest markets. On that point I would like to say that I think one of my colleagues here has some exact figures for a long series of years showing precisely in what years the fall market was higher than the spring market, and in what years the spring market was higher than the fall market. I have not seen those figures.

Mr. BEALL. I am not attempting to compare the price of the fall market with the price of the spring market, but comparing the price of cotton in October and November. Take October, for example. Has not the ordinary rule been that the prices for October would be lower than the price at the beginning of the season, the tendency as the cotton was gathered and accumulated upon the market by the farmers to depress the market price?

Mr. MARSH. I have not the exact figures on that. I think that the figures on that point would be somewhat misleading anyway, for the reason that it very often happens that the end of a given crop year has so reduced the amount of cotton for sale that those spinners who have not been forehanded, who have to have some actual cotton, are obliged to pay more for it to get it at once than they would have to pay if they waited a little longer. There is a disturbing element in the situation which I think would make the particular figures that you desire rather misleading.

Mr. BEALL. And you think that some other gentleman has actual figures that he can submit?

Mr. MARSH. I think so.

Mr. HAUGEN. I understood you to say that contracts for future delivery do not call for any special grade.

Mr. MARSH. They do not, sir.

Mr. HAUGEN. Are we to understand, then, that they may dump on to the exchange any grade of cotton which they may produce ?

Mr. MARSH. Oh, no. I did not understand your point, sir. Of course the cotton which the merchants of the exchange recognize to be unfitted for spinners' use is not deliverable on contracts in the New York Cotton Exchange.

Mr. Haugen. Then there is a grade; it has to come up to a certain grade?

Mr. MARSH. Oh, certainly. The rule is that no cotton below good ordinary in grade is deliverable. The line is drawn at good ordinary white cotton.

Mr. HAUGEN. Does the same rule apply as to the delivery and as to accepting it?

Mr. MARSH. How do you mean, sir ?

Mr. HAUGEN. As I understand it, if I sell a dozen bales to be delivered to New York before the exchange, that calls for certain kind of grade, and if I buy I get the same kind of grade?

Mr. MARSH. Certainly. The grade is the same whether you buy or sell.

Mr. HAUGEN. Is there any considerable number of sales delivered in compliance with these contracts ?

Mr. MARSH. From a half a million to three-quarters of a million bales a year.

Mr. BEALL. What is the smallest number of bales you have ever known to be in stock in New York during the cotton season?

Mr. MARSH. I have known the stock in New York to be as low as 5,000 bales; but I think that was only in August, if my recollection is correct, and not in the active cotton season.

Mr. BEALL. There have been numerous instances in which practically all the cotton that was in stock in New York was owned by one or two persons, have there not?

Mr. MARSH. Oh, yes.

The CHAIRMAN. You said before the committee adjourned this forenoon that you wanted to make a few remarks in regard to the bill before the committee. Would you like to do that now? Mr. MARsh. Yes, I should. The CHAIRMAN. You may proceed with your statement, then. Mr. MARsH. What I have to say will not take much of the committee's time. Not being a lawyer, Mr. Chairman, I have not been able to determine the legal implications of the different bills which I have understood are before the committee; but in the first place I should like to call the attention of the committee to the possibility that any or all of these bills as they now stand may have consequences which the committee itself would hardly expect. All these bills as they now stand simply prohibit one very important feature in the business of a spot cotton merchant. In the conduct of the business of a spot cotton merchant hedges are bought and sold, not merely on the New Orleans exchange, the New York exchange and the Liverpool exchange; hedges are being constantly bought and sold all over the lot, so to speak. They are consequently being bought and sold on the floor of j. Houston exchange and on the Memphis exchange; but not in the same manner, at open outcry, as the by-laws of the New York Cotton Exchange call for; but still essentially the same thing. Now, to bring that point out, I should like to give an illustration of just what I mean. Suppose I am a spot merchant in the South and I ve offered to me a thousand bales of cotton running from low middling up to, we will say, strict middling. On that same day, or simultaneously, I receive an offer from a spinner for a thousand bales of good middling cotton. In the thousand bales of cotton which I have bought in the South there is no good middling, but my spinner wants a thousand bales of good middling cotton, we will say, for shipment to him a month or two months or three months ahead. Now, any spot merchant will buy the thousand bales of low middling to strict middling and will sell the thousand bales of good middling and will regard the sale.of the thousand bales of good middling to a spinner or to a merchant as a hedge against the thousand bales of actual cotton which he has ". That spot merchant selling a contract to the foreign merchant or to the spinner for the future delivery of a thousand bales of good middling cotton has entered into No. of future contract just as distinctly and in its legal obligations exactly similar to a contract which he might enter into upon the New York Cotton Exchange for future delivery of a thousand bales of May or July. But under the terms of the i. as I have read them, that spot merchant not having in his possession a thousand bales of good middling cotton, not growing it on his land, not having it in his possession in any way or on the point of taking it into his possession, would be legally violating the provisions of the act which might result from these bills. Now, the extent of the disturbance that would be created among spot dealers by running into that complication would be very great indeed, and a multitude of transactions, amounting in the aggregate to millions of bales, would, as I see the matter, be made illegal. The CHAIRMAN. I think, Mr. Marsh, that most of these bills, provide that if there exist in the mind of the seller the bona fide intention to deliver the cotton, no inhibition is put upon his activities in any way.

Mr. MARSH. Well, Mr. Chairman, of course when you get onto the question of intentions you get into very muddy waters. It constantly happens that a spot merchant sells a thousand bales of cotton to a foreign merchant or to a spinner intending at the moment when he makes the trade to make the actual delivery himself, and yet before the time for fulfilling the contract comes around he sells out his contract or buys in his contract from some other merchant in the South. In other words, exactly the same process, Mr. Chairman, is going on, not in a concentrated and visible way, but none the less going on, all over the South, that is going on on the floor of the New York Cotton Exchange.

The CHAIRMAN. Is not that provided for by this language in the bill I have before me, in the section in which provision is made by the filing with the telegraph company of an affidavit on the part of the sender of the message, which shall state among other things that he has the bona fide intention of “acquiring and delivering said cotton, grain, or other farm products.” Now, that does not imply that he has already made a contract for it or that it is growing on his land or the land of some other person with whom he has made a contract; it only requires him to make an affidavit that he has the bona fide intention of acquiring and delivering the cotton in accordance with the terms of his contract.

Mr. MARSH. Mr. Chairman, I am not lawyer enough and not a sufficiently clear thinker in legal matters to say whether that clause would be a sufficient protection; but I got the impression from the language of the bills that the tests that were to be imposed upon dealers with regard to the bona fides of their intentions were such that in transactions such as I have described considerable impediments and confusions would result. I should like to say on that point that I simply bring this up as a difficulty which has arisen in my mind with regard to the bills, and which I should like to call to the attention of the committee as a matter which might be very easily overlooked by the committee through the fact that all these multitudinous transactions through the South do not come to the surface, so to speak, like the transactions which take place on the floor of one of the great cotton exchanges.

The CHAIRMAN. We are very glad to have your suggestions on those lines. Have you anything further ?

Mr. MARSH. Now, from the point of view of the legal side of the matter, I should like to suggest to the committee a question whether these contracts which are entered into in New York are or can be made interstate commerce. As members of the committee are undoubtedly aware, the New York Cotton Exchange is a New York corporation, a corporation chartered by the assembly of the State of New York. The contracts which are made upon the New York Cotton Exchange must be made in the State of New York. It is impossible to make a contract on the New York Cotton Exchange except where both parties to the contract are physically present in the State of New York. It is impossible for me or anybody to make a contract on the floor of the New York Cotton Exchange if I am not physically present in New York. I can not, for example, send a telegram from Washington-although I am a member of the exchange-I can not send a telegram from Washington to another member of the exchange and make a contract with him. What I have got to do, if I desire to enter into a contract in New York, is to send a telegram to a member there to make a contract for me with another member. In other words, these contracts are strictly limited to contracts made by persons physically in the State of New York.

Not only is that true, but these contracts call for the delivery of cotton only in the city of New York or in the port of New York. Thus the contracts are very determinately, completely, and wholly made within the State of New York. Now, Mr. Chairman, it does not change the legal aspect of the matter, as I understand it, that the cotton which may be delivered in the fulfillment of one of these contracts is to be obtained or has been obtained outside the State of New York. For example, it is not interstate commerce for a man to contract for the erection and delivery in the city of New York of an office building, though the contractor knows that the marble for that building is to come from Vermont, the steel from Pennsylvania, the lumber from Georgia, or Mississippi, or Texas, or Oregon, and the cement from Kansas. Neither is it interstate commerce for a man in Pennsylvania to send instructions to an agent of his in New York instructing him to contract with another man in New York for the construction and delivery of an office building subject to all these conditions which I have just described. In other words, sir, I think the committee will find on careful study of the exact terms of the contract entered into upon the New York Cotton Exchange that it is absolutely and completely a contract limited to the State of New York.

I simply suggest this as a point for the committee's consideration, and there is only one other point which I should like to bring to the committee's attention, and that is, that legislation such as is proposed here may have, if enacted, effects of an incalculable character. For example, it can hardly be known to many members of this committee that the fact that the stock of cotton of the world was hedged in New York during the past year has had a most vital influence upon the balance of trade in this country. The remittances of foreign merchants who were carrying cotton in Bremen, and Havre, and Milan, and Genoa, and Liverpool, with hedges sold in New York, the remittances of those merchants during the past year to New York can not possibly have been less than $75,000,000. They probably were very much more than that. They were probably a good deal over $100,000,000.

To destroy a business which, as one of its factors so vitally affects the balance of trade in this country and which if it had not existed this year would certainly have produced financial confusion in the country, because the withdrawal of another $75,000,000 or $100,000,000 of gold in this country would certainly have produced widespread financial confusion-I say to disturb a business which has such far-reaching consequences may lead to results which members of the committee themselves could hardly foresee.

I dwell upon this as simply one of a large number of complications which would certainly arise in the business of the country if this method which cotton merchants have worked out for the distribution

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