Mr. GLENNY. There is another point which Mr. Thompson has already touched upon, as to the insurance feature of this matter. I have touched upon that myself, but I want to cite the year 1907, which has already been brought into the testimony to-day. I think that if those who know anything about the prices of the cotton market, whose business it was to be interested in the prices, will look at the records, they will find that those commodities in which there were future markets suffered less through the depression than any other commodities in the world. In spite of the fact that your state bank stocks and other things decline to a point where banks failed, not a single cotton merchant worthy of the name failed. And why? Simply because those who were cotton merchants and not speculators did their business on a business basis and carried a hedge, either buying or selling futures to protect themselves, and it mattered not to them whether the market went up or down. That was their protection. The protection to the farmer was this: Here was a place where in one moment he could sell every pound of his production, and feeling that that place existed buoyed up his spirits to such an extent that he did not have to go into the market and sacrifice his product for fear that when he wanted to sell the other man would not want to buy.

Another thing is, as I know of my own knowledge, that a great deal of money was brought over from Liverpool and from European countries, which was sent out into the country in cash. It took up that cotton which was forced on the market through stress of circumstances, and that cotton was hedged in the future market. I can say from my own knowledge that I carried many thousands of bales of cotton handled in just this way. When things settled, the hedge was gotten rid of and the spinner had his cotton for whatever purpose he wished. Right now in New Orleans a great deal of cotton is being taken up on March contract, which is being distributed to the mills through the third party, who had bought the future contract. Had it not been for that the mill men could not have bought the cotton from the merchant, the merchant could not have sold the cotton to the mill men.

The CHAIRMAN. That phase of the question has been very fully covered.

Mr. GLENNY. Now, there is another thing. What brought about the future business and the cotton exchange? Let us look back just a little. The future business and the cotton exchange was brought about through sheer necessity, and it was not a thing that suddenly sprang into existence by a preconceived plan. It was a thing which existed long before the rules and regulations of the exchanges were published to the world. The merchant bought or sold cotton; transactions were made in an indiscriminate way around the cities. In New Orleans I know it was true. The exchange simply was brought about to see that fair play was given to the buyer and the seller for the protection of everybody.

The CHAIRMAN. That phase of the subject has also been pretty thoroughly covered, and perhaps it would meet the necessities of the present case if you would permit me to ask you just a few questions.

Mr. GLENNY. Yes.

The CHAIRMAN. About the nature of your future transactions? Mr. GLENNY. Yes.

The CHAIRMAN. Is it the practice of the brokers on your exchange to execute orders that may come to them for future contracts, from anybody who is financially responsible, or who sends a check along with the order?

Mr. GLENNY. From anybody that I know or feel satisfied is a responsible party. Bear in mind that if a man is not responsible I stand between him and the other man, and I would lose my money.

The CHAIRMAN. My question had reference to orders that came from people whom you do not know, over the country.

Mr. GLENNY. I naturally would not trade with a man I did not know anything about.

The CHAIRMAN. Not even if his order contained a check for a reasonable margin?

Mr. GLENNY. Not unless within my discretion, and I had Bradstreet and Dun to refer to. If a man has not credit I do not want his business, and I care not for his margin.

The CHAIRMAN. I think you see what I am driving at.

Mr. GLENNY. Yes; I see. I would rather have moral responsibility than cash.

The CHAIRMAN. You are answering as you would answer if you were in the banking business; but the general impression is round about the country, you know, that Tom, Dick, and Harry can gamble on the exchanges simply by putting up a small margin.

Mr. GLENNY. Mr. Scott, I will show you what gives rise to that. You are confusing-and it is unfortunate that it is so, but it is the bucket shop with the cotton exchange.

The CHAIRMAN. Oh, I am not confusing the two at all.

Mr. GLENNY. In a bucket shop anybody can trade who has money, and the less money he has the better the bucket shop likes it.

The CHAIRMAN. Yes; and I could show you letters from the brokers of the Chicago Grain Exchange, which is not a bucket shop

Mr. GLENNY. I do not know anything about what they do. The CHAIRMAN (continuing). Which make it perfectly patent that anybody who will send in an order for 5,000 bushels of wheat and cover it with a check to the amount of 4 cents a bushel can have that order executed. What I was driving at

Mr. GLENNY. I do not know about that, but

The CHAIRMAN. Will you please wait until I finish my question, so as to keep the record straight? I was trying to find out whether any such transactions as that were carried on on the New Orleans Cotton Exchange.

Mr. GLENNY. I would not permit a man that I knew nothing of to operate on my books, even with a margin. If he put up a margin, of course, that would buy the cotton, that would be a different

matter.

The CHAIRMAN. Do you think your practice in that respect is followed

Mr. GLENNY. I think it is very general.

The CHAIRMAN. If you will just wait until I finish my questions, I will be obliged to you. The reporter can not get his record right if we both talk at once. I will repeat the question. Do you know to what extent the practice which you say you follow is followed by other members of the New Orleans exchange?

Mr. GLENNY. I have access only to my own books, and as a matter of fact I do not know; but in my opinion, I believe the business is not done as you describe. A man must know something of the responsibility of the parties who are trading on his books.

The CHAIRMAN. Mr. Thompson suggested that perhaps one way to reach the evil of overspeculation, or speculation only, on the exchanges might be to require greater margins to be put up. If margins are not accepted on the exchange, if transactions are wholly a question of credit, and brokers on the exchange do not do business except for persons whom they know, there would not be much of an opportunity to enforce that kind of a rule, would there?

Mr. GLENNY. I might know a man, and yet deem that that man was required to put up a margin. I would therefore ask a margin in proportion to the credit I thought he ought to have. Some men I have asked $10 a bale from this year. Others I have asked nothing from. I have no fixed rule as to the amount of margin I require.

The CHAIRMAN. But so far as you know, that is not the custom of the members of the New Orleans Exchange, to execute the order of anybody who may send them in a margin with the order? Mr. GLENNY. I do not think it is.

The CHAIRMAN. With a check for a margin?

Mr. GLENNY. No, sir; I do not think it is.

The CHAIRMAN. Unless you have something further to offer, I believe there is nothing more. We are very much obliged to you. Mr. Thompson, did you wish to present any other members of your committee? We have only a very few minutes left.

Mr. THOMPSON. No, sir; we have had all the opportunity we desire.

The CHAIRMAN. We are very much obliged for the information you have given the committee.

Mr. Neville, will you be kind enough to respond to a question or two?

Mr. NEVILLE. Yes, sir.

ADDITIONAL TESTIMONY OF MR. GEORGE W. NEVILLE.

(The witness had been previously sworn.)

The CHAIRMAN. Since you were before the committee on the former hearing I have come into possession of two or three reports from a committee which was formed for the purpose of circulating information as to the plan proposed to extend the system of certificating cotton, of which committee Mr. James F. Maury was chairman. You are familiar with the reports of that committee?

Mr. NEVILLE. Not entirely. The matter is something that the committee has considered for a number of years, but as they have gotten along and thought that they had one part of it about worked out, they have run against legal obstacles, so that they had to reconsider it, and I think the entire report is to-day in the hands of the committee, who are trying to overcome some legal objections in the way of issuance of warehouse receipts in the southern warehouses; that is, to make them conform to requirements necessary so that the banks would advance money on them.

The CHAIRMAN. I should like to read just a few extracts from the third report of this committee, to give you and the members of the

committee an idea of the sentiments that are expressed there. They say, on page 2 of this third report:

Some of our members fear that because it will be made possible to fulfill our contract it will diminish the speculative business.

That would seem to imply that the present contract, which this committee is seeking to change, was at the time such that it would not be fulfilled; and it would also seem to imply that some members of the New York Cotton Exchange would look upon the diminution of the speculative business of that exchange as an evil. Those are fair implications, are they not, both of them?

Mr. NEVILLE. No. I would say that, on the face of it, it might seem fair to one who was not familiar with the composition of that committee or with the business conducted on the exchange. I want to state to you gentlemen that Mr. Maury, as Mr. Marsh stated, is one of our very respected members, but he has not been in the active cotton business for a great many years; and when I say a great many years I do not mean five years, or ten years, but more than that. That is one of his hobbies, and when people have hobbies the New York Cotton Exchange is always ready to give them an opportunity to work them out and see if they can be made of practical benefit. I put that proposition as to the value of spinning grades of cotton before your committee. I want to say that I am looked upon as having wheels in my head on that subject; but I think I am going to make good on it. I think, while on its surface that report would indicate what you have said, when you know the composition of the committee and the difficulties they have to overcome in the differences in the laws in the Southern States regarding the liability of warehouse receipts you will not look upon it in that way. The banks are not free lenders of money, except in two States, on warehouse receipts.

The CHAIRMAN. I am not interested in the plan that the report was discussing; but the report contains statements that seemed to be extremely significant as to the present method of conducting business on the New York exchange. In your answer to all of these reflections upon those methods, I understand you to express a different opinion? Mr. NEVILLE. Yes.

The CHAIRMAN. And so I will not ask you to answer any more; but I would like to read just one more extract here.

Mr. HUBBARD. Just one thing on that line, Mr. Chairman. I think the meaning of that is that the contract would be fulfilled in other places besides New York; that is, that cotton would be delivered in Augusta, or Norfolk, or Memphis, or Columbia, S. C., instead of being delivered in New York.

The CHAIRMAN. Well, that construction could hardly be put upon the paragraph which I shall now read, from page 8 of this third report:

The almost entire divorce of the spot business from the future business in our market has caused a false, an unfortunate, and a very hurtful idea to prevail in our exchange, especially among the younger and more recent members. The two kinds of business are considered as inimical. The buyers and the sellers of futures are considered as natural enemies. The buyer is supposed to buy futures because the cotton will not (we had almost written ". can not") be delivered to him; and the seller is supposed to sell because the buyer does not want the cotton and will not call for it. It is needless to say that this is reducing legitimate business and legitimate speculation to the basis of gambling; it brings discredit on the exchange and its members. The exchange must take the position, before the country and the law, that its contracts are genuine business and not gambling

That implies, certainly, that the present position of the exchange gives the country warrant for the understanding that its contracts are not now genuine business, but are mere gambling

because they can be fulfilled whenever delivery is called for, and that every precau tion is taken to insure the validity of the contract. How can we claim this position if we depend upon a stock so small that it tempts wealthy gamblers at almost any time to corner our market.

If those conditions exist to any extent, Mr. Neville, have you any suggestion to make as to changes that might be made in your rules that would eliminate the evils which have given rise to the distrust under which the exchange is now resting?

Mr. NEVILLE. That is the opinion of Mr. Maury as chairman of that committee, in which I do not concur. In the conditions that he describes there he entirely overlooks two important factors. He takes the stock of cotton, the certificated stock, in New York as being all the available stock against the contracts that may be out in market, when as a matter of fact that stock embraces cotton owned by cotton merchants who have hedged that cotton on the New York market by selling contracts. Whether that cotton is stored in Oklahoma City or in Galveston or in Houston or any other interior southern market, wherever it may be, in case of necessity that cotton is either brought there for delivery or is bought in and transferred to someone else to deliver. I want to illustrate that with this one illustration right here. My firm to-day has cotton stored in Houston, Tex., and in several warehouses in South Carolina, and we have future contracts sold against them. Now, if we can not sell the spot cotton to spinners between now and May, that cotton comes to New York and is delivered on May, so that it is just as much New York stock as if it was part of the 146,000 bales certificated there to-day.

The CHAIRMAN. Yes; that ground was very carefully covered in your previous statement, and I think we all understand your position upon that, and your answer to the specific attack. What I am now trying to get your answer upon is this: Admitting, as I think you do, that it is unfortunate, to say the least, that outsiders-rank outsiders knowing nothing about the cotton business-should be able to engage in future transactions on any exchange with no other thought in their minds than to gamble on the margin of prices, have you any thought in your mind, admitting that to be so, as to a remedy?

Mr. NEVILLE. Yes, I have two ideas of a remedy. One is to raise the cash margin so high as to probihit it, and the other is to appoint a guardian by law for those people.

The CHAIRMAN. Well, we will not consider the second; but how can you raise the margin so high as to probihit it, in the face of the statements made by yourself and other gentlemen, that no margin is required when a man is regarded as solvent?

Mr. NEVILLE. Simply because the fact has been referred to here by other gentlemen and myself that the moral standing and worth of a man are looked to by us rather than the margin that a man puts up, you must not overlook the fact that that class of men have some right to buy or sell cotton. Now, you asked me about a rank outsider who wants to speculate. He is not the man we have been talking about. They are two distinct classes of people.

The CHAIRMAN. Well, I will not go any further on that.

Mr. THOMPSON. Mr. Chairman, will you indulge me just a moment? The CHAIRMAN. Yes.