in this country-the unsettled condition of the spinners as to legislation. Not ouly that, but they can't get money easy to lay in stocks. The uncertainty about the tariff has some effect. I think dealing in futures has a tendency to keep the price rather high, because it facilitates the transaction of business and reduces risks to a minimum."

Dealing in futures facilitates the handling of cotton and operates as an insurance. The man who buys futures may be doing it to protect himself or for speculation. He may have sold actual cotton to the spinner, and while he is buying that cotton he does not wish to run any risk, and he buys futures and closes them out as he buys cotton and ships it. Can form no idea of the percentage of purely gambling transactions in futures from the large amount of future sales as compared with sales of spots for the same period, because it is "like one dollar's paying debts; one dollar may pay fifty debts in a day, may go round a hundred times, and is still only a dollar. A legitimate contract for future delivery may change hands or be transferred 50, 100, or any number of times, each transfer being regarded as a separate transaction, thus swelling the aggregate of futures that many times the amount involved in the first transaction, and all may b. legitimate. No doubt many of the transactions are purely speculative, but does not know what per cent of them are so. The only legitimate use of futures is for protection or insurance purposes on behalf of the producer or consumer. Has no idea that the wiping out of futures would stop speculation entirely, but speculators and cotton men would want larger profits, and would only buy when the promise of large profits was favorable.

Does not think Memphis cotton market a mere reflex of Liverpool and New York, but it may sympathize with those markets. Memphis ships direct to spinners in America, England, France, and Germany. Thinks New York has more influence over the market than Liverpool.

Thinks a majority of gambling speculators lose money. Cotton speculators often broke up before futures existed. The evil of the future business is the ease with which men of small capital can speculate.

Does not think futures cause an irregular market, but rather otherwise. More changes occur, but none so great as formerly. Was an agent for a Liverpool and New York house for future dealing 8 or 9 years ago.

[WILLIAM FROHLICH, aged 60 years; a cotton buyer in Memphis for thirty-five years.] Opposes futures and believes them injurious to the cotton trade. Price of cotton regulated wholly by manipulations in New York. The South has suffered greatly therefrom, more especially those who invested in options. Memphis alone lost $10,000,000 in last 4 years in options. Believes options and futures lower the price of cotton at least 1 cent a pound; make the market more irregular; disastrous to dealing in actual cotton; demoralizing to young men who engage in it; advantage altogether with the men in New York, who seem to be in some secret organization and prey upon the other speculators in cotton. The great money power in New York is in aid of the cotton speculators on the exchange; it contro's the whole cotton crop. Largest stock held in New York any one time was 270,000 bales, while futures there amounted to about 52,500,000 bales, and 419 bales of spots were dealt in. The spots included, very likely, what had been consigned to New York. These dealings have decreased the demand for cotton, and have weakened the market. In futures a delivery is seldom contemplated, and if the market goes against the outsider he forfeits his margins as a rule. Nearly all the transactions are mere gambling of the worst form. New York shapes the market to suit the interests of the exchange, and may depress the price or enhance it. The condition of cotton growers has retrograded, attributable largely to future dealings. Memphis has lost heavily in futures, and the depreciation of cotton during the last 4 years amounts to $20,000,000. Land has necessarily depreciated also, by reason thereof. Legislation to suppress futures should be enacted.

[W. N. BROWN, aged 71; a cotton factor in Memphis for forty years.]

The general condition of the cotton trade has been unfavorable during the last eight or ten years. Futures, as conducted, have been very detrimental to the South. They take all the speculation out of spot cotton. If futures were carried on so that there would be actual delivery, thus eliminating the gambling feature, they would be beneficial. Southern people are largely buyers of futures, instead of sellers, and they lose their margins. In Memphis $10 have been lost in futures to every dollar won. If spot cotton were bought and taken out of the market, and stored for future sale, with a view of profiting by the purchase, it would retire that much cotton off the market, and the prices would naturally advance. Future I O VOL XI- 4

dealings prevent this, by destroying speculation in spot cotton. Futures, like any other species of gambling, is injurious to the morals of the community. New York exchange regulates the price of cotton, and the brokers there "fool the people of the South." Futures govern the price of spots, have depressed prices, and make the market more irregular. As a general rule, no delivery is contem plated in futures. The condition of cotton growers has retrograded in the last 10 years, although the crop has been good for several years. Thinks futures in cotton more hurtful to the South than the "tariff or anything else."

[C. P. HUNT, aged 50, resides in Memphis, and is the manager for the Mississippi Valley Cotton Company.]

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"The business of futures in late years has become so inextricably interwoven with trade it is almost impossible to do without it. We would have to quit business tomorrow unless we could use the future board. We use it as an insurance against transactions and not as a vehicle of speculation.

This method of doing business furnishes a demand for cotton at all times, even when the mills and spinners are generally out of the market, and brings out a competition that would not exist were the seller and speculator to be done away with."

A variety of demand, no matter whether speculative or consumptive, brings about a competition that facilitates the sale of cotton and enhances its value. Spinners, dealers, and planters can profitably use the future market as an insurance, and to good profit, and in the interest of commerce. Gave an instance of his experience as a planter, where by the sale of his crop for future delivery he made $20 a bale more than he could have made by waiting to sell his cotton as spots.

Present low price of cotton not due to future dealings, but to actual causesthe large production and bad trade and lack of demand. The exceedingly large crop of 1892 reduced prices, and the milis stocked up heavily, making the invisible supply at the beginning of the next cotton year very large, as was also the visible supply; consequently the crop of 1893, though not large, was augmented by the excess left over from the preceding year, so that the supply was above the normal. The strike in Lancashire from November, 1892, to April, 1893, lessened consumption from 500,000 to 600,000 bales and lessened the demand that much. Argues from statistics that the price of cotton is regulated by the law of supply and demand.

Aside from the insurance features of future dealings, he knows of no benefits accruing therefrom except that they frequently give an impetus to the spot market and advance the price of spots. An advance in futures always creates a demand for spot cotton. If there were no future dealings the planters would be at the mercy of the consumers, who would purchase only as they needed the cotton, because speculators would not take the risk of buying cotton to hold for the demands of the consumers. One form of legitimate future dealings is to buy for future delivery on orders from Liverpool, such orders at present being unlimited. This is called basis buying. A man who buys cotton in the South for export to Liverpool and does not hedge against it by the sale of futures is regarded by the trade as a wild speculator, unworthy of confidence, and a gambler. In all sales made on the exchanges the brokers are the only persons known in the contract; but either the buyer or seller of cotton, under the rules of the exchange, may demand the names of the parties represented by the brokers. The brokers are protected by the margins put up in their hands, which is usually a dollar a bale to be kept unimpaired. There is not only an indemnity, but an insurance of profit by future dealings. The method of buying and selling futures against spot cotton has but taken the place of the old order of things. Formerly the broker bought the cotton on a commission for the spinner. Now the spinner buys direct from the broker. In most instances the spinner has sold his goods ahead, and buys the cotton ahead from some broker to insure and indemnify him against the loss in the sale of his goods which he has made. The broker buys the contract as a hedge against the sale he has made to the spinner, thus establishing the direct chain, and linking the future and legitimate business so closely that it is almost impossible to extirpate the one without killing the other."

Future quotations reasonably represent the cost of carrying spot cotton from the time the transaction is made until the month in which the contract matures. There may be gambling in futures as well as in other businesses-real estate for instance, or any other commodity.

The price of futures is not fixed on the board of trade arbitrarily, but is supposed to, and really does, reflect the actual price of cotton on the date of the contract. The large amount of future sales on the exchange does not prove that the majority of them are purely speculative, because the crop may be sold any number of times over. Many transactions, however, are mere wagers, perhaps one

half or two-thirds of them. But "the more cotton there is bought and sold on the New York exchange, the more impetus it gives to legitimate cotton, the more animation it infuses into the market, and the better the result to spot cotton." Cited instances in support of this statement, and says the only one damaged by the gambling transaction is the small speculator who, if he had not had a chance to bet his money away on cotton, would probably have done it at a faro bank."

In 1893, there was great speculation in cotton, many country merchants in the South buying it and holding it for higher prices. They got the country banks to pay for it, did not sell futures against it, with the result that many of them, and some of the banks, broke. All this would have been avoided had they sold contracts against it. In that year, up to December 5th, there were enormous sales of futures and a constantly rising market; but about that time the demand fell off owing to the Lancashire strike and the closing of the mills, and it began to be ascertained that a large amount of cotton had been carried over from the year before. These facts, together with the impending financial troubles in the United States, caused cotton to decline, but not to a greater extent than did other com modities and stocks of all kinds. The dealers in New York in November of that year, when prices were high and advancing, knew little more of the condition of the cotton than anyone else who was interested in the product.

The costs attendant upon future dealings do not come out of the producer, but out of the buyer. Future dealings are a valuable adjunct to legitimate trade, but may be abused like everything else. Is "fully convinced that the larger the speculation and the more speculators there are in the market bidding for the cotton, the more it enhances the price, and the more it redounds to the advantage of the producer." To derive a full and complete benefit "from the future market it should be left free and unrestricted." The reason such large fature sales are made in New York is because four-fifths of the spot cotton sold throughout the South, or three fourths of the spot cotton bought in the South, are hedged in New York or Liverpool. The exporters and the American spinners hedge in New York. The reason futures in New York on any given day in the year are lower than spots is as follows:

"Cotton arriving in New York City against which contracts have been sold, and which is intended for actual delivery, has, under the rules of the New York Cotton Exchange, to be certificated. In other words, it has to be received by a classer appointed by the New York Cotton Exchange; it has to be weighed and classified, and a certificate that it has been is attached to the contract, as also a certificate that the weights will hold out, making both grade and weight standard; that it costs anywhere from 18 to 25 points to obtain this certificate, in the shape of actual expenses. Therefore, contracts for the current month are generally a little below the price of spot cotton, as spot cotton must necessarily undergo the expense of certificating before it can be delivered on contracts, and that expense is deducted from the actual value of the spot cotton in order to fix the true value of contracts. It takes about 20 points, almost certainly 15 points, to certificate cotton, and that is about the premium on two months; it is from 7 to 8 points per month."

Spot cotton does not require any certificate where it is sold to a spinner. They rely upon personal examination.

The fact that in the New York exchange futures are sold on the basis of middling cotton has some tendency to make a disparity between futures and spots, because the buyer of futures never knows exactly what cotton he is going to get, which may be anything from "good ordinary" to "good middling," not below "good ordinary." He buys on the basis of middling, and pays for it on a sliding scale of prices, according to the grade delivered. This is in the interest of the producer, especially if he has a crop of low grades, as they can thus market such crops more easily and cheaply than in any other way. Futures are largely used in the market with no expectation of delivering the actual cotton, but more as insurance, nine-tenths of the business being thus transacted. The objection to taking the actual cotton in the future contracts is that buyers might not get the grade suitable for their purposes. Futures do not tend to increase the visible, at the expense of the invisible, supply. The only difference is that without futures the actual cotton would have been sent by the planters to the commission merchants to obtain money as advances, and it would thus be and remain unsold, continually seeking a market and depreciating prices. Future dealing increases business, furnishes an outlet, and leads to transactions that would otherwise be impossible. A spinner would not dare sell his goods six months ahead unless he was able to protect himself by the use of the future market.

Thinks that a large volume of future dealing frequently puts the market for spots higher than it would otherwise go, and when these contracts have to be sold out the market may break more than it would have done otherwise. They tend to

make the market less regular, but without them there would be low prices regularly. Future contracts are based purely on the value of spot cotton. In futures a preponderance of buying orders will advance the market a few points without reference to the value of spots, or vice versa; but whenever there is a serious advance or decline in futures it is based upon immediate or presumptive change in spot cotton. Brokers in New York, Liverpool, and New Orleans are not banded together, but are divided like everybody else. Natural causes and not artificial ones invariably influence the market. The interests of the consumers are opposed to futures because of the competition thus created. Southern people may be better posted in regard to the actual conditions of their crop, but they know less about the collateral and correlative conditions attached to cotton than anyone else; hence they generally lose when they speculate in futures. A corner to advance prices seldom, if ever, succeeds; but temporarily it advances prices, and is thus in the interests of the producer. The mass of the people who speculate in anything lose money. The New York and New Orleans exchanges do not cooperate, but often diverge considerably. Those exchanges have nothing to do with the price of cotton, except. perhaps, temporarily; supply and demand regulate the prices. They make money through commissions largely.

[FRED. B. JONES, aged 33, a cotton buyer, Memphis, for ten years.]

Futures are a necessary attribute of the cotton business; are an insurance to cotton buyers; and if properly used are very beneficial to the planter by reason of the fact that a market is always sustained for the product. To remove futures would put the producer entirely in the hands of the consumer, who could depress the price at his pleasure. Futures are regulated by spots. Futures in New York allude to the whole cotton trade of the country, and not alone to the spot cotton consigned to New York. That city is not a factorage cotton market. Thinks that one-third of the amount of futures is actually tendered in cotton. The others may be tendered but are often settled. The contracts are negotiable, and each one covers many transactions. Futures make the market for spots more regular and less fluctuating-narrower fluctuations. The worst thing you can do is to interfere with business arrangements that business men make for themselves."

[J. M. RICHARDSON, aged 33, cotton buyer, Memphis, for twelve years.]

Argued in favor of futures on same lines as preceding witnesses. Referring to the amount of futures on New York exchange, he said it ought to be cut in two, because the purchasers of it are also sellers, and each transaction is thus counted twice. Many transactions occur in respect of every lot dealt in, the contracts being negotiable and transferred from hand to hand. Showed that the largest future transactions occurred on the exchange when cotton was advancing and was highest in price. No doubt considerable was pure speculation-perhaps 25 per cent.

[J. F. FRANK, aged 73, merchant and planter, engaged in business for forty-seven years in Memphis, member of the exchange, and a cotton factor.]

Futures have nothing to do with the price of cotton. The great causes of the decline in price is spending the crops before they make them; another cause is "to work on shares:" another cause is the planters rush the cotton to market within ninety days and thus depress prices. Planters should also raise all the necessities of life, and their own supplies as far as they can. That would improve their condition and enable them to hold their cotton for a better price. Poor management on the part of the cotton planters, and not attending to their business, cause them to remain poor, and not futures.

[F. D. TALLEY, aged 61, a cotton buyer in Memphis for twenty-five years.] Belicves futures have greatly injured the cotton-producing business; have depressed prices because of the amount of fictitious cotton thrown on the market, and taken all speculation out of actual cotton, because they can trade with so much less money than in actual cotton. Regards the majority of deals as simply bets on what the price will be at a given time. Supply and demand may in the long run exert an influence on prices, but temporarily they do not. Thinks planters lose by the system at least $25,000,000 annually. Opposes futures on moral grounds, also, claiming that they are ruinous to men who deal in them, and injurious to the country generally. His testimony, generally, was on the same lines as that of preceding witnesses who oppose the future system.

[JOHN W. DILLARD, aged 55, for twenty-eight years a cotton factor in Memphis.] Opposes futures because their general result is adverse to the South. The strong cotton elements in New York manufacture a sentiment in the South that cotton is bound to advance, and then when the Southern people have bought great quantities of futures, New York puts prices down and buyers are all wiped out. Delivery is not contemplated except in a few transactions. Futures depress prices while the crop is being marketed, and generally advance them after the crop has left the hands of the producers. They have created a more uniform demand for cotton; fluctuations more numerous but less violent. Cotton growers in the South are getting poorer every year.

The South has lost as much money in futures since the war as it did by the war. Futures are a "genteel" form of gambling.

[T. J. MCCARTHY, aged 46, cotton dealer in Memphis for twenty-seven years.] The principal causes of the low price of cotton are overproduction, the Baring panic, the Manchester strike, and the financial depression in America. Had it not been for the sustaining influence of futures it would have gone still lower, because if that method of insuring against losses had been removed, spot cotton would have been a drug on the market. A buyer of spot cotton will not purchase unless it is exceptionally cheap, while in futures, the price cuts no figure, as hedge sales can be made no matter what the price may be. Not futures, but supply and demand, regulate the price of cotton. Futures most active when prices are high and advancing. Future business is an insurance, and if removed the result will be disastrous to the cotton business. There is not a single transaction in all the future business on the New York Cotton Exchange where a man wanted to get the actual cotton but what he could get it. New York is a clearing house for the cotton trade of the world. The greater portion of the cotton sent abroad is covered in New York, simply because New York is relatively a higher market than Liverpool for spot or anything. Whenever a man has cotton to hedge, he hedges it in the dearest market. From personal knowledge can say that in Memphis three-fourths of the transactions in futures are based upon spot transactions in some way.

It is utterly impracticable, as a rule, for the producer to sell futures against his crop, because the great bulk of the producers are small and have no knowledge whatever of the machinery of commerce, and only the large planter would be able to sell. Does not think it possible for any legislation passed by Congress to reach the illegal transactions. Whenever the Government starts to regulate trade customs in an arbitrary way it simply results in making trouble for the trade and injures all connected with the trade. To abolish futures would result in the formation of a manufacturers' trust, which would name the prices fixed for cotton and would transfer the future business abroad, making Liverpool the center of the cotton trade of the world to a greater extent than it is to-day. The crop is marketed better than it would be without futures. Sales can now be made at almost any small town in the South at practically the same price that obtains in the cotton centers; whereas, under the old system, only the largest towns dealt in cotton. This system has grown up because it was needed. Doing away with futures would enable the consumer of cotton to get his cotton cheaper than he can now. With the advance of civilization the consumption of cotton has increased. The improvement in machinery has had something to do with this increase.

[L. A. SCARBOROUGH, for twenty-four years a cotton buyer in Memphis.] Believes the future system at the time it was inaugurated had a tendency to enhance prices, but thinks as at present carried on the reverse is true. The general tendency is to impoverish the producers of cotton and depreciate the price of the product and the value of their lands. Thinks the South has lost $500,000,000 by the system in the last 20 years. Thinks the New York Cotton Exchange has entire control over the market and can fix prices as they choose. Does not think the law of supply and demand has very much influence on the market as now conducted. Futures have destroyed speculation in real cotton, and they make the market more irregular than it was before. Regards the system as a gambling scheme and as detrimental to any community in which it is carried on.

[JAMES E. GOODLETT, aged 51, a cotton factor in Memphis for twenty-seven years.] Never dealt in futures. Thinks such dealing has almost entirely destroyed the legitimate buying of cotton and has been very demoralizing to the people of the South, as they have lost large sums of money in New York. Futures have a tendency to decrease the demand for cotton, at least at the time the crop is coming in.