COTTON PRICES AND MARKETS 35 
o'clock shall be deposited one hour before the close of the exchange. 
The price which governs is the one established by the midday call 
and posted about 1 p. m., 
The size of the margin required by different members of the 
exchange for their customers on the outside, and the accommoda- 
tious given, are not uniform. One important firm in June, 1924, 
was requiring an original margin of $15 per bale. This margin 
had to be kept good. Such a margin was required by the above 
firm when the original margin was impaired as much as 25 points 
or $1.25 per bale. If the price change is to the interest of the 
customer, some firms permit him to draw down his profits if he is 
a good client, and especially if his business is in the nature of a 
hedge rather than a speculation. When a member executes a client's 
contracts he must take care of the required margins with the clear- 
ing house as though he were the party at interest and not a mere 
broker. 
THE CLEARING HOUSE 
The clearing house is not technically a part of the exchange. It 
was organized by the members of the exchange for their service only. 
(1) It clears money values on differences, (2) it clears the con- 
tracts, and (3) it guarantees, in a measure, against loss. The clear- 
ing house system was first used in New York and applied only to 
money values or differences. In 1915 the system was modified to 
include contracts and the guarantee features. New Orleans adopted 
the clearing-house system of settlement in the spring of 1924, 
The principles of a commodity clearing house are essentially like 
those of a clearing house for banks, except for the insurance 
features. The contracts executed during the day are all properly 
signed and exchanged with the different members with whom busi- 
ness has been done. When this has been done, each member makes 
up separate lists of sales and purchases by months. The totals 
from these sheets are transferred to what is known as the clearing- 
house sheet, which not only summarizes the business of the day, 
but in addition shows the amount carried over from yesterday, the 
amount carried over for to-morrow, the settling price, the financial 
statement, and the margin requirements. 
When the documents are made up and balanced, the check is at- 
tached to them and sent to the clearing house, which assumes the 
obligation of buyer to the seller and of seller to the buyer. The 
actual contracts are cleared on the principle of earliest date, highest 
price. The settlement price is fixed by the quotation committee and 
must be within 10 points of the bid price at the close of the day. 
SETTLEMENT OF CONTRACTS 
Broadly speaking, future contracts may be settled by " offset " ; 
that is, by buying back or selling contracts previously sold or bought ; 
or they may be settled by the delivery or receipt of the required num- 
ber of bales of spot cotton to cover the contracts previously sold or 
bought. 
Offset method. — Most of the contracts for the future delivery of 
cotton are settled without the actual delivery of spot cotton. The 
