26 BULLETIN 1444, U. S. DEPARTMENT OF AGRICULTURE 
The board of directors governs the organization largely through 
committees. The important committees are those on membership, 
rules, information and statistics, finance, arbitration, appeals, spot 
quotations, contracts for future delivery, classification and supervi- 
sion, and deliveries. 
Any person of age, good character, and commercial standing may 
become a member of the exchange, provided he is recommended by 
the committee on membership and is approved by a majority of the 
board of directors under certain prescribed rules. In addition to the 
initiation fee of $500 and annual dues of $150, members may be 
called upon to pay other small fees and taxes. At present each mem- 
ber must pay 6 cents on each futures contract sold, as assessments to- 
ward the building fund of the exchange. Each must also pay 0.75 
cent on each bale of spot cotton sold or bought, as a levee inspection 
fee. 18 
The exchange states the purposes of the association as follows: 
The purposes of this association shall be to provide and maintain suitable 
rooms for a cotton and commercial exchange, in the city of New Orleans ; to 
adjust controversies between members; to establish just and equitable prin- 
ciples, uniform usages, rules and regulations, and standards for classifications, 
all of which shall be for the government of transactions in cotton or other ar- 
ticles or matters of trade between members ; to acquire, preserve, and dissemi- 
nate information connected therewith ; to decrease the risks incident thereto, 
and generally to promote the interests of the trade and the amount of the cot- 
ton and other business in the city of New Orleans. 
The futures market performs several functions. It is essentially 
a price-making organization. The thing traded in is a contract for 
future delivery of cotton. It is based on Middling but may be settled 
by the delivery of other grades at the prevailing differences. Thus 
it does not represent the value of any particular grade of cotton, 
though the more perfectly it functions, the more nearly the basis 
price approaches the price of Middling spot cotton. The price made 
is a general level representing the relative price position of all cot- 
ton, rather than the price of any particular grade. The market is 
conducted essentially as reciprocal auction, though the buyer is not 
compelled to receive at a higher price than his bid or the seller to 
take a lower price than that offered. Every influence which is calcu- 
lated to affect the supply of or demand for cotton, either at present 
or within 12 months, may register its influence immediately on the 
price in the futures market. It may be weather conditions in the 
Cotton Belt, business conditions, or a calamity like the earthquake 
in Japan. The price at any time is a balance of the judgments of 
those buying and selling in the market. When it is realized that 
each has a different temperament, different contacts and sources of 
information, and different amounts of money, it is no wonder that 
the price fluctuates almost continuously, and sometimes radically. 
Because there are so many different classes of cotton with highly 
specialized uses, the futures market is ordinarily an unsatisfactory 
place in which to buy and sell spot cotton. Those who deal in spots 
have found a way to use the price-making facilities of the futures 
market and at the same time carry on their spot business in another 
market better adapted to spot transactions. They use the futures 
18 Charter, Constitution, By-laws, and Rules, New Orleans Cotton Exchange, 1924, p. 13. 
