COTTON PRICES AND MARKETS 23 
staple lengths, and finally, the "on" for delivery of even-running 
cotton at the mill warehouse. After agreement has been reached on 
these three points, the mill is usually given the privilege of calling 
the day when the price is to be fixed; that is, the future price to 
which the " ons " and " offs " shall be added or subtracted to 
make the price. The spinner prefers the call because it gives him 
advantages in bargaining for the sale of his product and relieves him 
of the duties of hedging. The merchant does not care particularly, 
because his interest usually coincides with that of the spinner. The 
spinner wishes to call the price when futures are low, and this suits 
the merchant, for he can buy his hedges back cheaply. 
EXILES GOVERNING TRANSACTIONS IN SPINNERS' MARKETS 
The rules governing the purchase and sale of cotton in spinners' 
markets are made and administered by the trade organizations at 
interest: (1) The spinners, (2) the cotton dealers, and (3) the south- 
ern shippers. Throughout New England there is one body of rules 
known as "New England terms for buying and selling American 
cotton." These rules are accepted by the Arkwright Club, represent- 
ing the mills, and by the New England Cotton Buyers' Association, 
the Fall River Cotton Buyers' Association, and the Providence Cot- 
ton Buyers' Association. 
The rules define what constitutes satisfactory shipments and the 
percentage of variation above and below the grade ,or type specified 
that may be delivered. Thus they provide that " sales calling for 
even-running grades or made on type, may contain 5 per cent a 
grade below the grade specified if offset by an equal number of bales 
a grade above that specified — any excess of low grades may be re- 
jected by the purchaser, or claimed for at an allowance. If rejected, 
the seller is to have the right to replace and the«purchaser may re- 
quire replacement. The cost and actual expenses of handling rejec- 
tions shall be paid by the seller." 
The rules lay down detailed plans of procedure in such matters as 
arbitration, classification of cotton, making and settling claims, 
rejections, replacements, fixing handling charges, and adjustment of 
transportation rates and insurances. 12 
FUTURES MARKETS 13 
A futures market is a place where cotton is bought and sold for 
future delivery on a rigidly standardized contract. Futures mar- 
kets are formed by an association, and transactions are made only 
through members, whereas spot markets are generally free markets. 
Futures markets differ from spot markets primarily because con- 
tracts for the future delivery of cotton, or " futures," are bought and 
sold in them as well as contracts for the delivery of spot cotton, 
or " spots." Both kinds of contract are defined here to prevent con- 
fusion because of the close relationship between the two. The fol- 
lowing discussion applies particularly to the transactions on the Xew 
York and the New Orleans exchanges. 
12 For details see New England Terms for Buying and Selling American Cotton, 1924. 
13 For a discussion of the origin of the Futures Market, see Cox,, Alonzo B., evolu- 
tion of cotton .marketing. Mimeographed report. 
