a spinner who is asked to quote for deliveries of yarn for, say,
the next six months, may obtain from a broker quotations for deliveries
of the cotton that he needs, in quantities as he needs it, for the next
six months, and upon these quotations he may base his own for yarn. If a
spinner is pressed by a shipper to make quotations with refusal for two
or three days to give time for business to be settled by cable, it is
evidently not impossible for the spinner to shift the risk involved by
getting in turn from his broker refusal quotations for cotton. But
spinners do not try always to take the safest course.

Method of distributing risks.

Now it is evident that brokers in turn require some means of passing on
the risks that they are bearing, or some portion of them from one to
another, or of sharing them with other market experts, as they find
themselves overburdened, and as their judgment of the situation changes.
The means have been provided in the "futures" which circulate on the
Cotton Exchange. The risks of anticipating are carried by those who
create or hold "futures" without a hedge. In order to facilitate
business, "futures" are all drawn in the same unit (100 bales), and are
all based on the same class of cotton, namely Upland cotton of middling
grade of "no staple" (i.e. with a fibre of about 3/4 in.) and of the worst
growth. American cotton, we may remind the reader, is graded into a
number of classes, both on the Liverpool and New York Exchanges, and an
attempt is made in each market to keep the grades as fixed as possible.
But what, it may be inquired, is the value of "futures" relating to
"middling" cotton to a broker whose contracts with spinners are not in
"middling" cotton? The answer is that though the ratios between the
prices of the various grades alter, the prices of all of them move
generally together, and that the "futures" of the Exchange at least
provide a hedge against the latter movements. Other things being equal,
the broker would be better off if he could hedge with equal ease against
all his risks. But other things are not equal: the market would be more
confusing and quotations would be complicated if "futures" were in use
for all grades.

Characteristics of "futures."

We may now examine the exchange "futures" in minuter detail. They are
quoted as a rule for about ten months ahead. Thus in January the futures
quoted will be January (technically termed "current," "present mont