prices on the preceding Monday are
taken as the basis of the settlement. From all differences interest at
5% is deducted for the time between settlement day and the tenth day of
the second month on which the "future" elapses, since settlement terms
mean that money is paid in instalments before it is actually due. To the
admission of periodic settlements there was for a time vehement
opposition on the ground that the door would be opened to gambling on
"differences." Hence at first, in 1882, they were used only by a section
of the market constituted of members who had voluntarily agreed to do
business with one another upon these terms alone. By 1884, however, the
advantages of "settlement terms" became so evident that they were
adopted by the Cotton Association, at first for fortnightly periods,
with the saving clause originally that they should not be compulsory.

Origin of Liverpool Cotton Association.

As soon as the clearing house was set up it became evident that
"futures" were an impossibility away from it. At the same time "futures"
were becoming an increasing necessity to importers, because through
"futures" alone could they hedge on their purchases of cotton, or buy
when the market seemed favourable, and they were not prepared to assume
heavy risks. Now from the clearing house importers were rigorously
excluded, and on invoking the aid of "futures," therefore, they were
penalized to the extent of double broker's commission, one commission
being charged on the sale of the "futures" and one on their purchase
back. The importers, therefore, found it necessary to establish a club
of their own, the Liverpool Cotton Exchange, which they as rigorously
guarded against brokers. The split in the market so caused was so
damaging to both parties that a satisfactory arrangement was eventually
agreed upon, and both institutions were absorbed in the Liverpool Cotton
Association.

Publication of information relating to demand and supply.

A condition of specialist dealers working to the public service is that
they should not act in the dark. They must watch demand, be able to form
reasonable anticipations of its movements, and at the same time know
the existing stocks of cotton, the sales taking place from day to day,
and the best forecasts of the coming supplies. A man accustomed to
devote the whole of his time to the study of demand and supply in
relation to cotton, after some years of experience, will be qualified