Liverpool's Cotton Brokers
PLEASE NOTE - This page is under construction!
On this page:
1. Introduction
2. Sources
3. How Liverpool's Cotton Brokers Traded Cotton for Others
4. Provision of Credit
1. Introduction
2. Sources
3. How Liverpool's Cotton Brokers Traded Cotton for Others
4. Provision of Credit
1. Introduction
Liverpool's cotton brokers were absolutely central to the Liverpool market. It was they who sold the cotton imported by merchants and bought it for the cotton spinning industry. In many ways, the brokers were the most powerful group of traders in the market. A matter that importing merchants and cotton-buying spinners acknowledged. It was the brokers' organization, 'The Liverpool Cotton Brokers Association" that effectively governed the market, drew up trading rules, designed the contracts all market users employed, and arbitrated in trading disputes. One cannot truly understand the Liverpool cotton market with understanding its cotton brokers. Indeed, as discussed on another page of this website: The emergence of the Liverpool cotton broker was the emergence of the Liverpool cotton market.
2. Sources
Despite the large number of cotton brokers and their importance to the Liverpool market and wider cotton trade, there is relatively little in print concerning them. The most important book examining the matter is Thomas Ellison's The Cotton Trade of Great Britain, published in 1886 (London: 1886). This work is an immensely useful introduction to the subject but it has its limitations. In the first place, it was published in 1886 and hence later developments are not included. Ellison does not examine in detail the business interests and trading practices of the brokers. A valuable short article was published in the 1950s by Francis E. Hyde, Bradbury B. Parkinson, and Sheila Marriner: 'The Cotton Broker and the Rise of the Liverpool Cotton Market' (Economic History Review, 2nd series, VIII (1955), pp. 75-83). This is a study of the ledger of an early Liverpool cotton broker, Nicholas Waterhouse, which survives from the turn of the eighteenth and nineteenth centuries. Beyond these works, there is little to guide the historian.
The archival sources for studying Liverpool's cotton brokers are not plentiful and it is perhaps this paucity which has deterred historians from researching the subject in more recent times. Liverpool University Library contains the ledger belonging to the broker, Nicholas Waterhouse, mentioned above (Liverpool University Library, special collections, Liverpool, MS24.54, Ledger, Nicholas Waterhouse). In the Liverpool Record Office there are records belonging to the broking firms of Francis Reynolds (Liverpool Record 0ffice: Ledger, Francis Reynolds, acc. 1216), and two important broking houses: Reynolds & Gibson (Liverpool Record 0ffice:, acc. 1216, ledgers, journals, and miscellaneous papers, Reynolds & Gibson), and George Holt & Co. (Liverpool Record Office: MD220 to MD230, account books, joumals, and letters, George Holt & Co). Some brokers' records have survived in record offices Beyond Liverpool including those of M. & J. Pool in Trowbridge, Wiltshire (Wiltshire Record) Office, Trowbridge: 946, ledgers, letter books, notebooks, M. & J. Pool). A few papers of Sykes & Allen in the Denbigshire Record Office in North Wales (Denbighshire Record Office, Rhuthun/Ruthin: DD/HB, miscellaneous papers and legal documents, Sykes & Allen). and a few documents belonging to the broking firm of Thomas Haigh & Co. in the Public Record Office, London (National Archives: Public Record Office: J 90/994 to J 90/998, letter books, notebooks and miscellaneous papers of Thomas Haigh employed as evidence in case of Mertens vs Haigh). The limited number of surviving brokers' records can be compensated for by records belonging to banks and merchant banks, the records of which often contain discussions and assessments of particular Liverpool broking firms. Of especial help are the records of the Bank of Liverpool (Barclays Group Archives, Wythenshawe, Greater Manchester, minute and reference books, Bank of Liverpool), the Liverpool branch of the Bank of England (Bank of England, London: C127, letter books, Liverpool branch of the Bank of England), Baring Brothers (ING Bank NV (Barings), London Wall, London, letter books, reference books, memoranda, and miscellaneous papers, Baring Brothers), and Kleinwort, Benson & Co. (London Metropolitan Archives: )
3. How Liverpool's Cotton Brokers Traded Cotton for Others
The core of the Liverpool cotton brokers' business was selling the cotton imported by merchants and buying it for spinners. The broker acting for the merchant would sort the merchant's cotton imports into lots of similar grades of cotton - a task which was particularly important with American cotton (which accounted for the vast majority of the imports) because bales could vary considerably. The broker would value the cotton and then extract a sample from every bale which would be fixed onto a roll of brown paper and kept in the broker's office. The broker buying cotton for a spinner would inspect these samples and select the cotton which he knew from his experience his spinner would require for the types of yarn he spun. Alternatively, the buying broker would collect a large range of samples and take them to his own office. The spinner would then visit Liverpool, examine these samples with his broker and make the selection in that way; this was certainly a common practice by the early 1840s, with the new railways making it easier for spinners from across the north-west of England to visit their brokers. Occasionally, cotton samples would be sent by Liverpool brokers for spinners to peruse at their mill; this practice can be traced back to the very beginning of the nineteenth century and appears to have continued throughout the period under discussion. For instance, in 1806 we find a reference to M. & J. Pool sending samples by coach to the spinner, John Eamer in Preston (Wiltshire Record 0ffice: 946/281, 3 Nov. 1806 letter from John Earner to M. & J. Pool). In the 1870s in the records of the Lostock Hall Spinning Company, also of Preston, there are references to the directors of the firm both being sent cotton samples and visiting Liverpool to inspect samples in person (Lancashire Record Office, Preston: DDX 938/2, Minute Book No. I, 25 Jun. 1877, Lostock Hall Spinning Co.
Ltd, and DDX 938/3, Minute Book No. 2, 15 Oct. 1877, Lostock Hall Spinning Co. Ltd.). The brokers earned commission of ½ per cent on the value of the cotton they bought or sold. In addition to buying the cotton, the purchasing broker would arrange for the cotton to be sent to the spinner - by canal or railway - or stored in Liverpool if there was insufficient warehousing space at the spinner's mill.
Ltd, and DDX 938/3, Minute Book No. 2, 15 Oct. 1877, Lostock Hall Spinning Co. Ltd.). The brokers earned commission of ½ per cent on the value of the cotton they bought or sold. In addition to buying the cotton, the purchasing broker would arrange for the cotton to be sent to the spinner - by canal or railway - or stored in Liverpool if there was insufficient warehousing space at the spinner's mill.
Liverpool's brokers sometimes acted for merchants who did not have a place of business in Liverpool or even in the United Kingdom. Some merchants, particularly from London in the early nineteenth century, employed brokers to oversee the importation of cotton shipments through Liverpool as well as to arrange their sale, hence leading the broker to act almost as a commission merchant. For instance, the cotton brokers Michael and Joseph Pool are recorded in the early nineteenth century as handling the Liverpool bound cotton cargoes of the important London merchant, John Tunno, who traded with the United States (Wiltshire Record Office: 946/290, Journal, 7 Mar. 1817 and p.45 (John Tunno's account with M. &J. Pool for 1817), M. & J. Pool). In the later nineteenth century, the Liverpool cotton brokers, Reynolds & Gibson, handled the imports of Egyptian cotton into Liverpool for several firms based in London and Egypt (Liverpool Record Office: acc. 1216, ledgers, No. I D and No. 1 L, Reynolds & Gibson).
On the buying side, some mainland European cotton spinners (for instance in France, Germany or Belgium) bought a proportion of their cotton at Liverpool because of the extensive range of cotton on offer in the large Liverpool market. This cotton re-export trade from Liverpool was at its greatest magnitude in the1860s and 1870s - before the development (in the later nineteenth century) of more substantial direct shipments of cotton to Continental ports such as Havre and Bremen from cotton growing countries. There were specialist cotton exporting merchants based in Liverpool, often branch houses of firms established elsewhere in Europe. However, the records of Reynolds & Gibson indicate that this broking firm also exported cotton. It is recorded that they shipped cotton to several spinners in Ghent in the early 1870s (Liverpool Record Office: acc. 1216, Ledger No. 1 D, Reynolds & Gibson). In the early twentieth century the Liverpool broker Paul Hemelryk referred to this exportation by brokers in a manner which suggests it was relatively common (P. E. J. Hemelryk, Forty Years' Reminiscences of the Cotton Market (Liverpool, 1916), pp. 6-13).
A new source of brokerage income opened up for the Liverpool's cotton brokers with the development of a cotton 'futures' market in Liverpool in the 1860s and 1870s - becoming Britain's first futures market. Liverpool cotton futures were, in a sense, a paper currency for cotton - promises to supply fixed amounts of American cotton at some date in the future. These contracts were used both for 'hedging' and for speculation. By trading futures in tandem with actual or 'spot' cotton, importers, holders of stocks and spinners could guard, or 'hedge', themselves against a fall in the value of the cotton they possessed. Futures trading developed still further with the opening of a futures market for Egyptian cotton in Liverpool in 1896 and, from around the tum of the century, a cotton options market emerged in the port. Futures contracts were bought and sold for clients by Liverpool's cotton brokers at a commission rate of ½ percent of the contract's value; in 1882 the rate was reduced to ¼ percent (see: Nigel Hall, 'The Liverpool cotton market: Britain's first futures market', in Transactions of the Historic Society of Lancashire and Cheshire, 149 (2000), 99-118).
Futures trading became a valuable source of income for Liverpool's cotton brokers. It is difficult to estimate quite how much commission cotton brokers in general earned from futures trading because, during this period, statistics of trading volume were not kept. The records of Reynolds & Gibson (by the eve of the First World War, Liverpool's largest broking firm) may be indicative. The total income of this firm in 1913 was £59,176 6s. 0d., of which no less than £23,275 was contributed by brokerage on futures contracts (Liverpool Record Office: acc. 1216, Ledger No. 3 B, Reynolds & Gibson). There is even some indication that in the years before 1914, some broking houses were beginning to specialize in futures (rather than the physical commodity); in 1909, Homby, Hemelryk & Co. was described as a firm which specifically concentrated on futures trading (Barclays Group Archives: acc. 25/150, Reference Book 'Sundry Enquiries', p. 5, Bank of Liverpool).
Some brokers developed other specialisms in the late nineteenth and early twentieth centuries, for instance concentrating upon one particular type of cotton. Most of the cotton imported into Liverpool came from the United States, but the records of Reynolds & Gibson for this later period indicate a strong interest in Egyptian cotton
which is not evident in the records of this firm dating from earlier periods (Liverpool Record Office: acc. 1216, ledgers, Reynolds & Gibson). In 1908, the cotton broker George Bridge was described as being associated with firms which imported Egyptian cotton. L. H. Chinn in the same year was described as having been an apprentice in the firm of J. P. Schilizz, a broking firm again specializing in Egyptian cotton, and Chinn had maintained this interest when he founded his own broking house, supplying mills which specialized in spinning Egyptian cotton, particularly in the Bolton area of Lancashire (J. Wallace Coop and Seymour Taylor, Bulls and Bears: Cartoons of Members and Ring Traders of the Liverpool Cotton Exchange (Liverpool, 1908) [unpaginated] nos 15, 25).
which is not evident in the records of this firm dating from earlier periods (Liverpool Record Office: acc. 1216, ledgers, Reynolds & Gibson). In 1908, the cotton broker George Bridge was described as being associated with firms which imported Egyptian cotton. L. H. Chinn in the same year was described as having been an apprentice in the firm of J. P. Schilizz, a broking firm again specializing in Egyptian cotton, and Chinn had maintained this interest when he founded his own broking house, supplying mills which specialized in spinning Egyptian cotton, particularly in the Bolton area of Lancashire (J. Wallace Coop and Seymour Taylor, Bulls and Bears: Cartoons of Members and Ring Traders of the Liverpool Cotton Exchange (Liverpool, 1908) [unpaginated] nos 15, 25).
4. Provision of Credit
A key service provided by Liverpool’s cotton brokers was that of supplying credit to cotton importing merchants. The records of the brokers Nicholas Waterhouse and M. & J. Pool from around the turn of the eighteenth and nineteenth centuries indicate that both firms extended credit to merchants; other contemporary Liverpool brokers were certainly providing a similar service (see: United Kingdom, Parliamentary Papers, Report from the Select Committee on the Law Relating to Merchants, Agents, or Factors (1823), 153-4 (evidence of Samuel Hope, a Liverpool cotton broker). When a merchant’s cotton was landed in Liverpool and placed in the hands of Waterhouse or the Pools, they would grant credit to the merchant with the cotton forming the collateral. As the cotton was gradually sold by the broker, the debt would be paid off. Waterhouse, in particular, advanced considerable sums to merchants. The merchanting house of Thomas and William Earle was one of Waterhouse’s key clients, at one point, April 1801, this house had received credit from Waterhouse to the enormous extent of £23,505 2s 0d (Liverpool University Library: MS24.54, Ledger, Nicholas Waterhouse). Waterhouse also acted for other important Liverpool merchanting firms of the period, including Cropper, Benson & Rathbone, Tarletons, Hughes & Duncan; to these firms he again extended liberal credit. The Pools, like Waterhouse, made some very large advances. For example, their records suggest that in July 1811, the merchant William Greenwood was in their debt to a sum in excess of £23,000 (Wiltshire Record Office: 946/284, 'Balances due this day' 5 Jul. 1811, Journal, M. & J. Pool). One needs to be careful of assuming that the amount of credit provided by Waterhouse or the Pools was necessarily typical at the time; both firms were of considerable standing. Nicholas Waterhouse & Sons was certainly the largest cotton broking business in Liverpool at this early date, while the records of M. & J. Pool indicate that this partnership had considerable resources, boasting an apparent capital in 1811 of £38,367 17s 0d (Wiltshire Record Office: 946/284, 'Balances due this day' 5 Jul. 1811, Journal, M. & J. Pool).