Here is still another newspaper quotation, which, while not applying directly to foreign exchange, materially affects its rates in the western market: "New York exchange - 30 cents discount before clearings, 40 cents discount after clearings." The expressions "before" and "after clearings" mean before or after the meeting of the bank clearing-house, a meeting held each day about 11 a. m. by representatives of the different banks to exchange debits and credits with each other. "New York exchange" means checks payable by a bank in New York. Thirty cents discount in this case would mean that New York exchange, in sales between banks (not as a rule with the public), would be sold at a discount of 30 cents for each $1,000. If New York exchange were quoted at a premium of 30 cents, they would charge 30 cents additional per $1,000. The reason why the rates for New York exchange affect the rates for foreign exchange in the West is that the rates in the West and elsewhere in the United States are based on - or I might say controlled by - the rates in New York, because New York is the principal buying market. Therefore if New York exchange here is at a discount, on large transactions banks would sell you a draft on London or other foreign city at the rate of 30 cents per $1,000, less than you could buy it for in New York; or, if at a premium, the rate would be that much per $1,000 higher than New York rates, providing of course you paid in cash or local funds.

Foreign Bill of Exchange.