Regulation P, above referred to, in series of 1915, here follows:

Bills of Exchange Drawn Against Sales of Goods and Accepted by Purchasers Hereinafter Referred to as "Trade Acceptances."

I. Definition

In this regulation, the term "trade acceptance" is defined as a bill of exchange of the character hereinafter described, drawn to order, having a definite maturity and payable in dollars in the United States, the obligation to pay which has been accepted by an acknowledgment, written or stamped, and signed across the face of the instrument by the company, firm or corporation, or person upon whom it is drawn; such agreement to be to the effect that the acceptor will pay at maturity according to its tenor, such draft or bill without qualifying conditions.

II. Character of Paper Eligible

A trade acceptance, to be eligible for rediscount, under Section 13, with a Federal Reserve Bank at the rate to be established for trade acceptances,

(a) must be indorsed by a member bank, accompanied by waiver of demand, notice and protest,

(b) must have a maturity at the time of discount of not more than ninety days,

(c) must be accepted by the purchaser of goods sold to him by the drawer of the bill and the bill must have been drawn against an indebtedness expressly incurred by the acceptor in the purchase of such goods.

III. Method of Certifying Eligibility

A trade acceptance must bear on its face, or be accompanied by evidence in form satisfactory to the Federal Reserve Bank, that it is drawn by the seller of goods on the purchaser of such goods. Such evidence may consist of a certificate on or accompanying the acceptance, to the following effect: "The obligation of the acceptor of this bill arises out of a purchase of goods from the drawer." Such certificate may be accepted by the Federal Reserve Bank as sufficient evidence; provided, however, that the Federal Reserve Bank, in its discretion may inquire into the exact nature of the transaction underlying the acceptance."

From this circular, it will be noted that the Federal Reserve Board recognizes trade acceptances as comprising a distinct class of commercial paper and subject to rediscount at rates somewhat lower (usually one-quarter to one-half of one percent.) than that applicable to other commercial paper. The Federal Reserve Board also especially commends this paper as a class of double name paper, which has shown itself in so many countries a desirable form of investment and an important factor of modern commercial systems.

The recommendation of the Federal Reserve Board to the effect that acceptances are a high grade commercial paper, commends this form of credit to the study and use of the merchants and manufacturers of the United States of America.

From the foregoing, we may, therefore, define the term "trade acceptance" as follows:

"A bill of exchange, drawn to order, having a definite maturity, and payable in dollars in the United States, the obligation to pay which has been accepted by an acknowledgment, written or stamped, and signed, across the face of the instrument, by the company, firm, corporation or person, upon whom it is drawn; such agreement to be to the effect that the acceptor will pay at maturity according to its tenor, such bill without qualifying conditions."

Or, in other words, a trade acceptance is an order to pay, drawn by the seller and accepted by the buyer, and represents transactions in merchandise only, as stated on its face. They are time bills of exchange and serve the same purpose as a transfer of gold itself in the cancellation of debts, and are regarded by economists as a special sort of currency.

Trade acceptances are in fact two name paper and have behind them not only the names of the acceptor and the drawer, but the additional advantage of representing actual transactions in commodities.

Trade acceptances are eligible for rediscount by member banks with Federal Reserve Banks up to fifty percent, and where authorized by the Federal Reserve Board, up to one hundred percent of the capital and surplus, which again shows the high esteem in which they are held under the law.

The general use of acceptances is strongly encouraged by the Federal Reserve Board and by the various Federal Reserve Banks to the end that they may be used freely by member banks and depositors therein. The Board has shown no hesitancy at any time to do its full share towards developing the acceptance method in this country, and has given the most careful attention to its development as evidence of its practicability.