A glance at a newspaper will show that in addition to cable transfer and demand rates there are a variety of other rates generally quoted - bankers' bills and various kinds of commercial bills drawn for varying periods of time. Rates for these bills are always lower than demand rates. If the demand rate on London was $4.86, the rate on bankers' 60-day bills might be $4.83, and it might be found that the rate on a certain class of commercial bills was $4.82 1/2 and on another kind $4.82. The quotations on time bills are less than those for demand exchange by the amount of the varying costs of discounting them in the foreign country on which they are drawn, and by the stable costs of commissions and stamp taxes. If the rate of discount on a 60-day banker's bill is 3% in London, then the quotation for a bill of similar kind in New York will be the sight rate of exchange less the discount and other charges on the bill in London. Should the discount rate in London advance on that particular kind of bill, then the quotation will move somewhat farther away from the sight rate. The reason for the different prices or quotations for the various kinds of time bills is that there is a scale of discount rates in the London market dependent upon the character of the bill, the lowest rate being on bills drawn for acceptance on a London bank or acceptance house.

Bills without documents, known as clean bills, can be marketed by drawers of well-known and established credit, but most foreign trade gives rise to documentary bills of exchange. The seller draws a bill of exchange upon the purchaser, or upon the bank of the purchaser, attaching to the bill various documents, the most important being the bill of lading, without which it is impossible to secure possession of the goods. Documentary bills are of two kinds, documentary for payment of and documentary acceptance bills. In the case of documentary payment bills the purchaser of the goods cannot get possession of them until he has paid the bill of exchange. These payment bills, again, may be classified as those drawn against sales of perishable goods and such other goods as the purchaser is fairly certain to want immediately upon arrival, and those drawn in connection with goods which the purchasermay not want until the bill matures. If the purchaser desires the goods immediately and makes payment, he is allowed a rebate, which, in the case of English bills, is 1% below the current Bank of England rate. Therefore the maximum price of such bills is the sight rate of exchange, less the rebate and the ordinary commission and stamp tax. If the goods are of a kind which are not likely to be wanted by the purchaser until maturity of the bill of exchange, then the dealer purchasing the bill may be ooliged to hold it until maturity. It cannot be discounted, because the purchaser of the goods may at any time exercise his right of taking up the bill. The exchange dealer may, however, use such bills as collateral, drawing his own bills upon his foreign correspondent.

Documentary acceptance bills are of two kinds - those which are drawn for acceptance on a merchant, and those which are drawn on a bank or acceptance house. Documentary acceptance bills on merchants are regularly discounted at a slightly higher rate in London, and consequently the price of such a bill in this country will be slightly lower than documentary bills on London banks and bankers. For this reason, to an increasing extent the bank acceptance is displacing the commercial bill in foreign trade throughout the world. The importer, for example, secures an acceptance credit for some definite amount with a well-known bank in his own or some other country. He then instructs his agent, or those from whom he purchases goods, to draw bills accompanied by shipping documents upon the accepting bank. Similarly the exporter may draw bills on banks in his own or in some other country with which his customers have established acceptance credits.

The United States, like other rapidly developing countries, has not in the past financed any appreciable amount of its foreign trade, either of exports or of imports. Demands for capital within the country have been so great that rates for loans have regularly been above those in European money centers, and especially in London. London, and to the same extent other European money markets, have, therefore, financed not only the trade between Europe and the rest of the world, but also trade between non-European countries.

Let us take, for example, the case of an importation of wool to the United States from Australia. The most common way of arranging payment has been through thecommercial letter of credit on a London bank. Let us suppose that a Boston wool house is about to purchase a cargo of wool. It will secure through some foreign exchange banker in this country an acceptance credit with a London bank. Under the terms of this credit, the agent in Australia of the Boston wool house will be empowered to draw documentary acceptance bills up to a certain amount on the London bank. Upon the purchase of the wool a bill on the London bank is drawn, and with shipping documents attached is sold to some Australian bank. Thus the funds are provided with which to pay for the wool. The Australian bank sends the bill with the documents to its London correspondent, and at the same time ordinarily will sell an equivalent amount of sight exchange against the credit which it will secure in London through the discount of the documentary bill. No one in Australia has any further connection with this transaction. The correspondent of the Australian bank in London takes the bill with its documents to the London bank on which it is drawn for acceptance. Having been accepted by the London bank, which takes the shipping documents, the bill is discounted in the open market by the

London agent of the Australian bank. This provides funds to meet the sight exchange which the Australian bank had sold. The London bank which accepted the bill then sends the documents to this country to the foreign exchange banker through whom the arrangement was made or perhaps to a shipping broker. The wool house cannot get possession of the wool until it can get the bill of lading, and the exchange banker need not give up this document until he is provided with funds to purchase the sight exchange on London necessary to meet the payment of the bill accepted by the London bank. Thus everyone is secured at each stage in the transaction, in so far as the wool itself may be regarded as security.