14. Buying and selling exchange.—It is difficult for the mind to grasp the process by which the multi tudinous transactions in foreign exchange, occurring daily in thousands of banks in the United States and Canada, continuously, and apparently automatically, adjust the rate of exchange on the basis of supply and demand. New York is the recognized foreign ex change market of the continent, and banks thruout the country having exchange to sell or buy do so thru their New York correspondents. The exchange re quirements of the country are therefore concentrated in New York. Some New York banks will have ex change to sell, others orders to buy, and the scarcity or abundance of the bills of exchange on any country is promptly disclosed by competition, and the rates ad just themselves accordingly. Foreign exchange brokers, as they are called, act as intermediaries be tween buyers and sellers in New York. As the factors which regulate the supply and demand are constantly changing, the brokers must keep in close touch with the market and with their clients. They call daily, sometimes hourly, on the leading bank ers and exchange houses to inquire if they are buy ers or sellers, and at what price. A broker not only brings buyers and sellers together, but obtains in so doing an approximate knowledge of the general supply and demand for bills and can advise his clients accordingly. The usual commission to a broker is
about $5 per £10,000 on sterling exchange and %4 of one per cent on continental exchanges.
15. New York demand for sterling exchange.— London's operations in New York exchange are factors that have to be taken into consideration, tho the transactions are comparatively small compared with those originating on this side. Since the ex change rate is, as a rule, fixed by the country which draws and negotiates the most bills, London neces sarily adjusts its rate to that fixed by New York. The reason for this preponderance of American trans actions is that the American exporter, rather than await a remittance from London, prefers to sell his bill and obtain ready money by drawing on his cus tomer; American banks buy these bills readily as they can discount them in the London market. The American importer, likewise, who has bought goods abroad would rather remit for them to the foreign ex porter than allow the latter to draw against him. In the former case he can obtain as low a rate as possible from his own bank, while in the latter he would have to pay a rate fixed by a strange bank or broker who would not have the same interest in the transaction.