The rates quoted on the leading types of these bills are indicated in the following table:

Rates on Sterling Bills on October 4, 1921

The variations found in the above rates on foreign bills are due largely to the element of time, and conse-quently of interest, which enters into the remitting of drafts. Banks quote the highest rate on their cable transfers, for these orders are payable immediately upon presentation by the payee. In the case of a sterling cable transfer, only a few hours elapse between the sale by the bank in New York and the surrender of funds to the beneficiary in London. A demand draft is forwarded by mail, and even on the fastest steamer it reaches the payee at least after seven days have passed. Meantime the bank which sells the draft has full use of this portion of its foreign balance, and is thus able to quote a cheaper price on demand drafts than on cable transfers. From the above table it is seen that the greater the difference of time in which the funds become available, the lower is the quotation on the bill because of the difference in the interest charge. The element of time, and therefore of interest, does not enter into the quotation on cable transfers, which represent the exact market relationship between dollars and sterling in the above table, or between any two other currencies. The cable-transfer rate, therefore, is fundamental in determining the price of all other bills.

Rates on the various classes of bills are determined also by the extent of the credit risk involved. The credit factor is usually of minor influence in fixing the rates on bankers' bills. They are called prime bills when accepted by the stronger institutions, and all are usually considered of the same value. If a bank should place upon the discount market a volume of bills unwarranted by its resources, such policy would soon operate to depress rates quoted on its drafts.. A differentiation is sometimes made between one-name and two-name bankers' bills. Those drawn by a bank on its foreign branch or on an affiliated institution will ordinarily bring a lower rate of exchange because of the identity between drawer and acceptor, and the consequent single responsibility of the parties to the instrument. When a first-class bank draws on a separate institution of standing, the accepted bill gives the holder a twofold security, and therefore commands a higher price in terms of foreign money.

Trade bills drawn by mercantile houses on other business concerns vary in their market quotations according to the credit standing of the parties. Drafts of less-known or doubtful firms are sold only with difficulty. These bills may at times find a market if they are based on staple goods which are nonperishable and in active demand. The value of such drafts is then determined not by the credit standing of the parties, but by the security in the goods.