A further factor, and one of considerable importance in its effects upon trade balances, at least as far as this country is concerned, is the personal expenditure of travelers abroad. It is roughly estimated that this amounts to something like $150,000,000 per annum. In order to meet the needs of this class, a peculiar instrument has been called into being - the Letter of Credit, which is addressed to a certain number of banking firms, and sets forth that N. M. is the bearer, and is entitled to draw upon a certain bank, generally located in London, for a specified amount. Payments as made in different localities, are indorsed on the Letter of Credit itself, and when exhausted it is returned with the last draft. A modification of this instrument is found in the Circular Note, or Travelers' Check, which calls for a specific amount in U. S. Dollars, and is payable in various countries at certain fixed rates. A further important instrument in connection with the Foreign Exchange business, is the Commercial Letter of Credit, used principally by importers. This is usually addressed to a firm by a bank or banker, authorizing them to value on its correspondent for a fixed amount, and engages that the drafts drawn thereunder will be protected if drawn in accordance with the terms of the Letter of Credit. The terms are, as a rule, that the draft should be accompanied by Bills of Lading, Consular Invoices and Insurance Certificates, showing the shipment of goods purchased. The most common instruments used in foreign transactions are checks or cheques, demand drafts and time drafts. Checks are most commonly used for payments on demand. Most countries have legislated in favor of this method of transferring funds by means of the entire abolition, or modification, of the stamp tax - hence demand drafts are very seldom used. In continental countries the circulation of a check is limited as to time, particularly in France, and in order to avoid the possibility of a change in date the law in that country requires that all checks be dated in words, thus - August fourteenth, 1903 - instead of Aug. 14, 1903; and in Germany a check must expressly state that the funds transferred are derived from a balance due the maker. A peculiar method in vogue of evading the stamp tax in Germany when it is not possible to make the required declaration as to funds due, is to issue what is called a delegation-i. e., a communication addressed to the beneficiary that a specified sum will be held at his (the beneficiary's) disposal upon his application to certain designated parties. This instrument is not intended for circulation, as its very nature deprives it of that characteristic. Demand drafts have been almost entirely displaced by checks and delegations, hence are very rarely used. They are subject to a tax of 1/2% per mille, (1/2°/oo) in most all European countries, the same as time drafts.

Time drafts on merchants, with shipping documents attached, enable the purchaser to dispose of the goods by sale before paying for same, and generally contain a provision where the documents are held as security for the payment of the draft that in the event of the drawee desiring to withdraw the merchandise, he can do so upon payment of the draft, less a rebate of interest at the official bank rate for the unexpired time. This on the Continent. In England such a draft may be paid prior to maturity under a rebate of interest of 1/2% above the advertised rate for it must be noted that the quotations for French exchange progress by § of 1%, and as the quotations are for so many Francs and Centimes per dollar, each progression would be the equivalent of 1/8 of 1% in our money, and when it is desired to shade the rate either up or down, this is done by quoting the rate plus 1-16%, plus 1-32%, or minus 1-16 or 1-32. It must be further noted that as the foreign denomination in this case is the variable quantity, the higher the quotation the lower the rate of exchange.

Taking the sight draft as a basis, the following calculations will demonstrate how the quotations for telegraphic transfers and 60 d/s bills are arrived at; e. g. quotation for sight drafts on England, 485 1/4. Sight drafts or checks have an average circular short deposits in the London Joint Stock Banks, which as a rule is 1 1/2% below the Bank of England rate. Thus should the Bank of England rate be 3%, the rebate rate would be 2%.

The regular quotations of foreign exchange cover three distinct classes:

1.    Posted rates. These are rates arbitrarily determined by international bankers in New York for the purpose of adjusting foreign currencies payable in the United States, and are generally somewhat higher than the actual rates.

2.    Actual rates, are the rates at which bankers will sell their own drafts, telegraphic transfers, etc.

3.    Commercial rates, are the buying rates of bills of exchange, etc., issued by merchants in the regular course of business. A typical quotation list would read as follows:

Rates Of Exchange.

*Telegraphic Transfers,

tion of ten days, hence the interest accruing on the amount drawn until presentation for payment is enjoyed by the seller. With telegraphic transfers, however, which are immediately payable, this benefit falls away, so interest for ten days must be added to the quotation of sight exchange in order to arrive at the price of a telegraphic transfer. Thus:

Commercial bills with documents to be surrendered on payment under rebate of interest at bank rate in the event of the bill being paid prior to maturity.

In determining the value of time bills, other items 01 cost must be taken into consideration, such as commissions to be paid to bankers abroad for handling the items, etc.

In discounting bills in England it must be noted that the 3 days of grace allowed by law are taken into consideration in calculating the discount while on the continent, where grace is also customary, only 60 days are brought into computation. Days of grace, as applied on the continent, have relation only to the notarial act of protest in the event of non-payment - i. e. if a bill matures on Jan. 1 and is not paid, it will not be protested until three working days thereafter. On the other hand it is customary in Germany, when discounting a batch of bills, to apply the bank rate on 5 days and the current rate on the remaining days the bills have to run.