whole amount of foreign exchange dealt in in the New York market, will
be described first.

Suppose a cotton dealer in Memphis to have sold one hundred bales of
cotton to a spinner in Liverpool, the arrangement being that the
English buyer is to be drawn on at sixty days' sight. The first thing
the Memphis merchant does is to ship the cotton on its way to
Liverpool, receiving from the railroad company a receipt known as a
"bill of lading." At the same time he arranges for the insurance of the
cotton, receiving from the insurance company a little certificate
stating that the insurance has been effected.

The next step is for the Memphis shipper to draw the draft on the
Liverpool buyer--or upon some bank abroad designated by the buyer. This
draft is drawn in pounds sterling for the equivalent of the dollar
value of the cotton and made payable sixty days after the party abroad
on whom it is drawn has seen it and written "accepted" across its face.
This draft, the bill of lading received from the shipping company, and
the insurance certificate received from the insurance company are then
pinned together and constitute a complete "commercial long bill with
documents attached."

Other less important documents go with such a bill. Sometimes invoices
showing the weight and price of the cotton go along with it and
sometimes there is also attached a "hypothecation slip" which formally
turns over the right to the goods to the Memphis or New York banker who
buys the draft and accompanying documents from the Memphis cotton
shipper. Sometimes, too, insurance is effected by the buyer abroad, in
which case there may be no insurance certificate. But in the main, one
of these "documentary" commercial bills consists of the draft itself,
the bill of lading, and an insurance certificate.

Having pinned the document and the draft together, the Memphis cotton
shipper is in possession of an instrument which he can dispose of for
dollars. This he does either by selling it to his bank in Memphis or by
sending it to New York, in order that it may be sold there in the
exchange market at the current rate of exchange. Say, the bill of
exchange is drawn on London at sixty days' sight, for L1,000. The
buying price for such a draft will be, perhaps, 4.84. The Memphis
shipper gets his check for $4,840, and is out of the transaction. The
bill has passed into a banker's hands, who will send it abroad--deposit
it in some foreign bank where he keeps a