h day will be according to the supply and demand for
bills. On any given morning by ten o'clock the bankers will all have
received their cables quoting money and exchange rates in the foreign
centers, and will all have pretty well made up their minds as to what
the rate for demand bills on London ought to be. A banker, for
instance, has L10,000 he wants to sell as early in the morning as
possible, and from his foreign cables figures that 4.86 is about the
right price. He offers it at that, but learns that another banker is
offering exchange at 4.8595. He offers his own at that price, and
somebody comes along, taking both lots and bidding 4.86 for L50,000
more. Somebody else bids 4.86 for other large lots, refusing, however,
to pay 4.8605. The market is established at that point.

For the time being. A cable message from abroad may induce some banker
to bid 4.8605 or 4.8610, or it may cause him to throw on the market
such an amount of exchange as may break the price down to 4.85-3/4.
Rates are constantly changing, and changing at times almost from minute
to minute. Yet so complete is the system of telephones and brokers that
any exchange manager can tell just about what is taking place in any
other part of the market. Not infrequently, of course, sales are made
simultaneously at slightly different rates, but, as a rule, if a trade
is made at 4.86 on Cedar Street, 4.86 will be the rate on Exchange
Place. It is remarkable how closely each manager keeps in touch with
what is going on in every part of the market. And the great number of
brokers continually circulating around and trying to "get in between"
for five points is in itself a powerful influence toward keeping rates
exactly the same in all parts of the market at once.

"Posted rates" mean little with regard to current conditions, being
simply the bankers' public notice of the rate at which he will sell
bills for trifling amounts. Exchange bankers dislike to draw small
drafts and usually can be induced to do so only by the offer of a much
higher rate than that current for a large amount. A banker might offer
to sell you L10,000 at 4.87, but if you said you wanted only L10, he
would be likely to point to his posted rate and charge you 4.88.
Considering that in transactions based on the best bills the banker
only figures on making from $10 to $20 profit on each L10,000, it may
readily be seen why he is not anxious to sell a L10 draft.

As to the actual fluctuation of