An exchange is a place in large commercial towns where merchants, agents, bankers, brokers, and others concerned in commercial affairs meet at certain times for the transaction of business. The institution of exchanges dates from the 16th century. They originated in the important trading cities of Italy, Germany, and the Netherlands, from which last-named country they were introduced into England. In some exchanges only a special class of business is transacted, Thus there are stock exchanges, corn exchanges, coal exchanges, cotton exchanges, etc.
In commerce, exchange, is that species of transactions by which the debts of individuals residing at a distance are cancelled by order, draft, or bill of exchange, without the transmission of specie. Thus, a merchant in London who owes 1000 pounds worth of cotton goods in Glasgow, gives a bill or order for that amount which can be negotiated through banking agencies or otherwise against similar debts owing by other parties in Glasgow. who have payments to make in London. The creditor in Glasgow is thus paid by the debtor in Glasgow, and this contrivance obviates the expense and risk of transmitting money. The process of liquidating obligations between different nations is carried on in the same way by an exchange of foreign bills. When all the accounts of one country correspond in value with those of another, so that there is an even balance, the exchange between the countries will be at par, that is, the sum for which the bill is drawn in the one country will be the exact value of it in the other. Exchange is said to be at par when, for instance, a bill drawn in New York for the payment of 100 pounds sterling in London can be purchased there for 100 pounds. If it can be purchased for less, exchange is under par and is against London. If the purchaser is obliged to give more, exchange is above par and in favour of London. Although the thousand circumstances which incessantly affect the state of debt and credit prevent the ordinary course of exchange from being almost ever precisely at par, its fluctuations are confined within narrow limits, and if direct exchange is unfavourable between two countries this can often be obviated by the interposition of bills drawn on other countries where an opposite state of matters prevails. Research Exchange
Abbreviations
Money
Research Exchange