EXCHANGE, in commerce, implies the receiving or paying of money in one country for a similar sum in another, by means of bills of exchange.—See Bill.
The laws of all commercial nations have conferred great privileges on bills of exchange; punctuality in liquidating them, is essential to commerce: as soon, therefore, as a merchant's accepted bill is protested, on account of his insolvency, he is considered a bankrupt.
A regular bill of this description is a mercantile contract, in which four persons are concerned, viz. 1. The drawer, who receives the value. 2. The drawee, his debtor, in a distant place, upon whom the bill is drawn, and who must accept and pay it. 3. The person who gives a valuable consideration for the bill, and to whom, or to whose order it is to be paid: and 4. The person to whom payment is to be made, and who is creditor to the third. By this operation, reciprocal debts, which are due in two distant places, are paid by a kind of transfer, or permutation of debtors and creditors.
Beside those merchants, who circulate among themselves their reciprocal debts and credits, arising from their importation and exportation of goods, there is another class of men who deal in exchange; that is, in the importation and exportation of money and bills. When, however, balances are to be made, exchange becomes intricate; and merchants, being engaged in their particular branches of trade, commonly intrust these complicated calculations to certain agents, who are thence called exchange-brokers, and have made this a most lucrative employment.
The Course of Exchange, is the current price between two places, which is always fluctuating and unsettled, being sometimes above, and at others below par, according to the circumstances of trade. When the course of exchange rises above par, the balance of trade is said to run against that country where it rises. But, though the course of exchange be in a perpetual fluctuation, and rise or fall, according to various circumstances, yet the exchanges of London, Hamburgh, Amsterdam, and Venice, regulate those of all the other trading places of Europe.—Such readers as are desirous to make themselves acquainted with the laws of this country, as they relate to cash bills, and bills of exchange, will find ample information in Mr. Chitty's "Treatise on Bills of Exchange," &c. (8vo. 7s.), where the subject is perspicuously and accurately treated.