Reconstructing the London Money Market at the Heyday of the First Globalization

March 1, 2021 | Blog
Home > Reconstructing the London Money Market at the Heyday of the First Globalization

This blog is based on an article published in the Economic History Review:


By Olivier Accominotti (London School of Economics), Delio Lucena-Piquero (University of Toulouse and Sciences Po Toulouse), and Stefano Ugolini (University of Toulouse and Sciences Po Toulouse)

The London market for bills of exchange was central to the UK’s global financial dominance between 1880 and 1914. This market was the world’s main centre for short-term lending and borrowing, and it financed a large share of global trade. Yet, very little is known about how the London bill market actually worked because of a lack of direct empirical evidence on bill trading. Since the money market was of the ‘over-the-counter’ type, there was no systematic recording of bill transactions. Consequently, researchers have relied on indirect evidence to document specific aspects of the bill market (Nishimura, 1971; Chapman, 1986; Jansson, 2008). To date, no comprehensive review of the London money market’s structure and functioning exists.

In a recent article (Accominotti et al, 2021),  we provide a systematic study of the London money market by exploiting a unique archival source: the Discount Office ledgers at the Bank of England. This source, which has recently been uncovered by economic historians (Flandreau and Ugolini, 2013), contains invaluable information on the bill market.

The bill of exchange was a short-term credit instrument involving three counterparties: a drawer (borrower), an acceptor (guarantor), and a discounter (lender). The Discount Office ledgers contain systematic information about the drawers, acceptors, and discounters of all bills purchased (rediscounted) by the Bank of England. To reconstruct the structure of the money market, we collected information about the counterparties involved in each of the 23,493 bills rediscounted by the Bank during the year 1906.

The Bank of England purchased large amounts of bills as part of its monetary operations. Yet, these bills still only represented a small share (2.47 per cent in 1906) of all sterling bills of exchange. Therefore, one might question whether the bills in the Bank’s portfolio were representative of the entire market? To examine this question, we perform a series of cross-checks of our data with corresponding information obtained from the preserved archives of other money market actors. These checks do not reveal any systematic quality bias in the bills purchased by the Bank of England.

Based on these new data, our article makes several original contributions. First, we show that bills could be used in many different ways to finance very diverse commercial and financial transactions. Second, we reveal the truly global nature of the London bill market at the beginning of the twentieth century. We show that borrowers through sterling bills were globally distributed (Figure 1), and that only a minority (13.56 per cent) were located in the UK.


Figure 1.         Geographical location of borrowers (drawers) on the London bill market.

Note: This map shows the geographical location (at the city level) of all drawers of sterling bills in our data set.
Source: Bank of England’s Discount Ledgers.


We develop many original network metrics to analyse the relationships between the various actors operating in the money market. This analysis reveals how bills  were transformed into liquid and riskless money market instruments thanks to the successive interventions (and guarantees) of various London intermediaries.

Finally, our data provide new insights into the micro-structure of the London money market. The historiography has generally considered that a handful of merchant banks dominated the market as they accepted (guaranteed) large amount of bills on account of borrowers (Chapman, 1984).  However, we show that these institutions’ market shares were in fact quite limited.  Money market intermediaries were diverse, comprised a large number of very small acceptors (including small financial, trading and industrial firms), and co-existed with a small number of large intermediaries (merchant and commercial banks).  We also provide evidence on how sterling bills were distributed to the final investors in London. This function of distributing bills was fulfilled by the market’s biggest discounters. Our data reveal that discounters were of two main types:  British multinational commercial banks, and discount houses.

Our research reveals how archival, micro-level data, can illuminate the functioning of the most important financial market between the late nineteenth and early twentieth centuries. London’s financial power lay in the remarkably high specialization of intermediaries operating on its money market.


To contact the authors:

Olivier Accominotti,

Delio Lucena-Piquero,

Stefano Ugolini,



Accominotti, O., Lucena-Piquero, D., and Ugolini, S., ‘The origination and distribution of money market instruments: sterling bills of exchange during the first globalization’, Economic History Review, forthcoming.

Chapman, S., The Rise of Merchant Banking (London, 1984).

Flandreau, M. and Ugolini S. (2013), ‘Where It All Began: Lending of Last Resort and Bank of England Monitoring during the Overend-Gurney Panic of 1866’, in Bordo, M. D. and Roberds W. (eds.), The Origins, History, and Future of the Federal Reserve: A Return to Jekyll Island, (New York, 2013), pp. 113-161.

Jansson, W., The Finance-Growth Nexus in Britain, 1850-1913, unpublished PhD dissertation, (University of Cambridge, 2018).

Nishimura, S., The Decline of Inland Bills of Exchange in the London Money Market, 1855-1913 (Cambridge, 1971).