TeachMeFinance.com - explain Open market discount
Open market discount -- This term is generally applied to
the open market discount rate in a foreign financial centre. In
London the bank rate is the rate of the Bank of England,
whereas the open market rate is the rate of other banks and
bankers and bill brokers (dealers in commercial and bank
paper). In Paris the bank rate is the rate of the Bank of
France, in Berlin the bank rate is the rate of the Imperial
Bank of Germany, and so on.
In New York the bank rate is the uniform rate of the banks
as distinguished from the varying rates of other lenders. In
London when the Bank of England makes a rate the other
lenders adopt it, if possible, or sometimes even quote a higher
one ; but if they find they cannot do business at it they make
a lower rate, and so it is in Paris, Berlin, etc. In New York
if other lenders cannot do business at the rate adopted by the
banks they make a lower one.
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