The origination and distribution of money market instruments: sterling bills of exchange during the first globalization

This article presents a detailed analysis of how liquid money market instruments—sterling bills of exchange—were produced during the first globalization. We rely on a unique dataset that reports systematic information on all 23,493 bills re‐discounted by the Bank of England in the year 1906. Using descriptive statistics and network analysis, we reconstruct the complete network of linkages between agents involved in the origination and distribution of these bills. Our analysis reveals the truly global nature of the London bill market before the First World War and underscores the crucial role played by London intermediaries (acceptors and discounters) in overcoming information asymmetries between borrowers and lenders on this market. The complex industrial organization of the London money market ensured that risky private debts could be transformed into extremely liquid and safe monetary instruments traded throughout the global financial system.