#Bills of exchange, domestic.# Foreign and domestic exchange is the sale of orders for the payment of specified sums of money at distant points.

But for this, payments at distant points would ordinarily have to be made by sending the money in some way.

It must often occur, for example, that hundreds of payments, aggregating millions of dollars, must be made by persons in and near Chicago to those in and near New York, while, at the same time, equally large sums are due from New York to Chicago.

The wasteful process of shipping these sums back and forth is avoided by the cancellation of indebtedness between the two localities.

It has been the practice for each small bank to keep a part of its legal reserves in correspondent banks in one or more of the larger cities on which it draws bills of exchange for its customers and to which in turn it remits for collection drafts and checks which it has received.