The London money market and the New York money market are among the leading international money markets of the world. Though the general functions of these two money markets are broadly the same, they differ considerably in the development of institutions and instruments and in the mode of operations.
1. Period of Supremacy:
The London and New York money markets have different periods of supremacy. The London money market remained supreme in the world up till 1914. The supremacy of the New York money market began after 1914.
2. Different Circumstances:
The Two money markets developed under different circumstances. The London money market was developed in the 19th century and, therefore, the requirements of industry and trade of that period and the financial requirements of the foreign governments have influenced its development.
The New York money market developed after the establishment of the Federal Reserve Banks in 1913. The rapid development of America and other European countries and the growth of international institutions, like the IMF and the World Bank also contributed to the development of the New York money market.
3. Different Institutions:
The two money markets have different financial institutions. The London money market has well- developed institutions of discount houses and acceptance houses, which are specialised in the businesses of discounting and acceptance of bills.
These two institutions are a peculiar feature of the London money market and account for its supremacy as an international financial centre.
The New York money market, on the other hand, did not develop such specialised institutions. It operates through commercial banks which have direct access to the central bank.
4. Different Instruments:
The two money markets deal with different financial instruments and have different sub-markets. A unique feature of the New York money market is the development of the commercial bill market. The London money market has no such market.
Similarly, the New York money market has other peculiar sub-markets, such as certificates of deposit market, Federal Funds market, repurchase agreement market, etc., which have no parallel in the London money market.
5. Modes of Operation:
The two money markets differ in the modes of operation. The London market mainly functions by convention and experience. The New York money market, on the other hand, operates through law and legislation.
For example, the relation between the Bank of England and the London money market is determined by convention, while the relation between the Federal Reserve Bank and the member banks is determined by law.
6. Growing Importance of Treasury Bills:
There is however, one similar feature of the London and the New York money markets. In both these markets, the Treasury bills have been gaining importance over other financial institutions over the year.