STOCK EXCHANGE AN INTERNATIONAL MARKET 503
developing a continuous character and a highly perfected tech-
nique. The need for it existed long before the ability to ac-
complish it efficiently. During the nineteenth century the
United States was continually a debtor nation, and to build up
rapidly our railway, mining, and industrial corporations it was
therefore necessary to borrow capital heavily in Europe. For
many decades, in fact, American economic development was
largely limited by the degree of enthusiasm exhibited for these
enterprises by European security investors. As a result, very
few foreign securities were listed or dealt in upon the New
York Stock Exchange, while very large dealings in our secur-
ities became in time a regular occurrence on the stock exchanges
of London, Amsterdam, and other European centers. The
American issues, which thus came to possess regular stock
exchange markets in Europe as well as in New York, were
often called “international securities.” London particularly, as
the unquestioned financial center of the world, actively in-
vested and traded even from the early decades of the nine-
teenth century in “Yankee rails” and other American com-
pany and even government securities, whose turnover there
constituted a large proportion of the total dealings on the great
London Stock Exchange.
In the beginning, prices for the same American security
in New York and London varied considerably and were estab-
lished principally by local conditions, since the old packet ships
took weeks to cross the Atlantic. In consequence, trans-Atlantic
arbitrage at first was slow, risky, and of minor importance.
At mid-century, the new invention of steam navigation, by
improving trans-Atlantic communication, tended to expand ar-
bitrage between New York and London and magnify its im-
portance in the stock exchanges of both centers. But after
1836, the opening of the trans-Atlantic cables reduced com-
munication across the Atlantic from a matter of days to one
of seconds, and with this vastly more efficient facility, arbitrage
in American securities between London and New York greatly
