Studies of the early modern exchange market have usually focused on the strategies of traders who made profits from differences in exchange rates. This article instead focuses on the inventory management practices of exchange dealers, who traded almost exclusively on behalf of third parties while acting as market makers in the Lyon fairs in the sixteenth century. Using evidence from 1 937 transactions performed by one of the major Lyon banks (Salviati), it uncovers a specific rebalancing technique based on the use of the bill of exchange as a netting instrument. Thanks to a system of limit orders, the Lyon exchange dealers were able to offset order flows, thus minimizing their credit risk while remaining exposed to reputational risk. Such a rebalancing mechanism involved multiple clients and markets and contributed to the clearing of international payments once bills reached maturity. Double-entry bookkeeping both facilitated and limited the use of the bill of exchange as a multilateral netting instrument.

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Based on the private records of a prominent sixteenth-century merchant bank (Salviati of Lyon), this article focuses on an important instrument of trade finance in the early modern period: the fair deposit. While the financial history of deposit banking has often been separated from that of merchant banking, this study demonstrates that during the sixteenth century a specific type of deposit banking emerged at fairs, intrinsically connected to merchant banking and international trade. As analysis of the Salviati archives reveals, the fair deposit was an instrument of both clearing and credit, sustaining the financing of large-scale European trade. Credit mostly derived from international trade and banking, where it was reinjected almost immediately. Investments were stimulated by the numerous advantages offered by the fairs held at Lyon: licit lending at interest, a choice of investments, and the possibility of making purchases and rapid transfers. Loans to local and foreign businessmen nourished the trade of commodities and, above all, the exchange business, conferring on Lyon a crucial position in the European trade and exchange system. This form of deposit banking was closely related to the development of merchant banks that worked mostly on commission, drawing substantial profits from it without becoming specialists or even deposit banks.

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