Zero Discounted Currency Exchanges

Currency exchanges happen all the time and every banking business day. If you are going to travel to Europe and have US dollars then you may need your dollars exchanged into German Marks. What about the internet broker deals where the exchange is at a discount? Is it for real or not? Currency exchanges at a discount, like 15/10 or a fifteen percent discount happen in very rare instances where the client “losing” money on the exchange needs fast action to the other currency and is willing to lose some in return. On the other hand, the chance of this happening in the broker community is miniscule or nil.

Why do you see so many currency deals on the internet today? Two reasons, ignorance and greed. The currency deals you see within the realm of the internet or your “in-box” are for the “hope” to make a lot of money on the “currency swap” from brokers. Brokers are ignorant to the fact that their chance of ever doing a discounted currency transaction is nil by the reason someone told someone they are doing currency transactions all of the time. They will mention names such as, the Treasury Department, the Feds, or some “group” which needs to have Euros instead of Dollars. The reality is more myth than fact and defies common sense.

Here are the numbers for your review:

Client A has 100 million dollars and would like to have the currency exchanged into Euros.

Client A has a somebody that will exchange the currency for the “broker” 15/10 or fifteen percent discount.

Client A, according to the brokers, would like to have the Euros, even though the Client loses money.

As of the 1^st of August, 2011 the exchange rate is one US dollar to .70 Euros, therefore Client A will have the equivalent of 85 million Dollars except it will be in Euros which is 59.9 million Euros after the currency exchange, or to state, Client A will lose fifteen million dollars.

If you were Client A, would you do it? Does it make sense to lose money on behalf brokers and other that believe you can do currency exchanges with 15 percent discounts all the time?

Welcome to Zero Discounted Currency Exchanges.

Real currency exchanges take place within the private banking realm and the client never loses any money. Using the example above, Client A with 100 million dollars will have 70 million Euros instead of 59.9 Euros. As stated before, would you, as Client A rather have 70 million Euros or 59.9 million Euros at the end of the day?

Now a surprise to the brokers which claim to have done numerous currency exchanges. How do you think you will be paid if there is a zero discount currency swap?

In summary, Client A really doesn't need a broker, but if there is a broker on the horizon, it is in the best interest of the broker to take care of their client and make sure Client A does not lose money. So you have to ask yourself, are you in business to help your clients? Or are you in business to line your pockets with the mystical, discounted currency swap which will hurt your client?

And we ask the brokers again, “How do you think you will be paid for a zero discounted currency exchange?”

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In Ground Assets and Monetization Part III

As we mentioned in our last article about the possibility of monetizing an insurance wrap, which is slim, we are going to into detail why this is a fault of brokers across the world which have believed a myth.

Insurance wraps are a nice way of saying an insurance policy for an asset which is worth a lot of money.  The belief is an owner of gold mine or other type of in ground asset can be insured or "wrapped" for a certain percentage of the mine and then the wrap is then monetized or transferred into cash to place into a private banking program.

How do you monetize and insurance wrap?  The correct question would be, "what lender is going to lend cash against the wrap"?  From our point of view there is not a lender today which is willing to lend against an insurance wrap because of the risks involved.  On of the reasons is the insurance wrap is not an asset, but a policy.  For example, would a lender lend against a life insurance policy?  They wouldn't.  Would the lender lend against whole life policy?  That is a maybe, because a whole life policy builds up cash and as many know is probably the worst of life insurance policies.

In summary, the probability of a lender lending against an insurance wrap is nil.  So why do so many brokers try over and over to get an insurance wrap monetized?  We will leave that up to the reader to figure that one out.

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In-ground Assets, Monetization, Private Banking, Part II

From our prior post we talked about why in-ground assets aren't pertinent to private banking programs. The reason why we are speaking about this is there are a lot who "claim" to be well placed to have a private banking program which should place the monetized asset into a banking program.

One of the features of in-ground assets has the power to "predict" how much is under the ground. Again, this would be a prophecy and not a factual statement, which leads us to private banking programs which are based mostly on factual money information which is obvious in an once a month bank account statement. How would somebody trade on a prophecy? They would not. 

The other feature we wish to recap is getting an insurance firm to "wrap" the asset. How is the insurer, to supply the wrap, going to give the owner a policy based mostly on a prophecy? They are not. Here is where in principle is sounds great, but in fact it does not work. There's not an insurance firm which will give the owner a policy, or "wrap", on an envisioned asset. 

Nevertheless on occasions if there's available true assets, e.g. the volume of gold, etc, exiting the mine, then and if, the owner is pleased to pay for the "insurance wrap", then yes, naturally, the insurer would be content to wrap the asset into a policy. This naturally, would cost millions of dollars for the owner and now the very next step "if" the owner of the gold mine has gotten this far, is to have the "wrap" or policy monetized into money. How troublesome do you believe that is? Stay informed, and we'll explain the unvarnished reality of monetizing an insurance wrap.

In-ground Assets, Monetization, Private Banking Programs

One of the things we are called upon is being able to monetize in-ground assets, such as gold mines, or any other asset that may be under the ground.  The majority of owners with in-ground assets are "asset rich" and "cash poor".  Since some of the assets can have substantial value to them, many brokers throughout the world believe you can take an in-ground asset, monetize it, or put an insurance wrap on the asset, then monetize it, and place the cash funds into a private banking program.

The truth of the matter and fact, is this proposed activity has never been done and the probability to get it done is nil.  One the primary reasons why is to really know how much, in assets, is under the ground is hard to predict.  The other aspect, is finding the appropriate insurance company to place an insurance wrap on the "predicted" assets which are under the ground.  The other important part to realize is even if the asset owner was able to get an insurance wrap on the in-ground assets, it does not mean the wrap can be monetized.  It would be a risky proposition for the owner for the reason an insurance wrap costs a substantial sum of money.  To further clarify, the lender, or the one to monetize, the asset is taking a risk too.

As you can see, there are many facets involved, step by step, as to why this type of private banking transaction will not work.  We will go through it step by step throughout our blog/article post.

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Alternative Investmest Regulations and Forex

In the choice investment world, there are many markets, whether its private placement, managed futures, foreign-exchange or any other niche, one thing's certain, alternative investments are showing up everywhere with disinformation. With this trend now clear, the large issue is, why would you not broker alternative investments? Well, if you can follow the guidelines, brokering could be a rewarding profession. As you'll see, there's lots of money in investment brokerage, but there's also harsh regulation. Since you can't broker deals with insufficient education, we are providing the best info on alternative investment education to aid you in succeeding. To get you going, we'll review some of the basic legal facts for brokers, covering all of the major markets during the process. This will enable you to shield yourself and others while brokering, making your transactions more successful. Most vital, if you choose to broker non-public placement investments, you have to act within the law. First, you need to typically reach financiers indirectly without solicitation. This is terribly critical due to the hard laws connected with private placement programs. If you solicit for speculators before they ask about particular investments the reality is, you are breaking the law. To remain effective and legal, you need to often contact backers mentioning project finance as your most vital goal.

Once trust opens up the conversation and they request information, you can debate any investment you want. Also, when providing paperwork to an investor, a brokering agent you never send it. It should come straight from the program and the documentation will never state yields or commitments. By referencing yields either verbally or through forms, you are breaking the law again, and this time it much more serious.

 

If you'd like to become an introducing broker for a managed currency exchange investment, there are two routes you can take. First, you could become an introducing broker for a foreign exchange trader in the United States, earning commission for each banker you find. Though this sounds great to most, you have to have a license before it's possible to start soliciting stockholders. There is some studying, however it can pay off great in the ultimate analysis. Against that you can become an introducing broker for FX traders using offshore Forex brokers. Once again, you would be collecting commissions for banker referrals. By working with traders who exploit offshore currency exchange brokers, you are not subject to the laws in the States. This does allow you to earn residual payments, but the truth of the case is, accomplishing Forex shareholders can be extremely difficult if you're unapproved. Overall, whether you'd like to broker domestic or offshore Forex investments, you need to always keep the law under consideration. Though managed Forex is highly rewarding, one mistake can be drastic. If you make a decision to broker managed futures investments, you can take one of two routes. First, you can broker managed futures in the States, raising capital to earn commission. This requires a NFA license, which adds firm oversight into the picture. Though there are failings to having an NFA license, the reality is, authorized futures brokers have the capability to earn millions every year. For this awfully reason, it's frequently a good idea to get a NFA license if you are working in managed futures. Since the license is recognized by backers around the world you can raise never-ending equity if you're smart.

 

Against that if you choose to broker a managed futures investment without a license, the trader must be offshore. In this example, since you are working with an offshore futures trader , USA laws don't apply to you, unless you are working with residents of the USA. Remember, always keep the SEC on your side and comply with regulations and laws of the pertinent country.

 

Though it'd appear appealing to broker deals without regulation, actually it's stronger than it sounds. For more info about a NFA license. If you would like to broker investment related products, you have to go outside of your niche.

 

If it is REO's, private equity, hedge funds, loans or maybe more, there's always a deal to broker. Though you can become loaded brokering investments, you have to know one thing above all, the law. In each investment market, there are laws you want to consent to if you would like to attain success in business.

 

Do yourself a favor, and completely research your alternative investment niche before following it. The reality is, you may need a license, or else you will decide to work with private investments. Remember, alternative investments are good, but just like the rest in life, there are ground rules.

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Precious Gems and Private Banking Programs

The buying and selling of gemstones is harder than one would think. This is another market which is very hard to penetrate. We are not going to go into detail about the buying and selling of gemstones, but would like to relay how difficult it is to use gemstone product for a private banking program.

 

The most important part of using gemstones for a private banking program is the stones have to be of bank specifications. What does that mean? The stones have to be cut and polished, each stone has to be certified by a gemologist, and the stones have to have documentation from a Top World Bank. Gemstones in a non-bank vault do not qualify because the majority of the stones are uncut, or in laymen terms, they are not cut and polished.

 

What is the likelihood you will have gemstones from Top World Bank? Very slim. Anyone can take the stones and have them stored in a bank vault for security, but to have the Top World Bank issue a SKR, (Safe Keeping Receipt) is a different task. Why, the bank will not issue any documentation, including a SKR, if the stones are not “high” quality. Lastly, the stones being cut and polished, having bank specification quality, and issued documentation including a Safe Keeping Receipt has to total fifty million US dollars.

 

Any vault, like the Sarasota Vault, non-bank vault, or the like are stones which will have to be transferred to a top world bank, cut and polished, and receive bank specified quality which will cost a sum of money.

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Primary vs Secondary Market Banking Activity

As many of you have been learning about financial instruments and private security transactions nobody ever goes into much detail between the difference of the secondary and primary market.  The majority of deal making with brokers is within the secondary market, but many do not realize the difference between the two.

The primary market is the market which happens at the financial institutions or the Top World Bank's level.  Most of the people you deal with on a day to day basis do not have access to a Top European Banker to ask questions about financial instruments or private transactions.  There are advantages to primary market over the secondary market.  One of the key advantages of the primary market is predictability.  In the primary market and throughout the Top World Banks, they are able to predict the gain and/or loss ten or mores in advance whether it be medium term notes, currencies, or the like.  The primary market has safety for the client.  This is the similar to predictability.  If the Top World Traders are able to predict the outcome ten or more years in advance then safety of the transaction is an obvious.  The other aspect within the primary market is experience.  We would say any Top World Trader has been doing this type of activity for most of their life and have the correspondents (other Top World Banks) to work together.  The downside to the primary market is it is virtual impossible to penetrate.  You have to know or know of someone that knows of a Top World Banker that is experienced within this arena of activity.  Another illustrative example is the oil business.  The top players like Chevron, Exxon, and Shell are the primary market and anything else would be the secondary market.

The secondary market is exactly what it says it is.  It is second to the primary market.  The activity which takes place at the primary market level reaches down to the secondary market level or sometimes in finance mentioned as, the street level.  The main disadvantage of the secondary market is the amount of fraudulent activity.  Another disadvantage is the unpredictability of trading activity.  Traders in the secondary market cannot predict ten years out and beyond.  Secondary market traders can be from a top world bank, but most of them are not.  Think of it this way; why would a trader working in the primary market decided to go out on his or her own and work in the more unpredictable secondary market?  They wouldn't.  This is how some inexperienced traders that have done a few transactions end up in the secondary market attempting to make a lot of money off the client and putting the client at more risk than the primary market.  Also, this is the market where fraudulent traders can take off with the clients money, or have the client block funds in their bank account and nothing happens resulting in a waste of time and loss of little money, and worse case putting a bad taste in the clients thinking about this type of activity.  The advantage to the secondary market is it can be fairly easy to penetrate if you have a client with the money.  This same advantage comes with a disadvantage, a lot of fraudulent activity.  You can run in circles for years with brokers masquerading as buyers, sellers, and high net worth individuals.  To put in perspective, the secondary market is the internet market and the primary market is the relationship market.  We do not want to stick our foot in our mouth either.  The secondary market is a relationship market too, however, at the end of the day, you will found out that elusive secondary, grey, market is full of many individuals that do not understand the basics of this type of business.

While we have stated some negative information about the internet, we would like to state the internet is a great tool to prospect for new clients or more business.  Just keep your eyes open for anything suspicious and do not believe what everyone says. 

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Common Hazards for Brokers

There's common misappropriate utilization of terms like "broker, intermediary," and "self-styled commitment holder." the reality is, these aren't official terms in banking or finance, but such terms are used inside banking programs, and in their communication between one another. The issue with brokers is they claim to be someone with that title, for example "trader," but that does not invariably mean or guarantee anything. Anyone can call himself a trader, or a commitment holder, or anything. If somebody is attempting to buy and resell something, they are definitely a trader of a kind. This is a little out of the way and can be a poor example, but these positions can only be authenticated at the central bank level, or at a bank with an International Bank Account Number (IBAN). There will always be a broker introducing a client to the program.

The reason our banks can't solicit for these programs is that it is the law and neither can brokers, middlemen, or self-styled traders. Nevertheless a broker may know a customer with money, who knows another broker, who works in association with a program. We would like to point education and training in programs is different than solicitation for one.

Through correct education and training, a good broker should be well placed to screen potential customers by filtering the most promising candidates, and simultaneously, be well placed to without delay communicate with a banker through email to register the possible client.

Common hazards a broker or self-styled trader can meet during their own work in this business are:

• They have to be in a position to handle masses of clients before finding the best candidate.

• They typically get part of the truth concerning the client's funds at an initial stage, that may be found later to be infeasible, even after weeks or months of working on it.
• They usually have trouble qualifying themselves with new clients because they can't show any previous performance, or past contract, and the relationship with the customer is simply a matter of trust at an initial stage.
• There may be an extensive list of brokers and / or arbitrators between the customer and the banking program.

In this example, some brokers in the middle can destroy the deal by not giving the proper information to the customer, or to the banking program, and / or causing issues with the profit sharing agreements.

There might be a few levels concerned with the brokers: the nearest one to the banking program, also on occasion called the facilitator, is the most significant person.

This person ought to have a contact with somebody in the banking program. This business is simple if a broker has a customer with acceptable funds. You'd need a clear customer with funds for 30,000,000 or even more in a top world bank, and a broker in contact with a banking program. By "clear" customer, we mean a customer who can offer a real monthly bank statement, showing that they've a 30,000,000 equivalent in liquid money.

Nevertheless from a practical viewpoint, this is the ultimate situation that's so surprising, that most brokers won't ever see it in their life. We don't mean to deter you as a potential broker, but almost all of the clients generally have issues with their funds, they don't seem to be in full command of them, they don't wish to move them, the funds aren't cleared, or they're not cooperative enough to cope with the banking programs and their direct associates. Additionally, many brokers disguised as clients will show a bank guarantee, standby letter-of-credit, certificate of deposit, or any other instrument like a medium-term note, to make claims that they have the capacity to work with the banking program. Most of the time, the instruments, whether public or personal, are borrowed or leased instruments, and are infrequently fake. To conclude, the broker's job is an exceedingly nerve wracking activity. Any new candidate may have a tough time teaching himself before getting the right disposition. Disappointment is sure, and patience is always a virtue. One of the advantages of our services is to alleviate our own clients of the strain and frustration of trying to discover a customer or a banking program.

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Soft Offers Explained

There is no such thing as a soft offer, soft offers don't exist. All offers are liable to last approval, offers aren't reliant on final confirmation however quotations are, or request for quotations (RFQ's). This is a legal matter in contract law offer and acknowledgment are well outlined; offers indicate eagerness to contract on certain terms, the aim being that it shall become binding as fast as it is accepted by the individual addressed, the offeree. Offers must be accepted precisely as presented, without alteration. Any alteration is a counter-offer and destroys the first offer. This has to be accepted. However, requests for extra info and clarification don't represent a counter offer.

Now, it's right that under USA UCC or Uniform Commercial Code, there are some differences in how offers acknowledgment ties. The UCC permits definite expression of offer approval, or written confirmation of ad-hoc agreements, to represent valid approval even though further terms are mentioned or different terms from the primary offer or agreement are said.

Such extra terms are then treated as suggestions for addition into the governing contract and in effect become part of the contract unless the opening offer in particular boundaries acknowledgment to the offers terms or notification of objection to the such terms is presented in a fair time frame, and under certain other conditions. The conditions outlining an offer of sale include price, completion date, payment terms, and detailed fair outline of the service or product, including condition and quantities. Offers can be revoked before acceptance, so long as it isn't encompassed in a choice, by satisfactory communication to the offeree. You can literally write a credible offer with a Bic pen on a piece of paper if you wished to, and it might still be binding, even if that sounds a bit crazy.

 

Under USA UCC codes, and well as trade law as recognized by the EU and United Countries, quotes and offers are two separate undertakings and offers are binding under acknowledgment, where a soft offer would not make sense. Legally almost everywhere a quote is known as non binding (with a couple of minor exceptions in some scenarios, in certain domestic environments like the United States, in which explicit indication is given). For that reason there isn't any such thing as a soft offer, despite the odd use of this term by some traders and by law all offers are binding per and subject to the terms suggested.

 

Purchase orders are like offers in this regards. Offers generally are binding at time of acknowledgment. Under UK law such approval doesn't need to be suggested at the time of acknowledgment, legally it still is binding and under US law such approval does have to be suggested, once done it is jointly binding.

 

Either way an officially accepted offer is binding on all parties, in a similar way a contract is. This has to be accepted, offers create contractually binding conditions.

 

Plain and simple, soft offers don't exist, the word offer has particular legal definitions. Again, you can consult with any trade attorney to clear this up. This explains why there is no such thing as a soft offer. The phrase soft offer could be used informally in specific areas but this is a non standard use and thus evaded to stop confusion due to non standard terms.

 

Again, to recap by law all offers are legally binding thus actually a soft offer doesn't exist, while soft non binding quotations can and do exist. These details are crucial to understand, don't undervalue their significance.

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You think your are closing a deal in three days?

One of the attributes of business is the transfer of funds from bank to bank.  We have talked to those that "think" they are going to get paid on a deal in three days. We ask "have you talked to your banker where the funds are going to be wired?" The answer is "No, I haven't." Our answer to them is they have no clue to what they are involved in or what they are doing.

For example, you happen to close a transaction and you have given all your banking information to the appropriate parties. You know for sure the deal is going to close and let's say you are going to get 1 million bucks in profit sharing arrangements. Of course, for those that understand this business the funds do go into an escrow account of a well established attorney. The question is you want your money wired to your account to a different bank. Have you told your banker about the transaction? Let's say you haven't. Now 1 million dollars is going to go to your account and you haven't informed your banker, what do you think he/she is going to do? One Million bucks came from where? Do I need to explain more? Unless you regularly do deals this large your banker is going to question the source of funds, bottom line. That is why, as contrary to jokers, these deals do not take place in three days as I have been told numerous times. Unless you already have the existing relationship and transactional history.

This is why asking for an "MFPA" otherwise known as a Master Fee Protection Agreement upfront is nonsense and just broker talk. You have to have the established relationship with those you are working with and also your Banker. The bank will need to know the source of funds - period. And not the quote that funds are clean, free, of all criminal origin. It does not work that way. If your banker has any doubts your funds will be in question if you do not inform him beforehand with documentation.

If you have any doubts and you think you have a deal that is closing call your banker today and tell him that I believe One Million Dollars may be deposited in my account in the near future. See what he/she says?

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Borrowing Certificate of Deposits

Borrowing a CD or certificate of deposit is fairly easy when the client has the funds available.  The issuer is able to put a CD for you on DTC/Euroclear or delivered via SWIFT.  An important thing to keep in mind, DTC/Euroclear is typcally more cost effective for delivery of the instrument.

Once the instrument is placed on screen and validated by your banker, the placement charge is to be paid inside forty eight hours. The instrument will be issued for a term of one year to five years with an option to renew were the backend payment is due inside sixty days after placement of the instrument on screen and delivered to the client via MT-760 if using swift.

The issuers CD's as stipulated and agreed on by contract, are allotted in an individual or company name, and are basically used for supply of a project, commercial endeavors, and balance sheet and credit enhancement.

The typical time frame to complete a CD transaction for new clients is 45 to 60 days.

All instruments are AA rated from Top World Banks. The CD's may be employed for collateral purposes and permit lending. As a borrower, you may be allotted a quoted Bank Instrument from a major global financial institution, allotted straight in your name. Your instrument is placed on DTC with a one, three, or five year time for borrowing the instrument.  Over 90 percent of the clients borrow the instrument for five years as it is more cost effective to do so.

Transactions are from a minimum quantity of 10 million dollars if delivered via DTC/Euroclear and 50 million dollars if delivered vis swift.  However, the minimum can be agreed up with a cooperative and qualified client.  The Bank Instrument must be returned unencumbered to the Bank 15 days before its maturity date or the client may have an option to renew the term of the lease. It is easy to extend the lending period for another 5 years (annual cost remains the one of first year) with fifteen pre-advice days if issuance is via swift.  The CD's are available on DTC or they can have bank to bank (MT799 form) confirmation where they're cash-backed with repository receipt. The issuer CD's are in one to five year increments with low up front cost and structured payments. The client gets DTC info to determine the instrument when set up charge is escrowed. A set up charge gets the CD started and live for the first sixty days. Payment for the balance of the annual charge is based on the term of borrowing the instrument and is due inside sixty days with a payment guarantee from the bank.

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CC information

URC 522 Articles

As we have stated on our website if you see the LOI or BCL in the procedures you are wasting your time.  The best situation for the intermediary is to find the end supplier or principal and work the deal as we stated with the DCL. (This is primarily for bulk commodities). You can otherwise step back after sourcing the end buyer connect the end buyer to your source in return for protection in the deal. 

 

After you have the proper documentation in order it is time for collections.  You want to get paid on the guarantee of the presented IDCL.  The most widely used reference for collections is the ICC regulations URC 522.  The URC stands for Unified Rules for Collections. The URC's rules are of some concern to intermediaries because they govern the collection of the buyers' remittances on how one collects on getting paid and these regulations more or less reinforce the UCP (500 and 600) and detail how such payments are contractually required and are to be made.

 

The URC:  1) "Application of URC 522 applies to all collections as defined in article 2 where such rules are incorporated into the text of the 'collection instruction' referred to in article 4 and are binding on all parties thereto unless otherwise expressly agreed or contrary to the provisions of a national, state or  local law and/or regulation which cannot be departed from."  When the URC is referred to in a collection instrument, in a contractually binding situation between multiple parties, it directly applies to the direct collections  of payments in the mode specified on that collection instrument Incorporating URC rules into an offer or contract makes it binding on everyone (all parties) to obviously the buyer and seller. A bank is not irrevocably obligated to handle a particular payment collection or instruction relating to that payment collection. The reason this has to be considered is a bank can choose to handle a collection, or not to. If a bank elects, for any reason, not to handle a collection or any related instructions received by it; it must advise the party from whom it received the collection or the instructions by telecommunication or, if that is not possible, by other expeditious means, without delay. While banks are not obligated to handle a payment collection for a party, if it chooses, however, not to, it is required to inform the party sending  the collection instructions at once.

 

We are not going to into much more and bore you with procedures and regulations.  If you have the chance review URC 522 at your leisure.  One important aspect is you will soon realize the ICC gives little protection to intermediaries.

 

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Standby Letters of Credit Part II

Letter of credit traits are letters of credit which are customarily debatable. The issuing bank is obliged to pay not just the beneficiary, but also any bank designated by the beneficiary. Debatable instruments are passed readily from one party to another just about in a rather similar way as cash. To be debatable, the letter of credit must include an unconditional guarantee to pay, on demand or at a definite time. The designated bank becomes a holder in due course. As a holder in due course, the holder takes the letter of credit for value honestly, without warning of any claims against it. A holder in due course is treated favourably under the UCC or the Uniform Commercial Code.

 

The exchange is thought of as a straight negotiation if the issuing bank's payment requirement extends only to the beneficiary of the credit.

 

If a letter of credit is a straight negotiation it is referenced on its face by "we engage with you" or "available with ourselves". Under these conditions the guarantee doesn't pass to a shopper of the draft as a holder in due course. Revocability letters of credit might be either revocable or irrevocable. A revocable letter of credit might be revoked or altered for whatever reason, at any point by the issuing bank without notification. A revocable letter of credit can't be confirmed. If a private bank is engaged in an exchange that involves a revocable letter of credit, it serves as the advising bank.

 

Once the documents have been presented and meet the T&Cs, or Times and Credits, in the letter of credit, and the draft is honoured, the letter of credit can't be revoked.

 

The revocable letter of credit isn't a generally used instrument. It is typically used to provide laws for shipment. If a letter of credit is revocable it would be referenced on its face. The irrevocable letter of credit would possibly not be revoked or amended without the accord of the issuing bank, the confirming bank, and the beneficiary. An irrevocable letter of credit from the issuing bank insures the beneficiary that if the mandatory documents are presented and the terms are went along with, payment will be made. If a letter of credit is irrevocable it is referenced on its face.

 

The beneficiary has the right to transfer or allot the privilege to draw, under a credit just when the credit states it's transferable or assignable. Credits ruled by the Uniform Commercial Code (Domestic , or the United States) perhaps transferred a vast number of times. Under the Uniform Customs Practice for Documentary Credits (World) the credit may be transferred only once. But whether or not the credit specifies that it's nontransferable or nonassignable, the beneficiary may transfer their rights before performance of conditions of the credit. 

 

All letters of credit need the beneficiary to give a draft and stipulated documents to receive payment. A draft is a written order by that the party making it, orders another party to pay money to a 3rd party. A draft is also known as a bill of exchange. There are two kinds of drafts: sight and time. A sight draft is owing as fast as it is presented for payment.

 

The bank is authorized a fair time to review the documents before making payment. A time draft isn't due till the lapse of a selected time period stated on the draft.

 

The bank is needed to accept the draft as fast as the documents go along with credit terms. The issuing bank has a fair time to look at those documents. The issuing bank is responsible to accept drafts and pay them at maturity. The standby letter of credit serves a different function than the commercial letter of credit in obvious cases stated above.

 

The commercial letter of credit is the first payment mechanism for an exchange. The standby letter of credit is a secondary payment mechanism. A bank will issue a standby letter of credit for a buyer to provide assurances of his capability to perform under the provisions of a contractual arrangement between the beneficiary. The parties concerned with the exchange don't expect the letter of credit will ever be drawn on. The standby letter of credit assures the beneficiary of the performance of the customer's duty. The beneficiary is able to draw under the credit by presenting a draft, copies of invoices, with proof the buyer hasn't performed its requirement. The bank is obliged to make payment if the documents presented go along with the details of the letter of credit. Standby letters of credit are issued by banks to stand behind financial duties, to insure the refund of upfront fee, to support performance and bid needs, and to insure the completion of a sales contract.

 

The usage of the letters of credit as a tool to reduce risk has grown significantly over the last decade.

 

Letters of credit do their purpose by replacing the credit of the bank for that of the customer, for the sake of facilitating international trade. The credit pro should be acquainted with two kinds of letters of credit: commercial and standby. Commercial letters of credit are used essentially to aid foreign trade. The commercial letter of credit is the first payment mechanism for an exchange.

 

The standby letter of credit serves a different function. The standby letter of credit is a secondary payment mechanism. The bank will issue the credit for a purchaser to provide assurances of his capability to perform under the conditions of a contract. On invoice of the letter of credit, the credit pro should review all items meticulously to insure that what's predicted of the vendor is totally accepted and he can comply with all of the terms. When compliance is in query, the customer should be asked to modify the credit.

 

For more information please visit:  Professional Commodity Training

Standby Letters of Credit Part I

Letters of credit do their purpose by replacing the credit of the bank for that of the buyer, for the sake of facilitating international trade.

There are two main types: commercial and standby letters of credit.

The commercial letter of credit is the primary payment mechanism for an exchange, while the standby letter of credit is a secondary payment mechanism. Commercial letters of credit have been employed for many years to aid payment in global trade. Their use may continue to increase as the world economy develops. Letters of credit utilized in global transactions are ruled by the World Chamber of Commerce Uniform Customs and Practice for Documentary Credits. The general provisions and definitions of the World Chamber of Commerce are binding on all parties. Domestic collections in the U. S. are ruled by the Uniform Commercial Code.

A commercial letter of credit is a contractual agreement between a bank, called the issuing bank, for one of its consumers, authorizing another bank, called the advising or confirming bank, to make payment to the beneficiary. The issuing bank, on the request of its customer, opens the letter of credit. The issuing bank makes a dedication to respect drawings made under the credit. The beneficiary is usually the provider of products and/or services.

Fundamentally, the issuing bank replaces the bank's shopper as the payee.

Elements of a Letter of Credit:

A payment undertaking given by a bank (issuing bank)  for a customer (candidate).

To pay a seller (beneficiary) for a fixed amount of cash.

On display of cited documents representing the provision of products.

Inside cited time boundaries.

Documents must comply with T&Cs laid out in the letter of credit.

Documents to be presented at a stated place. 

The beneficiary has entitlement to payment so long as he will be able to supply the documentary proof needed by the letter of credit. The letter of credit is a definite and separate exchange from the contract on which it is based. All parties deal in documents and not in products. The issuing bank isn't responsible for performance of the fundamental contract existing between the buyer and beneficiary. The issuing bank's requirement to the purchaser, is to look at all documents to insure that they meet all of the conditions of the credit. On asking for requirement for payment the beneficiary warrants that all conditions of the contract have been went along with.

If the beneficiary (seller) fits with the letter of credit, the vendor must be paid by the bank.  The issuing bank's culpability to pay and to be repaid from its client becomes profound on the completion of the conditions of the letter of credit. Under the provisions of the Uniform Customs and Practice for Documentary Credits, the bank is given a fair quantity of time after bill of the documents to laud the draft.

The issuing bank's role is to offer a guarantee to the vendor that if compliant documents are presented, the bank will pay the vendor the sum outstanding and to look at the documents, and only pay if these documents go along with the terms set down in the letter of credit. Generally the documents requested will include a commercial invoice, a transport document like a bill of lading or airway bill and an insurance document; but there are several others.

Letters of credit deal in documents, not products.  An advising bank, sometimes a foreign reporter bank of the issuing bank will counsel the beneficiary.  Usually, the beneficiary would like to utilize a local bank to insure the letter of credit is valid. Additionally, the advising bank would be answerable for sending the documents to the issuing bank. The advising bank has no other obligation under the letter of credit. If the issuing bank doesn't pay the beneficiary, the advising bank isn't responsible to pay.  The correspondent bank may confirm the letter of credit for the beneficiary at the request of the issuing bank, the correspondent obligates itself to insure payment under the letter of credit. The confirming bank wouldn't confirm the credit until it evaluated the country and bank where the letter of credit originates.

For more information please visit:  Professional Commodity Training 

Commodity Trading

Medium Term Notes Part II

More bond issues are truly medium-term notes because massive, underwritten offerings find the booming market efficient. Paying for the establishment efficiently and opportunistically today means understanding how to make the optimum use of the medium-term note market. Though some borrowers may borrow too small or be rated too low to exploit this expanding market, other constraints are disappearing swiftly. Treasury executives of investment-grade companies with healthy appetites for debt financing either use medium-term note programs cleverly or they pay too much. Once the illiquid personal playground of auto finance corporations, like GMAC, MTNs became the capital market of choice for many main line non-financial companies as well in the US and Europe. Why are issuers turning to MTNs? 

* Operational adaptability. For lower ranks public issuers, once shelf registration is authorized, you're licensed to sell. Just call your agents and post the paper you would like to sell or issue it opportunistically thru agents, without posting. You are out of and into the market, with little or big issues, whenever you need to be.

* Structural suppleness. No more fitting your debt into normal maturity boxes. The "medium-term" label is outmoded. Maturities now range all the way from 9 months to thirty years or maybe longer. Disney issued 100-year MTNs, (yes a 100 year medium term note a few years back). You can issue fixed or floating. Issues can be agented or underwritten, public or place notes secretly, without or with 144A standing. You can design structured notes of virtually any outline tying the coupon rate to a currency, equity index or commodity price and employing the same put or call provisions and covenants as bonds.

* Speed.  Gain advantage from the opportunities which appear and disappear by posting an offering as fast as you see a dip in IRs or an increase in requirement for paper you'd need to issue. An offering can be posted and sold between breakfast and lunch - often in an hour, and some of the deals happen within 30 minutes.

* Liquidity. Once thin, liquidity has risen seriously as the scale of the market has grown and as investment banks have gone up their market-making role, regularly underwriting issues and supporting a strong secondary market. 

For more information please visit Professional Commodity Training

The basics for bank guarantess, standby letters of credit, and medium term notes

There are countless financial instruments, such as bank guarantees, medium term notes, standby letters of credits, certificate of deposits, and business documents which are legitimate and have value. However, the con man, huckster, fraudster and scammer will use everyone and everything to part you from your money.   We believe it to be important to inform everyone we can to be able to weed out anything fraudulent and many legitimate systems are abused or simply overused. 

Here are a few recommendations we use to stay away from frauds, scams, abusers and thieves, one important aspect of any transaction, as this post will say in the last sentence is "take your time" which is paramount to success.  Nobody in the world is in a hurry to do a multi-thousand dollar deal, let alone in the millions.

• Take your time. The fraudster needs you to make a decision on the spot. If you are being rushed aggressively, slow down even more, or just stop right there.
• Check out every claim made in calls, written documentation and every website connected to the company.
• Do a web search on each person and each company's name. A lot of people think Google is the place to go. Google is great, but remember, there are a huge number of search engines, and even ones that will gather results from multiple search engines at the same time. This is known as a "meta-search."
• Call your state's securities regulatory office and check if the party has violated securities laws.
• If someone claims to be an expert in something that sounds too good to be true, and especially if your attorney, accountant or financial planner never heard of the program before, cross check with people you know to be true experts in the area, although the best course of action is to simply say 'no,' and move on.
• One of the best sources is to verify the location.
• The most successful frauds are schemes where many people are involved, and perhaps only one person knows all of the details, and multiple locations are involved. Keep looking until you find all the parts.
• Hire competent, respected and professional attorneys, accountants, and auditors.
• Does the company have a phone number that works? Call it. Also, call the phone company's information line and check if the phone number is for the same company.
• Call and reference the name against those whom you know in this business.
• Never send money to a P.O. Box, unless you already know the firm.
• Don’t buy anything from a new supplier or vendor until you have verified that the company exists.
• Remember that nothing is going to happen fast.  If it does that is a sign that it may be a fraud.