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Introduction
to Institutional Trading
Introduction
The key to safety and profits
Questions and
Answers: (Member section)
If this is such a good investment, why have we not heard about it? (Member
section)
How are the investor's funds protected? (Member
section)
What is a bank guarantee? (Member
section)
Can I participate through my U.S. bank or brokerage firm? (Member
section)
Can I go directly to a European bank to participate? (Member
section)
Can the profits be compounded? (Member
section)
Can I use U.S. Treasury Bonds, Bills or other U.S. Government Securities
in a Forfaiting Program? (Member
section)
What role is the Federal Reserve playing? (Member
section)
What is the reason for the existence of this market? (Member
section)
How does the process work? (Member
section)
Are IMF and the World Bank involved? (Member
section)
Where are the Money Center banks located? (Member
section)
Introduction
The trading in "debt instruments" is a multi trillion dollar
industry worldwide. Top world banks
(Money Center Banks) are authorized to issue blocks of debt instruments
like Bank Purchase Orders (BPOs),
Promissory Bank Notes or Mid-Term Notes (MTNs), Zero Coupon Bonds (Zeros),
Documentary Letters of Credit (DLCs), Stand By Letters of Credit (SLCs),
or Bank Debenture Instruments (BDls) under International Chamber of
Commerce guidelines (ICC - 500 & 600).
The prices of these instruments
are quoted as a percentage of the face amount of the instrument, with
the initial market price being established when first issued. Thereafter,
as they are resold to other banks, they are sold at escalating higher
prices, thus realizing a profit on each transaction, which can take as
little as one day to complete.
As these
debt instruments are bought and sold within the banking community,
the trading cycles generally move from the higher level banks to lower
level (smaller) banks. Often they move through as many as seven or eight
trading cycles, until they eventually are sold to an already contracted
retail customer or "exit buyer"
such as a pension fund trust fund, foundation, insurance company, security
dealer, etc. that is seeking a conservative, reasonable yield investment
that is suitable for 8 figure amounts.
By the time the
bank debentures
ultimately
reach the "retail" or secondary market level, they are of course
selling at substantially higher prices than when originally issued. For
example, while the original issuing bank might sell a "MTW"
at 80% of it's face value, by the time it finally reaches the "retail/exit"
buyer it can sell for 91% to 93% of it's face value. Since these transactions
are intended for large financial institutions, they are denominated in
face amounts commonly ranging from US $10 million.
The
key to safety and profits
The key to successful trading in Bank
Instruments lies in having the contacts, initial cash resources, and
wherewithal to purchase them at the maximum discount while also having
the necessary resources and contacts to sell the Instruments in the higher
priced secondary markets. The real secret of successful participation
lies not in knowing the how, why and wherefore of these transactions,
but far more importantly, in knowing and developing a strong working relationship
with the "Insiders": the Principals, Providers, Bankers, Lawyers,
Brokers, and other specialized professionals who can combine their skills
and connections to turn these resources into lawful, secure, and responsible
programs with the maximum potential for safe gain. There has been a lot
of interest expressed by persons seeking to learn more about risk free
capital accumulation by participating in
Forfeiting (Trading) Programs. Essentially, we are discussing a Money
Center Bank Instrument or Bank Debenture Purchase and Resale Program in
which these monetary securities are bought at a beneficially lower price
and then sold in the money markets at a higher price.
Before a
trader commits to any transaction, they must always ensure that they
have a guaranteed Exit Sale, (another party willing to purchase the bank
debentures at an agreed to higher price, at the conclusion of a number
of trading cycles). If no end customer is available before the transaction
commences, then no trade will take place, as the trader must always protect
his positions; This is, of course, vital for the maintaining of the profitability
of the program.......................
THIS DOCUMENT
IS FOR INFORMATION PURPOSES ONLY. IT DOES NOT CONVEY OR IMPLY A REQUEST,
OFFER OR SOLICITATION OF ANY KIND.
Source:
TCI Corporation
We provide more information in
our Member Area. Subscribe
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Recommended further reading:
Bonds
Bankers
Acceptance
Commercial
Paper
Discounting of bank
guarantees (BG's)
(Redeeming for cash or raising a credit line)
Guarantees
Introduction to Bank
Debenture Trading Programs
Zero Coupons and STRIPS
Terms
of use
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