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Trade Arbitrage

The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time.

Given the advancement in technology it has become extremely difficult to profit from miss pricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly and the opportunity is often eliminated in a matter of seconds.

Arbitrage Info & Terms

————————————–

Arbitrage Trading Program – ATP

What Does Arbitrage Trading Program – ATP Mean?

A program used to place simultaneous orders for stock index futures and the underlying stocks.
The ATP attempts to exploit price variations (market arbitrage). The term is better known as program trading.

What Does Dividend Arbitrage Mean?

An options trading strategy that involves purchasing put options and an equivalent amount of underlying stock before the ex-dividend date and then exercising the put after collecting the dividend. When used on a security with low volatility (causing lower options premiums) and a high dividend, dividend arbitrage can create profits while assuming very low to no risk.

What Does Triangular Arbitrage Mean?

The process of converting one currency to another, converting it again to a third currency and, finally, converting it back to the original currency within a short time span. This opportunity for risk-less profit arises when the currency’s exchange rates do not exactly match up. Triangular arbitrage opportunities do not happen very often and when they do, they only last for a matter of seconds. Traders that take advantage of this type of arbitrage opportunity usually have advanced computer equipment and/or programs to automate the process.

What Does Currency Arbitrage Mean?

A forex strategy in which a currency trader takes advantage of different spreads offered by brokers for a particular currency pair by making trades. Different spreads for a currency pair imply disparities between the bid and ask prices. Currency arbitrage involves buying and selling currency pairs from different brokers to take advantage of this disparity. Currency arbitrage involves the exploitation of the differences in quotes rather than movements in the exchange rates of the currencies in the currency pair. Forex traders typically practice two-currency arbitrage, in which the differences between the spreads of two currencies are exploited. Traders can also practice three-currency arbitrage, also known as triangular arbitrage, which is a more complex strategy. Due to the use of computers and high-speed trading systems, large traders often catch differences in currency pair quotes and close the gap quickly.

What Does Market Arbitrage Mean?

Purchasing and selling the same security at the same time in different markets to take advantage of a price difference between the two separate markets. An arbitrageur would short sell the higher priced stock and buy the lower priced one. The profit is the spread between the two assets.

Many large institutional trades throughout the day have nothing to do with information and everything to do with liquidity. Investors that feel overexposed will aggressively hedge or liquidate positions, which will end up affecting the price. These liquidity demanders are often willing to pay a price to exit their positions, which can result in a profit for liquidity providers. This ability to profit on information seems to contradict the efficient market hypothesis but forms the foundation of statistical arbitrage.

Statistical arbitrage aims to capitalize on the relationship between price and liquidity and works by profiting from the statistical mis-pricing of one or more assets based on the expected value of the assets generated from a statistical model. Read on to learn more about this model and how it works. (For background reading, see Trading The Odds With Arbitrage and What Is Market Efficiency?)

Role in the Markets

Statistical arbitrage plays a vital role in providing much of the day-to-day liquidity in the markets. It enables large block traders to place their trades without significantly affecting market prices, while also reducing volatility in issues like American depositary receipts by correlating them more closely with their parent stocks.

Read More

What They Really Are

MTN-CMO-BG.com has Found a Great article on PPP Private Placement Platforms and we am sharing it with you.

Dont Be Fooled

Trading Platforms are pools of capital that invest in a wide variety of financial instruments including stocks, bonds, commodities, ETF’s and foreign exchange. These pools of capital may be a number of legal entities; however, the most common is known as a PPP, an acronym for Private Placement Programs. Private Placement Trading Programs are not offered to the general public. They are exactly what their name implies, offerings of membership interest to a select group of chosen investors who meet certain financial requirements.

The minimum investment in these Private Placement Programs can often be quite high and require a lockup period, where the capital is committed to the Trade Program for a certain amount of time. The minimum investment levels and principal commitment periods vary depending on the type of investments and the objective of the investment. One year lock ups are not uncommon and in some investments the lock up period may be even longer. Lock ups serve a very important function. They provide the Trade Platform Managers and Platform Traders with time in which to obtain results for the investors. Platform Traders want to know that the capital allocations they have been given to trade are for a long enough period of time to allow a particular trading strategy time to mature.

If you were to look at the returns of outstanding Platform Traders you would see profitable results over time; however, in the short term they may have a period of negative returns. If your interest is in traders with no down periods, please read no further, as they do not exist, contrary to popular belief. There is no such thing as free money. Trading involves risk. Every investor dreams of opening the door today and finding tomorrows Wall Street Journal, but this only exists in fantasy. Platform Trading requires hard work, tremendous discipline, patience and superb talent. The fact is very few people have the gifts to be a successful trader. The Platform Traders at the very top of their peers are rewarded with staggering wealth. Platform Traders utilize many strategies to help determine profitable trades, such as macro analysis, price theory, fundamental analysis, value analysis and many more investment strategies. What superior and outstanding Platform Traders can do is make enough winning trades over time, irrespective of what strategy they may use to accumulate trading profits. However, a number of their trades will not be winners. A large part of successful Private Placement Program trading is risk management; controlling losses and preserving investment capital.

One of the very basic risk management techniques utilized by Private Placement Program Traders is only risking a very small percentage of the investment capital on every trade. It is usually between one half and two percent on a particular trade. If a trade loss hits a defined percentage allocation, the trade is closed out. The average investor has an extremely difficult time taking a loss. In fact, it is a human tendency to hold on to losing trades and cut winning trades short, which is the very opposite of what great Platform Traders do. Risk management systems can get very complex and Platform Traders often write complex algorithms to manage risk when there are many positions and trade strategies running all at once.

The advent of the computer has radically revolutionized trading, just as it has every facet of our lives. Modern Trading Platforms are heavily dependent on mathematics and the hard sciences. Most Platform Traders today have advances formal education and training in mathematics, probabilities, physics, computer science, economics and engineering. Trade rooms are more similar to busy computer driven laboratories than the old image of guys in a boiler-room shouting into two telephones at one time. Almost all orders are input electronically and trades are matched up by sophisticated software. Private Placement Programmers and software engineers are indispensable to successful Private Placement Programs and Trade Platforms.

As mentioned earlier, Platform Traders have many products to trade and a huge number of global exchanges to execute the trades. The most well-known exchange in the world is the New York Stock Exchange (NYSE). When Platform Traders make a trade, that trade is executed on an exchange. The NYSE, CME, NYMEX, ICE, CBOE and NASDAQ are the largest U.S. exchanges. In Europe the LSE, Euronext and Frankfort Exchange are largest. In commodities much of the execution is done on the Globex, an electronic exchange. Platform Traders use the exchanges to buy and sell trillions of dollars of stocks, bonds, currencies, gold, oil, euro-dollars, collateralized mortgage obligations (CMO’s), Exchange Traded Funds (ETF’s) and hundreds of other securities, currencies and derivatives in efforts to make profits for themselves and investors.

Private Placement Program Traders can make profits by buying a particular instrument or by shorting, (selling it) betting the price will go down. Some Platform Traders buy and sell similar instruments simultaneous, betting on the change in price between the two instruments; this is called arbitrage and spread trading. Other Platform Traders employ option strategies, such as writing options, writing straddles, strangles, butterflies and condors. Option strategies can quickly become extremely complex and are a highly specialized area of trading which requires extraordinary expertise.

Private Placement Trading Platforms utilize margin to buy and sell all of the various instruments they trade. Margin is simply a partial payment for the instrument. Most people are familiar with margin on stocks. Margins are met with cash, period. Contrary to what some people may believe, the only instrument that is good for backing a trade position is cash. When a profit is made, it is credited to the Trade Platforms books that day; when a loss is taken it is debited from the Trade Platforms books that day. Private Placement Platform Trading is a cash business; gains and losses are marked to market each day. Trade Platform Managers should know by between midnight and two a.m. each trading day where they stand. The Private Placement Trade Platforms maintain what is called a customer segregated account with an Futures Commission Merchant, more commonly known as a FCM. This account is where the Trade Platform Investors’ funds are held. An independent capital account is established for each Trade Platform Investor in order to provide accurate accounting on a monthly or quarterly basis. The Private Placement Platforms’ funds are deposited into a master segregated funds account to be used for margin in trading.

Goldman Sachs, Merrill Lynch, ABN AMRO, MF Global, JP Morgan Chase, Credit Suisse, Deutsche Bank and Bank of America are all FCMs. These companies, as well as handling trades for independent Trade Platforms for many years, have had their own internal proprietary trading desk or Trade Platforms. Some of these trade desks are famous such as Goldman’s Alpha Fund, Morgan Stanley’s PDT (Process Driven Trading) Platform and Deutsche Bank’s legendary SABA Trading Program, led by Boaz Weinstein. The new regulatory environment is forcing many of the banks to divest themselves of proprietary Trading Platforms. This is making for a large talent pool comprising the best and brightest traders available for Private Placement Programs, Private Hedge Funds and Trading Platforms.

Private Placement Programs and Trading Platforms often use what is known as notionalization or notional funding to increase the leverage that the Trade Platform may use. The Trading Platforms may leverage its trading capital as much as ten times, meaning that One Hundred Million Dollars ($100,000,000) may be traded as it was a Billion Dollars ($1,000,000,000). Leverage, while giving the ability to greatly increase the returns on cash can also lead to significant loss. The old adage that “leverage is a double-edge sword” is very true. Notionalization absolutely must be constantly monitored and adjusted, depending on margin requirements and market conditions. The Private Placement Platform Managers have investment committees that are responsible for determining notional trading levels. Notionalization is a very powerful tool for the Private Placement Trading Platforms.

In conclusion, when it comes to Private Placement Programs, the minimum investment can be high and the risk can be high as well. However, the reward can be great, great enough to easily justify the investment and risk for one who has the means with which to get involved in such an investment.

By: Dane G. Brigadier
On behalf of MB Asset Holdings, LLC.
Website: http://www.mbassets.com

*Important Disclaimers

THIS COMMUNICATION IS NOT TO BE CONSTRUED AS AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITY OR INVEST IN ANY PRIVATE PLACEMENT PROGRAM OR PLATFORM. ANY SUCH OFFER OR SOLICITATION CAN BE MADE ONLY BY MEANS OF AN EXEMPT DISCLOSURE DOCUMENT AND TRADE PLATFORM OFFERING MEMORANDUM (WHICH CONTAIN A DETAILED DESCRIPTION OF RISK FACTORS). PARTICIPATION IN PRIVATE PLACEMENT PROGRAMS IS ONLY AVAILABLE TO QUALIFIED ELIGIBLE PERSONS. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RETURNS.

MB Asset Holdings, LLC (“MB Assets”) and Dane Brigadier are not Certified Financial Advisors, Registered Securities Brokers, Broker/Dealers and/or a Stock Brokers. MB Assets is a business consultancy firm which provides advice to private individuals on or about business matters.

If any of you are looking for these services we can provide the following

Proof-of-funds provider, we help our clients obtain VOD’s, POF’s, SWIFTs, SBLC’s or BCL letters to facilitate their trade transactions.

please send us an email to get the information in order to move forward.

Everyone thanks Ron Borcky for his development of this Article

Purpose:
The purpose of this document is to provide a general understanding of letters of credit, their use and application.

The topics covered are the following:

* General background information;
* Types of letters of credit;
* Common problems with letters of credit;
* Procedures for establishing letters of credit;
* Amendments; and
* General tips to both buyers and sellers.

In addition, this document details a step-by-step letter of credit procedures.

Definition:
Letters of credit are commonly used to reduce credit risk to sellers in both domestic and international sales arrangements. By having a bank issue a letter of credit, in essence, one is substituting the bank’s credit worthiness for that of the customer.

Types:

There are two basic forms of letters of credit:

1. Standby and Documentary. Documentary letters of credit can be either Revocable or Irrevocable, although the first is extremely rare.
2. Irrevocable letters of credit can be Confirmed or Not Confirmed. Each type of credit has advantages and disadvantages for the buyer and for the seller, which this information will review below.

Charges for each type will also vary. However, the more the banks assume risk by guaranteeing payment, the more they will charge for providing the service.

Documentary Revocable Letter of Credit
Revocable credits may be modified or even canceled by the buyer without notice to the seller. Therefore, they are generally unacceptable to the seller.

Documentary Irrevocable Letter of Credit
This is the most common form of credit used in international trade. Irrevocable credits may not be modified or canceled by the buyer. The buyer’s issuing bank must follow through with payment to the seller so long as the seller complies with the conditions listed in the letter of credit. Changes in the credit must be approved by both the buyer and the seller. If the documentary letter of credit does not mention whether it is revocable or irrevocable, it automatically defaults to irrevocable. See Credit Administration, Sample Procedure for Administration of a Documentary Irrevocable Letters of Credit for a systematic procedure for establishing an irrevocable letter of credit.

There are two forms of irrevocable credits:

• Unconfirmed credit (the irrevocable credit not confirmed by the advising bank)In an unconfirmed credit, the buyer’s bank issuing the credit is the only party responsible for payment to the seller. The seller’s advising bank pays only after receiving payment from the issuing bank. The seller’s advising bank merely acts on behalf of the issuing bank and, therefore, incurs no risk

• Confirmed credit (the irrevocable confirmed credit)In a confirmed credit, the advising bank adds its guarantee to pay the seller to that of the buyer’s issuing bank. Once the advising bank reviews and confirms that all documentary requirements are met, it will pay the seller. The advising bank will then look to the issuing bank for payment. Confirmed Irrevocable letters of credit are used when trading in a high-risk area where war or social, political, or financial instability are real threats. Also common when the seller is unfamiliar with the bank issuing the letter of credit or when the seller needs to use the confirmed letter of credit to obtain financing its bank to fill the order. A confirmed credit is more expensive because the bank has added liability.

Standby Letter of Credit

This credit is a payment or performance guarantee used primarily in the United States. They are often called non-performing letters of credit because they are only used as a backup should the buyer fail to pay as agreed. Thus, a stand-by letter of credit allows the customer to establish a rapport with the seller by showing that it can fulfill its payment commitments. Standby letters of credit are used, for example, to guarantee repayment of loans, to ensure fulfillment of a contract, and to secure payment for goods delivered by third parties. The beneficiary to a standby letter of credit can cash it on demand. Stand-by letters of credit are generally less complicated and involve far less documentation requirements than irrevocable letters of credit. See Credit Administration, Sample Procedure for Administration of a Standby Letter of Credit for a systematic procedure for establishing a standby letter of credit.

Special Letters of Credit;

The following is a brief description of some special letters of credit.

Back-to-Back Letter of Credit
This is a new letter of credit opened based on an already existing, nontransferable credit used as collateral. Traders often use back-to-back arrangements to pay the ultimate supplier. A trader receives a letter of credit from the buyer and then opens another letter of credit in favor of the supplier. The first letter of credit serves as collateral for the second credit.

Deferred Payment (Usance) Letter of Credit
In Deferred Payment Letters of Credit, the buyer accepts the documents related to the letter of credit and agrees to pay the issuing bank after a fixed period. This credit gives the buyer a grace period for payment.

Red Clause Letter of Credit
Red Clause Letters of Credit provide the seller with cash prior to shipment to finance production of the goods. The buyer’s issuing bank may advance some or all of the funds. The buyer, in essence, extends financing to the seller and incurs the risk for all advanced credits.

Revolving Letter of Credit
With a Revolving Letter of Credit, the issuing bank restores the credit to its original amount once it has been used or drawn down. Usually, these arrangements limit the number of times the buyer may draw down its line over a predetermined period.

Transferable Letter of Credit
This type of credit allows the seller to transfer all or part of the proceeds of the original letter of credit to a second beneficiary, usually the ultimate supplier of the goods. The letter of credit must clearly state that it is transferable for its to be considered as such. This is a common financing tactic for middlemen and is common in East Asia.

Assignment of Proceeds:
The beneficiary of a letter of credit may assign all or part of the proceeds under a credit to a third party (the assignee). However, unlike a transferred credit, the beneficiary maintains sole rights to the credit and is solely responsible for complying with its terms and conditions. For the assignee, an assignment only means that the paying bank, once it receives notice of the assignment, undertakes to follow the assignment instructions, if and when payment is made. The assignee is dependent upon the beneficiary for compliance, and thus this arrangement is riskier than a transferred credit. Before agreeing to an assignment of proceeds arrangement, the assignee should carefully review the original letter of credit.

Common Problems with Letters of Credit:
Most problems result from the seller’s inability to fulfill obligations stated in the letter of credit. The seller may find these terms difficult or impossible to fulfill and, either tries to fulfill them and fails, or asks the buyer to amend to the letter of credit. As most letters of credit are irrevocable, amendments may at times be difficult since both the buyer and the seller must agree.

Sellers may have one or more of the following problems:

The shipment schedule cannot be met;
The stipulations concerning freight costs are unacceptable;
The price becomes too low due to exchange rates fluctuations;
The quantity of product ordered is not the expected amount;
The description of product is either insufficient or too detailed; and,
The stipulated documents are difficult or impossible to obtain.

Even when sellers accept the terms of a letter of credit, problems often arise late in the process. When this occurs, the buyer’s and seller’s banks will try to negotiate any differences. In some cases, the seller can correct the documents and present them within the time specified in the letter of credit. If the documents cannot be corrected, the advising bank will ask the issuing bank to accept the documents despite the discrepancies found. It is important to note that, if the documents are not in accord with the specifications of the letter of credit, the buyer’s issuing bank is no longer obligated to pay.

Basic Procedures for Establishing a Letter of Credit:
The letter of credit process has been standardized by a set of rules published by the International Chamber of Commerce (ICC). These rules are called the Uniform Customs and Practice for Documentary Credits (UCP) and are contained in ICC Publication No. 500. The following is the basic set of steps used in a letter of credit transaction. Specific letter of credit transactions follow somewhat different procedures.

1. After the buyer and seller agree on the terms of a sale, the buyer arranges for his bank to open a letter of credit in favor of the seller. Note: The buyer will need to have a line of credit established at the bank or provide cash collateral for the amount of the letter of credit.
2. The buyer’s issuing bank prepares the letter of credit, including all of the buyer’s instructions to the seller concerning shipment and required documentation.
3. The buyer’s bank sends the letter of credit to the seller’s advising bank.
4. The seller’s advising bank forwards the letter of credit to the seller.
5. The seller carefully reviews all conditions stipulated in the letter of credit. If the seller cannot comply with any of the provisions, it will ask the buyer to amend the letter of credit.
6. After final terms are agreed upon, the seller ships the goods to the appropriate port or location.
7. After shipping the goods, the seller obtains the required documents. Please note that the seller may have to obtain some documents prior to shipment.
8. The seller presents the documents to its advising bank along with a draft for payment.
9. The seller’s advising bank reviews the documents. If they are in order, it will forward them to the buyer’s issuing bank. If a confirmed letter of credit, the advising bank will pay the seller (cash or a bankers’ acceptance).
10. Once the buyer’s issuing bank receives and reviews the documents, it either (1) pays if there are no discrepancies; or (2) forwards the documents to the buyer if there are discrepancies for its review and approval.

Opening a Letter of Credit

Level of Detail
The wording in a letter of credit should be simple, but specific. The more detailed an L/C is, the more likely the seller will reject it as too difficult to fulfill. At the same time, the buyer will wish to define in detail what its is paying for.

Type of Credit
Letters of credit used in trade are usually either irrevocable unconfirmed credits or irrevocable confirmed credits. In choosing which type to open both the seller and the buyer should consider the generally accepted payment processes in each country, the value and demand for the goods, and the reputation of the buyer and seller.

Documents
In specifying required documents, it is very important to include those required for customs and those reflecting the agreement reached between the buyer and the seller. Required documents usually include the bill of lading, a commercial and/or consular invoice, the bill of exchange, the certificate of origin, and the insurance document. Other documents required may be an inspection certificate, copies of a cable sent to the buyer with shipping information, a confirmation from the shipping company of the state of its ship, and a confirmation from the forwarder that the goods are accompanied by a certificate of origin. Prices should be stated in the currency of the letter of credit and documents should in the same language as the letter of credit.

The Letter of Credit Application
The following information should be addressed when establishing a letter of credit.

1. Beneficiary
The seller should provide to the buyer its full corporate name and correct address. A simple mistake here may translate to inconsistent or improper documentation at the other end.

2. Amount
The seller should state the actual amount of the letter of credit. One can request a maximum amount when there is doubt as to the actual count or quantity of the goods. Another option is to use words like “approximate”, “circa”, or “about” to indicate an acceptable 10 % plus or minus from the stated amount. For consistency, if you use this wording you will need to use it also in connection with the quantity.

3. Validity
The seller will need time to ship and to prepare all the necessary documents. Therefore, the seller should ensure that the validity and period for document presentation after the shipment of the goods is long enough.

4. Seller’s Bank
The seller should list its advising bank as well as a reimbursing bank if applicable. The reimbursing bank is the local bank appointed by the issuing bank as the disbursing bank.

5. Type of Payment Availability
The buyer and seller may agree to use sight drafts, time drafts, or some sort of deferred payment mechanism.

6. Desired Documents
The buyer specifies the necessary documents. Buyers can list, for example, a bill of lading, a commercial invoice, a certificate of origin, certificates of analysis, etc. The seller must agree to all documentary requirements or suggest an amendment to the letter of credit.

7. Notify Address
This is the address to notify upon the imminent arrival of goods at the port or airport of destination. A notification listing damaged goods is also sent to this address, if applicable.

8. Description of Goods
The seller should provide a short and precise description of the goods as well as the quantity involved. Note the comments in step #2 above concerning approximate amounts.

9. Confirmation Order
With international arrangements, the seller may wish to confirm the letter of credit with a bank in its country.

Amendment of a Letter of Credit:
For the seller to change the terms noted on an irrevocable letter of credit, it must request an amendment from the buyer. The amendment process is as follows:

1. The seller requests a modification or amendment of questionable terms in the letter of credit;
2. If the buyer and issuing bank agree to the changes, the issuing bank will change the letter of credit;
3. The buyer’s issuing bank notifies the seller’s advising bank of the amendment; and
4. The seller’s advising bank notifies the seller of the amendment. Tips for Buyers and Sellers

Seller

1. Before signing a sales contract, the seller should make inquiries about the buyer’s creditworthiness and business practices. The seller’s bank will generally assist in this investigation.

2. In many cases, the issuing bank will specify the advising and/or confirming bank. These designations are usually based on the issuing bank’s established correspondent relationships. The seller should ensure that the advising/confirming bank is a financially sound institution.

3. The seller should confirm the good standing of the buyer’s issuing bank if the letter of credit is unconfirmed.

4. For confirmed letters of credit, the seller’s advising bank should be willing to confirm the letter of credit issued by the buyer’s bank. If the advising bank refuses to do so, the seller should request another issuing bank as the current bank may be or is in the process of becoming insolvent.

5. The seller should carefully review the letter of credit to ensure its conditions can be met. All documents must conform to the terms of the letter of credit. The seller must comply with every detail of the letter of credit specifications; otherwise the security given by the credit is lost.

6. The seller should ensure that the letter of credit is irrevocable.

7. If amendments are necessary, the seller should contact the buyer immediately so that the buyer can instruct the issuing bank to make the necessary changes quickly. The seller should keep the letter of credit’s expiration date in mind throughout the amendment process.

8. The seller should confirm with the insurance company that it can provide the coverage specified in the letter of credit and that insurance charges listed in the letter of credit are correct. Typical insurance coverage is for CIF (cost, insurance and freight) often the value of the goods plus about 10 percent.

9. The seller must ensure that the goods match the description in the letter of credit and the invoice description.

10. The seller should be familiar with foreign exchange limitations in the buyer’s country that could hinder payment procedures.

Buyer

1. When choosing the type of letter of credit, the buyer should consider the standard payment methods in the seller’s country.

2. The buyer should keep the details of the purchase short and concise.

3. The buyer should be prepared to amend or re-negotiate terms of the letter of credit with the seller. This is a common procedure in international trade. With irrevocable letters of credit, the most common type, all parties must agree to amend the document.

4. The buyer can reduce the foreign exchange risk by buying forward currency contracts.

5. The buyer should use a bank experienced in foreign trade as its issuing bank.

6. The validation time stated on the letter of credit should give the seller ample time to produce the goods or to pull them out of stock.

7. A letter of credit is not fail-safe. Banks are only responsible for the documents exchanged and not the goods shipped. Documents in conformity with the letter of credit specifications cannot be rejected on grounds that the goods were not delivered as specified in the contract. The goods shipped may not in fact be the goods ordered and paid for.

8. Purchase contracts and other agreements pertaining to the sale between the buyer and seller are not the concern of the issuing bank. Only the letter of credit terms are binding on the bank.

9. Documents specified in the letter of credit should include those the buyer requires for customs clearance.

This article was written by Credit Research Foundation www.crfonline.org

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