Bank Instruments or Bonds are issued by major banks worldwide at discounted prices amounting to billions of US dollars daily. These instruments are issued by financially strong banks as they can sell at discounted prices while promising to pay back the total face value upon maturity.
It is essential to understand that all these activities are ‘off-balance-sheet activities.’ These activities are contingent assets and liabilities where the value depends on the claim’s outcome. Likewise, PPP trading is private and by invitation only. They are only available to individuals with high net worth and qualified institutional investors.
The returns are usually contractual double-digit monthly returns while the investor’s capital never leaves their bank account, meaning it is not put at risk in the trading. Trade proceeds are usually disbursed weekly over 40 weeks (international banking weeks over 12 calendar months).
Traders and investors must know that:
● PPP transactions are free from unusual restrictions that are present in the securities market.
● PPP is based on arbitrage transactions that have pre-defined prices, meaning traders don’t need to control the Client’s funds.
● The trading platform is regulated by strict guidelines established by the European Central Bank, Federal Reserve, and the Bank of International Settlement
(BIS). Thus, both participating financial institutions and traders require special licenses to participate.
● The trading banks loan money to the traders at a ratio of 1:10. However, in certain conditions, it can be as high as 20:1.
● Nonetheless, these trading platforms rely on heavy utilization of leverage for generating high returns. Leverage, in turn, is dependent on margin utilization.
Moreover, PPP trading is a very low-risk opportunity for an investor who can provide a cash deposit, a Standby Letter of Credit (SBLC), or a Bank Guarantee for a minimum of 100 million Euro (€100,000,000). This allows the trade bank to release credit facilities for the trading of MTNs. The notional returns to the Investor/Asset Provider are expected to be over 20% per month. However, returns are contractually agreed upon and vary on a case-by-case basis.
On the other hand, investors who don’t have 100M Euro can make a wealth-accumulation “bullet trade” where the trade proceeds are paid in one lump sum. This is usually within seven days to 30 days. This is done in order to help the investor get to the 100M Euro level more quickly.
Rules for Entering PPP Trading
To enter PPP trading, you need to make sure that you qualify and meet the set rules in place. Not all clients with high net worth can participate in PPP trading programs.
Clients are evaluated for qualification. Until the Client is successfully accepted by the traders, compliance, and trading banks, they can’t trade through PPP. Furthermore, even when selected, they may be disqualified due to any misconduct. Moreover, the asset should be acceptable by the bank. Clients may be disqualified if they submit forged, counterfeit, or altered documents or financial instruments. The procedures, practices, and clients’ acceptance are determined by the US FRA and Western European Central Banks program management and trading banks.
Also, application document submission to more than one management group at a time is likely to get blacklisted and will never be accepted by any group. PPP trades shall commence as soon as the Client passes through the due diligence and provides the required collateral.
PRIVATE PLACEMENT PROGRAM / PPP TRADE ENTRY OPTION-1
PPP Trade Entry through SBLC (Stand-by Letter of credit)
This program is predominantly for non-recourse debt finance agreement or non-recourse loan or funding development of a commercial property or infrastructure on a large scale in alignment with the UNDP SDG 9. [Sustainable Development Goal 9: Infrastructure/Innovation/Industry].
Note details:
Receiving Bank:
Disbursement Fiduciary : [Insert details]
Principal Administrator: [Insert details]
Sender’s Bank: AA/AAA only
SWIFT MT760 only
Disbursement Target: [Insert]
LTV/Loan To Value: [Insert percentage range of Face Value]
Minimum First Tranche : [Insert amount]
Compliance Norms Applicable
SWIFT MT760 VERBIAGE: Cash Backed SBLC
Procedure to Follow
1. The Client must provide standard Compliance/AML Risk Assessment/KYC documentation, including colored passport copy, Registration Company, proof of account, bank officer, and asset fund. Plus, they should provide all necessary signatures on the following documents:
● Affidavit requesting client information sheet or corporate resolution where applicable.
2. The Principal issues a complete Finance Agreement to the Client for countersign. The agreement means that you are legally binding between all parties of the alliance. It has all the details of receiving bank, receiving bank officer, authorized licensed fiduciary, principal party, and overview of project finance from trade assigned to the Client.
3. The bank officer of the Client must then arrange NDS [Non-Depleting Signatory] to client Master Account, or Sub Account linked to Master Account.
5. Trades Begin and disbursements according to agreement.
6. Appointed Auditors Report is received, viewed, and confirms that the Project Funds are placed as assigned in commercial and economic developmen
