I have of late started getting frequent mails offering BGs from top European banks of the order of 10 B to 500 B at anyting between 66% to 52%.

A recent one was a BG valid for one year and one day at 52%.

I would like to know whether any member has really closed such deals in the past, while remaining within the four cornors of law.

First it depends on the wording, second on the terms and currency and if the issuer is the liable party or the issuer issues without liability for a third party ( for example RABO Bank (AAA) issues for the risk and liability solely of a Columbian Bank (not rated or below investment grade). Second factor is jurisdiction, reimbursement arrangement and clean status.

I have worked in the issuing, the buying and the using side and yes done transactions but not the way it is described in the brokerage emails etc; BG's we will acquire for the structuring of a collateral pool and combine them through a dark pool liquidity structure from which there is income generated through specific either private OTC deals or iceberg orders in public markets, all through institutional market participants with direct access to clearing and settlement mechanisms. I have so far not seen more than 3 brokers being paid in the arrangement of those deals and those which have been paid received plenty in terms of money but only 2 to 5 basis points in regards of percentage (meaning 0.02 to 0.05%). The players are all known, they hardly need brokers and beside the very big law firms you find mostly very specialized in house lawyers. There are no procedures like they are described in these offers on the internet, no secrets, no hard copy deliveries etc.

My advise: do not waste your time

Since BGs are not classified as securities and ISIN / CUSIP codes are not issued, to view in the Euroclear screen, the following steps are suggested.

1. Obtain a copy of the BG so the verbiage can be reviewed.
2. Obtain a copy of the safekeep receipt (SKR) so ownership can be established.

If the BG is being offered to you at, say, 66% of FV, then, there is huge chance the BG carries a high risk of default. Not too many financial institutions are willing to pay 44% in profit.

The first two steps allows the experienced buyer know if it has a real offer or a waste of time.

The rest of the verification process is conducted between banks or securities houses.



The broker fee: This is where most street brokers get in trouble. The 100bps may be doable, but not always.

I dont know why I stoped getting email Richard.. but I would like to be put back on your list.. I enjoyed the reading for the most part.. and that is saying a LOT! with regard to email..

My best to you and yours Richard now as always, JW

 

Tony,

Does this mean the 1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1 on all of those "Fresh Cut" deals will not pay out, EVER?

Man.. that is terrible..

JW

JW:

The 1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1+1

Is only doable in "Bradyland"...If you know what I mean.

Best wishes.

P.I.
--------------

To those who are not to good at using a calculator. Let me illustrate how much money you, as the introducing broker, can make on a transaction.

Example: Let's say the transaction is worth USD1M and you will be compensated 2bps for this transaction. That translates to USD2M in fees for this transaction.

If your average income, per annum, is USD12,000.00 a payment of USD2M will raise a lot of red flags with your bank. You will have to explain, in writing, why you are getting this huge amount of cash; when in the past you could hardly make your mortgage payments....if you know what I mean.

Good luck.

PI:
2 basis points of 1M is 1.000.000,00 multiplied by 0.0002, = 200
please do not use the term safekeeping receipt, the technical term is depositary receipt and you can cusip those
in regards of red-flagging, I have always said that unregistered brokers should never ever use their normal day to day accounts to receive a brokerage income which is flagged institutional, even a 200$ wire in such a transaction would immediately kill the account

JW:
we are reorganizing the email list and require people to opt in, meaning they need to request the newsletter

Honestly.. I just missed seeing you.. which then turned into not hearing from you.. sounds a lil on the sensitive side Richard.. but I have not seen so much good information for the masses ever in my life.. I think the world of what you do.. and the fact that you act for everyone / anyone Richard.. just trying to help any and all you come into contact with is simply priceless.. you are a superior individual Richard.. but for all of the right reasons.. God keep and protect you for you are truely a gem..

That is more serious than I like to be Richard but.. you deserve to hear it.

My best to you Richard and yours now and always, JW

RL:

You are correct in your calculations.

I should had paid attention to what I typed before I pressed "send".

No one will work for me, if I paid 2bps on a transaction (as mentioned on my original post). They would simply work for someone else who would reward their hard work with a decent compensation.

Thank you for bringing my error to my attention.

But, here is where I need to fine tune my definition of SKR.

It is my understanding that a Safekeeping receipt is a document issued by a bank which requires the bank to hold specific funds (or securities, gold, etc.) unconditionally separate from other assets and return them when requested by the depositor. In this way, the funds (or securities, gold, etc.) are not an asset of the bank nor are they, directly or indirectly, subject to any of the banks other obligations or debts.

Now, you define, Depositary receipt as the correct term and it is my understanding thata depository receipt is a financial instrument and they are three kinds:

American Depositary Receipts, European Depositary Receipts and Global Depositary Receipts.

Correct me if I am wrong (I will check with my people in a few minutes).

An American Depositary Receipt (or ADR) represents ownership in the shares of a non-U.S. company and trades in U.S. financial markets. The stock of many non-US companies trade on US stock exchanges through the use of ADRs. ADRs enable U.S. investors to buy shares in foreign companies without the hazards or inconveniences of cross-border & cross-currency transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.

Each ADR is issued by a U.S. depositary bank and can represent a fraction of a share, a single share, or multiple shares of the foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR often tracks the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares. In the case of companies incorporated in the United Kingdom, creation of ADRs attracts a 1.5% stamp duty reserve tax (SDRT) charge by the UK government.

Depositary banks have various responsibilities to an ADR shareholder and to the non-US company the ADR represents. The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co.

There are currently four major commercial banks that provide depositary bank services - JPMorgan, Citibank, Deutsche Bank and the Bank of New York Mellon.

Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADS).

Now, as far as European Depository Receipts--I fail to remember the correct definition and I will get in deeper trouble if I quote anything that I am not too sure.

Last, a Global Depository Receipt(GDR) is a certificate issued by a depository bank, which purchases shares of foreign companies and deposits it on the account. GDRs represent ownership of an underlying number of shares.

Global Depository Receipts facilitate trade of shares, and are commonly used to invest in companies from developing or emerging markets.

Prices of GDRs are often close to values of related shares, but they are traded & settled independently of the underlying share. Several international banks issue GDRs, such as JPMorgan Chase, Citigroup, Deutsche Bank, Bank of New York. GDRs are often listed in the Luxembourg Stock Exchange and in the London Stock Exchange, where they are traded on the International Order Book (IOB). Normally 1 GDR = 10 Shares, but not always.

And to close, I do not profess to know everything and I am not one to reject someone's help in correcting my errors. But, for the past 10 years or so, I have used the services of others, who have way more formal education than I do in finance, to guide me through this profession. It is over 30 years since I graduated from school and I am getting old(er). And you know what they say about getting old....two things happen. One, the mind starts to go and second........(gee...I forgot).

RL, I welcome your comments and like I always said, "Thank G_D for Mentors who are willing to help us when others won't."

Here is cartoon of something that I have in one of the walls of my office.

PI what you use is the version for publicly traded securities, you can have a depositary receipt issued which concerns itself with debt as well, whereas a safekeeping receipt relates to physical commodity, was developed from the receipt issued by the merchant who held commodities or the skipper who shipped it, these receipts are transferable and defacto transfer ownership of the commodity; in terms of securities what you would have in regards of a safekeeping receipt would not be enough in its legal conotation, therefore depositary receipts where created for the holding of securities value, later transformed for publicly traded shares a standarized version like the ADR was created, the general DR, often issued as GDR is a security which provides a holding of securities, not necessary shares or publicly traded, but issued for value. It is a way to make non-securities papers which carry value to securities, sort of a derivative carrying a cusip.

To further back up PI's BG example of an offer at 66%, the profit is not 44% but is actually 51.5%! (34/66)

You are correct.