MTN JOKER BROKER SPOOF AND MID TERM NOTE REALITY CHECK
If you have any experience dealing with brokers in regards to the potential purchase or trade of MTN’s or “Mid Term Notes”, then you will really enjoy this spoof on the industry I have provided. Although these transactions actually do occur, it takes a direct relationship on both sides and a solid understanding of the bank instruments market to even think about being successful in this type of transaction. You would be hard pressed to find any brokers that have closed these type of transactions that are not licensed traders.
I have provided a few points to consider before entering into this market, as well as bit of information in the event you are either involved or thinking of getting involved in some capacity.
- What is a Mid Term Note? simply put, it is a debenture. In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. Mid Term Notes are a guarantee for payment, which can either be cash backed, asset backed or corporate backed which provides a fixed annual rate of return also known as a fixed income note. The term for an MTN is typically for a period of 10 years. However, due to the nature of this type of instrument an MTN that is trading on the open market would have an International Securities Identification Number (ISIN) which uniquely identifies a security that is commonly issued for bonds, commercial paper, stocks and warrants. You may be able to find a licensed broker that can purchase a share of an MTN on the open market, however, you will almost never find a MTN for sale by one owner or title holder, contrary to what you might hear from many brokers.
- An MTN is created by a bank and has go through an extensive underwriting process before they are issued by the underwriting bank. Due to this process, a prospectus should always be provided with any real MTN offered to a qualified investor to evaluate prior to them even considering to invest in this type of bank instrument. This is done so that the investor has a clear understanding of his or her perceived risk.
- An MTN that is directly underwritten for a client, from the bank is typically known as Fresh Cut or “FC”, which is just a made up broker term, understand there is no actual banking term such as “Fresh Cut Securities.” It is a term widely used by the secondary broker network by those who have unlearned correct banking procedures, terminology, and documentation. Truthfully; there is no cutting house, it’s simply a bank that underwrote the debenture.
Once the paper is offered in the open market for trading, or anyway has a lien placed on it, it is then considered “seasoned.” Securities and mortgages with an excellent track record of timely and reliable payment are very desirable investment instruments and can be readily sold in the SECONDARY MARKET. Some brokers will use the broker term “slightly seasoned”, but regardless of how much time is left till the maturity date of the instrument, as long as the MTN is in trade it’s considered seasoned.
- The people who are licensed and regulated to buy and sell MTN’s typically do not need you. There are many brokers that believe that they have access to the holy-grail for bank paper IE: spot MTN paper, when in reality they are just pushing paperwork that was generated by a broker. Chances are, that by the time you receive a real MTN that was available for trading to either buy and/or sell it has already been sold many times and you have absolutely no authority to trade or sell it. On rare occasion you will have access to private transaction which is handled at a bank level and performed by experienced traders otherwise know as Tier III or even forfaiters. For more in on this term you can download a pdf from “ Credit Suise here “ to get a better understanding.
- If you have read this far you are starting to realize that there is much to know about this process. Most of the broker BS you find on line is exactly that, a series of miss guided individuals who have never done a transaction in this space and have no access to real sources, banks or clients that have the ability or capacity to perform in the purchase or sale of bank instruments.
- A common misconception highlighted on the broker joker video. If in fact you are actually working with the mandate or representative for the client, for the record in order for them to call themselves a legal mandate or representative they must have signatory authority on behalf of the buyer seller or trader otherwise they are just another broker ready waste everyone’s time.
If you are serious and are currently looking for vetted resources to assist in this type of transaction, and you in fact have done your due diligence on your potential clients and or bank instrument first, then feel free to contact us to discuss how we may able to provide additional information to assist on a higher level.
Please be sure to include the reason for your inquiry in your submission.