Financial Switch
From Supply Chain Management Encyclopedia
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* 4) Company С pays the contract delivering the said mining equipment from company А to company В. | * 4) Company С pays the contract delivering the said mining equipment from company А to company В. | ||
- | As in case of the Product Switch, switch traders <ref>A switch trader, in case of switch trading, is the third party to whom the importer (under the first barter contract: A-B) transfers its obligations to pay to the exporter (A) in exchange to delivery from the said importer received with a discount. Then, the switch trader resells this product for a hard currency and the latter is used to fulfill the payment obligation to the original exporter (A) under the first barter contract: A-B. According terms and conditions of such agreements the discount in favor of the switch trader depends on the importer’s need degree for a hard currency and corresponding msrket conjuncture [Countertrade -https://www.boundless.com/business/international-business/types-of-international-business/countertrade/]. </ref> and clearing brokers <ref> As usual [Clearing Broker - http://www.investopedia.com/terms/c/clearingbroker.asp], the clearing broker is understood as a member of an exchange that acts as a liaison between an investor and a clearing corporation. A clearing broker helps to ensure that the trade is settled appropriately and the transaction is successful. Clearing brokers are also responsible for maintaining the paper work associated with the clearing and executing of a transaction. In the context of countertrading, the clearing broker (organization) plays almost the same roles. Especially, in case of switch transactions, the clearing broker could be an intermediary who converts a local (soft) currency using a currency exchange. The same function could take place on product markets – a liaison between the third party in switch trading and a commodity exchange. A clearing broker is employed by a company that has holds the right to trade directly on the various commodity exchanges on behalf of customers [Economics and Marketing: Choosing a Commodity Broker - http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis1015].</ref> could be used as middlemen in such transactions. | + | As in case of the [[Product Switch]], switch traders <ref>A switch trader, in case of switch trading, is the third party to whom the importer (under the first barter contract: A-B) transfers its obligations to pay to the exporter (A) in exchange to delivery from the said importer received with a discount. Then, the switch trader resells this product for a hard currency and the latter is used to fulfill the payment obligation to the original exporter (A) under the first barter contract: A-B. According terms and conditions of such agreements the discount in favor of the switch trader depends on the importer’s need degree for a hard currency and corresponding msrket conjuncture [Countertrade -https://www.boundless.com/business/international-business/types-of-international-business/countertrade/]. </ref> and clearing brokers <ref> As usual [Clearing Broker - http://www.investopedia.com/terms/c/clearingbroker.asp], the clearing broker is understood as a member of an exchange that acts as a liaison between an investor and a clearing corporation. A clearing broker helps to ensure that the trade is settled appropriately and the transaction is successful. Clearing brokers are also responsible for maintaining the paper work associated with the clearing and executing of a transaction. In the context of countertrading, the clearing broker (organization) plays almost the same roles. Especially, in case of switch transactions, the clearing broker could be an intermediary who converts a local (soft) currency using a currency exchange. The same function could take place on product markets – a liaison between the third party in switch trading and a commodity exchange. A clearing broker is employed by a company that has holds the right to trade directly on the various commodity exchanges on behalf of customers [Economics and Marketing: Choosing a Commodity Broker - http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis1015].</ref> could be used as middlemen in such transactions. |
Revision as of 01:43, 30 July 2014
Russian: Финансовый свитч
Financial Switch (Simplified Flow Chart)[1]
LEGEND:
In case of the financial switch (participants: Company А = USA; Company В = Chili; Company С = Ukraine) the switch is developed as following:
- 1) Company В (Chili) needs to renovate its mining equipment to use on its copper mines. Traditionally, such mining equipment is bought in USA from the Company А. There is an obstacle for this transaction: Company А insists to receive payment in dollars, but the Company В has not a dollar amount necessary this time.
- 2) Company В has found the Company С supplying Ukrainian copper plants with the copper ore concentrate. However, this product has a relatively low liquidity to be an effective product for a compensating transaction.
- 3) There are two possible actions of the Company С:
- 1 – Company С directly sells this product on its domestic market for grivna (Ukrainian national currency) and, then, converts the grivna revenue in the hard currency (dollar) with a disagio, to accelerate the deal with a clearing broker.
- 2 - Company С releases the product to a switch trader on consignment basis with a discount depending on the time of consignment and receives in exchange the hard currency (dollar).
- 4) Company С pays the contract delivering the said mining equipment from company А to company В.
As in case of the Product Switch, switch traders [2] and clearing brokers [3] could be used as middlemen in such transactions.
References
- ↑ Черенков В.И. Внешнеэкономическая деятельность предприятия: основные операции (серия «Высшее образование»). Ростов-на-Дону «ФЕНИКС», 2007 - с. 97-102. (с авторским изменением дизайна)
- ↑ A switch trader, in case of switch trading, is the third party to whom the importer (under the first barter contract: A-B) transfers its obligations to pay to the exporter (A) in exchange to delivery from the said importer received with a discount. Then, the switch trader resells this product for a hard currency and the latter is used to fulfill the payment obligation to the original exporter (A) under the first barter contract: A-B. According terms and conditions of such agreements the discount in favor of the switch trader depends on the importer’s need degree for a hard currency and corresponding msrket conjuncture [Countertrade -https://www.boundless.com/business/international-business/types-of-international-business/countertrade/].
- ↑ As usual [Clearing Broker - http://www.investopedia.com/terms/c/clearingbroker.asp], the clearing broker is understood as a member of an exchange that acts as a liaison between an investor and a clearing corporation. A clearing broker helps to ensure that the trade is settled appropriately and the transaction is successful. Clearing brokers are also responsible for maintaining the paper work associated with the clearing and executing of a transaction. In the context of countertrading, the clearing broker (organization) plays almost the same roles. Especially, in case of switch transactions, the clearing broker could be an intermediary who converts a local (soft) currency using a currency exchange. The same function could take place on product markets – a liaison between the third party in switch trading and a commodity exchange. A clearing broker is employed by a company that has holds the right to trade directly on the various commodity exchanges on behalf of customers [Economics and Marketing: Choosing a Commodity Broker - http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis1015].