F208. Open Market Paper (Commercial Paper)
Federal Reserve definition for F208 flow of funds table
Open market paper comprises commercial paper and bankers acceptances.
Commercial Paper
Commercial paper consists of short-term promissory notes issued by financial and nonfinancial borrowers.
- Maturities range up to 270 days and average 30 days.
- Commercial paper may be directly issued or dealer placed.
- It is usually bought and sold on a discount basis, with face value being paid to holders upon maturity.
Bankers Acceptance
A bankers acceptance is a draft or bill drawn on and accepted by a banking institution (the "accepting bank") or its agent for payment by that institution on a future date specified in the instrument (most commonly about three months later).
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Funds are advanced to the drawer of the acceptance (the borrower) by the discounting of the accepted draft, either by the accepting bank or by others.
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The accepted draft is a negotiable money-market instrument and may be sold and resold subsequent to its original discounting.
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On the maturity date, the current owner of the acceptance presents the accepted draft to the accepting bank for payment.
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The accepting bank is obligated to pay the holder the face amount of the draft on the maturity date; the borrower is obligated to repay the funds to the bank, or or before that date.
Bankers acceptances are often used in financing international trade.
In the flow of funds accounts, they are treated as liabilities of U.S.-chartered commercial banks and of foreign banking offices in the U.S.
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