In 2009, Blades International, Inc. started brokering Export Letter of Credit transactions for clients under confidential brokerage agreements. As a result, the years of transaction data have provided a foundation for a Trade Finance Index, such that clients can see pricing for the Export Letter of Credit (L/C) market. Client and Exporter terms are confidential, however, the data on Export L/C transactions has enabled Blades International to develop an Index, and understand the pricing dynamics for large and moderate Export Letter of Credit transactions from various foreign markets.
Trade Finance Index - Sample
The focus of the pricing index is on the Confirmation Fee and the Negotiation Fee. The Confirmation of an Export Letter of Credit is a 'Definitive undertaking by a Bank to pay a letter of credit if it is drawn on in accordance with the terms and conditions of the Credit". Accordingly, the Confirmation Fee has a risk premium element based on the Country Risk, Bank Risk, and Tenor. This is where the market can be inefficient and the Blades International Trade Finance Index (BITFI) brings economies and transparency to the market.
The Negotiation Fee is for the service of reviewing and processing the documents. The Negotiation of a Letter of Credit is the standard procedure a bank performs which includes checking the documents and giving value to the Exporter/Seller. These Fees are based on the size of the Letter of Credit and can range from 3bps to 25bps and are typically charged on a flat basis as an amount of the Letter of Credit.
When a Time Draft is presented, or there is a Deferred Payment, Banks earn Acceptance Fees and Discount Fees for creating Banker's Acceptances and Discounting Drafts. The BITFI helps bring efficiencies and economics to this market as well and savings can be obtained.
Other Ancillary Letter of Credit Fees, which are typically small and moderate, include the Advising, Amendment, Discrepancy and various Out of Pocket Charges for such things as Courier expenses.
Please contact us to see how the Blades International Trade Finance Index may be of assistance to you.