ACCEPTANCE MARKET Meaning and
Definition
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Acceptance market refers to a financial market where acceptance bills or promissory notes are bought and sold. Acceptance bills are short-term negotiable instruments that are used to finance trade transactions. They are issued by the seller (drawer) to the buyer (drawee) as a written promise to pay a certain amount on a specified date. The acceptance bill signifies the seller's acceptance of the buyer's creditworthiness and willingness to hold the bill until maturity.
In the acceptance market, these bills are actively traded among financial institutions, such as banks and discount houses. The purpose of trading in the acceptance market is to provide liquidity and financing options to participants involved in international trade.
The acceptance market is typically regulated and operates within the framework of specific laws governing negotiable instruments. It provides a platform for buyers and sellers to negotiate the terms of the bills, including the discount rate or interest rate applied to the bill. This allows participants to manage their cash flow and optimize their trade financing arrangements.
The acceptance market plays a crucial role in facilitating global trade by providing a secure and efficient method of financing and transferring funds between international buyers and sellers. It serves as a means of managing credit risk and promoting trust between parties involved in trade transactions. The market's liquidity and active trading contribute to maintaining the smooth flow of funds across borders, enhancing economic activities and promoting international commerce.
Similar spelling word for ACCEPTANCE MARKET
