What Is an Acceptance Market?

Acceptance market (acceptance market) is the business of operating acceptance bills, which consists of banks and other financial institutions and bill brokers buying and selling acceptance bills. Acceptance refers to the act of the holder of the note requiring the debtor to sign and stamp to recognize the due payment. Here, the accepted bill refers to a draft. The nature of acceptance is the guarantee of the acceptor to pay the ticket unconditionally. Accepted notes are called acceptance notes. Since the acceptor of the promissory note has guaranteed payment during the repayment period, investors are willing to buy or sell the promissory note on the secondary market to adjust liquid assets to form a promissory market.

Acceptance market

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Acceptance market (acceptance market) is the business of operating acceptance bills, which consists of banks and other financial institutions and bill brokers buying and selling acceptance bills. Acceptance refers to the act of the holder of the note requiring the debtor to sign and stamp to recognize the due payment. Here, the accepted note refers to a bill of exchange. The nature of acceptance is the guarantee of the acceptor to pay the ticket unconditionally. Accepted notes are called acceptance notes. Since the acceptor of the promissory note has guaranteed payment during the repayment period, investors are willing to buy or sell the promissory note on the secondary market to adjust liquid assets to form a promissory market.

The transaction market of the acceptance market mainly includes bank acceptance bills and commercial acceptance bills. Commercial acceptance bills are those directly acknowledged by the payer recorded in the bill. Commercial acceptance bills are mostly used for domestic trade. Usually, the seller sends the commercial bill and the goods document to the buyer. Seller, at this time the commercial paper has become a commercial acceptance note. Bank acceptance bills are mostly used in international trade. They are bills issued by banks in order to help importers and exporters to undertake international trade obligations to pay due bills. When the importer of country A orders goods from abroad, the bank of country A accepts the request of the foreign exporter and promises to pay the exporter or the designated bank. The note becomes a bank acceptance note. Because of the backing of banks, such bills have become an important trading object in the acceptance market.

The main constituents of the acceptance market are:

(1) Various types of banks that provide promissory notes, which provide notes for exporters or domestic manufacturers. The reason why banks are willing to accept bills is because they provide financing to customers by means of acceptance. The bank only provides its own credit as a guarantee, which does not necessarily reduce the bank's own deposit capacity. Moreover, such bills are self-paying, and the risks that banks assume as guarantors are small.

(2) Bill dealer. They buy the promissory note from the drawer, the accepting unit and the holder, and sell it at a slightly higher price to make a profit. Buyers of acceptance bills are mainly commercial banks, central banks, savings banks, insurance companies and other financial institutions. The central bank stabilizes the acceptance market. When the purchase discount rate set by the central bank is lower than the market discount rate, a large amount of bills must flow to the central bank; on the contrary, if the purchase discount rate of the central bank is higher than the market discount rate, it will be reduced to its sellers, and in the acceptance market In the past, when the market interest rate was low and the banks' capital turnover was flexible, they successively purchased acceptance bills as part of the management of liquid assets. When the market interest rate is high and the money is tightening, banks will divert funds to other uses, reducing the number of acceptance bills held in their hands, and there are a large number of acceptance bills on the acceptance market that need to be sold. At this time, the central bank always buys as soon as possible, in order to prevent the holders from accumulating too many notes and taking greater risks, thereby exerting a positive stabilizing effect.