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Asset-backed commercial paper

Prime MMF: Mutual fund that buys commercial paper from multiple issuers

ABCP: Special purpose vehicle that issues commercial paper backed by assets

SUBSCRIPTION 1 Investor submits buy order for $9 2 GTS accepts buy order 3 Investor sends USD to U.S. Bank 4 GTS buys $9 Treasuries 5 GTS mints 10 tokens to investor wallet

MATURITY REDEMPTION 6 Treasuries mature, return $10 principal 7 U.S. Bank sends 10 USD to investor 8 GTS burns 10 tokens

EARLY REDEMPTION 6 Investor requests redemption 7 GTS sells Treasuries 8 U.S. Bank sends USD to investor 9 GTS burns tokens

BUYING: 1 Investor wires $970k to North Capital 2 North Capital forwards $970k to Great Bridge SPV 3 Great Bridge mints GDCP tokens to investor's wallet 4 Great Bridge instructs U.S. Bank to buy $970k of 6-month Treasury bill 5 U.S. Bank purchases T-bill and holds as pledged collateral

REDEEMING: 6 At maturity, T-bill pays $1M to U.S. Bank 7 U.S. Bank transfers $1M to Great Bridge 8 Great Bridge pays investor $1M face value 9 Great Bridge burns GDCP tokens from investor's wallet 10 Great Bridge pays 60bp management fee to Guggenheim

hashtag
Guggenheim Digital Commercial Paper

COUNTERPARTIES Issuer: Great Bridge Capital Company, a Delaware LLC (also see #7) Manager: Guggenheim Treasury Services, Delaware LLC Collateral Agent: U.S. Bank Trust Company, NA Smart Contracts: Zeconomy, the technology provider, a Delaware corporation Placement Agent: North Capital Private Securities Corporation Rating Agency: Moody’s Investors Service Inc.

FLOW OF FUNDS

1 Before placing orders, an investor must complete the onboarding process (this step is done once) with North Capital, which includes:     a. entering into a Participation Agreement with the Issuer,     b. being whitelisted, and     c. being granted access to a permissioned web portal. 2 GTS, on behalf of the Issuer, defines the terms of the GDCP and posts them on the portal. 3 The investor submits a buy order through the portal. 4 GTS accepts the order, notifies the investor, requests funds. 5 The investor wires funds to the GDCP account at U.S. Bank. The bank confirms receipt and ensures the funds are sufficient. If funds are not received by 4 pm Eastern, the trade is canceled. 6 GTS executes purchase of maturity-matched Treasury securities. If market disruption prevents purchase, the trade is canceled and funds are returned. 7 GTS records issuance of GDCP on the blockchain, crediting investor’s Ethereum account with GDCP. 8 At maturity, GTS instructs U.S. Bank to pay the investor directly. GTS updates the Ethereum ledger to mark the tokens as paid.

PROBLEM

Early redemption liquidity

https://ratings.moodys.com/ratings-news/424161arrow-up-right

SOLUTION

Redemption in-kind.

SOURCES

GS intro to money marketsarrow-up-right SIVs and the Asset-Backed Commercial Paper Marketarrow-up-right Commercial Paper Funding Facilityarrow-up-right Giddy.orgarrow-up-right

MMF: Buyer = owner

ABCP: Buyer = lender/creditor

MONEY MARKET FUND (MMF):

  • Shares represent proportional ownership of fund assets

  • Daily liquidity - redeem anytime at NAV

  • Pooled assets - your money mixed with other investors

  • Regulated under Investment Company Act

  • $1 NAV maintained through daily mark-to-market

  • Manager buys/sells Treasuries based on fund flows

ASSET BACKED COMMERCIAL PAPER (ABCP):

  • Debt instrument - you're a creditor, not owner

  • Fixed maturity - locked until maturity date

  • Specific collateral - your investment backed by specific Treasuries

  • Exempt from Investment Company Act (3c7)

  • Discount structure - buy at $9, redeem at $10

  • Pre-funded - Treasuries bought upfront, held to maturity

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