# Asset-backed commercial paper

**Prime MMF:** Mutual fund that <mark style="color:red;">buys</mark> commercial paper from multiple issuers

**ABCP:** Special purpose vehicle that <mark style="color:red;">issues</mark> commercial paper backed by assets

<figure><img src="/files/pEfrDAWINEpCaAL8zjLN" alt=""><figcaption></figcaption></figure>

<mark style="color:purple;">SUBSCRIPTION</mark>
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1 Investor submits buy order for $9
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2 GTS accepts buy order
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3 Investor sends USD to U.S. Bank
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4 GTS buys $9 Treasuries
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5 GTS mints 10 tokens to investor wallet

<mark style="color:purple;">MATURITY REDEMPTION</mark>
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6 Treasuries mature, return $10 principal
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7 U.S. Bank sends 10 USD to investor
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8 GTS burns 10 tokens

<mark style="color:purple;">EARLY REDEMPTION</mark>
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6 Investor requests redemption
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7 GTS sells Treasuries
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8 U.S. Bank sends USD to investor
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9 GTS burns tokens

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

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

<figure><img src="/files/f17quEQDYgf2SzCAO5v4" alt=""><figcaption></figcaption></figure>

## Guggenheim Digital Commercial Paper

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

<mark style="color:purple;">FLOW OF FUNDS</mark>

1 Before placing orders, an investor must complete the onboarding process (this step is done once) with North Capital, which includes:
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    a. entering into a Participation Agreement with the Issuer,
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    b. being whitelisted, and
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    c. being granted access to a permissioned web portal.
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2 GTS, on behalf of the Issuer, defines the terms of the GDCP and posts them on the portal.
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3 The investor submits a buy order through the portal.
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4 GTS accepts the order, notifies the investor, requests funds.
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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.
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6 GTS executes purchase of maturity-matched Treasury securities. If market disruption prevents purchase, the trade is canceled and funds are returned.
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7 GTS records issuance of GDCP on the blockchain, crediting investor’s Ethereum account with GDCP.
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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/424161>

SOLUTION

Redemption in-kind.&#x20;

SOURCES

[GS intro to money markets](https://www.gsam.com/content/dam/gsam/pdfs/us/en/miscellaneous/Introduction-to-Money-Markets-May-2020.pdf)\
[SIVs and the Asset-Backed Commercial Paper Market](https://www.financialresearch.gov/conferences/files/nellieniang%20_collapse_of_abcp_market.pdf)[\
Commercial Paper Funding Facility](https://www.newyorkfed.org/medialibrary/media/images/v4/markets/cpff_structure_infographic.pdf)\
[Giddy.org](http://giddy.org/)\
&#x20;

***

MMF: Buyer = owner

ABCP: Buyer = lender/creditor&#x20;

**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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