DEFINITION of 'Acceptance Market'

Acceptance market is an investment market based on short-term credit instruments typically used by exporters who prefer to get paid faster for their exported goods. Acceptances are typically used to finance imports and exports between foreign countries and storage of readily marketable staples in foreign countries.

BREAKING DOWN 'Acceptance Market'

An acceptance is a time draft or bill of exchange that is accepted as payment for goods. A banker's acceptance, for example, is a time draft drawn on and accepted by a bank as a common method of financing short-term debts in international trade including import-export transactions. An acceptance is a short-term credit instrument signed by a buyer indicating its intention to pay a specific sum of money to the seller (or exporter) at an agreed date.

The exporter would send the acceptance or bill to the buyer who signs it to affirm his obligation to make good on his payment for the goods bought. The credit instrument has a maturity date which specifies when the buyer must fulfill its obligations. After signing, the buyer returns the bill to the exporter who sells it to a bank at a discount. Thus, the seller receives immediate payment for goods sold even if the buyer has not received the goods, and the buyer does not have to settle payment for the transaction until the goods arrive. In addition, the importer can often obtain physical possession before payment, and also has some time prior to maturity to sell the goods of which the proceeds will be used to settle the debt.

The acceptance market is useful to exporters, who are immediately paid for exports; for importers, who do not need to pay until possession of goods occurs; for the financial institutions, that are able to profit from the acceptances at the spread that ensues between the negotiating rate and the rediscounting rate; and for investors and dealers who trade acceptances in the secondary market. Acceptances are sold in the secondary market at a discount from face value (similar to the Treasury Bill market), at published acceptance rates.

  1. Time Draft

    A time draft is a form of short-term credit used for financing ...
  2. Buyer's Credit

    Buyer's Credit is a loan that a bank or other financial institution ...
  3. Net Exporter

    A net exporter is a country or territory whose value of exported ...
  4. Export Incentives

    Export incentives are government programs that encourage a firm, ...
  5. Documentary Collection

    A documentary collection is a trade transaction in which the ...
  6. Acceptance Testing

    Acceptance testing, in the engineering and software industries, ...
Related Articles
  1. Investing

    What Are the Top U.S. Exports?

    As worries of a trade war escalate, take a closer look at the United States' top exports in 2017.
  2. Insights

    Interesting Facts About Imports and Exports

    Learn how imports and exports exert a profound influence on the consumer and the economy.
  3. Investing

    What's the Balance of Trade?

    The balance of trade is the difference between the value of all the goods and services a country exports and the goods and services it imports.
  4. Insights

    The Biggest Losers From China's Slowdown

    A look at how China's slowdown is impacting countries around the world.
  5. Investing


    Learn more about the generally accepted accounting principles, standards and procedures that companies use to compile their financial statements.
  6. Personal Finance

    Which Business Schools Are the Most Selective?

    Standing out in a sea of exceptionally qualified applicants can be tricky. Here are a few tips on applying.
  7. Investing

    Playing hardball when selling your home

    Are you planning on selling your house? Learn these strategies to help you get you a better deal in house sale.
  8. Tech

    When Will Amazon Accept Bitcoin? (AMZN)

    Amazon has been reluctant to embrace digital currency for various reasons, though some reasons are pure speculation.
  9. Investing

    Getting To Know The Money Market

    If you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
  10. Investing

    Housing deals that fall through

    Find why buyers back out, and what you can do if you're left holding the bag.
  1. Who uses bills of exchange?

    Find out who uses bills of exchange, why they are important in international trade and what happens when a bill is traded ... Read Answer >>
Trading Center