Commercial paper (CP) is defined as a short term, unsecured, negotiable promissory notes with fixed maturity. For a corporate this type of a short term capital market product is used to raise funds and is issued by rated companies at a discount to face value.
Notwithstanding, shari’a doesn’t permit trading in debts on the basis that it amounts to and as such it is feared it would fling the door open to the explicit payment or receipt of riba. In essence, discounting commercial papers is, per se, not permissible because it involves the sale of debt to a third party for a price lower than its face value. Likewise, a commercial paper can’t be sold on a murabaha basis.
Corporate issued commercial paper is not the only type of commercial paper available in the market today. Asset backed commercial paper (ABCP) is a way for financial institutions to more efficiently finance their receivables through off-balance sheets. ABCP’s are sold through special purpose vehicles also known as conduits. These conduits have many structures and they pool assets of many entities from various industries. Diversification from multiple sellers of various industries is one of the main goals of such a multi-seller ABCP program. Structured investment vehicle (SIV) is another relatively new structure that issues commercial paper and do not serve the purpose of funding in the traditional sense. Certain Structured investment vehicles capitalize on spread differentials in fixed income securities, earning interest rate arbitrage profits. Some of the asset categories that SIV’s invest in are difficult to value as they are not traded in the open market.
Commercial paper is not backed by collateral and in order to sell it at a reasonable price, firms need to have an excellent credit rating from a recognized rating agency. All commercial paper issues in India follow the mandate of being rated by at least one of the credit rating agencies. Originally, only the highest credit quality entities had the Commercial paper market available to them. What has made CP viable for entities with low credit ratings these days are innovations such as liquidity programs, credit enhancements and various special legal structures. Commercial Paper usually carries higher interest repayment rates than bonds. It is often cheaper to draw on a commercial paper than on a bank line of credit after a business becomes established and builds a high credit rating.
In addition, other variations of CP have been introduced in the market in recent years, including extended liquidity notes. The maturity of notes in this variation of the commercial paper (also called extendible or structured notes) may extend beyond their original maturity date in the case of a default. The MSF rate was raised from 8.25 per cent to 10.25 per cent this July to curb the volatility in the rupee. As a direct result of such an easing in short term rates companies are shifting from bank borrowings to the commercial paper (CP) market.
The above point of view is mainly held by Islamic finance practitioners and fuqaha in the Arabian region. In East Asian countries, some institutions are already in the business of trading commercial papers. A product dubbed “Islamic commercial paper” (ICP) is issued (for maturities ranging from 1 month to 12 months) and traded in the interbank market and may either be sold or purchased at a discount, at par or premium to the face value. Prices depend mainly on the credit-worthiness of the issuer. ICPs have their own credit rating assigned by rating agencies.
A is a tradable certificate representing pecuniary rights whereby the issuer is under obligation to pay at sight or after a short notice. Basically, it is an instrument of payment (means of exchange) and serves as a substitute for cash in commercial transactions. These papers, being debts receivable, cannot be sold or purchased below or above par. Any commercial paper entitles the holder to receive a specified amount of money from the issuer, but it cannot be negotiated from a shari'a perspective. The only way it can be traded is to transfer it at face value (i.e., without discounting). At a corporate level, commercial papers are issued by corporations to finance their working capital requirements on a short-term, rollover basis. Shari’a permits using commercial papers in transactions on the condition that they don’t end up with any contravention of shari’a principles and percepts.
Governments have a short term investment approach as far as the commercial paper is concerned. Investments are usually made for funds that are not immediately required and to provide diversification and competitive rates of return. Most governments that purchase CP also follow a ‘buy and hold approach until maturity strategy’. There have been periods of disruption due to either issuer-specific events or as a result of a broader market wide disruption. This has been the case inspite of an already existing secondary market that can be used for sales prior to maturity.
Market disruptions present investors with another risk of not being able to issue new CP to refinance the maturing commercial paper thus causing the secondary market to disappear. CP is usually backed by bank lines of credit to mitigate this risk.
We believe that our results have clear implications for the EU policy on air quality. Specifically, they suggest that the current 24-hr daily limit value for PM10 in Europe is not sufficient to protect the population from short-term effects, and that a daily limit value for PM2.5 is clearly warranted. Both PM2.5 and PM10 daily limits are needed to control air pollution generated from different sources: vehicle exhausts and combustion sources for fine particles, natural sources together with resuspension of road dust (containing a mixture of soil, tire wear, and brake wear), non-exhaust emissions, and commercial and industrial residues for coarse particles. Because coarse particles of natural origin cannot be controlled, policy measures aimed at controlling anthropogenic sources of coarse particles would be advisable. Alternatively, a specific short-term limit value for coarse particles (PM2.5–PM10) may be considered, but only in addition to an effective PM2.5 daily limit.
Note, however, that pre-award costs are not allowable charges for stipends or tuition/fees on institutional training grants because these costs may not be charged to the grant until a trainee has actually been appointed and the appropriate paperwork submitted to the NIH awarding component. Any additional costs associated with the decision to allow research elective credit for short-term research training are not allowable charges on an institutional training grant.