System

Warehouse Receipt System

High level End to End Process for Warehouse receipt system:

The AHL Commodities Exchange Collateral management division will be conducting following key functions:

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  1. The owner brings a commodity to one of the AHL COMMODITIES EXCHANGE warehouses, where, the Warehouse manager ensure that:
    1. ARET Draws Samples and forwards it for quality Assessment- (Done by ARET) (ARET to suggest the detailed procedure for Sampling and Grading)
    2. After quality is assessed, the depositor needs to agree.
    3. Once the depositor agrees to the grades assigned, the stock is offloaded.
    4. The Warehouse will weigh and stores it there according to the Grades.

  1. The electronic Commodity Deposit Acknowledgement (CDA) is issued on behalf of the EWH to the Warehouse Depository of the AHL COMMODITIES EXCHANGE to confirm the commodity is physically accepted by the WH with certain quantity and quality characteristics. The WH also issues a signed paper copy of an electronic CDA to the depositor.
  2. The electronic Warehouse Receipt (WHR) is issued by the Warehouse Depository to the owner according to the AHL COMMODITIES EXCHANGE Rules. Simultaneously, the electronic WHR is reflected in the Member Daily Balance Card with a certain ID reference and all the necessary characteristics (AHL COMMODITIES EXCHANGE Client ID / Client name, quantity / number of lots, quality / grade, the location, the duration / expiry date, and etc.)

  1. As soon as the owner sells the commodity (electronic WHR) at the AHL COMMODITIES EXCHANGE Trading Session according to the AHL COMMODITIES EXCHANGE procedure the clearing house will recommend the Transfer of titles.
  2. As soon as the commodity (electronic WHR) is sold, the Warehouse depository closes the traded electronic WHR, and transfers the title on the commodity in favor of the buyer according to the AHL COMMODITIES EXCHANGE Rules. Also, the Clearing House charges the owner for WH services and WHR fee and other AHL COMMODITIES EXCHANGE services (if any).
  3. Financing of WHR by Banks:

    1. Lending by Banks:
      1. The owner / potential borrower approaches the bank with the detailed WHR info, based on the Member / Client Daily Balance card, and completes the Loan Application according to the bank’s internal procedure.
      2. Bank will review the application based on its internal procedure and use its standard selection criteria including strategic alignment, commercial viability etc. In this regard, the owner / potential borrower needs to meet the bank’s loan standards and the risks of each transaction could be evaluated on a case-to-case basis. In this regard, the Loan Application will be a subject to the bank’s prescribed internal review and approval processes and procedures.
      3. The bank needs to be sure the submitted WHR is valid and not pledged yet. Also, the bank needs to be sure that the submitted commodity (WHR) is free from any other liens, attachments, rights, adverse claims or interests. For this AHCX – WD also needs to be sure that the owner / potential borrower provided correct info to the bank regarding the electronic WHR to be pledged. In this regard, the AHCX-WD will provide a interface to the bank that will allow the bank to access the required information to verify and to issue the Pledge on the electronic WHR in favor of the bank. The Bank will issue the pledge if everything is O’K with the applied electronic WHR and this will be updated by the bank in the AHCX WD system using the same interface. The AHCX WD needs to acknowledge the Pledge before disbursement of the Loan to the borrower.
      4. As soon as the Pledge issued is acknowledged by AHCX WD, the electronic WHR should receive a mark of pledge, and be no longer available for trade and withdrawal until the request from the bank to lift the No-sale status arrives.
      5. In case bank needs to put a Un-Pledge Request / Foreclosure on the pledged electronic WHR to the AHCX-WD, it will use the Interface to unpledged it. As soon as such a Request is received by the AHCX-WD will acknowledge the request. After this, pledge mark on the electronic WHR would be cancelled in the AHCX Member / Client Daily Balance card.

  1. As soon as the owner / borrower decide to repay the loan, he / she approaches the bank with a request to release the WHR for sale. It should be done on the basis of the internal banking procedure. In this regard, the bank lifts the No-sale condition, using the Interface, for the pledged electronic WHR. At the same time, the AHCX-WD needs still to keep this electronic WHR in the AHCX Pledge Register & Movement List, but without the No-sale condition. As soon as the AHCX – CD receives such an instruction, it will need to inform the owner / borrow on the release of the pledged electronic WHR for sale. This can be through a separate report/ SMS.
  2. The owner / borrow sells the commodity (electronic WHR) at the AHCX Trading Session. At the same time, the sold electronic WHR needs still to have a pledge mark in the AHCX records to follow up by the AHCX – Clearing House within the pay-out procedure to the bank.
  3. As soon as the commodity (electronic WHR) is sold, the AHCX will proceed to transfer the title in favor of the buyer and charge the owner / borrower the AHCX services fees. The AHCX would be paid by the borrower first for its services, and then the bank’s loan pay-out should be preceded. It is important to note that after the commodity (pledged electronic WHR) is sold at the AHCX Trading Session, the AHCX guarantees the direct pay-out to the bank’s Loan Account against the bank’s instructions according to the WHR sale proceeds (the total commodity value gained minus the AHCX fees). After the loan is re-paid from the Loan Account (costs, interest rate, principle and penalties, if any), the bank sends the difference to the owner’s banking account, if a surplus remains.