Letters of credit (L/Cs) will soon be auctioned by Russia's MDM Financial Group, which has decided to utilise the online auction system provided by the UK's LTP Trade to source financing for their clients' international trade business.

The agreement with LTP is the latest move by MDM in its ambitions to become one of Russia's foremost trade finance providers.

Russia trade specialist

In line with this aim, MDM says it is committed to strengthening its relations with international counterparties in the financial sector.

"With trade finance playing an important role in our business strategy, LTP's technology will enable us to achieve this aim whilst opening new sources of liquidity across the global banking community," says Alexandre Kotcherguine, Managing Director International Business Division, MDM Bank.

Transparency

The Russian trade finance specialist is moving its funding from the "traditional inefficient and opaque process to an e-sourced one" according to LTP's chief executive, Luigi La Ferla.

Clients can source finance or risk coverage through LTP's web-based facilities through which financiers essentially bid for business with traders. In turn, suppliers of finance or risk cover respond to the auctions by making bids. The process is transparent and competitive says LTP.

L/C rollout

MDM's first auction through the LTP system of promissory notes is expected in September. Financial institutions chosen and prequalified by the bank will be asked to submit bids for certain MDM-issued promissory notes.

Once this system is up and running, MDM will expand the process to cover its L/C business, using the LTP database to secure the lowest price confirmation.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.