Why You Should Use an Auto-Adaptive Approach

Today’s markets aren’t the same as 30 years ago. The impact of algorithmic trading on markets is substantial and changes as well as fundamental movements inside markets are much faster than ever before. Today it is more important than ever in history to know how to adapt. And this should also be one of the characteristics of your current ATS.

There are many ways to approach an issue with an adaptive ATS; from simple methods to very sophisticated ones (which are technically far behind the abilities of a common user). Nevertheless, a common user doesn’t have despair, as some solid approaches still exist to ensure a bigger adaptation of our ATS systems within ever-changing markets.

Today I will describe three of these such methods and my experience with them. I would like to remark that these are basic approaches, accessible to any common user.

1. Adaptive indicators

A wide range of auto-adaptive indicators have been around for many years now. Their principle is quite simple – these indicators mostly contain one of the means of volatility measurement or market trending.

A simple example of such indicators can be KAMA (Kaufman´s Adaptive Moving Average). There is nothing complicated about it. You just have to add one more component to a regular moving average – a component that will “calculate” where markets are at the moment; if they are currently in a trending or non-trending phase. For example, Perry Kaufman used another of his own indicators called Efficiency Ratio (ER) for KAMA. This indicator simply fluctuates in the range 0 – 1; a closer to number 1 market is trending and a closer to 0 one would be trending less. Afterwards there is just a need to choose a period range – e.g. from 2 to 50. An interconnection with an ER indicator will result in an auto-adaptive version of a moving average using a higher figure of the set range if the ER is moving closer to 0 (if ER is at 0, EMA will be using period 50). The reason is that there is too much “noise” in the market and therefore lower periods are highly unsuitable. Or the other way around – if the market is trending, then lower figures of EMA will be used automatically and ER will move closer to figure 1 (if ER is at 1, period 2 will be used automatically). The periods of the EMA indicator aren’t fixed here. They are dynamically changing in the range 2 – 50 (or any other chosen range) depending on how the market is moving.

In practice such settings of auto-adaptive indicators look quite simple. For example, AMA has three parameters to be set.

The first parameter states the period calculated by ER indicator, the second and third parameters define the range of EMA period, which will automatically adapt to the current market situation (based on ER indicator).

In practice everything works very well and reliably and the indicator is truly auto-adaptive – it adapts EMA figures to the current market situation without any problems.

My experience with adaptive indicators varies. Most of them are pretty interesting (e.g. KAMA), while some are, according to my experiments, equal to any other ordinary indicators.

This adaptive category isn’t bad at all, but it isn’t as functional as the second category which I am constantly using.

2. Regular reoptimization of systems

Based on my experience and with the benefit of hindsight I find it impossible to have a “universal” combination of parameters in our system. Markets are moving and changing too quickly. With the help of a good quality process, it is possible to find a truly robust combination of parameters for our system (i.e. settings of indicator periods etc.), but nothing can compare to regular, high-quality reoptimization.

Regular reoptimization isn’t complicated. Basically, after a certain previously scheduled time, you carry out a new optimization of your system to gain new parameters that are in compliance with the latest market development. It means those that are more adapted to current environment. The process of regular reoptimization can be also simulated – it is a pretty basic thing called Walk Forward Analysis (WFA) which is possible to simulate in many programs these days.

What is WFA? It isn’t anything magical or complicated. We simply take data on which we are about to backtest a regular reoptimization of our system. We divide such data into 10 identically large segments (we will try to simulate 10 times regular optimization) and then we divide each segment into two parts – a smaller one and a bigger one. The bigger part, usually 70-80% of data, will be used for optimization called In-Sample (IS). Here, we carry out a basic backtest and we search (optimize) parameters which are making our system more interesting – not only from a profitability point of view, but also from a stability of equity curve point of view. Then we take the selected parameters and test the rest of the data – 20-30% which we haven’t used for the primal backtest and therefore for any optimization of parameters. These remaining data are called Out-Of-Sample (OOS) and show us how the system is capable of constantly adapting. If the system has such an ability, then we carry out a regular reoptimization in live trading as well.

Today, personally, I reoptimize each of my systems on a regular basis, i.e. each system I trade I consider to be auto-adaptive. The process of reoptimization and selection of an ideal period, and particularly when to perform it is very important.

3. To have a plan on when to completely turn the system off and when to start to use it again

This last point may seem like it isn’t relevant to the adaptive issue, but from my experience it is. From my point of view, to know when to turn the system off when the conditions aren’t acceptable and when to turn it on again when we get out of our drawdown is one of the highest levels of adaptiveness.

This task is exceptionally difficult and it can be approached in many ways. From quite complex algorithms which can tell when the system isn’t currently suitable for a given market and which will turn such system off automatically for a certain period of time, to simple rules resulting from our possibilities and our common sense.

The base for such approach should always be a drawdown. Historical drawdown is an important indicator (even if it is “only” the backtest one). Its exceeding in live trading definitely indicates something important, therefore for example, the rule of turning the system off when it exceeds historical DD by 1.5x and its turning on when it reaches again at least 50% of its recent drawdown, can be a fundamental way to use and test.

In regards to this I have to mention another experience I have: What I haven’t found useful at all and what I consider to be one of the worst approaches, is to filter equity with the help of moving average. It means, for example, to turn the system off when its equity drops below its moving average. This method is very treacherous, has many pitfalls, and it simply doesn’t work.

Surprisingly enough, better usage can be found in rules based on drawdown. A conservative and much better approach is with usage of MC and OOS intervals.

Conclusion

In this article I have only “touched” an adaptive issue from the easier point of view, which is accessible to a common user while using approaches I fully support – e.g. WFA. From my experience it isn’t possible to create a good quality ATS without using some adaptive elements in our workflow. On the other hand, in regular intraday or swing ATS there is no need to use an extreme approach and reoptimize the strategy nearly every day or every minute. A few months’ interval is more than enough. Anyhow it is useful to constantly think about how to be as prepared as possible for the ever-changing market environment and have instruments at hand that help us to adapt in a better and faster way.

Happy Trading!

The Importance of Import and Export

No matter how rich a country is, how small or big it is, no nation is self-sufficient. It will never be totally independent from the rest and have everything it needs. Every country, no matter how powerful it is, needs raw materials from other countries to produce products that it needs or that is needed by other countries. In short, every country is involved in import export transactions.

Hundreds of years ago, Europe, the Far East and the United States were already importing and exporting goods between themselves and other countries. It had already set up a simple system of trading and global sourcing, albeit on a smaller scale. Today, import and export has become a very important part of the economy. This business has flourished into a more sophisticated but convenient, smoother and safer business. Risks are minimized with more international trading laws that aim to protect both importers and exporters. Regulating and governing bodies such as the World Trade Organization (WTO) has streamlined the export import system. Trade agreements like the North American Free Trade Agreement (NAFTA) have greatly contributed to the growth of the industry.

It is also now highly possible for small countries to go beyond the borders of their countries and reach out to a wider marketplace that can bring in products and supplies that they need. The businesses in these countries can benefit from having lower product costs and have a competitive edge over bigger countries. The demand for more imported products is growing exponentially and businesses are taking these import export opportunities seriously. There are new international markets open for both importers and exporters that have brought in a lot of opportunities for companies to lower production or buying costs and make higher profits.

Because of global sourcing, businesses have access to more product and technology choices that are up to international standards that are otherwise not available in that particular place. Importing products offers an alternative source of supply so there is reduced dependence on local suppliers for products that may have a limited supply. Exporting products give countries a chance to expand its market outside its territories.

With more information available to the businessmen following the advent of the internet and advancement of technology, all types of businesses can take advantage of the many import export business opportunities available. It is not so surprising for a processor to be exported from the Philippines to Taiwan for assembly into laptops.

Singapore then imports the laptop for Asian distribution then re-exports it back to other countries within its Asian sales territory.

Advanced trade systems have given businesses the assurance that transactions can flow smoothly and securely. Several companies have seamlessly integrated its import export business transactions with its operations by bringing in professional manpower that understands the intricacies of the business and who have undergone import export training courses.

With enough information and assistance from knowledgeable personnel, businesses are able to take advantage of the many import export business opportunities for both purchasing and marketing as well as make use of business systems that can help the company achieve maximum advantage in the international market.

The Vulture is a Patient Bird

Lots of people are getting fed up looking at their cash earning next to nothing on deposit. Yes, it seems to make sense to hang on and just sit on the money, and yes, it is nice to have survived all the possible troubles so far, but hey, the boredom of it all!

A friend of mine phoned me recently saying that he is slowly going nuts waiting for some action. I smiled and told him “You mean you are itching to invest into some currency but are scared to take the plunge, right?”

“I guess” he said, waiting for me to come up with a suggestion without having to make it look like he was fishing for advice.

If the urge to get some currency action is strong enough and the feeling of sitting on non working money is unbearable, that is a situation which needs careful handling. One must not get into a state like an alcoholic who craves for a drink, or a gambler who needs to have a bet for the sake of having a bet.

It is not very easy to fall in love with any currency these days. However, it is not hard to feel jittery about holding one type in particular, namely Sterling. Lately, when I think of GBP,I see an acrobat wobbling on a tight rope with no safety net below and a strong gale approaching. Now, getting rid of it, means one has to get into another currency. Personally, I have the feeling that of late, the USD is beckoning and saying “Hey, come and get me before it is too late”. It does not mean that many people do not have a different opinion. This is just as well, since any market needs a buyer and a seller.

It does not need a lot of imagination to come to the conclusion that the USA will be the real first to come out of the recession. Equally, it does not need a lot of imagination to realize that it cannot be possible for GBP to be prodded up for ever or ride on the back of this or that sentiment or risk appetite. Somewhere along the line, all this has to be paid for in full. This will mean that the belt will have to be tightened, and whoever will tighten it, will not be too popular with the masses, as is invariably the case. But that of course, is another matter.

The weapons of opportunity have to be carefully maintained in tip top condition, as must be the knowledge of when and how best to use them to obtain maximum results. Everybody gets a chance to strike it right at least once, and I am sure many of you will admit you have had that chance, only to see it go out of the window due to being totally unprepared to grab it. This does not mean that one should consider dicey prospects. It is prudent to know when not to proceed, let go, and walk away.

With all this in mind, I phoned my friend saying that if the need was so great as to have to get into some action, then I would get rid of my pounds pronto, and get into dollars. I would not expect miracles immediately, but I would expect to go forward in style in due course. The game is not for tame little birds, it is more for vultures. They have a knack for spotting prey, but we know a vulture is a patient bird.

Types of Foreign Currency Hedging Vehicles

The following are some of the most common types of foreign currency hedging vehicles used in today's markets as a foreign currency hedge. While retail forex traders typically use foreign currency options as a hedging vehicle. Banks and commercials are more likely to use options, swaps, swaptions and other more complex derivatives to meet their specific hedging needs.

Spot Contracts – A foreign currency contract to buy or sell at the current foreign currency rate, requiring settlement within two days.

As a foreign currency hedging vehicle, due to the short-term settlement date, spot contracts are not appropriate for many foreign currency hedging and trading strategies. Foreign currency spot contracts are more commonly used in combination with other types of foreign currency hedging vehicles when implementing a foreign currency hedging strategy.

For retail investors, in particular, the spot contract and its associated risk are often the underlying reason that a foreign currency hedge must be placed. The spot contract is more often a part of the reason to hedge foreign currency risk exposure rather than the foreign currency hedging solution.

Forward Contracts – A foreign currency contract to buy or sell a foreign currency at a fixed rate for delivery on a specified future date or period.

Foreign currency forward contracts are used as a foreign currency hedge when an investor has an obligation to either make or take a foreign currency payment at some point in the future. If the date of the foreign currency payment and the last trading date of the foreign currency forwards contract are matched up, the investor has in effect "locked in" the exchange rate payment amount.

* Important: Please note that for contracts contracts are different than futures contracts. Foreign currency futures contracts have standard contract sizes, time periods, settlement procedures and are traded on regulated changes throughout the world. Foreign currency forwards contracts may have different contract sizes, time periods and settlement procedures than futures contracts. Foreign currency forwards contracts are considered over-the-counter (OTC) due to the fact that there is no centralized trading location and transactions are directly related between parties via telephone and online trading platforms at thousands of locations worldwide.

Foreign Currency Options – A financial foreign currency contract giving the buyer the right, but not the obligation, to purchase or sell a specific foreign currency contract (the underlining) at a specific price (the strike price) on or before a specific date (the Expiration date). The amount the foreign currency option buyer pays to the foreign currency option seller for the foreign currency option contract rights is called the option "premium."

A foreign currency option can be used as a foreign currency hedge for an open position in the foreign currency spot market. Foreign currency options can also be used in combination with other foreign currency spot and options contracts to create more complex foreign currency hedging strategies. There are many different foreign currency option strategies available to both commercial and retail investors.

Interest Rate Options – A financial interest rate contract giving the buyer the right, but not the obligation, to purchase or sell a specific interest rate contract (the underlining) at a specific price (the strike price) on or before a specific date (the Expiration date). The amount the interest rate option buyer pays to the interest rate option seller for the foreign currency option contract rights is called the option "premium." Interest rate option contracts are more often used by interest rate speculators, commercials and banks rather than retail forex traders as a foreign currency hedging vehicle.

Foreign Currency Swaps – A financial foreign currency contract whereby the buyer and seller exchange equal initial principal amounts of two different currencies at the spot rate. The buyer and seller exchange fixed or floating rate interest payments in their respective swapped currencies over the term of the contract. At maturity, the principal amount is effectively re-swapped at a predetermined exchange rate so that the parties end up with their original treaties. Foreign currency swaps are more often used by commercials as a foreign currency hedging vehicle rather than retail forex traders.

Interest Rate Swaps – A financial interest rate contracts whereby the buyer and seller swap interest rate exposure over the term of the contract. The most common swap contract is the fixed-to-float swap whereby the swap buyer receives a floating rate from the swap seller, and the swap seller receives a fixed rate from the swap buyer. Other types of swap include fixed-to-fixed and float-to-float. Interest rate swaps are more often utilized by commercials to re-allocate interest rate risk exposure.

Forex 12 Major Currency Pairs – What Are They & How Can You Profit From Them?

By sticking to the most popular pairs in Forex (called the MAJORS) you know you’ve got the most liquidity:

PAIR

CURRENCIES (NICKNAME)

EUR/USD

Euro / US Dollar (Fiber)

USD/JPY

US Dollar / Japanese Yen (Gopher)

GBP/USD

UK Sterling / US Dollar (Cable)

USD/CHF

US Dollar / Swiss Franc (Swizzy)

USD/CAD

US Dollar / Canadian Dollar (Loonie)

AUD/USD

Australian Dollar / US Dollar (Aussie)

NZD/USD

New Zealand Dollar / US Dollar (Kiwi)

Some currency pairs are more volatile than others. This makes them better to use in trades as they trend. The best currencies to trade are those of countries that are the major role players in the world economy (these are called “G7” countries). The G7 was formed in 1976, when Canada joined the Group of Six: France, Germany, Italy, Japan, the United Kingdom, and the United States.

You’ll see that the spread on the “major pairs” from the G7s is much lower than on less popular pairs from weak countries with chronic economic and political instability. Example: The spread on the EUR/USD is between 1.5 and 3 pips because the major countries making up the Euro Currency and the United States are BOTH G7 countries.

Take South Africa for instance. I think Nelson Mandela is a pretty cool guy. His story is a classic “Think and Grow Rich” example of a definite major purpose and definite desire having transmuted his dream to reality. But I DON’T trust the WACKO government that has evolved from the hatred not only of whites against blacks (apartheid) but also of blacks against whites. Change happened WAY TOO FAST IN SOUTH AFRICA and because of that it is now an unstable 3rd world political economy. The law of an equal or greater benefit will come of the political economic tragedy that is South Africa but it will be in the future as I write this.

Because of this the spread on the USD/ZAR pair is about 60 pips – 20 times more expensive to trade than the EUR/USD – reflecting the high instability of this African political economy.

The safest place to learn Forex trading is in the EUR/USD pair where a full 1/3 of all Forex trades occur. Then, after you know what you’re doing, you can venture out into other pairs on the list below. For instance, there are some CROSS PAIRS that are also good for trading. So when we add the two strongest CROSSES and delete the two weakest MAJORS from your list of TRADABLES above here’s an alternative group to trade:

PAIR

CURRENCIES (NICKNAME)

EUR/USD

Euro / US Dollar (Fiber)

USD/JPY

US Dollar / Japanese Yen (Gopher)

GBP/USD

UK Sterling / US Dollar (Cable)

USD/CHF

US Dollar / Swiss Franc (Swizzy)

USD/CAD

US Dollar / Canadian Dollar (Loonie)

GBP/JPY

Euro/Yen Cross (Geppy)

EUR/GBP

Euro/Cable Cross (Chunnel)

THE TRADABLE EIGHTEEN

There are many official currencies that are used all over the world, but there only a handful of currencies that are traded actively in the Forex market. In currency trading, only the most economically and politically stable countries have currencies that are traded enough to be liquid. For example, due to the size and strength of the United States economy, the American dollar is the world’s most actively traded currency.

Benefits of Digital Currency

If you are a technology reader, you know about the new type of currency that has been created. You may have read about Bitcoin for instance. If you have not gone into the details, you may be asking yourself questions about the benefits of this digital currency. If you have no idea about it, you should read this article.

The Benefits of Digital Currency

Inexpensive transactions

The transaction fees with digital currency are a lot lower than the transactions made with PayPal or credit cards. At times, you don’t have to pay any transaction fee. So, this saves you plenty of money.

No fees for international transfers

Since digital money is used on the Net, no borders are involved. Typically, you have to pay fees should you want to send money abroad, which excludes the costs for currency conversion. On the other hand, sending digital currency to anywhere in the world costs nothing. You will pay nothing as long as you can wait for a while for the currency to be sent.

No Account fees

Today, most banks charge their clients a fee on a monthly basis. At times, some banks also charge hidden fees from time to time. As a matter of fact, anyone can sign up for a free digital wallet online without paying any fees or hidden charges.

Simple account creation

You know that opening an account with a bank is a laborious process since you have to provide a lot of personal details, such as address and identity proof. Aside from this, they carry out backgrounds checks as well.

On the other hand, you can create a currency account without providing personal details as long as you don’t want to benefit from a service that asks for personal details. And the beauty of the system is that it offers 100% acceptance rate. All you have to do is open the digital currency site on your computer or mobile phone and then create the account. You don’t have to go to the office of a company for account creation. Within a few minutes, the account will be created.

It’s an Investment

The conventional form of money tends to lose its value with the passage of time because of several factors, such as inflation. However, the digital currency is a form of investment. Most types of currency features a fixed period upon the creation of new coins.

When more and more people go for digital currency, the demand goes up. As a result, the value of your digital money goes up. This is kind of the return on your investment. So, you don’t have to go to a rich country just to see the value of your money go up. Since the digital currency is growing at a rapid pace, the number of users is increasing. So, it’s the right time to make the investment and reap the benefits.

The takeaway

So, if you have been looking forward to investing in digital currency, we suggest that you re-read this article again. Hopefully, you will be able to get the most out of your investment down the road.

What Is Bitcoin And How To Learn About It?

Bitcoin is a decentralized digital currency which is owned by none. Government has no control over it. It uses peer to peer networking and cryptographic proofs to operate the system. The system is controlled and made fraud free by recording transactions in block chain, a public history record, once they are validated with a proof of work system.

The network began operating in 2009 and is a concept involving virtual currency which has no link to government regulated currency. The Bitcoin system has few advantages like:

• It is less expensive to operate and use this virtual money.

• It can be instantaneously transferred throughout the world and there will be no transaction fees. Moreover, you can use it and transfer it anonymously as well.

• Like other currencies, the quantity of this virtual money is fixed and no one has the right to create new Bitcoins. However, people can mine Bitcoins but there is a limit to it and mining Bitcoins is not at all cheap.

• Bitcoin is an independent currency; no organization has any control over it

• It is a democratic currency.

• It is the digital equivalent of something of value.

• As it uses a digital medium, it has the potential to become even more valuable than gold.

How to Learn About Bitcoin Conveniently

You can learn about Bitcoin from various sources on the internet. You can check blogs, magazines, articles etc. Internet is a very good source for a newbie to learn more about Bitcoin. Through blogs and forums, you’ll learn technical, economical and political issues related to the Bitcoin system. These mediums are rich source of information and you can learn everything about this virtual currency. Furthermore, even if you are already in the system and know quite a lot about how it works, you can stay updated on every news and issue about the new digital currency system. It’s also wise to get registered on related forums and start discussion with the experts. Post threads and ask whatever you are unclear about. Many forums also have blog section where experts post informative articles. This is the best learning source as you get benefited from other’s experience.

The digital system of Bitcoin currency seems complicated to those who know nothing about it and most people find the concept hard to grasp and trust. It will not take long before people start accepting and then adopting to this virtual currency system, which is more secure, open and independent.

Doing Business in Vietnam – Minimizing the Language Barriers With English, Chinese and Vietnamese

For many companies outside of Vietnam, doing business in Vietnam is like a gold mine which is loaded with business opportunities. Many companies aspire to tap on this raising Asian market to increase the returns of their business. Vietnam is a favourable destination for business because of the large size of the Vietnamese market itself, increasing purchasing power of the Vietnamese and its ideal geographical location. Other reasons include low labour costs and established political stability. As with all international dealings, companies doing business with Vietnam may find some challenges. One such clear challenge is the language barrier.

No doubt English is the official working language in Vietnam, it is but true that only very few Vietnamese actually speak it. Almost 90% of the Vietnamese populations speaks Vietnamese while the rest speak either Chinese or both Chinese and Vietnamese. English sufficient enough to conduct business is largely only spoken by foreign-educated Vietnamese professionals who may have obtained even higher degrees from other English-speaking nations. While it may not be difficult to go about with daily routine speaking English, this poses as a problem when engaging clients and businesses in Vietnam in Business English. Much of the understanding of the Vietnamese society comes about by understanding what lies between the lines. These lines can only be understood with a basic knowledge of the local language.

As such, the language barrier between English, Chinese and Vietnamese needs to be minimized. This is where multilingual B2B websites come into play. Multilingual websites have been introduced primarily for reducing the language barriers between local Vietnam suppliers and manufacturers and global companies wanting to trade with them. One such multilingual B2B website which helps to minimize the language barrier is Vigogo. The large trading platform allows users to instantly switch into English, Chinese and Vietnamese. This allows Vietnam suppliers to reach out to a large consumer than suppliers on a monolingual English only B2B site would be able to.

Fraud in Nigerian Crude Oil Selling: Authenticating The Crude Allocation and Documents by Oil Buyers

HOW DO YOU ASSURE THAT A NIGERIAN CRUDE OIL SELLER’S ALLOCATION OR DOCUMENT IS AUTHENTIC OR GENUINE?

This observation by the research report on the subject, done by the Africans in America News Watch, a New York based non-profit organization, in August 2010, sums up the issue:

“There are many genuine crude oil sellers in Nigeria but the problem is getting the real and verifiable ones. Crude Oil trade is a booming and thriving business and many people seem to want to go into it. Buyers from other countries contact sellers in Nigeria in order to buy Nigerian Crude Oil. [But the business is now full of]… scammers on the prowl.” It adds that “There are lots of crude oil sellers in Nigeria, but the challenge there is the ability to find genuine and verifiable sellers.”

In point of fact, as this author has amply documented elsewhere in another study, the assertion that in the arcane world of international crude oil buying and selling today the landscape is literally littered and crawling with fraudsters and scammers, is now a well-established, well-settled truth about which there can hardly be any serious argument or disputation in the contemporary international oil buying and selling industry.

In consequence, given that stark REALITY that “there are many genuine crude oil sellers in Nigeria but the problem is getting the real and verifiable ones,” the big million dollar question is this: AS A CRUDE BUYER, HOW THEN DO YOU GET THOSE SELLERS FROM AMONG THE WHOLE LOT WHO ARE THE “REAL AND VERIFIABLE” ONES?

THE KEY? Most experts, in the case of Nigeria, say that basically you (the crude buyer) would have to demand and insist on the purported Seller showing you AUTHENTIC documentation and other proofs of having genuine BLCO and FLCO allocation from the Nigerian NNPC, as well as proof that that product is still currently availability. (For Nigeria, the NNPC, which stands for the Nigeria National Petroleum Corporation, is a Federal government-owned company that administers the buying and selling of petroleum, including giving allocation to genuine sellers of the crude oil in Nigeria).

THE KEY DOCUMENTS IN NIGERIAN CRUDE OIL BUYING/SELLING INDUSTRY

There are some key documents that are crucial in the purchasing of the Nigerian crude oil transactions. They will include the following documents, among others:

– Seller’s shipping documents, such as: Clean Ocean Bill of Lading; Seller’s Commercial Invoice

– Seller’s Proof of Product (will comprise the License to Export & the Approval to Export, issued by the country’s government, statement of Availability of the Product, Port Storage Agreement, etc)

– SGS/Sayboat Certificate of Quantity and Quality issued at the loading port

– Certificate of Origin issued by the NNPC

– Certificate of Authenticity issued by the NNPC

– Charter Party Agreement on the vessel, issued to the charterer of the vessel and presumably showing that the vessel is actually chartered in the designated Seller’s name

– the Q88 questionnaire, filled out by the managers of the vessel providing the relevant information and specs of the vessel;

– Etc.

PROOF OF PRODUCT

Probably the most important document of all that a crude buyer may need to see from the seller, is the proper Proof of Product (POP). This document, which has to be one issued by the appropriate department of the NNPC in Abuja, Nigeria, serves as a clear indication to a crude buyer that the owner of the oil commodity has true possession of the product, and also serves as an indication that, at least as at the time of the transaction (but only at that time), the seller has the commodity available for sale.

IMPORTANT: It should not just be any form of POP, however. It needs to be one that is in a format that will enable satisfactory verification to ascertain that it is valid and authentic. Based on this writer’s research, to ensure the optimum likelihood that this goal can be attained, there are basically two types of POP documents that are acceptable, and none others, and only sellers whose POP documents meet those “preferred” POP documents standards, ought to be entertained or attended to.

THE POP MUST MEET THE FOLLOWING CONDITIONS.

A). It must have the Loaded vessel documents that are CURRENT (that is, must not be more than 2 days old, otherwise the document will immediately be rejected as it may mean that the vessel is no longer available), and should include the following documents:

i. A Current Authority to Board (ATB). Seller must provide, for the buyer’s inspection, the ATB that was specifically issued to the initial buyer (consignee) of the crude in whose name the vessel was issued. The name on the ATB must match exactly with the name on the POP and other documents named here. And, here again, the ATB MUST be CURRENT – that is, it must be no more than 2 days old. (An ATB that is more than 2 days old, should be automatically be viewed as representing a vessel which is no longer available and hence not acceptable).

ii. Certificate of quality.

iii. Certificate of origin

iv. Cargo manifest

v. Vessel ullage report

vi. Certificate of quantity.

vii. Bill of lading

viii. ATS (Authority to Sell) from the NNPC

B) PROVIDE THE PARTICULARS OF THE VESSEL.

Generally, the Buyer may require (and hence the Seller must be willing and ready to release them), vessel particulars such as the following: the name of the vessel, location of the vessel, the IMO name, call sign and other vessel details. The reason this is required is so the buyer can do the tracking of the said loaded vessel, and to ascertain its current availability.

C) PROVIDE THESE DOCUMENTS, ALSO, FROM THE NNPC

As in the case of the POP which reputable buyers’ facilitating outfits like the Reliable Dealings International require from any AWR seller before they can begin to do business with them, the other things that may often be required from a seller, would include the following:

= the Lifting Lease/License from the NNPC, and

= the Letter of Authority to Sell (ATS) from the NNPC. The Letter of Authority to Sell, also called a Letter of Allocation, which should usually come from the NNPC’s Crude Oil Marketing Department, is basically the official document which shows the buyer that the seller actually has the authority from the official government agency for the crude product that he’s selling. (Must usually be in a paper format and on NNPC company letterhead; must contain the date of issue and expiration date, and be signed. Scanned copies of document are alright. All documents must be certified, valid, authentic and verifiable.)

= If, for example, the seller claims that the cargo has been cleared, then he should usually be able to provide the CPA (Charter Party Agreement), the ATL (Authority To Load), and Q88 vessel details.

ALRIGHT, BUT HOW DO YOU ASSURE THAT THESE DOCUMENTS ARE AUTHENTIC?

OK, so let’s say you’ve assembled the proper Proof of Product and the other essential documents such as those that are outlined above. There’s one key, in deed critical, question that still remains for you – how do you assure that these documents you’ve gotten from the seller are even any good? That they are real, valid, AUTHENTIC and GENUINE to warrant your taking the Seller’s offer seriously?

This question is, perhaps, often the most critical for a buyer because, as a rule, most fraudsters and con artists who operate in the Nigerian crude oil industry, are simply masterful forgers and copiers of every bit of the legitimate industry documents that are used in selling and buying operations by refineries and government agencies, and who are highly skilled at the craft. Consequently, buyers are strictly wary never, ever to accept outright at face value or be ever fooled by, any document submitted by sellers or claims made by them, however seemingly convincing or real-looking!. And what it all means, is that one crucial facility that a crude oil buyer and his aides must quickly develop and have, are some good, fool-proof, tools or skills by which they can INDEPENDENTLY VERIFY the authenticity of at least the key, most significant pieces of documents from among the tons of documents that sellers and their agents will often present them in the course of hawking their products. And, above all, that they must have the skills and the knowledge and business sophistication to be able to detect which ones among such documents are genuine and legitimate, and which ones might be plain bogus.

To be sure, making such verification and confirmation may often be problematic for a buyer. However, it is not really that difficult a task, at least for the schooled and experienced eyes. You only need to know what and what to look for, the right questions to ask, and how to counter check and cross check facts and information. And, in any case, whenever in serious doubt about the authenticity of a document, you should always take the path of caution – ask for more proof, or even reject the offer, depending on the particular facts at issue in an offer.

FOR A FOLLOW UP

YOU WANT TO FOLLOW UP ON HOW YOU CAN ASSURE THAT A NIGERIAN CRUDE OIL SELLER’S ALLOCATION OR DOCUMENT IS AUTHENTIC OR GENUINE?

Please see the instructional information in the author’s resource box below

Effects of a Strong Or Weak Philippine Peso Currency

Two conflicting stories came out of a national paper this week. One announced that exporters are badly hurt by the appreciating peso while the other states that the Bangko Sentral ng Pilipinas (BSP) claims that the surging currency is beneficial to the Philippine economy. Those stories seem to tell the Filipinos that we cannot have our cake and eat it too. Whenever there is a good effect, there is a corresponding draw back. Let us take the first statement. There are two types of exporters. One is who imports raw materials, processes it and exports the finished product. The other is one who buys or produces the raw material locally, processes it and exports the result. In the first case, we export only labor. In the second, we export labor and raw material converted by labor into finished product. When the peso is weak, more pesos are spent to buy raw materials. The product is sold to earn a strong dollar. Then labor is paid in weak peso.

When the peso is strong, there will be less pesos spent acquiring raw material. Then the finished product is sold earning weak dollars. There will be more dollars needed to pay labor in strong pesos. What exporters are afraid of is our finished product will be less competitive in the world market if a strong peso raises production costs. Labor costs will rise because there will be more dollars to be converted to pesos to be spent for labor. What will be affected are the export processing zones. Finished products will be less competitive in the world market. Profits will dive and factories may close.

On the other hand, the quality of the peso in the world market is raised. We will need less pesos to service our external debt in dollars. There will be more investors coming because they can earn more than when the peso is weak. Philippine economy will be stronger. There will be more investors coming because the strong peso earned will compensate their efforts. The BSP argues that the peso surge is but temporary. Market forces will eventually force the peso to seek its level. Overseas workers are the ones responsible for the strong peso. When remittances slow down the peso will depreciate. There is a tendency for the overseas workers to live permanently in the place where they work if the government of the country will allow.

The sad part of the business is that even if the peso appreciates, it is never felt locally. Local prices will remain the same. Take for example oil products. If the world market for liquid petroleum gas rises, our local prices rise along with it. If it falls the peso price for Liquified Petroleum Gas (LPG) will remain the same. Even if the peso appreciates, there is still no roll back in LPG prices. There must be something wrong with our economics.

Perhaps we would be much thankful that the peso appreciates. We are an importing country. Since birth we have been conditioned to believe that anything imported is excellent. Imported wines, whiskeys, cigarettes, chocolates, perfumes and cars are better appreciated than local products. With the appreciating pesos, plus the General Agreement on Trade and Tariff all imported luxuries will now be within the reach of the locals. The incoming dollars will go out again. Our overseas workers will have to stay longer if not forever just to keep our economy afloat. While economy is on the rise, we do not institute measures to keep it up.

Our economic planners must pull their acts together. We still are not aware how the strong peso affects the small and medium enterprises. If there is any benefit from the surging currency, the influence must be felt locally in any way otherwise the natives will never be able to benefit from the situation. Is the surging peso beneficial or detrimental?