MT 799, MT 999 AND MT 199 BANK SWIFT MESSAGES

A basic primer relative to Managed Buy/Sell Trade Programs

Introduction: SWIFT is the global provider of secure financial messaging services (www.swift.com). SWIFT’s messaging services are used and trusted by more than 11,000 banking and securities organizations, market infrastructures and corporate customers in more than 200 countries and territories. SWIFT enables secure, seamless and automated financial communication between users (banks and other financial institutions). SWIFT does not hold funds or manage accounts on behalf of customers, rather SWIFT enables our global community of users to communicate securely, exchanging standardized financial messages in a reliable way, thereby facilitating global and local financial flows, and supporting trade and commerce all around the world. Many non-banking clients and lower-level bankers hear of various types of SWIFT Messages which are sent bank to bank to perform various inter-banking tasks. Unless you work on a daily basis in the SWIFT department of a bank, you may not have knowledge of how the SWIFT system works, and the function of each particular Message Type. In particular, a client who has assets in a bank such as cash, or assets lodged in a bank custodial account, may hear confusing things and, as a result, misunderstand the role and purpose of the hundreds of Message Types (MT) which are used to either transmit, hold, or inform other banks within the SWIFT system.

In the world of trading, a client’s assets must be shown by the bank holding them. From bank to bank (and other SWIFT members in the financial sector) certain Message Types are used to connect a client’s assets to a trading entity. The list of all SWIFT Message Types is long and, for the purposes of this paper, are not relevant to our discussion. The purpose of this document is to help the non-banking individual better understand the impact each of these messages have for our use in these niche trading programs.

For beginners, both the MT 799 and MT 999 are classified by SWIFT as a “free format message”, the difference is that for an MT 799, banks must exchange a so called BKE authenticator… which means a test key is automatically coded into the sent message, and decoded at the receiving end. An MT 999 is the same as MT 799, just without this test code. therefore, its considered unauthenticated, and MT 999 messages have no value whatsoever, unless confirmed via a separate test key.

SWIFT MT 799 The MT 799 is a free format SWIFT message type in which a banking institution confirms that funds are in place to cover a potential trade. This can, on occasion, be used as an irrevocable undertaking, depending on the language used in the MT -799, but it is not a promise to pay, nor is it or any form of Standby Letter of Credit, Bank Guarantee or other non-cash commitment. The function of the MT 799 is simply to assure the seller (or in our case, the trader) that the buyer does have the necessary funds to complete the trade.

What does the SWIFT MT 799 option provide? An account with the SWIFT MT 799 capability allows bank-to-bank SWIFT electronic verification for Proof of Funds in compliance with the SWIFT Category 7 “Treasury Markets & Syndication” message types. the MT 799 format provides the required bank confirmation for the application. There is a $1 million minimum account size for a SWIFT MT -799, and additional costs may apply from your bank. The MT 799 is usually issued before a contract is signed and before a letter of credit or bank guarantee is issued. After the MT 799 has been received by the receiver’s bank, it is then normally the responsibility of the sender’s bank to send a POP (proof of product) to the buyer’s bank, at which point the trade continues towards commencement. In the case of an MT 799 necessary for a trade entity, POP is not something needed: It is just an assurance from the client’s bank that the funds are actually sitting in the account. The actual payment method commonly used is a documentary letter of credit or an MT -103 (wire transfer), which the seller presents to the issuing or confirming bank along with shipping documents. Once the bank confirms the documents, the seller is then paid. This is not applicable when the MT 799 is used to confirm availability of funds. An alternative method is to use a bank guarantee in place of a letter of credit. It is normally at the sender’s discretion which method of payment is used. However, this is not the case when the MT 799 is confirming the account status, balance, and availability.

How Do I Issue an MT 799 Swift Message? The short answer is that you don’t: You approach your bank, and make an arrangement with them to have an MT 799 wired to the receiver’s bank. Some banks are reluctant to issue MT 799’s, as these make them liable for the full cost of the trade, which can sometimes be in the millions. A bank will normally not issue an MT 799 without some form of collateral to secure their own interests, so be prepared to put up a hefty amount of collateral. Your bank account serves as that collateral.

What Does A MT 799 Look Like? An MT 799 is an automated message sent electronically from one bank to another, so you won’t really ’see’ an MT 799 at all. The paperwork associated with an MT 799 will vary from bank to bank, though most banks follow a similar format.

What Information Do I Need to Send A MT -799? You will need the following information for your bank to send an MT -799. Note: some of these may not be applicable when serving as confirmation to a trading entity.

• Name of the advising bank. • LC Number. • LC Amount. • Tenor of Draft. • Latest shipment date. • Person or entity liable for confirmation fee. • Whether the LC is restricted for negotiation or not. • A description of the merchandise. • Port and/or country where product will be loaded. • Port and/or country where product will be unloaded.

What does the SWIFT MT -999 option provide? The difference is that for an MT 799, banks must exchange a so called BKE authenticator…which means a test key is automatically coded into the sent message, and decoded at the receiving end.

An MT 999 is the same as the MT 799, just without this test code, therefore, it’s considered unauthenticated, and MT 999 messages have no value whatsoever, unless confirmed via a separate test key.

What is Swift MT 199 Message bank letter? A Swift Message Type 199 Is A Interbank Message Used Between Two Banks to Transmit the Value of a Bond or an Skr or A Free Format Message Engaging 2 Banks Readiness to Move Forward with A Transaction. Usually A Private One. A MT 199 Swift Message Is Easily Explained as A “Chat” Message between your banker and the receiving banker. Basically You Use This Format

• When A Transfer Order Has Been Sent and You Want to “Notify” The Beneficiary Bank in Order to Sort Out Something,

• Or to Find Out If Funds Have Been Applied,

So Basically, A MT 199 Is One Banker or Security Officer “Talking” To Another. Still have questions? Ask!