How is CP program paper sold?

Commercial paper programs are established for the issuance of CP in domestic markets and in foreign markets, in the form of Euro-CP (ECP).  The paper of commercial paper programs is marketed either as dealer paper or direct paper.

Dealer paper, which is usually issued by nonfinancial and smaller financial companies, is CP that is placed with a dealer that markets and sells it to investors on a best-efforts basis.  US dealer firms are typically large securities firms and subsidiaries of bank holding companies.

Companies normally require dealers for the placement of their paper when they lack the name recognition to attract investors or their funding requirements are too limited or infrequent to justify establishing their own distribution system.  Dealers make a market in paper they sell, buying back paper sold by investors prior to maturity.

Direct paper is commercial paper that is sold to investors directly by the issuer, usually financial companies and very large nonbank corporations, without the intermediation of a dealer.  Direct issuers are typically financial companies that have frequent and sizable funding needs and flexibility in determining the amount and maturity of their issues to meet the individual needs of investors.

Direct issuers of CP are generally regular issuers that borrow in such amounts and such frequency that the cost of setting up and running their own distribution system is less than having their paper placed by dealers.  Direct issuers normally honor requests to repay should investors wish to liquidate prior to CP maturity.