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A financial organization that purchases
BANKERS' ACCEPTANCES and
TRADE ACCEPTANCES,
BILLS
OF EXCHANGE, and
COMMERCIAL
PAPER (short-term IOU, or unsecured money market
obligation).
Acceptances, negotiable bills of exchange, and commercial paper are money market
instruments (market where short-term debt securities are issued and traded).
The purpose of the discount house is to purchase the above items, clearing the
debt off the books of the institution holding them. It is a way for a
lending institution to increase its cash flow, albeit for a smaller return than
if the instruments were held until maturity.
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