Blank Endorsement

A blank endorsement is an order or contract which can be redeemed by anyone, rather than a specific person or entity.

For example, a bearer share which is not registered in a specific person’s name could be considered a blank endorsement. A bearer bond is another example of a blank endorsement.

Cash checks on which the recipient is not specified are another form of blank endorsement because they can be cashed by anyone.

Cash is a basic form of blank endorsement because it represents a claim to goods and services which can be redeemed by anyone who holds it.

Blank endorsements are used for many types of transactions in which the final recipient of assets is unknown.

Example of a blank endorsement:

An investor believes that the value of the Argentinian peso will fall sharply against the Swiss franc after elections are held in Argentina. The investor fills out a bank-guaranteed deferred check for 5 million pesos to be drawn by its bearer on or after the date on which election results are announced. They do not make out the check to a specific person or entity. It can simply be cashed or deposited by the person who holds it.

They then sell this check to a speculator at the going rate in Swiss francs at the time of filling out the check. The speculator believes that the value of the peso will go up after the elections and that they will make a significant profit by converting the 5 million pesos to Swiss francs after that date.

Over the next months, the value of the peso against the franc drops steadily and the speculator loses faith in the growth of the peso. They sell the deferred check to another speculator who believes that the peso will recover. This cycle repeats itself multiple times until the check matures and its bearer at that point in time or later decides to cash it. When they do, the 5 million pesos are drawn from the bank account of the person who originally signed the deferred check and paid to the individual who cashed the check.

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