(banking) (a) The action by which a negotiable instrument is circulated (bought and sold) from one holder to another. (b) In letter of credit transactions, (1) the examination of the seller’s documentation by the negotiating bank to determine if they comply with the terms and conditions of the letter of credit and (2) the giving of value for draft(s) and/or document(s) by the bank authorized to negotiate. Mere examination of the documents without giving value does not constitute a negotiation. See letter of credit.

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