What Is a Negotiable Certificate of Deposit (NCD)?

A negotiable certificate of deposit (NCD), also known as a jumbo CD, is a certificate of deposit (CD) with a minimum face value of $100,000—though NCDs are typically $1 million or more. They are guaranteed by the bank and can usually be sold in a highly liquid secondary market, but they cannot be cashed in before maturity.

Because of their large denominations, NCDs are bought most often by large institutional investors that typically use them as a way to invest in a low-risk, low-interest security. A Yankee CD is one example of an NCD.

Key Takeaways

• Negotiable certificates of deposit are CDs with a minimum face value of $100,000.
• They are guaranteed by banks, cannot be redeemed before their maturation date, and can usually be sold in highly liquid secondary markets.
• Along with U.S. Treasury bills, they are considered a low-risk, low-interest security.

Advantages of NCDs

• One feature of the NCD is its low risk. NCDs are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor per bank. This was increased from $100,000 in 2010 with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Therefore, the product attracts those who would invest in other low-risk investments, such as U.S. Treasury securities.
• That said, NCDs are generally considered riskier compared with T-bills, which are backed by the U.S. government's full faith and credit.