PRIVATE PLACEMENT trading safety is based on the fact that the transactions are performed as arbitrage transactions. This means that the instruments will be bought and resold immediately with pre-defined prices. A number of buyers and sellers are contracted, including exit-buyers comprising mostly large financial institutions, insurance companies, or exceptionally wealthy individuals. The issued instruments are never sold directly to the exit-buyer, but to a chain of clients. For obvious reasons, the involved banks cannot directly participate in these transactions, but are still profiting from it indirectly by loaning money with interest to the trader or client as a line of credit. This is their leverage. Furthermore, the banks profit from the commissions involved in each transaction.
The client's principal does not have to be used for the transactions, as it is only reserved as a compensating balance ("mirrored") against this credit line. This credit line is then used to back up the arbitrage transactions. Since the trading is done as arbitrage, the money (“credit line”) can not be used, but it has to be available to back up each and every transactions.
Such programs never fail because they don't begin before all actors have been contracted, and each actor knows exactly what role to play and how they will profit from the transactions.
Arbitrage transactions with discounted bank instruments are done in a similar way. The involved traders never actually spend the money, but have to be in control of it. The client's principal is reserved directly for this, or indirectly in order for the trader to leverage a line of credit.