This glossary is supplied by
Accrued interest:
Coupon interest that is earned on a bond from the last coupon date to the present date.
Agent:
A party to a loan transaction that acts on behalf of a client. The agent typically does not take in risk in a transaction. See “Indemnity.”
All-in dividend:
The sum of the manufactured dividend plus the fee to be paid by the borrower to the lender, expressed as a percentage of the dividend of the stock
on loan.
All-in price:
Market price of a bond, plus accrued interest. Generally rounded to the nearest 0.01. Also known as “dirty price”.
American Depositary Receipt (ADR):
Negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S.
exchange.
Basis point (bp):
One one-hundredth of a percent or 0.01%.
Bearer securities:
Securities that are not registered to any particular party and hence are payable to the party that is in possession of them.
Beneficial owner:
A party that is entitled to the rights of ownership of property. In the context of securities, the term is usually used to distinguish this party from the
registered holder (a nominee, for example) that holds the securities for the beneficial owner.
Benefit:
Any entitlement due to a stock or shareholder as a result of purchasing or holding securities, including the right to any dividend, rights issue, scrip
issue, etc. made by the issuer. In the case of loaned securities or collateral, benefits are passed back to the lender or borrower (as appropriate),
usually by way of a manufactured dividend or the return of equivalent securities or collateral.
BMA:
The Bond Market Association – is a US-based industry organisation of participants involved in certain sectors of the bond markets. The BMA
establishes non-binding standards of business conduct in the US fixed-income securities markets. Formerly known as the Public Securities
Association or PSA.
BRIC:
An acronym for the economies of Brazil, Russia, India and China combined.
Buy-in:
The practice whereby a lender of securities enters the open market to buy securities to replace those that have not been returned by a borrower.
Strict market practices govern buy-ins. Buy-ins may be enforced by market authorities in some jurisdictions.
Buy/Sell,Sell/Buy:
Types of bond transactions that, in economic substance, replicate reverse repos, and repos respectively. These transactions consist of a purchase (or
sale) of a security versus cash with a forward commitment to sell back (or buy back) the securities. Used as an alternative to repos/reverses.
BVI:
The German Association of Investment Companies.
Carry:
DiMerence between interest return on securities held and financing costs:
Negative carry:
Net cost incurred when financing cost exceeds yield on securities that are being financed.
Positive carry:
Net gain earned when financing cost is less than yield on financed securities.
Cash-orientated repo:
Transaction motivated by the need of one party to invest cash and the need of the other to borrow. See also ‘Securities-orientated repo’.
Cash trade:
A non-financing purchase or sale of securities.
Clear:
To complete a trade, i.e. when the seller delivers securities and the buyer delivers funds in correct form. A trade fails when proper delivery
requirements are not satisfied.
Close-out (and) netting:
An arrangement to settle all existing obligations to and claims on a counterpart falling under that arrangement by one single net payment,
immediately upon the occurrence of a defined event of default.
Collateral:
Securities or cash delivered by a borrower to a lender to support a loan of securities or cash.
Corporate action:
A corporate event in relation to which the holder of the security must or may make an election or take some other action in order to secure its
entitlement and/or to opt for a particular form of entitlement (see also equivalent).
Corporate event:
An event in relation to a security as a result of which the holder will or may become entitled to:
• a benefit (dividend, rights issue etc.); or
• securities other than those which he held prior to that event (takeover offer, scheme of arrangement, conversion, redemption, etc). This type of
corporate event is also known as a stock situation.
Conduit borrower:
See intermediary.
CSD:
Central Securities Depository.
Custodian:
An entity that holds securities of any type for investors, effecting receipts and deliveries, and supplying appropriate reporting.
