Glossary

A B C D E F G H I L M N O P R S T V

CARRY: The differences between the interest return on the securities held and the financing costs. Any gain derived from holding or carrying a securities is known as a positive carry while any loss as a negative carry.
CASH AND CARRY TRADE: A type of trading that is similar to a reverse repo trade. A trader buys a bond that is deliverable into a futures contract and then sells futures against that position. When the futures contract expires the trader delivers the bond to cover the short. The effect on this is the same as a reverse repo trade. At the beginning the trader pays cash to acquire a bond and at the end of the contract returns to bond to receive cash. The difference between the initial cash amount and the cash received at the end allows the calculation of the implied repo rate. The cash and carry trader can, if they wish, finance the bond they acquire by a repo contract that lasts until the date of the futures delivery.
CASH TRADE: Where an outright purchase or sale of securities is made for a purpose other than financing.
CASH-ORIENTED REPO: A transaction motivated by the need of one counterpart to invest cash and the other to obtain it.
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, financial instruments or deposits of the currency that are delivered by the borrower to the lender to support a loan transaction. In repos and buys-sell backs the collateral is considered to be the securities side of the transaction. In securities lending the collateral will be the cash or securities supplied in exchange for the specific borrowed securities.
CONDUIT BORROWER: A party that borrows a security in order to on-deliver it to a client, rather than borrowing it for its own in-house needs.
CONTRACT FOR DIFFERENCES (CFD): An OTC derivative transaction that enables one party to gain economic exposure to the price movement of a security (bull or bear). Writers of CFDs hedge by taking positions in the underlying securities, making efficient securities financing or borrowing key.
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 be or may become entitled to: a benefit (dividend, rights issue etc.); or securities other than those which he holds prior to that event (takeover offer, scheme of arrangement, conversion, redemption etc). This type of corporate event is also known as a stock situation.
COUPON DATE: The date upon which the issuer of an interest paying security makes an interest payment to the registered holder (as of the ex-coupon date) of that security. Coupons may be paid (in most cases) annually, semi-annually or quarterly.
CROSS-CURRENCY REPO: A repo in which the securities are de nominated in a different currency to the collateral.
CUSTODIAN: An entity that holds securities of any type for investors, effects receipts and deliveries, and supplies appropriate reporting.