Glossary

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

MANUFACTURED DIVIDENDS: When securities that have been lent to pay a dividend, the borrower of the securities is required to pass the dividend on to the lender of securities. This payment is know as a manufactured dividend (as opposed to the normal dividend paid by the issuer of the securities) and will be an amount equal to the gross coupon. Manufactured dividends cause tax problems in some markets.
MARGIN CALL: A request by one party in a transaction for the initial margin to be reinstated or to restore the original cash/securities ratio to parity.
MARGIN, INITIAL: Refers to the excess of cash over securities or securities over cash in a repo/reverse repo, sell/buy-buy/sell, or securities lending transaction. One party may require an initial margin due to the perceived credit risk of the counterpart. No initial margin is typically expected in fixed-income transactions, but where it does occur, it normally ranges from 1% to 3%.
MARGIN, VARIATION: Once a repo or securities lending transaction has settled. The variation margin on a repo or securities lending transaction refers to the band within which the value of the security used as collateral may fluctuate before triggering a margin call. Variation margin may be expressed either in percentage or absolute currency terms. The GMRA (See PSA/ISMA Global Master Repurchase Agreement) states that all legitimate requests for variation margin must be honoured.
MARK-TO-MARKET: The act of revaluing the securities collateral in a repo or securities lending transaction to current market values. This maybe done daily or at a suitable interval agreed upon by the parties to a transaction.
MARKET CAPITALISATION: The value assigned to a security derived from the product of the market price and number of shares in issue as at the reporting date.
MARKET VALUE: The value of loan securities or collateral as determined using the last (or latest available) sale price on the principal exchange where the instrument was traded or, if not so traded, using the most recent bid or offered prices.
MASTER REPURCHASE AGREEMENT: The standard legal agreement for repos in the US, under New York law.
MATCHED/MISMATCHED BOOK: Refers to the interest rate arbitrage book that a securities lending/repo trader may run. By matching/mismatching maturities, rates, currencies or borrowing margins, the stock lender/repo trader creates a profit or loss.
MOVING AVERAGE: A statistical measure that reports the average of the previous stated number of day's data in preference to the actual value for that day. This process can improve trend recognition by smoothing shorter-term fluctuations.