Lexicon

Term

Description

Related Terms

A

Account Settlement

The practice of settling trades once in a predefined period of days (e.g. once per fortnight), giving each exchange a different account settlement timeframe. The alternative is rolling settlement.

On interest bearing bonds, the interest accumulated since the most recent coupon payment date and payable at the next coupon payment date.

Documentation sent to a securities trading organisation by a counterparty to confirm the execution of a given transaction, for which the securities trading organisation has not issued a matching message (e.g. a settlement instruction).

A contractual relationship in which one party, the agent, acts on behalf of another party, the principal. The agent may execute trades for the principal but is not responsible for performance by the principal.

Effecting the buying or selling of securities on behalf of clients in the capacity of agent.

An entity, such as a fund manager or a custodian, that undertakes a securities loan and negotiates the terms with the borrower on behalf of a customer-owner.

Expressed as a percentage of the dividend on the stock on loan, a sum combining the actual dividend plus the fee to be paid by the borrower to the lender..

American Depository Receipt

Certificate issued by a U.S. bank representing a specified number of shares in a foreign stock. ADRs are traded in their own right at a US Dollar price on a U.S. exchange, helping to reduce administration and duty costs on each transaction that would otherwise be levied.

A rise in a currency's value in relation to the market value of another currency.

The simultaneous buying and selling of a security, currency or commodity across different exchanges or markets in order to benefit from a price differential.

The process of diversifying investments in a portfolio across different kinds of assets, such as stocks, bonds, real estate, and cash, to try to meet a specific objective (such as risk reduction).

B

Back Office

The aspects of a financial services organisation responsible for post-trade functions, e.g. documentation, risk management, accounting, settlements. In some firms a portion of these responsibilities usually found in the back office -particularly those related to risk management - have been combined into what they term a 'middle office'.

The transmission or processing of a group of payment orders and/or securities transfer instructions simultaneously at set points in time.

Securities that are traded without any record of ownership and hence are payable to the party that is in possession of them.

The entitlement to receive some or all of the benefits of ownership of a security or other financial instrument (e.g. income, voting rights, power to transfer). Beneficial ownership is usually distinguished from "legal ownership" of a security or financial instrument.

The consolidation of two or more open trades in the same security, between two parties into a single movement of securities and/or cash.

A type of security that represents a loan of cash by an investor to a government, government agency, supranational organisation or company, for which the investor usually receives a fixed rate of interest periodically during the term of the loan, and receives repayment of capital at maturity of the bond, usually years later.

The owner of bonds.

Also known as a 'scrip issue' the offer of free additional shares by an issuer to its shareholders, typically at a fixed ratio of additional shares to original shares. Often issued as an alternative to increasing a dividend payout.

A method of registering and settling trades of securities without a physical certificate. Ownership is registered electronically and where both the seller and buyer use the same CSD, settlement results in a transfer of securities and cash within the CSD's books rather than a physical movement of assets. .

The date established by a share issuer for the purpose of determining the shareholders entitled to corporate action benefits, such as dividends or bonus issues. Also known as record date.

An entity that issues bonds as a means of raising cash is said to be the borrower of cash. Also known as the issuer.

The term used for the electronic link between the two ICSDs Euroclear and Clearstream, which enables settlement of trades across the two.

An organisation that is licensed to execute trades on behalf of its clients rather than on its own behalf, by finding buyers where clients wish to sell and finding sellers where clients wish to buy securities.

An organisation that is licensed to trade, on an individual trade basis, either as an agent for investors on its client's behalf, or on a proprietary trading basis (on its own behalf).

When an investor is forced to repurchase securities because the borrower has not delivered the securities in accordance with the terms of the transaction (e.g. on the settlement date). In such circumstances all costs are borne by the borrower.

C

Bank used by the securities settlement systems to make or receive payments

The payment of income in the form of cash to shareholders by an issuer.

Typically a central bank or limited purpose bank, the cash settlement agent's assets are used to settle the ultimate payment obligations arising from securities transfers within the CSD. Accounts with the cash settlement agent are held by settlement banks, acting both on their own behalf and also in some cases on behalf of participants that do not have accounts with the settlement agent.

[The language is unclear so not sure which of the following two is appropriate…] Either: A purchase or sale of securities not executed with the purpose of injecting cash into the issuing entity (e.g. between two third parties). Or: A transaction which is settled by cash on the same day as the trade.

An organisation that is counterparty to both buyer and seller, and which practices clearing, thereby enabling the identification of net settlement movements.

An organisation providing a securities holding facility, enabling securities transactions to be processed by book entry. The depository may immobilise physical securities or dematerialise securities (ie so that they exist only as electronic records). In addition to safekeeping, a central securities depository may incorporate comparison, clearing and settlement functions.

A physical document of ownership in a security. Certificates have historically been issued in registered or bearer form. In many financial centres today, certificates are no longer issued and proof of ownership is held electronically within book-entry systems.

Shares held in certificate form.

The transmittion, reconciliation and, in some cases, confirmation of payment orders or security transfer instructions prior to settlement, possibly including the netting of instructions and the establishment of final positions for settlement. Sometimes imprecisely used to include settlement.

A central agency through which financial institutions agree to exchange payment instructions or other financial obligations (e.g. securities). Member institutions settle for items exchanged at a designated time based on the rules and procedures of the clearing house.

Located in Luxembourg, one of the two International Central Securities Depositories (ICSDs) offering custody and settlement services to its participants, the other being Euroclear.

An asset that is offered to secure a loan or other credit obligation by the borrower. Collateral arrangements may take different legal forms such as title transfer or pledge.

The standard description of shares issued by companies in the USA.

A statement confirming the transaction between a brokerage firm and its clients for the purchase or sale of securities. In foreign exchange, the written communication to the counterparty in a transaction which recites all the relevant details agreed upon by phone or telex.

A contractual commitment by a custodian to credit a customer's cash account with interest, dividend or tax refund payments on the date on which the payments are scheduled, regardless of whether the custodian has actually received the payment. Usually such credits are provisional and are reversed if the custodian does not receive the payment within an interval established by the custodian.

The crediting or debiting of securities and/or cash to reflect settlement on value date, regardless of when the exchange of securities and cash actually occurs.

A contractual commitment by a custodian to credit and debit a customer's cash and securities accounts, as appropriate, on the date stipulated by the customer's contract with its counterparty, regardless of whether settlement has actually occurred. Usually these credits and debits are provisional and are reversed if settlement does not occur within an interval established by the custodian.

An event which materially changes a security, potentially entitling the holder 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).

An arrangement whereby one bank (correspondent) holds deposits owned by other banks (respondents) and provides payment and other services to those respondent banks. Also known in some domestic contexts as agency relationships. In international banking, balances held for a foreign respondent bank may be used to settle foreign exchange transactions. Reciprocal correspondent banking relationships may involve the use of so-called nostro and vostro accounts to settle foreign exchange transactions.

The opposite party to a financial transaction such as a securities trade or swap agreement.

On interest bearing bonds, certificates are issued with coupons attached; each coupon represents interest due on one specified coupon payment date. In order to receive interest on the bond, the coupon must be detached and presented to the coupon paying agent.

The scheduled date of a coupon payment.

The period of time between each payment of interest on a bond.

The exchange of securities and cash between one country's CSD and another country's CSD, or between a country's domestic CSD and an ICSD.

The agreement to buy or sell securities, where the parties to the trade are located in different countries.

Central Securities Depository

A trade which entitles the buyer rather than the seller of a security to receive a dividend that has been declared, but not paid.

Committee on Uniform Securities Identification Procedures; an organisation that provides standardised and unique reference numbers (CUSIP numbers) for individual securities traded in the United States and Canada, enabling unambiguous identification of the issue being traded and delivered.

Bank or financial institution that assumes legal responsibility for its clients' securities and (usually) cash, providing management as well as safekeeping services for its account holders.Also known as depot.

The safekeeping and administration of securities and financial instruments on behalf of others.

The risk of loss of securities held in custody occasioned by the insolvency, negligence or fraudulent action of the custodian or of a subcustodian.

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D

See Securities Data Provider

Failure by a bond issuer to make payments of interest and/or repayments of capital at the scheduled time, or failure by a counterparty to meet its contractual obligation.

The earliest date that settlement can occur on a new issue of securities; also known as primary value date.

Final transfer of a security or financial instrument.

The date on which the actual exchange of securities and cash between counterparties has taken place: this date is known only after settlement has occurred.. Also called value date or settlement date.

The simultaneous, final, irrevocable and risk-free exchange of securities and cash between seller and buyer (or their custodians). Commonly known as DvP.

Securities holdings represented only by electronic records; settlement of sales and purchases are effected via book entry.

An agent with the primary role of recording securities either physically or electronically and keeping records of the ownership of these securities.

An instrument issued by a bank in one country that establishes an entitlement to a security held in custody in another country.

See Custodian

The specific account held by a depot or custodian in which securities are held.

Entitlements arising on securities that are loaned out, e.g., dividends, interest, and non-cash distributions.

The distribution of earnings by a company to its shareholders whether in the form of cash or additional securities.

The exchange of securities and cash in the central securities depository of the security's home country/market.

A trade between counterparties located in the same country.

An arrangement between two countries, whereby residents of one country that invest in securities issued within the other country, will be liable for a lower rate of withholding tax than the standard rate payable by investors.

A basic accounting principle whereby each accounting entry is offset by a contra (debit or credit) entry.

Delivery versus Payment

E

The right of ownership relating to certain types of corporate action.

A generic term describing the date used to determine whether seller or buyer is entitled to benefit from a corporate action.

An alternative description for the term share; an 'equity issue' is synonymous with the term 'share issue'.

A term denoting that securities or collateral returned following a loan must be of an identical type, nominal value, description and amount to those originally provided. If, during the term of a loan, there is a corporate action relating to loaned securities, the lender is entitled to specify at that time the form in which he wishes to receive equivalent securities or collateral on termination of the loan. The legal agreement will also specify the form in which equivalent securities or collateral are to be returned in the case of other corporate events.

See Tri-Party

Located in Brussels, one of the two International Central Securities Depositories (ICSDs) offering safe custody and settlement services to its participants; the other ICSD is Clearstream Banking Luxembourg.

Trades executed over a registered stock exchange are said to be 'exchange traded'. An alternative is OTC Trading.

The date used to determine whether seller or buyer is entitled to benefit from certain types of corporate action on (primarily) equity securities.

Execution of a trade on an ex-dividend basis entitles the seller rather than the buyer to a dividend which has been declared but not paid.

The agreement to undertake a specific securities trade on specified terms, between two parties (whether buying or selling, lending or borrowing, etc.). [I don't want to change above definition as am not the expert but thought execution meant completion of a buy/sell order, rather than simply agreement?]

The process of converting a security to an associated (or underlying) security.

F

See Failed Transaction

A securities transaction in which the securities and cash are not exchanged as agreed on the settlement date. Also known as a failed trade.

See Free of Payment

The market for trading foreign money. In addition to currency and coin, foreign exchange includes bank assets and liabilities payable in another currency. Rates of exchange are established and quoted for various foreign currencies based on the demand, supply and stability of the currency.

The exchange of securities with no corresponding payment of funds. Commonly referred to as FoP.

A firm's trading unit and other areas that are responsible for developing and managing relationships with counterparties.

An organisation that usually operates a range of funds in which end investors place their cash; the fund manager is responsible for the investment strategy and day-to-day trading of the fund's portfolio in order to maximize the return on investment or to maximise regular income, in accordance with the objective of each fund.

G

An organisation that offers a broad range of services to its clients including the holding of securities and other financial instruments, the holding of cash in various currencies, the settlement of trades and the collection of corporate actions. Global custodians typically operate a network of subcustodians that hold such assets on its behalf.

A receipt or certificate issued by a bank detailing its ownership of foreign securities. The shares are held by a foreign branch of an international bank. This enables them to be offered for sale globallybut traded as domestic shares.

H

An arrangement whereby securities are not physically delivered to the a borrower but are simply segregated by the lender in an internal customer account.

I

ICSD

See International Central Securities Depository

Securities holdings whose certificates of ownership are held in secure storage and for whom delivery of physical certificates is not permitted. Such securities are maintained electronically and settlement of sales and purchases is effected by book entry.

A generic term given to end-investors that are organisations, as opposed to individuals, including fund managers, hedge funds, insurance companies and pension funds.

A request by a seller to the buyer for reimbursement of lost cash interest, where the seller was able to deliver securities (on or after the value date) but the buyer was unable to pay/settle.

A settlement that is effected through transfers of securities and funds on the books of a single intermediary, made possible because both counterparties maintain their securities and funds accounts with the same intermediary.

A central securities depository which clears and settles international securities or cross-border transactions in domestic securities. Euroclear (Brussels) and Clearstream Banking (Luxembourg) are two recognised ICSDs.

An individual or institution that has purchased and owns securities.

International Securities Identification Number; a code following a global standard that uniquely and unambiguously identifies a specific securities issue during trading.

International Securities Market Association; a self-regulatory organisation and trade association (headquartered in Zurich) which regulates trading and settlement in the international securities markets.

International Organization for Standardization; worldwide federation of national standards bodies concerned with consistent rules or guidelines of technical specifications relating to goods and services within many industries.

A standard for the transmission of electronic messages between participants in the securities industry.

A set of internationally recognised three-digit codes representing each of the world's currencies.

An individual security.

An entity that issues securities to the marketplace in order to raise cash, such as companies, sovereign entities, governments, government agencies and supranational organisations.

An institution that acts on behalf of an issuer to distributesecurities and to realise the proceeds of transactions for the benefit of the issuer.

J

K

L

An organisation appointed by the issuer of a security for the purpose of launching and distributing the security to investors and to ensure that the issuer receives the cash it wishes to raise.

Usually represented by holding "legal title", ownership (of a security or financial instrument) recognised by law. Sometimes distinguished from beneficial ownership/interest.

An organisation that provides custody services for securities traded and settled in the country in which it is located to non-resident trade counterparties and settlement intermediaries.

M

When securities that have been lent out pay a cash dividend, the borrower of the securities is generally contractually required to pass on the distribution to the lender of the securities. This payment "pass-through" is known as a manufactured dividend.

Additional collateral requested by a lender to avoid being under-collateralised. Margin calls can also be made by the collateral provider (where the market price of the collateral increases) in order to avoid over-collateralising.

The practice of revaluing securities and financial instruments using current market prices. In some cases, unsettled contracts to purchase or sell securities are marked to market and the counterparty with an as yet unrealised loss on the contract is required to transfer funds or securities equal to the value of the loss to the other counterparty.

An environment within which securities are traded.

A securities trading organisation that publicises the price at which it is prepared to buy and sell specific numbers of specific securities, thereby maintaining liquidity and efficiency of trading. Also known as specialists on some stock exchanges.

The value of securities 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.

Following receipt of a settlement instruction, the custodian compares the details with the counterparty's settlement instruction details and, if they agree (within certain predefined tolerances), reports them as 'matched'.

The process for comparing the trade or settlement details provided by counterparties to ensure that they agree with respect to the terms of the transaction.

The date of capital repayment by a bond issuer to investors.

The marketplace in which cash is lent and borrowed over varying periods of time. Certain securities are regarded as money market instruments, including certificates of deposit, commercial paper, medium term notes and floating rate notes with less than five years to maturity.

The single movement of securities and/or cash in order to settle open trades in the same security, between many parties.

Also known as an investment fund, a pool of capital provided by investors and invested into a group of assets in accordance with a stated set of objectives.

N

A central securities depository that holds domestic securities and which typically facilitates settlement of trades in the domestic currency on a book entry basis.

The settlement of a number of obligations or transfers between or among counterparties on a net basis.

The final cash amount payable on a purchase and receivable on a sale of securities.

An agreed offsetting of mutual obligations by trading partners or participants in a system, including the netting of trade obligations, for example through a central counterparty. Also refers to an agreement to settle securities or funds transfer instructions on a net basis.

A person or firm in whose name securities are registered for the purpose of holding in safe custody and facilitating transactions on behalf of the beneficial owner.

A term used within the securities industry to describe third parties (e.g. correspondent banks) that hold and settle cash over accounts operated on behalf of foreign securities trading organisations.

The specific account held by a nostro in which cash is held on behalf of the account holder.

O

A single account which combines the transactions of multiple individual account holders. A clearing member will often maintain an omnibus account at the clearing house for all of its clients. In this case, the clearing member is responsible for maintaining account records for individual clients and the identities of individual account holders are not revealed to the clearing house.

A trade for which settlement has not yet occurred, whether value date is in the future or in the past.

The standard description of shares issued by companies in various parts of the globe, including Australia, India and the UK.

Trading conducted 'over-the-counter' via a method (e.g. telephone) other than through a registered stock exchange.

P

Pair Off

The netting of cash and securities in the settlement of two trades in the same security for the same value date. Pairing off allows for settlement of net differences.

The face value of an equity security.

The exchange of a quantity of securities and a proportionate amount of cash that are less than the full quantity and cash value of the trade.

The practice of paying a fee to the lender to hold securities for a particular borrower until the borrower is able to take delivery.

An institution that acts on behalf of an issuer to make payments to holders of securities (e.g. payments of interest or principal).

The actual movement of securities certificates for the purpose of settlement, outside a central securities depository or other custodian. Typically a rare occurrence today as in many financial centres settlement is usually effected by book entry.

The transfer of an asset by a borrower (debtor / pledgor) to a lender (secured party) for the purpose of securing debt. The lender holds an interest (lien) in the pledged asset but does not assume ownership unless a default occurs.

The netting of instructions relating to obligations between two or more parties, as a result of which neither satisfies nor discharges those original individual obligations.

Authority given by the owner or operator of a depot or nostro account to a third party to issue instructions to receive or deliver securities or to pay or receive cash over that account.

A type of share which provides a specific dividend that is paid before dividends to ordinary share holders and, should liquidation of the company occur, takes precedence over ordinary shares for reimbursement of capital. Unlike ordinary shareholders, preferred shareholders do not usually have voting rights.

A generic term for the market for new securities issues, in which the securities are purchased directly from the issuer.

See Deferred Delivery Date

A service offered to clients -typically hedge funds - by investment banks to support their trading, investment and hedging activities. The service consists of clearing, custody, securities lending, and financing arrangements.

A party to a transaction that acts on its own behalf. In acting as a principal, a firm is buying/selling (or lending/borrowing) from its own account for position and risk, expecting to make a profit. A lender institution offering customers' securities on an undisclosed basis may also be considered to be acting as principal.

A document that details the terms and conditions applicable to the issuance of a new security.

Q

R

Realignment

The transfer (by a seller) of securities from one CSD to another, thereby enabling settlement of a sale within the same CSD as the buyer. The alternative is cross-border settlement.

The interest rate that a securities lender pays the borrower on cash collateral. This will normally be a below market rate to reflect the lending fee.

A request by a lender for the return of securities from a borrower.

Equities: the date on which the shareholders on an issuer's register are identified for the purpose of distributing corporate action benefits, such as dividends or bonus issues. Also known as books closing date.

Bonds: the date at which a custodian identifies its account holders to whom coupon payments and redemption monies will be made.

The repayment of capital by an issuer to a bondholder.

The list of holders of a registered security, maintained by an issuer or a registrar acting on the issuer's behalf, allowing direct communication (for example, payments of income) by the issuer with the owners of the security.

Securities for which the issuer, (or a registrar acting on the issuer's behalf) maintains a record of ownership. This usually requires that when securities are sold the seller's name is replaced by the buyer's name on the register. Typically, shares rather than bonds are issued in registered form.

An organisation appointed by an issuer of a registered security to maintain the register of holders of that security. Also known as transfer agent.

The act of updating the issuer's register of owners (of a registered security) in order to reflect transfer of ownership.

The mandatory provision of information (to a regulator) by a securities trading organisation regarding its trading activity, securities positions and resultant risks.

Securities holdings that were previously represented electronically and in dematerialised form, but which have been replaced by certificates of ownership.

Transaction whereby one party sells securities to another party and agrees to repurchase the securities at a future date at a fixed price.

Transaction whereby one party purchases securities from another party and agrees to resell the securities at a future date at a fixed price.

An offer by an issuer to the existing shareholders to purchase additional shares in proportion to their existing shareholding.

The practice of settling trades a fixed number of days after their trade date, so that trades executed on a new trading day will have a value date one business day later than trades executed the previous day. Rolling settlement is usually defined in terms of T+1, T+2, T+3 etc, where T is the trade date. The alternative is account settlement.

S

A procedure by which securities registered in the name of a customer are physically held and preserved by a custodian or other agent.

Money balances that the recipient has a right to transfer or withdraw from an account on the day of receipt.

See Stock Dividend

A generic term for the marketplace in which existing securities are traded (as opposed to those securities that are in course of being brought to the marketplace, within the primary market).

Financial instruments representing evidence of ownership that may be purchased and sold, the most common forms of which are equities and bonds.

In the event that a seller cannot directly deliver securities to the buyer, the practice of borrowing securities from a shareholder or bondholder at a cost, in order to facilitate settlement of the trade. . Securities borrowing enables the seller to receive the sale proceeds at the earliest opportunity.

A facility whereby a loan of securities is made to facilitate timely fulfilment of settlement obligations.

An organisation that supplies detailed information concerning individual securities, usually electronically, to those that subscribe to the service; also known as a data vendor.

See Central Securities Depository

The practice of a share or bond holder loaning its securities to a borrower for a fee and in exchange for collateral, for a fixed period of time, in order to enhance the lender's return on its investment.

A system which facilitates the confirmation, clearance and settlement of securities trades and safekeeping of securities. Settlement of securities occurs on securities deposit accounts held with the CSD (whether a private CSD or a national central bank acting as a CSD) or with the central bank (safe custody operational accounts). In the latter case, the central bank acts as the intermediate custodian of the securities. The final custodian is normally a CSD. Settlement of cash occurs in an interbank funds transfer system (IFTS), through a settlement agent.

A method of protecting client assets and positions by holding or accounting for them separately from those of the carrying firm or broker.

A formal procedure for a seller to bring about the closure of an open trade that has passed its value date, by forcing the buyer (via a Sell-Out Agent) to pay for the securities owing, with associated costs being borne by the buyer. Such procedures must be conducted under the rules of the exchange market over which the trade has been executed.

The quantity of securities held within an investor's account with its custodian; differences between the settled position and trading position are usually due to one or more open trades.

The act of buyer and seller (or their custodians) exchanging securities and cash in order to fulfil their contractual obligation.

A role frequently performed by the central bank of a given jurisdiction, the settlement agent maintains and makes transfers between settlement accounts for the purpose of settling claims that arise among members of a given payment system.

The standard or default period of time between trade date and value date of trades, within each marketplace.

See Delivery Date

Trades for which securities and cash have not been exchanged on value date (the contractual settlement).

A message issued by an account holder to its custodian requesting the custodian to deliver or receive securities and/or to receive or pay cash on a specified date (the value date of the trade).

Instead of settling each open trade independently, the settlement of two or more trades simultaneously by the single delivery (or receipt) of the remaining quantity of securities and the single receipt (or payment) of the outstanding balance of cash.

The status of a settlement instruction as reported by a custodian to its account holder. Typical statuses are: unmatched with counterparty; matched with counterparty;settled and failed.

A predetermined cash margin, set by a custodian, within which differing cash amounts on a seller's and buyer's settlement instructions are deemed to match; such tolerances avoid small cash differences from preventing settlement occurring.

The clearance of a small cash balance on an individual trade (within internal books and records), leaving no cash amount due to or from the counterparty.

That which represents equity ownership in a company.

The owner of shares in a company.

A tax in the form of the cost of stamps which are required to be affixed to legal documents such as certificatesand receipts.

A store of information pertaining to, for example, trading companies, counterparties, securities and currencies which is used in the processing of trades, position management and corporate actions.

The automatic attachment of appropriate information to basic trade details, according to predefined rules.

A dividend paid by an issuer to its shareholders in the form of securities rather than cash; also known as scrip dividend.

A recognised body through which securities can be issued and subsequently bought and sold by investors. Members of the exchange are bound by the rules and regulations set by the exchange.

A system of double-entry bookkeeping that accounts on the one side for the ownership of securities (e.g. trading positions) and on the other side for their location (e.g. at the custodian or with the counterparty awaiting settlement).

See Straight Through Processing

An objective of securities trading organisations, suppliers of communications software, custodians, etc. to manage the entire trade lifecycle in an automated and seamless manner, with minimal manual intervention in the form of review or repair. The benefit of straight through processing is reduced costs and the ability to process high volumes of trades in a secure and risk-free manner.

Where one custodian (e.g. a global custodian) holds its securities through another custodian (e.g. a local custodian), the latter is known as a subcustodian.

The Society for Worldwide Interbank Financial Telecommunications; a worldwide industry-owned co-operative providing standardised messaging services and interface software to financial institutions. Message types supported include trade confirmations, settlement instructions, securities and cash statements and corporate actions. A SWIFT payment message is an instruction to transfer funds; the actual exchange of funds (settlement) subsequently takes place over a payment system or through correspondent banking relationships.

T

Third-Party Lending

System whereby an institution lends directly to a borrower and retains decision-making power, while all administration (settlement collateral monitoring and so on) is handled by a third party, such as a global custodian.

Trade

An agreement to exchange specific securities (for cash or for another asset) on specified terms, between two parties (whether buying or selling, lending or borrowing, etc.).

A communication of the details of a trade from one party to its counterparty.

The execution date of the trade.

The process of comparing a seller's and a buyer's trade details electronically shortly after trade execution. A means of achieving trade agreement.

A legally enforceable consolidation and offsetting of individual trades into net amounts of securities and money due between trading partners or among members of a clearing system. A netting of tradeswhich is not legally enforceable is referred to as position netting.

Operationally, the sending (or movement) of funds or securities or of a right relating to funds or securities from one party to another party by (i) conveyance of physical instruments/money; (ii) accounting entries on the books of a financial intermediary; or (iii) accounting entries processed through a funds and/or securities transfer system. The act of transfer affects the legal rights of the transferor, transferee and possibly third parties in relation to the money balance, security or other financial instrument being transferred.

The provision of collateral management services, including marking to market, repricing and delivery by a third party. Also known as escrow.

A bank or trust company that holds title to, or a security interest in, leased property for the benefit of the lessee, lessor, and/or creditors of the lessor. A leveraged lease often has two trustees an owner trustee and an indenture trustee.

U

Unmatched Settlement Instruction

A settlement instruction issued to a custodian to deliver or receive securities (typically versus payment or receipt of cash) that has no directly corresponding instructionissued by the counterparty to the trade.

V

Value Date

See Delivery Date

W

Warrant

A type of security entitling (but not obliging) the holder to subscribe to another security in proportion to the number of warrants held, at a fixed price, at or before a specified date; beyond that date, subscription is no longer possible and the warrant expires.

Tax deducted at source in the issuer's country of residence, on income paid by issuers to investors, whether on equities or bonds. Investors resident in certain countries may be subject to a lower rate of withholding tax, if the issuer's country and the investor's country have a double taxation agreement (or treaty) in place.

X

Y

Z

Zero Coupon Bond

Debt securities that do not pay interest, but which are issued at a deep discount and redeemed at their full face value on the bond maturity date.