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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 any risk in a transaction.

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 on the stock on loan.

All-in price
The market price of a bond plus accrued interest. Also known as "dirty price".

Basis point
One one-hundredth of a percent, or 0.01%

Bearer securities
Securities that are not registered to any particular party on the books of the issuing company 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 U.S.-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.

Bond repo
The transaction whereby one party sells securities (e.g. Government Bonds) to another, agreeing to repurchase (Repo) the securities at a future date at a pre-agreed price. Repo usually refers to Bond Repo, but this transaction type is increasingly used with other marketable securities too, as evidenced above.

Buy-in
The practice whereby a lender of securities enters the open market to buy securities in order to replace those that have not been returned by a borrower. Strict market practices govern the buy-in process.

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. These transactions are often undocumented, for a set duration and the transaction structure does not allow for variation margining.

Carry
The difference between interest return on securities held and financing costs. See Negative carry and Positive carry.

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-oriented repo
A transaction motivated by the need of one counterpart to invest cash and the other to obtain it.

Cash trade
Where an outright purchase or sale of securities is made for a purpose other than financing.

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.

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.

Custodian
An entity that holds securities of any type for investors, effects receipts and deliveries, and supplies appropriate reporting.

Daylight exposure
The period in the day when one party to a trade has a temporary credit exposure to the other due to one side of the trade having settled before the other. It would normally mean that the loan had settled but the delivery of collateral would settle at a later time, although there would also be exposure if settlement happened in reverse order. The period extends from the point of settlement of the first side of the trade to the time of settlement of the other. It occurs because the two sides of the trade are not linked in many settlement systems or settlement of loan and collateral take place in different settlement systems, possibly in different time zones.

Days to cover
The number of days (in terms of average daily outright buying/selling turnover of the security) that it would take to cover the value on loan as of the date reported.

Deliver-out repo
"Standard" two-party repo, where the party receiving cash delivers bonds to the cash provider.

Delivery by Value (DBV)
A mechanism in some settlement systems (including CREST) whereby a member may borrow or lend cash overnight against collateral. The system automatically selects and delivers collateral securities meeting pre-determined criteria and to the value of the cash (plus a margin) from the account of the cash borrower to the account of the cash lender and reverses the transaction the following morning.

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

Dividend date
The date upon which the issuer of the share pays the dividend to the owner (as at the ex-dividend date) of the security.

Dividend effect adjusted
This adjustment smoothes out the unusual peaks of activity seen between the ex-dividend date and payment date. This process is only applied where specified on selected graphs.

Double counting
Financing transactions include a proportion of trades executed by intermediaries. These transactions artificially inflate the overall value on loan and are, therefore, automatically removed prior to publication of the data. In brief, the process to exclude double counting removes transaction values where one participant is seen to lend and borrow the same security value from two other participants on the same day. The originating lender and end borrower values are retained to represent the true level of value on loan.

DVP
Delivery versus payment, or the simultaneous delivery of securities against the payment of funds.

Equity finance
The exchanging of Equities for other Securities (e.g. Cash, Government Bonds or Convertible Bonds) via Repos, Swaps or any other method as agreed between the counterparts to the transaction. This business allows firms to fund their inventory of equity products that they hold for proprietary or Hedge Fund customers.

ERISA
The Employee Retirement Income Security Act, a U.S. law governing private U.S. pension plan activity, introduced in 1974 and amended in 1981 to permit plans to lend securities in accordance with specific guidelines.

Equivalent (securities or collateral)
A term denoting that the securities or collateral returned 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 in relation to loaned securities, the lender is normally 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.

Escrow / triparty
The provision of collateral management services by a third party. This may include custody, marking to market, margin calls and delivery.

Fail
The failure to deliver cash or collateral in time for the settlement of a transaction.

Free-of-payment delivery
Delivery of securities with no corresponding payment of funds.

GBP
Prices or values reported in Great British Pounds

GBp
Prices or values reported in Great British Pence

General Collateral (GC)
Securities that are not "special" (see definition below) in the market and may be used, typically, simply to collateralise cash borrowings. Also known as "stock collateral".

Gilt-edged securities (Gilts)
Government bonds issued by the United Kingdom.

Gilt Edged Securities Lending Agreement (GESLA) see Master Gilt Edged Securities Lending Agreement

Global Master Securities Lending Agreement (GMSLA)
A market standard legal agreement drafted with a view to compliance with English law. An English law opinion has been obtained on the agreement.

GMRA
See PSA/ISMA Global Master Repurchase Agreement

Gross-paying securities
Securities on which interest or other distributions are paid without any taxes being withheld.

Haircut
Initial margin on a repo transaction. Generally expressed as a percentage of the market price.

Hedge fund
A specialist leveraged investment fund that engages in trading and hedging strategies, frequently using leverage.

Hold in Custody (HIC) repo
Repo whereby the borrower of cash segregates collateral in a specific internal account for the cash lender, rather than delivering out collateral.

Hot/hard stock
A particular security that is in high demand relative to its availability in the market and is thus difficult to borrow.

Icing/putting stock on hold
The practice whereby a lender holds securities at a borrower's request in anticipation of that borrower taking delivery.

Indemnity: A form of guarantee or insurance, frequently offered by Agents. Terms vary significantly and the value of the indemnity does also.

Interdealer broker
An agent or intermediary that is paid a commission to bring buyers and sellers together. The broker's commission may be paid either by the initiator of the transaction or by both counterparts.

Issued outstanding
The quantity/nominal of a security available in the market as at the reporting date. This value will fluctuate as more shares/bonds are issued or repurchased/redeemed.

ISLA
The International Securities Lenders Association, the trade association for securities lenders.

ISMA
The International Securities Market Association, an organisation of international securities dealers, maintains offices in Zurich. ISMA is an industry group that sets standards of business conduct in the global securities markets, advises regulators on market practices and provides educational opportunities for industry participants.

LIBA
London Investment Banking Association, the principal trade association in the UK for firms active in the investment banking and securities industry. LIBA members are generally borrowers and intermediaries in the stock lending market.

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

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.

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.

Mark-to-market
The act of revaluing the securities collateral in a repo or securities lending transaction to current market values. This may be 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.

Matched/mismatched book
Refers to the interest rate arbitrage book that a repo trader may run. By matching or mismatching maturities, rates, currencies, or margins, the repo trader generates a P&L.

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.

Negative carry
Net cost incurred when financing cost exceeds yield on securities that are being financed.

Net paying securities
Securities on which interest or other distributions are paid net of withholding taxes.

Open transactions
Trades done with no fixed maturity date.

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.

Partialling
Market practice or a specific agreement between counterparts that allows a part-delivery against an obligation to deliver securities.

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

Positive carry
Net gain earned when financing cost is less than yield on financed securities.

Prime brokerage
A service offered by both Bank and Non-Bank financial institutions (e.g. Investment Banks and Broker/Dealers) to support customers' proprietary trading, investment and hedging activities. Clients of this service are frequently Hedge Funds, who are often long on ideas, short on capital and the necessary support infrastructure. Prime Brokerage may therefore include Clearing, Custody and Reporting, but also Securities Lending, Financing and Execution across many products and markets.

Principal
A party to a loan transaction that acts on its own behalf or substitutes its own risk for that of its client when trading.

Proprietary trading
Trading activity conducted by a securities firm for its own account rather than for its clients.

PSA
The Public Securities Association is a U.S.-based industry organisation of participants involved in certain bond markets sectors. The PSA establishes non-binding standards of business conduct in the fixed income securities markets and advises regulators and others on market practices.

PSA/ISMA Global Master Repurchase Agreement (GMRA)
The market-standard document used for trading repo in instruments other than U.S. Treasuries. The GMRA is based on the U.S. PSA Master Repurchase Agreement, was introduced in November 1992 and revised in November 1995.

Rebate rate
The interest paid on the cash side of a securities lending transaction. A rebate rate of interest implies a fee for the loan of securities.

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

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

Repo rate
The interest rate paid on the cash side of a repo/reverse transaction.

Repo (or reverse) to maturity
A repo or reverse repo that matures on the maturity date of the security traded.

Repricing
Occurs when the market value of a security in a repo or securities lending transaction changes and the parties to the transaction agree to adjust the amount of securities or cash in a transaction to the correct margin level.

Return
Occurs when the borrower of securities returns them to the lender.

Revaluation (reval)
See Repricing.

Reverse repo
A transaction whereby one party purchases securities from another party and agrees to resell the securities at a future date at a fixed price.

Roll
To renew a trade at its maturity.

Securities finance
The exchanging of Securities for other Collateral (e.g. Cash, Equities, Government Bonds or Convertible Bonds) via Securities Lending (see below) Repos (see below), Swaps or any other method as agreed between the counterparts to the transaction. This term is now in general use to describe all the businesses mentioned below.

Securities lending
The collateralised (usually) borrowing and lending of Securities. This business allows large investors (e.g. Pension Funds, Insurance and Assurance Companies and Investment Funds of various types) to generate additional income from their investments in securities by lending them. There is no formal market structure, and no compulsion to use any intermediary. Lenders and Borrowers can thus configure their programs to suit individual needs - using either Agent or Principal Intermediaries as required, or going direct to the Proprietary Borrowers, including Hedge Funds. Securities are borrowed to support hedging and arbitrage transactions, market making, as well as settlement activities.

Securities-oriented repo trade
A transaction motivated by the need of one counterpart to borrow securities and of the other to lend them.

Shares in issue
The number of shares available in the market Securities that for a given security as at the reporting date.

Short squeeze (bear squeeze)
Where one or more market participants reduce liquidity by withholding securities that are "special"/in high demand for any of several reasons, are sought after in the market by borrowers. Holders of special securities will be able to earn incremental income on the securities by lending them out via repo, sell/buy, or securities lending transactions.

Specials
Securities that for any of several reasons are sought after in the market by borrowers. Holders of special securities will be able to earn incremental income on the securities by lending them out via repo, sell/buy, or securities lending transactions

Spot
Standard non-dollar repo settlement two business days forward. A money market convention.

Stock Lending and Repo Committee (SLRC)
A U.K.-based committee of international repo and securities lending market practitioners chaired by the Bank of England and administered by the London Stock Exchange.

Substitution
The ability of a lender of general collateral to recall securities from a borrower and replace them with other securities of the same value.

Term transactions
Trades with a fixed maturity date.

Third-party lending
The 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.

Triparty repo
Repo used for funding/investment purposes in which bonds and cash are delivered by the trading counterparts to an independent custodian bank or clearing house (the 'Triparty Custodian") that is responsible for ensuring the maintenance of adequate collateral value, both at the outset of a trade and over its term. The Triparty Custodian marks the collateral to market daily and makes margin calls on either counterpart, as required. Triparty repo reduces the operational/systems barriers to participating in the repo markets.

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.

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