SECURITIES LENDING & REPO MARKETS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - OCTOBER 2010

GLOSSARY

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.

Agent

Profiting from a difference in price when the same security, cur- rency or commodity is traded on two or more markets.

Arbitrage

Australian Securities Lending Association

ASLA

One one-hundreth of a percentage, or 0.01%

Basis point (bp)

In the context of securities lending, owner of securities portfolios, i.e. the lender

Beneficial owner

Entitlement to receive some or all of the benefits of ownership of a security or financial instrument (e.g. income, stock splits, power to transfer). Beneficial ownership is usually distinguished from “legal ownership” of a security or financial instrument. A person or firm sometimes acting as broker and sometimes as principal intermediary in securities transactions. A broker is a firm that communicates bid and ask levels to potential principals and otherwise arranges transactions as agent for a fee, without acting as counterparty in the transactions. The party to a repo that purchases collateral on the purchase date and commits to sell back equivalent collateral on the repurchase date or on demand, in the case of open repo. The lender of cash. The practice whereby a lender of securities or its agent enters the open market to buy securities to replace those that have not been returned by the borrower in accordance with the terms of the transaction (e.g. on the settlement date). All costs are borne by the borrower in this case. An institution for holding securities, which enables securities transactions to be processed by means of book entries. Physical securities may be immobilised by the depository or securities may be dematerialised (so that they exist only as electronic documents). The term “clearing” has two meanings in the securities markets. It may mean the process of calculating the mutual obligations of market participants, usually on a net basis, for the exchange of securities and money. It may also signify the process of transfer- ring securities on the settlement date, and in this sense the term “clearing system” is sometimes used to refer to securities settle- ment systems. Transactions motivated by the wish to borrow/invest a cash amount through a repo (or loan) of securities.

Beneficial ownership/ interest

Broker-dealer

Buyer

Buy-in

Cash-driven securities lending transactions

Central securities depository (CSD)

Clearing

Securities Lending & Repo markets | page 61