SECURITIES LENDING & REPO MARKETS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - OCTOBER 2010

GLOSSARY

Trading conducted through a network of electronic terminals.

Screen-based trading

Transactions whose motivation lies in borrowing/lending specific securities via a repo or securities loan. See cash-driven securities lending transactions (repos).

Securities-driven securities lending transactions

A loan of specific securities to a borrower, usually against collat- eral (cash or securities).

Securities loan/ Securities lending

A system in which the settlement of securities takes place.

Securities settlement system (SSS)

A form of interest in property that provides that the property may be sold on default in order to satisfy the obligation covered by the security interest. Transactions that have the same economic effect and intent as a repurchase agreement and which consist of two distinct simulta- neous purchase and sale transactions for different value dates – one for immediate settlement and the other for forward settlement. Typically sell-buybacks do not allow for marking to market and margin calls. In a repo transaction, the party that sells the collateral for cash on the purchase date and commits to buy back equivalent collateral on the repurchase date or on demand in the case of open repo. The borrower of cash. The completion of a transaction, wherein the seller transfers secu- rities or financial instruments to the buyer and the buyer transfers money to the seller. A settlement may be final or provisional. The amount of time that elapses between the trade date (T) and the settlement date typically measured relative to the trade date, e.g. if three days elapse, the settlement interval is T+3. General term used to designate the risk that settlement in a trans- fer system will not take place as expected. This risk may comprise both credit and liquidity risk. A sale of securities which the seller does not own and thus must be covered by the time of delivery; a technique used (1) to take advantage of an anticipated decline in the price or (2) to protect a profit in a long position. In securities lending and repos, a particular security that is in high demand in relation to its availability in themarket and thus relatively expensive to borrow/purchase (as opposed to General Collateral).

Security interest

Sell-buybacks (or buy-sellbacks)

Seller

Settlement

Settlement interval

Settlement risk

Short sale (or short position)

Specials

Securities Lending & Repo markets | page 69