Glossary

Valuation based on the monetary worth of an asset.

The custodian’s (or investor’s) assent to settlement terms that have already been ratified by the buying and selling broker.

Profit making by buying a security, currency or commodity at a lower price in one market and simultaneously selling in another market at a higher price.

Securities not registered on the books of the issuing company and thus payable to whomever possesses the certificate (i.e. the “bearer”). Income is usually payable upon presentation of coupon.

The entity which enjoys the benefits of ownership (such as income) of the security even though title may be in another name.

The standard unit of shares commonly traded in a given market. Fractions of a board lot (“odd lots”) may not be readily negotiable.

The date by which a change of registration must be submitted to the company registrar to ensure the new owner receives entitlement (or corporate action) directly from the issuer.

A settlement system which transfers securities and/or cash positions between two counterparty accounts electronically (usually at a depository or the central bank) without the need for the movement of physical certificates.

The action taken by the buying broker (or stock exchange) to acquire on the open market the securities which the selling broker failed to deliver on time.

The broker or dealer who represents the purchaser of the securities in market transactions.

A physical document attesting to the holder’s ownership of a security. A certificate may be bearer or registered. Depending on local rules, a registered certificate may indicate the issuer, serial number, interest rate (if debt), number of shares (or par value of debt), name and address of shareholder, custodian and local agent, and tax-related information.

The inter-broker or broker-depository agreement to settle a trade based on written or electronic instructions that match in all key respects.

Securities issued as debt instruments that can be converted into common or preferred stock, or another type of debt of the issuing company under specified circumstances.

General term covering a range of capital structuring changes announced by the issuer of shares (e.g. rights issues, bonus issues, stock splits and tender offers).

A party to a trade legally bound to make a good delivery (or a good payment) and responsible for consequences of non-settlement.

A standard numbering system for uniform identification of U.S. and Canadian securities.

The buyer receives the purchased securities at the same time the seller receives payment.

Elimination of physical documents as evidence of ownership for securities. Securities and ownership records exist only as computer data in this "scripless" or "non-certificated" environment.

A facility for holding securities, either in certificated or dematerialised form, to enable book-entry transfer. A central depository may also perform comparison and/or clearance functions.

Any security that derives its value from an underlying, separately-traded asset. Options, futures and swaps are common derivatives.

An agreement between two sovereign governments defining how each entity taxes the local income of the other’s residents. Usually reduces the local tax obligations incurred in cross-border investment by either country’s residents.

A membership of European countries forming a single united market for goods, services, capital and labour. Effective January 1, 1999 “in” countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

Typically, a payment of cash (or stock) to the holder of a security or the offer of such payment. An entitlement may involve a status and/or a capitalisation change, distribution or the exercise of a privilege. Also known as “benefits” in the U.K.

A single European currency replacing the national currency units (NCUs) of “in” countries. NCUs were denominated in euro at fixed exchange rates, effective January 1, 1999. Euro is available as book-entry only currency until introduction of coins and bills in 2002.

The date when securities are traded without the most recently announced entitlements (e.g. income, corporate actions).

A securities transaction that does not settle on contractual settlement date. Also known as a "fail".

A dividend paid out of income already taxed to the issuer. The dividend may be fully franked (i.e. entirely tax-free to the shareholder) or partially franked (and thus partially taxable).

Bearer securities that are equivalent, substitutable and interchangeable without restrictions or loss of value.

A contract conferring the obligation to buy (or sell) a set amount of a financial instrument at a particular price on a given future date.

Abbreviation for the Group of 30. A custody related “think tank” which has put forth nine recommendations with the intention of standardising settlement procedures throughout the world.

In the U.K. and Ireland, a sovereign debt instrument issued through the Treasury, with the principal and interest guaranteed by the government.

A delivery of securities that meets all contractual and regulatory requirements (e.g. type and number of shares, acceptable form and registration type, proper documentation when necessary).

The collective storage of physical certificates as evidence of total ownership, while recording the specific investors’ proportional holding by book-entry in a depository’s computer records.

System designed by the United Nation’s International Organisation for Standardisation (ISO) and advocated by the G-30. The ISIN numbering scheme is not compatible with the CUSIP system used in the United States and Canada, but is widely viewed as an evolving international standard.

Trades that have reached an irrevocable stage in settlement. Neither party can alter the terms of the impending settlement.

The process of comparing mandatory and sometimes optional details of a transaction to facilitate trading and settlement.

Settlement of cash or securities balances by offsetting all credits and debits for a given period, then moving cash or securities only in the amount of the net total.

Usually an independent company (usually formed by a financial institution)in whose name client securities are registered for the purpose of collecting income and general shareholder recordkeeping. The nominee maintains a complete record of underlying beneficial owners.

Fractions of a board lot (see "board lot").

The right to sell or buy a security at a set price on or before a given date. A "put" gives the holder the right to sell; a "call" the right to buy.

A Latin designation indicating that new shares rank equally with "parent line" shares in all respects.

Securities held in vaults and traded as paper certificates, requiring physical transfer from seller to buyer.

Written authority to act on behalf of an absent shareholder at shareholder meetings. Depending on local regulations a nominee, custodian, lawyer, broker or "local representative" may act as proxy

The process of returning physically-held shares to the central depository for trade settlement or continued custody.

The date set by an issuer for the purpose of determining investor entitlements. In general, registrants officially listed on the registrar’s (or depository’s) book on record date receive the next scheduled entitlement. The record date may or may not coincide with the book-closure date.

Partial or full return of the debt (or shares) to the issuer in exchange for cash. A call is an issuer-compelled redemption.

Nominal value of securities converted from national currency units into euro and rounded into a fractional holding or truncated to a whole euro.

Recording of securities ownership by the issuer’s registrar, transfer agent or central depository. Registration attests to ownership and typically establishes the right to shareholder entitlements. In most markets, physical securities in the registration process cannot be sold.

The opportunity given a shareholder by a company to buy additional shares at a discounted price for a limited time. Rights may or may not be transferable or negotiable. In some countries, companies cannot honour all subscription requests, and the eventual exercise of rights may be subject to the company’s allotment.

A cash payment of which the receiver has constructive use on the day of receipt. Funds that can be used immediately to fund a clean payment to a third party.

Systems which use book-entries to represent the security position (i.e. no physical certificates). Markets can have scripless holding, scripless settlement, or both. Also called "non-certificated".

The broker or dealer who represents the seller of the securities in market transactions.

Date by which an executed trade must be cleared through delivery of the securities against cash payment.

The standard period between trade date and settlement date. Each market has its own conventions. Settlement periods can vary by type of instrument.

The sale of a security position not owned by the seller. A short position may be borrowed or acquired on the cash market to make a delivery. Short selling is common in some established markets but may be illegal or technically impossible in most emerging markets.

A duty levied by the local authorities on securities transactions. In many markets, failure to pay stamp duty may result in the loss of ability to enforce the transfer of assets and/or shareholder benefits.

A proportionate change in the number of shares in the corporation, without changing the total stockholder’s equity. Typically, a firm splits its stock to reduce the market price and make the shares attractive to a larger pool of investors.

Generally, a synonym for "shares" or "equity". In the U.K., Ireland, Australia and New Zealand, "stock" can refer to debt instruments as well.

Securities endorsed by the previous owner but not reregistered in the new owner’s name. The previous owner remains the titular owner and may be entitled to dividends, interest, bonus issues, rights, voting privileges and other benefits. In certain instances, securities in street name may not be considered good delivery.

The process by which a non-resident investor obtains a cash refund of taxes, in whole or in part, previously withheld from income when the investor is qualified for local tax reduction under a double-taxation treaty.

The date on which a transaction is executed. Trade date usually signifies the transfer of ownership of the securities and entitlements (e.g. dividends, voting rights) to the buyer. Nevertheless, this principle can vary country to country.

A transaction (purchase/sale) affecting ownership of a security. Also known as a "bargain" in the U.K. and an "arrangement" in Australia.

A supplemental document containing transfer-of-ownership information that is usually required for reregistration of physical certificates. In some markets where new certificates are issued on reregistration, a transfer deed endorsed by the issuer can be a surrogate at resale for as yet unissued certificates.

A standard way to describe the progress of settlement in relation to “trade date” (T). For example, settlement on “T+3” means securities and payment are exchanged three business days after the transaction was executed.

To "unwind" a position in the securities or derivatives market is to terminate the position (i.e. sell, if it is a long position or buy in if it is a short position).

An instrument, usually issued together with a bond, that entitles the holder to buy a proportionate amount of common stock at a specified price, usually for a period of years.