Coupon interest that is earned on a bond from the last coupon date to the present date.
An address on a blockchain is a string of characters that represents a wallet that can send and receive cryptocurrency. It is akin to a real-life address, email or website. Every address is unique and denotes the location of a wallet on the blockchain. (Source).
An agent bank is a bank that performs services in some capacity on behalf of an entity. An agent bank, also known as agency bank, can offer a wide variety of services for businesses looking to expand internationally. Agent banks can offer securities lending as part of their suite of services to clients.
Agent Lender Disclosure (ALD)
Agent Lending Disclosure provides an industry standard for agent lenders and broker-dealers to exchange underlying principal level detail information related to transactions executed under securities lending agreements. The initiative established a standard process and infrastructure among industry participants.
Artificial intelligence (AI) is the ability of a computer or a robot to perform tasks that are usually done by humans because they require human intelligence and discernment. Specific AI is designed to complete one task very well e.g. play Go, whereas General AI represents the ability to perform across multiple tasks like a human. General AI has not yet been achieved. (Source)
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (AIFMs)
An airdrop refers to a method of distributing cryptocurrency to the public, via the fact that they own certain other tokens or wallets on a particular blockchain. This is usually done for marketing purposes to incentivize the holding of other tokens or induce them to become a participant in the blockchain network. It is analogous to a rights or bonus issue on a traditional security. (Source)
An air gap is a security measure in which computers, computer systems or networks are not connected in any way to any other devices or networks. This is used in instances requiring airtight security without the risk of compromise or disaster. (Source)
Any cryptocurrency other than the original cryptocurrency, Bitcoin, is known as an alt-coin.
alternate investment fund (AIF)
An alternative investment fund (AIF) is defined in the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD). In the UK, this definition was implemented via the Alternative Investment Fund Managers Regulations (SI 2013/1773) (AIFMD UK Regulation) and the FCA Handbook. This note provides a discussion of the elements of the AIF definition, including exclusions and examples of schemes that are categorised as AIFs.
alternative investment fund (AIF)
An alternative investment fund (AIF) is defined in the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD). In the UK, this definition was implemented via the Alternative Investment Fund Managers Regulations (SI 2013/1773) (AIFMD UK Regulation) and the FCA Handbook. This note provides a discussion of the elements of the AIF definition, including exclusions and examples of schemes that are categorised as AIFs.
Alternative Investment Management Association (AIMA)
The Alternative Investment Management Association represents the global alternative investment industry.
AIMA website: https://www.aima.org/
An application programming interface (API) is a connection between computers or between computer programs. It is a type of software interface, offering a service to other pieces of software (Source)
Asset-backed tokens are digital claims on a physical asset and are backed by that asset. Gold, crude oil, real estate, equity, soybeans or just about any other real, physical asset can be tokenized and become an asset-backed token. (Source)
When a central bank creates new money electronically to make large purchases of assets (see also quantitative easing).
Association for Financial Markets in Europe (AFME)
The Association for Financial Markets in Europe work on behalf of its members to advocate for stable, competitive, sustainable capital markets.
AFME website: https://www.afme.eu/
Association of Luxembourg Fund Industry (ALFI)
The Association of Luxembourg Fund Industry represents the interests of the Luxembourg Fund industry, set up in 1988.
ALFI website: http://www.alfi.lu/
Association of National Numbering Agencies (ANNA)
ANNA is committed to the use of standard identifiers to make the financial world a more efficient, safer and more stable environment for investors and the financial institutions that serve them.
ANNA website: https://www.anna-web.org/
Atomic exchange/ Atomic swap
The transfer of cryptocurrency from one party to another, without the use of an exchange or other intermediary. (Source)
average aggregate notional amount (AANA)
To calculate your AANA is to sum the total outstanding notional amount of non-cleared derivative positions during a prescribed period on a gross notional basis.
Asynchronous means not simultaneous, or not happening at the same time or speed. In computer science, asynchrony refers to the occurrence of events that are independent of the main program. In an asynchronous system, operations are not coordinated by a global clock signal, but rather events (changes in the system), meaning that they are not reliant on external signals for their reliable operations. (Source)
Decentralised Applications (DApps) are a type of application that runs on a decentralised network, avoiding a single point of failure. (Source)
Baking is a process that is used by Tezos in order to append new blocks of transactions onto its blockchain. This is a delegated-proof-of-stake system, where bakers receive rewards for each block that is baked. (Source)
Bank for International Settlements (BIS)
The Bank for International Settlements (BIS) is an international financial institution owned by central banks which “fosters international monetary and financial cooperation and serves as a bank for central banks”. The BIS carries out its work through its meetings, programmes and through the Basel Process – hosting international groups pursuing global financial stability and facilitating their interaction. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.
BIS website: https://www.bis.org/
Bank of England (BoE)
The Bank of England is the UK’s central bank. Their aim is to promote financial stability in UK Markets.
BoE website: https://www.bankofengland.co.uk/
Bank Recovery and Resolution Directive (BRRD)
An EU directive designed to create a framework for authorities to manage bank failures effectively.
Basel Committee on Banking Supervision (BCBS)
The Basel Committee on Banking Supervision is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters.
BCBS website: https://www.bis.org/bcbs/
Basel III is a global, voluntary regulatory framework on bank capital adequacy, stress testing, and market liquidity risk.
One one-hundredth of a percent, or 0.01%.
Securities that are not registered to any particular party and hence are payable to the party that is in possession of them.
A party that is entitled to the right 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.
Any data that is too big for conventional systems or methods to handle. The data could be “big” due to variety (range of data types present e.g. dates, alphanumeric, images), velocity (speed of data transmission or arrival e.g. real-time feeds) or volume (number of data points). (Source)
A cryptocurrency that enables payment in a decentralized peer-to-peer (P2P) network not governed by any central authority or middleman. Bitcoin was the world’s first widely-adopted cryptocurrency. (Source)
Bitcoin Cash is a cryptocurrency created in 2017 from a hard fork of bitcoin. Bitcoin Cash increased the size of blocks, allowing for more transactions to be processed in a single block, improving scalability. (Source)
A file on a blockchain containing information on transactions completed during a given time period.
A blockchain is a type of ‘distributed ledger’ database that allows records of asset ownership to be updated via a network of computers and added as a ‘block’ to the chain, without the involvement of a central party, such as a bank. Blockchains are cryptographically secure, decentralised, append-only (data cannot be changed or removed) and updated by consensus. (Source)
An application enabling a user to view transactions details of blocks on a given blockchain. Block explorers are a key part of cryptocurrency’s mssion of transparency and decentralisation. Example can be found here.
A bond is a contract between two parties. Companies or governments issue bonds because they need to borrow large amounts of money. They also have to pay the investors a little bit more than they paid for the bond. Bonds are usually traded through brokers and are part of a financial instrument group called ‘fixed income’.
A broker-dealer is a person or firm in the business of buying and selling securities for its own account or on behalf of its customers.
BTF is a fixed-rate short-term discount Treasury bill issued by the French debt agency.
BTP are bonds offered by the government of Italy.
A bund is a debt security issued by the German government to generate revenue with which to finance expenditures.
The act of repurchasing shares, where a counterparty did not deliver securities in a timely fashion, or did not deliver them at all. The difference in price is transferred to the failing party.
BVI Bundesverband Investment und Asset Management e.V. (BVI)
BVI represents the interests of the German fund industry at national and international level. The association promotes sensible regulation of the fund business as well as fair competition vis-à-vis policy makers and regulators.
BVI website: https://www.bvi.de/en/
Byzantine Generals Problem
The Byzantine Generals Problem is a theory which describes the difficulty decentralized parties have in arriving at consensus without relying on a trusted central party. In a network where no member can verify the identity of other members, how can members collectively agree on a certain truth? More here. (Source)
Capital Markets Union (CMU)
An EU initiative which aims to deepen and further integrate the capital markets of EU Member States.
Cardano is a third-generation, decentralized proof-of-stake (PoS) blockchain platform designed to be a more efficient alternative to proof-of-work (PoW) networks. Scalability, interoperability, and sustainability on PoW networks like Ethereum are limited by the infrastructure burden of growing costs, energy use, and slow transaction times. (Source)
Difference between interest return on securities held and financing costs:
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.
A non-financing purchase or sale of securities.
Centralised decentralised finance (CeDeFi) combines centralised traditional financial services with decentralised applications, merging conventional regulatory policies with modern financial products and infrastructure. (Source)
Central Bank Digital Currencies (CBDC)
Central Bank Digital Currencies (CBDC) are digital fiat currencies, or digital cash. They are similar to cryptocurrencies, however are centralised and backed by the state. (Source)
central counterparty clearing house (CCP)
A central counterparty clearing house (CCP) is an organisation that exists in various European countries to help facilitate trading done in European derivatives and equities markets.
Central Securities Depositories Regulation (CSDR)
The Central Securities Depositories Regulation (CSDR) entered into force on 17 September 2014 and aims to harmonize the authorization and supervision of central security depositories (CSDs), across the EU and to improve settlement discipline in the securities settlement systems (SSSs) that CSDs operate.
central securities depository (CSD)
A financial organisation that specialises in holding securities so that ownership can be easily transferred electronically without the need for physical certificates.
The clean price is the price of a coupon bond not including any accrued interest. That is, it doesn’t include the accrued interest between coupon payments.
To complete a trade, i.e. when the seller delivers securities and the buyer delivers funds on correct form. A trade fails when proper delivery requirements are not satisfied.
A software program a user executes on a desktop, laptop or a mobile device to launch an application. (Source)
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.
Cloud computing is a general term for anything that involves delivering hosted services over the internet. Processing is performed on a remote server rather than on the client’s device. Most mobile apps take full advantage of cloud computing technology to process large amounts of data that would be inefficient or impossible on a mobile device, serving results of the processing back to the device. (Source)
A cryptocurrency wallet that is in offline storage (i.e. not connected to the internet), and is thus protected by an air gap. (Source)
Securities or cash delivered by a borrower to a lender to support a loan of securities or cash.
Collateral management is the method of granting, verifying, and giving advice on collateral transactions in order to reduce credit risk in unsecured financial transactions.
In cryptocurrency, collateral tokens are used as a risk mitigation asset when borrowing other types of crypto tokens. (Source)
commercial paper (CP)
Commonly used type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities.
common domain model (CDM)
A CDM is a single, market-wide domain model: it is a common data representation of transaction events, used by the market as a whole. That common data representation is the foundation for the development of solutions that are scalable, efficient and that futureproof our market.
Common Domain Model (CDM)
The Common Domain Model (CDM) provides a common representation of transaction events, allowing for greater market efficiency and consistency through the use of a common set of fields. More information here.
common reporting standard (CRS)
common reporting standard (CRS) An information standard for the Automatic Exchange Of Information (AEOI) on a global level, between tax authorities.
The time elapsed when a transaction is submitted to the network and the time it is recorded into a confirmed block. Confirmation times can vary even on the same chain. Often paying a larger fee can improve confirmation time as nodes have a larger incentive. (Source)
A consensus mechanism is a fault-tolerant mechanism used in a blockchain to reach an agreement on a single state of the network among distributed nodes. These are protocols that make sure all nodes are synchronized with each other and agree on transactions, which are legitimate and are added to the blockchain. (Source)
Consumer Credit Directive
Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC.
contract for difference (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 position in the underlying securities, making efficient securities financing or borrowing key.
A corporate action is an event initiated by a public company that brings or could bring an actual change to the securities—equity or debt—issued by the company. Corporate actions are typically agreed upon by a company’s board of directors and authorized by the shareholders.
A coupon payment on a bond is the annual interest payment that the bondholder receives from the bond’s issue date until it matures.
credit default swap (CDS)
A financial contract whereby a buyer of corporate or sovereign debt in the form of bonds attempts to eliminate possible loss arising from default by the issuer of the bonds. This is achieved by the issuer of the bonds insuring the buyer’s potential losses as part of the agreement.
credit rating agency (CRA)
A company that assesses the financial strength of firms and government entities, especially their ability to meet principal and interest payments on their debts.
A transaction concerning either more than one Member State, or a Member State and a third country.
A security issued natively on a blockchain. In Germany the eWpG specifically defines a crypto security as being registered on a crypto security register as opposed to a CSD.
A digital currency that relies on cryptography to validate and secure transactions. (Source)
Crypto custody solutions are independent storage and security systems used to hold large quantities of digital assets. A crypto custodian manages the necessary private keys to access and transact with assets held in an address. (Source)
A crypto exchange is an online platform that acts as an intermediary between buyers and sellers of cryptocurrencies and other digital assets. (Source)
A field of study and practice to secure information, preventing third parties from reading information to which they are not privy. (Source)
Crypto lending allows crypto owners to use their crypto holdings as collateral in exchange for stablecoins. (Source)
An entity that holds securities of any type for investors, effecting receipt and deliveries, and supplying appropriate reporting.
Decentralised Autonomous Organisation (DAO), is an organisation with no one central point of organisation, usually via a series of smart contracts. (Source)
A distributed denial-of-service (DDoS) attack is a malicious attempt to disrupt the normal traffic of a targeted server, service or network by overwhelming the target or its surrounding infrastructure with a flood of Internet traffic. (Source)
Decentralised finance refers to the property of a system in which nodes work in concert in a distributed fashion to achieve a common goal. Usually this term refers to the growing industry in providing dApps
“Standard” two-party repo, where the party receiving cash delivers bonds to the cash provider.
delivery versus payment (DvP)
The simultaneous delivery of securities against the payment of funds within a securities settlement systems.
Delta One products are financial derivatives that have no optionality and as such have a delta of (or very close to) one – meaning that for a given instantaneous move in the price of the underlying asset there is expected to be an identical move in the price of the derivative. Delta one products can sometimes be synthetically assembled by combining options. Delta One trading desks are either part of the equity finance or equity derivatives divisions of most major investment banks. They generate most revenue through a variety of strategies related to the various Delta One products as well as related activities, such as dividend trading, equity financing and equity index arbitrage.
A financial security with a value that is reliant upon or derived from, an underlying asset or group of assets.
Diem (formerly known as Libra) was a permissioned blockchain-based stablecoin payment system proposed by the American social media company Meta Platforms (parent of Facebook). The plan also includes a private currency implemented as a cryptocurrency. The project was announced as being wound down in January 2022.
Cryptocurrency difficulty is a measure of how “hard” it is to mine a block in a blockchain for a particular cryptocurrency. A high cryptocurrency difficulty means it takes additional computing power to verify transactions entered on a blockchain—a process called mining. (Source)
A security issued natively on a blockchain. In Germany this term may be used to distinguish an asset registered with a CSD instead of a crypto security, which the eWpG specifically defines a crypto security as being registered on a crypto security register not a CSD.
Digital Regulatory Reporting (DRR)
A directive is a legal act of the European Union but each Member State is free to decide how to transpose directives into national laws.
Directive on Administrative Cooperation Amendment 6 (DAC6)
The mandatory automatic exchange of information in the field of taxation, in relation to reportable cross-border arrangements. DAC6 forms part of the EU’s Mandatory Disclosure Rules.
Dirty price is the price of a bond that includes accrued interest between coupon payments.
Entitlements arising on the securities that are loaned out, e.g. dividends, interest, and non-cash distributions.
A dividend is the distribution of a portion of a company’s earnings, decided and managed by the company’s board of directors.
Distributed Ledger Technology (DLT) – a database that is replicated and shared across numerous computers, allowing individuals or instituons to securely verify and record changes to the shared database without the need for a trusted intermediary. (Source)
Dogecoin is a cryptocurrency created as a joke, making fun of the wild speculation in cryptocurrencies at the time. It is widely considered to be the first ‘meme coin’. (Source)
Domain Specific Language (DSL)
A domain-specific language (DSL) is a computer language specialized to a particular application’s target subject area.
A successful cryptocurrency transaction that is sent to two different recipients simultaneously. It’s essentially as if the same dollar bill could be spent twice. The cryptocurrency’s blockchain protocol should prevent this from happening. (Source)
Securities Depository Center Company in Saudi Arabia, owned by the Saudi Stock Exchange (Tadawul).
Edaa website: https://www.edaa.com.sa/
Environmental Social and Governance (ESG)
Environmental, Social, and Governance (ESG) refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These criteria help to better determine the future financial performance of companies (return and risk).
An equity swap is a financial derivative contract (a swap) where a set of future cash flows are agreed to be exchanged between two counterparties at set dates in the future. (See also swap).
equivalent (securities or collateral)
A term meaning 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 the loan, there is a corporate action in relation to loaned securities, the lender is normally entitled to specify at the 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.
A type of token standard for Ethereum which ensures the tokens perform in a predictable way. This allows the tokens to be easily exchangeable and able to work immediately with decentralized applications that also use the ERC-20 standard. Most tokens released through ICOs are compliant with the ERC-20 standard. (Source)
A token standard for non-fungible Ethereum tokens. (Source)
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal United States tax and labor law that establishes minimum standards for pension plans in private industry. It contains rules on the federal income tax effects of transactions associated with employee benefit plans.
Escrow is a legal concept describing a financial instrument whereby an asset or escrow money is held by a third party on behalf of two other parties that are in the process of completing a transaction.
The use of a third party, which holds an asset or funds before they are transferred from one party to another. (See also tri-party).
The form of payment used in the Ethereum platform.
Ethereum is a decentralized, open-source blockchain with smart contract functionality.
European Banking Authority (EBA)
The European Banking Authority (EBA) is an independent EU Authority which works to ensure effective and consistent prudential regulation and supervision across the European banking sector.
EBA website: https://eba.europa.eu/
European Central Bank (ECB)
The European Central Bank is the central bank for the euro and administers monetary policy within the Eurozone, which comprises 19 member states of the European Union and is one of the largest monetary areas in the world.
ECB website: https://www.ecb.europa.eu/home/html/index.en.html
European Collateral Directive
Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements.
European Commission (EC)
The European Commission is the executive of the European Union and promotes its general interest.
EC website: https://ec.europa.eu/info/index_en
European Economic Area (EEA)
The European Economic Area was established via the EEA Agreement in 1992, and is an international agreement which enables the extension of the European Union’s single market to non-EU member parties.
European Fund and Asset Management Association (EFAMA)
EFAMA is the representative association for European investment management industry.
EFAMA website: https://www.efama.org/SitePages/Home.aspx
European Insurance and Occupational Pensions Authority (EIOPA)
A European Union financial regulatory institution and an independent advisory body to the European Commission, the European Parliament and the Council of the European Union.
EIOPA website: https://www.eiopa.europa.eu/
European Market Infrastructure Regulation (EMIR)
The European Market Infrastructure Regulation (EMIR) is a body of European legislation for the regulation of over-the-counter derivatives.
European Repo and Collateral Council (ERCC)
ICMA’s European Repo and Collateral Council (ERCC) which operates under the board’s ultimate oversight is the industry representative body responsible for promoting best market practice for the European repo market and providing education and information for the benefit of market participants.
European Securities and Markets Authority (ESMA)
ESMA is an independent EU Authority that contributes to safeguarding the stability of the European Union’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets.
ESMA website: https://www.esma.europa.eu/
European Systemic Risk Board (ESRB)
The European Systemic Risk Board (ESRB) was established in 2010 to oversee the financial system of the European Union (EU) and prevent and mitigate systemic risk.
ESRB website: https://www.esrb.europa.eu/home/html/index.en.html
European Union (EU)
The European Union consists of 28 member states. Each member state is party to the founding treaties of the union and thereby subject to the privileges and obligations of membership.
An evergreen trade automatically renews after the expiry date. The parties involved in the trade agree that it rolls over automatically until one gives the notice to terminate it.
elektronische Wertpapier Gesetz- the German Electronic Securities Act.
The failure to deliver cash or collateral in time for the settlement of a transaction.
Federal Reserve (Fed)
The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest.
Fed website: https://www.federalreserve.gov/
Any money declared by a government to be to be valid for meeting a financial obligation, like USD or EUR. Specifically “fiat” denotes the currency is not backed by physical assets like gold reserves. Fiat currencies are generally controlled by central banks of nations. (Source)
financial/non-financial counterparty (FC) (NFC)
Financial and non-financial counterparty is defined in Article 3(3) and Article 3(4) of SFTR regulation text : Full text here.
“(3) ‘financial counterparty’ means:
(a) an investment firm authorised in accordance with Directive 2014/65/EU of the European Parliament and of the Council ( 1 );
(b) a credit institution authorised in accordance with Directive 2013/36/EU of the European Parliament and of the Council ( 2 ) or with Regulation (EU) No 1024/2013;
(c) an insurance undertaking or a reinsurance undertaking authorised in accordance with Directive 2009/138/EC of the European Parliament and of the Council ( 3 );
(d) a UCITS and, where relevant, its management company, authorised in accordance with Directive 2009/65/EC;
(e) an AIF managed by AIFMs authorised or registered in accordance with Directive 2011/61/EU;
(f) an institution for occupational retirement provision authorised or registered in accordance with Directive 2003/41/EC of the European Parliament and of the Council ( 4 );
(4) ‘non-financial counterparty’ means an undertaking established in the Union or in a third country other than the entities referred to in point (3);”
Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) is the conduct regulator for 59,000 financial services firms and financial markets in the UK and the prudential regulator for over 18,000 of those firms.
FCA website: https://www.fca.org.uk/
Financial Stability Board (FSB)
The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system.
FSB website: https://www.fsb.org/
Financial Transaction Tax (FTT)
Proposed by the European Commission to impose a financial transaction tax (FTT) within some of the member states of the European Union. The tax would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU.
The Fintech Open Source Foundation (FINOS) is an independent 501(c)(6) nonprofit organization whose purpose is to accelerate collaboration and innovation in financial services through the adoption of open source software, standards and best practices.
FINOS website: https://www.finos.org/about-us
The creation of an ongoing alternative version of the blockchain, by creating two blocks simultaneously on different parts of the network. This creates two parallel blockchains, where one of the two is the “winning” blockchain. The “winning” blockchain gets determined by its users, by the majority choosing on which blockchain their clients should be operating. Can be thought of as analogous to a corporate action which results in a second asset. (Source)
free of payment (FOP)
Delivery of securities with no corresponding payment of funds.
FSB Workstream 5
FSB Workstream 5 is the Financial Stability Board’s work streams concerned with securities finance.
Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price.
A term used on the Ethereum platform that refers to the price you are willing to spend on a transaction. See also confirmation time. (Source)
general collateral (GC)
A set of security issues which trade in the repo market at the same or a very similar repo rate.
gilt-edged securities (gilts)
Government bonds in the U.K., India, and several other Commonwealth countries are known as gilts. Gilts are the equivalent of U.S. Treasury securities in their respective countries. The term gilt is often used informally to describe any bond that has a very low risk of default and a correspondingly low rate of return.
GitHub is a website and cloud-based service that helps developers store and manage their code, as well as track and control changes to their code. (Source)
Global Legal Entity Identifier Foundation (GLEIF)
Established by the Financial Stability Board in June 2014, the Global Legal Entity Identifier Foundation (GLEIF) is tasked to support the implementation and use of the Legal Entity Identifier (LEI). The foundation is backed and overseen by the LEI Regulatory Oversight Committee, representing public authorities from around the globe that have come together to jointly drive forward transparency within the global financial markets.
GLEIF website: https://www.gleif.org/en/
Global Master Securities Lending Agreement (GMSLA)
The Global Master Securities Lending Agreement (GMSLA) is an industry standard master agreement that is promoted and maintained by the International Securities Lending Association (ISLA). It is used predominantly for the conclusion of cross-border securities lending transactions.
Global Master Repurchase Agreement.
Governance tokens are tokens that developers create to allow token holders to help shape the future of a protocol. Governance token holders can influence decisions concerning the project such as proposing or deciding on new feature proposals and even changing the governance system itself. This is analogous to preference shares conveying voting rights. (Source)
Securities on which interest or other distributions are paid without any taxes being withheld.
A characteristic or feature of a cross-border arrangement that presents an indication of a potential risk of tax avoidance.
A radical change to a network’s protocol that makes previously invalid blocks and transactions valid, or vice-versa. A hard fork requires all nodes or users to upgrade to the latest version of the protocol software.
A cryptography tool that turns any input into a string of characters that serves as a virtually unforgeable digital fingerprint of the data, called a hash. (Source)
The speed of a bitcoin transaction.
A leveraged investment fund that engages in trading and hedging strategies, frequently using leverage.
High Quality Liquid Assets (HQLA)
Level 1 assets include Federal Reserve bank balances, foreign resources that can be withdrawn quickly, securities issued or guaranteed by specific sovereign entities, and U.S. government-issued or guaranteed securities.
hold in custody
An arrangement under which securities are not physically delivered to the borrower (lender), but are simply segregated by the lender in an internal customer account.
Hold on for dear life (Hodl)
A type of passive investment strategy where you hold an investment for a long period of time, regardless of market volatility. (Source)
A particular security that is in high demand in relation to its availability in the market and is thus relatively expensive or difficult to borrow.
A cryptocurrency wallet that is connected to the internet for storage of cryptocurrency. As opposed to a cold wallet which has an air gap to the network. (Source)
icing/putting stock on hold
The practice whereby a lender holds securities at a borrower’s request in anticipation of that borrower taking delivery.
Unable to be changed. Public blockchain protocols impose immutability as a method of preserving trust.
A form of guarantee or insurance, frequently offered by agents. Terms vary significantly and the value of the indemnity does also.
A share index is a number that indicates the state of a stock market. It is based on the combined share prices of a set of companies.
Initial Coin Offering (ICO)
A blockchain-based fund-raising mechanism in which entrepreneurs mint new crypto-tokens and sell them to investors. (Source)
initial margin (IM)
Initial margin is collateral collected by a counterparty and posted on a two-way basis (each party posts and receives at the same time) to minimize current and potential risk exposure.
An institutional investor is a company or organization that invests money on behalf of other people. Mutual funds, pensions, and insurance companies are examples. Institutional investors often buy and sell substantial blocks of stocks, bonds, or other securities.
intended settlement date (ISD)
The date that is entered into the securities settlement system as the settlement date, and on which the parties to a securities transaction agree that settlement is to take place.
interdealer broker (IDB)
An interdealer broker (IDB) is a specialist financial intermediary that facilitates transactions between broker-dealers, dealer banks and other financial institutions rather than private individuals.
interest rate swaps
An interest rate swap is a financial derivative that companies use to exchange interest rate payments with each other. Swaps are useful when one company wants to receive a payment with a variable interest rate, while the other wants to limit future risk by receiving a fixed-rate payment instead. (See also swap).
An institution that facilitates a financial transaction between two parties.
International Capital Market Association (ICMA)
ICMA is a membership association, headquartered in Switzerland, committed to serving the needs of its wide range of members. These include private and public sector issuers, financial intermediaries, asset managers and other investors, capital market infrastructure providers, central banks, law firms and others worldwide. ICMA currently has more than 550 members located in over 60 countries.
ICMA website: https://www.icmagroup.org/
International Organization of Securities Commissions (IOSCO)
An association of organisations that regulate the world’s securities and futures markets.
IOSCO website: https://www.iosco.org/
International Securities Market Association (ISMA)
The International Securities Market Association (ISMA) was a self-regulatory organization (SRO) committed to monitoring transactions and encouraging compliant trading in the international securities market. In 2005, ISMA merged with the International Primary Market Association to form the International Capital Market Association (ICMA).
International Swaps and Derivatives Association (ISDA)
ISDA fosters safe and efficient derivatives markets to facilitate effective risk management for all users of derivative products.
ISDA website: https://www.isda.org/
Internet of Things (IoT)
The Internet of Things describes physical objects that are embedded with sensors, processing ability, software, and other technologies that connect and exchange data with other devices and systems over communication networks. A common example of how the IoT will change the world is the concept of a fridge that will detect milk running low and placing an order with the supermarket automatically. (Source)
Investment Authority (IA)
The Investment Association is the trade body that represents UK investment managers.
IA website: https://www.theinvestmentassociation.org/
ISO20022 is an emerging global and open standard for payments messaging, creating a common language and model for payments data across the globe. (Source)
ITS on reporting
Commission Implementing Regulation (EU) 2019/363 of 13 December 2018 laying down implementing technical standards with regard to the format and frequency of reports on the details of securities financing transactions (SFTs) to trade repositories in accordance with Regulation (EU) 2015/2365 of the European Parliament and of the Council and amending Commission Implementing Regulation (EU) No 1247/2012 with regard to the use of reporting codes in the reporting of derivative contracts.
The authority given by law on legal matters within a particular geographic area.
Layer 2 refers to a secondary framework or protocol that is built on top of an existing blockchain system. The main goal of these protocols is to solve the transaction speed and scaling difficulties that are being faced by the major cryptocurrency networks. (Source)
Legal Entity Identifier (LEI)
The Legal Entity Identifier (LEI) is a unique global identifier of legal entities participating in financial transactions. These can be individuals, companies or government entities that participate in financial transaction.
lendable assets or supply
The term given to those portfolio assets that are placed into lending programmes, and made available to borrow in return for a fee.
These are ERC-20 tokens that offer leverage to holders. By using these tokens, you automatically gain a leveraged position, unlike traditional trading methods. These tokens offer convenience as they don’t require you to take care of the margins or to have an understanding of liquidation risk. (Source)
When securities that have been lent out pay a cash dividend, the borrower of the securities is in general contractually required to pass the distribution back to the lender of the securities. This payment “pass-through” is known as a manufactured dividend.
Under a Title Transfer agreement, if a borrower is holding stock over a record date and receives a dividend in the market, this is transferred back to the lender via a manufactured dividend payment.
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.
To mark-to-market is to calculate the value of a financial instrument (or portfolio of such instruments) at current market rates or prices of the underlying. Marking-to-market on a daily (or more frequent) basis is often recommended in risk management guidelines.
Market Abuse Regulation (MAR)
Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse.
Market in Financial Instruments Directive (MiFID)
Markets in Financial Instruments Directive (MiFID) is a regulation that increases the transparency across the European Union’s financial markets and standardises the regulatory disclosures required for particular markets. This was updated in 2017 with MiFID II.
Markets and Financial Instruments Regulation (MiFIR)
Markets in Financial Instruments Regulation MiFIR), is a European law which demands its member states to comply with its regulations. As a result of the last financial crisis, the need for a European Union wide regulation called for the emergence of MiFIR. This regulation was formed with the intent to not only protect the markets, but also the investors.
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, of not so traded, using the most recent bid offered prices.
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 takes market risk in search of returns.
The European Union (EU) is a political and economic union, consisting of 27 Member States that are subject to the obligations and the privileges of the membership. Every member state is part of the founding treaties of the union and is subjected to binding laws within the common legislative and judicial institutions.
Memecoins are essentially cryptocurrencies inspired by internet jokes. These currencies often aren’t suppossed to be taken seriously, but can still gain momentum when members of the retail community invest in the coin and cause it to spike. See also Dogecoin. (Source)
A metaverse is simply an alternate version of reality that exists digitally. Much like the physical reality, people interact in real-time in this metaverse to work, play, do business, and socialize with other people and elements. (Source)
The process through which transactions are verified and added to the blockchain. (Source)
money market fund
A money market fund is an open-ended mutual fund that invests in short-term debt securities such as US Treasury bills and commercial paper. Money market funds are managed with the goal of maintaining a highly stable asset value through liquid investments, while paying income to investors in the form of dividends.
Money Market Statistical Reporting (MMSR)
Regulation (EU) No 1333/2014 concerning statistics on the money markets.
Mortgage Credit Directive
Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010.
national competent authority (NCA)
National competent authorities are organisations that have the legally delegated or invested authority, or power to perform a designated function, normally monitoring compliance with the national statutes and regulations.
Digital assets that are issued on chain as opposed to representing traditional assets that exist off chain.
net paying securities
Securities on which interest or other distributions are paid net of withholding taxes.
For many years ISLA has obtained and annually updated legal opinions in a joint exercise with ICMA for approximately 60 jurisdictions globally.
More information on Netting Opinions: click here.
A connection point for the transmission of data. (Source)
Non-fungible tokens (NFTs)
Non-fungible tokens (NFTs) differ from traditional cryptocurrencies. Cryptocurrencies like Bitcoin are fungible, in that every one unit of BTC is exactly the same as another unit of BTC and they can be exchanged for one another with no further considerations. Non-fungible tokens are often used as proof-of-ownership for underlying assets, such as digital art or equities. (Source) Also see here for a French version.
OAT’s (Obligations assimilables du Trésor) are government bonds issued by Agence France Trésor (French Treasury), generally by auction according to an annual calendar published in advance.
If a transaction is processed outside of a blockchain network it is known as Off Chain.
Official Journal (OJ)
The Official Journal of the European Union is a directory of official record. Legal acts published in the Official Journal are binding.
A bridge between traditional assets and currencies and a blockchain.
Transactions that are recorded on the blockchain itself and shared with all participants are On Chain.
Software released under a license that gives anyone the ability and right to use, update and distribute it freely. Development can also be open-source when a community approach is taken to contributions to the code. (Source)
A trade with no fixed maturity date.
A data feed, usually a third party service, that provides off chain information for use in smart contracts. (Source)
An orphan block is a block that has been solved within the blockchain network but was not accepted by the network.
Over-the-counter or off-exchange trading is done directly between two parties, without the supervision of an exchange. It is contrasted with exchange trading, which occurs via exchanges.
With overcollateralisation, excess collateral is used to enhance credit in order to get a better debt rating from a credit rating agency. An issuer backs a loan with assets or collateral which has value in excess of the loan, thereby, limiting credit risk for the creditor and enhancing the credit rating assigned to the loan.
Pan Asian Securities Lending Association (PASLA)
PASLA was incorporated in Hong Kong in 1995, and is an association of firms that are active in the business of borrowing and/or lending securities of Asian markets.
PASLA website: https://www.paslaonline.com/
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.
A payment date, also known as the pay date or payable date, is the date on which a declared stock dividend is scheduled to be paid to eligible investors. This date can be up to a month after the ex-dividend date. However, the stock price may fall on the payment date to reflect the dividend payment.
Peer-to-peer securities lending is the practice of lending cash or securities to borrowers without bank intermediation.
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 loan transaction that acts on its own behalf or substitutes its own risk for that of its client when trading.
A private key generally refers to an alphanumeric string that is generated at the creation of a crypto wallet address and serves as its password or the access code. Whoever has access to a private key has absolute control over its corresponding wallet, access to the funds contained within, and can transfer or trade assets and use the account for other purposes. (Source)
Proof of Authority (PoA)
In Proof of Authority (PoA) based networks, blocks and transactions are validated by approved accounts which are also known as validators. Validators run software allowing them to put transactions in blocks. The process is automated and does not require validators to continually monitor their computers.
Proof of Stake
A novel consensus protocol in which, instead of mining, nodes can validate and make changes to the blockchain purely on the basis of their existing economic stake. (Source)
Proof of Work (PoW)
The consensus protocol of choice for Bitcoin and many other cryptocurrencies. To add a new block, miners must calculate a hash for it that meets certain narrow criteria. Doing so requires an enormous number of random guesses, making it a costly process that deters attempts to commit fraud. (Source)
Trading activity conducted by an investment bank for its own account rather than for its clients.
Protocols are a basic set of rules that allow data to be shared between computers. For cryptocurrencies, they establish the structure of the blockchain. (Source)
Prudential Regulation Authority (PRA)
Responsible for the prudential regulation and supervision of 1,500 banks, building societies, credit unions, insurers and major investment firms.
A public key refers to a series of alphanumeric characters used to encrypt plain text messages into ciphertext. (Source)
quantitative easing (QE)
When a central bank creates new money electronically to make large purchases of assets (see also asset purchase).
A type of computation that harnesses phenomena from quantum mechanics in order to perform much more efficient computations than older, classical computer. Harnessing the collective properties of quantum states a quantum computer can in effect perform many calculations simultaneously rather than linearly. (Source)
The interest paid on the cash side of securities lending transactions. A rebate rate of interest implies a fee for the loan of securities and is therefore regarded as a discounted rate of interest.
A request by a lender for the return of securities from a borrower.
A dividend record date is the date on which the company finalizes the list of investors who qualify as “shareholders of record.”
A regulation is a legal act of a government or other authority that becomes immediately enforceable as law.
repo (or reverse) to maturity
A repo or reverse repo that matures on the maturity date of the security being traded.
The interest rate paid on the cash side of a repo/reverse transactions.
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.
repurchase agreement (repo)
Transaction whereby one party sells securities to another party and agree to repurchase the securities at a future date at a fixed price.
Occurs when the borrower of securities returns them to the lender.
Transaction whereby one party purchases securities from another party and agrees to resell the securities at a future date at a fixed price.
Risk Management Association (RMA)
The Risk Management Association (RMA) is a not-for-profit, member-driven professional association serving the financial services industry. Its sole purpose is to advance the use of sound risk management principles in the financial services industry.
RMA website: https://www.rmahq.org/
risk weighted assets (RWA)
Risk weighted assets (RWA) are used to determine the minimum amount of regulatory capital that must be held by banks to maintain their solvency. This minimum is based on a risk assessment for each type of bank risk exposure; credit, market, operational, counterparty and credit valuation adjustment risks.
To renew a trade at its maturity.
The smallest unit of Bitcoin (BTC). Equal to 0.00000001 BTC.
securities finance transaction (SFT)
Securities financing transactions (SFTs) allow investors and firms to use assets, such as the shares or bonds they own, to secure funding for their activities. A securities financing transaction can be:-
– A repurchase transaction – selling a security and agreeing to repurchase it in the future for the original sum of money plus a return for the use of that money.
– Lending a security for a fee in return for a guarantee in the form of financial instruments or cash given by the borrower.
– A buy-sell back transaction or sell-buy back transaction.
– A margin lending transaction.
Securities Industry and Financial Markets Association (SIFMA)
SIFMA is the voice of the U.S. securities industry. Promoting effective and resilient capital markets.
SIFMA website: https://www.sifma.org/
Securities Lending Market Report
ISLA’s Securities Lending Market Report is a bi-annual publication that looks at the performance of the industry in the previous 6 months as well considering the future of the market.
Security Token Offering (STO)
In a security token offering, or STO, security tokens are sold in security token exchanges. STOs are a type of public offering that facilitates the trading of financial assets via tokenized digital securities. A token is categorized as a security token when subjected to rules and regulations under law and deriving its value from external tradable assets or enterprises.
The completion of a securities transaction where it is concluded with the aim of discharging the obligations of the parties to that transaction through the transfer of cash or securities, or both
The time period between the trade date and the intended settlement date.
A scaling solution for blockchains. Typically, every node in a blockchain network houses a complete copy of the blockchain. Sharding is a method that allows nodes to have partial copies of the complete blockchain in order to increase overall network performance and consensus speeds. (Source)
Shareholder Rights Directive (SRD)
Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement.
Short selling is the sale of a security that is not owned by the seller or that the seller has borrowed. Short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit.
A smart contract is a piece of code, or a program, that automatically executes pre-defined actions upon certain conditions being met. (Source)
A protocol upgrade where only previous valid transactions are made invalid, with most soft forks requiring miners to upgrade their mining software. Soft forks are backward compatible. (Source)
Software as a Service
A licensing and delivery model in which software is licensed on a subscription basis from a central host.
Solana is a crypto-computing platform that aims to achieve high transaction speeds without sacrificing decentralization. Solana aims to improve blockchain scalability by using a combination of proof of stake consensus and so-called proof of history.
Learn more: https://www.coinbase.com/
Sets out regulatory requirements for insurance firms and groups, covering financial resources, governance and accountability, risk assessment and management, supervision, reporting and public disclosure.
A cryptocurrency with extremely low volatility. Examples include gold-backed or fiat-pegged cryptocurrency. Algorithmic stablecoins also exist. (Source)
Staking is the process of actively participating in transaction validation (similar to mining) on a proof-of-stake (PoS) blockchain. On these blockchains, anyone with a minimum-required balance of a specific cryptocurrency can validate transactions and earn staking rewards.
Learn more: coinbase.com
standard settlement instruction (SSI)
Standard Settlement Instructions (SSIs) are the agreements between two financial institutions which fix the receiving agents of each counterparty in ordinary trades of some type. These agreements allow traders to make faster trades since the time used to settle the receiving agents is conserved.
The name for ISLA’s SFTR Steering Committee, which is comprises of a core group of representatives from 15 ISLA member firms and also has input from a further 50+ member firms.
A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything. (See also equity swap and interest rate swap).
Secure Worldwide Interbank Asset Transfer (SWIAT) is a global network of interoperating regulated financial entities based on distributed-ledger technology. (Source)
SWIFT is a messaging system that allows for interbank transfers across the world.
Saudi Stock Exchange.
Tadawal website: https://www.tadawul.com.sa/wps/portal/tadawul/home/
T2S is a platform for securities settlement in the EU where an exchange of delivery of securities vs payment can occur simultaneously. (See also CSDR).
Trades with a fixed maturity date.
Tether (USDT) is an Ethereum token that is pegged to the value of a U.S. dollar (also known as a stablecoin). Launched in 2014, Tether is a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner. Tether tokens are backed by reserves, which include traditional currency and cash equivalents. (Source)
Title Transfer Collateral Arrangements (TTCA)
This term is used to describe an agreement under which collateral is provided by one party (the “Collateral Provider”) to the other (the “Collateral Receiver”) on a “title transfer basis”. This means that the collateral receiver receives full title (e.g. legal ownership) to that collateral from the collateral provider.
Tokens are a type of cryptocurrency that are used as a specific asset or represent a particular use on the blockchain.
The process by which real-world assets are turned into something of digital value called a token, often subsequently able to offer ownership of parts of this asset to different owners. (Source)
Tri-party arrangements involve two counterparties to a transaction and the entity that acts as an independent, third-party collateral agent to manage the collateral securing the transaction. Tri-party structures have long been used for repo and securities lending in global markets.
Uncleared Margin Rules (UMR)
Regulation requiring the implementation of margin requirements for non-centrally cleared derivatives.
Undertaking for Collective Investments in Transferable Securities (UCITS)
UCITS came about from a 1985 EU directive that aimed to standardise the rules and regulations across Europe regarding open-ended funds and transferable securities. The plan was to make funds approved in one country easy to market and sell to investors throughout the EU. The first two versions of UCITS were not adopted, but UCITS III was approved in 2001, and remains in force today.
USD Coin (USDC) is a type of stablecoin. Each USDC is backed by one dollar or asset with equivalent fair value, which is held in accounts with US regulated financial institutions. (Source)
Tokens that are designed specifically to be able to help people use something. For example, one day, Uber could have its own utility token which people use to pay for rides on the Uber network. Utility tokens are not designed as investment vehicles. (Source)
variation margin (VM)
Variation margin reflects the daily change in market value of a contract due to market movements.
A place where cryptocurrency users can store, send and receive digital assets.
Web 3.0 is the new generation of internet services that utilise advanced machine-based learning and artificial intelligence to connect web-based applications together and form a more personalised web. (Source)
Wrapped crypto tokens are cryptocurrencies pegged to the value of another original crypto or assets like gold, stocks, shares, and real estate and put to work on the DeFi platforms. The original asset is ‘wrapped’ into a digital vault, and a newly minted token is created to transact on other platforms. (Source)
eXtensible Markup Language (XML) is a mark-up language and file format for storing, transmitting, and reconstructing arbitrary data. Tags are not pre-defined but defined by the implementer.
Learn more: developer.mozilla.org
Yield farming involves earning interest by investing crypto in decentralised finance markets.
Zero Knowledge Proof
In cryptography, a zero-knowledge proof or zero-knowledge protocol is a method by which one party (the prover) can prove to another party (the verifier) that a given statement is true while the prover avoids conveying any additional information apart from the fact that the statement is indeed true. (Source)