Securities Finance glossary

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.

This 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.

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.

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 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 EU-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 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 offered prices.

This was developed as a market standard agreement under English law for securities lending prior to the creation of the Global Master Securities Lending Agreement. It has a legal opinion from Queen’s Counsel and has been mainly, but not exclusively, used for lending UK securities excluding gilts.

The agreement was developed as a market standard exclusively for lending UK gilt-edged securities. It was drafted with a view to complying with English law and has a legal opinion from Queen’s Counsel.

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.

An MMF is an open-ended mutual fund that invests in short-term debt securities such as US treasury bills and commercial paper. MMFs 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.