Securities Finance International

SECURITIES FINANCE GLOSSARY

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Securities Finance - The exchanging of Securities for other Securities (e.g. Cash, Equities, Government Bonds or Convertible Bonds) via Securities Lending (see below) Repos (see below), Swaps or any other method as agreed between the counterparts to the transaction. This term is now in general use to describe all the businesses mentioned below.

Bond Repo - The transaction whereby one party sells securities (e.g. Government Bonds) to another, agreeing to repurchase (Repo) the securities at a future date at a pre-agreed price. Repo usually refers to Bond Repo, but this transaction type is increasingly used with other marketable securities too, as evidenced above.

Equity Finance - The exchanging of Equities for other Securities (e.g. Cash, Government Bonds or Convertible Bonds) via Repos, Swaps or any other method as agreed between the counterparts to the transaction. This business allows firms to fund their inventory of equity products that they hold for proprietary or Hedge Fund customers.

Prime Brokerage - A service offered by both Bank and Non-Bank financial institutions (e.g. Investment Banks and Broker/Dealers) to support customers' proprietary trading, investment and hedging activities. Clients of this service are frequently Hedge Funds, who are often long ideas, short capital and the necessary support infrastructure. Prime Brokerage may therefore include Clearing, Custody and Reporting, but also Securities Lending, Financing and Execution across many products and markets.

Securities Lending - The collateralised (usually) Borrowing and Lending of Securities. This business allows large investors (e.g. Pension Funds, Insurance and Assurance Companies and Investment Funds of various types) to generate additional income from their investments in securities by lending them. There is no formal market structure, and no compulsion to use any intermediary. Lenders and Borrowers can thus configure their programs to suit individual needs - using either Agent or Principal Intermediaries as required, or going direct to the Proprietary Borrowers, including Hedge Funds. Securities are borrowed to support hedging and arbitrage transactions, market-making, as well as settlement activities. It is estimated that outstanding balances in this business exceed a trillion dollars ($1,000,000,000,000)

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