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Bank Guarantee - A written guarantee issued and payable by a bank
which provides for the return of the principal amount plus an interest.
BIS - Bank for International Settlements, Basle, Switzerland. The
bank’s bank.
Blocked Funds - Term for "reserving" funds by one bank for
the benefit of another bank. Blocking of funds is an often used banking
procedure to ensure that the same funds are not used twice. Often more
beneficial to an investor than a bank guarantee.
Bond - Any interest-bearing government or corporate security that
requires that the issuer will pay the holder of the bond a specified sum
of money, usually at fixed intervals, and will repay the principal
amount of the loan at maturity. A secured bond is backed by collateral,
whereas as an unsecured bond or debenture is backed by the full faith
and credit of the issuer, not by any specified collateral.
Broker - An intermediary. An individual or organization
in-between the person/organisation that controls the funds and the
provider/trader. A broker often knows someone who knows somebody else
who may provide program trading. This chain of brokers is known in the
business as a "daisy chain". There are thousands of "want-to-be”-,
"hope-to-be”- and "wish-they-were” brokers in the
high-yield business who are giving the industry a bad name.
Certificate of Deposit (CD) - A deposit with a fixed time period
and a fixed rate of interest.
Clearing System - A mechanism for calculation of mutual positions
within a group of participants with a view to facilitating the
settlement of their mutual obligations on a net basis.
Conditional SWIFT - A funds transfer method which uses Society
for Worldwide Interbank Financial Telecommunications protocols to
transfer funds conditionally between banks, subject to the performance
of a specified party.
Commission - The fee that a broker charges clients for dealing on
their behalf.
Commitment Holder - A wealthy private party buying guarantees from
the issuing banks, reselling them to other banks/brokers. Commitment
holders are not allowed to trade or do business on their own behalf.
Other designation: provider.
Compound Yield - The total return on investment, consisting of
the distribution (dividend, interest) and the capital gain or loss, in %
of the investment amount.
Consideration - The money value of a transaction (number of shares
multiplied by the price), before adding commission, stamp duty, etc.
Data Sheet - An information sheet containing the personal data
and/or company data of investors or applicants
Debenture - A certificate of indebtedness, an instrument in which a
corporation or a company acknowledges indebtedness for a specified sum
on which interest is due until the principal is paid back and not
secured by specific assets.
Discount - When the market price of a newly issued security is lower
than the issue price. If it is higher, the difference is called a
premium.
Draft - A signed, written order by which one party (the drawer)
instructs another party (the drawee) to pay a specified sum to a third
party (the payee), at sight or at a specific date.
Ex - Latin for 'without', the opposite of Cum. Used to indicate that
the buyer is not entitled to participate in whatever forthcoming event
is specified, for example, ex cap, ex dividend, ex rights.
Exit Buyer - The buyer of a security arriving on the secondary (retail)
market.
Expatriation - The removal of ones legal residence or citizenship
from one country to another in anticipation of future restrictions on
capital movements or to avoid estate taxes.
FED - Federal Reserve, the US Central Banking system, established in
1913 and responsible for managing the US Dollar, both within and outside
the US.
Fresh Cut - Security arriving on the secondary (retail) market.
Foreign Currency Account - An account maintained in a bank in
another currency than the currency of the country in which the bank is
located. Foreign currency accounts can be maintained for depositors by
banks in the United States.
Forfaiting - The process of purchasing at a discount registered bank
paper which will mature in the future without recourse to previous
holders of the receivable. Comparable to factoring.
Glass-Steagall act - A portion of the Banking Act of 1933 which
prohibits banks from entering into the securities business and prohibits
securities firms from accepting deposits. However, securities issued or
guaranteed by a bank are not subject to the Securities Act of 1933.
Therefore, bank instruments, by virtue of being issued by a bank, are
not considered a form of securities.
Hard Currency - The term "hard currency" is a carry-over
from the days when sound currency was freely convertible into
"hard" metal, i.e. gold. It is used today to describe a
currency which is sufficiently sound so that it is generally accepted
internationally at face value.
ICC - International Chamber of Commerce, Paris, France. The
institution that issues the rules governing Demand Guarantees, including
SLC’s. The International Chamber of Commerce has no affiliation with
the local Chamber of Commerce offices.
Key tested telex (KTT) - An older form of transferring funds between
banks, using telex machines in addition to verification of messages
through the use of key code numbers.
Laundering - Laundering is the process of cleaning illicitly gained
money so that it appears to others to have come from, or to be going to,
a legitimate source.
Letter of Intent (LOI) - A document by which the investor states
that he intends to enter into a High-Yield transaction. A generic
document can be found in the "How to contact us" page of this
site.
Limited Power of Attorney - A legal document that empowers the
trade manager to deal with the various parties of the transaction on
behalf of the owner of the funds (the Principal). Transactions will not
happen without this instrument.
Medium Term Notes An instrument in which a bank acknowledges
indebtedness for a specified sum, often debentures (i.e. not secured by
specific assets).
Merchant Bank - A European form of an Investment Bank.
Money Supply - The total of all money and money substitutes (demand
deposits and currency outside of banks).
MTN - Medium Term Note. A guarantee issued by a bank with a
maturity between 1 and 10 years and paying interest (often 10 years with
a 7 1/2% coupon).
Off-balance sheet financing - The process whereby a contingent (dependent
on certain events) liability is not recorded as a liability on the
balance sheet but typically appears in the notes to the financial
statement. Off-balance sheet financing is therefore not reflected in the
balance sheet total, although possible related reserves will.
One-year Zeros - An obligation of a bank due in one year and sold
at a discount from face value in lieu of an interest coupon.
Parallel Account - A separate account established at the trading
bank.
Pay Order - A document which instructs a bank to pay a certain
sum to a third party. Such orders are normally acknowledged by the bank
which provides a guarantee that the payment will be made.
Portfolio - A collection of securities held by an investor.
Principal - The party that controls the funds and seeks a secure
high-yield investment.
Private Placement - An issue that is offered to a single or a few
investors as opposed to being publicly offered.
Proof of Funds (POF) - A document by which the principal's bank
states that the principal owns the funds required for the transaction.
Usually, proof of funds can also be delivered in the form of a recent
bank-, security- or custody statement. A generic document can be found
in the "How to contact us" page of this site.
Provider - A wealthy private party buying guarantees from the
issuing banks, reselling them through banks/brokers. Other designation:
commitment holder.
Retail Buyer - The buyer of a security when it arrives on the
secondary (retail) market.
Roll Program - A broker term describing a trade program. The use of
the term “roll program” should be avoided.
Safekeeping receipt - A document issued by a bank which requires the
bank to hold specific funds (or securities, gold, etc.) unconditionally
separate from other assets and return them when requested by the
depositor. In this way, the funds (or securities, gold, etc.) are not an
asset of the bank nor are they, directly or indirectly, subject to any
of the bank’s other obligations or debts.
Seasoned - Securities owned by a participant in the secondary (retail)
market.
Securities - General name for shares and bonds of all types. Shares
produce a variable dividend and bonds a fixed interest.
Settlement - Exchanging money or securities for securities.
SLC - Stand-by Letter of Credit. A financial guarantee or
performance bond issued by a bank on behalf of a customer and regulated
by the ICC-500 rules.
Sub-account (segregated account) - When a bank acts on behalf of an
intermediary, a sub-account is opened for each of the intermediaries'
clients, to hold their funds in their name. The account can only be
operated, and the funds can only be used, according to the terms of a
written agreement (Power of Attoney) that is given to, and approved by,
the bank. The deposited funds are not considered intermediary assets nor
bank assets if a safekeeping receipt is issued by the bank.
Time Deposit - A bank deposit that is not payable on demand.
Trade Program - A term for the participation in the buying and the
selling of bank debentures.
Tranche - A specified part of a larger transaction. Each purchase
and resale of a separate block of bank instruments within the total
transaction is known as a tranche. For example, a contract may be signed
to buy 100 million US dollars worth of bank paper with an initial
tranche (or purchase) of 25 million US dollars.
Transfer - The form signed by the seller of a security authorizing
the company to remove his name from the register and substitute that of
the buyer.
Underwriting - An arrangement by which a company is guaranteed that
an issue of shares will raise a given amount of cash because the
underwriters, for a commission, agree to subscribe for any of the issue
not taken up by the public.
Yield - The return earned on an investment taking into account the
annual income and its present capital value. There are a number of
different types of yield and in some cases different methods of
calculating each type.
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