Glossary of Terms

Cash Sweep

Transaction where excess cash is automatically transferred at the end of the day into interest bearing accounts. Sweep transactions on behalf of our custody clients typically have 3 options:   

•ABC managed and processed internally.

•Client managed funds held in custody at State Street, whereby cash movements are internal (typically posted through capstockfunctions).

•Managed by a third party requiring a wire transfer to/from another financial Institution.

Capstock

Capital Stock - Capital Stocks are fund shares, which have been authorized and issued to the shareholders. This includes outstanding and treasury shares. Capstock activity is typically administered by a Transfer Agent (TA) whereby subscriptions (contributions) and redemptions (withdrawals) are instructed as cash inflows/outflows from the fund’s DDAtypically to/from a capstock concentration DDA.  Redemptions represent a real-time debit to the fund DDA  resulting in a wire out to the shareholder  via the concentration DDA.  Subscriptions are contractually credited  to the Fund DDA  from the concentration DDA, however an overdraft could occur if the shareholder wire is not received.

CD

Certificate of Deposit - A certificate of deposit (CD) is a time deposit, a financial product commonly sold in the United States and elsewhere by banks, thrift institutions, and credit unions. CDs are similar to savings accounts in that they are insured and thus virtually risk free; they are "money in the bank." In the USA, CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions. They are different from savings accounts in that the CD has a specific, fixed term (often monthly, three months, six months, or one to five years) and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.

CLS

Continuous Linked Settlement - CLS is an external means of settling foreign exchange transactions finally and irrevocably. CLS Transactions typically require pre-matching within the CLS system prior to value date. CLS transactions will suspend in IBS risk, and a non-approval requires the transaction to be cancelled.

CP

Cash Payment - A form of liquid funds given by a consumer to a provider of goods or services as compensation for receiving those products. In most domestic business transactions, a cash payment will typically be made in the currency of the country where the transaction takes place, either in paper currency, in coins or in an appropriate combination.

DDA

Direct Deposit Account - Funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution. Demand deposits can be "demanded" by an account holder at any time. Many checking and savings accounts today are demand deposits and are accessible by the account holder through a variety of banking options, including teller, ATM and online banking. In contrast, a term deposit is a type of account which cannot be accessed for a predetermined period (typically the loan's term).

DVP

Delivery Versus Payment - The settlement convention whereby securities and cash have to be delivered at the same time. DVP trades can occur at XYZ in two forms:   

•ASD Buy/Sell- Actual settlement of buy or sell trade.  Proceeds are not received until transaction has settled in the market. 

 •CSD Buy/Sell- Contractually settled securities buy or sell.  Proceedsare funded by the custodian on contractual settlement date despite a fail in the market.  Contractual settlement can be reversed if a trade is determined to be invalid.

EBA

European Banking Authority 

ECB

European Central Bank

EHQCB

Extremely high-quality covered bond 

FICC

Fixed Income Clearing Corporation - Provides clearing for fixed income securities, including treasury securities and mortgage backed securities.

FICC was created in 2003 to handle fixed income transaction processing, integrating the Government Securities Clearing Corporation and the Mortgage-Backed Securities Clearing Corporation. The Government Securities Division (GSD) provides real-time trade matching (RTTM), clearing, risk management, and netting for trades in U.S. government debt issues, including repurchase agreements or repos. Securities transactions processed by FICC's Government Securities Division include Treasury bills, bonds, notes, zero-coupon securities, government agency securities, and inflation-indexed securities. The Mortgage-Backed Securities Division provides real-time automated and trade matching, trade confirmation, risk management, netting, and electronic pool notification to the mortgage-backed securities market. Participants in this market include mortgage originators, government-sponsored enterprises, registered broker-dealers, institutional investors, investment managers, mutual funds, commercial banks, insurance companies, and other financial institutions.

FX

Foreign Exchange - Exchanges of currencies, either “spot” or “forward”.  The settlement of the FX is monitored internally however debits for FX transacted with GM will not suspend in the DDA while FX transacted with a third party will suspend if there is insufficient cash or credit.  Third Party FX may settle via clean cash payments or through CLS.

GL

General Ledger - A company's main accounting records. A general ledger is a complete record of financial transactions over the life of a company. The ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.

G-SIB

Global List of Systemically Important Banks -

A financial institution whose distress or disorderly failure, because of its size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity. Those institutions deemed as systemically important must hold additional loss absorption capacity tailored to the impact of their default, rising from 1% to 2.5% of risk-weighted assets (with an empty bucket of 3.5% to discourage further systemicness), to be met with common equity.

G-SII

Global systemically important institution 

IBS

Integrated Banking System / Clean Cash - Process by which a cash transfer occurs between either internal DDA’s or to external counterparties in IBS. Clean Cash has many uses including FX settlements, wire transfer, expense payments, capstocketc.  IBS Clean Cash typically suspends in IBS Risk if DDA lacks sufficient cash or credit.  

IBT

Internal Book Transfer - Cash transfers between DDAs instructed by the client.  

Income

Interest payments for bonds, dividend for stocks, principle and interest for mortgage backed securities as well as short term securities. Income is typically auto-posted contractually and managed within the Global Income Collection unit within Global Operations.  Typically these transactions post as credits and thus are not monitored for overdrafts, however reversals, cancellations, adjustments, fails, etc. can create debits to the fund’s DDA. 

Joint Repo

Joint Repurchase - Joint Repurchase Agreement is a contract to sell and then repurchase a security at a specified price and specified time. There are overnight repos and term repos. Joint Repo accounts act as clearing accounts established at the request of the client/IM typically servicing a number of funds across the complex. Joint accounts allow the IM to move fewer but larger wires between custodians and broker accounts.  

LCR

Liquidity Coverage Ratio

Non Receipt or Unwind

Treasury fronts all payments for 5 business days – an “unwind” occurs when Treasury pulls back the fronted monies.  Unwound payments are posted to the affected DDAs as debits which do not suspend and can cause overdrafts.  

O-SII

Other Systemically Important Institution