Glossary of Terms

1. Standard and Poor's Ratings Services.

2. One of the stock indices calculated and published by Standard and Poor's. For example the S&P 500.

1. An index made up of the common stock (share) prices of 500 large companies actively traded in the US stock markets.

2. The 500 companies whose stocks are included in the index.

France.
Société Anonyme, a public limited liability company.

The physical holding and preservation of securities, or the maintenance of up-to-date Central Securities Depository records, for the beneficial owners of securities by an agent bank, custodian or fund administrator.

The extent to which a key variable or input can fall below its current or planned level, without endangering the entity or project under review.

A fixed regular payment made by an employer, often monthly for professional or office work as opposed to manual work.

Pensions.
An agreement between an employer and an employee whereby the employee forgoes part of his or her salary (or bonus) in return for a corresponding, or enhanced contribution by the employer to a pension scheme.

Such arrangements often benefit from tax advantages to the employer and/or the employee, although the cost to the employer can be high.

A sale and leaseback transaction takes place when an owner sells an asset and immediately re-acquires the right to use the asset by entering into a lease with the purchaser.

1. Accounting.
Near enough the same as Revenue (and measured in money terms).

2. The volume of goods or services sold, measured as the number of units (rather than as an amount of money).

Accounting.
The Sales day book records all invoices raised and credit notes issued.

Tax charged on the value of goods and services bought and sold, rather than on net income or profits.
For example, VAT.

Funds transfer.
Money balances that the recipient has a right to transfer or withdraw from an account on the day of receipt.

A group of items selected from a population and used to estimate properties of the population.

The statistical technique involved in gathering a selection of items from an entire population in order to estimate properties for the entire population.

A selected period of time from which a representative sample of data is taken.
The selection of different sampling periods can have a substantial effect on the results of statistical analysis, for example of the returns on traded assets.

A yen-dominated bond issue made in the Japanese market by a foreign (non-Japanese) issuer.

(SOX/SOXA/Sarbox).
1.
The Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act of 2002.
A United States federal law made in response to a number of widely publicised corporate and accounting scandals including those involving Enron, Tyco and WorldCom.

2.
The external reporting requirements and the internal structures, processes and monitoring needed to comply with the Act.

The Sarbanes-Oxley Act.

France.
Société à responsabilité limitée, a private limited liability company.

Also written 'Sarl'.

1. Economics.
The portion of household income not used in consumption expenditure.

2. More generally, financial benefits resulting from a reduction in costs.

Stategic Business Unit.

Economics.
Referring to a resource (such as natural gas) which is limited in supply and from which demand must be satisfied.

A diagram showing the relation between two quantities. Each observation is represented by a dot or a cross.

A process of analysing possible future events by considering a number of different potential outcomes.
The different scenarios under analysis can involve changing more than one input simultaneously.

Tax.
Under a schedular system taxable income is split into different categories known as schedules, each having their own rules as to the taxation of the income and deductibility of expenses.

Pensions.
The named actuary appointed by the trustees of an occupational pension scheme under UK pensions legislation.

Sometimes ‘appointed actuary’ is used, although this does not always have precisely the same meaning.

Pensions.
The auditor appointed (usually) by the trustees of an occupational pension scheme under UK pensions legislation.

Insolvency law.
An agreeement between a financially distressed company and its creditors or members to effect a merger or a restructuring, which requires the sanction of the court.

Pensions.
Traditionally, that part of a pension trust deed dealing with the detailed provisions concerning eligibility, benefits, transfers and similar issues.
The main part of the trust deed generally defines the power and duties of the trustees and the sponsoring company.

(SSF). Pensions funding.
The name originally given to the former pension scheme funding regime introduced in the UK Pensions Act 2004 whereby trustees and employers must agree a funding programme specific to the scheme concerned on the basis of actuarial and other advice. It replaced the Minimum Funding Requirement which was introduced by the Pensions Act 1995.

SSF has been replaced by Statutory Funding Objective.

A loan instrument usually governed by German law.
Schuldschein is sometimes translated as 'certificate of indebtedness'.

Schuldscheine are bilateral loans, privately placed, unlisted and unregistered. They are not securities as the debt is legally constituted by the underlying loan agreement, rather than by the certificate of indebtedness itself.

Historically the largest category of Schuldschein issuers has been German public authorities, but the market is also tapped by corporate borrowers and financial institutions.

Also known as Schuldscheindarlehen (SSD).

Standardised Corporate Environment.

Sterling Commercial Paper.

An issue of bonus shares in proportion to existing shares held.

A 'one-for-one' scrip issue would mean that one new share was issued for each share held. This would effectively halve the share price; each shareholder would still have the same share value.

SEPA Credit Transfer.

1. Statistics.
Standard deviation.

2. UK Tax.
Stamp duty.

SEPA Direct Debit.

UK Tax.
Stamp Duty Land Tax.

Special Drawing Rights.

Stock Exchange Automated Quotations system.

Stock Exchange Alternative Trading Service.

US. Securities and Exchange Commission.

Also known as State Second Pension.

UK Tax.
UK National Insurance contributions paid by employers.

Law.
1.
Delegated legislation.

2.
In EU law, sources of EU law other than Treaties (which are the primary source of EU law).
EU secondary legislation includes Regulations, Directives and Decisions.

The market for the trading in securities that have previously been bought by investors as new issues in the primary market.

(SSL). A predecessor to Transport Layer Security (TLS). SSL is a communications cryptographic protocol that uses Public Key Infrastructure (PKI) to provide secure communications on the internet for such things as web browsing, e-mail, Internet faxing, instant messaging and other data transfers.

A person who holds some security, such as a mortgage, for money that they have lent.

Debt backed by collateral in the form of real or monetary assets. The debt provider takes a legal charge or mortgage debenture against the asset pledged as security.
All other things being equal, secured debt is safer for the lender than unsecured debt.

(SEC). US. An independent agency which has primary responsibility for enforcing federal securities laws and regulating the securities industry, the stock and options exchanges, and other electronic securities markets in the United States.

(SSS). A system which permits the transfer of securities: either free of payment, such as free delivery (for example in the case of pledge), or against payment.

Settlement of securities occurs on securities deposit accounts held with a Central Securities Depository (private CSDs or a central bank acting as a CSD) or with a central bank (safe custody operational accounts). In the latter case, the central bank acts as the intermediate custodian of the securities. The final custodian is normally a CSD.
Settlement of cash occurs in an interbank funds transfer system (IFTS), through a settlement agent.

1. The trend for large companies to use less bank lending facilities and instead to issue their own securities direct to the markets.

2. The process of converting non-tradable assets into tradable securities.

1. Assets pledged by a borrower, as additional protection for the lender's interest. For example a residential mortgage loan, for which the security is the residential property mortgaged to the lender.

2. A tradable legal claim upon the assets of the issuer of the security. Examples of traded securities include shares and bonds.

3. Safety, including both physical safety and - for example - the confidentiality of information.

4. Systems and procedures to improve safety. Including for example both physical access controls and electronic controls such as encryption and passwords.

An occupational pension scheme where the assets are invested with an internal or external investment manager (or managers) rather than by the purchase solely of an insurance policy to secure the benefits.

A loan that is to be used to acquire assets that will produce sufficient return to meet the interest obligations and repay the principal.

Nearly enough the same as Semi-annual rate.

The semi-annual rate is the simple annual interest quotation for compounding twice a year. For example if the semi-annual rate is quoted as 10%, then the periodic interest accruing is 5% (= 10% x 6/12) per six month period.

A semi-annual rate is an example of a nominal annual rate.

Not to be confused with the annual effective rate, which in this case would be = 1.05² - 1 = 10.25%.

A semi-fixed cost is where the cost is fixed within limited ranges of activity, but which increases when the level of activity becomes greater than this limited range.
An example of a semi-fixed cost is where extra supervision salaries have to be paid each time an extra shift is worked.
If the total semi-fixed cost were plotted on the y-axis of a graph, with the x-axis being the level of activity, the shape of the cost curve would be a series of steps going up.

One form of the Efficient Market Hypothesis (EMH).
The EMH is the general hypothesis that markets operate efficiently. In other words that assets are fairly priced by the market mechanism to incorporate available information.

There are three forms of potential efficiency: the weak form, the semi-strong form and the strong form.
The semi-strong form states that prices react to public information so that any form of analysis using publicly available information cannot be successful in consistently generating excess returns.

A semi-variable cost has a fixed element and a variable element.

An example of this would be a telephone bill with a fixed line rental plus a rate per unit used.
If the total semi-variable cost were plotted on the y-axis of a graph, with the x-axis being the level of activity, the shape of the cost curve would be an upward-sloping ramp.

Semi-annual rate.

Funds transfer.
An analytical rather than operational or legal term used to describe the point at which an unconditional obligation arises on the part of the initiating participant in a funds transfer system to make final payment to the receiving participant on the value date.

Debt which ranks ahead of other unsecured or subordinated debt in right of payment in a liquidation.

The benefit of ranking ahead of the claims of other creditors in right of payment in a liquidation.

The degree of variability in a financial value or decision, associated with changes in one or more of the inputs.

The refinement of a financial valuation or decision making model. Sensitivity analysis quantifies the degree of change in a valuation or other assessment, to changes in one or more of the inputs.

It can also be used to identify the break even point or points, at which a financial decision would change.

An important type of sensitivity analysis is stress testing.

1. The Single Euro Payments Area.
2. The SEPA payments and transfers Scheme.

(SCT). An electronic transfer of euro made under the rules and standards of the SEPA Scheme.

The standardised formats and service levels create:
1. Certainty over data carried and delivered with payments.
2. A requirement for gross payments with a maximum execution time of 3 days, reducing to 1 day from 2012; and
3. Other specifications, for transfers within Europe, whether between or within national boundaries.

(SDD). A direct debit made under the SEPA scheme rules, either within or across national boundaries within Europe, whereby one-off and repetitive payments are initiated by the payee to collect payments electronically from the debtor’s bank account based on a mandate giving pre-authorisation.

The scheme provides for mandate creation, predictable and convenient time-cycles, appropriate refund rules and the necessary features to permit end to end straight-through-processing.

(SEPA). The scheme for payments and transfers within the Single Euro Payments Area.

The SEPA Scheme encompasses the SEPA Credit Transfer, SEPA Direct Debit and SEPA cards framework.
It covers 32 countries including the European Union Member States plus Iceland, Norway, Liechtenstein, Switzerland and Monaco.

An autonomous legal system.
For example, European community law is created by community institutions and is therefore legally separate from the national law of any member state.

Company law.
The concept that a company exists as a separate legal entity distinct from its members.

(SFO). Independent UK Government department that investigates and prosecutes serious or complex fraud and corruption and by doing so contributes to maintaining confidence in the UK's business and financial institutions.

UK Pensions.
The former UK State Earnings Related Pension Scheme.

1. Debt.
To make payments of interest and principal on a borrowing as they fall due.

2. Pensions.
A period of employment by an employee with an employer which counts towards pension benefit accrual.

A contract specifying the service to be provided.

Pensions.
The increase in projected benefit obligation due to employee service in the current year.

(SLA).
1. An SLA formalises the relationship between a company and its service providers (for example banks), by covering the minimum standards of service expected by the company, including key performance indicators (KPIs) and agreed to by the service provider.

2. More generally, any similar agreement between a customer and a service provider.

(SPPI). A measure of the change in prices for services provided by UK companies to other UK companies and to the UK government.

Formerly known as the Corporate Services Price Index (CSPI).

Situation whereby a debtor may acknowledge the claimant’s demand but pleads his own claim in order to extinguish the claimant’s demands either in full or in part.

Stock Exchange Electronic Trading System.

1. An act that discharges obligation in respect of funds or securities transfers between two or more parties.

2. Pensions.
An irrevocable action that relieves the employer of the primary responsibility for a pension obligation, thus eliminating associated risks.

3. The disposal of assets via a trust arrangement.

An institution that is responsible for managing all aspects of the settlement process (including the calculation of settlement positions and the monitoring of the exchange of payments) on behalf of transfer systems or other settlement arrangements.

The date on which a security transaction is settled, for example, payment is made and securities are physically received and delivered or beneficial ownership records are changed in central securities depositories.

Also known as final settlement.

Funds transfer.
An institution across whose books transfer between participants take place in order to achieve settlement within a settlement system.

The time-lag that occurs in an exchange-for-value process between the conclusion of the trade/bargain and its discharge by the final exchange of a financial asset for payment.

Also known as payment netting.

A general term used to designate the risk that settlement in a transfer system will not take place as expected. This risk may comprise both credit risk and liquidity risk.

A system used to facilitate the settlement of transfers of funds or financial instruments.

Near enough the same as unwinding.

An individual that disposes of assets via a trust arrangement.

Joint and several liability.

Statement of Federal Financial Accounting Concept.

Statement of Federal Financial Accounting Standard.

1. Statutory Funding Objective.

2. Serious Fraud Office.

Statement of Funding Principles.

Company law.
A person who is not a director of a company but who gives instructions (rather than professional advice) according to which the directors are accustomed to act.

UK Tax.
For UK tax purposes, a bond issued in the primary market at a price exceeding 90 per cent of its face value.

A share in a company is a proportionate ownership right in the company.

Its main features normally include:

- A right to receive any dividends declared.
- A right to vote in general meetings of the company.
- An obligation to subscribe equity capital of a fixed amount per share.

Historically, shares were evidenced by paper certificates. More commonly, they are now recorded in electronic form.

The process of a company buying back its own shares. This reduces the number of shares in existence and, potentially, increases unit share price.

National regulations determine how the shares bought in this way must be treated.

The process is widely used to adjust capital structure by reducing the proportion of equity.

1. Company law.
The capital of a company which is represented by shares.

2. Accounting.
The figure appearing on the face of the balance sheet for Share capital is the total nominal value of shares issued to date.

The exchange or swap of one shareholding for another, usually on a takeover or merger.

Also written 'share-for-share exchange'.

UK Law.
An amount recorded in the share premium account.

UK Company law.
An accounting reserve representing the excess of the amount paid for issued share capital over the par value of the shares.

Similar to a scrip issue, a share split also results in the shareholder owning more shares in proportion to the initial holding.

Under a share split each share is subdivided so that the par value is also subdivided; a 5 for 1 split would see an initial par value of 25p reduced to 5p for each new share.

(SSC). Shared Services provide a service by one part of an organisation or group where previously the service had been found in more than one part of the organisation or group. The funding and resourcing of the service is shared so the providing department becomes an internal service provider.

Literally the value accruing to shareholders.

Shareholder value calculations take account of:
(i) The market value of shares;
(ii) Dividends paid out to the shareholders;
(iii) Capital introduced by the shareholders; and
(iv) Capital returned to the shareholders.

Often the term is used qualitatively to describe the general trend away from focusing on accounts-related measures of performance and towards economic value-based measures of performance.
Shareholder value management emphasises the consequences of management decision-making in terms of resulting market values rather than in terms of purely accounting based measures such as accounting profits or earnings per share.

In simple terms, shareholder value is added or created when the Internal rate of return from the firm's investment projects exceeds the appropriately risk-adjusted Weighted average cost of capital.

The owners of a company.

Cash flow available for distribution to shareholders, after debt servicing costs and taxation.

(SHF). Accounting. The item in a balance sheet which relates to equity capital and reserves. The book value of equity.

Shareholders' Funds.

1. Short term (or 'shorter term') financial instruments and other items are generally defined to be those with a remaining maturity up to (and including) one year.

2. Short selling.

Tax.
A chargeable accounting period of less than 12 months.

A dealing term meaning periods up to one week, but sometimes used to refer to periods up to a month.

UK Tax.
Interest on a loan made for a period of less than one year.

UK Tax.
An asset which has an expected useful life of less than 8 years.

The short seller of an asset has a 'short position' in the asset. So they are short of the asset.
They now need to obtain some of the asset, in order to fulfil their sale contract. They have obligations.

Short selling means selling an asset that one does not already own. (Compared with normal selling which means selling an asset that one does already own.)

In bond markets, bonds with initial maturities of less than two years.

In company balance sheets, debt with a remaining maturity of less than a year.

Investments with maturities of less than one year.

Money owed within a year on bank debt, mortgages or vehicle payments.

Statutory Instrument.

Standing Interpretations Committee.

Société d’Investissement à Capital Variable.

Systemically Important Financial Institution.

Current accounts, overnight deposits and money at call.

A draft that demands payment immediately, ‘at sight’.

1. The lower-case Greek letter 'σ' - equivalent to the English small letter 's' - used to designate the standard deviation of a variable.

2. The capital Greek letter 'Σ' - equivalent to the English capital letter 'S' - used to designate the Sum of a selection or series of values.

Informational content of dividend irrelevancy theory.

The cards or electronic representations on file at a financial institution that contain the signatures of authorised cheque and document signers.

A measure of the reliability of the conclusion drawn from the results of a test.

A statistical test which measures whether there is sufficient evidence to reject the null hypothesis (at the chosen significance level) in favour of the alternate hypothesis.

Also known as Hypothesis testing.

A fixed periodic cash flow which usually continues for a defined number of periods only.

A method of calculating and quoting interest which takes no account of interest on interest.
So the total interest for a given period is calculated simply by multiplying or dividing the simple annual interest rate by the relative length of the interest period.

Simple interest is the usual basis of quotation for periods up to and including one year.
For example, when the daily rate of GBP interest is quoted as 5.11%, this means that the amount of interest per day is given by the quoted simple annual rate of 5.11% multiplied by 1/365 (to reflect one day in a 365 day year):
= 5.11% x 1/365
= 0.014% per day.

Financial reporting.
This is used by the parent company in its own accounts for all investments (ordinary investments).

A model of a financial or other process, especially one containing random components.

A set of related equations including two or more variables.

For example:
y = 3x and
x + y = 1

(SEPA). The area where businesses and individuals will be able to make and receive payments in euro, within Europe, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of location.

SEPA encompasses the SEPA Credit Transfer, SEPA Direct Debit and SEPA cards framework. It covers 32 countries including the European Union Member States plus Iceland, Norway, Liechtenstein, Switzerland and Monaco.

A cash management technique based around a single legal master account structure in the name of the parent or group financing company where the other participant accounts act as memo accounts of that legal account.

This cash management technique is widely used in Northern Europe (Nordic and Baltic countries).

Also known as Balance netting.

Also known as Sole trader.

An amount in cash or securities periodically set aside by a borrower to redeem all or part of its long-term debt issues.

Statement of Investment Principles.

France. Système Interbancaire de Télécompensation.

1. The same as Skewness.

2. To cause skewness.

Statistics.
A distribution which is not symmetrical.

Statistics.
A measure of the symmetry of a distribution.
The greater the skewness, the less the degree of symmetry.

Service Level Agreement.

Social, Legal, Economic, Political and Technological analysis.

Capital adequacy.
The supervisory assignment of specialised lending - for example commercial real estate loans - into one of a small number of broad risk categories for the purposes of capital adequacy calculations.
The loans in the higher risk categories are given correspondingly greater (standardised) percentage risk weightings.

(SMEs). Companies whose headcount or turnover falls below certain limits.

Stored value cards, plastic cards with embedded integrated computer chips capable of storing data, including monetary value that can be electronically replenished.

Also known as a chip card or integrated circuit card.

Small or Medium-sized Enterprise.

(Sometimes pronounced smee.)

Small and Medium-sized Enterprises.

This began the first stage of the multilateral exchange rate realignments that followed the collapse of the Bretton Woods system of international monetary relations. This system came to an end in 1973.

Short Message Service.

Banking.
Standing Order.

UK. Serious Organised Crime Agency.

(SICAV). Type of collective investment scheme available in western Europe.

Unlike Fonds Commun de Placements (FCP), SICAVs are distinct legal entities, with each investor being a shareholder of the company. In other words, SICAVs are open-ended investment companies.

(SWIFT). A co-operative organisation created and owned by banks that operates a network which facilitates the exchange of payment and other financial messages between financial institutions (including broker-dealers and securities companies) throughout the world.

It is a major international financial telecommunications network that transmits international payment instructions as well as other international financial instruments or messages.

A SWIFT payment message is an instruction to transfer funds; the exchange of funds (settlement) subsequently takes place over a payment system or through correspondent banking relationships.

Sum of the digits.

A market is generally said to be soft if prices in the market are falling.

A weak form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.
Soft call protection requires the payment of a premium to the investor, on any early redemption of a callable bond by the borrower/issuer.
The premium is usually small - for example 0.5% or 1% of the principal per annum - over the remaining life at early redemption.
At early redemption the premium becomes payable, together with principal and outstanding interest at the call/redemption date.
A 1% premium is often referred to as 101 call protection.
It sometimes applies only for an early part - for example just the first year - of the life of a security (the security becoming freely callable after that initial period of soft call protection).

A weak - or weakening - currency, in which international investors do not generally have as much confidence as they have in "harder" currencies.

A sole trader effectively entails an individual trading alone.

Also known as a single trader.

In relation to credit ratings, a credit rating requested by - and generally paid for by - the issuer of the obligation being rated.

1. The ability of an entity to pay its liabilities as they fall due, in the short, medium and longer term.

2. Pensions.
The extent to which the assets of a defined benefit pension scheme are sufficient to meet the liabilities and thus closely related to funding level. Liabilities, and thus solvency, may be calculated on a discontinuance or a going concern basis for the scheme concerned.

European Union law.
A second Directive relating to the regulation of insurance companies in the European Union, including the minimum amount of capital that they must hold to reduce the risk of their insolvency.

Comparable with the Basel II framework for banks.

Sterling Overnight Index Average. Tracks actual average market sterling funding rates each day for settlement that day where repayment is made on the following business day.

It is published by the Wholesale Market Brokers' Association (WMBA) in London at 5pm each day.

It is defined and calculated as the weighted average rate (to four decimal places) of all unsecured sterling overnight cash transactions brokered in London by WMBA member firms between midnight and 4.15pm London time with all counterparties in a minimum deal size of £25 million.

Statement of Recognised Income and Expense.

Financial reporting.
Statement of Recommended Practice.

1.
The jurisdiction under which a debtor or other entity operates.
Most commonly the country in which a debtor - for example a bank - is located.

2.
Independent of any higher external authority, especially in relation to a country.

3.
The head of state in a monarchy.

4.
A British gold coin historically worth one pound sterling, now used for collection or investment purposes.

1. Narrowly, the loans outstanding of individual countries, usually negotiated by their respective governments.

2. More broadly, the total amounts of loans owned both by central governments and by quasi-governmental organisations, including local government organisations, local central banks and other state-owned enterprises.

1. Euro zone.
The currently prevailing arrangements in the Euro zone, under which individual countries issue their national debt separately and individually.

2.
More broadly, direct borrowings by an individual country.

1. Importantly, it indicates the maximum creditworthiness of a counterparty – no organisation can be more creditworthy than its home country’s central bank.
Sovereign risk also includes concepts such as expropriation, war and civil unrest.

2. The risk of losses arising from default on sovereign debt.

Independence exercised and enjoyed by a national or other entity.
In particular, the degree of independence in financial affairs enjoyed by a country.

Sarbanes-Oxley Act.

Sarbanes-Oxley Act.
Also known as "SOX".

Special Purpose Entity.
Similar to a Special Purpose Vehicle.

(SDR). An international reserve asset created in the 1969 by the International Monetary Fund to supplement its member countries' official reserve.

An endorsement of a negotiable instrument that names the party to whom the instrument is being transferred.

(SPE). A legal entity established to facilitate restricted transactions or purposes for a particular sponsor or sponsors, often characterised by severely limited independence of decision making and a relatively small capital base.

(SPV). A legal entity established to facilitate a single transaction or purpose.

In the Capital Asset Pricing Model specific risk is the component of total risk which is fully diversified away by rational investors by holding well-diversified portfolios of investments. Under the CAPM, there is therefore no additional reward to investors for accepting specific risk.

Also known as Unsystematic risk, Diversifiable risk, or Idiosyncratic risk.

1. Any risk taking activity or decision which depends for its favourable result on market rates or prices. For example, a decision to leave a natural operational exposure unhedged, or a decision not to buy a relevant insurance contract.

2. Intentionallly creating market positions - for example by buying or selling securities or derivative contracts - in the hope of making profits from favourable changes in market rates or prices.

3. Similar position-taking activity which depends for its favourable result on there being no material change in prevailing market rates, prices or conditions.
For example, selling straddle options (being one of the speculative activities undertaken by the Barings Bank ‘rogue trader’ Nick Leeson).
Another example would be a decision to operate without committed credit lines, or a decision to ride the yield curve.

A desire to hold money to allow an individual or firm to take advantage of potential investments which offer a higher rate of return.

A potentially strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.

Under a Spens clause the borrower/issuer has to value the cash flows beyond the date of the call/redemption at the government bond yield, or some other low rate.

This potentially makes it prohibitively expensive for the issuer to take an early redemption.

For example the Bank of England's purchase scheme for corporate bonds favours bonds having a Spens clause.

The consequence of a Spens clause for the investor is that they can re-invest the redemption monies in government stock, thus preserving their originally expected cash inflows at lower risk.

1. Pensions.
In relation to a pension scheme, an organisation (usually the employer or former employer of the members of the pension scheme) which establishes the scheme and which has obligations to fund the scheme.

2. More generally, a corporate body or individual creating or supporting the activities of another corporate body or individual.

The (illegal) practice of placing orders and then immediately cancelling or withdrawing them, with the intention of artificially manipulating market prices.

Spot market, spot price, spot rate or spot transaction.

A market in which a currency or commodity is traded for spot settlement, usually within two business days.

The rate or price applying to the immediate delivery of a commodity or currency.

1. In interest rate markets, the Zero coupon rate.

2. In foreign exchange markets, the foreign exchange rate for a transaction to be settled at the earliest possible date after the deal date.

A transaction where both parties agree to pay each other a specific amount in a foreign currency either on the same day or within a maximum two days of each other.

Also known as Zero coupon yield.

Services Producer Price Index.

1. Bid-offer spread.

2. The differential between the yields of two fixed-income securities, usually expressed in basis points.

3. In statistics, the extent to which data are clustered centrally, or more widely dispersed. Measured for example by Standard deviation, Variance or Mean deviation.

The risk that loss may occur due to changes in the shape of the yield curve against the maturity profile of a firm's borrowings and investments.

The spread differential between the yields of a non-government fixed income security and that of a treasury/government security with the same or similar characteristics, whereby the latter acts as a benchmark.

1. A feature of a computer program that allows easy entry and manipulation of figures, equations and text used especially in financial planning and budgeting.

2. A workbook or file produced using the spreadsheet program.

3. An individual sheet within a multi-sheet workbook. Also known as a worksheet.

The risk of financial losses or other adverse effects resulting from errors, omissions or duplications in a spreadsheet.

Losses and other adverse effects may also result from fraud, overconfidence in the spreadsheet's results, overdependence on the spreadsheet, misinterpretation of results, failure to communicate assumptions and limitations, or failure to understand the consequences of assumptions and limitations.

Best Practice Spreadsheet Modelling Standards.
Standards designed to provide a comprehensive framework for:
1. Developing any spreadsheet in accordance with best practice; and
2. Reducing the time and cost associated with spreadsheet development, maintenance and use.

Special Purpose Vehicle.

See Random walk.

UK. Statement of Standard Accounting Practice.

Many SSAPs have, over time, been replaced or superseded by other financial standards.

The following Statements of Standard Accounting Practice have been withdrawn or superseded:
SSAP 1, SSAP 2, SSAP 3, SSAP 6, SSAP 7, SSAP 8, SSAP 10, SSAP 11, SSAP 12, SSAP 14, SSAP 15, SSAP 16, SSAP 17, SSAP 18, SSAP 20, SSAP 22, SSAP 23, SSAP 24.

Pronounced 'sap'.

UK Statement of Standard Accounting Practice 4, dealing with accounting for government grants.

UK Statement of Standard Accounting Practice 5, dealing with accounting for value added tax.

UK Statement of Standard Accounting Practice 9, dealing with stocks and long-term contracts.

UK Statement of Standard Accounting Practice 13, dealing with accounting for research and development expenditure.

UK Statement of Standard Accounting Practice 19, dealing with accounting for investment properties.

The current UK Statement of Standard Accounting Practice 21, dealing with accounting for leases and hire purchase contracts.

(To be superseded in due course by a replacement standard currently being developed jointly with the FASB.)

UK Statement of Standard Accounting Practice 25, dealing with segmental reporting.

Shared Service Centre.

Schuldscheindarlehen.
German loan instruments, more commonly known as Schuldscheine.

Pensions funding.
Scheme Specific Funding.

Secure Sockets Layer.

Spreadsheet Standards Review Board.
The SSRB oversees the implementation of Best Practice Spreadsheet Modelling Standards.

Securities Settlement System.

1.
The desirable qualities of predictability and confidence about future market conditions.

2.
Pensions funding.
A funding method is considered stable if it is not greatly affected by fluctuations in experience.

A proposed new debt instrument for the Euro zone, also sometimes known as a euro bond (or a Eurobond).
The new instrument would be denominated in euro and issued jointly by a number of relevant countries, for example all of the Euro zone countries.

A situation in which rapid inflation is accompanied by stagnating or declining output and employment.

UK Pensions.
A type of defined contribution pension scheme.
Sometimes such schemes are based on employer contributions only.

(SD). UK Tax.
A tax on documents usually involving the transfer of property or shares.
Payable on - among other transactions - the acquisition of a chargeable interest in land.

(SDLT). UK Tax.
Duty payable in the UK on the acquisition of a chargeable interest in land.
Often known colloquially as 'stamp duty'.

(S&P). Leading credit rating agency.

Pensions.
Also known as normal contribution rate.

A pre-determined cost of a unit of production or service on the basis of a specification of all the factors affecting costs given normal efficiency.

(SD). Standard deviation measures the spread of data around their mean. The standard deviation is the square root of the variance.

Standard deviation is used widely as a measure of risk, because it is relatively easy to calculate, compare and combine with the standard deviations of other variables.

UK VAT.
Chargeable to UK VAT at the full standard rate.
Most types of goods and services are standard rated.

(SCORE). A means by which companies gain access to SWIFT - similar to a Member-Administrated Closed User Group (MA-CUG). Unlike a MA-CUG, any company that has become a member of SCORE can communicate with any financial institution that is also a member.

SCORE is open only to companies with a public listing in a country which supports the Financial Action Task Force (FATF).

A normal frequency distribution whose mean is zero and whose standard deviation is 1.0.

The normal distributions set out in standard tabulations are standardised normal distributions.
The related Excel function is =NORMSDIST()

A type of letter of credit issued to ensure the financial performance of a bank’s customer to a third party beneficiary and is drawn upon only in the event of non-performance.

(SO). An instruction from a customer to a bank to make a regular payment of a fixed amount to a named creditor.

1. In the BCG analysis matrix, a business with a large share of a market with rapid growth.

2. Any business, product or individual with outstandingly excellent performance.

Law.
Latin for 'let the decision stand,' a doctrine requiring that judges apply the same reasoning to cases as has been used in prior similar cases.

(SERPS). Formerly the second tier of the UK state pension scheme. Now the State Second Pension.

(S2P). The second tier of the UK state pension scheme.

1. An account containing a summary of bills or invoices and displaying the total amount due.

2. An account prepared by a bank for each of its clients, usually at regular intervals, to show all credits and debits since the last account and the balance at the end of the period.

Insolvency law.
A document that must be prepared in the UK by the directors of an insolvent company setting out details of the assets (at their expected realisable values) and liabilities (in order of ranking for payment) as at the date of insolvency.

Financial reporting.
International Accounting Standard (IAS) term for the cash flow statement. One of the IAS primary statements.

Accounting.
A primary financial statement required by International Accounting Standard, IAS 1.

Financial reporting.
1.
Under International Accounting Standards (IAS), where there is a separate income statement, an extension of the income statement like the statement of total recognised gains and losses (STRGL) or statement of recognised income and expense (SORIE).

2.
Where there is no separate income statement, the Statement of comprehensive income is the entire statement. The first part being the same as an income statement and the second part being the same as the STRGL or SORIE.

(SFFAC). US Government accounting.
Federal accounting concept produced by the Federal Accounting Standards Advisory Board (FASAB).

(SFFAS). US Government accounting.
Federal financial standard produced by the US Federal Accounting Standards Advisory Board.

Financial reporting.
International Accounting Standard (IAS) term for the Balance sheet – where assets and liabilities are listed. One of the IAS primary statements.

(SFP). Pensions.
The written statement of principles governing the level of funding and contributions for a UK occupational pension scheme. It must be prepared and maintained by the trustees, having had advice from a suitable qualified advisor and in consultation with the employer.

(SIP). Pensions.
In the UK, the written statement of the principles governing investment decisions for an occupational pension scheme, required under pensions legislation, that must be prepared and regularly reviewed by the trustees, having had advice from a suitable qualified advisor and in consultation with the employer.

UK Tax.
A statement issued by Her Majesty's Revenue & Customs (HMRC) in order to clarify the application of some legislation.

(SORIE). In international accounting terms, roughly the equivalent of the Statement of total recognised gains and losses under UK GAAP.

Sometimes pronounced 'sorry'.

(SORP). Recommendations for accounting practices for specialised industries or sectors issued by industry or sectoral bodies recognised by the UK Accounting Standards Board for this purpose.

Under US accounting, a statement which explains the total net change in shareholders’ equity for the reporting period. It includes the net earnings (or net loss) for the reporting period, gains or losses not reported in the net earnings figure, and dividends.

Comparable statements under UK accounting and international accounting are the Statement of total recognised gains and losses and the Statement of recognised income and expense.

(SSAP). An older mandatory statement of accounting practice for the UK, issued by the Accounting Standards Board. Being replaced over time by Financial Reporting Standards.

(STRGL). In UK accounting, the STRGL presents a summary of the elements making up an entity’s total gains and losses for the reporting period including those not reported in the profit and loss account or income statement.

Sometimes pronounced 'struggle'.

Near enough the same as frequency distribution.

The process of using observations of a sample to estimate the properties of a population.

A measure of the likelihood that observed statistical data under review might have arisen randomly (rather than as a result of the proposed statistical relationship).

If the data under review are NOT statistically significant, then they should not normally be used as a basis for important decisions.
It is less likely, for example, that a very small sample of data would produce a statistically significant result.

1. The collection of techniques to describe data and provide a means of making inferences about a total group, based on a sample of observations from that group.

2. Selected summary information about a sample or a population, for example the mean, mode, median, standard deviation, inter quartile range and skewness.

1. Statistics.

2. Statutory accounts.

A law established by an act of the legislature.

A law which sets the maximum period which a person can wait before filing a claim, depending on the type of case or claim.

The mandatory externally reported financial statements of an organisation.
Sometimes abbreviated to "stats".

A type of company incorporated by private act of parliament.

1. Pensions.
Debt on the employer.

2. More generally, an enforceable debt arising by operation of law.

(SFO). Pensions.
The is the name given to the pension scheme funding regime introduced for the UK by pensions legislation whereby trustees and employers must agree a funding programme specific to the scheme concerned on the basis of actuarial and other advice.

According to the relevant Code of Practice, '… full funding in relation to technical provisions is the statutory funding objective'.

It replaced the previous regime, the Minimum Funding Requirement.

(SI). A type of delegated legislation in the UK, usually written by a Government minister, exercising legislative powers delegated to the minister by Act of Parliament.

Pensions.
Statutory surplus basis.

Pensions.
Historically, statutory liability valuation basis specified under the Income and Corporation Taxes Act 1988 for the purposes of determining whether a scheme’s assets exceeded 105% of past service liabilities and therefore whether a proposal to reduce the surplus was required.
The prescribed basis was considerably more stringent than a typical valuation basis.

Was sometimes known as the ‘Government Actuary’s Basis’.

Under pensions legislation this requirement has been discontinued.

Social, Technological, Economic, Environmental, Political, Legal and Ethical analysis.

Social, Technological, Economic, Environmental, Political, Legal, Ethical and Demographic analysis.

Social, Technological, Economic, Ecological and Regulatory analysis.

A bulk clearing for EUR-denominated low-value cross-border transactions within the EU.
Run by the clearing arm of the Euro Banking Association,

UK. Abbreviation for the UK currency, pound sterling.

(SCP). Sterling commercial paper is normally issued on a discount basis. However, it can also be issued in interest bearing form.
In either case, it is conventionally quoted in the market on a yield basis.

(SONIA). Tracks actual average market sterling funding rates each day for settlement that day where repayment is made on the following business day.

Alternative name for the CORE system.

The fundamental fiduciary duty of company directors, to safeguard and administer the property belonging to a company, on behalf of its shareholders.

Short Term Interest Rate.
For example STIR futures are short term interest rate futures.

Describing a model or process containing one or more random components.

1. Raw materials, components, work in progress (WIP) and finished goods held by a company or other entity under review. Also known as Inventory.

2. Accounting.
Value of raw materials, components, work in progress (WIP) and finished goods held by a reporting entity at a balance sheet date.

3. A financial asset which may be a common share, a corporate debt security or a government debt security.

A stock exchange is an organised market place which provides facilities for stock brokers and traders, to buy and sell (trade) stocks and other securities.

Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends.

(SEATS). A computerized system used on the London Stock Exchange for trading on the Alternative Investment Market and for stocks of restricted liquidity. A screen-based service showing current prices and orders, it runs alongside the Stock Exchange Automated Quotations System (SEAQ).

(SEAQ). A system for trading mid-cap London Stock Exchange stocks. Stocks need to have at least two market-makers to be eligible for trading via SEAQ.

(SETS). An automated trading system for the largest companies quoted on the main list of the London Stock Exchange. Trades through SETS match buyers and sellers automatically, cutting out the need for a market maker.
Smaller companies continue to use the SEAQ quote book system.

Near enough the same as inventory management.

Near enough the same as inventory turnover ratio.

A trigger point for a market position to be closed out, by leaving in the market an order to buy or to sell when a specified price is reached or passed.

Straight-Through Processing.

Options speculation.
A composite speculative deal in two options which results in profits from large changes in the underlying asset price, either up or down.
The straddle’s profit/loss profile is ‘V’ shaped.

It is also sometimes known as a bottom straddle or a long straddle.

A long straddle is constructed by simultaneously buying a call option and a put option with identical strike prices.

The opposite composite transaction - which is a mirror image of the ‘V’ shaped long straddle - is known as a top straddle or a short straddle. This is the position taken by the seller of a conventional long straddle.

A bond which has no conversion rights, nor any other special features.

Straight bond.

1.
A basis of allocating total costs or income equally across successive time periods.

For example, a fixed asset has a cost of $12m, an expected disposal value of $2m and an expected useful life of 4 years.
The total expected accounting cost = $12m - $2m = $10m.

Allocated on a straight line basis over 4 years, the depreciation charge in each year would be $10m/4 = $2.5m.

The net book value of the fixed asset would be (at the end of each year):
Year 1 = 12.0 - 2.5 = $9.5m.
Year 2 = 9.5 - 2.5 = $7.0m.
Year 3 = 7.0 - 2.5 = $4.5m.
Year 4 = 4.5 - 2.5 = $2.0m.

Using a straight line basis of depreciation, the net book value of a retained asset will often fall to zero.
(But it would never be depreciated to a negative value of course.)

2.
An estimation method which assumes a straight line relationship between the items under review.
Sometimes known as Linear interpolation.

(STP). The automated processing of transactions and any related payment transfers including the automated completion of confirmation and settlement instructions.

The systematic review and planning of an organisation's longer term objectives and the means of realising those objectives.

Strategic analysis tools include:

Environmental impact matrix, often referred to as PEST analysis
Market life cycle
Market environment matrix
Porter's Five Forces
Value chain analysis
Boston matrix
Ansoff's product-market matrix
SWOT analysis

(SBU).
A unit within a corporate entity serving a separately defined external market.
The strategic business unit may be organised as a subsidiary company, or as a division of a larger single company.

Sometimes known as a Separable business unit.

A statistical sampling technique which divides the data into non-overlapping areas based on a particular condition. A random sample is then taken from each divided area.

Stress testing is a form of scenario analysis in which worst case data are input into a financial model.
The idea is to test whether creditworthiness - or any other attribute being modelled - is robust enough to survive the selected 'worst case' scenario.
Stress testing necessarily involves a significant degree of judgement and subjectivity in identifying the appropriate worst case inputs with which to run the stress test.

Statement of Total Recognised Gains and Losses.

Options.
The price at which an option holder has the right to require the option writer to deal.

More specifically, the predetermined price in a contract at which the option holder can either purchase or sell the underlying security, instrument or commodity.

Also known as the Exercise price.

Options.
In relation to foreign exchange options, the foreign exchange rate at which the option holder has the right to require the option writer to deal.

In relation to interest rate options, the interest rate at which the option holder has the right to require the option writer to deal.

Also known as the Exercise rate.

One form of the Efficient Market Hypothesis (EMH).
The EMH is the general hypothesis that markets operate efficiently. In other words that assets are fairly priced by the market mechanism to incorporate available information.

There are three forms of potential efficiency: the weak form, the semi-strong form and the strong form. The strong form states that analysis of public knowledge and even insider information cannot generate consistent excess returns.

Risk management.
An effective reduction in the ranking of the claim of a lender or other creditor resulting from a combination of:
(1) The ownership structure of the borrower, for example in a group of companies; and
(2) Holding a claim against the 'wrong' legal entity.

For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group. This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.

This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.

Any company/institution providing custody administration services on behalf of other custodians who may not have an operation in the country concerned.

An arrangement between two banks whereby in return for the sub-participant bank depositing with the lending bank the principal amount of a loan made by the latter, the lending bank will pass to the sub-participant bank its relevant share of any payments received from the borrower.

As a legal matter sub-participation is solely between the lending and sub-participant banks, giving the latter no contractual link with the borrower.

Making loans that are in the riskiest category of consumer loans and are typically sold in a market from prime loans.

Also known as near-prime, non-prime, or second-chance lending.

A member of a new issue syndicate who agrees to buy a certain proportion of the issue from the managers should the issue be undersubscribed. They receive an underwriting fee and a selling concession on the principal amount of the securities for which they may subscribe.

Law.
Delegated legislation.

A form of debt where the rights of the lender are ranked AFTER either senior debt or after another form of claim on the resources of the borrower.

The ranking of the claims of a creditor or other claimant after those of other creditors, for example subordinated debt.

Accounting.
A parent undertaking has a subsidiary for accounting purposes if it has control over the other entity.

The subsidiary is the entity (usually a company) which is controlled by the parent undertaking (also known as the group holding company).

Accounting.
This replaced the term 'subsidiary' following its introduction in UK Companies legislation.

It is a wider definition in that a parent/subsidiary relationship is based more on control rather than ownership.

Accounting.
The accounting principle that financial transactions and financial relationships are dealt with and presented in accordance with their commercial substance. (Even if this differs from the legal form of the transaction.)

UK Tax.
A holding of 10% or more of the share capital of the company.

US. A negotiable instrument created by the Clearing for the 21st Century Act (Check 21).
A substitute check is an electronic version of a paper cheque, which is legally the equivalent of the original cheque and includes all the information contained on the original cheque.

Economics.
A product which may be used instead of another product. For example tea in place of coffee.

The substitution of one party for another in respect of an obligation.
In a netting and settlement context, this generally equates to altering a contract between two parties so as to bring in a third party (sometimes the clearing house, as in an option and future trade) which acts as counterparty to each of the two parties and ensures the original contract between the two parties is satisfied and discharged.

The law concerning the passing of property from one person to others after death or bankruptcy.

A negotiable instrument representing a proportionate share of an underlying capital asset, financed by the cash raised from the issue of the sukuk.

Sometimes referred to (incorrectly) as an 'Islamic bond'.

(SOD).
1.
A basis of allocating total costs or income across successive time periods, so as to 'front-end load' them.
In other words, a systematically greater proportion of the total cost or income is allocated to the earlier periods.

For example, a fixed asset has a cost of $12m, an expected disposal value of $2m and an expected useful life of 4 years.
The total expected accounting cost for the 4 year period = $12m - $2m = $10m.

The 'sum of the digits' of the expected holding Years 1 to 4 inclusive = 1 + 2 + 3 + 4 = 10.

The allocation proportions (for the total depreciation charges of $10m) are calculated as follows:

Year 1: 4/10 (x $10m = $4m).
Year 2: 3/10 (x $10m = $3m).
Year 3: 2/10 (x $10m = $2m).
Year 4: 1/10 (x $10m = $1m).

The net book value of the fixed asset - applying the depreciation charges calculated above - would be (at the end of each year):
Year 1 = 12 - 4 = $8m.
Year 2 = 8 - 3 = $5m.
Year 3 = 5 - 2 = $3m.
Year 4 = 3 - 1 = $2m.

2.
Sum of the digits methods are sometimes used to allocate total finance charges - for example under IAS 17 - as a simpler alternative to the Implied rate of interest (or Actuarial) method.

In the UK, public companies listed on the Stock Exchange are no longer required to send their members a full set of detailed accounts each year. Instead shareholders may be offered the option of receiving summary accounts, which disclose selected information in a more digestible form for the reader to assess the company's position.

Project appraisal.
Expenditure which has already taken place, or to which an organisation is already irrevocably committed, are sunk costs.
Sunk costs are irrelevant to project appraisal: "Sunk costs don't count."

A common mistake in project appraisal and analysis is the inclusion - in error - of sunk costs in the analysis.

The profit over and above the return which the owners of a company could have earned by investing their money elsewhere.

A special tax levied on individuals’ incomes above a certain level, in addition to their normal tax liabilities.

Also known as Deed of amendment.

An unconditional guarantee from the Export Credits Guarantee Department (ECGD) to a UK bank which enables that bank to finance an exporter's medium term credit to an export customer without recourse.

Economics.
The quantity of a good or service a producer is willing and able to sell at any given market price.

Economics.
A graphical illustration of the periodic quantity of a specified good or service that the producer would be prepared to sell at a given price.

Price elasticity of supply.

Policy aimed at stimulating the level of production in the economy by creating incentives for individuals and firms to increase their productivity, for example policies which encourage competition between firms or policies which encourage more people to work.
The aggregate supply curve is moved to the right.

Tends to be associated with monetarism.

Used in chartist analysis to describe when a security or commodity price has repeatedly fallen to a certain price, but has then recovered.

A bond issued by a supranational institution such as the World Bank or the European Investment Bank.

Maths.
An expression including the irrational root of a number, for example the square root of 2.

1. Pensions.
An excess of assets over liabilities in a pension scheme. Also known as over-funding.

2. More generally, any excess of financial assets over related liabilities.

3. Any excess of income over related costs.

UK Corporation tax.
Advance Corporation Tax brought forward which has yet to be offset against a company’s Corporation Tax liability.

In the context of UK group tax relief, the company which passes a trading loss to another group company under group relief provisions.

Any agreement which:
(1) Provides for the exchange of one or more payments based on the value or level of one or more rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind;

(2) And which transfers between the parties to the transaction, in whole or in part, the financial risk associated with a future change in any such value or level;

(3) Without also transferring a current or future direct or indirect ownership interest in an asset or liability that incorporates the financial risk transferred by the swap.

Examples of swaps include interest rate swaps, basis swaps, and cross currency interest rate swaps.

Not to be confused with a foreign exchange swap, which is different.

Risk management.
1.
A method for increasing the duration of fixed income portfolios, usually with a view to matching the duration of the underlying liabilities, by entering into long dated swap agreements (paying floating rates and receiving fixed rates).

2.
More generally, the use of a swap in conjunction with an existing underlying position or exposure.

FX swaps.
The difference between the exchange rates applied to the near leg and the far leg of an FX swap.

For example the spot exchange rate is GBP 1 = 1.6000 - 1.6010 USD;
And the outright forward points are 5-8.
The outright forward exchange rate quote is GBP 1 = 1.6005 - 1.6018 USD.

The pricing of a related FX swap contract would be favourable for the price-taker (compared with two related outright contracts) for example as follows.

1.
For a price-taker selling USD in the near leg and BUYING back a related amount of USD in the far leg.
The swap points would be +5 (because these are the points applying to calculate an outright forward BUYING rate for a client buying USD forward).
The swap points of +5 applied to calculate the differential between the near leg rate and the far leg rate would produce, for example:
NEAR LEG: Sale of USD at rate of USD 1.6000 per 1 GBP.
FAR LEG: Buying USD at a rate of USD 1.6005 per 1 GBP.

The selling rate of USD 1.6000 in the Near leg is better for the price taker, compared with the outright spot selling rate of USD 1.6010 per 1 GBP.
(The price taker pays away fewer USD in the near leg, per 1 GBP received.)

2.
For a price-taker buying USD in the near leg and SELLING back a related amount of USD in the far leg.
The swap points would be +8 (because these are the points applying to calculate an outright forward SELLING rate for a client selling USD forward).
The swap points of +8 applied to calculate the differential between the near leg rate and the far leg rate would produce, for example:
NEAR LEG: Buying USD at rate of USD 1.6010 per 1 GBP.
FAR LEG: Selling USD at a rate of USD 1.6018 per 1 GBP.

The buying rate of USD 1.6010 in the Near leg is better for the price taker, compared with the outright spot buying rate of USD 1.6000 per 1 GBP.
(The price taker RECEIVES more USD in the near leg, per GBP 1 paid away.)

1. Interest rates. Also known as Par Yield.

2a. The market price of a new interest rate swap, normally equal to the par yield +/- the bid-offer spread.
2b. The contracted price in an existing interest rate swap.

3a. The market price of any new capital market swap.
3b. The contracted price in any existing capital market swap.

4a. The foreign exchange rates in a new FX swap.
4b. The contracted foreign exchange rates in an existing FX swap.

1.
The difference between the swap rate (also known as the par rate) and the risk free rate of return - for example the government bill rate - for fixed rate funds of the same maturity.

The size of the swap spread is driven by the size of general credit spreads and by the supply and demand for fixed rate funds. The swap spread usually increases when interest rates are lower, as borrowers demand more fixed rate funds in an attempt to fix their borrowing costs, so driving up the price of fixed rate funds.

2.
Swap spread can also refer to a market maker’s bid-offer spread for swaps of a given maturity. In other words the difference between the market maker’s buying and selling prices.

A cash-settled futures contract, whose settlement is calculated by reference to interbank swap rates.

An option on a swap where the buyer of the option has the right, but not the obligation, to enter into a specified swap on a specific future date (or on one of a number of specified dates) set out in the terms of the swaption.

A bank account that automatically transfers excess balances into an overnight interest-earning investment with the same bank.

Near enough the same as Zero balancing.

Society for Worldwide International Financial Telecommunications.

Funds transfer.
The next generation messaging network currently being introduced by SWIFT.

A short term facility providing same day availability of funds, pending the arrival of funds from a normal two business day notice facility (which will provide longer term funds).

Used for example as a back-stop facility to commercial paper, or to fund same day value margin calls (for example on exchange traded derivatives contracts).

Strategic analysis.
A systematic assessment of the Strengths, Weaknesses, Opportunities and Threats of an enterprise.

Statistics.
A distribution where the halves on either side of a particular line are mirror images of each other. For example a Normal distribution.

A loan from a number of different lenders acting collectively.
Historically the lenders were normally banks, acting through an 'agent bank'. More recently some 'non-banks', notably hedge funds or pension funds, will also be parties to syndicated loans – in the primary market for sub-investment grade and, in the secondary market more widely too. Non-bank lenders are particularly attracted to fully drawn, often fixed rate tranches of a loan rather than rather than revolving or stand-by tranches.

A potential cost saving or revenue improvement, expected to result from the combination of one or more previously separate business activities.

A synthetic financial instrument is a combination of two or more instruments, designed to replicate the cashflows from another instrument.

For example, a synthetic forward foreign exchange contract can be built from a simultaneous combination of:
i. A spot foreign exchange contract.
ii. A borrowing in one of the currencies; and
iii. A deposit of equal maturity in the other currency.

In the Capital Asset Pricing Model, same as Market risk.

A sampling technique where the population is ordered in some way - for example alphabetically - and then every nth item is chosen.

(SIT). France
An electronic clearing system formerly used in France.
Replaced by the CORE system.

The risk that the failure of one participant in a transfer system, or in financial markets generally, to meet its required obligations will cause other participants or financial institutions to be unable to meet their obligations (including settlement obligations in a transfer system) when due.
Such a failure may cause significant liquidity or credit problems and, as a result, might threaten the stability of financial markets.

(SIFI.)
A bank, insurance company, or other financial institution whose collapse could trigger a global financial crisis.