A
accrued interest 167
actuals 167
additional margin 132–3
AEX 167
against actuals 167
agent 167
agent bank 167
All or None (AON) 167
allocation (give up) 167
American style option 85, 103, 168
arbitrage 168
Asian option 85, 104, 168
asset allocation 115–16, 168
assignment 168
ASX see Australian Stock
Exchange (ASX)
at-the-money (ATM) 92, 168
Australian Options Market 7
Australian Stock Exchange
(ASX) 7, 168
authorised unit trust 168
average rate option 85, 104, 168
average strike option 168
B
Bank for International
Settlements (BIS) 7
bargain 168
barrier options 104
base currency 168
base rate 168
basis
gross 169
risk 169
swap 99
trade 169
value or net 169
basis point (B.P.) 169
bear 169
bear market 169
benchmark bond 169
Bermudan option 85, 103, 169
best execution 169
bid 169
BIFFEX 169
bilateral netting 169
block trade 169
bond 170
bonus issue 170, 251
Bretton Woods Agreement 4, 170
broker/dealer 170
brokers 170
broking 170
building societies 170
bull 170
bull market 170
C
CAC 40 171
calendar spread 171
call option 83, 103, 171
Index
Page numbers in italics refers to tables and figures.
call spread 171
callable swaps 104
capital markets 171
caps options 104
cash market 171
cash settlement 171
CBOE see Chicago Board Options
Exchange (CBOE)
CBOT see Chicago Board of Trade
(CBOT)
Central Gilts Office 172
Central Securities Depository
(CSD) 59, 171
certificate 171
certificate of deposit 171
CFD see contract for difference
CFMA see Commodity Futures
Modernization Act
CFTC see Commodities and Futures
Trading Commission (CFTC)
CGO see Central Gilts Office
Cheapest to Deliver 60, 67, 172
Chicago Board of Trade (CBOT) 2–3,
4, 9, 36–7
Chicago Board Options Exchange
(CBOE) 6
Research Circular 144–7
Chicago Mercantile Exchange
(CME) 3, 4
Chicago Produce Exchange 3
clean price 172
clearing 172
agent 172
broker 172
free 172
house 79–80, 89–90, 172, 242–3
organisation 172
system 34–44, 50–2, 172
clearing corporation (CCorp) 37–8,
172
Clearing Process System (CPS) 42
clearnet 172
clearstream 172
client account/trading book,
options 87–8
client settlement 80–1, 162
futures 80–1
options 90–1
closing out 26
closing trade 173
CME see Chicago Mercantile
Exchange (CME)
collars 104
collateral 134–5, 173, 242
acceptable 135–9
commission 88–9, 173, 242
commodities 173
Commodities and Futures Trading
Commission (CFTC) 172
commodity futures 68–70, 173
Commodity Futures
Modernization Act 172
Commodity Futures Trading
Commission (CFTC) 36
commodity swap 173
common clearing link 173
common stock 173
compliance 122–3
compliance officer 173
Conduct of Business Rules 173
confirm 105, 174
conflicts of interest 173
consideration 174
contingent liability investment 241
contract 174
contract for difference 174
contract note 174
contract specification 174
contract standard 17, 18–19, 25,
48, 65–6
convergence 174
corporate action 143–55, 174,
249–56
bonus/scrip issues 251
demergers 250–1
equity shares contracts 255–6
ordinary dividends 252
policy 249–50
prices as basis for
adjustments 252–4
rights issues, cash, non-cash
special dividends 251–2
takeovers 254–5
correlation 174
cost of carry 174
counterparty 174
266 Index
coupon 175
covered option 175
covered writing 175
credit default swap 175
credit derivatives 175
credit risk 157, 175
CREST/Euroclear Crest 68, 175
cross currency interest rate
swap 175
cum-dividend 175
cum entitlement 253, 254
cum-rights 175
cumulative dividend 176
currency exposure 176
currency futures 176
custodian 176
customer-non-private 176
customer–private 176
D
daily settlement 48
day trading 26
dealer 176
default 176
deliverable basket/list 60, 176
delivery 59–61, 176
date 47
day 18
first notice day 61
futures 57–75
last notice day 61
last trading day 61–2
options 96
versus payment 176
delta 126–7, 177
dematerialised (form) 177
Department of Trade and Industry
(DTI) 177
Depository Trust Company 178
derivative instruments/
securities 177
derivatives 177
categories 15–16, 20–3,
25–7, 31
definition 1–2
differences 22
history 2–4, 6–10
over-the-counter 20
settlement terms 20
Derivatives Risk Warning 122
Designated Clearing Organisation
(DCO) 36
Deutsche Börse 4, 177
Direct Clearing Member
(DCM) 38, 40
dirty price 177
discount 177
factor 177
rate 177
securities 177
diversification 178
dividend 178
domestic bond 178
Dow Jones Index 178
DTC see Depository Trust
Company
due diligence 178
duration 178
E
ECB see European Central
Bank
Economic and Monetary Union
(EMU) 17, 25
effective date 99
EFP see exchange of futures
for physical (EFP)
electronic exchange 49
electronic trading sweeps options
industry 11–12
emerging market 178–9
equity 179
equity shares contracts 255–6
equity swap cash flow 102–3
equity/stock options 179
ETD see Exchange-Traded
Derivatives (ETD)
ethical investments 179
Eurex AG 4, 38–40, 39, 178
EURIBOR 179
Euro 17, 25, 179
Eurobond 179
EuroClear 179
Eurodollar futures 46–8
Index 267
Euronext.liffe 4, 178
corporate action policy 249–56
future contract specification
203–10
individual equity option
contracts 23–5
option contracts 211–13
Special Cash Dividend/
Consolidation of Share
Capital 148–9
Unusual Contract Sizes 150
European Central Bank 178
European Options Exchange 7
European style option 85, 103, 180
exchange 180
Exchange Delivery Settlement Price
(EDSP) 17, 18, 48, 66–7, 180
Exchange For Swap (EFS) 57
exchange of futures for physical
(EFP) 57, 178, 215–19
exchange-owned clearing
organisation 180
exchange rate 180
exchange-traded contract 26
Exchange-Traded Derivatives
(ETD) 33, 179
exchange-traded option 21
execute/eliminate order 180
execution 180
execution and clearing
agreement 180
execution only/give-up
agreement 180
exercise 180
day 24
price intervals 25
exercise price (strike price) 181
exotic options 23, 181
expiry date 23–4, 25, 181
exposure taking 120–1
F
face value 181
fair value 181
fill/kill order 181
final settlement 181
Financial Futures/Options
Contracts 3–4, 6, 181
Financial Services and Markets
Act (2000) 181
Financial Services Authority
(FSA) 36, 181, 183
derivatives and warrants risk
warning 237–43
First Notice Day 18, 61, 182
fit and proper 182
fixed income 182
fixed rate 182
flat position 182
flex options 182
floor 46, 104, 182
floorbroker 182
foreign exchange 182
foreign markets 241
forex 182
forward delivery 183
forward market 183
forward rate agreement
(FRA) 97–8
forward swaps 22
forwards 183
friendly society 183
front running 183
FSA see Financial Services
Authority (FSA)
FT index 183
FTSE 100 Index 16–19, 32, 183
FT-SE Mid 250 183
fund manager 183
funding 162
fungible contract 183
future value 184
futures 1–2, 45–9, 184
booking trade to relevant client
account/trading book 77
clearing and settlement 54–5
clearing process 50–2
client settlement
instructions 80–1
commodity delivery 68–70
definition 2
delivery 57–75
fees 79
268 Index
futures 75–81
history 2–3
initial margin 55–7
LME contracts 70–3
margin calculation 78
opening/closing
transactions 77–8
relevant commission 78
settlement process with clearing
house 79–80
soft commodities 73–5
SWORD system 73
trade capture 76
trade enrichment 77
trade validation 76–7
trading 49–50
use 52–4
variation margin 55
workflow 75–6
Futures and Options Fund
(FOF) 184
G
gamma 184
Geared Futures and Options
Fund (GFOF) 184
gearing 184
General Clearing Member (GCM)
38, 40
general principles 184
gilt 184
gilt edged security 184
Ginnie Mae Mortgage Bond 4
give-up 184
global
clearing 184
custodian 184
futures/options volume 5
Global Depository Receipt
(GDR) 184
GLOBEX 46–7, 185
gold 185
granter 185
‘Greeks’ 185
gross 84, 185
GSCC 185
H
haircut 185
hard commodities 185
hedge ratio 185
hedging 32, 118–20, 185
holder 84, 185
home state regulation 185
Hong Kong Exchange
(HKEx) 6, 7, 185
host state regulation 185
I
in-the-money 92, 186, 187
income enhancement
116–18, 186
independent clearing
organisation 186
index funds 186
indirect market participation 186
Individual Equity Option
Contracts 251–2
initial margin/deposit 125–6, 186,
188, 557
inside information 186
insider 186
insider dealing 186
insolvency 243
institutional investor 186
integration 186
inter-commodity credits 259–60
Inter-Month Spread Charge 259
interest rate futures 186
Interest Rate Guarantee
(IRG) 103
Interest Rate Swaps
(IRS) 98–102
international equity 187
International Monetary Market
(IMM) 3
International Petroleum
Exchange (IPE) 187
exchange for physicals
215–19
expiry dates 222–31
International Securities
Exchange (ISE) 187
Index 269
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