The definition of terms used in the industry
is presented below.
Buying securities in one country,
currency or market and selling in another to take advantage of price differentials.
Articles of Association
Regulations for governing the rights
and duties of the members of a company among themselves. Articles deal
with internal matters such as general meetings, appointment of directors,
issue and transfer of shares, dividends, accounts and audits.
Asset Protection Trust
A trust established offshore to
protect settlor's assets against those who may attempt to make claims
against them: creditors, former spouses and dependents on death. Some
offshore jurisdictions provide protection from creditor claims against
persons who have guaranteed bank loans.
Back to Back Loan
A loan structure when "A"
deposits a sum of money with a bank in country "X" on condition
that a related branch, agency, edge corporation or bank located in country
"Y" will lend an equivalent sum to "A" or a designee
in country "Y".
Also known as dry, formal, naked,
passive or simple trusts. These are trusts where the trustees have no
duties to perform other than to convey the trust property to the beneficiary(s)
when called upon to do so.
An investor who has sold a security
in the hope of buying it back at a lower price.
Bearer Share Certificate
A negotiable share certificate
made out in the name of the bearer and not in the name of a particular
person or organization.
Securities for which no register
of ownership is kept by the company. Dividends are not received automatically
from the company and must be claimed.
The actual or economic owner of
an offshore company as distinct to the registered or nominal owner.
A designation that a certain financial result is not guaranteed, but
that a good faith effort will be made to provide the result that is represented.
Bank for International Settlements,
Basle, Switzerland. The bank's bank.
A trust in which the trustees are
not allowed to provide any information to the beneficiaries about the
administration of the assets of the trust.
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.
Term for the most prestigious industrial
shares. Originally an American term derived from the color of the highest
value poker chip.
Any interest-bearing or discounted government or corporate security
that obligates the issuer to pay the holder of the bond a specified sum
of money, usually at specific intervals, and to 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, but not by any specified collateral.
Financing for a company expecting to go public usually within six months
to a year. Often bridge financing is structured so that it can be repaid
from proceeds of a public underwriting.
- 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.
- An investor who has bought a security in the hope to make a profit from
Funds provided to enable operating management to acquire a product line
or business, which may be at any stage of development, from either a public
or private company.
An option-like contract for which
the buyer pays a fee or premium, to obtain protection against a rise in
a particular interest rate above a certain level. For example, an interest
rate cap may cover a specified principal amount of a loan over a designated
time period such as a calendar quarter. If the covered interest rate rises
above the rate ceiling, the seller of the rate cap pays the purchaser
an amount of money equal to the average rate differential times the principal
amount times one quarter.
The process whereby money from
a company's reserves is converted into capital and then distributed to
shareholders as new shares, in proportion to their original holdings,
also known as bonus or scrip issue.
Certificate of Deposit (CD)
A deposit with a fixed time period
and a fixed rate of interest.
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.
The simultaneous purchase of a
cap and the sale of a floor with the aim of maintaining interest rates
within a defined range. The premium income from the sale of the floor
reduces or offsets the cost of buying the cap.
An entity which has the contractual ability to purchase bar instruments
directly from the issuer. Also known as Master Collateral Commitment Holders.
A method which uses the Society for Worldwide Interbank Financial
Telecommunications to transfer funds conditionally between banks subject
to the performance of another party.
The fee that a broker charges clients
for dealing on their behalf.
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.
The total return on investment,
consisting of the distribution (dividend, interest) and the capital gain
or loss, in % of the investment amount.
The money value of a transaction
(number of shares multiplied by the price), before adding commission,
stamp duty, etc.
Contract Exit for Non-performance
A conditions in a financial agreement that enables the investor to
take back his funds if the result represented is not achieved.
The day that a transaction takes
place, the broker sends the client a document detailing the transaction,
including full title of the stock, price, consideration and stamp duty
The total net profit a company
has available for distribution as dividend, divided by the amount paid,
gives the number of times that the dividend is covered.
Value amount representing the credit
risk exposure in off-balance sheet transactions. In the case of derivatives,
credit equivalent value represents the potential cost at current market
prices of replacing the contract's cash flows in the case of default by
The risk that a counter party to
a transaction will fail to perform according to the terms and conditions
of the contract, thus causing the holder of the claim to suffer a loss.
A transaction involving the exchange
of cash flows and principal in one currency for those in another with
an agreement to reverse the principal swap at a future date.
A bank deposit that can be withdrawn
by the depositor at any time.
Current Exposure Method
Term used in the Basle Capital
Accord to denote a method of assessing credit risk in off-balance sheet
transactions, consisting of adding the market to market replacement cost
of all contracts and an amount for potential credit exposure arising from
future price- or volatility changes.
A general debt obligation backed only by the integrity of the borrower,
not by collateral. Depository Trust Corporation (DTC): A domestic custodial
clearing facility owned by all of the major banks and securities firms
which is monitored by various banking regulatory agencies and the Securities
and Exchange commission.
A bank deposit that can be withdrawn
by the depositor at any time.
General term for payment undertakings
arising on the presentation of a written demand (plus possible other documents
specified in the guarantee), not conditional on proof of default by the
principal in the underlying transaction. They ensure often that the lender
will be paid the principal on maturity and possibly, depending on the
instrument, interest when due. Example: SLC's.
Depository Trust Company (DTC)
A custodial clearing facility owned
by the major banks and securities firms and monitored by various banking
regulatory agencies and the Securities and Exchange Commission.
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.
The form of trust usually established
offshore. The discretion's are vested in the trustee who can usually decide
which of the beneficiaries is to benefit, when and to what extent. Discretion's
are exercised under advice of, or suggestions from the settlor or protector.
The part of a company's post-tax
profits distributed to shareholders, usually expressed as an amount per
The place of a person's permanent
home and the means by which the person is connected with a certain system
of law related to issues such as marriage, divorce, succession of estate
Use of two passports for the purpose
of confusion or convenience.
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.
European Currency Unit.
European Monetary Unit.
Equity is ownership interest in a corporation, represented by the shares
of stock which are held by investors.
Raising funds by offering ownership in a corporation through the issuing
of shares of a corporation's common or preferred stock.
A class of options giving the purchaser
the right but not the obligation to buy or sell an individual share, a
basket of shares or an equity index at a predetermined price, on or before
a fixed date.
Equity Related Loan
Equity related loans are loans convertible into equity ownership or loans
collateralized with equity positions
A transaction that allows an investor
to exchange the rate of return (or a component thereof) on an equity investment
(an individual share, a basket or index) for the rate of return on another
non-equity or equity investment.
A bond issued in a currency other
than that of the country or market in which it is issued. Interest is
paid without the deduction of tax.
Currency that is owned by people
not being a national of the nation that issued the currency.
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,
The fixed price at which an option
holder has the right to buy, in the case of a call option, or to sell,
in the case of a put option, the financial instrument covered by the option.
The buyer of a security arriving
on the secondary (retail) market.
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.
Federal Reserve, the US Central
Banking system, established in 1913 and responsible for managing the US
Dollar, both within and outside the US.
World Federation of Stock Exchanges.
Security arriving on the secondary
An amount typically deposited with
a Swiss Bank which will redeposit the sum with a third party bank outside
Switzerland in its own name (to eliminate Swiss withholding tax on interest).
The dividend paid by a company
at the end of its financial year.
A bank deposit for a fixed period
The movement of large sums of money
from one country to another to escape political or economic turmoil, aggressive
taxation or to seeking higher rates of interest.
A contract whereby the seller agrees
to pay to the purchaser in return for the payment of a premium, the difference
between current interest rates and an agreed (strike) rate times the notional
amount, should interest rates fall below the agreed rate. A floor contract
is effectively a string of interest rate guarantees.
The occasion on which a company's
shares are offered on a market for the first time.
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.
The process of purchasing at a discount registered bank "paper"
which will mature in the future without recourse to any previous holder
of the debt-generated bank paper.
Applied to new issues when the
total amount payable in relation to the new shares has been paid to the
Securities or goods bought or sold
for future delivery. There may be no intention to take them up but to
rely upon price changes in order to sell at a profit before delivery.
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, any security which is issued or guaranteed by any bank
is 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.
Under US tax law, income of the
trust is taxed as the income of the grantor.
Calculation of the amount that
would be required in the case of an investment subject to tax to equal
the income from that investment as if it were not subject to tax.
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.
Speculative funds managing investments
for private investors (in the US, such funds are unregulated if the number
of investors does not exceed one hundred).
(1) Large quantities of money that
move quickly in international currency exchanges due to speculative activity.
(2) Foreign funds temporarily transferred to a financial center and subject
to withdrawal at any moment.
is simply the minimum amount of money you must have in your account (at
the close of trading) on the first day you establish a new position.
Think of it as an initial requirement you must have to enter an
exclusive club. In order to pass through the front door of the "Sugar
Club", you have to have at least $700 in your pocket, and it can not be
$700 that you have committed to anything else.
A relatively small amount of capital provided to an investor or entrepreneur,
usually to prove a concept. It may involve product development, but rarely
involves initial marketing.
A criminal offense involving the
purchase or sale of shares by someone who possesses inside information
about a company's performance and prospects which is not yet available
to the market as a whole, and which, if available, might affect the share
Interbank Rate of Exchange
The rate at which banks deal with
each other in the market.
Interest Rate Swap
A transaction in which two counterparties
exchange interest payment streams of differing character based on an underlying
notional principal amount. The three main types are coupon swaps (fixed
rate to floating rate in the same currency), basis swaps (one floating
rate index to another floating rate index in the same currency) and cross-currency
interest rate swaps (fixed rate in one currency to floating rate in another).
International Business Company (IBC)
A term used to define a variety
of offshore corporate structures. Common to all IBC's are the dedication
to business use outside the incorporating jurisdiction, rapid formation,
secrecy, broad powers, low cost, low to zero taxation and minimal filing
and reporting requirements. An increasing number of offshore jurisdictions
are permitting the use of nominee shareholders, directors and officers.
International Chamber of Commerce (lCC)
An international body which governs the terms and conditions of various
financial transactions worldwide, it is headquartered in France and has
no affiliation with the local Chamber of Commerce offices.
An investment banking firm acts as underwriter or agent, serving as intermediary
between an issuer of securities and the investing public. Investment bankers
handle the distribution of blocks of previously issued securities, either
through secondary offerings or through negotiations, maintain markets
for securities already distributed, and act as finders in private placements
A company whose sole business
consists of buying, selling and holding shares.
IPO/Initial Public Offering
A company's first offering of stock to the public.
Key Tested Telex (KTT)
An older form of transferring funds between banks using a telex machine
on which the messages are verified by use of key code numbers.
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.
Letter of Wishes/Memorandum of Wishes
A document prepared by the settlor
or grantor of a trust providing guidance on how trustees should exercise
Company debt expressed as a percentage
of equity capital. High leverage means that debts are high in relation
to assets. The equivalent UK term is gearing.
Programs which use leased assets (such a United States government
obligations) to increase the amount of instruments purchased and resold
for a profit. The benefit of leased assets is that such programs generate
substantially larger profits.
In relation to dealing instructions,
a restriction set on an order to buy or sell, specifying the minimum selling
or maximum buying price.
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.
A company that has obtained permission
for its shares to be admitted to the London Stock Exchange's Official
The amount of money you must have in your account after
the first day. The amount is always slightly less than the Initial
Margin . In other words, after the first day in the club, you
no longer have to have the full $700 in reserve. You can spend a little
of it, as long as you keep, say, $500 (the theoretical maintenance margin)
in your pocket at all times.
Man of Straw
Effectively a nominee settlor or
grantor who creates an offshore trust but often has no further connection
with the trust once it is created.
An offshore bank also known as
a Class "B" or Cubicle Bank. The Managed Bank is not required
to maintain a physical presence in the licensing jurisdiction. Its presence
in the licensing jurisdiction is passive with nominee directors and officers
provided by a managing trust company with a physical presence. The Managed
Bank is not permitted to transact business within the licensing jurisdiction
but may maintain its books, records, etc., to assure secrecy of operations.
Occur anytime your account balance falls below your total margin requirement.
If you do not have enough money to satisfy your total margin requirement,
you are placed on a Margin Call. Technically you have up
to 5 days to satisfy a margin call, which can be done by increasing your
account value or by liquidating some of your positions. Many brokerage
firms, however, will insist that you correct a margin call immediately.
Medium Term Note (MTN)
When discussing bank trading programs, a standard form of debenture
with a term of ten years and a annual interest rate of 7.5 %. Also known
as Medium Term Debenture (MTD).
A European form of an Investment
A short (usually preprinted) form of a trust, often used as a confidentiality
enhancer, to bridge the ownership and management of an International Business
Company. The Mini-Trust is intended only to pass assets on the death of
the settlor, i.e. a will substitute.
- The total of all money and money substitutes (demand deposits and currency
outside of banks).
MT 100 Field 72
A means of irrevocably transferring funds between banks using computers.
Mutual Legal Assistance Treaty
A treaty which provides for mutual
legal assistance, including the exchange of information, etc., in cases
where criminal offenses have been committed.
Net Asset Value
The value of a company after all
debts have been paid, expressed as an amount per share.
A company formed for the express
purpose of holding securities and other assets in its name or to provide
nominee directors and/or officers on behalf of clients of its parent bank
or trust company.
A director whose function is passive
in nature. The director receives a fee for lending his or her name to
the organization. Nominee directors are subject to director responsibilities.
Name in which security is registered
and held in trust on behalf of the beneficial owner.
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.
By popular usage, the establishment
and operation of US or foreign banks in such offshore tax havens as the
Bahamas, The B.V.I. and the Cayman Islands.
Offshore Banking Unit (OBU)
A bank in an offshore financial
center, not allowed to conduct business in the domestic market but only
with other OBU's or with foreign persons.
Offshore Booking Centers
An offshore financial center used
by international banks as a location for "shell branches" to
book certain deposits and loans. Such offshore bookings are often utilized
to avoid regulatory restrictions and taxes.
See International Business Company.
Offshore Financial Centers
A country or jurisdiction where
an intentional attempt has been made to attract foreign business by deliberate
government policy such as the enactment of secrecy laws and tax incentives.
Offshore Group of Banking Supervisors
Established in October 1980 at
the instigation of the Basle Committee on Banking Supervision with which
the Group maintains close contact. The primary objective of OGBS is to
promote the effective supervision of banks in their jurisdictions and
to further international cooperation in the supervision between the Offshore
Banking Supervisors and between them and Basle Committee member nations
and other banking supervisors. Current OGBS members are: Aruba, Bahamas,
Bahrain, Barbados, Bermuda, Cayman Islands, Cyprus, Gibraltar, Guernsey,
Hong Kong, Isle of Man, Jersey, Lebanon, Malta, Mauritius, Netherlands
Antilles, Panama, Singapore and Vanuatu.
Offshore Limited Partnership
A partnership, the general partner
of which is an offshore company. The limited partners may be onshore entities.
Offshore Profit Centers
Branches of major international
banks and multinational corporations located in a low tax financial center
which are established for the purpose of lowering taxes.
The quality that differentiates
an offshore trust from an onshore trust is portability. The offshore trust
can be transferred to additional jurisdictions to maintain confidentiality
and to advantage desirable facets of the new jurisdictions laws.
An obligation of a bank due in one year and sold at a discount from
face value in lieu of an interest coupon.
- The most common form of shares. Holders receive dividends which vary
in accordance with the profitability of the company and the recommendations
of the directors. The holders of the ordinary shares are the owners of
Equal to the nominal or face value of a security. A bond selling at
par is worth the same dollar amount as it was issued for, or at which
it will the redeemed at maturity.
A separate account established at the transactional bank.
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.
A collection of securities held
by an investor.
The party that controls the funds
and seeks a secure high-yield investment.
The sale of securities to a small group of investors (generally 35 or
fewer) which is exempt from SEC registration requirements. The investors
execute an investment letter stating that the securities are being purchased
for investment without a view towards distribution.
Private Trustee Company
A company incorporated in certain
offshore jurisdictions, such as Bermuda, to act as a trustee for a limited
class or group of trusts. Private trustee companies are not permitted
to offer trustee services to the public generally.
Conversion of a state run company
into a public company, often accompanied by a sale of its shares to the
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.
The body of law which governs the
validity and interpretation of a contract or trust deed.
A person appointed by the settlor/grantor
of a trust, who has limited powers to control the trustee. The protector
usually has the right to change trustees.
A wealthy private party buying
guarantees from the issuing banks, reselling them through banks/brokers.
Other designation: commitment holder.
A trust created for an express
purpose without any individually ascertained or ascertainable beneficiaries.
A purpose trust is typically used in circumstances where the trust is
of philanthropic nature.
A bank, trust company or holding
company permitted to deal only in local currency. Foreign currency transactions
must be approved by the appropriate regulatory authority.
The buyer of a security when it
arrives on the secondary (retail) market.
Some offshore jurisdictions allow
corporations incorporated in other jurisdictions to reincorporate in their
own at will.
An invitation to existing shareholders
to acquire additional shares in the company in proportion to the number
of shares they already own - usually at a preferential price.
A broker term describing a trade
program. The use of the term "roll program" should be avoided.
A document issued by a bank which obligates the bank to unconditionally
hold certain funds separate from other bank assets and return them when
requested by the depositor. In this way, the funds are not an asset of
the bank nor are they directly or indirectly subject to any of the bank's
other obligations or debts.
Securities owned by a participant
in the secondary (retail) market.
Secondary Public Offering
This refers to a public offering subsequent to an initial public offering.
A secondary public offering can be either an issuer offering or an offering
by a group that has purchased the issuer's securities in the public markets.
Purchase of stock in a company from a shareholder, rather than purchasing
stock directly from the company.
General name for shares and bonds
of all types. Shares produce a variable dividend and bonds a fixed interest.
A company located in an offshore
financial center to provide management, invoicing and other services for
client companies located in other countries. Initially used to advantage
double taxation treaties. Service Companies are now frequently used to
facilitate flight capital outflow and are often involved in money laundering
Exchanging money or securities
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.
Financing provided to companies that have expended their initial capital
and require funds, often to initiate commercial manufacEagle Tradersg
Working capital for the initial expansion of a company that is producing
and shipping and has growing accounts receivable and inventories. Although
the company has clearly made progress, it may not yet be showing a profit.
Funds provided for the major growth of a company whose sales volume is
increasing and that is beginning to break even or turn profitable. These
funds are typically for plant expansion, marketing and working capital
development of an improved product.
A subsequent investment made by an investor who has made a previous
investment in the company -- generally a later stage investment in comparison
to the initial investment.
Sub Account (Segregated account)
Where an entity has established a relationship with a bank that
includes the bank acting on the entity's behalf a sub account is opened
to hold funds in the name of the entity's client. The funds can only the
used according to the terms of a written agreement that is given to and
approved by the bank. The funds are not considered an asset of the entity
or the bank, and are not subject to the debts of either the entity or
the bank if a safekeeping receipt is issued by the bank.
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.
A bank deposit that is not payable
Total Margin for your futures account
is simply all the margin requirements of all your positions added together.
As long as your account balance is greater than this total, you have adequate
A term for the participation in
the buying and the selling of bank debentures.
A specified part of a larger transaction. Each purchase and resale
of a separate block of bank instruments in a trading group is known as
a tranche. For example, a contract may the signed to buy 10 billion dollars
worth of bank paper with an initial tranche (or purchase) of 500 million
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.
An investment banking firm acting as underwriter sells securities from the
issuing corporation to the public. A group of firms may from a syndicate
to pool the risk and assure successful distribution of the issue. There
are two types of underwriting arrangements: best efforts and firm commitment.
With best efforts, the underwriters have the option to buy and authority
to sell securities, or if unsuccessful, may cancel the issue and forgo any
fees. This arrangement is more common with speculative securities and with
new companies. With a firm commitment, the underwriters purchase outright
the securities being offered by the issuer.
Venture Capital is the process by which investors fund early stage, more
risk oriented business endeavors. A venture capital funding arrangement
will typically entail relinquishing some level of ownership and control
of the business. Offsetting the high risk the investor takes is the promise
of high return on the investment.
The investment is usually in the
form of stock or an instrument which can be converted into stock at some
future date. As the business matures, an initial public offering may take
place, or the business merged or sold, or other sources of capital found.
Any of these would occur with the intention of buying out the venture
capitalists. Venture capitalists typically expect a 20-50% annual return
on their investment at the time they are brought out. Venture capitalists
typically invest in high growth companies with the potential to generate
revenues of $20MM in any one company, but typical investments range from
between $500,000 and $5MM. Management experience is a major consideration
in evaluating financing prospects.
A special kind of option given
by the company to holders of a particular security giving them the right
to subscribe for future issues, either of the same or of some other security.
A company which rescues another
which is in financial difficulty, especially one which saves a company
from an unwelcome takeover bid.
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.
106/108% Bank Guarantee
A written guarantee issued and
payable by a bank which provides for the return of the principal amount
plus six or eight percent interest.
The information contained in
this document is for information purpose only and is not intended as a
solicitation nor an offer to sell any form of securities.
World Investment Network, Ltd.