Money Market and Debt Market Securities

Practice vocabulary flashcards covering money market instruments, repo transactions, and various forms of bonds and debentures based on the lecture notes.

CP Credit Rating

The minimum credit rating for the issuance of Commercial Paper as prescribed by SEBI, which is currently set at $'A3'$.

Clearcorp Dealing System (India) Ltd. (CD-SIL)

The reporting platform where all OTC trades in CP must be reported within $15$ minutes of the trade.

Bills Rediscounting Scheme (BRDS)

A scheme formulated by the RBI whereby a bank may raise funds by issuing Usance Promissory Notes on the strength of genuine trade bills discounted by it, with a minimum tenor of $15$ days and a maximum tenor of $90$ days.

Usance Promissory Note (UPN)

An instrument issued by a bank borrowing under the BRDS to a lender, backed by unencumbered Usance Bills of Exchange of at least equal value.

Inter-Bank Participation Certificates (IBPCs)

A short-term money market instrument where a borrowing bank sells its loans and credit for a temporary period to a participating bank, which can be issued on a with-risk or without-risk sharing basis.

Regional Rural Bank (RRB) IBPCs

Certificates issued by RRBs for their priority sector advances in excess of $75\%$ of their outstanding advances, provided only on a 'risk sharing' basis.

Collateralised Borrowing and Lending Obligation (CBLO)

A discounted money market instrument developed by CCIL for entities that are phased out of the inter-bank call money market, usually available for tenures ranging from $1$ day to $90$ days.

Constituent SGL (CSGL) Account

An account required by CBLO members for depositing securities offered as collateral or margin for borrowing and lending funds.

Treasury Bills (T-Bills)

Short-term money market instruments issued by the Government of India through the RBI for tenures of $14$, $28$, $91$, $182$, and $364$ days.

Market Stabilisation Scheme (MSS)

A scheme introduced to enable the RBI to mop up excess liquidity from the system, where the notified amount in T-Bill auctions is included.

Repo (Repurchase Agreement)

A process enabling collateralised short-term borrowing and lending where a holder of securities sells them to an investor with an agreement to repurchase the same at a predetermined date and rate.

Repo Rate

The annualised interest rate for the funds lent by the buyer of the securities to the seller in a repo transaction.

Reverse Repo

A transaction viewed from the angle of the borrower of securities, where securities are acquired with a commitment to resell them later.

Liquidity Adjustment Facility (LAF)

A monetary tool used by the RBI to control market liquidity, representing a reverse repo from the perspective of the RBI.

Double Ready Forward Transaction

A transaction where an entity sells a security on a repurchase agreement basis while simultaneously purchasing another security from the same entity on a resell basis.

Buy-Sell Back Repo

A type of repo where the lender takes possession of the collateral, the security is sold outright, and the forward price is set by adjusting for repo interest and coupon earned.

Classic Repo

A repo transaction where the start and end prices of the securities are the same, and a separate 'interest' payment is made.

Tripartite Repo

A repo transaction where a common custodian or clearing agency handles the custody, clearing, and settlement for the counterparties.

Fixed Income Securities

Tradable instruments where the total return, consisting of periodic coupon payments and a redemption amount on maturity, is fixed for the investor.

Zero-Coupon Securities

Securities that carry no periodic interest; instead, the return arises from the difference between the original issue price and a higher redemption amount.

Floating Rate Securities

Debt instruments where the coupon is linked to a benchmark and is reset periodically during the tenor of the security.

Settlement Proceeds Formula

The calculation for the amount a buyer pays a seller on the settlement date: $\text{Settlement Proceeds} = [(\frac{\text{Price of bond}}{100}) \times (\text{Total Face Value})] + [\text{Accrued interest}]$.

French Auction

A variable price auction where applicants submit bids at their desired price and successful bidders pay the actual price they bid.

Dutch Auction

A uniform price auction where all successful bidders are allotted the security at a single cut-off price or yield.

State Development Loans (SDLs)

Securities issued by various State Governments to meet their estimated requirements, usually issued at a fixed coupon.

Public Sector Undertaking (PSU) Bonds

Medium or long-term debt instruments, typically issued for $5$ to $10$ years by state-owned enterprises, which can be taxable or tax-free.

Non-Convertible Debentures (NCD)

Debt instruments issued by companies that cannot be converted into equity shares and retain their debt character throughout.

Partly Convertible Debentures (PCD)

Debentures where a portion is converted into equity shares at a future date at the issuer's notice.

Fully Convertible Debentures (FCD)

Instruments that are entirely converted into equity shares at the issuer's notice, granting investors the status of ordinary shareholders.

Optionally Convertible Debentures (OCD)

Debentures where the investor holds the choice to convert the debt into shares at a price agreed upon at the time of issue.

Debenture Redemption Reserve (DRR)

A mandatory reserve that must be created for non-convertible debentures with a maturity period exceeding $18$ months.