Glossary

Public Debt Market Glossary

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Second tier 

The trading area of the public debt market to which all members have access. It is a decentralised market in which the balancing entry is known and in which the intervention of a mediator is not obligatory, although it is communicated to the Book-entry System when it occurs.

Securities lending system 

Sell/buy-back system (or security swaps), organised by the Book-Entry System, aimed at reducing the securities settlement risk in the registered public debt market. By virtue of this system which, prior to voluntary accession thereto, functions automatically provided that there is sufficient balance in the cash account (or other securities account) of the overdrawn entity, a group of lenders and the Banco de España transfer the necessary securities to the overdrawn entity to complete the daily settlement simultaneously (or by means of securities swaps if the Banco de España is the lender) with penalisation.

Security issued at a discount 

A fixed-income security issued at below its par value, income from which is received from the difference between the purchase price and the nominal value at which it is redeemed.

Sell/buy-back transaction 

A transaction that constituted by two linked purchase/sales in opposite directions, contracted at the same time but with different settlement dates. In the case of a participant which purchases the securities in the first sell/buy-back transaction it is a temporary acquisition, while for their counterpart it is a repurchase agreement.

Simultaneous 

See «sell/buy-back transaction».

Strip 

A marketable security with regular coupons that can be split and traded separately to the principal, whereby a security with n regular coupon payments becomes n 1 (including the principal (bonds issued at a discount). As far as the Book-entry System is concerned, the possibility of splitting and reuniting medium and long-term central and regional government bonds that have received strip rating requires authorisation from the Ministry of Economic Affairs and Finance. Strips can only be undertaken by market makers and they must on nominal amounts of multiples of €100,000, with a minimum of €500,000.

STRIPS 

The acronym for Separate Trade of Registered Interest Principal Securities.

Syndication 

An ever more frequent issuance procedure used by sovereign issuers that consists in a group of institutions committed to issuing securities among their investors, in exchange for a sales and underwriting fee. As well as improving debt distribution between final investors, this technique allows a sufficiently high outstanding balance to be reached, quickly leading to its presence in international electronic trading platforms, which creates greater liquidity of the new reference. Although syndication permits multiple structures, a common feature of all of the structures is the existence of a restricted group of institutions selected by the issuer that lead, organise and, in most cases, underwrite issuance. The Spanish Treasury used this procedure for the first time in March 2002, to mark the issuance of the first period of the new benchmark fifteen year bond.