Definition of Security deposit (initial)

Security deposit (initial)

Synonymous with the term margin. A cash amount of funds that must be deposited
with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as
part payment or purchase. Related: margin

American Depositary Receipts (ADRs)

Certificates issued by a U.S. depositary bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may
represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's
are "sponsored," the corporation provides financial information and other assistance to the bank and may
subsidize the administration of the ADRs. "Unsponsored" ADRs do not receive such assistance. ADRs carry
the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American depositary shares(ADSs) are
a similar form of certification.

Asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.

Certificate of deposit (CD)

Also called a time deposit, this is a certificate issued by a bank or thrift that
indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest
rate, and can be issued in any denomination. The duration can be up to five years.

Convertible security

A security that can be converted into common stock at the option of the security holder,
including convertible bonds and convertible preferred stock.

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Depository transfer check (DTC)

Check made out directly by a local bank to a particular firm or person.

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.

Derivative security

A financial security, such as an option, or future, whose value is derived in part from the
value and characteristics of another security, the underlying security.

Electronic depository transfers

The transfer of funds between bank accounts through the Automated
Clearing House (ACH) system.

Eurocurrency deposit

A short-term fixed rate time deposit denominated in a currency other than the local
currency (i.e. US$ deposited in a London bank).

Exchangeable Security

security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.

Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.

Fixed-dollar security

A nonnegotiable debt security that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.

Host security

The security to which a warrant is attached.

Hybrid security

A convertible security whose optioned common stock is trading in a middle range, causing
the convertible security to trade with the characteristics of both a fixed-income security and a common stock
instrument.

Initial margin requirement

When buying securities on margin, the proportion of the total market value of
the securities that the investor must pay for in cash. The security Exchange Act of 1934 gives the board of
governors of the Federal Reserve the responsibility to set initial margin requirements, but individual
brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by
the exchange.

Initial public offering (IPO)

A company's first sale of stock to the public. Securities offered in an IPO are
often, but not always, those of young, small companies seeking outside equity capital and a public market for
their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the
possibility of large gains. IPO's by investment companies (closed-end funds) usually contain underwriting
fees which represent a load to buyers.

International Depository Receipt (IDR)

A receipt issued by a bank as evidence of ownership of one or more
shares of the underlying stock of a foreign corporation that the bank holds in trust. The advantage of the IDR
structure is that the corporation does not have to comply with all the regulatory issuing requirements of the
foreign country where the stock is to be traded. The U.S. version of the IDR is the American depository
Receipt (ADR).

MBS Depository

A book-entry depository for GNMA securities. The depository was initially operated by
MBSCC and is currently in the process of becoming a separately incorporated, participant-owned, limitedpurpose
trust company organized under the State of New York Banking Law.

Monthly income preferred security (MIP)

Preferred stock issued by a subsidiary located in a tax haven.
The subsidiary relends the money to the parent.

Mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash
flow from the collateral pool is "passed through" to the security holder as monthly payments of principal,
interest, and prepayments. This is the predominant type of MBS traded in the secondary market.

Negotiated certificate of deposit

A large-denomination CD, generally $1MM or more, that can be sold but
cannot be cashed in before maturity.

Primitive security

An instrument such as a stock or bond for which payments depend only on the financial
status of the issuer.

Savings deposits

Accounts that pay interest, typically at below-market interest rates, that do not have a
specific maturity, and that usually can be withdrawn upon demand.

Security

Piece of paper that proves ownership of stocks, bonds and other investments.

Security characteristic line

A plot of the excess return on a security over the risk-free rate as a function of
the excess return on the market.

Security deposit (maintenance)

Related: Maintenance margin security market line (SML). A description of
the risk return relationship for individual securities, expressed in a form similar to the capital market line.

Security market line

Line representing the relationship between expected return and market risk.
security market plane A plane that shows the equilibrium between expected return and the beta coefficient
of more than one factor.
security selection
See: security selection decision.

Security selection decision

Choosing the particular securities to include in a portfolio.

Time deposit

Interest-bearing deposit at a savings institution that has a specific maturity.
Related: certificate of deposit.

Underlying security

Options: the security subject to being purchased or sold upon exercise of an option
contract. For example, IBM stock is the underlying security to IBM options. depository receipts: The class,
series and number of the foreign shares represented by the depository receipt.

Variable price security

A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.

Security Market Line

A graph illustrating the equilibrium relationship between the
expected rate of return on securities and their risk as measured by
the beta coefficient

Fixed-income security

A security that pays a specified cash flow over a
specific period. Bonds are typical fixed-income securities.

Marketable security

An easily traded investment, such as treasury bills, which is
recorded as a current asset, since it is easily convertible into cash.

Security

Either the collateral on a loan, or some type of equity ownership or debt, such
as a stock option or note payable.

floating-rate security

security paying dividends or interest that vary with short-term interest rates.

initial public offering (IPO)

First offering of stock to the general public.

security market line

Relationship between expected return and beta.

Certificate of Deposit (CD)

A bank deposit that cannot be withdrawn for a specified period of time. See also term deposit.

Demand Deposit

A bank deposit that can be withdrawn on demand, such as a deposit in a checking account.

Deposit Creation

The process whereby the banking system transforms a dollar of reserves into several dollars of money supply.

Deposit Switching

Central bank switching of government deposits between the central bank and commercial banks.

Multiple Deposit Creation

The process whereby the money multiplier operates.

Notice Deposit

See term deposit.

Term Deposit

An interest-earning bank deposit that cannot be withdrawn without penalty until a specific time.

Time Deposit

See term deposit.

Direct Deposit

The direct transfer of payroll funds from the company bank account
directly into that of the employee, avoiding the use of a paycheck.

Employee Retirement Income Security Act of 1974 (ERISA)

A federal Act that sets minimum operational and funding standards for employee benefit
plans.

Social Security Act of 1935

A federal Act establishing Old Age and Survivor’s
Insurance, which was funded by compulsory savings by wage earners.

Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.

Debt Security

A security representing a debt relationship with an enterprise, including a government
security, municipal security, corporate bond, convertible debt issue, and commercial
paper.

Equity Security

An ownership interest in an enterprise, including preferred and common stock.

Held-to-Maturity Security

A debt security for which the investing entity has both the positive
intent and the ability to hold until maturity.

Nonmarketable Security

A debt or equity security for which there is no posted price or bidand-
ask quotation available on a securities exchange or over-the-counter market.

Security

A share or an interest in a property or an enterprise such as a stock certificate or a bond.

Trading Security

A debt or equity security bought and held for sale in the near term to generate income on short-term price changes.

Canadian Deposit Insurance Corporation

Better known as CDIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the CDIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.

Initial Public Offering

A firms first offering of its shares to the investment public, after registration requirements of the various securities regulators have been met.

Security

Collateral offered by a borrower to a lender to secure a loan.

Security Value

The monetary value placed on security by a lender in determining the extent to which it can make loans against such security.

direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service. For example, you can arrange with your employer to have your pay cheques automatically deposited into your no fee bank account.

pre-authorized direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service.

Margin

This allows investors to buy securities by borrowing money from a broker. The margin is the
difference between the market value of a stock and the loan a broker makes. Related: security deposit (initial).

Original margin

The margin needed to cover a specific new position. Related: Margin, security deposit (initial)

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