Securities Finance Technical Glossary 

Agency Lending Disclosure (ALD) is a regulatory and operational framework that requires agents lending securities on behalf of underlying principals (such as pension funds or asset managers) to disclose the identity of these principals to borrowers. This disclosure enables borrowers to manage their counterparty credit risk and regulatory capital requirements more accurately. ALD requirements involve automated transmission of information between parties and ensuring compliance with disclosure standards, helping firms manage counterparty exposure effectively while meeting regulatory obligations.

Regulatory Reporting provides automated ALD reporting functionality as part of the regulatory compliance framework.

The automated process of returning borrowed securities to lenders without requiring manual intervention, typically triggered by pre-defined conditions or system rules. Auto-returns streamline the return process for borrowers who no longer need securities or are managing their inventory positions. From a P&L perspective, auto-returns improve operational efficiency, reduce the risk of fails penalties, and help optimize borrowing costs by returning securities that are no longer needed. Operationally, they reduce manual workload, minimize human error, and provide consistent execution of return instructions. For risk management, auto-returns help maintain appropriate inventory levels, reduce counterparty exposures, and ensure timely responses to changing market conditions or regulatory requirements.

Post Trade Services offers comprehensive billing reconciliation and delivery services that automate the entire billing process, ensuring accurate and timely fee calculations while reducing operational costs and minimizing disputes.

The systematic process of calculating, validating, and settling financial obligations arising from securities finance activities, including lending fees, rebates, and related charges. Billing and fee management encompasses rate determination, accrual calculations, invoice generation, reconciliation, and payment processing. P&L implications are direct and significant, as billing accuracy directly impacts revenue recognition, expense management, and the overall profitability of securities finance operations. Operationally, it requires precise fee calculation engines, standardized billing cycles, robust dispute resolution processes, and efficient payment mechanisms. From a risk management perspective, proper billing controls prevent revenue leakage, ensure compliance with contractual terms, and maintain transparency with counterparties and clients.

Pirum's future-proofed technology offers comprehensive billing reconciliation and delivery services that automate the entire billing process, ensuring accurate and timely fee calculations while reducing operational costs and minimizing disputes.

Block Allocations Workflow is a process that manages the breakdown of large securities finance trades ("blocks") into smaller positions allocated to specific accounts or funds. This workflow is particularly important in repo markets where transactions may be executed at a consolidated level but need to be distributed across multiple legal entities or funds. Effective block-allocation matching ensures all parties agree on allocations before settlement, reducing disputes and settlement failures while improving operational efficiency.

RepoConnect provides block-allocation matching functionality that streamlines this process for repo transactions, enabling efficient allocation across multiple accounts.

The Common Domain Model (CDM) is a standardized, machine-readable representation of events and processes in financial markets, designed to create consistency in how financial products, transactions, and events are represented across the industry. CDM reduces the fragmentation of data models and enables interoperability between systems and market participants. This approach supports the industry's move toward standardization and greater automation through consistent data representations across the securities finance lifecycle.

Pirum's futureproofed technology approach is compatible with CDM, supporting the industry's move toward standardization.

A Central Counterparty is a financial institution that interposes itself between counterparties to trades,
becoming the buyer to every seller and the seller to every buyer to guarantee trade settlement. CCPs impact P&L through membership fees, default fund contributions, margin requirements, and potential netting benefits. Operationally, CCP clearing requires trade submission, confirmation, novation, collateral posting, and ongoing position management. From a risk perspective, CCPs mitigate counterparty risk through multilateral netting, standardized risk management, and default handling procedures, but concentrate risk in the CCP itself.

ClearingConnect provides seamless connectivity to major CCPs, automating the full clearing lifecycle from trade submission through settlement, helping firms efficiently manage their cleared positions while reducing operational overhead.

CSDR is a European regulation that harmonizes the operation of central securities depositories and improves securities settlement efficiency across the EU. It introduced T+2 settlement cycles, settlement discipline measures including cash penalties for fails, and potential mandatory buy-ins. P&L implications include direct costs from settlement fail penalties, potential buy-in costs, and liquidity requirements to ensure timely settlement. Operationally, CSDR requires enhanced settlement monitoring, matching, and allocation processes, with increased emphasis on pre-settlement matching. Risk management under CSDR involves implementing proactive settlement failure prevention, monitoring failing trades, and maintaining sufficient liquidity for settlement.

Post Trade Services offers real-time settlement monitoring capabilities and Trade Risk Manager provides a centralized dashboard for CSDR penalty monitoring to help firms minimize settlement fails and associated costs.

Collateral refers to assets pledged to secure financial obligations, providing the lender protection against borrower default in securities finance transactions. Common collateral types include cash, government securities, corporate bonds, and equities, with acceptability determined by liquidity, volatility, and credit quality. P&L implications involve opportunity costs of pledging assets, collateral optimization to minimize funding costs, and potential returns from reinvesting cash collateral. Operationally, collateral management requires systems for eligibility checks, valuation, substitution processing, and margin calls to maintain required coverage. Risk management focuses on maintaining adequate collateral value through haircuts, daily mark-to-market adjustments, concentration limits, and wrong-way risk monitoring to protect against market and credit risks.

CollateralConnect provides real-time visibility of collateral and inventory across multiple books and venues, enabling firms to optimize collateral usage and effectively manage margin requirements.

Corporate actions are events initiated by issuers that affect their securities and impact holders' rights and benefits. These include mandatory actions (dividends, stock splits, mergers) and voluntary actions (tender offers, rights issues). Corporate actions affect P&L through direct income (dividends), changes in position values, potential tax implications, and operational costs/errors. Operationally, they require timely notification processing, entitlement calculations, instruction management for voluntary events, and position reconciliation. Risk management involves preventing missed events, ensuring accurate entitlement calculations, managing voluntary election deadlines, and maintaining proper record-keeping.

CoacsConnect centralizes and automates corporate actions processing, reducing operational risks and errors while streamlining communication between counterparties in securities lending transactions.

Digital Asset Connectivity refers to infrastructure that allows securities finance participants to interact with blockchain-based assets, tokenized securities, and distributed ledger technology (DLT) platforms. This connectivity enables traditional securities finance firms to expand into digital asset lending, borrowing, and collateralization while maintaining integration with conventional systems. Digital asset connectivity represents an important element of future-proofed technology, preparing firms for the evolution of securities finance to include tokenized assets and DLT-based settlement.

Pirum TradeConnect includes digital asset connectivity as part of its future state offering, preparing clients for the evolution of securities finance to include tokenized assets.

A database that is replicated and shared across numerous computers, allowing individuals or institutions to securely verify and record changes to the shared database without the need for a trusted intermediary. 

Dividend processing in securities finance refers to the handling of dividend payments on securities that are loaned over dividend record dates. It encompasses collecting entitlement information, calculating manufactured payments, generating claims, tax processing, and settlement. P&L impacts include the direct value of dividend entitlements, potential differential tax treatment, operational processing costs, and risks of errors or delays. Operationally, dividend processing requires record date monitoring, entitlement calculation, claim generation, tax adjustment calculation, and payment reconciliation. Risk management involves ensuring accurate and timely claims processing, managing tax implications, resolving disputes, and maintaining proper audit trails.

CoacsConnect streamlines dividend processing by automating claims generation, matching, and settlement, while providing a centralized platform for counterparties to communicate and resolve any discrepancies.

The systematic identification, measurement, monitoring, and control of financial risks arising from securities finance activities. Exposure management encompasses counterparty, market, collateral, and liquidity exposures across all trading relationships and venues. P&L implications are substantial, as proper exposure management optimizes capital allocation, reduces funding costs, and prevents losses from uncollateralized positions. Operationally, it requires robust systems that provide real-time visibility into global exposures, allow for timely margin calls, and facilitate efficient collateral allocation. From a risk perspective, effective exposure management establishes appropriate exposure limits, ensures adequate collateralization, and enables rapid responses to market volatility or counterparty deterioration.

ExposureConnect, part of the Post Trade Services suite of solutions, service provides real-time visibility and control of exposures across multiple trading venues, enabling firms to optimize collateral usage, reduce risk, and improve financial performance.

Golden Record refers to a single, authoritative version of data that serves as the trusted source for all systems and processes within an organization or between counterparties. In securities finance, establishing a golden record for trade details, corporate actions, collateral values, and other critical data points reduces reconciliation breaks and operational risk. Golden records created through real-time matching and reconciliation processes provide a single source of truth that improves data quality, reduces disputes, and enables more efficient operations across the securities finance lifecycle.

Pirum's platforms create golden records through real-time matching and reconciliation processes as part of their futureproofed technology approach.

The structured approach to identifying, resolving, and preventing settlement failures in securities finance transactions. Fails management encompasses monitoring pending settlements, identifying potential issues, implementing remediation actions, and analyzing root causes to prevent recurrence. The P&L impact of fails is significant, including penalty fees, compensation payments, buy-in costs, and potential reputational damage with counterparties and clients. Operationally, effective fails management requires proactive settlement monitoring, clear escalation procedures, and coordinated efforts between trading, operations, and counterparty-facing teams. From a risk perspective, persistent fails increase operational risk, regulatory scrutiny, and potential capital charges under regulations like CSDR.

Trade Risk Manager provides a centralized dashboard to monitor potential fails and settlement issues in real-time, enabling proactive resolution before they impact P&L or trigger regulatory penalties.

A haircut is the percentage reduction applied to the market value of collateral in securities finance transactions, reflecting the potential decrease in asset value during adverse market conditions. Higher haircuts are applied to more volatile or less liquid assets, with sovereign bonds typically receiving minimal haircuts while equities might face reductions of 15% or more. P&L implications include opportunity costs from providing additional collateral, capital efficiency considerations, and strategic asset allocation to minimize haircut impacts. Operationally, haircuts require systems for calculation, monitoring, and adjustment based on market conditions and regulatory requirements. Risk management involves tailoring haircuts to address market risk, correlation risk between collateral and underlying transaction, and specific issuer risks, with regular stress testing to ensure adequacy during market disruptions.

CollateralConnect helps firms manage haircuts efficiently across multiple collateral venues and counterparties, enabling optimized collateral allocation and real-time visibility of requirements.

Income claims in securities finance are claims to manufactured payments that arise when a security is on loan over an income record date, requiring the borrower to compensate the lender for any dividends or other income paid. P&L implications include the direct value of claims, potential tax implications, operational costs of processing, and risk of missed or incorrect claims. Operationally, claims processing involves identifying loan positions over record dates, calculating entitlements, generating and reconciling claims, and settling payments. Risk management requires monitoring record dates, ensuring accurate calculations, resolving disputes, and maintaining proper documentation for tax purposes.

CoacsConnect automates the entire income claims process, from identification to settlement, ensuring that lenders receive timely and accurate manufactured payments while reducing operational overhead and risk.

Initial margin is collateral posted at the outset of a transaction to cover potential future exposure in the event of counterparty default. Unlike variation margin, which covers current exposure, IM is calculated based on potential future market movements over a liquidation period. IM impacts P&L through funding costs, opportunity costs of encumbered assets, and optimization expenses. Operationally, IM requires complex calculation methodologies (SIMM or schedule-based), daily reconciliation with counterparties, and segregated account management. From a risk perspective, IM helps mitigate counterparty and systemic risk but creates liquidity challenges and necessitates robust collateral management.

IMConnect provides end-to-end automation of initial margin processing, from exposure calculation to instruction delivery and ongoing monitoring, helping firms reduce operational costs while ensuring regulatory compliance.

Margin in securities finance represents additional assets required beyond the loan value to protect against adverse price movements of the underlying collateral. It functions as a buffer against market volatility, with margin requirements varying based on collateral quality, transaction type, and counterparty risk. P&L implications include funding costs to meet margin requirements, opportunity costs of locked assets, and potential revenue from optimizing margin allocation across trading activities. Operationally, margin management involves daily calculations, calls/returns processing, dispute resolution, and threshold monitoring, often requiring sophisticated automation. Risk management focuses on maintaining adequate margin levels through stress testing, concentration monitoring, and correlation analysis to ensure sufficient protection during market disruptions.

ExposureConnect, part of the Post Trade Services, provides real-time margin calculation and automated workflow solutions that help firms monitor exposures, process margin calls efficiently, and reduce operational risks across securities finance activities.

Mark-to-market is the daily practice of revaluing securities finance positions based on current market prices to accurately reflect their fair value. This ensures positions reflect current economic reality rather than historical costs, with price sources including exchange quotes, broker screens, and pricing services. P&L implications include daily unrealized gains and losses that impact financial statements, collateral requirements, and risk metrics. Operationally, mark-to-market requires robust price sourcing, valuation models for less liquid assets, automated reconciliation with counterparties, and exception management processes. Risk management considerations include valuation uncertainty during market stress, sudden collateral calls due to price movements, and potential disputes with counterparties over valuations, especially for complex or illiquid securities.

Post Trade Services automates the agreement of mark-to-markets between parties, ensuring positions are correctly collateralized and fee/rebate accruals accurately calculated using up-to-date market values.

Pair Off / Settlement Netting Automation is a process that identifies offsetting transactions between counterparties and reduces them to a single net settlement, minimizing the number of security movements and payment flows. In repo markets, automated pair-offs reduce gross settlements and improve funding certainty as early as trade date. Effective netting engines identify opportunities and streamline the agreement process between counterparties, leading to more efficient use of funding and reduced settlement risk.

RepoConnect automates pair-offs that reduce gross settlements and improve funding certainty as early as trade date.

Pre-Pays & Loan Release refers to the early termination process for securities lending transactions before their contracted maturity date, including the return of securities and the release of associated collateral. Managing this process efficiently requires coordination between borrowers and lenders, with accurate calculations of accrued fees and proper handling of collateral movements. Automated loan release processes following pre-payments ensure timely communication between counterparties and proper reconciliation of positions and fees, thereby reducing operational risk and improving efficiency.

Post Trade Services includes functionality to manage pre-pays and automated loan release as part of its comprehensive securities lending solution.

The process by which lenders in securities lending transactions request the return of previously loaned securities before the original agreed maturity. Recalls may be triggered by various events including sales of the underlying security, corporate actions, or voting requirements. P&L implications include potential lost lending revenue, opportunity costs, and possible market impact when covering positions. Operationally, recalls require timely communication between lenders and borrowers, clear tracking of recall status, and efficient management of return instructions. The risk aspects include potential settlement failures if recalls aren't promptly addressed, penalties under shortened settlement cycles like T+1, and potential market risk if securities need to be purchased at unfavorable prices.

Recalls Manager automates the entire recalls process, providing real-time tracking, automated notifications, and exception-based workflow management to reduce fails and associated costs.

A repo is a short-term financial transaction where one party sells securities to another with a simultaneous agreement to repurchase them at a later date at a higher price. The price difference represents implicit interest, making repos functionally equivalent to collateralized loans. P&L implications include interest expense for the cash borrower and interest income for the cash lender, with rates influenced by counterparty credit quality and collateral type. Operationally, repos require robust systems for trade capture, margin calls, and collateral management to ensure proper settlement and reduce fails. From a risk perspective, repos involve credit, liquidity, operational, and market risks that must be monitored, with proper haircuts applied to protect against collateral value fluctuations.

Post Trade Services provides front-to-back automation of the full repo trade and collateral lifecycle, processing over $3 trillion in transactions daily across the securities finance ecosystem.

A reverse repo represents the opposite side of a repurchase agreement transaction, where a party buys securities and agrees to sell them back at a specified future date at a higher price. For the cash lender (securities buyer), reverse repos generate interest income from the price differential while maintaining high liquidity and low risk due to holding collateral. Operationally, reverse repos require efficient systems to track collateral values, process margin calls, and manage settlement processes. Risk management involves continuous monitoring of collateral value, counterparty exposure, and market conditions, particularly when accepting less liquid securities as collateral. Central banks frequently use reverse repos as monetary policy tools to control money supply and influence short-term interest rates.

ExposureConnect, part of the Post Trade Services, offers real-time management of cash and non-cash collateral lifecycle, providing comprehensive oversight of reverse repo exposures and automating margin calculations.

Required Value (RQV) is a calculation used in collateral management that determines the value of collateral required to adequately secure a financial transaction, factoring in haircuts based on the quality and volatility of the collateral. RQV serves as a reference point for margin calls, exposure management, and collateral allocation decisions. In securities finance, RQV calculations and reconciliations ensure accurate collateralization of positions and efficient communication of requirements to counterparties. Properly managed RQV processes help optimize collateral usage while maintaining appropriate risk coverage.

ExposureConnect, part of the Post Trade Services, provides full exposure and RQV reconciliations as part of its real-time exposure management functionality.

Securities Borrowing and Lending (SBL) is a market practice where securities are temporarily transferred from one party (lender) to another (borrower) in exchange for collateral and a fee. Unlike Securities Lending, which focuses specifically on the lender's perspective, SBL encompasses both sides of the transaction and the market as a whole. SBL activities support market making, short selling, settlement coverage, and collateral optimization. The practice enables firms to generate income from otherwise idle securities, access hard-to-borrow securities for trading strategies, and efficiently manage inventory and settlement requirements.

Pirum supports the entire SBL lifecycle through its Post Trade Services platform, providing end-to-end automation from trade initiation through to settlement and maturity.

Securities borrowing is the practice of obtaining temporary ownership of securities from their holders by providing collateral and paying a borrowing fee. For borrowers, P&L implications include the cost of borrowing fees, collateral optimization strategies, and the ability to support revenue-generating trading activities like short selling and arbitrage. Operationally, borrowers must manage collateral allocation, maintain margin requirements, handle recalls efficiently, and process corporate actions that occur during the borrowing period. Risk management involves monitoring counterparty exposure, maintaining adequate collateral, responding to market volatility, and ensuring sufficient inventory to return securities when required. Unlike traditional loans, the borrower receives full legal ownership rights, including voting rights and dividends (though these are typically passed back to the lender).

Post Trade Services streamlines the securities borrowing process by automating reconciliation, returns processing, and exception management across multiple counterparties.

SFTR is a European Union regulation implemented to increase transparency in securities financing markets by establishing comprehensive reporting requirements for securities financing transactions (SFTs). It requires firms to report details of repos, securities lending, buy-sell backs, and margin lending transactions to approved trade repositories. The regulation impacts P&L through increased compliance costs, technology investments, and potential penalties for non-compliance. Operationally, SFTR demands significant data collection and reconciliation capabilities, UTI generation and sharing, and detailed lifecycle reporting. From a risk management perspective, SFTR helps regulators identify potential systemic risks while requiring firms to implement robust data validation, error correction, and reporting oversight mechanisms.

Regulatory Reporting provides comprehensive SFTR reporting automation, including UTI generation and sharing, data reconciliation, and direct connectivity to trade repositories.

Securities lending is the temporary transfer of securities from one party (lender) to another (borrower) in exchange for collateral and a fee. The borrower gains temporary ownership of the securities while paying a lending fee, typically expressed as an annualized percentage of the securities' value. P&L opportunities arise from lending fee income for lenders, while borrowers use the securities to support trading strategies like short selling, arbitrage, or covering settlement failures. Operationally, securities lending requires sophisticated systems for trade capture, reconciliation, corporate actions processing, and collateral management. Risk considerations include counterparty default, collateral value deterioration, operational errors, and recall risk if the lender needs the securities returned quickly.

CoacsConnect automates corporate actions processing for securities lending, helping firms manage dividend payments and other events across loaned securities, reducing operational risk and maximizing income.

Standard Settlement Instructions (SSIs) are predefined payment and settlement details that enable automatic routing of trades and funds between counterparties without requiring manual input for each transaction. In securities finance, SSIs include account details, custodians, clearing agents, and other information needed to ensure smooth settlement. Effective SSI management reduces settlement failures, operational risk, and manual intervention while improving straight-through processing. SSIs standardize pre-trade, pre-settlement, and post-trade processes, contributing to front-to-back settlement efficiency and reduced breaks in the trading process.

SSIConnect standardizes pre-trade, pre-settlement, and post-trade processes, contributing to front-to-back settlement efficiency and reduced breaks in the trading process.

Straight-Through Processing (STP) refers to the complete automation of securities finance transaction processing from initiation to settlement without manual intervention. In securities finance, STP eliminates re-keying of data, reduces errors, speeds up transaction times, and lowers operational costs. High STP rates (often up to 99.8%) through automated matching, affirmation, returns processing, and other post-trade activities translate directly to operational efficiency, saving multiple hours per day across trading and operations teams while reducing risk through consistent execution of processes.

Pirum's solutions achieve up to 99.8% STP rates through automated matching, affirmation, and post-trade processing, significantly improving operational efficiency and reducing risk.

T+1 Settlement refers to the market practice of settling securities transactions one business day after the trade date, representing a shortening of the settlement cycle from the previous T+2 standard. This accelerated timeline requires more efficient post-trade processes, faster reconciliation, and near real-time communication between counterparties. Organizations need real-time connectivity, automated reconciliation, and exception-based workflows that quickly identify and resolve potential settlement issues to adapt to compressed settlement timeframes while reducing fails and associated penalties.

Post Trade Services and Trade Risk Manager support T+1 settlement by providing real-time connectivity and automated workflows that help firms adapt to compressed settlement timeframes

The end-to-end sequence of events and processes that occur from the inception of a securities finance transaction to its eventual closure. The trade lifecycle encompasses pre-trade activities, execution, confirmation, settlement, ongoing position management, collateral management, and eventually maturity or termination. P&L considerations arise throughout the lifecycle, from trade pricing and fee negotiations to ongoing collateral optimization and early termination decisions. Operationally, managing the trade lifecycle requires coordinated workflows across front, middle, and back offices, with automated processes to handle high volumes efficiently. Risk management across the lifecycle involves pre-trade credit approvals, settlement risk controls, ongoing exposure monitoring, and compliance with evolving regulatory requirements.

Pirum's service brings together all lifecycle requirements for securities finance transactions, providing front-to-back automation across pre-trade, post-trade, and collateral management phases.

The systematic process of comparing trade data across multiple systems and counterparties to ensure accuracy, completeness, and agreement. Trade reconciliation verifies all aspects of securities finance transactions, from basic trade details to valuations, identifying and resolving discrepancies before they impact settlement or financial reporting. From a P&L perspective, effective reconciliation prevents revenue leakage from missed fees, incorrect pricing, or unidentified transactions. Operationally, it establishes a reliable foundation for all downstream processes, including settlement, corporate actions, and regulatory reporting. For risk management, reconciliation provides an essential control framework that reduces operational risk, limits financial exposure from failed trades, and helps maintain regulatory compliance.

Post Trade Services automates the reconciliation process across the entire securities finance lifecycle, significantly reducing operational risk while improving processing efficiency and profitability.

A neutral third-party institution that facilitates and optimizes collateral management between counterparties in securities finance transactions. Tri-party agents provide automated selection, valuation, allocation, substitution, and settlement of collateral, reducing operational burden while enhancing risk management. From a P&L perspective, tri-party arrangements improve capital efficiency, reduce operational costs, and enable firms to focus on revenue-generating trading activities rather than collateral administration. Operationally, tri-party agents streamline complex collateral processes, handle eligibility verification, and provide consolidated reporting across multiple trading relationships. The risk management benefits include independent collateral valuation, reduced settlement risk, automated margin calls, and guaranteed segregation of assets.

CollateralConnect provides seamless connectivity to all major tri-party agents, enabling automated collateral instructions, real-time visibility, and optimized collateral allocation across multiple venues.

UMR is a global regulatory framework requiring firms trading non-centrally cleared derivatives to exchange initial and variation margin, designed to mitigate counterparty and systemic risk. UMR affects P&L through increased funding costs for margin, collateral optimization needs, and operational expenses for compliance. Operationally, UMR requires firms to calculate, reconcile, and exchange margin on a daily basis, manage collateral schedules and eligibility, and maintain segregated custody arrangements. Risk management includes counterparty exposure monitoring, collateral concentration risk management, and liquidity planning for margin calls.

IMConnect streamlines UMR compliance by automating the full initial margin lifecycle, from calculation to instruction delivery to triparty agents, while providing oversight of collateral eligibility and optimization.

A Unique Transaction Identifier (UTI) is a distinct code assigned to a securities finance transaction to identify it uniquely across systems, firms, and regulatory reporting. UTIs are crucial for regulatory compliance with regimes like SFTR and SEC Rule 10c-1a, ensuring transactions can be tracked throughout their lifecycle without duplication or confusion. Regulatory reporting solutions automate UTI generation and sharing based on pairing status and client configuration, reducing the operational burden of regulatory compliance while ensuring accurate and consistent transaction reporting.

Pirum's regulatory reporting solutions automate UTI generation and sharing based on pairing status and client configuration, ensuring consistent identification of transactions for regulatory reporting