Securities Terms and Definitions

Basis Grade The grade of a commodity used as the standard or par grade of a futures contract. Accommodation Trading Non-competitive trading entered into by a trader, usually to assist another with illegal trades. Carrying Charges Cost of storing a physical commodity or holding a financial instrument over a period of time. These charges include insurance, storage, and interest on the deposited funds, as well as other incidental costs. Buy (or Sell) On Close To buy (or sell) at the end of the trading session within the closing price range. Call An option contract giving the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position Amortization Liquidation of a debt through installment payments. Allowances The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par (or basis) grade or location specified in the futures contract. See Differentials. Backwardation Market situation in which futures prices are progressively lower in the distant delivery months. For instance, if the gold quotation for January is $360.00 per ounce and that for June is $355.00 per ounce, the backwardation for five months against January is $5.00 per ounce. (Backwardation is the opposite of contango ). See Inverted Market. Buy (or Sell) On Opening To buy (or sell) at the beginning of a trading session within the open price range. Systemic Risk The risk that a default by one market participant will have repercussions on other participants due to the interlocking nature of financial markets. For example, Customer A’s default in X market may affect Intermediary B’s ability to fulfill its obligations in Markets X, Y, and Z.

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	Did You Know?
	Swap: In general, the exchange of one asset or liability for a similar asset or liability Swap: In general, the exchange of one asset or liability for a similar asset or liability for the purpose of lengthening or shortening maturities, or raising or lowering coupon rates, to maximize revenue or minimize financing costs. This may entail selling one securities issue and buying another in foreign currency; it may entail buying a currency on the spot market and simultaneously selling it forward. Swaps also may involve exchanging income flows; for example, exchanging the fixed rate coupon stream of a bond for a variable rate payment stream, or vice versa, while not swapping the principal component of the bond. Swaps are generally traded over-the-counter.