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MARKET VALUE: <br />The value at wbich a security is trading and <br />could presumably be purchased or sold <br />equal to price times face value. <br />MASTER REPURCHASE <br />AGREEMENT: <br /> A written contract covering designated <br /> transactions between the parties to <br /> repurchase and/or reverse repurchase <br /> agreements that establishes each party's <br /> rights in the transactions. A master <br /> agreement will often specify, among other <br /> things, the right of the buyer-lender to <br /> liquidate the underlying securities in the <br /> event of default by the seller-borrower. <br />MATURITY: <br /> The date upon which the principal or stated <br /> value of an investment becomes due and <br /> payable. <br />MONEY MARKET: <br /> The market in which short-term debt <br /> instruments (bills, commercial paper, <br /> bankers' acceptances, etc.) are issued and <br /> traded. <br />OFFER PRICE: <br /> The price at which a security is bought. <br /> (When you are buying securities, you ask <br /> for an offer.) <br />OPEN MARKET OPERATIONS: <br /> Purchases and sales of government and <br /> certain other securities in the open market <br /> by the New York Federal Reserve Bank as <br /> directed by the FOMC in order to influence <br /> the volume of money and credit in the <br /> economy. Purchases inject reserves into the <br /> bank system and stimulate growth of <br /> money and credit; sales have the opposite <br /> effect. Open market operations are the <br /> Federal Reserve's most important and most <br /> flexible monetary policy tool. <br />PORTFOLIO: <br /> Collection of securities held by an investor. <br />PRIMARY DEALER: <br /> A group of government securities dealers <br /> who submit daily reports of market activity <br /> <br /> and positions and monthly financial <br /> statements to the Federal Reserve Bank of <br /> New York and are subject to its informal <br /> oversight. Primary dealers include <br /> Securities and Exchange Commission <br /> (SEC)-registered securities broker-dealers, <br /> banks, and a few unregulated firms. <br />PRUDENT PERSON RULE: <br /> An investment standard stipulating <br /> practices as conducted by a prudent person <br /> of discretion and intelligence who is <br /> seeking preservation of capital as well as <br /> reasonable income. <br />QUALIFIED PUBLIC DEPOSITORIES: <br /> A financial institution designated by the <br /> Texas State Comptroller which does not <br /> claim exemption from the payment of any <br /> sales or compensating use or ad valorem <br /> taxes under the laws of this state, which <br /> has segregated for the benefit of the <br /> commission eligible collateral having a <br /> value of not less than its maximum liability <br /> in order to act as a depository for public <br /> funds. <br />RATE OF RETURN: <br />Commonly called current yield, mmual <br />cash flow divided by replacement cost. <br />REPURCHASE AGREEMENT (RP OR <br />REPO): <br /> A simultaneous buy-sell transaction in <br /> which holder of securities sells these <br /> securities to an investor with an agreement <br /> to repurchase them at a fixed price <br /> including interest on a fixed date. Dealers <br /> use RP extensively to finance their <br /> positions. When the Fed is doing RP, it is <br /> increasing bank reserves. <br />SAFEKEEPING: <br /> A bank or trust service for a fee whereby <br /> securities and valuables of all types and <br /> descriptions are held by the bank. <br />SECONDARY MARKET: <br /> The market created by the purchase and <br /> sale of outstanding issues following the <br /> initial distribution (sale by issuer). <br /> <br />City of San Marcos Investment Policy Page 11 <br /> <br /> <br />