MARKET: General
A collateral/pledge that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk with the counterparty. This risk can arise if the holder has borrowed cash from the counterparty to buy securities, or entered into a futures contract. The collateral can be in the form of cash or securities, and it is deposited in a margin account. The investor/speculator has to maintain this margin as a minimum amount in the margin account for as long as a position in the cash borrowed, securities, options or futures contracts is maintained.
Marginal Lending Rate
MARKET:Economics
This is a penalty rate of interest charged by the Reserve Bank for lending to financial institutions in the money market in excess of the daily liquidity requirement provided to the market at the repurchase (repo) rate.
Market Maker
MARKET: General
A participant in the financial markets (usually banks) who guarantees to make both a bid and an offer for a financial contract, generally with a pre-set bid/offer spread (or a schedule of spreads corresponding to different market conditions) up to a predetermined maximum market amount. The market maker is the counterparty who earns the bid-offer spread.
Market Risk
MARKET: Risk Management
Also known as price risk. Generally refers to the risk of loss on a position (long or short) due to changes in market prices, rates or values.
Market Taker
MARKET: General
The counterparty in a financial transaction who wishes to either buy from or sell to the market maker and has to deal on the latter’s price. The market taker is the party who pays the bid-offer spread.
Mark-to-Market (MTM)
MARKET: General
A process whereby both OTC and exchange-traded contracts are revalued on a daily basis. Changes in market prices from one day to the next will give rise to unrealised profits or losses on the existing (open) positions.
Maturity Date
MARKET: General
The final date specified in a transaction on which the transaction reaches maturity or final redemption.
Mine/Yours
Terms used when trading on a given price. ‘Mine’ - buying, ‘Yours’ - selling
Modified Duration
MARKET: Fixed Income
Modified duration is based on the concept that interest rates and bond prices move in opposite directions. This formula is then used to determine the effect a 100 basis point (1%) change in interest rates will have on the market price of a fixed income security.
Monetary Policy
MARKET: Economics
Any deliberate steps taken by the monetary authority of a country to control the nation’s money supply, interest rate and/or exchange rates by the central bank.
Monetisation
MARKET: Economics
The process of converting or establishing something into a legal tender. It usually refers to the printing of banknotes by central banks, but things such as gold, diamonds and emeralds, and art can also be monetised. Even intrinsically worthless items can be made into money, as long as they are difficult to make or acquire. Monetisation may also refer to exchanging securities for currency, selling a possession, charging for something that used to be free or making money on goods or services that were previously unprofitable.
Money Market
MARKET: Money Markets
Also known as short-term debt markets. This represents the section of debt markets where lending and borrowing transactions are concluded with maturities as short as overnight and not exceeding one year.
Monoline Insurance
MARKET: General
Monolines were set up to insure against the risk that a bond would default. Companies and public institutions would issue bonds to raise money and then pay a fee to the monoline insurer to insure their debt against default. This, in turn, helps raise the credit rating of the bond, which makes the interest costs for the borrower less.
Monopoly
MARKET: Economics
A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterised by an absence of competition, which often results in high prices and inferior products. According to a strict academic definition, a monopoly is a market containing a single firm.
Mortgage-backed Security
MARKET: Fixed Income
These are securities constructed from mortgage debt or a collection of mortgages. Banks repackage the debt from a number of established mortagages which can then be traded in the market.
MPC
Monetary Policy Committee (SA and UK)
