Adverse Selection - Risk that only liquid securities are crossed leaving illiquid securities and mismatched sectors.
Bid/Ask Spread - Difference between the lower bid (broker buys) and the higher ask (broker sells) for a security.
Credit Rating - A measure of a bond's quality as determined by a rating service. Ratings start at "AAA", the highest ranking, through "D" for bonds in default. The analysis uses Bloomberg composite ratings which are a blend of Standard and Poor's and Moody's.
Crossing (Internal) - Using a transition manager's access to index funds or other transition client flow to offset buys and sells. These security transfers are priced at the closing price of the day and are 100% free of commission and market impact costs since they are never shown to any brokers.
Crossing (External) - Using publicly available networks such as ITG's POSIT or Instinet to buy or sell securities at a pre-determined price. These trades are executed at low commission rates and market impact costs are reduced by either executing the match at the mid-point of the bid/ask spread or by pricing the trade at the market close.
Duration - The weighted average maturity of a securities future cash flows. A higher duration indicates greater price sensitivity to changes in interest rates.
Explicit Costs - Represents the most visible, but least significant cost of a trade. Includes commissions and fees.
Delay - Represents the loss in investment value between time of decision to trade and actual order release. Can also arise due to a jump in market prices from the prior night's close to the open, (i.e., open gap).
Fiduciary - Represents those who have discretionary authority or control over fund assets, are free from conflicts of interest, and must act in the interests of the participants of the plan.
Implementation Shortfall - Represents the difference in return between the actual portfolio and the target portfolio.
Implicit Costs - Represents the least visible, but most significant cost of a trade. Includes spread, market impact, timing risk, tracking error, and information leakage.
Information Leakage - The release of material information about a trade before the order is released to the market. Raises total costs since it allows arbitrageurs to trade ahead of the transition.
In-kind Transfers - Securities that are transferred from the legacy to target portfolio. These security contributions are priced at the closing price of the day and are 100% free of commission and market impact costs.
Legacy Portfolio - Portfolio that securities are being transitioned from.
Market Impact - Amount that a security price moves after placing a trade order.
Opportunity Costs - Cost associated with the time gap in transferring assets from the legacy portfolio to the target portfolio.
Over the Counter (OTC) - A dealer dominated trading market where securities exchange hands through direct negotiating between buyers and sellers. The majority of bonds and NASDAQ equity securities are traded OTC.
Pre-trade Analysis - An analysis detailing trading costs (commissions, taxes, market impact, bid/ask spread and opportunity costs), compared against an unmanaged transition providing characteristics of the legacy and target portfolios and highlighting problematic securities to be transitioned.
Post-trade Analysis - A comparison of the actual costs versus the pre-trade estimates of the transition and stated benchmark.
Principal Bid - Represents brokers who commit capital to facilitate trade at price set at a predetermined time in exchange for a premium. In the U.S., all principal trades are executed at the closing price. A blind bid is one that is submitted revealing only general characteristics of the securities, (beta, volatility), and not a specific list of securities.
Target Portfolio - Portfolio that securities are being transferred to.
Tracking Error - The expected deviation from the expected differences in returns between two portfolios.
Unmanaged Transition - Assumes that all trades are done in the open market without the benefit of in-kind transfers, internal crossing or external crossing.
Sunil Daswani is a Senior Vice President and is responsible for the relationship management team for all of Northern Trust's global clients (ex North America) who participate in Securities lending. He also leads the sales efforts for any new clients interested in Northern Trust's Securities Lending capabilities and may be interested in participating in our lending programme.
Sunil previously acted as Director and Regional Manager for Securities Lending, Asia for Northern Trust Global Investments based in Hong Kong. There he was responsible for addressing and evaluating securities lending initiatives for lenders and borrowers where Northern Trust acted as an agent lender. Sunil additionally focused on building the supply of Asian assets for Northern Trust global securities lending program ensuring that the due diligence was carried out when lending its clients assets in each jurisdiction. Sunil was also the Chairman of the Pan Asia Securities Lending Association (PASLA), from 2005 through 2008.
Prior to this position, Sunil was a Global Custody product manager at Citigroup.
Sunil holds a BSc. (Economics) in Accounting & Finance from the London School of Economics (1993).
Gavin Mashford works within the Northern Trust Capital Markets sales and relationship management team as a Specialist, Transition Management. Based in London Gavin’s role is to focus on transition management sales and distribution, whilst working closely with clients and the transition managers to provide relationship management through a restructure.
Gavin joined the transition management team in September 2013. Before joining Northern Trust, Gavin spent seven years at Deutsche Bank where his responsibilities included; covering client service solutions and market initiatives for the derivatives team, specifically with regard to OTC and their regulation.Gavin graduated from Lincoln University with a BSc Honours degree in 2001.
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Northern Trust Asset Management comprises Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc. and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.
This material is directed to professional clients only and is not intended for retail clients. For Asia-Pacific markets, it is directed to institutional investors, expert investors and professional investors only and should not be relied upon by retail investors.
Issued by Northern Trust Global Investments Limited.