Abstract

This survey collects information on holdings of residents of [name of economy] in equities and debt securities issued by unrelated nonresidents as at June 30/December 31, [Year]. The data from the survey will be used in the compilation of the balance of payments and international investment position statistics of [name of economy]. These statistics are published by [name of compiling agency] and reported to the Statistics Department of the International Monetary Fund. The survey is conducted in coordination with other economies to facilitate international data comparability.

Appendix 1 Model Forms

A. Model Form for a Mixed Custodian and End-Investor Security-by-Security Survey

Survey of Portfolio Investment: Holdings of Equities and Debt Securities Issued by Unrelated Nonresidents as at June 30/December 31, [Year]

Purpose of Collection

This survey collects information on holdings of residents of [name of economy] in equities and debt securities issued by unrelated nonresidents as at June 30/December 31, [Year]. The data from the survey will be used in the compilation of the balance of payments and international investment position statistics of [name of economy]. These statistics are published by [name of compiling agency] and reported to the Statistics Department of the International Monetary Fund. The survey is conducted in coordination with other economies to facilitate international data comparability.

Collection Authority

The information requested is collected under the authority of [state legal authority]. [Delete if voluntary]

Confidentiality

The completed forms will remain confidential to the [name of compiling agency].

What to Report

The survey should be completed in accordance with the reporting instructions provided. If there are any questions regarding these instructions, please contact [name of member of the survey staff] at [name of compiling agency].

When and Where to Report

Please provide the results of this survey by [specify the date] to

[Postal address/e-mail/telephone and fax numbers of compiler].

Respondents unable to meet the reporting deadline should contact [name of member of the survey staff] at [name of compiling agency] to request an extension.

How to Report

Data may be submitted electronically using the online survey form, e-mail, or paper forms (use the option applicable). Please keep a copy for your records.

[Name of compiling agency and date]

Notes

Note 1. Who Must Report
  • (a) Custodians that are resident in [name of economy] and that, as at close of business on June 30/December 31, [Year], manage the safe-keeping of securities issued by nonresidents on behalf of residents of [name of economy], or on their own account. Resident custodians are defined as entities located in [name of economy] who manage the safekeeping of securities for investors.

  • (b) Investors that are resident in [name of economy] and own equities or debt securities issued by unrelated nonresidents of [name of economy] as at the close of business on June 30/December 31, [Year], and that do not entrust the safekeeping of any or all of these securities to resident custodians. This includes both those who invest for their own account as well as those who invest on behalf of asset pools, such as the managers of mutual funds, insurance companies, and pension funds.

All entities that receive a copy of the survey forms must reply. Those that do not fall into either of the above two categories need to complete only the identification information on Form 1a and mark the box indicating that they are exempt from completing Forms 2 and 3.

Note 2. What Must Be Reported

All entities that receive either Form 2 or Form 3 must return the respondent identification section (Form 1a) within 30 days of receipt of the form, even those entities indicating that they are exempt from completing Form 1a.

Those respondents meeting the criteria above (see Note 1) must return the completed survey forms (Forms 1b, 2, and 3) by [specify the date]. Respondents unable to meet the reporting schedule should contact [name of compiling agency] indicated on the first page of this form to request an extension.

Reporters can file a consolidated report for all related entities that are resident in [name of economy], or each resident entity may file independently. If two or more entities are filing separately, please contact the member of the survey staff indicated on the first page of this form at [name of compiling agency] for additional identification numbers. If a consolidated report is being supplied for two or more entities, do not supply separate reports for the same entities.

Form 2: Detailed Holdings is used to report detailed information on holdings of securities issued by unrelated nonresidents. Such information must be provided by the following:

  • (a) Resident custodians in respect of securities issued by nonresidents that they manage the safekeeping of, for residents, or on own account. Securities issued by nonresidents that are entrusted to other resident custodians and those that are managed for nonresidents are excluded from Form 2; they should be included on Form 3.

  • (b) Investors in respect of securities that are issued by unrelated nonresidents that are not entrusted to the safekeeping of resident custodians. (See Note 6 to determine whether an entity is related.) Securities issued by unrelated nonresidents and entrusted to the custody of a resident custodian should be reported on Form 3.

Form 3: Summary of Holdings Entrusted to Custodians is to show the total value and custodian information. Such information must be provided by the following:

  • (a) resident custodians in respect of securities that are issued by nonresidents and that are entrusted to the safekeeping of other resident custodians and

  • (b) investors in respect of securities that are issued by nonresidents and that are entrusted to the safekeeping of resident custodians.

These holdings of securities should not be reported in detail on Form 2. Instead, only the total amounts entrusted to resident custodians should be reported, along with the name and address of the resident custodian.

Some respondents need to complete both Form 2 and Form 3.

Note 3. Residence

The reporting unit for this form is a resident of [name of economy]: that is, an individual, an enterprise, or other institutional unit domiciled in [name of economy]. It includes branches and subsidiaries of nonresident enterprises if the branches or subsidiaries are domiciled in [name of economy]. Domicile is defined as the center of predominant economic interest of the entity: for instance, where an enterprise engages in production. Corporations legally registered in [name of economy] are considered to be resident even if they have no “physical presence.” A nonresident of [name of economy] is any individual, enterprise, or other organization domiciled in a country other than [name of economy]. Branches and subsidiaries of [name of economy] enterprises domiciled in other jurisdictions are regarded as nonresidents of [name of economy].

The securities are classified by the jurisdiction of residence of the issuer of the securities. The residence of an enterprise can be taken to be where it is legally incorporated or, in the absence of legal incorporation, where it is legally domiciled. The economy of residence of the issuer may differ from the currency of issue, the place of issue, or the country of the guarantor of the security. Some securities are guaranteed by another party (such as the parent company or a government), and the guarantee may be either explicit or implicit. Even where the funds raised are for use by the guarantor, the residence of the issuer of the security should be used, not the residence of the guarantor. Securities issued by international organizations should be shown under the separate code for international organizations (XX), not included under the economy in which the organization is located.

[If one or more international organization(s) is/are located in your economy, [specify the name(s) of these international organizations] should not be considered to be resident(s) in [name of economy] and their holdings should not be reported in this return. However, pension funds for employees of these international organization(s) are considered to be resident in [name of economy]. (If not relevant, delete this paragraph.]

Note 4. Definition of Equities and Debt Securities

Refer to Appendix 4 of this Guide for details on definition and description of equity and debt securities. If you have any questions about how to classify an instrument, please contact the survey staff member indicated on the first page of this form at [name of compiling agency].

Note 5. Valuation

Market value should be used to report all holdings of securities. Do not report the face value of the security as the market value.

Equity securities should be reported at market prices converted to [domestic currency] using the exchange rate prevailing at the close of business on June 30/December 31, [Year].

For enterprises listed on a stock exchange, the market value of your holding of their equity securities should be calculated using the market price on their main stock exchange prevailing at the close of business on June 30/December 31, [Year].

For unlisted enterprises, if a market value is not available at the close of business on June 30/December 31, [Year], estimate the market value of your holding of equity securities by using one of the six alternatives methods (see Box 3.1 of this Guide).

Debt securities should be recorded at market prices converted to [domestic currency], using the exchange rate prevailing at the close of business on June 30/December 31, [Year]. For listed debt securities, a quoted traded market price at the close of business on June 30/December 31, [Year], should be used. When market prices are unavailable (e.g., in the case of unlisted debt securities), the use of following methods for estimating fair value (which is an approximation of the market value of such instruments) are recommended:

  • discounting future cash flows to the present value using a market rate of interest12 and

  • using market prices of financial assets and liabilities that are similar.

Refer to Box 10.3, BPM6 Compilation Guide for further details.

Note 6. Exclusion of Securities Issued by Related Enterprises

Securities (whether equities or debt) issued by a nonresident enterprise that is related to the resident owner of those securities should be excluded from this survey. Related nonresident enterprises are enterprises in which an enterprise group has an equity interest of 10 percent or more, or where a nonresident has more than 10 percent or more holdings in your group. Ownership is measured in terms of ordinary shares or voting stock of incorporated enterprises or equivalent beneficial interest in unincorporated enterprises. Where such a relationship exists, exclude all securities (debt and equities) from the scope of Coordinated Portfolio Investment Survey.

The only exception is if the nonresident entity that issued the security and the resident owner of the security are affiliated financial intermediaries (e.g., banks). In these circumstances, securities issued by related enterprises, other than equity or permanent debt, should be reported in this survey.

Note 7. Treatment of Securities Involved in Repurchase and Securities Lending Arrangements

A repurchase agreement is an arrangement involving the provision of securities in exchange for cash with a commitment to repurchase the same or similar securities at a fixed price. A reverse repo is the same transaction seen from the other side: that is, an agreement whereby a security is purchased at a specified price with a commitment to resell the same or similar securities at a fixed price on a specified future date. Securities (or stock or bond) lending is an arrangement whereby the ownership of a security is transferred in return for collateral, usually another security, under the condition that the security or similar securities will revert to its original owner at a specified future date.

  • Securities acquired under reverse repos or securities borrowing arrangements are to be excluded from the survey.

  • Securities sold under repos or “lent” under securities lending arrangements are to be included in the survey.

  • Securities acquired under reverse repos or securities borrowing arrangements and subsequently sold to a third party should be reported as a negative holding—namely, a short position (see Form 2, Item 10).

  • Valuations of securities under repos or securities lending arrangements should be at market value as at the close of business on June 30/December 31, [Year].

Note 8. Treatment of Depository Receipts

Depository receipts (DRs), which denote ownership of equity or debt securities issued by nonresidents (for instance, American DRs and global DRs), should be attributed to the country of residence of the issuer of the security underlying the DR. Financial intermediaries should not report holdings of any securities against which DRs have been issued and sold; however, if a DR has been issued before the financial institution arranging the issue has acquired the underlying securities, that financial institution should report a negative holding in the underlying security (see Form 2, Item 10).

Note 9. Treatment of Stripped Securities

Stripped securities (strips) are securities that have been transformed from a principal amount with periodic interest coupons into a series of zero-coupon securities, with the range of maturities matching the coupon payment dates and the redemption date of the principal amount.

  • If strips remain the direct obligation of the original issuer, then the residence of the issuer of the strips remains the same as for the original security. Dealers who request that a settlement house or clearing house create strips from an existing security issued by a nonresident should not report ownership of the underlying security after the strips have been created.

  • If strips have been created and issued by an entity in its own name, then the security should be classified according to the residence of the issuer of the strips. In turn, such an issuer of strips should report its ownership of the underlying securities if they were issued by a nonresident.

Strips with an original maturity of less than one year are classified as money market instruments and thus, if identifiable, should be reported as short-term debt securities.

Refer to paragraphs 3.49–3.80 in Chapter 3 of this Guide for additional details on Notes 7–9.

Note 10. Asset-Backed Securities

In reporting the market value of holdings of asset-backed securities, the respondent must be aware of the possibility of early partial redemption of principal. The market value of the principal amount outstanding at close of business on June 30/December 31, [Year], should be reported; if principal has been repaid, this market value will not be the same as the original face value revalued at end-period market prices.

If there are any questions regarding these instructions, please contact the survey staff member at [name of compiling agency] indicated on the front of this form.

Form 1b Instructions

This form must be completed by all organizations that receive these survey forms and are not exempt. It is used to

  • provide basic identification particulars and

  • provide summaries of data reported on Forms 2 and 3.

Notes on Selected Items

Item 1: Identification number—Enter the identification number provided on survey forms/e-mail sent to you [keep the relevant option]. If your number is unknown, please contact the member of the survey staff indicated on the first page of this form at [name of compiling agency].

Item 9: Number of Form 2 records reported—Enter the total number of Form 2 records submitted with your report (whether they are submitted on paper or electronically).

Item 10: Number of Form 3 records reported—Enter the total number of Form 3 records submitted.

Item 11: Total [domestic currency] value of all priced equities—For all equity securities (Form 2, Item 7, Type 1) for which prices are known, enter the total domestic currency value (Form 2, Item 10) of all such records.

Item 12: Total [domestic currency] value of all priced long-term debt securities—For all long-term debt securities (Form 2, Item 7, Type 2) for which prices are known, enter the total domestic currency value (Form 2, Item 10) of all such records.

Item 13: Total [domestic currency] value of all priced short-term debt securities—For all short-term debt securities (Form 2, Item 7, Type 3) for which prices are known, enter the total domestic currency value (Form 2, Item 10) of all such records.

Item 14: Total number of shares of unlisted equity—For all equity securities (Form 2, Item 7, Type 1) for which prices are unknown, enter the total number of shares (Form 2, Item 12) of all such records.

Item 15: Total face value of all unlisted long-term debt securities—For all long-term securities (Form 2, Item 7, Type 2) for which prices are unknown, enter the total face value (Form 2, Item 12) of all such records.

Item 16: Total face value of all unlisted short-term debt securities—For all short-term securities (Form 2, Item 7, Type 3) for which prices are unknown, enter the total face value (Form 2, Item 12) of all such records.

Form 2 Instructions

This form should be used by the following:

  • (a) Resident custodians to report holdings in their custody for resident clients of securities issued by non-residents (if these securities have not in turn been entrusted to other resident custodians).

  • (b) Resident investors that own such securities but have not entrusted the safekeeping of these securities to resident custodians (i.e., include any securities that have been entrusted to nonresident custodians). Own account holdings that have not been entrusted to other custodians should also be included.

Securities issued by entities related to the investor should not be reported (see Note 6 to the survey, above, for more information on securities issued by related enterprises).

Resident custodians who entrust their holdings of securities issued by unrelated nonresidents to other resident custodians should report these holdings on Form 3, not on Form 2. Only the custodian who arranges for the safekeeping of securities abroad (either directly or through a foreign local sub-custodian) should report its holdings on Form 2.

However, securities entrusted by custodians directly to central securities depositories (such as Depository Trust Company, Euroclear, and Clearstream, or other nonresident custodians) should be reported on Form 2 by the custodian who entrusted the securities to the central depository.

Notes on Form 2

Item 1: Identification number—Enter the identification number from Form 1a, Item 1.

Item 2: Sequence number—Starting at 1, sequentially number each record. The last record should have the same sequence number as the total number of records reported on Form 1b, Item 9.

Item 3: Security identification code—Enter the security identification code used to identify this record. Use either an International Securities Identification Number (ISIN) code or a code issued by a national or international numbering agency, such as a SEDOL, CUSIP, or common code. For example, Amazon stock listed on NASDAQ has securities identification number of US0231351067 under ISIN system. Hence, for the holdings of Amazon securities, this code be reported against this item. Do not use internally created codes unless this security has not been assigned a code by any recognized numbering agency.

Item 4: Security identification coding system—From Annex A, select the coding system that corresponds to the code reported in Item 3 (e.g., ISIN, CUSIP, SICC, SEDOL, VALOR, etc.). For the example in Item 3 on Amazon, ISIN be reported as the coding system.

Item 5: Name of other identification coding system—If the security identification code entered in Item 3 above was issued by a security identification coding system not listed in Annex A, enter the name of that system here.

Item 6: Ownership code—Indicate whether the security is held on (1) own account or (2) on behalf of a client.

Item 7: Security type—Indicate whether the security is (1) equity, (2) long-term debt, or (3) short-term debt.

Item 8: Name and economy of issuer—Enter the name and economy of the organization that issued this security. Economy of issuer of security—Enter the two-digit country code from the list provided in Annex B that corresponds to the country of domicile of the entity issuing the security. Holdings of issues of international organizations (such as the World Bank or United Nations) should be entered as country code XX, not as issues of the countries in which they are physically located.

Item 9: Security description—Provide pertinent descriptive information.

Item 10: [National currency] value of security held—Enter the total national currency value (price times quantity) of your holdings of this security. If reporting a negative position in the security, enter “S” before the value (see also Note 7 to the survey, above, on repurchase and securities lending arrangements and Note 8 on depository receipts).

For equity securities (Form 2, Item 7, Type 1), enter the national currency price equivalent (Form 2, Item 11) of this security multiplied by the number of shares held (Form 2, Item 12).

For long-term debt securities (Form 2, Item 7, Type 2), enter the product of the price (Form 2, Item 11) of this security and its face value (Form 2, Item 12) in the currency of denomination multiplied by the exchange rate (Form 2, Item 14).

For short-term debt securities (Form 2, Item 7, Type 3), enter the product of the price (Form 2, Item 11) of this security and its face value (Form 2, Item 12) in the currency of denomination multiplied by the exchange rate (Form 2, Item 14).

Item 11: Market price—See Note 5 to the survey (on valuation), above, for further information on market prices. For equity securities, enter your best estimate of the price per share in national currency.

For both long-and short-term debt securities, enter the price as a percentage of the security’s original face value. Thus, if a security is trading at 90 percent of its original value, enter 0.9 in this field. In the case of long-term zero-coupon or deep-discount issues, which trade when issued at a small percentage of their face value at maturity, enter the percentage of their face value at maturity that they are worth as at June 30/December 31, [Year]. Thus, if a zero-coupon bond were originally issued at a value equal to 17 percent of its face value at maturity and has—by June 30/December 31, [Year]—appreciated to 43 percent of its face value at maturity, enter 0.430 in this field.

Note: Custodians must provide prices for securities in a manner consistent with their normal business practices for providing prices to their customers. Thus, if a firm typically provides prices to its customers for all securities for which prices are commercially available, the same practice should be followed when reporting on the survey.

Item 12: Face value or number of shares held—For equity securities, enter the number of shares held, rounded to the nearest share. For both long-term and short-term debt securities, enter the face value held in the currency of denomination. For asset-backed securities, for which principal is repaid over time, enter the remaining, unrepaid face value of principal outstanding for this security as at close of business on June 30/December 31, [Year].

Item 13: Original face value for asset-backed securities only—Pertaining to the amount entered in Item 12 above, enter the original face value of principal that would have been outstanding if no principal had been repaid.

For example, if $1,000,000 of an asset-backed security were bought at date of issue, and 30 percent of the principal of this security had been repaid as at close of business on June 30/December 31, [Year], $700,000 should be entered in Item 12, and $1,000,000 should be entered in Item 13. The ratio between the amounts entered in Item 12 and Item 13 (700,000/1,000,000 = 0.700) should equal the “factor value” for this security.

Item 14: Exchange rate used—Enter the exchange rate used to convert the currency of denomination into national currency. This rate should be that prevailing at the close of business on June 30/December 31, [Year], and should be expressed as the national currency value of one unit of the currency of denomination.

Item 15: Currency of denomination—Enter the three-digit code corresponding to the currency used in Item 14 from the list provided in Annex C. If the currency used in Item 14 is not listed in Annex C, please contact the member of the survey staff at [name of compiling agency] indicated on the front page of this form.

Item 16: Amount on loan—Of the total amount held of this security as reported in Item 12, indicate how much of this position was on loan as at June 30/December 31, [Year].

Annex A:

Security Identification Coding Systems*

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* This list is not exhaustive. Please add security identification coding systems and issuing agency/countries, relevant for your economies
Annex B:

Jurisdiction Codes

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Annex C:

Currency Codes

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B. Model Form for an End-Investor Survey on an Aggregate Basis

Survey of Portfolio Investment

Holdings of Equities and Debt Securities Issued by Unrelated Nonresidents as at June 30/December 31, [Year]

Purpose of Collection

This survey collects information on holdings of residents of [name of economy] in equities and debt securities issued by unrelated nonresidents as at June 30/December 31, [Year]. The data from the survey will be used in the compilation of the balance of payments and international investment position statistics of [name of economy]. These statistics are published by [name of compiling agency] and reported to the Statistics Department of International Monetary Fund. The survey is being conducted in coordination with other countries to facilitate international data comparability.

Collection Authority

The information requested is collected under the authority of [state legal authority]. [Delete if voluntary]

Confidentiality

The completed forms will remain confidential to the [name of compiling agency].

What to Report

The survey should be completed in accordance with the reporting instructions provided. If there are any questions regarding these instructions, please contact [name of member of the survey staff] at [name of compiling agency].

When and Where to Report

Please provide the results of this survey by [specify the date] to

[Postal address/e-mail/telephone and fax numbers of compiler].

Respondents unable to meet the reporting deadline should contact [name of member of the survey staff] at [name of compiling agency] to request an extension.

How to Report

Data may be submitted electronically using the online survey form, email, or paper forms (use the option applicable). Please keep a copy for your records.

[Name of compiling agency and date]

Notes

Note 1. Who Must Report

Entities that are resident in [name of economy] and that own equities or debt securities issued by unrelated nonresidents of [name of economy] as at the close of business on June 30/December 31, [Year].

Note 2. What Must Be Reported

All entities that receive a copy of the forms must return the respondent identification section (Form 1) within 30 days of receipt of the forms, even those entities indicating that they are exempt from completing Form 1.

Those respondents meeting the criteria above (see Note 1) must return the completed survey forms (Form 2) by [specify the date]. Respondents unable to meet the reporting schedule should contact [name of compiling agency] indicated on the first page of this form to request an extension.

Reporters can file a consolidated report for all related entities that are resident in [name of economy], or each resident entity may file independently. If two or more entities are filing separately, please contact the member of the survey staff indicated on the first page of this form at [name of compiling agency] for additional identification numbers. If a consolidated report is being supplied for two or more entities, do not supply separate reports for the same entities.

Note 3. Residence

The reporting unit for this form is a resident of [name of economy]: that is, an individual, an enterprise, or other organization domiciled in [name of economy]. It includes branches and subsidiaries of nonresident enterprises if the branches or subsidiaries are domiciled in [name of economy]. Domicile is defined as the center of predominant economic interest of the entity: for instance, where an enterprise engages in production. Corporations legally registered in [name of economy] are considered to be resident even if they have no “physical presence.” A nonresident of [name of economy] is any individual, enterprise, or other organization domiciled in a country other than [name of economy]. Branches and subsidiaries of [name of economy] enterprises domiciled in other jurisdictions are regarded as nonresidents of [name of economy].

The securities are classified by the jurisdiction of residence of the issuer of the securities. The residence of an enterprise can be taken to be where it is legally incorporated or, in the absence of legal incorporation, where it is legally domiciled. The economy of residence of the issuer may differ from the currency of issue, the place of issue, or the economy of the guarantor of the security. (Some securities are guaranteed by another party (such as the parent company or a government), and the guarantee may be either explicit or implicit. Even where the funds raised are for use by the guarantor, the residence of the issuer of the security should be used, not the residence of the guarantor.) Securities issued by international organizations should be shown under the separate code for international organizations (XX), not included under the country in which the organization is located.

Note 4. Definition of Equities and Long-and Short-term Debt Securities

Refer to Annex IV for details on definition and description of equity and debt securities. If you have any questions about how to classify an instrument, please contact the survey staff member indicated on the first page of this form at [name of compiling agency].

Note 5. Valuation

Market value should be used to report all holdings of securities. Do not report the face value of the security as the market value.

Equity securities should be reported at market prices converted to [domestic currency] using the exchange rate prevailing at June 30/December 31, [Year].

For enterprises listed on a stock exchange, the market value of your holding of their equity securities should be calculated using the market price on their main stock exchange prevailing at June 30/December 31, [Year].

For unlisted enterprises, if a market value is not available at the close of business on June 30/December 31, [Year], estimate the market value of your holding of equity securities by using one of the six alternatives methods (see Box 3.1)

Debt securities should be recorded at market prices converted to [domestic currency], using the exchange rate prevailing at the close of business on June 30/December 31, [Year]. For listed debt securities, a quoted traded market price at the close of business on June 30/December 31, [Year], should be used. When market prices are unavailable (e.g., in the case of unlisted debt securities), the use of following methods for estimating fair value (which is an approximation of the market value of such instruments) are recommended:

  • discounting future cash flows to the present value using a market rate of interest and13

  • using market prices of financial assets and liabilities that are similar.

Refer to Box 10.3 of BPM6 Compilation Guide for further details.

Note 6. Exclusion of Securities Issued by Related Enterprises

Securities (whether equities or debt) issued by a nonresident enterprise that is related to the resident owner of those securities should be excluded from this survey. Related nonresident enterprises are enterprises in which an enterprise group has an equity interest of 10 percent or more, or where a nonresident has more than 10 percent or more holdings in your group. Ownership is measured in terms of ordinary shares or voting stock of incorporated enterprises or equivalent beneficial interest in unincorporated enterprises. Where such a relationship exists, exclude all securities (debt and equities) from the scope of Coordinated Portfolio Investment Survey.

In the circumstances where the nonresident entity that issued the security and the resident owner of the security are affiliated financial intermediaries (e.g., banks), the securities (other than equity or permanent debt) should be included in this report.

Note 7. Treatment of Securities Involved in Repurchase and Securities Lending Arrangements

A repurchase agreement is an arrangement involving the provision of securities in exchange for cash with a commitment to repurchase the same or similar securities at a fixed price. Securities (or stock or bond) lending is an arrangement whereby the ownership of a security is transferred in return for collateral, usually another security, under the condition that the security or similar securities will revert to its original owner at a specified future date.

  • Securities acquired under reverse repos or securities borrowing arrangements are to be excluded from the survey.

  • Securities sold under repos or “lent” under securities lending arrangements are to be included in the survey.

  • Securities acquired under reverse repo or securities borrowing arrangements and subsequently sold to a third party should be reported as a negative holding—namely, a short position.

  • Valuations of securities under repurchase or securities lending arrangements should be at market value as at June 30/December 31, [Year].

Note 8. Treatment of Depository Receipts

Depository receipts (DRs), which denote ownership of equity or debt securities issued by nonresidents (for instance, American DRs and global DRs), should be attributed to the country of residence of the issuer of the security underlying the DR. Financial intermediaries should not report holdings of any securities against which DRs have been issued and sold; however, if a DR has been issued before the financial institution arranging the issue has acquired the underlying securities, that financial institution should report a negative holding in the underlying security.

Note 9. Treatment of Stripped Securities

Stripped securities (strips) are securities that have been transformed from a principal amount with periodic interest coupons into a series of zero-coupon securities, with the range of maturities matching the coupon payment dates and the redemption date of the principal amount.

  • If strips remain the direct obligation of the original issuer, then the residence of the issuer of the strips remains the same as for the original security. Dealers who request that a settlement house or clearing house create strips from an existing security issued by a nonresident should not report ownership of the underlying security after the strips have been created.

  • If strips have been created and issued by an entity in its own name, then the security should be classified according to the residence of the issuer of the strips. In turn, such an issuer of strips should report its ownership of the underlying securities if they were issued by a nonresident.

Strips with an original maturity of less than one year are classified as money market instruments and thus, if identifiable, should be reported as short-term debt securities.

Refer to paragraphs 3.49–3.80 in Chapter 3 of this Guide for additional details on notes 7–9.

Note 10. Asset-Backed Securities

In reporting the market value of holdings of asset-backed securities, the respondent must be aware of the possibility of early partial redemption of principal. The market value of the principal amount outstanding at June 30/December 31, [Year], should be reported; if principal has been repaid, this market value will not be the same as the original face value revalued at end-period market prices.

If there are any questions regarding these instructions, please contact the survey staff member at [name of compiling agency] indicated on the front of this form.

uch06fig06
Notes: For presentation, only the first and last countries on the list are shown here. The complete list of countries is shown in Annex B of Appendix IA.a In general, for small economies with an international financial center (SEIFiC), the jurisdiction of issuers is concentrated in a small set of economies and mostly known to the national compilers. Hence, jurisdiction of issuers be listed in the first column for SEIFiC.

C. Model Form for a Mixed Custodian/End-Investor Survey on an Aggregate Basis

Survey of Portfolio Investment:

Holdings of Equities and Debt Securities Issued by Unrelated Nonresidents as at June 30/December 31, [Year]

Purpose of Collection

This survey collects information on holdings of residents of [name of economy] in equities and debt securities issued by unrelated nonresidents as at June 30/December 31, [Year]. The data from the survey will be used in the compilation of the balance of payments and international investment position statistics of [name of economy]. These statistics are published by [name of compiling agency] and reported to the Statistics Department of International Monetary Fund. The survey is being conducted in coordination with other countries to facilitate international data comparability.

Collection Authority

The information requested is collected under the authority of [state legal authority]. [Delete if voluntary]

Confidentiality

The completed forms will remain confidential to the [name of compiling agency].

What to Report

The survey should be completed in accordance with the reporting instructions provided. If there are any questions regarding these instructions, please contact [name of member of the survey staff] at [name of compiling agency].

When and Where to Report

Please provide the results of this survey by [specify the date] to

[Postal address/e-mail/telephone and fax numbers of compiler].

Respondents unable to meet the reporting deadline should contact [name of member of the survey staff] at [name of compiling agency] to request an extension.

How to Report

Data may be submitted electronically using the online survey form, e-mail, or paper forms (use the option applicable). Please keep a copy for your records.

[Name of compiling agency and date]

Notes

Note 1. Who Must Report

  • (a) Custodians that are resident in [name of economy] and that, as at June 30/December 31, [Year], manage the safekeeping of securities issued by nonresidents on behalf of residents of [name of economy], or on their own account. Resident custodians are defined as entities located in [name of economy] who manage the safekeeping of securities for investors.

  • (b) Investors that are resident in [name of economy] and that own equities or debt securities issued by unrelated nonresidents of [name of economy] as at June 30/December 31, [Year], as well as that do not entrust the safekeeping of any or all of these securities to resident custodians. This includes both those who invest for their own account as well as those who invest on behalf of asset pools, such as the managers of mutual funds, insurance companies, and pension funds.

All entities that receive a copy of the survey forms must reply. Those that do not fall into either of the above two categories need only complete the identification information on Form 1 and mark the box indicating that they are exempt from completing Forms 2a–2c (for end-investors) and Form 2d (for custodians).

Note 2. What Must Be Reported

All entities that receive a copy of the survey forms must complete the respondent identification section of Form 1 and return a copy to the [name of compiling agency] within 30 days of receipt of the survey forms.

All entities that receive a copy of the survey forms must submit their survey responses by [specify the date] to [name of compiling agency], whose address is listed in the key information section of Form 1. Respondents unable to meet the reporting schedule should contact [name of member of the survey staff shown on the front of this form] at [name of compiling agency] to request an extension.

End-Investors

Resident end-investors of [name of economy] should complete Form 1 and Form 2a (for equity holdings), Form 2b (for long-term debt securities holdings), and Form 2c (for short-term debt securities holdings) in respect of securities issued by unrelated nonresidents:

  • (a) held on their own account (i.e., not entrusted to a custodian) (Column 1) and

  • (b) entrusted to a nonresident custodian (Column 2) as at June 30/December 31, [Year].

Securities entrusted to resident custodians should be excluded from this form because they will be reported by the custodians.

Custodians’ own account holdings should be included in Form 2a, 2b, or 2c, as appropriate.

Reporters can file a consolidated report for all related entities that are resident in [name of economy], or each resident entity may file independently. If two or more entities are filing separately, please contact the member of the survey staff indicated on the first page of this form at [name of compiling agency] for additional identification numbers. Do not file both a consolidated report for the entire resident organization and for the separate units.

Custodians

In addition to Form 1, all custodians of [name of economy] should complete Form 2d in respect of securities issued by nonresidents and which were held as at June 30/December 31, [Year], on behalf of residents of [name of economy]. Report the holdings of equities in Column 1, long-term debt securities in Column 2, and short-term debt securities in Column 3.

Do not include own account holdings in Form 2d; these should be reported on Forms 2a–2c, as appropriate.

Securities issued by entities that are related to the investor should not be reported (see Note 6 on exclusion of securities issued by related enterprises).

Where securities have been entrusted by a resident of [name of economy] to a custodian who is a resident of [name of economy], and that custodian has passed the securities to another custodian, the first custodian should report the holding. The second (or subsequent) custodian in that chain of custody should not report holdings of securities issued by nonresidents held on behalf of another custodian.

All entities who receive any of the above forms must return the respondent identification section (Form 1) within 30 days of receipt of the forms, even those entities indicating that they are exempt from completing Form 1.

Those respondents meeting the criteria above (see Note 1) must return the completed survey forms (Forms 2a–2c for end-investors and Form 2d for custodians) by [specify the date].

Respondents unable to meet the reporting schedule should contact [name of compiling agency] indicated on the first page of this form to request an extension.

Note 3. Residence

The reporting unit for this form is a resident of [name of economy]: that is, an individual, an enterprise, or other institutional unit domiciled in [name of economy]. It includes branches and subsidiaries of nonresident enterprises if the branches or subsidiaries are domiciled in [name of economy]. Domicile is defined as the center of predominant economic interest of the entity: for instance, where an enterprise engages in production. Corporations legally registered in [name of economy] are considered to be resident even if they have no “physical presence.” A nonresident of [name of economy] is any individual, enterprise, or other organization domiciled in a country other than [name of economy]. Branches and subsidiaries of [name of economy] enterprises domiciled in other jurisdictions are regarded as nonresidents of [name of economy].

The securities are classified by the jurisdiction of residence of the issuer of the securities. The residence of an enterprise can be taken to be where it is legally incorporated or, in the absence of legal incorporation, where it is legally domiciled. The country of residence of the issuer may differ from the currency of issue, the place of issue, or the economy of the guarantor of the security. (Some securities are guaranteed by another party (such as the parent company or a government), and the guarantee may be either explicit or implicit. Even where the funds raised are for use by the guarantor, the residence of the issuer of the security should be used, not the residence of the guarantor.) Securities issued by international organizations should be shown under the separate code for international organizations (XX), not included under the economy in which the organization is located.

[If one or more international organization(s) is/are located in your economy: [Specify the name(s) of these international organizations] should not be considered to be resident(s) in [name of economy] and their holdings should not be reported in this return. However, pension funds for employees of these international organizations are considered to resident in [name of country]. (If not relevant, delete this paragraph.)]

Note 4. Definition of Equities and Debt Securities

Refer to Annex IV for details on definition and description of equity and debt securities. If you have any questions about how to classify an instrument, please contact the survey staff member indicated on the first page of this form at [name of compiling agency].

Note 5. Valuation

Market value should be used to report all holdings of securities. Do not report the face value of the security as the market value.

Equity securities should be reported at market prices converted to [domestic currency] using the exchange rate prevailing at June 30/December 31, [Year].

For enterprises listed on a stock exchange, the market value of your holding of their equity securities should be calculated using the market price on their main stock exchange prevailing at June 30/December 31, [Year].

For unlisted enterprises, if a market value is not available at June 30/December 31, [Year], estimate the market value of your holding of equity securities by using one of the six alternatives methods (see Box 3.1).

Debt securities should be recorded at market prices converted to [domestic currency], using the exchange rate prevailing at the close of business on June 30/December 31, [Year]. For listed debt securities, a quoted traded market price at the close of business on June 30/December 31, [Year], should be used. When market prices are unavailable (e.g., in the case of unlisted debt securities), the use of following methods for estimating fair value (which is an approximation of the market value of such instruments) are recommended:

  • discounting future cash flows to the present value using a market rate of interest14 and

  • using market prices of financial assets and liabilities that are similar.

Refer to Box 10.3 of BPM6 Compilation Guide for further details.

Note 6. Exclusion of Securities Issued by Related Enterprises

Securities (whether equities or debt) issued by a nonresident enterprise that is related to the resident owner of those securities should be excluded from this survey. Related nonresident enterprises are enterprises in which an enterprise group has an equity interest of 10 percent or more, or where a nonresident has more than 10 percent or more holdings in your group. Ownership is measured in terms of ordinary shares or voting stock of incorporated enterprises or equivalent beneficial interest in unincorporated enterprises. Where such a relationship exists, exclude all securities (debt and equities) from the scope of Coordinated Portfolio Investment Survey.

The only exception is if the nonresident entity that issued the security and the resident owner of the security are affiliated financial intermediaries (e.g., banks). In these circumstances, securities issued by related enterprises, other than equity or permanent debt, should be reported in this survey.

Note 7. Treatment of Securities Involved in Repurchase and Securities Lending Arrangements

A repurchase agreement is an arrangement involving the provision of securities in exchange for cash with a commitment to repurchase the same or similar securities at a fixed price. A reverse repo is the same transaction seen from the other side: that is, an agreement whereby a security is purchased at a specified price with a commitment to resell the same or similar securities at a fixed price on a specified future date. Securities (or stock or bond) lending is an arrangement whereby the ownership of a security is transferred in return for collateral, usually another security, under the condition that the security or similar securities will revert to its original owner at a specified future date.

  • Securities acquired under reverse repos or securities borrowing arrangements are to be excluded from the survey.

  • Securities sold under repos or “lent” under securities lending arrangements are to be included in the survey.

  • Securities acquired under reverse repo or securities borrowing arrangements and subsequently sold to a third party should be reported as a negative holding—namely, a short position (see Form 2, Item 10).

  • Valuations of securities under repurchase or securities lending arrangements should be at market value as at June 30/December 31, [Year].

Note 8. Treatment of Depository Receipts

Depository receipts (DRs), which denote ownership of equity or debt securities issued by nonresidents (for instance, American DRs and global DRs), should be attributed to the country of residence of the issuer of the security underlying the DR. Financial intermediaries should not report holdings of any securities against which DRs have been issued and sold; however, if a DR has been issued before the financial institution arranging the issue has acquired the underlying securities, that financial institution should report a negative holding in the underlying security.

Note 9. Treatment of Stripped Securities

Stripped securities (strips) are securities that have been transformed from a principal amount with periodic interest coupons into a series of zero-coupon securities, with the range of maturities matching the coupon payment dates and the redemption date of the principal amount.

  • If strips remain the direct obligation of the original issuer, then the residence of the issuer of the strips remains the same as for the original security. Dealers who request that a settlement house or clearing house create strips from an existing security issued by a nonresident should not report ownership of the underlying security after the strips have been created.

  • If strips have been created and issued by an entity in its own name, then the security should be classified according to the residence of the issuer of the strips. In turn, such an issuer of strips should report its ownership of the underlying securities if they were issued by a nonresident.

Strips with an original maturity of less than one year are classified as money market instruments and thus, if identifiable, should be reported as short-term debt securities.

Refer to paragraphs 3.49–3.80 in Chapter 3 of this Guide for additional details on notes 7–9.

Note 10. Asset-Backed Securities

In reporting the market value of holdings of asset-backed securities, the respondent must be aware of the possibility of early partial redemption of principal. The market value of the principal amount outstanding at June 30/December 31, [Year], should be reported; if principal has been repaid, this market value will not be the same as the original face value revalued at end-period market prices.

If there are any questions regarding these instructions, please contact the survey staff member at [name of compiling agency] indicated on the front of this form.

uch06fig08
Notes: For presentation, only the first and last countries on the list are shown here. The complete list of countries is shown in Annex B of Appendix IA.a In general, for small economies with an international financial center (SEIFiC), the jurisdiction of issuers is concentrated in a small set of economies and mostly known to the national compilers. Hence, jurisdiction of issuers be listed in the first column for SEIFiC.
uch06fig09
Notes: For presentation, only the first and last countries on the list are shown here. The complete list of countries is shown in Annex B of Appendix IA.a In general, for small economies with an international financial center (SEIFiC), the jurisdiction of issuers is concentrated in a small set of economies and mostly known to the national compilers. Hence, jurisdiction of issuers be listed in the first column for SEIFiC.
uch06fig10
Notes: For presentation, only the first and last countries on the list are shown here. The complete list of countries is shown in Annex B of Appendix IA.a In general, for small economies with an international financial center (SEIFiC), the jurisdiction of issuers is concentrated in a small set of economies and mostly known to the national compilers. Hence, jurisdiction of issuers be listed in the first column for SEIFiC.
uch06fig11
Notes: For presentation, only the first and last countries on the list are shown here. The complete list of countries is shown in Annex B of Appendix IA.a In general, for small economies with an international financial center (SEIFiC), the jurisdiction of issuers is concentrated in a small set of economies and mostly known to the national compilers. Hence, jurisdiction of issuers be listed in the first column for SEIFiC.

Appendix 2 Web Links of Survey Forms and Instructions of Some CPIS Participants

This appendix provides weblinks to portfolio investment survey forms/instructions in selected countries reporting the Coordinated Portfolio Investment Survey. These links would be helpful for countries that intend to develop portfolio investment data collection system or improve the existing systems. The following list will be updated with links to latest forms/instructions of the following countries and survey questions/forms of other countries that could be of use from time to time:

Appendix 3 Web Links of Reporting Forms for CPIS, SEFER, and SSIO Data Submission to IMF

Beginning with the reporting of end-June 2013 data, IMF Statistics Department (STA) introduced semiannual collection of both the Coordinated Portfolio Investment Survey (CPIS) and Securities Held as Foreign Exchange Reserves (SEFER) data for the reference periods end-June and end-December each year. As highlighted in Chapter 1, CPIS semiannual data should be reported to STA no later than 6.5 months after the end of the reference period as per the following reporting schedule:

  • Report End-June Year t data: No later than January 14, Year f + 1

  • Report End-December Year t data: No later than July 15, Year f + 1

SEFER semiannual data should be reported to STA no later than six months after the end of the reference period as per the following reporting schedule:

  • Report End-June Year t data: No later than December 31, Year t

  • Report End-December Year t data: No later than June 30, Year f + 1

The economies that continue to report only annual CPIS and/or annual SEFER data should use the above deadlines for end-December.

Regarding Securities Held by International Organizations (SSIO), annual data should be reported to STA according to the same timeline as for the end-December CPIS and end-December SEFER, for inclusion with the published results from these surveys.

The reporting economies should use the following data templates posted on the CPIS portal for reporting the seven CPIS tables and metadata questionnaire, two SEFER tables, and SSIO data

  • CPIS Data Template,

  • CPIS Metadata Questionnaire,

  • SEFER Data Template, and

  • SSIO Data Template.

(See http://0-data-imf-org.library.svsu.edu/?sk=B981B4E3–4E58–467E-9B90–9DE0C3367363&sId=1481574691948)

Appendix 4 Definition and Description of Securities

Equity and Investment Fund Shares

Equity consists of all instruments and records that acknowledge claims on the residual value of a corporation or quasi-corporation, after the claims of all creditors have been met. Equity may be split into listed shares, unlisted shares, and other equity. Both listed and unlisted shares are equity securities. Equity securities are commonly called shares or stocks. Other equity is equity that is not in the form of securities (Appendix 1 of 2013 External Debt Statistics: Guide for Compilers and Users (2013 EDS Guide) and Chapter 3 of Handbook on Securities Statistics (HSS)).

Ordinary Shares

Ordinary shares (or “common” shares) usually give holders the right to participate in the corporation’s general policymaking and have the right to attend, speak, and vote (in the case of voting shares) at general meetings; holders are usually entitled to a preferential subscription in the event of a capital increase and generally have the right to a share in the corporation’s profits (HSS, Chapter 3).

Preference Shares

Preference shares (or “preferred” shares or stocks) typically rank higher than ordinary shares. Part of the share capital of a company ranks after secured creditors but before ordinary shareholders in the event of liquidation. Preference rights are defined in the articles of association of the relevant company but may relate to dividend, voting rights, or distribution of surplus assets. Like ordinary shares, preferred shares represent partial ownership of a corporation. Unlike ordinary shares, however, preferred shares often pay a fixed dividend. In general, preferred shares comprise the following (Table 3.1 of HSS describes the different types or preferred shares):

  • cumulative or noncumulative preferred shares, depending on whether dividends payable are accumulated or not;

  • participating or nonparticipating preferred shares, depending on whether they confer the right to a share in the residual value of the corporation on dissolution (with participating preferred shares treated as equity securities, regardless of whether the income is fixed or determined according to a formula, while non-participating preferred shares are classified as debt securities);

  • convertible or exchangeable preferred shares, depending on whether they can be converted into a specified amount of ordinary shares or bonds;

  • redeemable or retractable preferred shares, which are redeemed or retracted at a fixed price on a specified date or during a specified period of time at the request of either the corporation or the holder;

  • straight perpetual preferred shares, which have no maturity date and pay fixed dividends for as long as they remain outstanding; rate reset preferred shares or fixed floating rate preferred shares, which pay fixed dividends until the reset date (which is typically also the call date); and floating rate preferred shares, which pay dividends on a quarterly (or in some cases monthly) basis—dividends fluctuate in relation to a reference rate, usually a prime rate, although some may have a “floor” or a minimum dividend, all of which have different dividend payment patterns; and

  • split and structured preferred shares, which are based on an underlying portfolio of ordinary shares or other financial instruments.

Depository Receipts

Depository receipts (DRs) are securities that represent ownership of securities in other economies. DRs listed on one exchange represent ownership of securities listed on another exchange, and ownership of the DRs is treated as if it represents direct ownership of the underlying securities (a depository is an entity to whom securities are entrusted for safekeeping). They facilitate transactions in securities in economies other than their home listing. They allow a nonresident institutional unit to introduce its debt or equity securities on another market in a form more readily acceptable to the investors in that market. Although the underlying securities may be equity or debt securities, the large majority are equities. American depository receipts (ADRs) and global depository receipts (GDRs) are the most common types of DRs. ADRs and GDRs are normally denominated in U.S. dollars and euros. ADRs are mostly traded on U.S. exchanges and GDRs on European stock exchanges. In general, each DR represents a single or more than one share of an underlying equity.

Investment Fund Shares or Units

Investment funds are collective investment undertakings through which investors pool funds for investment in financial or nonfinancial assets or both. These are sometimes known as mutual funds. These funds issue shares (if a corporate structure is used) or units (if a trust structure is used). The shares in the fund purchased by individual investors represent an ownership interest in the pool of underlying assets (i.e., the investors have an equity stake). Because professional fund managers make the selection of assets, investment funds provide individual investors with an opportunity to invest in a diversified and professionally managed portfolio of securities without the need of detailed knowledge of the individual companies issuing the stocks and bonds.

Investment funds include money market funds (MMF) and non-MMF investment funds. MMFs are investment funds that invest only or primarily in short-term debt securities such as treasury bills, certificates of deposit (CD), and commercial paper (CP). Non-MMF investment funds mainly invest in a range of assets, long-term in nature, also including commodity-linked investments, real estate, shares in other investment funds, and structured assets (BPM6, paragraphs 5.28–5.30). Open-ended funds or open funds are those whose shares or units are, at the request of the holders, repurchased or redeemed directly or indirectly out of the undertaking’s assets. Closed-ended, closed, or exchange-traded funds are those with a fixed share capital, where investors entering or leaving the fund must buy or sell existing shares.

Debt Securities

Due to the increasing internationalization of debt instruments, they are defined by market, interest, maturity, currency, borrower, amount issued, collateral, convertibility, and subordination.

Defined by the Market

According to the “location of issue” approach, debt securities issued by a resident of the same economy in which the security is issued are classified as domestically issued, regardless of the currency of issue. All other issues are classified as internationally issued. As financial markets become more open to foreign issuers and investors, the boundaries between domestic and international securities markets become less clear. The matrix below helps to classify a debt instrument by market, taking into account the other main elements of the instrument. Many (domestic) sovereign bonds are now traded intensively on international markets. Nevertheless, they still remain domestic instruments; their form, tax, and custody aspects are fixed under specific rules, which all are different, depending on the market.

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International Bond

International bond is a bond issued by a borrower in a foreign country. They include foreign bonds, parallel bonds, global bonds, and Eurobonds.

Global Bond

Global bond is an international issue placed at the same time in the Euro and one or more domestic markets with securities fungible between the markets.

Eurobond

Eurobond is a bond issued by a borrower in a foreign country, denominated in a Eurocurrency (e.g., U.S. dollar, Canadian dollar, yen, euro, etc.), underwritten, and sold by an international syndicate of financial institutions.

Foreign Bond

Foreign bond is a security issued by a nonresident borrower in a domestic capital market other than its own, usually denominated in the currency of that market. Issues are placed publicly or privately. These bonds generally adopt the characteristics of the domestic market of the country in which they are issued, such as in terms of registration (bearer or registered form), settlement, and coupon payment arrangements. Common foreign bonds are Yankee bonds (U.S. market), Samurai bonds (Japan market), and Bulldog bonds (U.K. market).

Defined by Interest

Fixed-Rate Bond

Fixed-rate bond is a fixed-rate, interest-bearing debt security.

Bull and Bear Bond

Bull and bear bond is a fixed-interest bond whose value at maturity is dependent on the performance of a stock market index. The issue is divided into two parts: a bull bond and a bear bond. The bull bond’s redemption value rises if the market index increases and declines if the index decreases. Conversely, the bear bond has a higher redemption value if the stock market weakens and a lower value if stock prices rise.

Step-Up or Step-Down Bond (or Note)

Rate will go up or down as indicated in the terms and conditions of the notes.

Zero-Coupon Bond

Zero-coupon bond is a bond without a coupon providing interest payments. It has an issue price well below 100 percent, with repayment on maturity at face value or par. The investor’s return is the difference between the issue price and redemption value. Variants of zero-coupon bonds include the following:

Capital growth bond: Issue price of par (100 percent) with redemption at a multiple of that amount.

Deep-discount bond: A bond with issue price significantly below maturity price because of a lack of coupon or a coupon below market rate.

Liquid yield option note (LYON): A LYON combines the features of a zero-coupon bond with those of a convertible bond. The zero-coupon bond pays no interest until it is redeemed at or before maturity; the difference between the issue price and the redemption price represents the accrued interest. In addition, the LYON bond may be converted by the holder into equity of the issuing corporation within a specified period and at a specified conversion price.

Floating-Rate Notes

Floating-rate notes (FRNs) are medium-to long-term debt securities with variable interest rates that are adjusted periodically (typically every one, three, or six months). The interest rate is usually fixed at a specified spread over one of the following specified deposit rates:

  • London interbank offered rate (LIBOR),

  • London interbank bid rate (LIBID), or

  • London interbank mean rate (LIMEAN)—average of LIBOR and LIBID

FRNs may also use short-term obligations of the U.S. government (Treasury bills) to establish their interest rate. Interest is payable at the end of each interest period.

Variants of FRN are the following:

Drop-lock bond: The drop-lock bond combines the features of both floating-and fixed-rate securities. It is issued with a floating interest rate that is reset semiannually at a specified margin above a base rate, such as six months LIBOR. This continues until the base rate is at or below a specified trigger rate on an interest fixing date or, in some cases, on two consecutive interest fixing dates. At that time, the interest rate becomes fixed at a specified rate for the remaining lifetime of the bond.

Mismatch FRN: FRN with a coupon structure that is refixed more often and for different maturities than the interest periods (e.g., the interest rate is based on six months LIBOR but adjusted every month).

Mini-max (or collared) FRN: FRN with a minimum and a maximum interest rate.

Capped FRN: FRN with a maximum interest rate.

Flip-flop FRN: FRN that combines an FRN with a very long final maturity, or even a perpetual issue, and an investor option to convert after a specified period into a short-dated FRN that typically pays a lower margin over LIBOR than the original issue. The investor further has the option at a later date to convert back into the initial issue before redemption of the short-dated note.

Convertible rate FRN: Issue that carries the option to convert either from an initial floating-rate note into a fixed-rate bond or from a fixed-rate bond into a floating-rate note. This provides ways in which investors and borrowers can speculate or hedge against the future course of interest rates.

Variable-rate note: FRN where the margin over the reference rate is fixed by the issuer and the remarketing agent several days before the following interest period. The holders, during a predetermined period of time, have the right to either bid for the new applicable margin over the reference rate or (under certain conditions) put the notes to the arranger (but not the issuer) on the following interest payment date (2013 EDS Guide, appendix 1).

Sukuk

Sukuk are Islamic instruments that are issued by Islamic financial institutions. A distinguishing feature of Sukuk is that they are structured to be consistent with Islamic law, which does not allow the charging of interest. The holders are entitled to a share (rent) from the return on the underlying assets. Sukuk can be classified by type of underlying contract, such as Murābahah, Ijārah, Salam, Istisnā, Mushārakah, Mudārabah, and Wakalah. They should be classified as debt securities, unless the owner of the security has a claim on the residual value of the issuing entity (HSS, annex 3 and 2013 EDS Guide, appendix 1).

Index-Linked Securities

Index-linked securities are debt instruments with coupon and principal payments linked to commodity prices, interest rates, stock exchange, or other price indices. The benefits to the issuer of indexing include a reduction in interest costs if the deal is targeted at a particular group of investors’ requirements and an ability to hedge an exposed position in a particular market. The benefit to investors is in the ability to gain exposure to a wide range of markets (e.g., foreign exchange or property markets) without the same degree of risk that may be involved in investing in the markets directly. Issues linked to a consumer price index also provide investors with protection against inflation (2013 EDS Guide, appendix 1).

Defined by Maturity

Bond with Call Option

The issuer has the right to redeem the bond at a specified earlier date than the one originally fixed as the final maturity.

Bond with Put Option

The investor has the right to require redemption of the principal at a specified date earlier than the one originally fixed as the final maturity.

Retractable Bond

Retractable bond is an issue carrying the option (for both the issuer and the investor) for early redemption at one or several fixed dates.

Extendable Bond

The investor has the option at one or several fixed dates to extend the maturity.

Perpetual Bond

Perpetual bond is due for redemption only in the case of the borrower’s liquidation. Usually the terms and conditions provide a call option at a premium. The interest rate can be fixed for the whole maturity or only for an initial period (e.g., 10 years). For each subsequent period, the interest is reset as provided in the terms and conditions.

Bullet Bond

Bullet bond is an issue with no call and no prepayments until maturity.

Sinking Fund

Sinking fund is a payment made by the borrower on a regular basis to a special account to set aside the necessary funds for the redemption of its long-term debt. In the Euromarket, borrowers can meet their requirements through purchases in the open market or through drawings by lot.

Defined by Currency

Dual-Currency Bond

A dual-currency bond is a hybrid debt instrument with payment obligations over the life of the issue in two different currencies. The borrower makes coupon payments in one currency, but redeems the principal at maturity in another currency in an amount fixed at the time of the issue of the bonds. The price of the bonds in the secondary market is indicated as a percentage of the redemption amount.

The following are variants of dual-currency bonds:

Foreign interest payment security (FIPS): FIPS is an instrument in the Swiss capital market. Its features are similar to a reverse dual-currency bond that offers interest payments in a foreign currency but keeps the principal in Swiss francs.

Adjustable long-term puttable security: The currency conditions are similar to a FIPS; however, the bonds have a floating interest rate and a put option.

Yen-linked bond: The yen-linked bond is expressed in U.S. dollars or Swiss francs, whose face value is also indicated in yen (parity fixed at issuance). Issuance and redemption are in yen, which are converted into the original currency at the parity of the payment date.

Multiple currency clause bond: The multiple currency clause bond is an issue with an investor’s option to choose the currency for redemption and sometimes also for interest payments.

Special Drawing Right (SDR) bond: The SDR bond is issued in the currency of the IMF. The SDR is a composite currency unit based on a standard basket system of valuation. SDR bonds are traded only in U.S. dollars.

Shogun or geisha bond: The shogun bond is a non-yen-denominated issue in the Japanese domestic market by a non-Japanese borrower.

Defined by Borrower

Brady Bonds

Brady bonds, named after U.S. Treasury Secretary Nicholas Brady, arose from the Brady Plan. This plan was a voluntary market-based approach, developed in the late 1980s, to reduce debt and debt service owed to commercial banks by a number of emerging market countries. Brady bonds were issued by the debtor country in exchange for commercial bank loans (and in some cases unpaid interest). In essence, they provided a mechanism by which debtor countries could repackage existing debt. They are dollar denominated, “issued” in the international markets. The principal amount is usually (but not always) collateralized by specially issued U.S. Treasury 30-year zero-coupon bonds purchased by the debtor country. Interest payments on Brady bonds, in some cases, are guaranteed by securities of at least double-A-rated credit quality held with the New York Federal Reserve Bank. Brady bonds are more negotiable than the original bank loans but come in different forms. The main types are par bonds, discount bonds, debt-conversion bonds, and front-loaded interest reduction bonds (2013 EDS Guide, appendix 1).

Guaranteed Bond

Guaranteed bonds have their interest, principal, or both guaranteed by another corporation. It is common for a parent company to guarantee bonds issued by subsidiaries.

Defined by Amount Issued

Deferred or Partial-Payment Issues

Deferred or partial-payment issues are instruments that consist of debt obligations where the investor pays only a portion of the issue price on the initial payment date and the balance several months later. The structure allows the borrower to achieve a lower all-in cost compared with straight issues by offering the investor a potential gain from a decline in rates and protection against depreciation of the currency between the time of the initial payment and that of the final payment. The appeal of these securities is a function of the interest rate and currency outlook at any given time.

Defined by Collateral

Mortgage-Backed Security

Mortgage-backed security is a generic term that refers to securities backed by mortgages, including pass-through securities, mortgage-backed bonds, mortgage pay-through securities, and collateralized mortgage obligations (see below).

Pass-Through Mortgage-Backed Security

Pass-through mortgage-backed security is a security representing an ownership interest in an underlying pool of mortgages. The cash flow from the underlying mortgages is “passed through” to the security holder as monthly payments of principal, interest, and prepayments. Pass-through securities have been guaranteed and issued by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA or “Fannie Mae”), and the Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”), as well as private institutions.

Private Pay-Through Security

These securities are secured by mortgage collateral and are issued by private financial entities (sometimes called “private conduits”) with no guarantees by any government or government-sponsored agency. Some securities are issued by public offering (registered with the Securities and Exchange Commission), and others are marketed through private placement.

Collateralized Mortgage Obligation

Collateralized mortgage obligations are debt obligations of an entity established by a financial institution or other sponsor. They are collateralized by whole mortgage loans or by mortgage-backed pass-through securities guaranteed by the GNMA, the FNMA, or the FHLMC. They are sold in multimaturity classes called tranches.

Asset-Backed Security

Asset-backed security is a security collateralized by loans, leases, unsecured receivables, or installment contracts on personal property, automobiles, or credit cards. The cash flows generated by the underlying obligations are used to pay principal and interest to the asset-backed security holders.

Collateralized Debt Obligations

Collateralized debt obligations (CDOs) are bonds whose income payments and principal repayments are dependent on a pool of instruments. Typically, they are backed by a diversified pool of loan and bond instruments either purchased in the secondary market or from the balance sheet of a commercial bank. The diversified nature of the instruments differentiates a CDO from an asset-backed security, which is backed by a homogeneous pool of instruments, such as mortgages and credit card loans. Issuers are often provided with different tranches of the security, so that if there are prepayments the first tier will be repaid first, the second tier next, etc. This allows investors to take different levels of credit risk. The pricing of each tranche reflects the probability of repayment (2013 EDS Guide, appendix 1).

Covered Bonds

Covered bonds are dual-recourse bonds with a claim on the issuer and, if the issuer defaults, a cover pool of high-quality collateral (which the issuer is required to maintain). They are issued under specific legislation (or contracts that emulate this). The recourse to the pool of collateral and consequent reduction in credit risk transfer distinguishes covered bonds from asset-backed securities (2013 EDS Guide, appendix 1).

Defined by Convertibility/Exchangeability

Convertible Issue

Convertible issue is a bond or note that can be converted for newly issued shares or bonds at predetermined prices during specified periods of time.

Exchangeable Issue

Exchangeable issue is a bond or note that can be exchanged for existing shares or bonds of a third party at predetermined prices during specified periods of time.

Straight Bond

Straight bond is a bond without clauses granting conversion or warrant privileges.

Reverse Convertible Bond Obligation

Reverse convertible bond obligation is a convertible bond that may be redeemed at the issuer’s discretion against existing shares of an underlying company that has no economic relation with the issuer or the guarantor of the bonds.

Catastrophe bonds

Catastrophe bonds (also known as cat bonds) are bonds whose principal and interest is forgiven in the event of a catastrophe. They are typically issued by insurers as an alternative to selling traditional catastrophe reinsurance. If no catastrophe occurred, the insurance company pays a coupon (usually at a high rate given the risk inherent in the bond) to the investors. If a catastrophe occurs, the forgiveness of the bond supports the insurance company as it makes payments to its claim holders (2013 EDS Guide, appendix 1).

Defined by Subordination

Subordinated debt (sometimes called mezzanine finance) has many of the characteristics of both debt and equity. A subordinated creditor agrees to rank after senior creditors but before ordinary shareholders in a liquidation. For regulatory purposes, certain forms of subordinated debt issued by financial institutions may be treated, like equity, as “primary capital.”

Short-Term Debt Securities

Euronote

Euronote is a short-term, negotiable bearer promissory note usually issued at a discount with maturities of less than one year.

Certificate of Deposit

CD is a certificate issued by a deposit-taking corporation acknowledging a deposit in that corporation for a specified period of time at a specified rate of interest. It is essentially a form of negotiable time deposit (evidenced by the certificate). Nevertheless, a small minority of CDs are known to be nonnegotiable—not negotiable. CDs are widely issued in the domestic and international markets, and are typically bearer instruments, issued at face value with original maturities of one to six months, although there have been maturities of up to seven years. Typically, interest costs are payable at maturity for issues of one year or less, and semiannually on longer issues (2013 EDS Guide, appendix 1).

Note Issuance Facility/Revolving Underwriting Facility

A note issued under a note issuance facility (NIF)/revolving underwriting facility (RUF) is a short-term instrument issued under a legally binding medium-term facility—a form of revolving credit. Banks underwrite, for a fee, the issuance of this three-or six-month paper and may be called upon to purchase any unsold paper at each rollover date, or to provide standby credit facilities. The basic difference between an NIF and an RUF is in the underwriting guarantee: under an RUF, the underwriting banks agree to provide loans should the issue fail; but under an NIF, they could either lend or purchase the outstanding notes. First developed in the early 1980s, the market for NIFs grew substantially for a short period in the mid-1980s. It was a potentially profitable market for international banks at a time when the syndicated credits market was depressed, following the debt crisis of the early 1980s. By the early 1990s, euro CP and euro medium-term notes had become more popular forms of finance (2013 EDS Guide, appendix 1).

Transferable Revolving Underwriting Facility

Transferable revolving underwriting facility is similar to an RUF, but the underwriting banks’ contingent liability (backup line) to purchase notes in the event of nonplacement by the borrower is fully transferable.

Grantor Underwriting Note

Grantor underwriting note is a floating-rate note facility and is similar to an RUF, in that a group of banks (grantors) undertake to purchase any notes put back to them by investors on any FRN interest rate fixing date. Put notes are then auctioned out to the market by the grantors.

Banker’s Acceptance

Banker’s acceptance is a negotiable order (a draft or a bill of exchange) to pay a specified amount of money on a future date, drawn on and guaranteed by a financial corporation. These drafts are usually drawn for international trade finance purposes as an order to pay an exporter a stated sum on a specific future date for goods received. The act of a financial corporation stamping the word “accepted” on the draft creates a banker’s acceptance. The acceptance represents an unconditional claim on the part of the owner and an unconditional liability on the part of the accepting financial corporation; the financial corporation’s counterpart asset is a claim on its customer. Bankers’ acceptances are treated as financial assets from the time of acceptance, even though funds may not be exchanged until a later stage. By writing the word “accepted” on the face of the draft, the bank carries primary obligation, guaranteeing payment to the owner of the acceptance. Bankers’ acceptances can be discounted in the secondary market, the discount reflecting the time to maturity and credit quality of the guaranteeing bank. Since the banker’s acceptance carries a financial corporation’s obligation to pay (in effect “two-name paper”) and is negotiable, it becomes an attractive asset. Bankers’ acceptances are always sold at a discount and usually have maturities of up to 270 days (2013 EDS Guide, appendix 1).

Commercial Paper

CP is an unsecured promise to pay a certain amount on a stated maturity date, issued in bearer form. It enables corporations to raise short-term funds directly from end-investors through their own in-house CP sales team or via arranged placing through bank dealers. Short-term in nature, with maturities ranging from overnight to one year, CP is usually sold at a discount. A coupon is paid in a few markets. Typically, issue size ranges from $100,000 up to about $1 billion. In bypassing financial intermediaries in the short-term money markets, CP can offer a cheaper form of financing to corporations. But because of its unsecured nature, the credit quality of the issuer is important for the investor. Companies with a poor credit rating can obtain a higher rating for the issue by approaching their bank or insurance company for a third-party guarantee, or perhaps issue CP under a multiple option facility, which provides a backup line of credit should the issue be unsuccessful (2013 EDS Guide, appendix 1).

Treasury Bill

Treasury bills are government obligations, issued for periods of three to 12 months. They are traded on a discount basis. They are the most liquid form of short-term investment.

Municipal Note

Municipal notes are interest-bearing securities issued by state and local governments as interim financing for a period usually less than one year.

1

See Chapter 4 of this Guide for additional details on these approaches.

2

If the result <10 percent, investment type = portfolio investment; and if the result ≥10 percent, investment type = direct investment.

3

Until now, just a few cases have been identified, and most of the debt instruments are issued by the general government.

4

See paragraphs 3.34–3.42 of this Guide for details on market price valuation.

5

See BPM6, para 7.27.

6

As of end of June 2015.

7

As mentioned in Chapter 1 (see footnote 2), equity includes investment fund shares for the purpose of CPIS. Data on equity and investment fund shares are not collected separately.

8

An indication of the problem may be persistently large negative net errors and omissions in the balance of payments. Although there are many reasons for errors and omissions, and a low figure may only indicate offsetting errors and omissions, if the number is large and has been growing strongly since any liberalization of capital markets, there is a possibility that measured outflows in portfolio investment are undercounted. In some countries, estimates of cross-border portfolio investment are made on the basis of cumulative flows—but not included in the CPIS because there is no breakdown by the country of residence of the issuer.

9

On the ABS form.

10

Committee on Uniform Securities Identification Procedure.

11

On November 10, 2008, the Federal Reserve and the Treasury announced a restructuring of the government’s financial support to American International Group (AIG). As part of this restructuring, two new limited liability companies (LLCs)— Maiden Lane II LLC and Maiden Lane III LLC—were created. On November 25, 2008, the Federal Reserve Board of New York began extending credit to Maiden Lane III LLC, an LLC formed to purchase multisector collateralized debt obligations on which AIG had written credit default swap and similar contracts in return for the cancellation of those contracts. The loans to Maiden Lane II LLC and Maiden Lane III LLC were extended under the authority of section 13(3) of the Federal Reserve Act, which permitted the board, in unusual and exigent circumstances, to authorize Reserve Banks to extend credit to individuals, partnerships, and corporations. For additional details, see https://www.federalreserve.gov/regreform/reform-aig.htm.

12

For examples on the calculation of present value and accrual of interest costs, refer to the 2013 External Debt Statistics: Guide for Compilers and Users (appendix, Chapter 2).

13

Refer to the 2013 External Debt Statistics: Guide for Compilers and Users (appendix, Chapter 2) for examples on the calculation of present value and accrual of interest costs.

14

Refer to the 2013 External Debt Statistics: Guide for Compilers and Users (appendix, Chapter 2) for examples on the calculation of present value and accrual of interest costs.

Author: Venkat Josyula