Definition of Book-entry securities

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Book

A banker or trader's positions.

Book

cash A firm's cash balance as reported in its financial statements. Also called ledger cash.

Book profit

The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT.

Book runner

The managing underwriter for a new issue. The book runner maintains the book of securities sold.

Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.

Book value per share

The ratio of stockholder equity to the average number of common shares. book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).

Debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
other instruments.

Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Exempt securities

Instruments exempt from the registration requirements of the securities Act of 1933 or the
margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis,
commercial paper, and private placements.

Federal agency securities

securities issued by corporations and agencies created by the U.S. government,
such as the Federal Home Loan Bank Board and Ginnie Mae.

Government securities

Negotiable U.S. Treasury securities.

Limit order book

A record of unexecuted limit orders that is maintained by the specialist. These orders are
treated equally with other orders in terms of priority of execution.

Manufactured housing securities (MHSs)

Loans on manufactured homes - that is, factory-built or
prefabricated housing, including mobile homes.

Market-book ratio

Market price of a share divided by book value per share.

Matched book

A bank runs a matched book when the distribution of maturities of its assets and liabilities are equal.

Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.

Mortgage-backed securities

securities backed by a pool of mortgage loans.

Net book value

The current book value of an asset or liability; that is, its original book value net of any
accounting adjustments such as depreciation.

Open book

See: unmatched book.

Pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
where the holder receives the principal and interest payments. Related: mortgage pass-through security

Price/book ratio

Compares a stock's market value to the value of total assets less total liabilities (book
value). Determined by dividing current stock price by common stockholder equity per share (book value),
adjusted for stock splits. Also called Market-to-book.

Project loan securities

securities backed by a variety of FHA-insured loan types - primarily multi-family
apartment buildings, hospitals, and nursing homes.

Public Securities Administration (PSA)

The trade association for primary dealers in U.S. government
securities, including MBSs.

Securities & Exchange Commission

The SEC is a federal agency that regulates the U.S.financial markets.

Securities analysts

Related:financial analysts

Short book

See: unmatched book.

Stockholder's books

Set of books kept by firm management for its annual report that follows Financial
Accounting Standards Board rules. The tax books follow IRS tax rules.

Stripped mortgage-backed securities (SMBSs)

securities that redistribute the cash flows from the
underlying generic MBS collateral into the principal and interest components of the MBS to enhance their use
in meeting special needs of investors.

Tax books

Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
books follow Financial Accounting Standards Board rules.

Treasury securities

securities issued by the U.S. Department of the Treasury.

Unmatched book

If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the
condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making
trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched
book hedges its net market risk with futures and options, usually.
Related expressions: open book and short book.

BOOK VALUE

An asset’s cost basis minus accumulated depreciation.

BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. book value equals:
(Stockholders’ equity) / (Common stock shares outstanding)

Double entry

The system of recording business transactions in two accounts.

Reversing entry

An entry that is made at the beginning of the current period so that the systems and procedures do not have to be altered to allow for previously accrued items.

book value and book value per share

Generally speaking, these terms
refer to the balance sheet value of an asset (or less often of a liability) or
the balance sheet value of owners’ equity per share. Either term emphasizes
that the amount recorded in the accounts or on the books of a business
is the value being used. The total of the amounts reported for
owners’ equity in its balance sheet is divided by the number of stock
shares of a corporation to determine the book value per share of its capital
stock.

double-entry accounting

See accrual-basis accounting.

Securities and Exchange Commission (SEC)

The federal agency that
oversees the issuance of and trading in securities of public businesses.
The SEC has broad powers and can suspend the trading in securities of a
business. The SEC also has primary jurisdiction in making accounting
and financial reporting rules, but over the years it has largely deferred to
the private sector for the development of generally accepted accounting
principles (GAAP).

Book Value

The value of an asset as carried on the balance sheet of a
company. In reference to the value of a company, it is the net worth
(equity) of the company.

Book Value per Share

The book value of a company divided by the number of shares
outstanding

Market to Book Ratio

Measure of the book value of a company on a per share basis. It is
calculated by dividing the book value of the company by the
number of common shares outstanding.

open-book management

a philosophy about increasing a firm’s performance by involving all workers and by ensuring
that all workers have access to operational and financial
information necessary to achieve performance improvements

Book inventory

The amount of money invested in inventory, as per a company’s
accounting records. It is comprised of the beginning inventory balance, plus the
cost of any receipts, less the cost of sold or scrapped inventory. It may be significantly
different from the actual on-hand inventory, if the two are not periodically
reconciled.

Book value

An asset’s original cost, less any depreciation that has been subsequently incurred.

Entry

The act of recording an accounting transaction in the accounting books.

Journal entry

The formal accounting entry used to identify a business transaction. The
entry itemizes accounts that are debited and credited, and should include some
description of the reason for the entry.

book rate of return

Accounting income divided by book value.
Also called accounting rate of return.

book value

Net worth of the firm’s assets or liabilities according
to the balance sheet.

Securities and Exchange Commission (SEC)

Federal agency responsible for regulation of securities markets in the United
States.

Securities

A general term for stock, bonds, or other other financial assets.

Book Income

Pretax income reported on the income statement.

Securities and Exchange Commission (SEC)

A federal agency that administers securities legislation,
including the securities Acts of 1933 and 1934. Public companies in the United States
must register their securities with the SEC and file with the agency quarterly and annual financial
reports.

Re-entry

This is a provision in some term insurance policies that allow the insured the right to renew the policy at a more favourable rate by providing updated evidence of insurability.

Asset-Backed Securities

Bond or note secured by assets of company.

Book Returns

book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.

MBS Depository

A book-entry depository for GNMA securities. The depository was initially operated by
MBSCC and is currently in the process of becoming a separately incorporated, participant-owned, limitedpurpose
trust company organized under the State of New York Banking Law.

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