Fixed-Income Brokers and Dealers Key Terms

Learn popular and important terminology of fixed-income brokers and dealers

By Christine Foley

Fixed income brokers and dealers are popular to do business with due to their considered safe nature, being backed by the nation, state or city governments. Examples of fixed-income securities include municipal and treasury bonds. When dealing with fixed-income brokers and dealers, it can help to be educated on their jargon to improve the flow of communication. You'll want to know about bid lists, defeasance of fixed-income assets, and how an option-adjusted spread will affect you.

Bid list

The bid list is a written list, or inventory, of the different securities that are being held by a particular investor. Bid lists are presented to fixed-income brokers so that they can quote the prices to the investor at which they would be willing to purchase the securities in the inventory.
Try: Yahoo.com offers information with respect to MarketAxess and it being awarded a patent for functionality in regards to its electronic bid list and offer list.

Bulge bracket dealers

Bulge bracket dealers are some of the most well-known fixed- income brokers and dealers in the United States. Many of these brokers and dealers are associated with Wall Street. They work for large companies, such as Goldman Sachs, Merrill Lynch, Morgan Stanley and Deutsche Bank.
Try: Zacks.com offers information on the trimming of bulge bracket dealers due to subprime earnings.

Concessions

Concessions are the fees that are paid to fixed-income brokers and dealers in return for their underwriting or selling an investor's debt securities. When mentioned in respect to a reference notes transaction, the concession is the only portion of the total concession that a dealer or broker would earn.
Try: Fidelity.com discusses its fixed-income concessions, including its minimum and maximum annual concessions.

Defeasance

Defeasance occurs in fixed-income assets when they are of extremely high quality. Typically, these types of fixed-income assets would have a rating of AAA or be backed by the government. The cash flows of these fixed-income assets would be matched precisely with the structured and well-defined liability payments that are made by the purchaser of the assets.
Try: On Investopedia.com, interested parties can learn how defeasance is able to affect and reduce fees that have been associated with commercial real estate.

Lead(s)

Lead(s) are the one or more primary dealers that have been put in charge of the responsibility to underwrite and distribute for a particular syndicated debt issuance.
Try: Reuters.com discusses the hiring of Michael Gelband by Millennium Management LLC to lead its global fixed-income business.

Option-adjusted spread

An option-adjusted spread is often abbreviated as OAS. This spread occurs between a fixed-income security and a benchmark security.
Try: To learn how to calculate the option-adjusted spread (OAS), review the material presented at MathWorks.com.