Terminology

Our terminology guide covers the most important terms, acronyms, and concepts used across the derivatives, risk management, and fintech industries.

Whether you’re navigating regulatory requirements, executing hedging strategies, or simply decoding industry jargon, this glossary is designed to help you speak the language of modern finance with confidence.

ALCO

Asset Liability Committee. A group within a bank or credit union responsible for overseeing risk and return on assets and liabilities, particularly with respect to interest rate and liquidity risks.

ALM

Asset Liability Management. A framework used by financial institutions to manage financial risks arising from mismatches between assets and liabilities, particularly related to interest rate risk and liquidity risk. 

CCS

Clearing Connectivity Standard is an industry standard that helps improve OTC derivative reporting and communication

CCP

Central Clearing Counterparty / Central Counterparty. Exchange established for cleared OTC derivatives margin, position and collateral statements.

CFTC

Commodities Futures Trading Commission. An independent agency with the mandate to regulate commodity futures and option and swaps markets in the United States.

CSA

Credit Support Annex is a bi-lateral agreement establishing terms of collateral posting between two derivative counterparties.

DCM

Designated Contract Market boards of trade (or exchanges) that operate under the regulatory oversight of the CFTC, pursuant to Section 5 of the Commodity Exchange Act (CEA), 7 USC 7.

DCO

Derivatives Clearing Organization is a CCP that is registered with the CFTC U.S. Commodity Futures Trading Commission.

Dodd-Frank

A comprehensive financial reform legislation in the United States enacted in 2010. It established regulatory frameworks for derivatives markets including requirements for swap data reporting, central clearing, and margining.

DTC

The Depository Trust Company, a subsidiary of DTCC; provides securities movements for NSCC’s net settlements, and settlement for institutional trades (which typically involve money and securities transfers between custodian banks and broker/dealers), as well as money market instruments.

DTCC

The Depository Trust & Clearing Corporation, through its subsidiaries, provides clearing, settlement and information services for over-the-counter derivatives.

FATCA

Foreign Account Tax Compliance Act requires non-U.S. foreign financial institutions (FFIs) and non-U.S. non-financial entities (NFFEs) to identify and disclose their U.S. account holders and members. Should they fail to do this, they will become subject to a new 30% U.S. withholding.

FCM

Futures Commission Merchant. An individual or firm who solicits or accepts orders to buy or sell futures contracts, options on futures, retail off-exchange forex contracts or swaps, on an exchange or through a clearinghouse.

FIA

Futures Industry Association is the primary industry organization for the centrally cleared futures and swaps markets.

Financial Swap

A financial swap is a derivative contract in which two parties exchange financial instruments, typically involving cash flows tied to different interest rates, currencies, or financial indexes. Common types include interest rate swaps, currency swaps, and commodity swaps. These are used for hedging risk or speculating on changes in market conditions.

FINRA

Financial Industry Regulatory Authority is the largest independent regulator for all securities firms doing business in the United States.

FSB

Financial Stability Board was established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability.

FVA

Funding Valuation Adjustment. A pricing adjustment made to account for the cost of funding uncollateralized derivatives positions.

FX

Foreign Exchange. The global marketplace for trading national currencies against one another. FX derivatives are used to hedge or speculate on changes in currency exchange rates.

GFMA

Global Financial Markets Association is an international association representing the common interests of the world’s leading financial and capital markets participants, with SIFMA the North American member.

GMEI

Global Markets Entity Identifier (formerly known as CICI) is the DTCC’s legal entity identifier solution offered in collaboration with SWIFT. See also LEI.

GTR

Global Trade Repository is an entity that centrally collects and maintains the records of over-the-counter (OTC) derivatives.

Hedge Accounting

A set of accounting rules that allows companies to match the timing of gains and losses on hedging instruments with the items they are intended to hedge, reducing earnings volatility.

IRR

Interest Rate Risk. The potential for investment losses due to fluctuations in interest rates, particularly important for financial institutions managing loan and deposit portfolios.

ISDA

International Swaps and Derivatives Association is the leading association for the over-the-counter derivatives industry.

ISDA Agreement

An ISDA Agreement is a standardized legal contract developed by the International Swaps and Derivatives Association (ISDA) to govern over-the-counter (OTC) derivatives transactions between two counterparties. It consists of a Master Agreement, Schedule, and trade confirmations. This agreement defines key terms such as payment netting, default provisions, termination events, and collateral requirements. By establishing consistent legal and credit risk terms, the ISDA Agreement helps reduce uncertainty and supports efficient risk management in derivative markets.

ISO

International Organization for Standardization is an international standard-setting body.

LEI

Legal Entity Identifier. A unique ID associated with a single legal entity, LEI’s allow for consistent identification of parties to financial transactions, facilitating a consistent and integrated view of exposures, see also CICI or GMEI.

LIBOR

London Interbank Offered Rate. A discontinued benchmark interest rate previously used for setting rates on trillions in loans and derivatives.

LSOC

Legally segregated, operationally commingled describes legal status in customer margin holdings for cleared transactions.

LOU

Local Operating Unit local implementers of the global system offering local registration, validation, and maintenance of reference data.

M2M

Mark-to-Market. A valuation method that measures the fair value of accounts that can fluctuate over time, such as derivatives.

NFA

National Futures Association is the self regulatory organization for the U.S. derivative industry, including on-exchange traded futures, retail off-exchange foreign currency and OTC derivatives.

OIS

Overnight Index Swap. A type of interest rate swap where a fixed rate is exchanged for a floating rate linked to an overnight index such as SOFR.

PLM

Portfolio Layer Method. A hedge accounting strategy that allows a portion of a closed portfolio of financial assets to be designated as the hedged item in a fair value hedge.

SDR

Swaps Data Repository are entities mandated by the Dodd-Frank Act to provide a central facility for swap data reporting and record keeping.

SOFR

Secured Overnight Financing Rate. The benchmark rate replacing LIBOR for USD-denominated derivatives and loans, based on transactions in the U.S. Treasury repo market.

Swap

A financial contract in which two counterparties agree to exchange sets of cash flows in the future. The most common type is an interest rate swap, where one party pays a fixed rate and the other pays a floating rate.

Swap Transaction

A swap transaction refers to the execution of a financial swap between two counterparties. This transaction outlines the terms of the swap, including the notional amount, payment frequency, start and end dates, and pricing terms such as fixed versus floating rates. Swap transactions are governed by documentation such as ISDA agreements and may be cleared through a CCP or traded bilaterally.

TCA

Transaction Cost Analysis. A process to assess the quality and cost efficiency of trading execution, often used in compliance and performance benchmarking.

XVA

Collective term for valuation adjustments (CVA, DVA, FVA, MVA, etc.) that reflect various costs in the valuation of derivatives, such as credit risk and funding.