Guide to Analysing Companies

C
CLOSING PRICE
77
01 Essential Finance 10/11/06 2:21 PM Page 77

---

CLS Bank
A bank based in New York and owned by dozens of other
banks worldwide which settles the $2 trillion or so that changes
hands each day on the foreign-exchange markets. Irrespec-
tive of time zones, where possible cls Bank aims to settle the
following day deals done in seven main currencies: US dollar,
Australian dollar, Canadian dollar, euro, sterling, yen and Swiss
franc. Most transactions are cleared during a five-hour window
when most of the central banks of the countries with the
participating currencies are open for business. The bulk of cls’s
business is accounted for by five main shareholders, which
between them account for nearly half the daily turnover in the
foreign-exchange markets. Other users, such as brokers and
fund managers, have to deal through one of the five.
cls is the main champion of continuous linked set-
tlement, a technique that has not only speeded up the settle-
ment of transactions in foreign-exchange markets but also
removed much of the counterparty risk (that is, of one or other
side not paying) that traders are exposed to when dealing in it.
CME
See chicago mercantile exchange.
COB
See commission des opérations de bourse.
COD
See cash on delivery.
C
78
CLS BANK
01 Essential Finance 10/11/06 2:21 PM Page 78

---

Co-financing
A technique for bringing the international muscle of institutions
such as the world bank or the Asian Development Bank to-
gether with the financing clout of commercial banks. Projects
in developing countries are co-financed jointly by the interna-
tional institution and a group of commercial banks. It gives
banks the comfort of knowing that borrowers rarely default
on loans from the World Bank and other such bodies. The
World Bank or other institution benefits from the extra money,
albeit on a quasi-commercial basis, that the commercial banks
can bring to a project.
Collar
There are several meanings.
 When trading options, the simultaneous selling of an
out-of-the money call option and the buying of
an in-the-money put option. In so doing, a trader
will create a collar by limiting both the upside and the
downside on the deal.
 When underwriting a new issue of securities, a collar
sets the minimum interest rate required by a buyer of
bonds and the lowest price that a bond issuer will
accept.
 When one company is taking over another, it may insist
on a collar which protects the acquirer from having to
put up more cash (or more of its own shares if it is
paying partly or wholly in equity), should the price of
its shares fall in the time between the agreement of the
terms of a deal (or its acceptance by shareholders) and its
closing.