Fitch Rated $5.7B U.S. Secondary Market Synthetic Securities in First Half '04.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. assigned ratings to 556 secondary market synthetic securities with dollar volume totaling $5.7 billion during the first six months of 2004. The number represents a 63.5% increase from the number of issues rated during the first half of 2003 when 340 issues were rated. Of the volume rated 98.0% or $5.6 billion of the securities were secondary market synthetic securities with put options. The remaining 2.0% of the rated securities were inverse (mathematics) inverse - Given a function, f : D -> C, a function g : C -> D is called a left inverse for f if for all d in D, g (f d) = d and a right inverse if, for all c in C, f (g c) = c and an inverse if both conditions hold. floating-rate receipts and custodial receipts. The number of issues rated and dollar volume of the securities have been increasing since Fitch began rating secondary market synthetic securities in 1998. Despite market uncertainties, Fitch expects continued growth in the number of securities rated during the second half of 2004 due to its increasing market share, new programs under review and strong investor demand for the securities. Secondary market synthetic securities were developed in the 1980s and were targeted to specific groups of institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. . The securities include custodial or trust receipts, auction rate receipts, inverse floating-rate receipts, and synthetic floating-rate receipts with put features, the most popular type of secondary market synthetic security. In a typical synthetic floating-rate receipt structure, a fixed-rate bond or note is deposited into a trust. The trust issues two types of receipts: receipts that bear interest at a variable rate and have a put option; and an inverse floating-rate or residual interest Residual Interest A type of interest payment received by investors in a real estate mortgage investment conduit (REMIC). Notes: Investors receive interest payments after all required regular interest has been paid to investors within higher priority tranches. receipt that captures the residual interest received from the underlying notes or bonds. The addition of the put option synthetically shortens the maturity of the deposited note or bond making the receipt eligible for purchase by tax-exempt money market funds Tax-exempt money market fund A money market fund that invests in short-term tax-exempt municipal securities. tax-exempt money market fund An open-end investment company that invests in short-term tax-exempt securities. , the dominant purchaser of such receipts. |
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