Securities Terms and Definitions

Call An option contract giving the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position Systemic Risk The risk that a default by one market participant will have repercussions on other participants due to the interlocking nature of financial markets. For example, Customer A’s default in X market may affect Intermediary B’s ability to fulfill its obligations in Markets X, Y, and Z. Aggregation The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative position limits. See CFTC Backgrounder: Speculative Limits, Hedging, and Aggregation. Accommodation Trading Non-competitive trading entered into by a trader, usually to assist another with illegal trades. Arbitrage A strategy involving the simultaneous purchase and sale of identical or equivalent commodity futures contracts or other instruments across two or more markets in order to benefit from a discrepancy in their price relationship. In a theoretical efficient market, there is a lack of opportunity for profitable arbitrage. See Spread. Basis Grade The grade of a commodity used as the standard or par grade of a futures contract. Butterfly Spread A three-legged option spread in which each leg has the same expiration date but different strike prices. For example, a butterfly spread in soybean call options might consist of one long call at a $5.50 strike price, two short calls at a $6.00 strike price, and one long call at a $6.50 strike price. Artificial Price A futures price that has been affected by a manipulation and is thus higher or lower than it would have been if it reflected the forces of supply and demand. Exercise Price (Strike Price) The price, specified in the option contract, at which the underlying futures contract, security, or commodity will move from seller to buyer. Hedge Exemption An exemption from speculative position limits for bona fide hedgers and certain other persons who meet the requirements of exchange and CFTC rules.

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	Did You Know?
	Yield to Maturity is defined Yield to Maturity: The rate of return an investor receives if a fixed income security is held to maturity.