representing uk government securities · uk government securities using the market data definition...

Version: 1.00 Date: 9 July 2003

Author: Martin C. Sexton

© 2003 London Market Systems Limited 33 Throgmorton Street

London EC2N 2BR

Tel: +44 20 7397 3350

Representing

UK Government Securities

using the

Market Data Definition Language (MDDL) XML Standard

by Martin C. Sexton

London Market Systems Limited

Abstract This paper examines the data modelling requirements needed to support the distribution of UK Government securities ("Gilts") via the use of an eXtensible Mark-up Language (or "XML") called Market Data Definition Language ("MDDL"). An investigation has been undertaken as to how and when issue data is made available, and an explanation of the process of issuing a Gilt is also provided.

A number of questions have been raised and recommendations provided that will enable MDDL to support the particular requirements associated with the issuing of Gilts.

Sample XML documents have been included, further examples can be found by visiting the London Market Systems website: www.londonmarketsysytems.com.

Table of Contents

REPRESENTING UK GOVERNMENT SECURITIES IN MDDL .................................................. 1 Introduction................................................................................................ 1 The Market Data Definition Language Version 2 ................................................ 1

THE PROCESS OF ISSUING A GILT............................................................................. 2 The Auction Procedure.................................................................................. 2

SOURCES OF INFORMATION.................................................................................... 3 The Prospectus............................................................................................ 3 Auction Announcement ................................................................................. 4 Conventional Gilt Auction Result ..................................................................... 5 Indexed-linked Auction Result ........................................................................ 5 Other information ........................................................................................ 6

POSSIBLE MDDL IMPROVEMENTS ............................................................................ 7 Prospectus Data .......................................................................................... 7

Non-competitive bid price ...................................................................................................7 Payment dates ...................................................................................................................7 Coupon details ...................................................................................................................7 Receipt of applications........................................................................................................7 Strip terms.........................................................................................................................8

Auction Results data..................................................................................... 8 Auction Prices ....................................................................................................................8 Yields at price ....................................................................................................................8 Inflation Rate .....................................................................................................................8

Market Conventions data............................................................................... 9 Minimum nominal bid size ..................................................................................................9 Ex-dividend period/dates....................................................................................................9 Yield conventions ...............................................................................................................9

CONCLUSION...................................................................................................10 APPENDIX A - MDDL SAMPLES..............................................................................11

4 1/4% TREASURY 2036 - " When- Issued" .....................................................11 4 1/4% TREASURY 2036 - Post-" When- Issued" ..............................................13

APPENDIX B - A PROSPECTUS ...............................................................................15 APPENDIX B - AN AUCTION ANNOUNCEMENT...............................................................17 APPENDIX D - A CONVENTIONAL GILT AUCTION RESULT .................................................18 APPENDIX E - AN INDEXED-LINKED AUCTION RESULT.....................................................19 GLOSSARY AND ACRONYMS ............................................................................20

1

Representing UK Government Securities in MDDL

Introduction This paper examines the data modelling requirements needed to support the distribution of UK Government securities ("Gilts") via the use of an eXtensible Mark-up Language (or "XML") called Market Data Definition Language ("MDDL"). An investigation has been undertaken as to how and when issue data is made available, and an explanation of the process of issuing a Gilt is also provided. XML documents have the advantage of being both readable and well structured so as to be understood by the recipient's IT systems, thus aiding an organisation to automate its delivery of reference data, which is a key component in achieving trade automation. As MDDL version 2.1 is specifically designed for the distribution of Bond Issue data this is the International standard chosen to be used in this report. To support the findings a number of sample XML documents based on recent Gilts issues have been used. These are XML compliant and have been validated against the MDDL schema. The report concentrates on outright Gilt auctions and does not examine the specific requirements associated with switch auctions, conversion offers or reverse Gilt auctions.

The Market Data Definition Language Version 2

In Q1 2001, the Bond Market Association of the USA working with the Financial Information Services Division (FISD) of the Software and Information Industry Association (SIIA) hired London Market Systems to co-ordinate the requirements gathering for the creation of MDDL version 2. The aim of the assignment was to define the vocabulary required to support the creation of a portal able to distribute Fixed Income issue data. This was achieved by using a team of bond experts from across the industry, the majority of the expertise was focussed on the US markets. This analysis formed the basis of MDDL version 2.0. Since completion of this assignment MDDL version 2.1-beta has been published by the FISD and is currently under review by the membership.

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The process of Issuing a Gilt Since 1994, auctions has been used as the principle means by which the UK Government has issued Gilts. Bidders can choose to participate through a Gilt-edged Market Maker (GEMM) who can bid direct by telephone to the Debt Management Office ("DMO") on the bidder’s behalf, or directly by completing an application form. Just prior to the start of each quarter the Debt Management Office announces the Gilts it proposes to auction in the following quarter and confirms the dates of the auctions.

The Auction Procedure The auction procedure itself can be broken down into the following discrete steps:

1. Normally, eight calendar days before an auction:

1.1 the amount of stock to be auctioned is announced in the form of an Auction Announcement;

1.2 the Prospectus and application form for the sale are also published.

1.3 the stock is listed on the London Stock Exchange with "When Issued" ISIN and Sedol codes (these are temporary identification codes), that allows for the forward trading of the stock.

2. Upon completion of the auction the Auction Result is published in the form of a Press Release.

3. "When-Issued" trades settle on the auction’s settlement date.

4. Post auction, new ISIN and Sedol numbers are allocated. In the situation where the issue is a new tranche of an existing stock, the codes of the existing stock are allocated to the security.

3

Sources of information

The Debt Management Office was established on 1 April 1998. Its brief is to carry out the Government's debt management policy of minimising financing costs over the long term, taking account of risk, and to manage the aggregate cash needs of the Exchequer in the most cost -effective way, in both cases consistently with the objectives of monetary and any wider policy considerations. The DMO website is an invaluable source of information for interested parties.

Prior to an auction, the Prospectus is issued and an auction announcement is published by the Debt Management Office. Upon completion of the auction the results are announced in the form of a Press Release. These publications form the basis for the creation of the MDDL documents.

To assist the reader in understanding the modeling requirements, the bond "4¼% TREASURY 2036" auctioned on the 2nd July 2003 has been used as an example.

The Prospectus

The Prospectus contains the following Market Data that is of interest to the recipient:

Item Description Example Data Coupon Real annualised coupon

interest rate paid per £100 GBP nominal of the Gilt.

4.25%

Instrument Name Full instrument name 4¼% TREASURY 2036 Amount issued in GBP nominal 2,250,000,000 Maturity Date 7 MARCH 2036 Auction Date 2 JULY 2003 Settlement Date 3 JULY 2003 Strippable Status The option to separate

trading of registered Interest and Principal of Securities.

True.

Minimum stripping units and applicable dates

The minimum nominal size at which the stripped stock can be traded. It varies depending on whether traded prior or after first coupon date.

1,000,000 GBP before 7-Sep-2003, becoming 10,000 GBP thereafter.

Price for non-competitive bids

GBP price per £100 nominal of stock.

102.00

Interest Payment dates

Semi Annually (Day month only).

7-March & 7-September

Application Details Latest times for receipt of applications and by what mechanism.

Application forms received by 10 am 02-July-2003 to: The Bank of England, New Issues, Southgate House, Southgate Street, Gloucester, GL1 1UW. Phone Bids no later than:10:30am on 02-July-2003.

Please refer to Appendix B for a sample Prospectus.

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Auction Announcement The Auction Announcement contains the following information in addition to what is published in the Prospectus: Item Description Sample Data "When Issued" ISIN code

ISIN code used prior to Auction date (a different code is allocated post auction (or Post-"When Issued").

3320794

"When Issued" SEDOL code

SEDOL code used prior to Auction date (a different code is allocated post auction (or Post-"When Issued").

GB0033207944

"When Issued" Trade reporting code

The TIDM code is used for trade reporting to the LSE. Codes starting AUC indicate trades that participating in the auction.

AUCB

Post-"When Issued" ISIN code

If the issue is a tranche of an existing stock this code will be set to that of the original issue.

3245239

Post-"When Issued" SEDOL code

If the issue is a tranche of an existing stock this code will be set to that of the original issue.

GB0032452392

Please refer to Appendix C for an example Press Release.

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Conventional Gilt Auction Result The Auction Result Press Release contains details about the success of the auction and includes a:

q breakdown of the issue take-up, amount allotment and the total bids received;

q The range of bids accepted and the Non-competitive allotment(Average) price.

Relevant issue Market Data includes:

Item Description Sample Data Highest Bid price and yield

Bid price and Yield at price ("Current yield")

Price: £94.05 Yield basis: 4.60%

Non-competitive allotment(Average) price

Bid price and Yield at price Price: £93.86 Yield: 4.62%

Lowest Bid price and yield

Price and Yield at price Price: £93.55 Yield: 4.63%

Amount Issued In nominal GBP 2,250,000,000 The over Allotment size (Absolute amount)

In nominal GBP, The over allotment size (absolute amount) needs to be calculated by subtracting the Total bids received by the Amount Issued.

3,388,410,000 minus 2,250,000,000 giving 1,138,410,000.

The over Allotment Size (Relative amount)

Relative figure between the Total bids received and the Amount Issued.

1.51 times over prescribed.

Please refer to Appendix D for an example Auction Results Press Release.

Indexed-linked Auction Result With Indexed-linked auctions, the price/yield information varies from a Conventional Gilt, the various price/yields are replaced by the Striking price, Real yield and inflation rate:

Item Description Sample Data Striking price The strike price is the price

which the holder can insist on the underlying transaction is fulfilled.

Price: £200 GBP

Real yield# #based on an Inflation Rate of 1.95%

Assumed Inflation Rate Inflation rate is derived from the change in RPI

3%

Please refer to Appendix E for an example Auction Results Press Release.

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Other information There are a number of other Market specific data items which should also be made available at the time of issue. These may be defaults for the market as a whole, or specific to the instrument itself:

q ex-dividend period, this is a numeric value that refers to the number of business or calendar days prior to the coupon payment date when the instrument goes ex-dividend. In the case of Gilts this is the coupon pay date minus seven business days;

q The minimum nominal bid size (denomination is the term used in MDDL): With of Gilts there is the need to represent two nominal bid sizes. Both the Competitive and Non-competitive bid size vary depending upon the instrument type:

Gilt Type Competitive bids Non-competitive bids Conventional £500,000 GBP £1,000 GBP (to a maximum of 500,000)

Indexed-linked £1 million GBP £100,000 GBP

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Possible MDDL Improvements From the analysis of the auction process a number of elements have been identified as being required in MDDL, these have been put forward to the reader for review. A couple of the improvements relate to Bond Analytics which, while not directly related to new issue, are of relevance during the Auction process. Possible additions and enhancements have been identified and categorised according to where they are sourced:

Prospectus Data Subject Associated

MDDL tag Requirement Description

1. Non-competitive

bid price

issuePrice Prior to the auction there are two prices supplied in the Prospectus: 1. The nominal price; 2. the Non-competitive bid price (or the

striking price in the case of Indexed-linked Gilts).

The Non-competitive bid price is a more realistic price to place in the issuePrice field as it takes market conditions and Accrued Interest into consideration.

A decision is required as to how these prices are to be uniquely identified within a MDDL document, Is it sufficient to set the issuePrice to the Non-competitive figure until the auction is complete?

2. Payment dates

paymentDate When a Prospectus is published only the payment month and day are specified. It is recommended that the paymentDate property be modified to allow for the year not being present.

This will require a redesign of the MDDL data model since historical and projected dates of events are distinct from the regular coupon dates.

3. Coupon details

interestRate (the Property)

The use of the interestRate property is not a business term widely used to represent the coupon details. It is recommended that a coupon property is created to support this term.

The interestRate property may also be confused with the class of the same name.

4. Receipt of applications

No tag available

A property is need to support the latest date/times for receipt of applications, the type of application (by phone, post or other means) and the type of applicant (Market Maker, public etc…) It will need to also allow for multiple addresses & phone numbers.

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Subject Associated


5. Strip terms No tag available

In MDDL a "strippable" tag exist. Adding the ability to support Multiple Strippable terms should be considered.

The a property will need to support a schedule of Multiple Strippable terms, that contain the minimum stripping units, the date and the rule applied to that date (up to, after, etc…).

Example text Until 7-Sep-2003 (the first coupon) the minimum stripping unit is 1,000,000 GBP nominal, after which the minimum stripping unit of £10,000 applies.

Auction Results data Subject Associated


1. Auction Prices

issuePrice Having the ability to specify a single issue price is not sufficient to cater for issue requirements of a Gilt. Post Auction there are the following prices that need to be supported: 1. Highest Auction price; 2. Non competitive allotment (Average

accepted) price. 3. Lowest Auction price

A decision is required as to whether the Average accepted price becomes the issuePrice upon completion of the auction, an in addition how to represent the High and Low prices.

2. Yields at price

Yield For each of the auction prices announced, (Highest, Average, Lowest) there is a need to specify the equivalent current yield.

3. Inflation Rate N/A The equivalent inflation rate will need to be supplied at time of issue (for Indexd-Linked bonds).

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Market Conventions data Subject Associated


1. Minimum nominal bid

size

denomination With a Gilt there is the requirement to specify both the Competitive and non-competitive Minimum nominal bid size. There is also a maximum nominal bid size applicable to non-competitive participants.

2. Ex-dividend period/dates

No tag available

For new issues of Gilts this is not required as the market convention is 7 business days. Though in another context, i.e. distributing data about existing bonds this could be an issue as, for example the instrument, "3½% War " goes ex-dividend ten business days prior despite being in the UK market.

It is recommended that we create a new property that supplies the ability to specify the number of days prior to Coupon date that the bond goes Ex Dividend. Also we need to support the associated day convention that applies, i.e. Business or Calendar days.

3. Yield conventions

Accrual All UK Gilts are Actual/365 for both yield and Accrued interest calculations. MDDL does not seem to support the situation where the Yield and Accrued Interest calculations may differ. For Example, Canadian Gov't bonds have a different yield and accrued interest conventions these being Actual/Actual and Actual/365 respectively.

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Conclusion

The paper was written to encourage a greater audience for MDDL. By examining the auction process of Gilts it has help identify where improvements and enhancements could be made to the standard.

These include supporting:

q The Non-competitive bid price;

q Payment dates where the year is not specified;

q The creation/use of the Coupon property replacing the interestRate property;

q Receipt of applications information;

q Strip terms;

q The various auction prices and their respective yields;

q Multiple Minimum nominal bid sizes;

q The Maximum nominal bid size;

q Ex-dividend period;

q Multiple Yield conventions.

The reason for the lack of coverage in the area of prices & yields is well understood - the detailed requirements analysis undertaken, Q2 2002 for the BMA focused entirely on the Bond Prospectus. There is a whole section of terms relating to Price, Yield and Accrued Interest for which the requirements gathering exercise needs to be repeated.

Though this analysis examined the data modelling requirements for only the elements of Market Data contained in the Prospectus and the related Press Releases, it became clear that in the longer term the ability to represent these publications in their entirety as XML documents should be considered.

Some MDDL bond samples have been included within this report (please refer to Appendix A), further samples have been made available on the London Market Systems Website: www.londonmarketsystems.com.

I look forward to any discussion this paper may create and hope that the recommendations within are adopted within the standard. Please address any correspondence to Martin Sexton, Email: [email protected].

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Appendix A - MDDL Samples A couple of MDDL samples have been created to examine how Gilts data can be represented in MDDL.

The samples include:

1. 4 1/4% TREASURY 2036 - a conventional stock - " When- Issued";

2. 4 1/4% TREASURY 2036 - a conventional stock - Post-" When- Issued".

4 1/4% TREASURY 2036 - " When- Issued" <?xml version="1.0" ?> <mddl xmlns="http://www.mddl.org/mddl/2003/2.1-beta"

xmlns:mdref="http://www.mddl.org/mddl/2003/2.1-beta/ref" xmlns:xlink="http://www.w3.org/1999/xlink" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:schemaLocation="http://www.mddl.org/mddl/2003/2.1-beta C:\LONDON~1\Website\mddlsamples\2.1-beta\mddl-2.1-beta.xsd"> <header>

<dateTime>2003-07-07</dateTime> <source>MDDL Conventional GILT Sample (1 of 2) - created by London

Market Systems - July 2003</source> </header>

 <snap>

<debtDomain> <currency>GBP</currency> <debtIssueData>

<instrumentIdentifier> <name>4 1/4 TREASURY 2036</name> <code

scheme="http://www.mddl.org/ext/scheme/iso6166">

<mdString>GB0004893086</mdString> </code> <code

scheme="http://www.mddl.org/ext/scheme/sedol"> <mdString>0489308</mdString>

</code> <code

scheme="http://www.londonstockexchange.com/TIDM">

<mdString>AUCB</mdString> </code>

</instrumentIdentifier> <!-- interestRate is not a business term widely used, one would expect to

use the term coupon.

12

--> <interestRate>

<mdDecimal>4.25</mdDecimal> <accrual>

<period> <dayRuleType>actual</dayRuleType> <duration>semi-annual</duration>

</period> <accrualBasis>

<daysInYear>365</daysInYear> </accrualBasis>

</accrual> </interestRate> <maturity>

<maturityDate> <mdDateTime>2032-06-07</mdDateTime>

</maturityDate> <maturityType>fixed</maturityType>

</maturity>  <paymentDate>

<mdDateTime>2003-03-07</mdDateTime> </paymentDate> <paymentDate>

<mdDateTime>2003-09-07</mdDateTime> </paymentDate> <strippable>true</strippable>

 <denomination>500000</denomination>

</debtIssueData> <issueData> <auctionDate>2003-07-02</auctionDate> <settlementDate>2003-07-03</settlementDate> <issuePrice>

 <mdDecimal>102.00</mdDecimal>

</issuePrice> <issueAmount>2250000000</issueAmount> <incomeType>

<mdString>interest</mdString> </incomeType>

</issueData> </debtDomain>

</snap> </mddl>

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4 1/4% TREASURY 2036 - Post-" When- Issued" <?xml version="1.0" ?> <mddl xmlns="http://www.mddl.org/mddl/2003/2.1-beta"

xmlns:mdref="http://www.mddl.org/mddl/2003/2.1-beta/ref" xmlns:xlink="http://www.w3.org/1999/xlink" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:schemaLocation="http://www.mddl.org/mddl/2003/2.1-beta C:\LONDON~1\Website\mddlsamples\2.1-beta\mddl-2.1-beta.xsd">

<header> <dateTime>2003-07-07</dateTime> <source>MDDL Conventional GILT Sample (2 of 2) - created by London

Market Systems - July 2003</source> </header>

 <snap> <debtDomain>

<currency>GBP</currency> <debtIssueData>

<instrumentIdentifier> <name>4 1/4 TREASURY 2036</name> <code

scheme="http://www.mddl.org/ext/scheme/iso6166">

<mdString>GB0032452392</mdString> </code> <code

scheme="http://www.mddl.org/ext/scheme/sedol"> <mdString>3245239</mdString>

</code> </instrumentIdentifier>  <interestRate>

<mdDecimal>4.25</mdDecimal> <accrual>

<period> <dayRuleType>actual</dayRuleType> <duration>semi-annual</duration>

</period> <accrualBasis>

<daysInYear>365</daysInYear> </accrualBasis>

</accrual> </interestRate> <maturity>

<maturityDate>

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<mdDateTime>2032-06-07</mdDateTime> </maturityDate> <maturityType>fixed</maturityType>

</maturity>  <paymentDate>

<mdDateTime>2003-03-07</mdDateTime> </paymentDate> <paymentDate>

<mdDateTime>2003-09-07</mdDateTime> </paymentDate>  <overAllotment>

<mdDecimal>1138410000</mdDecimal> <valuationType>absolute</valuationType>

</overAllotment>  <overAllotment>

<mdDecimal>1.51</mdDecimal> <valuationType>relative</valuationType>

</overAllotment> <strippable>true</strippable>

 <denomination>500000</denomination>

</debtIssueData> <issueData>

<auctionDate>2003-07-02</auctionDate> <settlementDate>2003-07-03</settlementDate> <issuePrice>

 <mdDecimal>93.86</mdDecimal>  <yield>4.62</yield>

</issuePrice> <issueAmount>2250000000</issueAmount> <incomeType>

<mdString>interest</mdString> </incomeType>

</issueData> </debtDomain>

</snap> </mddl>

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Appendix B - A Prospectus1

ISSUE OF £2,250,000,000

4¼% TREASURY STOCK 2036 FOR AUCTION ON A BID PRICE BASIS ON 2 JULY 2003

INTEREST PAYABLE HALF-YEARLY ON 7 MARCH AND 7 SEPTEMBER

PAYABLE IN FULL WITH APPLICATION With a competitive bid: Price bid (in accordance with paragraph 10)

With a non-competitive bid by a Gilt-edged market maker: Non-competitive sale price (in accordance with paragraph 10)

With a non-competitive bid by any other applicant: £102 per £100 nominal of stock

Application has been made to the UK Listing Authority for the stock to be admitted to the Official List on 3 July 2003. Application has also been made to the London Stock Exchange for the stock to be traded

on the Main Market.

Auction of Stock 1. THE UNITED KINGDOM DEBT MANAGEMENT OFFICE ("DMO") invites bids for the above stock.

General

2. This Prospectus is issued under the arrangements described in the Information Memorandum relating to the Issue, Stripping and Reconstitution of British Government Stock published by the DMO dated July

2000 as amended by the DMO’s notice of 2 July 2002 (the "Information Memorandum"). The terms of the Information Memorandum apply to the above stock and to the auction described in this Prospectus

except where expressly varied.

Maturity 3. The stock will be repaid at par on 7 March 2036.

Interest

4. Interest is payable half-yearly on 7 March and 7 September. The price payable for the stock being auctioned will include an amount equal to the accrued interest from 27 February 2003, the first issue

date of the stock, to 3 July 2003, the settlement date of this auction, at the rate of £1.456694 per £100 nominal of stock. This further issue of stock will rank for the interest payment of £2.218923 per £100

nominal due on 7 September 2003.

FOTRA exemptions 5. The stock and the interest payable on it will benefit from the exemptions from United Kingdom

taxation in favour of non-resident holders described in paragraph 47 of the Information Memorandum.

Gross payment of interest 6. Interest will be paid without deduction of income tax. However, stockholders may elect to have UK

income tax deducted from interest payments on application to the Bank of England.

Stripping 7. The stock may be stripped and holdings of stock reconstituted: the provisions relating to strips contained in the Information Memorandum apply except that the minimum stripping unit will be

£1,000,000 nominal until the payment of the non-standard first coupon on 7 September 2003; the standard minimum stripping unit of £10,000 nominal will apply after this date.

Methods of application

8. Bids may be made on either a competitive or non-competitive basis in accordance with paragraphs 33 to 41 of the Information Memorandum.

Non-competitive bids: amount payable on application

1 Debt Management Office website: www.dmo.gov.uk

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9. The amount payable on application in the case of a non-competitive bid (except in the case of a non-competitive bid made by a Gilt-edged market maker (“GEMM”)) is £102 per £100 nominal of stock.

Settlement of competitive bids and GEMMs' non-competitive bids

10. For those competitive bids which are accepted and those non-competitive bids from GEMMs which are accepted, settlement must be effected in accordance with paragraphs 36(iv) and 37(v) of the

Information Memorandum. For these purposes, the latest time and date for CHAPS payments to be sent to the Bank of England is 1.30 PM ON THURSDAY, 3 JULY 2003.

Latest times for receipt of applications

11. Application forms must be sent to the Bank of England, New Issues, Southgate House, Southgate Street, Gloucester, GL1 1UW, who are acting on behalf of the DMO, to arrive not later than 10.00 AM ON WEDNESDAY, 2 JULY 2003; or lodged by hand at the DMO, Eastcheap Court, 11 Philpot Lane, London, EC3M 8UD not later than 10.00 AM ON WEDNESDAY, 2 JULY 2003. GEMMs may bid by

telephone to the DMO not later than 10.30 AM ON WEDNESDAY, 2 JULY 2003.

Bids irrevocable 12. Bids will not be revocable between 10.30 am on Wednesday, 2 July 2003 and 10.00 am on Monday,

7 July 2003. United Kingdom

Debt Management Office

LONDON 24 June 2003

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Appendix B - An Auction Announcement2 PRESS NOTICE

DETAILS OF GILT AUCTION ON WEDNESDAY 2 JULY 2003 AMOUNT: £2,250 million nominal STOCK: 4¼% TREASURY STOCK 2036 MATURITY DATE: 7 MARCH 2036 INTEREST DATES: 7 MARCH / 7 SEPTEMBER AUCTION DATE: 2 JULY 2003 SETTLEMENT DATE: 3 JULY 2003 The United Kingdom Debt Management Office (“the DMO”) announces the issue by Her Majesty's Treasury of a further £2,250 million nominal of 4¼% Treasury Stock 2036, for auction on a fully-paid bid-price basis on Wednesday, 2 July 2003 and settlement on Thursday, 3 July 2003. This further issue will be fungible with the stock already in issue. Interest on 4¼% Treasury Stock 2036 is payable half-yearly on 7 March and 7 September. The price payable for the stock being auctioned will include an amount equal to the accrued interest from 27 February 2003, the first issue date of the stock, to 3 July 2003, the settlement date of this auction, at the rate of £1.456694 per £100 nominal of stock. This further issue of stock will rank for the interest payment of £2.218923 per £100 nominal due on 7 September 2003. The stock will be repayable at par on 7 March 2036. This stock is strippable in accordance with the terms of the Information Memorandum, published by the DMO, relating to the Issue, Stripping and Reconstitution of British Government Stock dated July 2000, as amended by the DMO’s notice of 2 July 2002, (the “Information Memorandum”). The minimum stripping unit will be £1 million nominal until the payment of the non-standard first coupon on 7 September 2003, after which the standard minimum stripping unit of £10,000 nominal will apply. Interest payments will be paid to all holders of this stock without deduction of United Kingdom income tax. However, holders may, on application to the Bank of England Registrar’s Department, elect to have United Kingdom income tax deducted from interest payments should they so wish. Under Rule 7265 of the London Stock Exchange, dealings in 4¼% Treasury Stock 2036 on a "when-issued" basis may be conducted from the time of this announcement until the close of business on Wednesday, 2 July 2003. The SEDOL and ISIN codes to be used for “when-issued” trading are 3-320-794 and GB0033207944 respectively. In relation to “when-issued” trading, the TIDM code "AUCB" should be used for trade reporting purposes. The SEDOL and ISIN codes to be used after this date are 3-245-239 and GB0032452392 respectively. Bids may be made on either a competitive or a non-competitive basis. Details of the bidding procedures are set out in the Prospectus and in the Information Memorandum. The Prospectus for competitive bids and non-competitive bids will be advertised in the Press. Application forms must be sent to the Bank of England Registrar’s Department, New Issues Team, who are acting on behalf of the DMO, at the following address; Southgate House, Southgate Street, Gloucester, GL1 1UW to arrive not later than 10.00 am on Wednesday, 2 July 2003; or lodged by hand at the DMO, Eastcheap Court, 11 Philpot Lane, London, EC3M 8UD not later than 10.00 am on Wednesday, 2 July 2003. Gilt-edged market makers may bid by telephone to the DMO not later than 10.30 am on Wednesday, 2 July 2003.


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Appendix D - A Conventional Gilt Auction Result3

United Kingdom Debt Management Office 26/03

DMO-TAS041/234

Eastcheap Court 11 Philpot Lane

London EC3M 8UD

Tel. 020 7862 6500 Fax. 020 7862 6509

02 July 2003

PRESS NOTICE

RESULT OF THE SALE BY AUCTION OF £2,250 MILLION OF 4 1/4% TREASURY STOCK 2036

The United Kingdom Debt Management Office ("DMO") announces that the auction of £2,250 million of 4 1/4% Treasury Stock 2036 has been allotted in full.

1. All bids which have been accepted at the lowest accepted price have been allotted approximately 6.0% of the amount bid for. Competitive bids made at prices above the lowest accepted price have been allotted in full. Competitive bids made at prices below the lowest accepted price have been rejected.

2. The range of bids accepted was as follows: Price Yield

Highest Accepted £94.05 4.60%

Non-competitive allotment price (i.e. the rounded average acceptance price)

£93.86 4.62%

Lowest Accepted £93.55 4.63%

3. The total amounts allotted and bids received were as follows:

Amount allotted to competitive bids £2,079.0 million

Amount allotted to non-competitive bids

Gilt-edged market makers £168.75 million

Others £2.25 million

Total £2,250.0 million

Total bids received £3,388.41 million

Times covered 1.51 times


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Appendix E - An Indexed-linked Auction Result4

United Kingdom Debt Management Office 23/03

DMO-TAS031/231

Eastcheap Court 11 Philpot Lane

London EC3M 8UD

Tel. 020 7862 6500 Fax. 020 7862 6509

02 July 2003

PRESS NOTICE

RESULT OF THE SALE BY AUCTION OF £350 MILLION OF 2 1/2% INDEX-LINKED TREASURY STOCK 2024

The United Kingdom Debt Management Office ("DM0") announces that the auction of £350 million of 2 1/2% Index-Linked Treasury Stock 2024 has been allocated as follows: (Note: all prices in this notice are quoted in pounds and decimals)

1. All bids which have been accepted at the striking price have been allotted approximately 33.5% of the amount bid for. Competitive bids made at prices above the lowest accepted price have been allotted in full. Competitive bids made at prices below the lowest accepted price have been rejected.

2. The range of bids accepted was as follows: Price Real Yield#

Striking Price £200.00 1.95%

3. The total amounts allotted and bids received were as follows:

Amount allotted to competitive bids £314.43 million

Amount allotted to non-competitive bids

Gilt-edged market makers £34.8 million

Others £0.77 million

Total £350.0 million

Total bids received £752.2 million

Times covered 2.15

# Assumed Inflation 3%


20

GLOSSARY AND ACRONYMS Accrued interest Interest earned on a Gilt since the last coupon payment

date, which is paid and received at the time of a transaction in addition to the clean price of the stock.

Competitive bid A bid for the stock at a price stated by a bidder in an auction.

Coupon Annual interest paid on a bond holding, usually in the case of Gilts in two equal, semi-annual installments. Exp ressed as a percentage of £100 GBP nominal.

Conversion offers A new issue of bonds launched at the maturity of another issue. The terms of the new issue are designed to encourage the investor to exchange the maturing issue for the new one.

Current yield Is a measure of the return an investor receives compared to the current market price of the bond.

DMO Debt Management Office Ex-dividend The trading status of a bond or share such that the seller

of the bond or share retains the right to receive the next interest or dividend payment. The alternative is cum dividend or cum interest, when the purchaser has the right to receive the next interest or dividend payment.

Interest yield It is the interest rate based on the actual buying price, not the nominal amo unt and is calculated by dividing the coupon by the price.

ISIN International Security Identification Number : As a member of the Association of National Numbering Agencies ("ANNA") the London Stock Exchange is responsible for the allocation and administration of UK ISIN codes.

LSE London Stock Exchange Maturity date Date on which stock is redeemed. Non competitive bid A bid where no price is specified; such bids are allotted at

the weighted average price of successful competitive bid prices.

Nominal amount The face value or amount of a Gilt, i.e. the amount the holder receives when the Gilt redeems.

Post-"When-issued" Upon completion of the auction the Gilt becomes a fully tradable instrument in the secondary Market.

Real Yield The yield on a security reduced by the inflation rate. Redemption yield The rate of interest at which all future payments (coupons

and redemption) on a bond are discounted so that their total equals the current price of the bond (inversely related to price). Also referred to as the yield to maturity.

Reverse auction An auction under which the holders can offer to sell stock back to the Government, who accept the stock offered to them at the most favorable price.

Retail Price Index ("RPI")

In the UK, a measure of price changes at the retail level. The US equivalent is the Consumer Price Index. From the RPI the Inflation rate can be derived.

Secondary Market Where existing securities are resold or purchased by market participants.

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SEDOL Stock Exchange Daily Official List code, a unique instrument identifier allocated by the London Stock Exchange. As the SEDOL code is reaching capacity the code will soon change from a seven digit numeric to alphanumeric code.

Strips Separate Trading of Registered Interest and Principal of Securities; for some (“strippable”) Gilts, the coupons and principal can be traded separately.

Striking price The strike price or strike rate of an option is the price or rate at which the holder can insist on the underlying transaction is fulfilled.

Switch Auction Intended to build up benchmark stocks, and to prevent possible market instability caused by investors, especially index trackers, who would sell stock about to fall out of an index (such as the FT-A Fixed Interest 15 year Medium Coupon Gilt index). Can be for up to £2 billion (nominal), and used for a stock where the amount in issue after the switch auction is about £4.5 billion (nominal) i.e. switch auctions are used for a stock too large to be considered for a conversion offer. The source stock and destination stock are within the same maturity bracket (which are defined, for conventional switch auctions, as 0-7 years, 5-15 years and over 14 years).

Tap A method of issuing a bond on an as-required basis, often irregular amounts. The UK Government offers Gilts through a tap mechanism in addition to the usual programme of auctions. It is used to take advantage of favorable conditions when, for example, there is temporary excess in demand for a stock.

TIDM The Tradable Instrument Display Mnemonic code is a unique short code used to identify a stock or bond. It is used for trade reporting purposes and replaced the London Stock Exchange's Exchange Price Input Computer (EPIC) code.

With Gilt auctions this code is normally, "AUC", "AUCA", "AUCB" etc.

When-Issued Market in stock which is shortly to be sold at auction; trades are for settlement on the day of issue, normally the business day after the auction.

Yield Is a measure of the return an investor receives compared to the current market price of the bond.

representing uk government securities · uk government securities using the market data definition...

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