4.6 Particular Remarks on Securities in the Money Market 119and accounting separation. However, the Code will initially apply exclusively to
cash equities. The Commission expects the scope of the Code to be gradually ex-
tended to include other financial instruments, such as bonds and derivatives.
Netting and financial collateral. Netting is supported by the Settlement Final-
ity Directive^171 and collateral arrangements by the Collateral Directive^172 (see
Volume II).
Market abuse, stabilisation. The Directive on market abuse can apply to bonds
and will therefore prohibit both insider trading and market manipulation (for mar-
ket abuse, see section 5.9.7 and Chapter 19).^173 For example, stabilisation meas-
ures are required to comply with the terms of Regulation 2273/2003 implementing
the Market Abuse Directive.
Covenants and other terms. The core commercial terms of corporate bonds in-
clude the nominal amount, the issue price, the maturity date, the coupon (the inter-
est rate), and the coupon dates (the dates on which the issuer pays the coupon to
the bond holders). There will also be typical covenants and other terms required
by the nature of corporate bonds.
Corporate bonds are normally unsecured. However, bonds issued by an SPV in
securitisation transactions are secured on the asset pool bought by the SPV (such
as a loan portfolio or collateralised debt obligations). If corporate bonds are unse-
cured, they can also be subordinated (for mezzanine financing, see Chapter 6).
If there is a large pool of investors, bond issues tend to be light on covenants
for practical reasons (for covenants, see also Volume II). However, convertible
bonds will necessarily have to contain more covenants in order to protect inves-
tors.^174
Furthermore, the issuing process and syndication will require a contractual
framework (see sections 4.7 and 5.10.2).
4.6 Particular Remarks on Securities in the Money Market VI Table of Contents
The term “money market” generally refers to the wholesale market for low-risk,
highly liquid, short-term debt instruments and denotes a part of the capital market
that is different from the equity market and the bond market. Through the money
market banks and other entities can receive large amounts of money from other
banks and liquid entities. The interbank money market can dry up in extreme
situations when banks are not regarded as low-risk borrowers.
(^171) See, in particular, Article 3(2) of Directive 98/26/EC (Settlement Finality Directive).
(^172) Directive 2002/47/EC (Collateral Directive).
(^173) For the list of financial instruments to which the Directive applices, see Article 1(3) of
Directive 2003/6/EC (Directive on market abuse).
(^174) See Ferran E, Principles of Corporate Finance Law. OUP, Oxford (2008) pp 517–522.