Definition
Held for Trading (HFT)
Held for Trading is the bank investment category for securities bought to profit from short-term price movements, marked to market through the profit and loss account.
The HFT book holds securities a bank intends to sell quickly to capture trading gains. These are marked to market frequently, with gains and losses flowing straight to the profit and loss account, making HFT the most earnings-sensitive part of the investment portfolio.
Because HFT positions can swing profits sharply with bond yields, the RBI caps and monitors them and requires daily valuation. The HFT, AFS and HTM classification together determines how a bank's reported profit responds to interest-rate movements.
Related terms
- Mark to MarketMark to market (MTM) is the daily settlement of profit or loss on a futures position based on that day's closing price.
- Held to Maturity (HTM)Held to Maturity is the bank investment category for securities intended to be held until they mature, valued at cost rather than market price.
- Treasury Income (Banking)Treasury income is the profit a bank earns from managing its investment portfolio, mainly gains and losses on government and corporate bonds and forex.
- Available for Sale (AFS)Available for Sale is the bank investment category for securities not held to maturity or for active trading, which are marked to market with changes routed through reserves.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.