Mondo Visione Glossary

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Quick Index: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

1 A
2 B
3 C
4 D
5 E
6 F
7 G
8 H
9 I
10 J
11 K
12 L
13 M
14 N
15 0
16 P
17 Q
18 R
19 S
20 T
21 U
22 V
23 W
24 Y
25 Z

A

Abandonment: Allowing an option to expire unexercised. Also, withdrawal from a cancellable forward contract to purchase securities.
Accrued interest: The amount of interest accumulated between the most recent payment and the sale of a fixed-interest security. For most bonds, accrued interest must be added to the purchase price, but that amount will be recovered by the purchaser in the next interest payment.
Action: French for share.
Action de jouissance: Share which grants the right to participate in the net profit of the company without conferring ownership rights. French/Belgian term.
Action ordinaire: French ordinary share.
Action privilégiée: French for preference share.
Active fund: A fund in which the fund manager actively manages investments.
Active management: Fund managers who strive to outperform the market by identifying stocks that could produce better returns and beat the overall market (or target index).
Actuals: The physical or cash commodity, as distinguished from futures contracts.
After hours dealing: On the London Stock Exchange, dealings done after the MQP. Such dealings are treated as dealings done on the following business day. In general, trading after the hours a stock market has closed. (For all major US stock markets, after-hours trading is 16:00-18:30 Eastern Standard Time). After-hours trading often takes place after the release of news that could make the price of a stock rise or fall sharply after the close of trading. Participation in the after-hours market is strictly voluntary and may offer less liquidity and inferior prices.
After market: See Secondary market
Agency cross: A trade in which a single broker acts as the agent for both the buyer and seller. This can occur when a member firm simultaneously receives a buy and a sell order from two different customers but for the same number of shares in the same stock. When these orders reach the floor broker, he can easily cross them and complete the transaction, but only after going to the designated trading post for that stock and announcing the bid in case another broker is prepared to offer a better price.
Agency order: An order that a broker/dealer executes for the account of a customer with another professional or retail investor and for which a commission is typically charged.
Aktie: German for share.
Algorithmic trading: Trading in which buy or sell orders of a defined quantity are determined by a quantitative model that automatically generates the timing of orders and the size of orders based on goals specified by the parameters and constraints of the algorithm.
All or none (AON): A condition that the full amount of an order to buy or sell is executed at an agreed price; a lesser amount is unacceptable.
Allotment letter: See Renouncable documents
Alternative trading system (ATS): Non-traditional, computerised trading systems that compete with or supplement dealer markets and traditional exchanges. These private trading systems; facilitate electronic trading in millions of shares of public issues every day, but do not provide a listing service. ECNs are alternative trading systems; however, not all ATSs are ECNs. (See Electronic communications network)
American Depository Receipt (ADR): A receipt or certificate issued by a US bank that represents a specific number of shares of foreign-based corporations held by a US banking institution in the country of origin on behalf of an investor in the US.
American option: An option which may be exercised at any time prior to expiration.
Amtlicher Handel: The official trade section of German stock exchanges.
Arbitrage: The simultaneous purchase on one exchange and sale on another of the same or equivalent financial instruments in order to benefit from price or currency differentials.
Arbitrageurs: Those looking for arbitrage opportunities.
Asian option: Asian options are based on an average price of a commodity over a period of time, rather than on a single price taken at the end of a period. Asian options are currently available only OTC.
Ask price: The price at which a seller has offered to sell a security or commodity.
Association Française des Sociétés de Bourse: A professional association which advises members of the French stock exchanges and represents them to outside bodies.
At best order: An order submitted to the order book with a specified size which may execute, either in part or in its entirety, against eligible orders at the price of those orders with any unexecuted portion being rejected from the book.
At-the-market: See Market order
At-the-money: An option whose strike/exercise price is equal to or near the current price of the underlying instrument.
Auction market: A system in which financial instruments are bought and sold through trading on an exchange floor by buyers and sellers competing via open-outcry with other buyers and sellers for the best price.
Authorised share capital: The maximum number of shares that a company can issue, as specified in the firm's articles of incorporation.
Automatic execution: An automatic trade executed by the trading system. Automatic trades are executed by matching buy and sell orders.
Avoir fiscal: A tax credit (on dividends) payable to French holders of French securities. In most cases, foreign holders are granted the avoir fiscal in accordance with tax agreements between France and their own country.
Azione: Italian for share.
Azione ordinaria: Ordinary share on Italian stock exchanges.
Azione privilegiata: Preference share on Italian stock exchanges.
Azione risparmio: Savings share on Italian stock exchanges normally issued in bearer form and enjoying privileged rights on the distribution of profits. Holders of these shares have no right to vote in shareholder meetings.

B

Backwardation: On futures markets, a market where a commodity is in shortage, causing near contract months to sell at a premium and distant contract months to sell at discount.
Bai al-Salam: Payment for future delivery, which in its simplest form is the advance payment in full of the purchase price by the purchaser for specified assets which the seller undertakes to supply to the purchaser at a later date.
Balloon maturity: The last bonds of an issue maturing in a substantially larger amount than those of earlier maturities.
Bandhani: An Indian form of trading in which the contract price is not allowed to go beyond floor and ceiling prices, set on the first day, throughout the life of the contract, thus restricting excessive volatility.
Bank Interchange Code (BIC): A unique code identifying a market participant.
Bargain: A transaction dealt through the London Stock Exchange which is a contract to buy or sell an agreed quantity of stock at an agreed price.
Basis: The difference between the cash price and futures price.
Basis grade: The grade of a commodity used as the standard of the futures contract.
Basis point (bp): 1% of 1%.
Basis price: The price expressed in terms of yield to maturity or annual rate of return.
Basket: The purchase or sale of equity securities, which comprise a pre-defined group of securities.
Bear: An investor who believes that prices are going to fall.
Bear market: A prolonged period of generally falling prices.
Bearer security: A security whose owner is not registered on the books of the issuer.
Bed-and-breakfast deal: Selling shares one day and buying them back the next, for tax purposes at the end of the financial year.
Benchmark: A standard used for comparison
Beneficial owner: The true owner of a security. The registered holder of the shares may act as a nominee to the true shareholder.
Best ask: The lowest quoted offer of all competing Market Makers to sell a particular stock at any given time.
Best bid: The highest quoted bid of all competing Market Makers to buy a particular stock at any given time.
Best execution: The obligation of Market Makers, broker/dealers, and others to execute customer orders at the best price available at the time the trade is entered.
Beta: A measurement of the relationship between the risk of an individual stock or stock portfolio and the risk of the overall market. The beta is a measure of the sensitivity of an investment's return to market movements. A diversified portfolio of high beta stocks is more risky than a diversified portfolio of low beta stocks.
Bid offer spread: The difference between the bid and offer prices of a security.
Bid price: The price at which a buyer has offered to purchase a security or commodity.
Bid/ask spread: The difference between the price at which a Market Maker is willing to buy a security (bid), and the price at which the firm is willing to sell it (ask). The spread narrows or widens according to the supply and demand for the security being traded.
Big Board: A popular term for the New York Stock Exchange.
Big figure: A market expression for the part of the price which is the least significant in terms of quotation movement.
Black box trading: A proprietary computerised trading system whose formulas and calculations are not disclosed or readily accessible. Users enter information and the system utilises pre-programmed logic to return output to the user, which may include trading signals and other data.
Black-Scholes model: An option pricing formula initially derived by Fisher Black and Myron Scholes for securities options and later refined by Black for options on futures.
Block: A large amount of shares, normally 10,000 shares or more.
Block crossing network: An Alternative trading system (ATS) that handles large blocks of stock for institutions, which may be matched in a "dark pool".
Block trade: The purchase or sale of stock in a large quantity, normally 10,000 shares or more.
Block volume: The aggregate volume of trades of 10,000 shares or more.
Blue chips: Shares with the highest status and quality as investments. Blue-chip stocks are normally relatively high-priced stocks with a long record of dividend payments.
Bonus issue: See Capitalisation issue
Book transfer: The transfer of title to a buyer without a physical movement of the product.
Book value: Common shareholder's equity on a per share basis. It is calculated by subtracting liabilities from assets and dividing the result by the number of outstanding shares of stock. The book value is not necessarily the same as the market value.
Borsa: Italian for stock exchange.
Bourse: French for stock exchange. The word Bourse is thought to originate from the town of Bruges in Belgium. In the early 13th century, merchants from the main commercial centres, particularly from Genoa and Venice, used to gather in front of the house of the Van der Buerse family in Bruges.
Briefkurs: The asked (offered price) on German and Swiss stock exchanges.
Broker: An agent, often a member of a stock exchange firm, who executes public orders to buy and sell securities and commodities. For this service a commission is usually charged. Brokers are agents working on commission and not principals or agents acting on their own account.
Brokerage fee: A fee charged by a broker for executing a transaction.
Broker-dealer: See Dealer
Bulge: A rapid price advance.
Bull: An investor who believes that prices are going to rise.
Bull market: A prolonged period of generally rising prices.
Bull spread: An option position composed of both long and short options of the same type, either calls or puts, designed to be profitable in a declining market. An option with a lower strike price is bought and one with a higher strike price is sold.
Bulldogs: Sterling bonds issued in the UK by foreign institutions.
Butterfly spread: (i) A futures butterfly spread is a spread trade in which multiple futures months are traded simultaneously at a differential. The trade basically consists of 2 futures spread transactions with either 3 or 4 different futures months at one differential. <\n>(ii) An options butterfly spread is a spread trade in which multiple options months and strike prices are traded simultaneously at a differential. The trade basically consists of 2 options-spread transactions with either 3 or 4 different options months and strikes at one differential.
Buyer/taker: The purchaser of an option, whether a call or put option. The buyer may also be referred to as the option holder. Option buyers receive the right, but not the obligation, to enter a futures/securities market position.
Buy-side trader: An individual, such as a pension or mutual fund portfolio manager, who effects trades for an institutional investor.
By-products: Products generated from the same raw materials.

C

Côte Officielle: The market on Euronext Paris where securities of the largest French issuers (public or private) are traded.
Cabinet trade: A trade that allows options traders to liquidate deep out-of-the-money options by trading the option at a price equal to one-half tick.
Cable: A term used in the foreign-exchange market for the US dollar/British pound rate.
Calendar spread: Buying (selling) the calendar spread involves the simultaneous purchase (sale) of contract(s) in a near delivery month and the sale (purchase) of an equal number of contract(s) in a far delivery month of the same futures contract.
Call: A period of trading.
Call option: A call option confers the right but not the obligation to buy stock, shares or futures at a specified price within a predetermined time period. The buyer (taker) pays the seller (grantor) a premium for this.
Cap: An agreement with a counterparty that sets an upper limit to interest rates for the cap buyer for a stated time period.
Cap and Trade: The basis of the carbon trading mechanism. When an authority sets a limit or cap on something (i.e.carbon dioxide (CO2) emissions) and allows those who exceed the limit to buy "credits" from those who have credits to spare.
Capital market: The market for medium- and long-term securities.
Capitalisation: See Market capitalisation
Capitalisation issue: The process whereby money from a company's reserves is converted into issued capital, which is then distributed to shareholders as new shares, in proportion to their original holdings. Also known as a bonus or scrip issue.
Carbon Credit: A "credit" to emit a Tonne of carbon dioxide (CO2) issued as part of an emissions trading scheme such as the European Emissions Trading Scheme.
Carbon emissions: Carbon dioxide (CO2) that enters the atmosphere as a result of human activity, especially the burning of carbon-based fuels.
Carbon neutral: When CO2 emissions of an individual, group, organisation or activity have been entirely "cancelled out" through a process of calculation, reduction and offsetting.
Carbon offsetting: The counter balancing of carbon emissions through the purchase of a carbon credit or offset from specialised intermediary companies who generate offsets by various means, such as planting trees or investing in renewable energy.
Carbon price: The amount it costs a company to buy permission to emit one metric tonne of carbon dioxide. The price varies depending on the trading scheme and fluctuates constantly due to market forces.
Carbon Trading: The trading of carbon dioxide (CO2) emission allowances through a scheme, such as the European Emissions Trading Scheme.
Carry: The interest cost of financing securities held.
Cash and carry: An arbitrage transaction involving the simultaneous purchase of a cash commodity with borrowed money and the sale of the appropriate futures contract.
Cash market: The market in the actual financial instrument on which a futures or options contract is based.
Cash settlement: Final disposition of open positions on the last trading day of a contract month. Occurs in markets where there is no actual delivery.
Central Securities Depository: A Central Securities Depository is a financial institution providing custodial and securities settlement services to one or several markets.
Certificate of deposit (CD): A negotiable certificate issued by a commercial bank as evidence of a deposit with that bank which states the maturity value, maturity rate and interest rate payable. CDs vary in size with maturities ranging from a few weeks to several years. CDs may normally be redeemed before maturity only by sale on the secondary market but may also be redeemed back to the issuing bank through payment of a penalty.
Certified Emissions Reductions: The output of Clean Development Mechanism projects, as set out in the Kyoto Protocol. One CER represents the reduction of one metric tonne of Carbon Dioxide (CO2).
Cheapest-to-deliver: The bond, deliverable against a futures contract, for which delivery is most attractive in terms of cost from the short position holder's point of view.
CIBOR: The rate at which the banks lend the Danish krone on an unsecured basis. The rate is calculated daily by the Danmarks Nationalbank (the Danish Central Bank), based on rules set out by the Danish Banker's Association.
Circuit breaker: A procedure that temporarily halts trading on all US stock markets for one hour when the Dow Jones Industrial Average falls 250 points or more within a trading day. The pause is designed to allow time for the markets to absorb the news that precipitated the decline. Should the average fall another 150 points within the same day, trading would again be halted, this time for two hours.
Clean Development Mechanism: The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment (so-called Annex 1 countries) to invest in emission reducing projects in developing countries as an alternative to what is generally considered more costly emission reductions in their own countries. The CDM is supervised by the CDM Executive Board (CDM EB) and is under the guidance of the Conference of the Parties (COP/MOP) of the United Nations Framework Convention on Climate Change (UNFCCC).
Clean price: The price of a bond not including the accrued-interest element.
Clearing: The process of matching, registering and guaranteeing transactions.
Clearing house: An exchange-associated, usually independent organisation through which all contracts are made, offset and delivered.
Clearing margin: Financial safeguards to ensure that clearing members (usually companies or corporations) perform on their customers' open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and sellers of futures and options contracts are required to deposit with brokers.
Clearing member: A member firm of a clearing house.
Close out: A transaction which leaves the trade with a zero net commitment to the market. A purchase if the initial transaction was a sale and vice versa.
Closed-end mutual funds: A mutual fund that issues a set number of shares, which then are only re-sold on the secondary market exchanges like regular stock shares.
Closing range: The high and low prices at which transactions took place at the end of the day's trading session.
Collar: A combination of a cap and a floor. A collar sets a band within which interest rates will apply (eg 10.5-13.75%), for a given period.
Collateralised mortgage obligations: CMOs package the mortgage payment stream from a portfolio of mortgages into several series of debt instruments which are prioritised in terms of their right to receive principal payments. In the most basic CMOs, each series must be repaid in full before any principal payments can be made to the holders of the next series.
Commission: The fee that a broker may charge clients for dealing on their behalf.
Commission des Opérations de Bourse (COB): The French securities-market watchdog. The COB holds the status of an autonomous administrative body.
Committee of Wise Men on the Regulation of the European Securities Markets: See Lamfalussy Report
Commodity Futures Trading Commission (CFTC): The US Federal regulatory agency for futures traded on commodity markets.
Concentration rule: The rule in the current European Union Investment Services Directive allows European Union Member States to require that all retail investor transactions be executed on a regulated market. However, the European Union Commission considers that there must be convergence towards a single consensus view of marketplace regulation in order to create a single financial market in which supply and demand for a given financial instrument can interact across an integrated and efficient trading infrastructure.
Concert party: A group acting together in a takeover situation. Each member of the group (which acts in secret) buys a percentage of shares to avoid no longer being able to hide behind nominee status.
Confirmation: The process immediately following a transaction whereby the traders confirm the details of the trade.
Conseil des Bourses de Valeurs (CBV): The French Stock Exchange Council which is the supervisory and regulatory authority of the French securities markets.
Consideration: On the London Stock Exchange, the money value of a transaction (number of shares multiplied by the price).
Consolidated tape: The combined tapes of the New York and American stock exchanges. Network A covers New York Stock Exchange-listed securities, identifying the market where the trade takes place. Network B does the same for American Stock Exchange securities and securities listed on US regional exchanges.
Contango: (i) On the London Stock Exchange, a mechanism for detailing settlement of a bargain until the next account day. This mechanism is used when the selling party is unable to deliver the stock for the appropriate account day. The selling party pays an interest premium to the buyer to cover the extended settlement period. On futures markets, a market in which distant months sell at a premium over near months. <\n>(ii) In futures markets a situation in which prices are progressively higher in the succeeding delivery months than in the nearest delivery month.
Contante price: Italian bond market cash price.
Contract: See Futures contract
Contract expiration date: The date on which a commodity must be delivered to fulfil the terms of the contract. For options, the last day on which the option holder can exercise his right to buy or sell the underlying security.
Contract month: The month in which a futures contract matures or becomes deliverable if not liquidated or traded out before the date specified.
Contract note: On the London Stock Exchange, on the day on which a bargain takes place a member firm must send to the client a contract note detailing the transaction, to include full title of the stock, price, consideration, commission and stamp duty (if applicable).
Contract size: For futures contracts, the quantity to be delivered.
Conversion premium: The amount by which the price of a convertible bond exceeds the market price of the underlying stock.
Conversion price: The par value of a convertible security divided by the number of shares into which it may be exchanged.
Conversion ratio: The number of shares for which a convertible security may be exchanged.
Convertible bond: A bond which confers on the holder the right to exchange the bonds for other securities of the issuing company at a predetermined price and at, or during, determinable dates.
Convertible security: Bond or preferred stock that may be converted into another security at the holder's option.
Corporate bond: A long-term interest-bearing debt instrument that requires the issuer to pay the purchaser a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity.
Correlation coefficient: A measure of the closeness of the relationship between 2 variables.
Coupon: (i) On bearer stocks, the detachable part of the certificate exchangeable for dividends. <\n>(ii) Denotes the rate of interest on a fixed-interest security.
Coupon value: The annual rate of interest of a bond.
Cours: On Belgian and French exchanges, the market price of a share.
Covariance: A measure of the comovement between two variables.
Cover: The total net profit a company has available for distribution as dividend, divided by the amount actually paid gives the number of times that the dividend is covered.
Crack spread: A hedge used in the energy futures market to offset the risk of buying (or selling) crude oil with an opposite transaction in the refined products that may be derived from it.
Crore: An Indian measurement equating to 10 million.
Cross rates: Rates between two currencies, neither of which is the US dollar.
Crossed market: The situation which exists when a broker's bid is higher than the lowest offer of another broker.
Cross-trade: A cross-trade transaction is a transaction where either the buy-broker and the sell-broker are the same, or the buy-broker and the sell-broker belong to the same firm.
Crush: The meal and oil products resulting from processing soya beans.
Crush margin: The ratio of oil and meal resulting from crushing a given volume of soya beans.
Crush spread: The spread between soya beans and soya bean products created by buying soya bean futures and selling soya bean oil and soya bean meal futures.
Cum: Latin for 'with' (used in the abbreviations cum cap, cum div, cum rights, etc), to indicate that the buyer of a security is entitled to participate in the forthcoming capitalisation issue, dividend or rights issue.
Cum all: A stock trading with the right to all supplementary advantages attached to the share.
Cum capitalisation: The purchaser of stock which is cum capitalisation is entitled to receive an issue of new shares made fully paid by the capitalisation of reserves and given free of charge in proportion to his or her existing holdings.
Cum dividend: The purchaser of a stock which is cum dividend is entitled to receive the declared dividend.
Cum period: A period during which a buyer of securities is entitled to the dividend regardless of whether or not he is on the register at the record date.
Cum rights: The purchaser of a stock trading cum rights is entitled to buy shares of a new issue of stock in direct proportion to his or her existing holdings.
Current delivery month: The most current calendar month in which a futures contract comes to maturity and becomes deliverable. Also known as the spot month.
CUSIP code: The CUSIP numbering system is the standard method for identifying securities throughout the US financial industry. The CUSIP number is a 9-digit alphanumeric number which is permanently allocated to each issue and identifying that single issue and no other issue. CUSIP numbers are also assigned to most Canadian securities. (Exceptions being issues of purely domestic interest such as municipal debt securities. Such securities are issued CUSIP compatible codes by the Canadian Depository for Securities Ltd.)
Customer margin: Within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfilling of contract obligations. FCMs are responsible for overseeing customer margin accounts. Margins are determined on the basis of market risk and contract value. Also referred to as performance-bond margin.

D

Déport: A discount on carrying over a position on a French equity from one settlement period to next.
Daily official list: The London Stock Exchange's daily official list is the list of listed securities and the prices of transactions published each day.
Dark pools: Private trading venues that offer anonymous executions and lack a quote display.
Day order: An order placed for execution, if possible, during only one trading session. If the order cannot be executed that day, it is automatically cancelled.
Day trader: Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.
Dealer: An individual or firm acting as a principal, rather than as an agent, in the purchase and/or sale of securities. Dealers trade for their own account and risk.
Debenture: A non-secured loan raised by a company, paying a fixed-rate of interest.
Decimalisation: The process that converted stock prices from fractional pricing to pricing in decimals; that is, in increments from eighths or sixteenths of dollars to nickels (USD0.05) or pennies (USD0.01). Decimalisation and the reduction of tick sizes are not the same and are not necessarily dependent on each other.
Declaration date: The latest day or time by which the buyer of an option must indicate to the seller his intention to exercise the option.
Default: The non-performance of a stated obligation.
Deferred shares: Stocks whose dividends are not paid until the expiration of a stated date, or until a specified event, such as the company's profitability reaching a certain level, has taken place.
Delivery: The settlement of a futures contract by receipt or tender of a financial instrument.
Delivery month: The calendar month in which a futures contract comes to maturity and becomes deliverable.
Delivery points: Those locations designated by futures exchanges at which stocks of a commodity represented by a futures contract may be delivered in fulfilment of the contract.
Delivery versus payment (DVP): A delivery instruction where the delivery of securities and the payment of the cash consideration are linked.
Delta: The change in the value of the option premium relative to the instantaneous change in the value of the underlying instrument, expressed as a coefficient.
Depository trust company: In the US, a central securities repository, owned by banks and brokerage houses, where stock and bond certificates are exchanged.
Depreciation: The reduction in the book or market value of an asset.
Depth of market: A measure of how much a price has to move in order to execute larger than normal transactions. The smaller the price movement and the larger the transaction, the deeper the market.
Derivatives: Financial instruments or arrangements that derive their value from some underlying stock, bond, commodity or other asset. Futures, swaps, some forwards, options and warrants, and certain mortgage-backed securities are the most common derivative forms.
Dilution: The diminution in the proportion of income to which each share is entitled.
Dirty prices: Bond prices which include the accrued interest.
Discount: When the market price of a newly issued security is lower than the issue price.
Discount factor: The present value of one unit of currency received at a stated future date.
Discount rate: The rate used to calculate the present value of future cash flows.
Discounted cash flow: Future cash flows multiplied by discount factors to obtain the present value.
Distribution date: See Payment date
Dividend: The distribution of (post-tax) earnings to shareholders declared by the board of directors of a corporation to be paid per share to the shareholders. Dividends are usually paid in cash, but can be paid in stock or by means of stock and cash.
Down tick: The sale of a security at a price lower than the previous one.
Dual-currency bond: A bond with the interest paid in one currency and the principal paid in another.
Durante price: Fluctuation price established during trading sessions other than the official opening and closing dealings on Italian exchanges.
Duration: A measurement of the change in the value of an instrument in response to a change in interest rates. It is the primary basis for comparing the effect of interest rate changes on prices of fixed-income instruments.

E

Earnings per share: The total net profit of a company per share.
EDGAR: Electronic Data Gathering, Analysis and Retrieval System - the Securities and Exchange commission's system for the electronic submission by direct transmission, magnetic tape or diskette, of most filings and related correspondence.
Efficient market: A market in which security prices reflect information instantaneously.
Electronic communication network (ECN): Any electronic system that widely disseminates to third parties orders entered by an exchange market-maker or OTC market-maker, and permits such orders to be executed against in whole or in part.
Equity: The ordinary shares of companies. The ownership interest in a company of holders of its common and preferred stock.
Equity warrant bonds: See Subscription warrant
ETFs: See Exchange traded funds (ETFs)
Eurobonds: A long-term loan issued in a currency other than that of the country or market in which it is issued. There is no withholding tax applied to interest payment. Eurobonds are internationally underwritten and available in bearer form. They are cleared through Cedel and Euroclear and are traded crossborder.
Eurodollar strips: Strips of Eurodollars are the co-ordinated purchase or sale of a series of futures contracts with successive expiration dates. The object is to lock in a yield for a period or term equal to the length of the strip.
Eurodollars: US dollars deposited in a bank (US or non US) located outside the US.
European option: An option that can be exercised only on its expiration date rather than before that date.
Ex: The opposite of cum, and used to indicate that the buyer is not entitled to participate in whatever forthcoming event is specified (ex cap, ex dividend, ex rights, etc).
Ex all: The sale of a security without dividends, rights, warrants or other supplementary privileges associated with that security.
Ex capitalisation: A stock or share sold without the right to the capitalisation issue which has been announced.
Ex date: The date, for a benefit event (eg a dividend) used to determine whether the buyer or seller of the security is entitled to the benefit. The ex date divides the cum period from the ex period. Bargains dealt prior to the ex date (during the cum period) are dealt with the benefit attached, unless stated to the contrary as a bargain condition. Bargains dealt after ex date (during the ex period) are dealt without the benefit attached, unless stated to the contrary by a bargain condition.
Ex dividend: A stock or share sold without the right to the recently declared dividend. A stock quoted ex dividend has the amount of the dividend which is about to be paid deducted from the price.
Ex rights: Stock sold without the right to participate in an offer of securities to existing shareholders by a company in proportion to their existing holdings.
Ex warrants: Stock sold with the buyer no longer entitled to the warrants formerly attached to the stock.
Exchange of futures for cash: A transaction in which the buyer of a cash commodity transfers to the seller a corresponding amount of long futures contracts, or receives from the seller a corresponding amount of short futures, at a price difference mutually agreed upon. In this way, the opposite hedges in futures of both parties are closed out simultaneously.
Exchange of futures for physicals: A futures contract provision involving an agreement for delivery of a physical product that does not necessarily conform to contract specifications in all terms from one market participant to another, and a concomitant assumption of equal and opposite futures positions by the same participants at the time of the agreement.
Exchange traded commodities (ETCs): Listed transferable securities that enable investors to buy and sell exposure to commodities through regular brokerage accounts; similar to exchange traded funds (ETFs).
Exchange traded funds (ETFs): Exchange traded funds are collective investment vehicles which track indices - they can allow low cost exposure to the performance of an index as quickly and efficiently as the most liquid stocks.
Ex-dividend date: The date on which a stock goes ex dividend. After this date the right to receive a current dividend will not automatically transfer from the seller of the stock to the buyer.
Exercise: The use of the right to purchase the underlying instrument by the holder of a call, or to sell the underlying instrument by the holder of a put.Upon exercise of an option on a futures contract, an option seller will be assigned (at the exercise price) a futures position opposite to the position acquired by the option buyer. Upon exercise of an option on equity shares, an option seller will be required to deliver shares at the exercise price (in the case of a call option) or purchase shares at the exercise price (in the case of a put option).Exercise of an option on an equity-index contract, either a call or a put, results in a cash settlement based on the difference between the exercise price and the index at the time of exercise.
Exercise notice: The formal notification that the holder of a call (or put) option wishes to buy (or sell) the underlying security at the exercise price.
Exercise price: See Strike price
Exercise value: For a call option, this is the amount by which the strike price is below the underlying investment; for a put option, it is the amount by which the strike price is above the underlying investment.
Exotic option: Any of a wide variety of options with unusual underlying, strike price calculations, strike price determinations, payoff mechanisms or expiration conditions.
Expiration date: (i) Options - the last date after which the option can no longer be exercised.<\n>(ii) Bonds - the date on which a bond matures.
Expiration month: The month in which an option expires.
extraMark: The London Stock Exchange market for innovative investment companies and products, is dedicated to providing investors with special investment opportunities.
Extrinsic value: See Time value

F

Face value: See Par value
Fair value: An option value derived from a mathematical option valuation model
Fannie Mae: Securities issued by the Federal National Mortgage Association (FNMA) of the US.
Fast market: Rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported.
Fill or kill order: An order submitted to the order book with a specified size and at the option of the member firm, a specified limit price which either executes in its entirety against eligible orders at the price of those orders or is rejected in full from the order book.
Final dividend: The dividend paid by a company at the end of its financial year, recommended by the directors, but authorised by the shareholders at the company's Annual General Meeting.
Financial future: A futures contract based on a financial instrument.
Financial Services Action Plan (FSAP): The FSAP is the European Commission's response towards improving the single market in financial services. Adopted in 1999, the FSAP contains a list of 42 measures to be implemented, grouped around four strategic objectives (retail markets; wholesale; prudential rules and supervision; and wider conditions for an optimal single financial market). The Markets in Financial Instruments Directive forms a major part of the implementation of the FSAP.
Firm quote: A market-maker's quote which is a price which he/she is committed to deal.
First notice day: The first day on which notices of intention to deliver actual commodities against futures market positions can be received.
Fixed-interest security: A security or bond which offers an annual guaranteed interest payment. There is usually a fixed date at which the bond is redeemed.
Flexible exchange (FLEX) option: A semi-customised, exchange-traded put or call option issued by a clearing house. Customisation is limited to expiration date, strike and exercise style (European or American).
Floor: An agreement with a counterparty that sets a lower limit to interest rates for the floor buyer for a stated time period.
Flotation: The occasion on which a company's shares are offered on the market for the first time.
Forward rate agreement (FRA): An agreement to borrow or lend at a specified future date at an interest rate that is fixed today. The borrowing and lending is purely notional as the contract allows the purchaser to fix interest costs for a specific future period.
Fourth market: The direct trading of securities between institutional investors without the use of brokers or dealers.
Free float: The number of shares not held by corporate insiders that are freely tradable in the public market or markets on which a company's securities are listed.
Freimakler: Independent dealers admitted to trade on German stock exchanges by the board of governors of the individual exchange. Freimakler participate in stock exchange dealings as intermediaries. They do not conclude business directly with buyers or sellers of securities. Freimakler, unlike Kursmakler, are not subject to any legal restriction with regard to the execution of business on their own account. The main area of trading of Freimakler is trading in the securities on other markets than the official trade. They may, however, also deal in officially listed securities.
Freiverkehr: The free market section of German stock exchanges.
Front month: The nearest active contract month of a futures contract.
Front running: A situation where the employees of a brokerage firm or a bank trade in equity shares using price-sensitive information that is privately available to the firm.
Fully paid: Applied to new issues, when the total amount payable in relation to the new shares has been paid to the company.
Fungibles: Instruments that are equivalent, substitutable and interchangeable in law.
Furthest month: The month that is furthest away from settlement of a futures or options contract.
Futures contract: A contract traded on a futures exchange which requires the delivery of a specified quality and quantity of a commodity, currency or financial instrument in a specified future month, if not liquidated before the contract matures.

G

Gamma: The rate at which a delta changes over time.
Gearing: A company's debts expressed as a percentage of its equity capital.
Geldkurs: The bid price on German and Swiss exchanges.
Genussscheine: Dividend right certificate (German and Swiss stock exchanges). Security incorporating the right to participate in the net profit and the liquidation proceeds of a company as well as the right to subscribe to new shares in the case of a rights issue. However, the holder has no membership rights, in particular he cannot attend shareholder meetings. The dividend-right certificate may be in bearer or registered form.
Geregelter Markt: The regulated market section of the German stock exchanges.
Gilt edged: (i) In the UK, loans issued on behalf of the government to fund its spending. Longs are gilts with a redemption date greater than 15 years. Mediums are those with a redemption date between 5 and 15 years. Shorts are those with a redemption date within 5 years.<\n>(ii) In the US top-quality stocks issued by corporations with a known record for profit and of paying dividends over the years. In the US, the term also refers to high-quality bonds.
Ginnie Mae: Securities issued by the Government National Mortgage Association (GNMA) of the US.
Giovannini Group: The Giovannini Group was formed in 1996 to advise the European Commission on issues relating to EU financial integration and the efficiency of euro-denominated financial markets. The Group consists of financial-market participants and meets under the chairmanship of Dr. Alberto Giovannini. The Commission's Directorate-General for Economic and Financial Affairs provides the secretariat, with officials from the Directorate-General for the Internal Market and from the European Central Bank (ECB) also supporting the Group's work.
Global Depositary Receipt (GDR): Certificate, denominated in US dollars, which represents ownership of a given number of a company's shares and which can be listed and traded independently from the underlying shares.
Going long: The purchase of a stock or commodity for investment or speculation.
Going short: The selling of a stock or commodity not owned by the seller.
Green shoe: A provision in an underwriting agreement that if there is an exceptional public demand, an issuer will authorise additional shares for distribution by the syndicate.
Greenmail: The situation by which a large block of stock is held by an unfriendly company, which forces the target company to repurchase the stock at a substantial premium to prevent a takeover.
Grey market: The market in a new issue prior to formal offering.
Gross: Before deduction of tax.
Grossing-up: Calculating a gross or pretax rate of interest or dividend by adding a notional amount of tax to the net, or post-tax amount received.

H

H share: A share of a mainland Chinese company listed on HKEx (the Hong Kong stock and derivatives exchange).
Hedge: The purchase or sale of options or futures contracts as a temporary substitute for a transaction to be made at a later date. Usually it involves opposite positions in the cash or futures or options market.
Hedge ratio: For futures the number of contracts required to hedge one contract's value of the underlying asset. For options see Delta.
Historical volatility: The annualised standard deviation of percentage changes in futures prices over a specific period. It is an indication of past volatility in the marketplace.
Horizontal spread: A calendar or time spread.
Hors-côte: The market on the Paris Stock Exchange where issues not traded on the official list or second market are traded.

I

Implied volatility: A measurement of the market's expected price range of the underlying commodity futures based on the market-traded option premiums.
Index: A number that measures changes in financial markets. Some indexes are used as benchmarks that financial performance is measured against.
Indexed bond: A bond whose payments are linked by an index (such as a consumer-price index).
Index-linked gilt: A gilt, the interest and capital of which change in line with the Retail Price Index.
Indicative quote: A market-maker's price which is not firm.
Inhaberaktien: Swiss or German bearer shares.
Initial margin: The margin required to secure a new futures or options position.
Initial public offering (IPO): A company's first sale of stock to the public. Companies making an IPO are seeking outside equity capital and a public market for their stock.
Inside information: Inside information is information of a precise nature which has not been made public, relating, directly or indirectly, to one or more issuers of financial instruments or to one or more financial instruments and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.
Inside spread (Inside quote): The difference between the best bid and best ask being quoted among all of the market makers competing in a security. Since the inside spread is the aggregate of individual market maker spreads, it is narrower than an individual dealer spread or quote. (See Market maker)
Insider dealing: The purchase or sale of shares by someone who possesses 'inside' information about the company; ie information on the company's performance and prospects which has not yet been made available to the market as a whole, and which, if available, might affect the share price.
Institutional investor: A bank, mutual fund, pension fund, or other corporate entity that trades securities in large volumes.
Interbank rates: The bid and offer rates at which international banks place deposits with each other.
Intercommodity spread: The purchase of a given delivery month on one futures market and the simultaneous sale of the same delivery month on a different futures market.
Interdealer broker: A specialist broker who acts as an intermediary between market-makers who wish to buy or sell securities to improve their book positions, without revealing their identities to other market-makers.
Interdelivery spread: The purchase of one delivery month of a given commodity futures contract and the simultaneous sale of another delivery month of the same commodity futures contract on the same exchange.
Interim dividend: A dividend declared part of the way through a company's financial year, authorised solely by the directors.
Intermarket spread: See Intercommodity spread
Intermarket Trading System (ITS): A computer system that interconnects competing US exchange markets for the purpose of choosing the best market. ITS is operated by the Securities Industry Automation Corporation (SIAC).
Intermediary: An institution acting between 2 or more other entities by assuming certain rights and obligations.
Internal rate of return: The discount rate at which an investment has a zero net present value.
Internalisation: A process where broker-dealers use internal inventories to settle trades, bypassing exchanges.
Intersettle: A sister company of the Swiss Securities Clearing Corporation (SEGA), which has been set up for international settlement purposes.
In-the-money: A call option is in-the-money if the price of the underlying instrument is higher than the exercise/strike price. A put option is in-the-money if the price of the underlying instrument is below the exercise/strike price. See also Out-of-the-money.
Intramarket spread: See Interdelivery spread
Intrinsic value: The amount by which an option is in-the-money. The intrinsic value is the difference between the exercise/strike price and the price of the underlying security.
Inverse floater: A bond with a coupon rate structured to move in the opposite direction of interest rates.
Investment Services Directive: The European Union Investment Services Directive, adopted in 1993, sought to establish the conditions in which authorised investment firms and banks could provide specified services in other European Union Member States on the basis of home country authorisation and supervision. It has subsequently been extended by the Markets in Financial Instruments Directive.
Investment trust: A company whose sole business consists of buying, selling and holding shares.
ISD: See Investment Services Directive
ISD 2: See Markets In Financial Instruments Directive (MiFID)
ISIN code: The structure of the ISIN code is: 2-digit alphacountry code (ISO 3166) or XS for securities numbered by CEDEL or Euroclear; 9-digit alphanumeric code based on the national securities code or the common CEDEL/Euroclear code; a check digit computed according to the modulus 10 'double-add double'.
Issue price: The gross price placed on a new bond issue, expressed as a percentage of the principal amount.
Issuer: A corporation or governmental agency which borrows money through the sale of securities.
Issuing house: An organisation, normally a merchant bank, that arranges the details of an issue of stocks or shares, and the necessary compliance with the London Stock Exchange regulations in connection with the listing of that issue.
Istisna'a: Construction financing, where the financial institution funds the manufacturer during the construction of the asset, acquires title to that asset on completion and immediately passes title to the developer on agreed deferred payment terms.
Itayose: A method of trading employed on Japanese exchanges. Under the itayose method, which is used in the case of opening trades and the like, all orders reaching the floor before the opening are treated as simultaneous orders, and in accordance with the principle of priority, each buy order is compared with sell orders till its quantity and price are matched by a sell order and treat the price as a single price for the consumation of the transaction.

J

K

Kassakurs: On German stock exchanges, the official cash settlement price established once per day, for orders of the amount of less than 50 shares.
Kassenverein: German securities clearing and deposit bank.
Kerb trading: Trading that takes place after the market has closed.
Kursmakler: The function of the Kursmakler is to act as an intermediary between persons admitted to deal on German stock exchanges and to fix official prices of those securities to which he/she is entrusted. The Kursmakler are subject to certain legal restrictions in the conclusion of business on their own account.
Kursmaklerkammer: A public body representing the Kursmakler of the German stock exchanges. The Kursmaklerkammer is responsible for the allocation of securities among the Kursmakler, for the control of the settlement of prices and for the editing of the Official List.
Kyoto Protocol: An international emissions reduction treaty signed in 1997 in the Japanese city of Kyoto. It is a protocol to the UN Framework Convention on Climate Change, under which the signatories are obligated to cut overall greenhouse gas emissions by an average of 5.2% below 1990 levels over the period 2008-2012.

L

Lakh: An Indian measurement equating to a hundred
Lamfalussy Report: The Committee of Wise Men on the Regulation of European Securities Markets under the chairmanship of Alexandre Lamfalussy was established by ECOFIN with a mandate to assess the current conditions for the implementation of the regulation of securities markets in the European Union. It was asked to assess how the mechanism for regulating those markets can best respond to developments, and, in order to eliminate barriers, to propose scenarios for adapting current practices to ensure greater convergence and co-operation in day-to-day implementation.
Lapsed rights: Rights for which call payments have not been made by the acceptance date.
Last notice day: The final day on which notices of intent to deliver on futures contracts may be issued.
Last trading day: The day on which trading ceases for an expiring contract.
Latency: Latency is the technical term for the delays in computer systems caused by both distance and processing. Distance creates latency because of simple physics. Messages travel at the speed of light and over long distances the delays are measurable. Processing creates latency by delaying messages at every instance where a process occurs.
Less liquid stocks: The London Stock Exchange has classified those of its listed and USM company shares that have a normal market size of 1,000 or less as liquid stocks.
Letter of renunciation: On the London Stock Exchange this applies to a rights issue and is the form attached to an allotment letter which is completed should the original holder wish to pass his entitlement to someone else, or to renounce his rights absolutely.
Leverage: The ability to control large amounts of a financial asset with a comparatively small amount of capital.
LIBID: The rate charged by one bank to another for a deposit.
LIBOR: The rate charged by one bank to another for lending money.
Life of contract: The period between the beginning of trading in a particular future and the expiration of trading.
LIMEAN: The average of the LIBOR and LIBID rates.
Limit: The maximum price fluctuation permitted by an exchange from the previous session's settlement price for a given contract.
Limit down: The maximum price decline from the previous trading day's settlement price permitted in one trading session.
Limit move: A price that has advanced or declined the limit permitted during one trading session.
Limit order: An order to buy or sell a specified amount of a security at a specified price or better.
Limit up: The maximum price advance from the previous trading day's settlement price permitted in one trading session.
Liquid: A characteristic of a security or commodity market with enough units outstanding to allow large transactions without a substantial change in price. Institutional investors are inclined to seek out liquid investments so that their trading activity will not influence the market price.
Liquid stocks: The London Stock Exchange has classified its listed shares and USM-company shares that have a normal market size greater than 1,000 as liquid stocks.
Liquidity: The level of trading volume in a market.
Listed security: The securities of a private company or public body which is traded on a securities exchange and has signed a listing agreement with the stock exchange.
Loan stock: Stock bearing a fixed rate of interest. Unlike a debenture, loan stock may be unsecured.
Local: A futures trader who normally trades on an exchange on his/her own account.
Locked market: For equities a market is locked when the bid price equals the asked price. In futures markets a locked market is one where trading is halted because prices have reached their daily limit move.
Long: Owning a security.

M

Maintenance margin: The minimum margin which an investor must keep on deposit in a margin account at all times.
Make-a-market: A dealer is said to make-a-market when he or she quotes bid and offer prices at which he or she stands ready to buy and sell.
Mandatory quote period (MQP): On the London Stock Exchange, the period during which all registered market-makers are obliged to display prices.
Marché au comptant: The French cash market. All securities on the official list not traded on the monthly settlement market are traded on this market. Cash transactions comprise the least active shares and the great majority of bonds; any quantity may be negotiated for immediate settlement and delivery.
Marché officiel: Official list of French stock exchanges.
Margin: (i) In equity markets, the amount paid by the customer when he/she uses his broker's credit to buy a security. <\n>(ii) For options, the sum required as collateral from the writer of an option. <\n>(iii) For futures, a deposit made to the clearing house on establishing a futures position.
Margin call: A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.
Market Abuse: Conduct that adversely affects a financial market and falls below the standards expected by the regular user of that market. The Financial Services Authority (FSA) can enforce disciplinary action against those who commit such abuses.
Market capitalisation: The current total market value of a company's issued shares. Obtained by multiplying the current market price by the current number of shares in issue.
Market operator: Market operator is a person or persons who effectively direct the business of a regulated market.
Market order: An order to buy or sell a financial instrument immediately at the best possible price.
Market value: The number of shares in issue multiplied by their current market price.
Market-maker: A market-maker is a person or firm authorised to create and maintain a market in a security. Market-makers commit themselves to always being ready to deal in the range of stocks for which they are registered.
Markets In Financial Instruments Directive (MiFID): European Union legislation covering investment intermediaries and financial markets which replaces the previous Investment Services Directive (ISD). MiFID, part of the EU's Financial Services Action Plan, extends the coverage of the ISD regime and introduces new and more extensive requirements for firms, in particular in relation to their conduct of business and internal organisation.
Mark-to-market: The daily adjustment of an account to reflect accrued profits and losses.
Material news: News released by a public company that might reasonably be expected to affect the value of a company's securities or influence investors' decisions. Material news includes information regarding corporate events of an unusual and non-recurring nature, news of tender offers, unusually good or bad earnings reports, and a stock split or stock dividend. (See Trading halt)
Maturity date: Date on which a bond matures, at which time the face value will be returned to the purchaser. Sometimes the maturity date is not one specified date but a range of dates during which the bond may be repaid.
Maximum on-line publication level: On the London Stock Exchange, the maximum size of bargain in each SEAQ security which will be published on-line on SEAQ, immediately following trade reporting.
Member firm: A trading firm on the London Stock Exchange which may act as an agency broker on behalf of clients or a principal.
Mercato ristretto: Italian regulated market for unlisted securities.
Mid-price: The price half-way between the 2 prices shown on the London Stock Exchange's daily official list under quotation, or the average of both buying and selling prices offered by the market-makers.
Minimum price fluctuation: The smallest increment of market price movement possible in a given futures contract.
Minimum quote size: On the London Stock Exchange, the minimum number of shares in which market-makers are obliged to display prices on SEAQ for securities in which they are registered.
Modaraba: Modaraba is an Arabic word which means a business (project) in which capital is provided by one party (a company or individual) while effort and skill are contributed by the other party (beneficiary, entrepreneur or borrower). During the lifetime of the project the lender is the sole owner of the project and the borrower is the manager. In a Modaraba arrangement financial losses have to be borne exclusively by the lender. In Pakistan, the sponsor of a Modaraba has to be a company which must be registered under the Modaraba Companies and Modaraba (Flotation and Control Ordinance 1980).
Money market: The market for short-term investments. 'Short term' is usually defined as less than one year.
Money-market fund: An open-ended mutual fund that invests in very short-term instruments such as US Treasury bills, corporate commercial paper and certificates of deposit of US and foreign banks.
Mudarabah: Participation or trust financing. This arrangement involves two parties, the managing trustee (Mudarib) and the beneficial owner (Rab al Maal). Where Mudarabah is used as a method of financing, the financial institution will provide funds to the customer who then acts as Mudarib. The Mudarib will retain a fixed percentage of the profits, the Islamic financial institution's reward is a fixed share in the balance of the revenue generated by the investments There is no guarantee that the Islamic financial institution's investment will be returned or that a profit will be generated.
Multilateral Trading Facility (MTF): An MTF is a multilateral system which brings together multiple third-party buying and selling interests in financial instruments - in the system and in accordance with non-discretionary rules - in a way that results in a contract.
Multiply-listed option: Any option contract that is listed and traded on more than one national options exchange.
Murabaha: Cost-plus profit financing. The Murabaha technique is used extensively to facilitate the trade finance activities of Islamic financial institutions. The financial institution purchases and takes title to the necessary equipment or goods from a third party (either directly or through an agent). The financial institution then sells on the equipment or goods to its customer at cost plus profit. All of the above contracts are undertaken at the request of the customer. Deferred payment terms may be agreed and the arrangement may be secured. Such arrangements are not considered to be contrary to Shari'ah law as, by taking title to the equipment or goods, the bank is assuming a risk and engaging in a sale transaction which entitles it to profit. As the price of the equipment or goods is fixed, the customer is not affected by fluctuations in the base lending rate.
Musharakah: Equity financing. This is very similar to the Mudarabah contract, except that the customer puts up part of the equity. The Islamic financial institution and the customer provide financing for a specified project in agreed proportions. All parties have the right to participate in the project but the parties also have the right to waive such rights. Furthermore, in the event of loss, both parties will bear the losses in proportion to their participation. Profits and losses are shared in direct proportion to the respective contributions of the participants. The Islamic financial institution may receive an agreed management fee.
Mutual fund: An open-end investment company. Equivalent to unit trust.

N

Nakadachi: Regular members of the Osaka Stock Exchange buy and sell securities on the trading floor through the medium of nakadachi members who serve as intermediate agents in transactions between members. Nakadachi members are prohibited from trading on their own account.
Namenaktien: On German and Swiss exchanges, shares made out in the name of the owner who is entered in the register of shareholders of the company concerned.
Nasdaq: The Nasdaq stock market is the second largest equity market in the US. It is screen-based, with multiple competing market-makers. The Nasdaq system is the market's electronic communications facility.
Nearby contracts: The closest active futures contracts, ie those that expire the soonest.
Net-asset value: The market value of all assets owned by an investment trust minus liabilities and divided by the number of shares outstanding. In mutual funds, the market value of a fund share.
Netback: An industry term referring to the net FOB cost of product offered on a delivered or CIF basis. It is derived by subtracting all costs of shipment from the landed price.
New issue: A company coming to the market for the 1st time or issuing additional new shares.
New shares: Shares recently issued by a company; these shares can usually be transferred on renouncable documents.
New time: On the London Stock Exchange, new time dealings may be transacted by special arrangement in the last 2 days of an account, and settled as if they had been done during the following account.
Nil paid: A new issue of shares, usually as the result of a rights issue, on which no payment has yet been made.
No brainer: A transaction guaranteed to make a profit.
Nominal quotation: (i) Securities. An approximation of a security's market value, given for the purpose of valuation.<\n>(ii) Futures. An estimated price for a future month or date for which there is no bid, ask or trade price.
Nominee name: Name in which a security is registered and held in trust on behalf of the beneficial owner.
Normal market size (NMS): A value expressed as a number of shares used to calculate the minimum quotation size for UK domestic equities and ADRs traded on the London Stock Exchange. The NMS values, which range from 500 shares to 200,000 shares, are based on each individual stock's average market turnover value in the previous 12 values.
Notice day: Any day on which notices of intent to deliver on futures contracts may be issued.

0

Odd lot: A block of securities bid or offered which is smaller than the standard lot size for that particular security.
Offer for sale: A method of bringing a company to the market. The public can apply for shares directly at a fixed price. A prospectus containing details of the sale must be printed in a national newspaper.
Offer price: The price at which a seller is willing to sell. The best offer is the lowest such price available.
Official list: The list of securities which have obtained a formal listing on the main market of an exchange.
Offset: The closing-out or liquidation of a futures position.
Open interest: The total number of outstanding option or futures contracts that have not been closed out by offset or fulfilled by delivery.
Open order: An order to buy or sell a security which remains in place until it is either executed or cancelled.
Open range: Price (or price range) recorded during the opening period of the market.
Open-end fund: A mutual fund with no limit to the number of shares that can be issued.
Open-outcry: A public auction method of trading conducted by calling out bids and offers across a trading ring or pit and having them accepted.
Option: A contract conferring the right but not the obligation to buy (call) or to sell (put) a specified amount of an instrument at a specified price within a predetermined time period.
Option class: All options of the same type - calls or puts - listed on the same underlying instrument.
Option series: All options of the same class having the same exercise/strike price and expiration date.
Optionspreis: German for premium. The price a put or call buyer must pay to a put or call seller for an option contract.
Optionsscheine: German for warrant.
Order book: Compiled list of orders received that are away from the current best price in the market.
Order ticket: The document on which the details of the order are manually recorded, as soon as the order is received.
Ordinary share: The most common form of share or stock. A certificate that represents share ownership in a corporation.
Out trade: A trade that cannot be reconciled in the clearing process.
Out-of-the-money: A call option is out-of-the-money if the price of the underlying instrument is lower than the exercise/strike price. A put option is out-of-the-money if the price of the underlying instrument is above the exercise/strike price.
Over-the-counter (OTC): In the US, a market where small capitalisation stocks (and some large capitalisation stocks as well), shell companies, inactively traded and unregistered stocks trade. The pink sheets and the OTC Bulletin Board (OTCBB) are the only places left in the US where unregistered stocks trade.

P

Par: (i) Price of 100%. <\n>(ii) The principal amount at which the issuer of a debt security contracts to redeem at maturity. <\n>(iii) The nominal value of a security.
Par value: The amount, exclusive of interest or premium, due to a security holder at maturity. The face value (par value) of a security is shown on the face of the security's certificate.
Partizipationsscheine: On Swiss exchanges, a bearer security incorporating the same rights as the dividend-right certificate and thus similar to that. It is issued for the purpose of raising capital, and its nominal value is part of the equity of the company.
Passive managers: Fund managers who do not attempt to beat the market. Instead, they try to mirror the performance of a selected market index.
Payment date: The date on which a dividend or bond interest payment is scheduled to be paid.
Penny stocks: Low-priced stocks selling at less than USD1 a share, often highly speculative.
Perpetual: A security without a time limit for redemption.
Pink sheets: A list of securities which are traded by OTC market-makers, published by the National Quotations Bureau; the price quotations for equity securities are published on pink sheets, those of debt securities on yellow sheets.
Pip: 1/100 of 1% of the nominal value of a security.
Pit: See Ring
Point: The smallest increment of price movement possible in trading a given futures contract.
Portfolio: A collection of securities held by an investor.
Position limit: The maximum position, either net long or net short, in one commodity future or in all futures of one commodity combined which may be held or controlled by one person.
Preferential form: The London Stock Exchange allows companies offering shares to the public to set aside up to 10% of the issue for applications from employees and, where a parent company is floating off a subsidiary, from shareholders of the parent company.
Preferred ordinary shares: See Preferred stock
Preferred stock: Shares that pay dividends at a specified or sometimes adjustable rate and have preference over ordinary shares (common stock) in the payment of dividends and liquidation of assets.
Premium: (i) Options, the price a put or call buyer must pay to a put or call seller for an option contract. <\n>(ii) The amount by which the market price of a bond exceeds its par value.
Present value: The discounted value of future cash flows.
Price-earnings ratio: Current price of a stock divided by its trailing 12-months earnings.
Primary market: The market relating to the original issue or 1st sale of new securities.
Principal: A dealer who buys or sells stock for his/her own account.
Principal orders: Activity by a broker/dealer when buying or selling for its own account and risk. Also called principal trades.
Principal trades: See Principal orders
Private placement: An issue that is offered to a single or a few investors as opposed to being publicly offered.
Privatisation: The conversion of a state run company to PLC status, often accompanied by a sale of its shares to the public.
Probate price: In the UK, the price used to assess the value of shares for inheritance tax purposes. The probate price is calculated by dividing the difference between the bid and offer prices by 4 and adding the result to the lower of the 2 prices.
Program trade: Program trading is defined as a wide range of portfolio trading strategies involving the purchase or sale of 15 or more stocks having a total market value of USD1 million or more.
Prospectus: A document giving the details that a company is required to make public, to support a new issue of shares.
Proxy: A form which, when completed by the shareholder, grants another person the authorisation or power to vote on his/her behalf at company meetings.
Public Limited Company (PLC): In the UK, a public company limited by shares and having a share capital, and which may offer shares for purchase by the general public. Only PLCs may qualify for listing or trading on the London Stock Exchange.
Put option: A put option confers the right but not the obligation to sell stock, shares or futures at the option exercise price within a predetermined time period.

Q

Quotation: The price quoted by a market-maker at which he/she will trade.
Quotation size: The maximum number of shares per order of a particular security that a Market Maker is willing to buy or sell at his or her current price.
Quote-driven system: A service that does not allow automatic execution. Trading of quote-driven securities is conducted via telephone dealing.

R

Range: The difference between the highest and lowest price of a future recorded during a given trading session.
Rating: A grade - usually denoted by a letter or series of letters - signifying a security's investment quality.
Real Estate Investment Trust (REIT): An organization similar to an investment company in some respects but concentrating its holdings in real estate investments.
Recognised Clearing House (RCH): In the UK, the Financial Services Authority has recognised and supervises a number of Recognised Clearing Houses (RCHs) under the Financial Services and Markets Act 2000. Recognition confers an exemption from the need to be authorised to carry on regulated activities in the United Kingdom. In order to be recognised, RCHs must comply with the recognition requirements laid down in the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001.
Recognised Investment Exchange (RIE): In the UK, the Financial Services Authority has recognised and supervises a number of Recognised Investment exchanges (RIEs) under the Financial Services and Markets Act 2000. Recognition confers an exemption from the need to be authorised to carry on regulated activities in the United Kingdom. In order to be recognised, RIEs must comply with the recognition requirements laid down in the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001.
Recognised Overseas Clearing Houses (ROCH): In the UK, the Financial Services Authority has recognised and supervises a number of overseas Recognised Investment exchanges (ROIEs), and has the power to recognise and supervise overseas Recognised Clearing Houses (ROCHs) under the Financial Services and Markets Act 2000 (FSMA). In order to be recognised, ROCHs must satisfy the requirements of S.292(3) of FSMA.
Recognised Overseas Investment Exchange (ROIE): In the UK, the Financial Services Authority has recognised and supervises a number of overseas Recognised Investment exchanges (ROIEs), and has the power to recognise and supervise overseas Recognised Clearing Houses (ROCHs) under the Financial Services and Markets Act 2000 (FSMA). In order to be recognised, ROIEs must satisfy the requirements of S.292(3) of FSMA.
Record date: The date on which a shareholder must be registered as the owner of shares in order to be entitled to a dividend.
Redemption: The extinguishing of a debt through cash payment.
Redemption date: The date on which a security (usually a fixed-interest stock) is due to be repaid by the issuer at its full face value. The year is included in the title of the security; the actual redemption date being that on which the last interest is due to be paid.
Reduced size market-maker: On the London Stock Exchange, a market-maker concerned primarily with retail business who has permission to display prices in reduced sizes on SEAQ.
Registered representative: The employee of a member firm who gives advice on which securities to buy and sell, and who collects a percentage of the commission income he or she generates.
Registrar: The registrar is responsible for keeping track of the owners of bonds and the issuance of stocks. Working with the transfer agent, the registrar keeps current files of the owners of a bond issue and the stockholders in a corporation. The registrar ensures that no more than the authorized amount of stock is in circulation. If the registrar and transfer agent are the same company, then there must be a Chinese Wall separating the functions.
Remisier: A self-employed stockbroker who gets commission for buying and selling for his own clients.
Renouncable documents: On the London Stock Exchange, temporary evidence of ownership, of which there are 4 main types. When a company offers shares to the public, it sends an allotment letter to the successful applicants; if it makes a rights issue, it sends a provisional allotment letter to its shareholders, or in the case of a capitalisation issue, a renounceable certificate. All of these are in effect bearer securities and are valuable. Each includes full instructions on what the holder should do if he/she wishes to have the newly issued shares registered in his/her name, or if he/she wishes to renounce them in favour of somebody else.
Report: A premium on carrying over a position on a French equity from one settlement period to the next.
Reverse split: The reduction in a corporation's outstanding common stock. This is accomplished by replacing outstanding common stock by fewer shares and increasing the stated or par value per share. The total number of shares will have the same market value immediately after the reverse split as before.
Reverse-crush spread: The spread between soya beans and soya-bean products created by buying soya-bean oil and soya-bean-meal futures and selling soya-bean futures.
Rights issue: An offer of securities to existing shareholders by a company in proportion to their existing holdings.
Ring: An area on a trading floor where futures or equities are traded.
Risk factor: The risk factor (delta) indicates the risk of an option position relative to that of the related futures contract.
Risk premium: The expected additional return for making a risky investment rather than a safe one.
Road show: A series of meetings with potential investors in key cities, designed and performed by a company and its investment banker as the company prepares to go public.
Rolling over: The substitution of a far option for a near option of the same underlying stock at the same strike/exercise price.
Round lot: (i) For stocks, a unit of trading, usually 100 shares. <\n>(ii) For futures, an amount of a commodity equal in size to the futures contract for that commodity.
Round trip: Buying and selling of a futures or options contract.

S

Saitori: Saitori members of the Tokyo Stock Exchange function as middlemen in transactions between regular members. Saitori members cannot trade for their own account, nor can they accept orders from members of the public.
SAPIB: Sociedad Anónima Promotora de Inversión Bursátil (Stock Investment Promoting Corporation) - A type of Mexican company which, once registered, has a three year transition period before it is required to comply with the full regulatory regime governing public companies. The shares of a SAPIB may only be bought and traded by certain institutional and qualified investors.
Sarbanes-Oxley Act: The Sarbanes-Oxley Act of 2002, was signed into law by U.S. President George W. Bush and became effective on July 30, 2002.The Act contains sweeping reforms for issuers of publicly traded securities, auditors, corporate board members, and lawyers. It adopts tough new provisions intended to deter and punish corporate and accounting fraud and corruption, threatening severe penalties for wrongdoers, and protecting the interests of workers and shareholders.
Scrip issue: See Capitalisation issue
SEAQ: An electronic system for displaying market-makers' quotations in UK quotations admitted to the London Stock Exchange. SEAQ forms the interface between the market-makers and their customers allowing the entry and display of bid and ask prices on the SEAQ system.
SEAQ International: The London Stock Exchange's electronic price quotations system for non-UK equities, similar to SEAQ.
SEATS: A London Stock Exchange service which supports the trading of listed UK equities in which turnover is insufficient for the market making system.
SEC: The Securities and Exchange Commission, established by Congress to protect investors in securities transactions.
Second Marché: Second Market of Euronext Paris. This market is chiefly intended for medium-sized firms.
Secondary market: Trading in a new issue, either OTC or on an exchange, immediately following its original issuance.
Secondary offering: A registered offering of a large block of a security that has been previously issued to the public. The blocks being offered may have been held by large investors or institutions, and proceeds of the sale go to those holders, not the issuing company. Also called secondary distribution.
Securities analyst: An individual who does investment research and makes recommendations to buy, sell, or hold. Most analysts specialize in a single industry or business sector.
Securitised derivative: Instruments that derive their value from another security (the underlying security), such as a share, share price index, currency or bond.
Security: Generic name for a stock or share. Stocks are fixed-interest securities and shares are the rest.
SEDOL code: The stock code used to identify all securities issued in the UK or Eire. The SEDOL code, which is the basis of the ISIN code for UK securities, consists of a 7-digit number allocated by the master file service of the London Stock Exchange.
Self-regulatory organisation (SRO): In the UK a recognised controlling body which regulates a specified class of investment business.
Seller/grantor: Also known as the option writer. The seller of an option is subject to a potential obligation if the buyer chooses to exercise the option.
SEQUAL: The London Stock Exchange trade confirmation service.
Serial expiration: Options on the same underlying futures contract which expire in more than one month.
Series: All options of the same class which share a common strike price.
Settlement date: The date by which an executed order must be settled by the transference of securities and funds between buyer and seller.
Settlement price: The official closing price for a future set by the clearing house at the end of each trading day.
Share price index: An index measuring movements in the prices of shares but not their dividends; as opposed to a total return index, which measures both price movements and dividend income.
Shares: See Security
Shares outstanding: The number of shares that have been issued that are actually in the hands of investors.
Short interest: The total number of shares of a security sold short.
Short sale: The sale of a security or commodities futures not owned by the seller at the time of the trade. Short sales are usually made in anticipation of a decline in the price.
SICOVAM code: A 5-digit code allocated to French securities.
Single stock futures: Futures contracts on individual stocks.
Sinking fund: The repayment of debt by an issuer at stated regular intervals through purchases in the open market or drawings by lot.
Size: (i) The number of shares or bonds which are available for sale. <\n>(ii) A term used when there are a large number of shares for sale.
Société des Bourses Françaises (SBF): This body applies regulations drawn up by the Conseil des Bourses de Valeurs to market operations of the French stock exchanges. Its activities include registering trades and listings and keeping investors informed of transactions.
Sociétés de Bourse: Member firms on the French Bourses. Sociétés de Bourse, previously known as Agents de Change, are empowered to conduct trade in securities and financial instruments, manage private and institutional portfolios, and set up and manage investment funds. Member firms are also entitled to deal as principals.
Specialist: A member of a US stock exchange who holds an exclusive franchise to trade in one or more securities on the exchange floor. The specialist in return is obliged to maintain a fair and orderly market in the stocks in which he or she is registered.
Split: The division of the outstanding shares of a corporation usually into a larger number of shares.
Spot commodity: The actual physical commodity, as opposed to the futures contract.
Spot month: The contract month closest to delivery or expiry.
Spot price: The price at which the spot or cash commodity is currently trading in the spot market.
Spread: (i) The difference between the bid and ask price of a security. <\n>(ii) The difference between the price of two related futures contracts. <\n>iii) For options, transactions involving two or more option series on the same underlying security.
Stag: One who applies for a new issue in the hope of being able to sell the shares alloted to him/her at a profit as soon as dealing starts.
Stammaktie: German for ordinary share.
Stamp duty: In the UK, a tax levied on the purchase of shares.
Stillhalter option: Swiss form of covered warrant.
Straddle: The simultaneous purchase/sale of both call and put options for the same share, exercise/strike price and expiry date.
Strike price: Also called exercise price. The price at which an options holder can buy or sell the underlying instrument.
Strip: For futures, buying (selling) the strip involves the simultaneous purchase (sale) of contracts of 4 or 6 consecutive delivery months in the same futures contract. For options, a stock option contract made up of 2 puts and one call.
Subscription warrant: A type of security that entitles the holder to purchase a specified number of shares at a fixed price within a fixed- or perpetual-time period. The conversion price per share at which the warrants are exercised is adjusted in the event of a rights issue or a stock split.
Sukuk: Tradable asset-backed financial certificates, designed to be compliant with Shari'ah. Can be regarded as an Islamic equivalent of a bond.
SuperMontage: The next-generation electronic trading system in both order display and execution for Nasdaq securities, launched by The Nasdaq Stock Market in 2002.
Swap: A forward type of contractual agreement to exchange one type of cash flow or asset for another, according to predetermined rules.
Swiss certificate (schweizer zertifikat): Original share certificate of a foreign company, mainly originating in the US, the UK or Canada, which is quoted on a Swiss Stock Exchange and is registered in the nominee name of a specified Swiss nominee endorsed in blank. For dividend payments or participation in corporate actions it must be stamped by the nominee company.
Swiss Index: The most relevant indices of SWX Swiss Exchange are: the Swiss Market Index(SMI) which comprises 20 blue chips, the SLI Swiss Leader Index (SLI), which comprises the 30 biggest stocks traded on the Swiss market and the Swiss Performance Index (SPI) which comprises all listed stocks except investment firms and companies with less than 20 percent free float.

T

Tap stocks: UK Government stocks which the government broker will supply at a given price. The price chosen provides a means of influencing interest rates in general.
Tender offer: In an offer by tender, buyers of shares specify the price at which they are willing to purchase.
Termine price: Italian bond market forward price.
Theta: The measure of the change in an option's premium given a change in the option's time until expiration. Equal to the change in the option's premium divided by the change in time to expiration.
Third market: In the US, the trading of exchange-listed securities on the OTC market by non-exchange member broker-dealers and institutional investors.
Tick: A minimum change in price, up or down.
Tick size: This is the minimum price movement for a futures contract.
Ticker symbol: Characters that identify a financial instrument on an exchange ticker.
Time value: That part of an option premium which reflects the length of time remaining in the option prior to expiration. The longer the time remaining until expiration, the higher the time value.
Total return index: An index that calculates the performance of a group of stocks assuming that dividends are re-invested into the index constituents. For the purposes of the index calculation, the value of the dividends are re-invested in the index on the ex-dividend date.
Touch: The best buying and selling prices available from a market-maker on SEAQ and SEAQ International in a given security at any one time.
Tracker: See Exchange traded funds (ETFs)
Trade date: The date on which a trade occurs.
Traded options: Transferable options with the right to buy and sell a standarised amount of a security at a fixed price within a specified period.
Trading halt: The suspension of trading in a security while material news from the issuer is being disseminated. A trading halt generally lasts 30 minutes and gives all investors equal opportunity to evaluate news and make buy, sell, or hold decisions on that basis.
Trading range: The range of prices that have been traded over a particular period.
Traditional options: Traditional options cannot be traded and are offered by 3 market-makers acting as principals.
Transaction: The buying or selling of securities resulting from the execution of an order.
Transfer: On the London Stock Exchange, the form signed by the seller of a security authorising the company to remove his name from the register, and substitute that of the buyer.
Transparent market: The degree to which trade and quotation information is available to the public on a current basis.
Treasury bills: Short-term obligations of a government issued for periods of one year or less. Treasury bills do not carry a rate of interest and are issued at a discount on the par value. Treasury bills are repaid at par on the due date.
Treasury bonds: Government obligations with maturities of 10 years or more.
Treasury notes: Government obligations with maturities greater than one year but less than 10 years.
Treasury stock: Previously issued stock that has been repurchased by, or donated to, or otherwise reacquired by the issuing firm. Treasury stocks pay no dividends and have no voting privileges.
Triple-witching: The simultaneous expiry of index futures, index options and individual stock options.
Turnover: The total money value of securities traded, as calculated by multiplying price by the number of securities traded.

U

Underlying security: The instrument upon which traded options are listed.
Underwriting: An arrangement under which a company is guaranteed that an issue of shares will raise a given amount of cash, because the underwriters, for a commission, undertake to subscribe for any of the issue not taken up by the public.
Unit: More than one class of securities trading together as one (eg a stock and a warrant).
Unit trust: A fund which raises money from investors and invests it in a range of securities.
Unlisted securities: Securities that are not listed on an exchange.
Unlisted trading privileges: The trading of securities not listed on a US exchange but traded on that exchange at the request of a member of that exchange, and not at the request of the issuing corporation.
Up tick: A transaction executed at a price greater than the previous transaction.

V

Valorennummer: The Telekurs securities identification number, consisting of up to 6 digits.
Value date: The date up to and including which accrued interest is calculated.
Variation margin: Profits or losses on open positions in futures and options contracts which are paid or collected daily.
Vega: The measure of the change in an option's premium for a 1% change in the volatility of the underlying futures contract. Equal to the change in premium divided by 1% change in volatility.
Volatility: Usually defined as the standard deviation of returns of an asset. Volatility generally refers to the magnitude of price movements in a specific asset. Large price movements are said to be more volatile and vice versa. Volatility has a major direct influence on option premium levels. When volatility is high, premiums increase (all other assumptions remaining the same). When volatility is low, premiums decline.
Volume: Amount of trading activity, expressed in shares or dollars, experienced by a single security or the entire market within a specified period, usually daily, monthly, or annually.
Vorzugsaktie: German for preferred share.
VWAP: VWAP - 'volume-weighted average price' - represents the total value of shares traded in a particular stock on a given day, divided by the total volume of shares traded in that stock on that day. Calculation techniques vary: some will use data from all markets or just the primary market and may or may not adjust for resubmits and other error corrections. VWAP is a method of pricing transactions and also a benchmark to measure the efficiency of institutional trading or the performance of traders themselves.

W

Warrant: A certificate giving the holder the long-term and at times perpetual privilege but not the obligation of purchasing securities at a specified price.
Wash trade: A matched deal which produces neither a gain nor a loss.
Wertpapierkennummer: Security code number on German stock exchanges. The German securities identification number is a 6-digit numeric code. Codes up to 499,999 are allocated to fixed-interest securities, codes from 500,000 are allocated to shares, warrants and unit trusts.
When issued: A transaction made conditionally in a security authorised but not yet issued.
White knight: A company which rescues another which is in financial difficulty, especially one which saves a company from an unwelcome takeover bid.

Y

Yield: The percentage rate of return computed by dividing a security's annual dividend by its current market price.

Z

Zaraba: A method of trading employed on Japanese exchanges. Under the zaraba method, transactions are consummated by auction based on (i) price priority in that the selling (buying) order with the lowest (highest) price takes precedence over other orders, and (ii) time priority in that an earlier order takes precedence over other orders at the same price.
Zero coupon bonds: Zero coupon bonds are corporate or municipal debt securities that trade at a deep discount from the face value, as the bond pays no interest to the bondholders during its lifetime.

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