Word Definition
52 Week Range The highest and the lowest prices paid for a given security for the last 52 weeks.
Accrued interest The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest.
Acquisition The acquiring of control of one corporation by another. In “unfriendly” takeover attempts, the potential buying company may offer a price well above current market values, new securities and other inducements to stockholders. The management of the subject company might ask for a better price or try to join up with a third company.
American Depositary Receipts (ADRs) Receipt for shares of foreign-based companies that entitle the shareholder to all dividends and capital gains. ADRs allow Americans to buy shares of foreign-based corporations’ securities at American exchanges instead of having to go to overseas exchanges.
American Stock Exchange (AMEX) The second largest stock exchange in the United States, located in the financial district of New York City. (Formerly known as the Curb Exchange from its origin on a Manhattan street.)
Amortization Accounting for expenses or charges as applicable rather than as paid. Includes such practices as depreciation, depletion, write-off of intangibles, prepaid expenses and deferred charges.
Annual report  The formal financial statement issued yearly by a corporation. The annual report shows assets, liabilities, revenues, expenses and earnings – how the company stood at the close of the business year, how it fared profit-wise during the year, as well as other information of interest to shareowners.
Arbitrage A technique employed to take advantage of differences in price. If, for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock here and sell the same amount in London, making a profit of $.50 a share, less expenses. Arbitrage may also involve the purchase of rights to subscribe to a security, or the purchase of a convertible security – and the sale at or about the same time of the security obtainable through exercise of the rights or of the security obtainable through conversion
Assets Everything a corporation owns or that is due to it: cash, investments, money due it, materials and inventories, which are called current assets; buildings and machinery, which are known as fixed assets; and patents and goodwill, called intangible assets.
Auction market  The system of trading securities through brokers or agents on an exchange such as the New York Stock Exchange. Buyers compete with other buyers while sellers compete with other sellers for the most advantageous price.
Auditor’s report  Often called the accountant’s opinion, it is the statement of the accounting firm’s work and its opinion of the corporation’s financial statements, especially if they conform to the normal and generally accepted practices of accountancy.
Averages Various ways of measuring the trend of securities prices, one of the most popular of which is the Dow Jones Industrial Average of 30 industrial stocks listed on the New York Stock Exchange. The prices of the 30 stocks are totaled and then divided by a divisor that is intended to compensate for past stock splits and stock dividends, and that is changed from time to time. As a result, point changes in the average have only the vaguest relationship to dollar-price changes in stocks included in the average.
Balance sheet  A condensed financial statement showing the nature and amount of a company’s assets, liabilities and capital on a given date. In dollar amounts, the balance sheet shows what the company owned, what it owed and the ownership interest in the company of its stockholders.
Basis point  One gradation on a 100-point scale representing 1%; used especially in expressing variations in the yields of bonds. Fixed income yields vary often and slightly within one percent and the basis point scale easily expresses these changes in hundredths of 1%. For example, the difference between 12.83% and 12.88% is 5 basis points.
Bear market  A declining market.
Bear  Someone who believes the market will decline.
Bearer bond  A bond that does not have the owner’s name registered on the books of the issuer. Interest and principal, when due, are payable to the holder.
Best Ask The lowest price at which someone is willing to sell a security.
Best Bid The highest price at which someone is willing to buy a security.
Beta Coefficient A measure of the volatility of a stock relative to the overall market. Beta is calculated by applying linear regression, the security’s week-to-week percent price change to the correlating index’s week-to-week percent change for a given period of time. A beta value of 1.1 indicates a 1.10% movement for a 1% move in the index, regardless of direction.
Bid and Asked  Often referred to as a quotation or quote. The bid is the highest price anyone wants to pay for a security at a given time, the asked is the lowest price anyone will take at the same time.
Block A large holding or transaction of stock – popularly considered to be 10,000 shares or more.
Blue chip  A company known nationally for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends.
Blue Sky Laws  A popular name for laws various states have enacted to protect the public against securities frauds. The term is believed to have originated when a judge ruled that a particular stock had about the same value as a patch of blue sky.
Bond Basically an IOU or promissory note of a corporation, usually issued in multiples of $1,000 or $5,000, although $100 and $500 denominations are not unknown. A bond is evidence of a debt on which the issuing company usually promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. In every case a bond represents debt – its holder is a creditor of the corporation and not a part owner, as is the shareholder.
Book value  An accounting term. Book value of a stock is determined from a company’s records, by adding all assets then deducting all debts and other liabilities, plus the liquidation price of any preferred issues. The sum arrived at is divided by the number of common shares outstanding and the result is book value per common share. Book value of the assets of a company or a security may have little relationship to market value.
Broker An agent who handles the public’s orders to buy and sell securities, commodities or other property. A commission is charged for this service.
Brokers’ loans  Money borrowed by brokers from banks or other brokers for a variety of uses. It may be used by specialists to help finance inventories of stock they deal in; by brokerage firms to finance the underwriting of new issues of corporate and municipal securities; to help finance a firm’s own investments; and to help finance the purchase of securities for customers who prefer to use the broker’s credit when they buy securities.
Bull One who believes the market will rise.
Bull market  An advancing market.
Buy side  The portion of the securities business in which institutional orders originate.
Callable A bond issue, all or part of which may be redeemed by the issuing corporation under specified conditions before maturity. The term also applies to preferred shares that may be redeemed by the issuing corporation.
Capital gain or capital loss Profit or loss from the sale of a capital asset. The capital gains provisions of the tax law are complicated. You should consult your tax advisor for specific information.
Capital gains.    Stocks are bought and sold constantly throughout each trading day, and their prices change all the time. When a stock price goes higher than what you paid to buy it, you can sell your shares at a profit. These profits are known as capital gains. In contrast, if you sell your stock for a lower price than you paid to buy it, you’ve incurred a capital loss.
Capital stock  All shares representing ownership of a business, including preferred and common.
Capitalization Total amount of the various securities issued by a corporation. Capitalization may include bonds, debentures, preferred and common stock, and surplus. Bonds and debentures are usually carried on the books of the issuing company in terms of their par or face value. Preferred and common shares may be carried in terms of par or stated value. Stated value may be an arbitrary figure decided upon by the director or may represent the amount received by the company from the sale of the securities at the time of issuance.
Cash flow Reported net income of a corporation plus amounts charged off for depreciation, depletion, amortization, and extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents.
Cash sale  A transaction on the floor of the stock exchange that calls for delivery of the securities the same day. In “regular way” trade, the seller is to deliver on the third business day, except for bonds, which are the next day.
Caveat Emptor Buyer Beware. There is a public interest concern associated with the company, which may include a spam campaign, questionable stock promotion, known investigation of fraudulent activity committed by the company or insiders, regulatory suspensions, or disruptive corporate actions.
Certificate The actual piece of paper that is evidence of ownership of stock in a corporation. Watermarked paper is finely engraved with delicate etchings to discourage forgery.
Certificate of deposit (CD)  A money market instrument characterized by its set date of maturity and interest rate. There are two basic types of CDs: traditional and negotiable. Traditional bank CDs typically incur an early-withdrawal penalty, while negotiable CDs have secondary market liquidity with investors receiving more or less than the original amount depending on market conditions.
Change/Percent Change Price change (net or percent wise) between the current price and the close from the previous trading day.
CIK Code A unique identifier assigned by the SEC to all companies that file with the SEC.
Class Notes Information about a particular class of a stock such as an IPO (initial public offering).
Classes of Stock In addition to the choice of common or preferred stock, certain companies may offer a choice of publicly traded share classes, typically designated by letters of the alphabet—often A and B. For example, a company may offer a separate class of stock for one of its divisions which itself was perhaps a well-known, formerly independent company that has been acquired. In other cases, a company may issue different share classes that trade at different prices and have different dividend policies.
Close The price of the last sale for a security at the end of the trading day.
Collateral  Securities or other property pledged by a borrower to secure repayment of a loan.
Commercial paper  Debt instruments issued by companies to meet short-term financing needs.
Commission The broker’s basic fee for purchasing or selling securities or property as an agent.
Commission broker  An agent who executes the public’s orders for the purchase or sale of securities or commodities.
Common Stock All publicly traded companies issue common stock. If you hold common stock you’re in a position to share in the company’s success or feel the lack of it. The share price rises and falls all the time—sometimes by just a few cents and sometimes by several dollars—reflecting investor demand and the state of the markets. The issuing company may pay dividends, but it isn’t required to do so. If it does, the amount of the dividend isn’t guaranteed, and it could be cut or eliminated altogether.
Common stock  Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock.
Company Notes Information about a company such as filing for bankruptcy, former name, etc.
Competitive trader  A member of the exchange who trades in stocks on the floor for an account in which there is an interest. Also known as a registered trader.
Conglomerate A corporation that has diversified its operations usually by acquiring enterprises in widely varied industries.
Consolidated balance sheet  A balance sheet showing the financial condition of a corporation and its subsidiaries
Consolidated tape  The ticker tape reporting transactions in NYSE-listed securities that take place on the NYSE or any of the participating regional stock exchanges and other markets. Similarly, transactions in AMEX-listed securities, and certain other securities listed on regional stock exchanges, are reported on a separate tape.
Convertible A bond, debenture or preferred share that may be exchanged by the owner for common stock or another security, usually of the same company, in accordance with the terms of the issue.
Correspondent A securities firm, bank or other financial organization that regularly performs services for another in a place or market to which the other does not have direct access. Securities firms may have correspondents in foreign countries or on exchanges of which they are not members. Correspondents are frequently linked by private wires. Member organizations of the NYSE with offices in New York may also act as correspondents for out-of-town member organizations that do not maintain New York offices.
Coupon bond  Bond with interest coupons attached. The coupons are clipped as they come due and presented by the holder for payment of interest.
Cumulative preferred  A stock having a provision that if one or more dividends are omitted, the omitted dividends must be paid before dividends may be paid on the company’s common stock.
Cumulative voting A method of voting for corporate directors that enables the shareholders to multiply the number of their shares by the number of directorships being voted on and to cast the total for one director or a selected group of directors. A 10-share holder normally casts 10 votes for each of, say, 12 nominees to the board of directors. One thus has 120 votes. Under the cumulative voting principle, one may do that or may cast 120 (10 x 12) votes for only one nominee, 60 for two, 40 for three, or any other distribution one chooses. Cumulative voting is required under the corporate laws of some states and is permitted in most others
Current assets  Those assets of a company that are reasonably expected to be realized in cash, sold or consumed during one year. These include cash, U.S. Government bonds, receivables and money due usually within one year, as well as inventories.
Current liabilities  Money owed and payable by a company, usually within one year.
Daily Range The highest and the lowest prices paid for a given security in the last trading day.
Day order  An order to buy or sell that, if not executed, expires at the end of trading day on which it was entered.
Dealer An individual or firm in the securities business who buys and sells stocks and bonds as a principal rather than as an agent. The dealer’s profit or loss is the difference between the price paid and the price received for the same security. The dealer’s confirmation must disclose to the customer that the principal has been acted upon. The same individual or firm may function, at different times, either as a broker or dealer.
Debenture A promissory note backed by the general credit of a company and usually not secured by a mortgage or lien on any specific property.
Debit balance In a customer’s margin account, that portion of the purchase price of stock, bonds or commodities that is covered by credit extended by the broker to the margin customer
Delayed opening The postponement of trading of an issue on a stock exchange beyond the normal opening of a day’s trading because of market conditions that have been judged by exchange officials to warrant such a delay. Reasons for the delay might be an influx of either buy or sell orders, an imbalance of buyers and sellers, or pending corporate news that requires time for dissemination.
Depletion accounting Natural resources, such as metals, oil, gas and timber, that conceivably can be reduced to zero over the years, present a special problem in capital management. Depletion is an accounting practice consisting of charges against earnings based upon the amount of the asset taken out of the total reserves in the period for which accounting is made. A bookkeeping entry, it does not represent any cash outlay nor are any funds earmarked for the purpose.
Depository Trust Company (DTC)  A central securities certificate depository through which members effect security deliveries between each other via computerized bookkeeping entries thereby reducing the physical movement of stock certificates.
Depreciation Normally, charges against earnings to write off the cost, less salvage value, of an asset over its estimated useful life. It is a bookkeeping entry and does not represent any cash outlay nor are any funds earmarked for the purpose.
Director Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice presidents, and all other operating officers. Directors decide, among other matters, if and when dividends shall be paid.
Discount The amount by which a preferred stock or bond may sell below its par value. Also used as a verb to mean “takes into account” as the price of the stock has discounted the expected dividend cut.
Discretionary account An account in which the customer gives the broker or someone else discretion to buy and sell securities or commodities, including selection, timing, amount, and price to be paid or received
Diversification Spreading investments among different types of securities and various companies in different fields.
Dividend A portion of company’s quarterly profit paid to its shareholders in the form of cash or stock.
Dollar-cost-averaging A system of buying securities at regular intervals with a fixed dollar amount. Under this system investors buy by the dollars’ worth rather than by the number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Thus temporary downswings in price benefit investors if they continue periodic purchases in both good and bad times, and the price at which the shares are sold is more than their average cost. Dollar-cost-averaging does not assure a profit and does not protect against loss in declining markets. Since dollar-cost-averaging involves continuous investment in securities regardless of fluctuating price levels of such securities, investors should consider their financial ability to continue purchases through periods of low price levels
Dow theory  A theory of market analysis based upon the performance of the Dow Jones Industrial Average and transportation stock price averages. The theory says that the market is in a basic upward trend if one of these averages advances above a previous important high, accompanied or followed by a similar advance in the other. When both averages dip below previous important lows, this is regarded as confirmation of a downward trend. The Dow Jones is one type of market index.
Dually Quoted Stocks (OTC Link and FINRA’s BB) Stocks that are quoted on both OTC Link and FINRA’s BB.
Earnings report  A statement, also called an income statement, issued by a company showing its earnings or losses over a given period. The earnings report lists the income earned, expenses and the net result.
Earnings/Share (Earnings per Share or EPS) Earnings per Share number reflects the company’s profit divided by its number of outstanding shares. Companies usually use a weighted average number of shares outstanding over reporting term.
Equipment trust certificate A type of security, generally issued by a railroad, to pay for new equipment. Title to the equipment, such as a locomotive, is held by a trustee until the notes are paid off. An equipment trust certificate is usually secured by a first claim on the equipment.
Equity The ownership interest of common and preferred stockholders in a company. Also refers to excess of value of securities over the debit balance in a margin account.
Estimated Market Cap (Market Capitalization) Calculated by multiplying the number of shares outstanding times previous close price. This number reflect the total dollar value of company’s outstanding shares.
Exchange Act Rule 15c2-11 SEC Rule 15c2-11 establishes requirements for the publication and submission of quotations for over-the-counter securities.
Ex-dividend  A synonym for “without dividend.” The buyer of a stock selling ex-dividend does not receive the recently declared dividend. When stocks go ex-dividend, the stock tables include the symbol “x” following the name.
Ex-rights  Without the rights. Corporations raising additional money may do so by offering their stockholders the right to subscribe to new or additional stock, usually at a discount from the prevailing market price. The buyer of a stock selling ex-rights is not entitled to the rights
Extra The short form of “extra dividend.” A dividend in the form of stock or cash in addition to the regular or usual dividend the company has been paying.
Face value  The value of a bond that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value.
Fail to Deliver A ‘fail to deliver’ is a transaction where one of the counterparties in the transaction fails to meet their respective obligations. For example, a broker/dealer does not deliver shares sold short.
FINRA The Financial Industry Regulatory Authority (f/k/a National Association of Securities Dealers), is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA was created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange.
FINRA The Financial Industry Regulatory Authority is an independent regulator for all US securities firms.
FINRA OTCBB FINRA operates an electronic bulletin board for OTC stocks.
Fiscal year  A corporation’s accounting year. Due to the nature of their particular business, some companies do not use the calendar year for their bookkeeping. A typical example is the department store that finds December 31 too early a date to close its books after the Christmas rush. For that reason many stores wind up their accounting year January 31. Their fiscal year, therefore, runs from February 1 of one year through January 31 of the next. The fiscal year of other companies may run from July 1 through the following June 30. Most companies, though, operate on a calendar year basis.
Fixed charges  A company’s fixed expenses, such as bond interest, which it has agreed to pay whether or not earned, and which are deducted from income before earnings on equity capital are computed.
Flat income bond This term means that the price at which a bond is traded includes consideration for all unpaid accruals of interest. Bonds that are in default of interest or principal are traded flat. Income bonds that pay interest only to the extent earned are usually traded flat. All other bonds are usually dealt in “and interest,” which means that the buyer pays to the seller the market price plus interest accrued since the last payment date.
Floor The huge trading area – about the size of a football field – where stocks, bonds and options are bought and sold on the New York Stock Exchange.
Floor broker  A member of the stock exchange who executes orders on the floor of the Exchange to buy or sell any listed securities
Foreign Ordinary Shares Foreign ordinary shares are equivalent to foreign common stock traded on U.S. markets. Ordinary shares are stocks bought by U.S. investors representing shares in foreign companies that are traded on their home markets, as opposed to stocks that trade in the U.S.
Form 211 SEC Rule 15c2-11 requires that, before a broker or dealer publishes proprietary quotes on a quotation medium, it must gather, review, and retain certain information about the issuer. The market maker must file a Form 211 with FINRA, along with two copies of the required issuer information. After a successful review, FINRA will notify the market maker that it may enter a quotation on OTC Link. Form 211 (pdf)
Formula investing  An investment technique. One formula calls for the shifting of funds from common shares to preferred shares or bonds as a selected market indicator rises above a certain predetermined point – and the return of funds to common share investments as the market average declines
Free and open market  A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated.
Fundamental research  Analysis of industries and companies based on such factors as sales, assets, earnings, products or services, markets and management. As applied to the economy, fundamental research includes consideration of gross national product, interest rates, unemployment, inventories, savings, etc.
Funded debt  Usually interest-bearing bonds or debentures of a company. Could include long-term bank loans. Does not include short-term loans, preferred or common stock.
General mortgage bond  A bond that is secured by a blanket mortgage on the company’s property but may be outranked by one or more other mortgages.
Gilt-edged  High-grade bond issued by a company that has demonstrated its ability to earn a comfortable profit over a period of years and pay its bondholders their interest without interruption.
Give-up  A term with many different meanings. For one, a member of the exchange on the floor may act for a second member by executing an order for him or her with a third member. The first member tells the third member that he or she is acting on behalf of the second member and “gives up” the second member’s name rather than his or her own.
Gold fix The setting of the price of gold by dealers (especially in a twice-daily London meeting at the central bank); the fix is the fundamental worldwide price for setting prices of gold bullion and gold-related contracts and products.
Good delivery Certain basic qualifications must be met before a security sold on the Exchange may be delivered. The security must be in proper form to comply with the contract of sale and to transfer title to the purchaser.
Good ’til canceled (GTC) or open order An order to buy or sell that remains in effect until it is either executed or canceled.
Government bonds Obligations of the U.S. Government, regarded as the highest grade securities issues.
Grey Market Grey Market is the classification of a security that is not listed, traded or quoted on any U.S. stock exchange, the FINRA BB or OTC Link. Grey market trades are reported by broker-dealers to their Self Regulatory Organization (SRO) and the SRO distributes the trade data to market data vendors and financial websites so investors can track price and volume. Since grey market securities are not traded or quoted on an exchange or interdealer quotation system, investor’s bids and offers are not collected in a central place so market transparency is diminished and Best Execution of orders is difficult.
Growth stock Stock of a company with a record of growth in earnings at a relatively rapid rate.
Halt A temporary stop to trading, usually for 30 minutes, during the time when news from the issuing company is being disseminated over the news wires. A trading halt gives investors an equal opportunity to evaluate news and make their buy, sell and hold decisions accordingly. A trading halt may also be imposed for purely regulatory reasons, either by the Nasdaq Stock Market or an exchange.
Holding company A corporation that owns the securities of another, in most cases with voting control.
Hypothecation The pledging of securities as collateral – for example, to secure the debit balance in a margin account.
Income bond Generally income bonds promise to repay principal but to pay interest only when earned. In some cases unpaid interest on an income bond may accumulate as a claim against the corporation when the bond becomes due. An income bond may also be issued in lieu of preferred stock.
Indenture A written agreement under which bonds and debentures are issued, setting forth maturity date, interest rate and other terms.
Independent broker  Member on the floor of the NYSE who executes orders for other brokers having more business at that time than they can handle themselves, or for firms who do not have their exchange member on the floor.
Index A statistical yardstick expressed in terms of percentages of a base year or years. For instance, the NYSE Composite Index of all NYSE common stocks is based on 1965 as 50. An index is not an average.
Institutional investor An organization whose primary purpose is to invest its own assets or those held in trust by it for others. Includes pension funds, investment companies, insurance companies, universities and banks.
Interest Payments borrowers pay lenders for the use of their money. A corporation pays interest on its bonds to its bondholders.
Intermarket Trading System (ITS)  An electronic communications network now linking the trading floor of seven registered exchanges and FINRA to foster competition among them in stocks listed on either the NYSE or AMEX and one or more regional exchanges. Through ITS, any broker or market maker on the floor of any participating market can reach out to other participants for an execution whenever the nationwide quote shows a better price is available.
Interrogation device  A computer terminal that provides market information – last sale price, quotes, volume, etc. – on a screen or paper tape.
Investment The use of money for the purpose of making more money, to gain income, increase capital, or both.
Investment banker  Also known as an underwriter. The middleman between the corporation issuing new securities and the public. The usual practice is for one or more investment bankers to buy outright from a corporation a new issue of stocks or bonds. The group forms a syndicate to sell the securities to individuals and institutions. Investment bankers also distribute very large blocks of stocks or bonds – perhaps held by an estate.
Investment company A company or trust that uses its capital to invest in other companies. There are two principal types: the closed-end and the open-end, or mutual fund. Shares in closed-end investment companies, some of which are listed on the New York Stock Exchange, are readily transferable in the open market and are bought and sold like other shares. Capitalization of these companies remains the same unless action is taken to change, which is seldom. Open-end funds sell their own shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them.
Investment counsel One whose principal business consists of acting as investment advisor and rendering investment supervisory services.
IRA  Individual retirement account. A pension plan with tax advantages. IRAs permit investment through intermediaries like mutual funds, insurance companies and banks, or directly in stocks and bonds through stockbrokers.
Issue  Any of a company’s securities, or the act of distributing such securities.
Issuers A company or municipality offering its securities for sale to investors.
Keogh plan Tax-advantaged personal retirement program that can be established by a self-employed individual
Last Sale The price at which the last trade was executed in a security.
Legal list A list of investments selected by various states in which certain institutions and fiduciaries, such as insurance companies and banks, may invest. Legal lists are often restricted to high-quality securities meeting certain specifications
Leverage  The effect on a company when the company has bonds, preferred stock, or both outstanding. Example: If the earnings of a company with 1,000,000 common shares increases from $1,000,000 to $1,500,000, earnings per share would go up from $1 to $1.50, or an increase of 50%. But if earnings of a company that had to pay $500,000 in bond interest increased that much, earnings per common share would jump from $.50 to $1 a share, or 100%.
Liabilities All the claims against a corporation. Liabilities include accounts, wages and salaries payable; dividends declared payable; accrued taxes payable; and fixed or long-term liabilities, such as mortgage bonds, debentures and bank loans.
Limit, limited order, or limited price order  An order to buy or sell a stated amount of a security at a specified price, or at a better price, if obtainable after the order is represented in the trading crowd.
Liquidation The process of converting securities or other property into cash. The dissolution of a company, with cash remaining after sale of its assets and payment of all indebtedness being distributed to the shareholders.
Liquidity From a trading perspective, liquidity is the ability of a security to be bought or sold without causing a significant movement in the price of the security. Liquid securities may be bought and sold in large numbers without a dramatic movement in the price of the security. The opposite is true for illiquid securities. Liquidity depends on a number of forces including supply and demand, price transparency, trading history, market venue, market participants and freely tradable shares (public float).
Liquidity The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. Liquidity is one of the most important characteristics of a good market.
Listed stock The stock of a company that is traded on a securities exchange.
Load The portion of the offering price of shares of open-end investment companies in excess of the value of the underlying assets. Covers sales commissions and all other costs of distribution. The load is usually incurred only on purchase, there being, in most cases, no charge when the shares are sold (redeemed).
Locked in  Investors are said to be locked in when they have profit on a security they own but do not sell because their profit would immediately become subject to the capital gains tax.
Long Signifies ownership of securities. “I am long 100 U.S. steel” means the speaker owns 100 shares
Manipulation An illegal operation. Buying or selling a security for the purpose of creating false or misleading appearance of active trading or for the purpose of raising or depressing the price to induce purchase or sale by others.
Margin The amount paid by the customer when using a broker’s credit to buy or sell a security. Under Federal Reserve regulations, the initial margin requirement since 1945 has ranged from the current rate of 50% of the purchase price up to 100%.
Margin call A demand upon a customer to put up money or securities with the broker. The call is made when a purchase is made; also if a customer’s account declines below a minimum standard set by the exchange or by the firm.
Market Capitalization You’ll frequently hear companies referred to as large-cap, mid-cap, and small-cap. These descriptors refer to market capitalization, also known as market cap and sometimes shortened to just capitalization. Market cap is one measure of a company’s size. More specifically, it’s the dollar value of the company, calculated by multiplying the number of outstanding shares by the current market price. There are no fixed cutoff points for large-, mid-, or small-cap companies, but you may see a small-cap company valued at less than $1 billion, mid-cap companies between $1 billion and $5 billion, and large-cap companies over $5 billion—or the numbers may be twice those amounts.
Market Makers Firms that publish bid and/or ask price(s) for a given security by using their own capital, research, retail and/or systems resources . Market Makers compete with each other for orders to buy or sell at publicly quoted prices (called making a market).
Market order An order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd.
Market price The last reported price at which the stock or bond sold, or the current quote.
Maturity The date on which a loan or bond comes due and is to be paid off.
Member corporation  A securities brokerage firm, organized as a corporation, with at least one member of the New York Stock Exchange who is an officer or employee of the corporation.
Member firm A securities brokerage firm organized as a partnership and having at least one general partner or employee who is a member of the New York Stock Exchange.
Member organization  The term includes New York Stock Exchange member firms and member corporations.
Merger Combination of two or more corporations.
Money market fund A mutual fund whose investments are in high-yield money market instruments such as federal securities, CDs and commercial paper. Its intent is to make such instruments, normally purchased in large denominations by institutions, available indirectly to individuals.
Mortgage bond A bond secured by a mortgage on a property. The value of the property may or may not equal the value of the bonds issued against it.
Municipal bond A bond issued by a state or a political subdivision, such as county, city, town or village. The term also designates bonds issued by state agencies and authorities. In general, interest paid on municipal bonds is exempt from federal income taxes and state and local taxes within the state of issue. However, interest may be subject to the alternative minimum tax (AMT).
Nasdaq A national securities exchange.
Nasdaq An automated information network that provides brokers and dealers with price quotations on securities traded over-the-counter. Nasdaq is an acronym for National Association of Securities Dealers Automated Quotations.
Negotiable Refers to a security, the title to which is transferable by delivery.
Net asset value Usually used in connection with investment companies to mean net asset value per share. An investment company computes its assets daily, or even twice daily, by totaling the market value of all securities owned. All liabilities are deducted, and the balance is divided by the number of shares outstanding. The resulting figure is the net asset value per share.
Net change The change in the price of a security from the closing price on one day to the closing price the next day on which the stock is traded. The net change is ordinarily the last figure in the newspaper stock price list. The mark +1 1/8 means up $1.125 a share from the last sale on the previous day the stock traded.
New issue  A stock or bond sold by a corporation for the first time. Proceeds may be used to retire outstanding securities of the company, for new plant or equipment, for additional working capital, or to acquire a public ownership interest in the company for private owners.
Nontraded shares Generally reserved for company founders or current management. There are often restrictions on selling these shares, and they tend to have what’s known as super voting power. This makes it possible for insiders to own less than half of the total shares of a company but control the outcome of issues that are put to a shareholder vote, such as a decision to sell the company.
NYSE New York Stock Exchange
NYSE AMEX Equities Formerly known as the American Stock Exchange (AMEX)
Odd Lot  An amount of stock less than the established 100-share unit.
Off-board  This term may refer to transactions over-the-counter in unlisted securities or to transactions of listed shares that are not executed on a national securities exchange.
Offer The price at which a person is ready to sell. Opposed to bid, the price at which one is ready to buy.
Opening Price Price for a given stock at the beginning of the trading day.
OTC Link OTC Link is a centralized quotation service that collects and publishes market maker quotes for OTC securities in real time. OTC Link is a nexus of OTC dealer markets that enhances price transparency in the OTC markets so investors can more efficiently buy and sell OTC securities. OTC Link is owned and operated by OTC Markets Group Inc.
OTC Markets Group Inc. OTC Markets Group Inc. operates the world’s largest electronic marketplace for broker-dealers to trade unlisted stocks. Our OTC Link platform supports an open network of competing broker-dealers that provide investors with the best prices in over 10,000 OTC securities. In 2010, securities on OTC Link traded over $144 billion in dollar volume, making it the third largest U.S. equity trading venue after NASDAQ and the New York Stock Exchange. We categorize the wide spectrum of OTC-traded companies into three tiers– OTCQX (the quality-controlled marketplace for investor friendly companies), OTCQB (the U.S. reporting company marketplace for development stage companies), and OTC Pink (the speculative trading marketplace) — so investors can identify the level and quality of information companies provide.
OTC Pink Current Information Companies that follow the International Reporting Standard or the Alternative Reporting Standard are designated as OTC Pink Current Information.
OTC Pink Limited Information Companies that have posted limited financial information through the OTC Disclosure & News Service or are late in their filing obligations with the SEC are designated as OTC Pink Limited Information.
OTC Pink No Information OTC Pink No Information companies are not able or willing to provide disclosure to the public markets – either to a regulator, an exchange or OTC Markets Group.
OTC-BBO OTC Best Bid and Offer (Ask) is calculated using all bid and offer quotes in OTC Link and the FINRA BB.
OTCQB OTCQB is a market tier for OTC-traded U.S. companies that are registered and reporting with the Securities and Exchange Commission (SEC) or a U.S. banking or insurance regulator. OTCQB stocks are identified with an icon reading “OTCQB – U.S. Registered.” OTCQB securities may also be quoted on the FINRA BB. The OTCQB allows investors to easily identify registered and reporting companies traded in the OTC market regardless of where they are quoted.
OTCQX The OTCQX marketplace is the premier tier of the U.S. over-the-counter market.
Other OTC Also known as the “Grey Market”.
Outstanding Shares The total number of shares of a given security currently owned by shareholders.
Overbought An opinion as to price levels. May refer to a security that has had a sharp rise or to the market as a whole after a period of vigorous buying which, it may be argued, has left prices “too high.”
Oversold The reverse of overbought. A single security or a market which, it is believed, has declined to an unreasonable level.
Over-the-counter  A market for securities made up of securities dealers who may or may not be members of a securities exchange. The over-the-counter market is conducted over the telephone and deals mainly with stocks of companies without sufficient shares, stockholders or earnings to warrant listing on an exchange. Over-the-counter dealers may act either as principals or as brokers for customers. The over-the-counter market is the principal market for bonds of all types
P/E Ratio (Price/Earnings Ratio) P/E Ratio is calculated by dividing stock’s market price by the company’s earnings per share.
Paper profit (loss)  An unrealized profit or loss on a security still held. Paper profits and losses become realized only when the security is sold.
Par In the case of a common share, par means a dollar amount assigned to the share by the company’s charter. Par value may also be used to compute the dollar amount of common shares on the balance sheet. Par value has little relationship to the market value of common stock. Many companies issue no-par stock but give a stated per share value on the balance sheet. In the case of preferred stocks it signifies the dollar value upon which dividends are figured. With bonds, par value is the face amount, usually $1,000.
Participating preferred  A preferred stock that is entitled to its stated dividend and to additional dividends on a specified basis upon payment of dividends on the common stock.
Passed dividend  Omission of a regular or scheduled dividend.
Penny Stock Penny Stocks are, generally speaking, those securities that are not listed on a national securities exchange and are priced under $5. There are exclusions for securities of issuers that have net tangible assets greater than $2 million if they have been in operation at least three years or greater than $5 million if in operation less than three years. Securities of issuers with average revenue of at least $6 million for the last three years are also not considered penny stocks. For a complete definition of a Penny Stock, see SEC Rule 3a51-1. FINRA BB securities are considered penny stocks unless they qualify for one of the exclusions. See: SEC Rule 3a51-1 – Definition of a Penny Stock
Penny Stock Rules Penny Stock Rule is designed to prevent deceptive or manipulative practices. It provides that a broker cannot sell a Penny Stock to any person unless it has approved that person’s account for penny stock transactions and the broker/dealer has received in writing from customer agreement to the transaction. Approving an account includes, among other things, reviewing the customer’s financial data and determining the customer’s suitability, including the capability to evaluate the risks of trading in penny stocks. Some types of transactions in penny stocks are exempt from these rules. Exempt transactions include those with an established customer (a customer of more than one year or one who has made at least three separate penny stock purchases) and transactions in which the customer is an institutional investor. See: SEC Schedule 15g
Piggy-Back Rule A “piggyback qualified” security is one that meets the frequency-of-quotation requirement described in SEC Rule 15c2-11(f)(3). The frequency-of-quotation test or “piggyback” exception is based on whether a broker/dealer has itself published quotations in the security in the applicable interdealer quotation system on at least 12 business days during the preceding 30 calendar days, with not more than four consecutive business days without quotations. Once this criteria has been satisfied, authorized participants may register on-line in a security. As long as the security remains piggyback qualified, any participant may quote the security without a Form 211 submission.
Point In the case of shares of stock, a point means $1. If ABC shares rise 3 points, each share has risen $3. In the case of bonds a point means $10, since a bond is quoted as a percentage of $1,000. A bond that rises 3 points gains 3% in $1,000, or $30 in value. An advance from 87 to 90 would mean an advance in dollar value from $870 to $900. In the case of market averages, the word point means merely that and no more. If, for example, the NYSE Composite Index rises from 90.25 to 91.25, it has risen a point. A point in this index, however, is not equivalent to $1.
Portfolio Holdings of securities by an individual or institution. A portfolio may contain bonds, preferred stocks, common stocks and other securities.
Preferred stock  A class of stock with a claim on the company’s earnings before payment may be made on the common stock and usually entitled to priority over common stock if the company liquidates. Usually entitled to dividends at a specified rate – when declared by the board of directors and before payment of a dividend on the common stock – depending upon the terms of the issue.
Premium The amount by which a bond or preferred stock may sell above its par value. May refer, also, to redemption price of a bond or preferred stock if it is higher than face value.
Previous Close The price of the last sale for a given security at the end of the previous trading day.
Price-to-earnings ratio  A popular way to compare stocks selling at various price levels. The P/E ratio is the price of a share of stock divided by earnings per share for a 12-month period. For example, a stock selling for $50 a share and earning $5 a share is said to be selling at a price-to-earnings ratio of 10.
Primary distribution  Also called primary or initial public offering. The original sale of a company’s securities.
Primary Venue The market , exchange or quotation service where a given security is primarily quoted.
Prime rate  The lowest interest rate charged by commercial banks to their most credit-worthy customers; other interest rates, such as personal, automobile, commercial and financing loans are often pegged to the prime.
Principal The person for whom a broker executes an order, or dealers buying or selling for their own accounts. The term “principal” may also refer to a person’s capital or to the face amount of a bond.
Profit-taking Selling stock that has appreciated in value since purchase, in order to realize the profit. The term is often used to explain a downturn in the market following a period of rising prices
Prospectus The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission. It highlights the much longer Registration Statement file with the Commission.
Proxy Written authorization given by a shareholder to someone else to represent him or her and vote his or her shares at a shareholders meeting.
Proxy statement  Information given to stockholders in conjunction with the solicitation of proxies.
Prudent Man Rule  An investment standard. In some states, the law requires that a fiduciary, such as a trustee, may invest the fund’s money only in a list of securities designated by the state – the so-called legal list. In other states, the trustee may invest in a security if it is one that would be bought by a prudent person of discretion and intelligence, who is seeking a reasonable income and preservation of capital
Quarterly Report (10Q) A report providing unaudited financial information required by the SEC for all U.S. public companies to be filed quarterly.
Quote The highest bid to buy and the lowest offer to sell a security in a given market at a given time. If you ask your financial advisor for a “quote” on a stock, he or she may come back with something like “45 1/4 to 45 1/2.” This means that $45.25 is the highest price any buyer wanted to pay at the time the quote was given on the floor of the exchange and that $45.50 was the lowest price that any seller would take at the same time
Rally A brisk rise following a decline in the general price level of the market, or in an individual stock.
Real Estate Investment Trust (REIT) An organization similar to an investment company in some respects but concentrating its holdings in real estate investments. The yield is generally liberal since REITs are required to distribute as much as 90% of their income.
Record date  The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs.
Red herring  A registration statement filed with but not yet approved by the Securities and Exchange Commission (SEC).
Redemption price  The price at which a bond may be redeemed before maturity, at the option of the issuing company. Redemption value also applies to the price the company must pay to call in certain types of preferred stock.
Refinancing Same as refunding. New securities are sold by a company and the money is used to retire existing securities. The object may be to save interest costs, extend the maturity of the loan, or both.
Registered bond  A bond that is registered on the books of the issuing company in the name of the owner. It can be transferred only when endorsed by the registered owner.
Registered competitive market maker  Members of the New York Stock Exchange who trade on the floor for their own or their firm’s account and who have an obligation, when called upon by an exchange official, to narrow a quote or improve the depth of an existing quote by their own bid or offer.
Registered representative  The man or woman who serves the investor customers of a broker/dealer. In a New York Stock Exchange-member organization, a registered representative must meet the requirements of the exchange as to background and knowledge of the securities business. Also known as a financial advisor or customer’s broker.
Registrar Usually a trust company or bank charged with the responsibility of keeping record of the owners of a corporation’s securities and preventing the issuance of more than the authorized amount
Registration Before an initial public offering may be made of new securities by a company, the securities must be registered under the Securities Act of 1933. A registration statement is filed with the SEC by the issuer. It must disclose pertinent information relating to the company’s operations, securities, management and purpose of the public offering. Before a security may be admitted to dealings on a national securities exchange, it must be registered under the Securities Exchange Act of 1934. The application for registration must be filed with the exchange and the SEC by the company issuing the securities.
Regular way delivery  Unless otherwise specified, securities sold on the New York Stock Exchange are to be delivered to the buying broker by the selling broker and payment made to the selling broker by the buying broker on the third business day after the transaction. Regular way delivery for bonds is the following business day.
Regulation T The federal regulation governing the amount of credit that may be advanced by brokers and dealers to customers for the purchase of securities.
Rights When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder.
Round lot  A unit of trading or a multiple thereof. On the NYSE, the unit of trading is generally 100 shares in stocks and $1,000 or $5,000 par value in the case of bonds. In some inactive stocks, the unit of trading is 10 shares.
Scale order  An order to buy (or sell) a security, that specifies the total amount to be bought (or sold) at specified price variations.
Seat A traditional figure of speech for a membership on an exchange.
SEC Filing A document, usually containing a financing statement, filed with the SEC and made available to the public. Pink Sheet companies are not required to file with SEC.
SEC  The Securities and Exchange Commission, established by Congress to help protect investors. The SEC administers the Securities Act of 1933, the Securities Exchange Act of 1934, the Securities Act Amendments of 1975, the Trust Indenture Act, the Investment Company Act, the Investment Advisers Act and the Public Utility Holding Company Act.
Secondary distribution Also known as secondary offering. The redistribution of a block of stock some time after it has been sold by the issuing company. The sale is handled off the NYSE by a securities firm or group of firms and the shares are usually offered at a fixed price related to the current market price of the stock. Usually the block is a large one, such as might be involved in the settlement of an estate. The security may be listed or unlisted.
Securities and Exchange Commission (SEC) Primary federal regulatory agency responsible for administering federal securities laws, promoting full disclosure and protecting investors against fraudulent and manipulative practices in the securities markets.
Securities Industry Automation Corporation (SIAC) An independent organization established by the New York and American Stock Exchanges as a jointly owned subsidiary to provide automation, data processing, clearing and communications services.
Securities Investor Protection Corporation (SIPC)  Provides funds for use, if necessary, to protect customers’ cash and securities that may be on deposit with a SIPC member firm in the event the firm fails and is liquidated under the provisions of the SIPC Act. SIPC is not a government agency. It is a non-profit membership corporation created, however, by an act of Congress.
Sell side  The portion of the securities business in which orders are transacted. The sell side includes retail brokers, institutional brokers and traders, and research departments. If an institutional portfolio manager changes jobs and becomes a registered representative, he or she has moved from the buy side to the sell side.
Seller’s option A special transaction on the NYSE that gives the seller the right to deliver the stock or bond at any time within a specified period, ranging from not less than two business days to not more than 60 days.
Serial bond An issue that matures in part at periodic stated intervals.
Settlement Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale.
Short covering  Buying stock to return stock previously borrowed to make delivery on a short sale.
Short sale  A transaction by a person who believes a security will decline and sells it, though the person does not own any. For instance: You instruct your broker to sell short 100 shares of XYZ. Your broker borrows the stock so delivery can be made to the buyer. The money value of the shares borrowed is deposited by your broker with the lender. Sooner or later you must cover your short sale by buying the same amount of stock you borrowed for return to the lender. If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices – not counting commissions and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and federal regulations govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes people will sell short a stock they already own in order to protect a paper profit. This is know as selling short against the box.
Short Selling Short selling is a trading strategy where an investor, believing that a security is over-valued, borrows (from a broker-dealer or institutional investor) and sells a security and then repurchases and returns (to the broker-dealer or institutional investor) the security at a lower price. The difference between the sale price and the purchase price is the investor’s profit. Short selling is a valid trading strategy; however, there are two important points that investors must remember: – Short selling carries with it unlimited risk because the purchase price of a security can rise to any price point. Conversely, long investors (buyers) may only lose the amount invested – if, for example, the security price drops to zero. – Short sellers are subject to price manipulation schemes – or short squeezes. In a short squeeze, traders believing that there are a lot of short sellers begin buying shares to force the price and the short sellers losses higher. These traders hope that the short sellers will be forced to buy pushing the price even higher at which point they can sell their shares at a profit. Short squeezes are easier to execute in illiquid securities.
Sinking fund  Money regularly set aside by a company to redeem its bonds, debentures or preferred stock from time to time as specified in the indenture or charter.
Specialist  A member of the New York Stock Exchange who has two primary functions: first, to maintain an orderly market in the securities registered to the specialist. In order to maintain an orderly market, the exchange expects specialists to buy or sell for their own account, to a reasonable degree, when there is a temporary disparity between supply and demand. Second, the specialist acts as a broker’s broker. When commission brokers on the exchange floor receive a limit order, say, to buy at $50 a stock then selling at $60 – they cannot wait at the post where the stock is traded to see if the price reaches the specified level. They leave the order with a specialist, who will try to execute it in the market if and when the stock declines to the specified price. At all times the specialists must put their customers’ interests above their own
Speculation The employment of funds by a speculator. Safety of principal is a secondary factor.
Speculator One who is willing to assume a relatively large risk in the hope of gain.
Spin off The separation of a subsidiary or division of a corporation from its parent company by issuing shares in a new corporate entity. Shareowners in the parent company receive shares in the new company in proportion to their original holding and the total value remains approximately the same.
Split The division of the outstanding shares of a corporation into a larger number of shares. A 3-for-1 split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the 3-for-1 split would have 300 shares, although the proportionate equity in the company would remain the same; 100 parts of 1 million are the equivalent of 300 parts of 3 million. Ordinarily, splits must be voted by directors and approved by shareholders.
Spread “The Spread” is a term that applies to all markets and represents the difference between the highest bid price and the lowest ask price. For example if “the bid” is $10.00 and “the ask&” is $11.00, then the spread is $1.00. The spread is one of the ways that broker-dealers, specifically market makers (a type of broker-dealer that provides liquidity by quoting and trading both sides of the market), make money. In an ideal world, market makers want to buy at the bid price and sell at the ask price. This scenario allows them to have very little risk and make “the spread&” on each share transacted. Unfortunately for market makers, this scenario is not extremely common due to price volatility – movements in the price of a security. Volatility makes it possible for market makers to lose money providing liquidity to both sides of the market. Security purchases at the bid price can become unprofitable if the price quickly or significantly moves lower. Therefore, spreads tend to be wider (larger) in very volatile or illiquid (not easily tradable) securities. Spreads are often the result of the amount of information available on a security. This information may come in the form of past trading data, news or company financials. If very little information is available on a security, spreads may be very large because the market maker does not want to be caught off guard by a better-informed investor. Conversely, active securities with current disclosure tend to have tighter spreads because market makers believe they have sufficient knowledge of the company and the security to buy and sell with confidence. OTC investors are wise to pay attention to the spread in OTC securities.
Stock dividend A dividend paid in securities rather than in cash. The dividend may be additional shares of the issuing company, or in shares of another company (usually a subsidiary) held by the company.
Stock exchange  An organized marketplace for securities featured by the centralization of supply and demand for the transaction of orders by member brokers for institutional and individual investors
Stock index futures  Futures contracts based on market indexes, e.g. NYSE Composite Index Futures Contracts.
Stock Symbol A system of letters used to designate a security for trading.
Stock ticker symbols  Every corporation whose transactions are reported on the NYSE or AMEX ticker or on Nasdaq has been given a unique identification symbol of up to four letters. These symbols abbreviate the complete corporate name and facilitate trading and ticker reporting. Some of the most famous symbols are: T (American Telephone & Telegraph), XON (Exxon), GM (General Motors), IBM (International Business Machines), S (Sears Roebuck) and XRX (Xerox).
Stockholder of record  A stockholder whose name is registered on the books of the issuing corporation.
Stop limit order  A stop order that becomes a limit order after the specified stop price has been reached.
Stop order  An order to buy at a price above or sell at a price below the current market. Stop buy orders are generally used to limit loss or protect unrealized profits on a short sale. Stop sell orders are generally used to protect unrealized profits or limit loss on a holding. A stop order becomes a market order when the stock sells at or beyond the specified price and, thus, may not necessarily be executed at that price.
Street name  Securities held in the name of a broker instead of a customer’s name are said to be carried in “street name.” This occurs when the securities have been bought on margin or when the customer wishes the security to be held by the broker.
Swapping  Selling one security and buying a similar one almost at the same time to take a loss, usually for tax purposes.
Syndicate A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue.
Technical research  Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effect of current market action on future supply and demand for securities and individual issues.
Tender offer  A public offer to buy shares from existing stockholders of one public corporation by another public corporation under specified terms good for a certain time period. Stockholders are asked to “tender” (surrender) their holdings for stated value, usually at a premium above current market price, subject to the tendering of a minimum and maximum number of shares.
The Commodity Futures Trading Commission (CFTC) Created by Congress in 1974 to regulate exchange trading in futures.
Third market  Trading of stock exchange-listed securities in the over-the-counter market by non-exchange member brokers.
Tick The change in price, either up or down.
Ticker A telegraphic system that continuously provides the last sale prices and volume of securities transactions on exchanges. Information is either printed or displayed on a moving tape after each trade.
Trader Individuals who buy and sell for their own accounts for short-term profit. Also, an employee of a broker/dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/or its clients
Trading post  The structure on the floor of the New York Stock Exchange at which stocks or options are bought and sold.
Transfer agent  A transfer agent keeps a record of the name of each registered shareowner, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly canceled and new certificates issued in the name of the new owner
Treasury stock  Stock issued by a company but later reacquired. It may be held in the company’s treasury indefinitely, reissued to the public or retired. Treasury stock receives no dividends and has no vote while held by the company.
Turnover rate  The volume of shares traded in a year as a percentage of total shares listed on an exchange, outstanding for an individual issue or held in an institutional portfolio.
Unlisted stock  A security not listed on a stock exchange.
Unsolicited Quote An unsolicited quote is one which represents an “Unsolicited Customer Order”. Publishing unsolicited quotes allows a broker/dealer to meet an exception to Rule 15c2-11, which requires a broker to have in its possession current information, including financial information, about the issuer of the securities . To avail itself of this exception to SEC Rule 15c2-11, a FINRA member firm must ensure that the quotation published or submitted: (1) is solely on behalf of a customer; (2) represents the customer’s indication of interest; and (3) does not involve the solicitation of the customer’s interest.
Up tick  A term used to designate a transaction made at a price higher than the preceding transaction. Also called a “plus” tick. A “zero-plus” tick is a term used for a transaction at the same price as the preceding trade but higher than the preceding different price. Conversely, a down tick, or “minus” tick, is a term used to designate a transaction made at a price lower than the preceding trade. A plus sign, or a minus sign, is displayed throughout the day next to the last price of each stock at the trading post on the floor of the New York Stock Exchange.
Variable annuity  A life insurance policy where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of stocks. Upon retirement, the policyholder is paid according to accumulated units, the dollar value of which varies according to the performance of the stock portfolio. Its objective is to preserve, through stock investment, the purchasing value of the annuity which otherwise is subject to erosion through inflation.
Volume The number of shares or contracts traded in a security or an entire market during a given period. Volume is usually considered on a daily basis and a daily average is computed for longer periods.
Volume The total number of shares traded on a given day.
Voting right  Common stockholders’ right to vote their stock in affairs of a company. Preferred stock usually has the right to vote when preferred dividends are in default for a specified period. The right to vote may be delegated by the stockholder to another person
Warrants Certificates giving the holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with securities as an inducement to buy.
When issued  A short form of “when, as and if issued.” The term indicates a conditional transaction in a security authorized for issuance but not as yet actually issued. All “when issued” transactions are on an “if” basis, to be settled if and when the actual security is issued and the exchange or National Association of Securities Dealers rules the transactions are to be settled.
Working control  Theoretically, ownership of 51% of a company’s voting stock is necessary to exercise control. In practice – and this is particularly true in the case of a large corporation – effective control sometimes can be exerted through ownership, individually or by a group acting in concert, of less than 50%.
Yield The annual rate of return on an investor’s capital investment, expressed as a percentage. For bonds, yield is the coupon rate of interest divided by the purchase price.
Yield to maturity  The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.
Yield  Also known as return. The dividends or interest paid by a company expressed as a percentage of the current price. A stock with a current market value of $40 a share paying dividends at the rate of $3.20 is said to return 8% ($3.20÷$40.00). The current yield on a bond is figured the same way.
Zero coupon bond  A bond that pays no interest but is priced, at issue, at a discount from its redemption price.
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