Term
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Definition
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An accounting process by which the book value of a security purchased at a discount from par is increased during the security's holding period. The accretion reflects the increase in the security's holding value as it approaches the redemption date. Under a "straight line" accretion method, the amount of the yearly accretion is the same for all years, and is equal to the product of the total amount of the discount divided by the number of years to redemption. * (See Tax Drill #2 in the chapter on Taxes)
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Term
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Definition
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An investor who meets certain suitability tests and therefore (in the eyes of the SEC) is not in need of the full protection of the securities laws. This term has relevance only when referring to private placements under Regulation D. It includes institutional purchasers and individuals with a net worth (including spouse) of at least $1,000,000 or net income of $200,000 for each of the past two (2) years ($300,000 if including spouse).
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Term
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Definition
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Interest dollars added to the contract price of a bond from the last interest payment date. It is always computed up to, but not including the settlement date.
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Term
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Definition
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An account established by the sponsor of a unit investment trust into which securities purchased for the portfolio of the trust are placed until they are formally deposited into the trust and the trust is formally created. *
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Term
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Definition
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Unit used to measure the value of the separate account of an annuity during the pay-in (accumulation phase). Similar to a mutual fund share in that this is the value of one unit (i.e., share) in the annuity separate account. Usually valued on a daily basis, and will fluctuate in value based on the performance of the investments chosen or directed into the separate account. (See "Annuity" and "Annuity Unit.")
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Term
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Definition
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The earnings test which must be satisfied under the provisions of a revenue bond contract before bonds of an additional issue having the same lien on a pledged revenue source can be issued. Typically, the test would require that historical revenues plus future estimated revenues (in some cases) exceed projected debt service requirements for both the existing issue and the proposed issue by a certain ratio. *
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Term
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Definition
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See "Income (Adjustment) Bonds."
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Term
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Definition
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(1) A person or institution named by the court to take charge of settling an estate when the person who died did not name an executor, or left no valid will or named an executor who cannot serve. This is considered a fiduciary. (2) Under State (blue sky) Laws, the person in charge of securities enforcement.
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Term
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Definition
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See "American Depository Receipt (ADR)."
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Term
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Definition
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A direct tax calculated "according to value" of property. Such tax is based on an assigned valuation (market or assessed) of real property and, in certain cases, on a valuation of tangible or intangible personal property. In virtually all jurisdictions, the tax is a lien on the property enforceable by seizure and sale of the property. An ad valorem tax is normally the one substantial tax which may be raised or lowered by a local governing body without the sanction of superior levels of government (although general restrictions (e.g., rate limitations) may exist on the exercise of this right); hence, ad valorem taxes often function as the balancing element in local budgets. *
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Term
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Definition
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A market theory that uses the relative number of advances versus declines in relation to total issues traded on the NYSE to make buying and/or selling decision. This theory measures the BREADTH of the market.
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Term
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Definition
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A procedure whereby outstanding securities are refinanced by the proceeds of a new issue of securities prior to the date on which the outstanding securities become due or are callable. Accordingly, for a period of time, both the issue being refunded and the refunding issue are outstanding. The proceeds of the refunding securities are generally invested in U.S. Government or federal agency securities (although other instruments such as bank certificates of deposit are occasionally used), with principal and interest from these securities being used to pay principal and interest on the refunded securities (or, in some cases, interest on the refunding securities and subsequently principal on the refunded securities). Securities are "escrowed to maturity" when the proceeds of the refunding securities are deposited in escrow for investment in an amount sufficient to pay the principal of and interest on the issue being refunded on the original interest payment and maturity dates. Securities are considered "pre-refunded" when the refunding issue's proceeds are escrowed only until a call date or dates on the refunded issue, with the refunded issue redeemed at that time. *
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Term
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Definition
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The organization which is employed by a mutual fund to give professional advice on its investments and management of its assets.
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Term
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Definition
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Anyone in a position to influence decisions made in a corporation, including officers, directors, principal stockholders, and members of their immediate families. Their shares are often referred to as "Control Stock".
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Term
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Definition
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A market for a security either over the counter or on an exchange after an initial public offering has been made. (See "Free-Riding & Withholding," "Hot Issue," "Stabilization," "Withholding.")
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Term
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Definition
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A colloquial term for securities issued by one of the federal agencies (e.g., the Federal National Mortgage Association or the Government National Mortgage Association). *
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Term
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Definition
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The role of a broker/dealer firm when it acts as an intermediary, or broker, between its customer and a market-maker or contra broker. For this service the firm receives a stated commission or fee.
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Term
| AGREEMENT AMONG UNDERWRITERS |
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Definition
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An agreement among members of an underwriting syndicate specifying the syndicate manager, his duties, and his privileges, among other things. (See "Underwriting Agreement," "Underwriter's Retention.")
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Term
| AGREEMENT OF LIMITED PARTNERSHIP |
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Definition
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Contractual agreement between the limited partners and the general partner(s).
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Term
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Definition
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A "best-efforts" offering of newly issued securities in which the corporation instructs the investment banker to cancel the entire offering (sold and unsold) if all of it cannot be distributed.
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Term
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Definition
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An order to buy or sell more than one round lot at one time and at a designated price or better. It must not be executed until both of these conditions can be satisfied simultaneously.
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Term
| ALTERNATIVE MINIMUM TAX (AMT) |
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Definition
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This is a part of the Internal Revenue Code which is intended to make sure that clever individuals and others who benefit from tax preference items such as long-term capital gains, accelerated depreciation, intangible drilling costs and depletion pay at least some federal income tax. If you have preference items, you calculate your taxes using your regular method and then use the AMT method (which puts a 26% tax rate on those items) and pay the amount (if any) by which the AMT exceeds the regular tax.
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Term
| AMBAC (AMBAC INDEMNITY CORPORATION) |
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Definition
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A wholly owned subsidiary of MGIC Investment Corporation which offers non-cancelable insurance contracts by which it agrees to pay a securityholder all, or any part, of scheduled principal and interest payments on the securities as they become due and payable, in the event that the issuer is unable to pay. Bonds insured by AMBAC are currently granted a Standard & Poor's rating of AAA. *
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Term
| AMERICAN DEPOSITORY RECEIPT (ADR) |
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Definition
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A receipt evidencing shares of a foreign corporation held on deposit or under the control of a U.S. banking institution; it is used to facilitate transactions and expedite transfer of beneficial ownership for a foreign security in the U.S. Everything is done in dollars and in English. Essentially the same as an American Depository Share.
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Term
| AMERICAN STOCK EXCHANGE PRICE CHANGE INDEX |
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Definition
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An "Unweighted" market index for all common stocks listed on the ASE, prepared hourly.
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Term
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Definition
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Option can be exercised at any point prior to expiration. (See "European Style Exercise.")
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Term
| AMORTIZATION OF A PREMIUM |
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Definition
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An accounting process by which the book value of a security purchased at a premium above par is decreased during the security's holding period. The amortization reflects the decrease in the security's holding value as it approaches the redemption date. Under a "straight line" amortization method, the amount of the yearly amortization is the same for all years, and is equal to the product of the total amount of the premium divided by the number of years to redemption. Compare: Accretion of a Discount. *
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Term
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Definition
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The process of paying the principal amount of an issue of securities by periodic payments either directly to securityholders or to a sinking fund for the benefit of securityholders.
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Term
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Definition
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Certain Private Purpose municipal bonds pay tax-exempt interest which is subject to the alternative minimum tax. They are called private purpose rather than public purpose because 10% or more of the proceeds goes to private activities. Examples are bonds used to fund airports, docks, wharves and government-owned solid-waste disposal facilities. MSRB rules require that confirmations indicate if the bond is subject to the AMT.
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Term
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Definition
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A bond transaction in which the buyer pays the seller a contract price plus interest accrued since the issuer's last interest payment. Virtually all interest bearing bonds always trade "and interest".
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Term
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Definition
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A formal statement issued yearly by a corporation to its shareowners. It shows assets, liabilities, equity revenues, expenses, and so forth. It is a reflection of the corporation's condition at the close of the business year (balance sheet) and earnings performance (income statement).
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Term
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Definition
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The time or process in which an annuity holder elects to begin his pay-out of income. This payout will follow the accumulation phase and will normally occur at retirement age. Once the annuitant elects to begin this payout he must select the settlement option in which he desires to receive payments. At this time, all control over the contract is surrendered to the insurance company. (See "Settlement Options.")
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Term
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Definition
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An investment product in which an investor contributes money into a plan and then elects to receive pay-out in a fixed or variable amount, usually at retirement. Two important features of this product that you will need to know are: (1) Tax deferred growth of earnings during the accumulation period. However, it is important to note that when you elect to receive payment you will be taxed at ordinary income rates on everything exceeding the cost basis. (2) The annuity will provide lifetime retirement income for the annuitant through the mortality guarantee. (See "Mortality Guarantee.")
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Term
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Definition
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Unit used to value the separate account of an annuity during the pay-out (annuity) phase. The number of annuity units is a fixed amount designated when electing to annuitize. With a variable annuity, the value of the units will vary according to the performance of the investments in the separate account, while in a fixed annuity the value remains constant. (See "Annuity" and "Accumulation Unit.")
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Term
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Definition
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See "All-or-None (AON) Order."
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Term
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Definition
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The simultaneous purchase and sale of the same or equal securities, such as convertible securities, in such a way as to take advantage of price differences prevailing in separate markets. The risk is usually minimal and the profit correspondingly small. (See "Risk Arbitrage.")
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Term
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Definition
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A system offered under SRO rules for resolving disputes, under which two parties who have a disagreement involving a securities transaction may submit the disagreement to an impartial panel for resolution. Securities dealers may be compelled to arbitrate disputes; customers cannot be compelled to arbitrate disputes involving securities law claims, although they can be forced to resolve general contractual disputes through arbitration if a valid arbitration agreement had been previously executed. Decisions of an arbitration panel are binding on the parties to the claim. *
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Term
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Definition
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(1) The price at which a mutual fund's shares can be purchased. The ask or offering price means the net asset value per share plus sales charge. (2) The offer side of a quote.
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Term
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Definition
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The appraised worth of property as set by a taxing authority for purposes of ad valorem taxation. It is important to note that the method of establishing assessed valuation varies from state to state, with the method generally specified by state law. For example, in certain jurisdictions, the assessed valuation is equal to the full or market value of the property; in other jurisdictions, the assessed valuation is equal to a set percentage of full or market value. *
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Term
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Definition
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Apportioning of the investment portfolio among categories of assets, such as money market instruments, stocks, bonds, put and call options, possibly tangible assets like precious metals, real estate and collectibles. The portfolio manager of an asset allocation mutual fund has more latitude than that of any other.
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Term
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Definition
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Everything of value that a company owns or has due: cash, investments, money due, materials, inventories--which are called current assets: buildings and machinery--fixed assets; and patents and good will--intangible assets.
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Term
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Definition
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The form imprinted on a registered securities certificate which, when completed and signed by the registered owner, authorizes the transfer of the security into the name of a new owner (designated on the form as the "assignee"). The assignment also usually provides for the granting by the registered owner of power of attorney to another person (usually the new owner or someone acting on his or her behalf) to accomplish the transfer. Assignments are often executed by the registered owner "in blank", with the name of the assignee and the person granted power of attorney filled in subsequently. *
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Term
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Definition
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Any partner, officer, director or other employee of a broker or dealer other than persons whose functions are solely clerical or administrative; in the case of a bank dealer, the term refers only to persons who are involved in the bank's dealer activities (or have some control over them). Associated persons are most often (but not always) registered as representatives or principals.*
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Term
| ASSUMED INTEREST RATE (AIR) |
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Definition
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A rate stated in a variable annuity which is merely an actuarial assumption of what the separate account will earn during the payout period. The FIRST annuity payout check will be based upon the AIR, thereafter the monthly checks will fluctuate upward and downward based upon how the actual investment results of the separate account compare to that assumed rate. If the actual results are the same as the AIR, then monthly payments remain the same. If the actual results are better than assumed, the following month's check will be greater and if the actual return is less, the following month's check will be lower. AIR is only a factor during the payout period...there are NO assumptions during the accumulation period.
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Term
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Definition
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The at-risk limitations (rules) affect investor basis and are, therefore, highly important since investor basis establishes an upper limit on deductions. For those investments that are affected by the at-risk limitations, the investor is only allowed to include recourse debt in his basis. In real estate programs, qualified non-recourse financing can also be included in investor basis.
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Term
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Definition
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An order to be executed at the market at the close of trading for the day.
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Term
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Definition
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An option is at-the-money if the underlying security is selling for the same price as the exercise price of the option.
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Term
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Definition
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An order to buy or sell at a limit price on the initial transaction of the day for a given security; if unsuccessful, it is automatically canceled.
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Term
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Definition
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A market for securities, typically found on a national securities exchange, in which trading in a particular security is conducted at a specific location with all qualified persons at that post able to bid or offer securities against orders via outcry. Compare: Over-the-counter Market. *
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Term
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Definition
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A unit or agency of government established to perform specialized functions, usually financed by service charges, fees or tolls, although it may also have taxing powers. In many cases, authorities have the power to issue debt which is secured by the lease rental payments made by a governmental unit using the facilities constructed with bond proceeds. An authority may function independently of other governmental units, or it may depend upon other units for its creation, funding or administrative oversight. Examples of authorities include health facilities authorities, industrial development authorities and housing authorities. *
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Term
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Definition
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The maximum number of shares permitted by the State Secretary to be issued by a newly chartered corporation.
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Term
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Definition
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The option available to mutual fund shareholders whereby fund income dividends and capital gains distributions are automatically put back into the fund to buy new shares, always at net asset value.
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Term
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Definition
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The predating of a letter of intent (by as much as ninety days) to allow an investor to incorporate recent large deposits for the purpose of qualifying for a load discount by reaching breakpoint on a purchase of open-end investment company shares.
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Term
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Definition
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Investment companies that strive to minimize market risks while at the same time earning reasonable current income with varying percentages of bonds and preferred and common stocks.
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Term
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Definition
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A condensed statement showing the nature and amount of a company's assets, liabilities, and capital on a given date. It shows in dollar amounts what the company owns, what it owes, and the ownership interest (shareholders' equity).
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Term
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Definition
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A maturity within a serial issue of securities (usually a later maturity) which contains a disproportionately large percentage of the principal amount of the original issue. A balloon maturity is generally distinguished from a term bond by the presence of serial maturities in the years immediately preceding the balloon maturity. Compare: Term Bonds. *
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Term
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Definition
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Low-interest bills of exchange guaranteed (accepted) by a bank or trust company for payment within one to nine months, (180 days), to provide manufacturers and exporters with capital to operate between the time of manufacturing (or exporting) and payment by purchasers. Bids and offers in the secondary marketplace are at prices discounted from the face value.
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Term
| BANKS FOR COOPERATIVES (COOP) |
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Definition
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An agency under the supervision of the Farm Credit Administration that makes and services loans for farmers' cooperative financing.
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Term
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Definition
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Notes issued by a governmental unit, usually for capital projects, which are paid from the proceeds of the issuance of long-term bonds. *
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Term
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Definition
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Property basis is the original cost adjusted by charges (such as deductions for depreciation) or credits (such as capitalized expenditures for improvements); it sets the base for calculating depreciation and assists in establishing the gain or loss on sale of the property. An investor's basis establishes the gain or loss on sale of the investor's unit(s) and sets an upper limit on his ability to take any losses generated by a property.
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Term
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Definition
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A book of mathematical tables used to convert yields to equivalent dollar prices and vice versa. The factors contained in the book are time redemption, interest rate, yield (or basis) and dollar price. The basis book is used to find the dollar price when yield is known for a given interest rate and time, or to find the yield for a given dollar price when interest rate and time are known. *
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Term
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Definition
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1/100 of 1 percent of yield. If a yield increases from 8.25% to 8.50%, the difference is referred to as a 25 basis point increase. Compare: Point. *
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Term
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Definition
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A price of a security expressed in terms of the yield to maturity to be realized by the purchaser. Compare: Dollar Bond. *
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Term
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Definition
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A declining securities market in terms of prices. (See "Bull Market.")
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Term
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Definition
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Bonds that do not have the owner's name registered on the books of the issuing corporation and that are payable to the bearer, frequently called coupon bonds. None have been issued since 1984.
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Term
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Definition
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The strategy an investor employs when it is thought that a security's price will decline.
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Term
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Definition
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The owner of securities who receives all the benefits, even though they are registered in the "street name" of a brokerage firm or nominee name of a bank handling his account.
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Term
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Definition
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An offering of newly issued securities in which the investment banker acts merely as an agent of the corporation, promising only his "best efforts" in making the issue a success, but not guaranteeing the corporation its money for an unsold portion. (See "All-or-None (AON) Offering.")
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Term
| BID AND ASK (QUOTATION OR QUOTE) |
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Definition
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The bid is the highest price anyone has declared that he wants to pay for a security at a given time; the asked is the lowest price anyone will accept at the same time. (See "Offer.")
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Term
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Definition
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A document, generally included with the notice of sale, to be completed by underwriters interested in submitting a bid on a new issue of municipal securities to be sold at a competitive sale. A bidding underwriter will state on the bid form its proposed interest rate(s) on the issue and the price it would be willing to pay for the new issue (subject to any conditions stated by the issuer in the notice of sale), and may be asked to propose a structure for the issue. (See "Competitive Bidding.") *
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Term
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Definition
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The price at which a mutual fund's shares are redeemed (bought back) by the fund. The bid or redemption price usually means the net asset value per share.
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Term
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Definition
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An investment fund in which the investors are unaware of the specific properties which will be purchased by the partnership at the time they make their partnership contributions.
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Term
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Definition
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The common stock of a large, well-known corporation with a relatively stable record of earnings and dividend payments over a period of many years.
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Term
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Definition
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The daily publication (The Blue List of Current Municipal Offerings) listing municipal bonds and notes being offered by dealers in the inter-dealer market. The par value, issuer, interest rate, maturity date, price or yield, and offering dealer are indicated for each security offered. *
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Term
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Definition
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The total of the par values of all municipal securities (except zero coupon bonds) offered for sale in The Blue List. The Blue List Total, as a measure of the supply of municipal securities available for purchase, is considered to be an indicator of the status of the secondary market for municipal securities. *
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Term
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Definition
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The efforts of the underwriters' lawyers to analyze and investigate state laws regulating the distribution of securities and to register particular issues under these laws.
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Term
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Definition
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The governing body of the NASD, comprised of persons elected by the general membership.
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Term
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Definition
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A certificate representing creditorship in an issuer and issued to raise long-term funds. The issuer pays interest, usually semi-annually, plus principal when due. (See "Bearer Bond," "Collateral Trust Bond," "Equipment Trust Bond," "Income Bond," "Mortgage Bond," "Serial Bond," "Tax-Exempt Securities," "United States Government Securities.")
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Term
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Definition
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A trade paper of the municipal securities industry published each business day, which contains advertisements for offerings of new issues of municipal securities, notices of bond redemptions, statistical analyses of market activity, results of previous bond sales, and articles relating to financial markets and public finance. A second publication, Credit Markets, provides similar information on a weekly basis. Also contains new issue worksheets for computing bids. *
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Term
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Definition
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Indicators published on a periodic basis by The Bond Buyer showing the price levels for various groups of municipal securities. Three of the indexes represent weekly averages, based upon estimates from municipal securities underwriters, of the yields which would be offered to investors if an issuer were to bring certain types of securities to market at par on a given day. These indexes are named after the number of issuers used in each index (the same issuers are used each week): 11 Bond Index - An estimation of the yield which would be offered on 20-year general obligation bonds with a composite rating of approximately "Aa" or "AA." The 11 issuers which comprise this index are also included in the 20 Bond Index. 20 Bond Index - An estimation of the yield which would be offered on 20-year general obligation bonds with a composite rating of approximately "A". 25 Bond Index or Revdex - An estimation of the yield which would be offered on 30-year revenue bonds. The 25 issuers used for this index cover a broad range of types of issues (transportation, housing, hospitals, water and sewer, pollution control, etc.) and vary in ratings from Moody's Baa to Aaa and Standard and Poor's A to AAA, for a composite rating of Moody's A1 or Standard and Poor's A+. The fourth index, the Bond Buyer Municipal Bond Index, represents an average of the prices, adjusted to an 8.00 yield, of 40 recently issued securities, based on quotations obtained from five municipal securities broker's brokers. The 40 component issues are selected according to defined criteria and are replaced by newer issues on a periodic basis. This index is published daily and serves as the basis of a commodities futures contract. *
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Term
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Definition
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An attorney (or firm of attorneys) retained by the issuer to give a legal opinion that the issuer is authorized to issue proposed securities, the issuer has met all legal requirements necessary for issuance, and interest on the proposed securities will be exempt from federal income taxation and, where applicable, from state and local taxation. Typically, bond counsel may prepare, or review and advise the issuer regarding authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation. The bond counsel may also be referred to as the "bond attorney," the "bond approving attorney", or the "bond approving counsel". *
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Term
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Definition
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The return on a discounted security figured on a basis which permits comparison with interest-bearing securities. On a short-term (under six months) discounted security, the bond equivalent yield is an annualized rate of return: on a longer term discounted security, the bond equivalent yield is determined by a computation which adjusts for the absence of periodic payments over the life of the security. *
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Term
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Definition
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See "Stock (or Bond) Power."
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Term
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Definition
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$1000 of debt outstanding for one year. The number of "bond years" in an issue is equal to the product of the number of bonds (1 bond equals $1,000 regardless of actual certificate denomination) and the number of years from the dated date (or other stated date) to the stated maturity. The total number of bond years is used in calculating the average life of an issue and its net interest cost. Computations are often made of bond years for each maturity or for each coupon rate, as well as total bond years for an entire issue.*
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Term
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Definition
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A system for the transfer of ownership of securities through entries on the records of a centralized agency. The centralized agency holds securities on behalf of their owners; when the securities are sold, ownership is transferred by bookkeeping entry from the seller to the purchaser. In the case of U.S. Government securities, securities certificates are not issued, and ownership of the securities is evidence in computer records maintained by the Federal Reserve System. For other types of securities, book-entry clearance is made available through linked or interfaced systems maintained by four securities depositories, which hold securities and act on behalf of their participants. *
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Term
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Definition
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The net asset value of a corporation's common stock. This is calculated by dividing the net tangible assets of the company (minus the par value of any preferred stock the company has) by the number of common shares outstanding.
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Term
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Definition
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The dollar level of investment necessary to qualify a purchaser for a discounted sales charge on a quantity purchase of open-end management company shares. (See "Backdating," "Letter of Intent.")
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Term
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Definition
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The soliciting of mutual fund orders in dollar amounts just below the breakpoint level; this practice is considered contrary to equitable principles of trade.
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Term
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Definition
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Term
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Definition
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A general term for a securities firm which is engaged in both buying and selling securities on behalf of customers and also buying and selling on behalf of its own account. The term would not be used to refer to a dealer bank or a municipal securities broker's broker. *
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Term
| BROKER'S BROKER OR MUNICIPAL SECURITIES BROKER'S BROKER |
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Definition
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A broker that deals exclusively with other municipal securities brokers and dealers and not with public investors. The services of a broker's broker are available, generally at a standard fee established by each broker's broker, only to certain municipal securities professionals that are selected by the broker's broker. Broker's brokers do not take inventory positions in municipal issues. *
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Term
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Definition
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A rising securities market in terms of price. (See "Bear Market.")
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Term
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Definition
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The strategy an investor employs when it is thought that a security's price will increase.
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Term
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Definition
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A stop order to buy at the market only when someone else executes an order at or above the stop price. It is frequently used as a protective device for a short position.
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Term
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Definition
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One who purchases the call or put. This is a long position. Sometimes called the holder.
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Term
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Definition
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A securities contract in which the seller's delivery of the certificates is due at the purchaser's office on the date specified at the time of the transaction. For example, "Buyer's 10", means delivery is due ten calendar days after the transaction date. (See "Cash Contract," "Regular Way Contract," "Seller's Option Contract," "When Issued/When Distributed Contract.")
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Term
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Definition
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The amount of marginable securities an investor may purchase with the SMA in a margin account. The formula is SMA divided by Regulation T. Selling (shorting) power is the same computation.
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Term
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Definition
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On any day after a prescribed settlement date, the purchasing firm who has failed to receive the certificates can give written notice to the selling firm that the contract is in default. (See "Sellout Procedure.")
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Term
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Definition
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Term
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Definition
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(1) A feature of preferred stock through which it may be retired at the corporation's option by paying a price equal to or slightly higher than either the par or market value. (2) A bond feature, by which all or part of an issue may be redeemed by the corporation before maturity and under certain specified conditions. The call price is usually a premium (never below par) which declines reaching par shortly before maturity.
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Term
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Definition
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A broker's loan from a commercial bank using margin account customer's securities as the bank's protection. (Usually the securities are worth about one-third more than the amount of the loan.) It is sometimes referred to as a "call" loan because either party can terminate it on twenty-four hours' notice. (See "Call Money Rate.")
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Term
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Definition
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The percentage of interest a broker/dealer pays on a broker's collateral loan, usually a bit lower than prime.
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Term
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Definition
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The right to buy a stated number of shares or other units of an underlying security at the exercise price, within a stated period of time.
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Term
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Definition
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The price, as established in the bond contract, at which securities will be redeemed, if called. The call price is generally at or above par (although it may be at or above the "compound accreted value" on certain types of securities) and is stated as a percentage of the principal amount called. *
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Term
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Definition
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The aspects of the redemption provisions of an issue of callable securities which partially protect an investor against an issuer's call of the securities or act as a disincentive to the issuer's exercise of its call privileges. These features include restrictions on an issuer's right to call securities for a period of time after issuance (for example, an issue that cannot be called for ten years after its issuance is said to have "ten years call protection"), or requirements that an issuer pay a premium redemption price for securities called within a certain period of time after issuance. The term may also be used to refer to market factors which would discourage an issuer from calling the securities (for example, a security callable at par which has a current trading market value of 70 is said to have "30 points of call protection"). *
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Term
| CANADIAN INTEREST COST or C |
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Definition
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I.C.. See "True Interest Cost." *
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Term
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Definition
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Profit (or loss) from the sale of a capital asset. Capital gains may be short term (12 months or less) and long term (more than 12 months). Capital losses are used to offset capital gains to establish a net position for tax purposes. Short term gains are taxed at the same rate as ordinary income while long term gains are taxed at a maximum rate of 20%.
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Term
| CAPITAL GAINS DISTRIBUTIONS |
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Definition
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Payments to mutual fund shareholders of gains realized on the sale of the fund's portfolio securities. These amounts, if any, are paid once a year and, if reinvested, are done so at NAV. They are taxable in the year realized by the fund.
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Term
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Definition
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The market for equity securities (stocks) and debt obligations with maturities in excess of one year. *
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Term
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Definition
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The monetary total of the securities (bonds, preferred stocks, and common stocks) issued or authorized by a corporation. Total capitalization also includes retained earnings.
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Term
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Definition
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Form of market manipulation in which a broker/dealer with an established short position in calls sells large blocks of the underlying security in an attempt to force the price down and lower the loss potential on the naked calls.
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Term
| CAPS (CAPPED INDEX OPTIONS) |
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Definition
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Limit the gain/loss potential from trades in index options. For example, the holder of an OEX 330 call with a 30 point cap would only realize a 30 point maximum gain even if the index closed at 390. Likewise, the writer has a maximum loss of the cap minus premium.
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Term
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Definition
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A securities contract by which delivery of the certificates is due at the purchaser's office the same day as the date of the trade. If the trade is made prior to 2:00 p.m., settlement occurs at 2:30 p.m. Otherwise, settlement occurs in 30 minutes. (See "Buyer's Option Contract," "Regular Way Contract," "Seller's Option Contract," "When Issued/When Distributed Contract.")
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Term
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Definition
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Reported net income of a corporation plus amounts charged off for depreciation, depletion, amortization, and extraordinary charges to reserve accounts for the particular year under consideration. All of these additional items are bookkeeping deductions and are not paid out in actual dollars and cents.
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Term
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Definition
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A department of a broker/dealer organization responsible for the physical handling of securities and money, delivery and receipt, collateral loans, borrowing, lending, and transfer of securities, and other financial transactions.
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Term
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Definition
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See "Certificates of Deposit (CDs)."
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Term
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Definition
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The actual piece of paper that is evidence of ownership or creditorship in a corporation. Watermarked certificates are finely engraved with delicate etchings to discourage forgery. Misplacement of a certificate by its holder will cause at least great inconvenience and at worst financial loss.
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Term
| CERTIFICATE OF DEPOSIT (CDs) |
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Definition
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Negotiable securities issued by commercial banks against money deposited with them for a specified period of time. They vary in size according to amount of deposit and maturity period and may be redeemed before maturity only by sale in a secondary market. Sometimes called "Jumbo CDs, the usual minimum size is $100,000. These are unsecured by any specific bank asset.
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Term
| CERTIFICATE OF INCORPORATION (CHARTER) |
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Definition
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A state validated certificate recognizing a business organization as a legal corporate entity.
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Term
| CERTIFICATE OF LIMITED PARTNERSHIP |
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Definition
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The legal document used to form the limited partnership, usually filed with the appropriate state government. Two or more persons must sign the certificate, although as a practical matter, the limited partners often execute a power of attorney authorizing the general partner to act on their behalf in filing the certificate.
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Term
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Definition
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A practice, in violation of SRO and SEC rules, in which a salesperson effects a series of transactions in a customer's account which are excessive in size and/or frequency in relation to the size and investment objectives of the account. A salesperson churning an account is normally seeking to maximize the income (in commissions, sales credits or mark-ups) derived from the account. *
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Term
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Definition
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Options of the same type (call or put) covering the same underlying security.
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Term
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Definition
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An organization registered as a clearing agency with the Securities and Exchange Commission which provides specialized comparison, clearance and settlement services for its members, but which does not safekeep securities on their behalf. Clearing corporations typically offer services such as envelope delivery systems, automated comparison systems, and transaction netting systems. The four registered clearing corporations are the Midwest Clearing Corporation (Chicago), the National Securities Clearing Corporation (New York), the Pacific Clearing Corporation (Los Angeles/San Francisco), and the Stock Clearing Corporation of Philadelphia. *
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Term
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Definition
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Funds drawn on one commercial bank which are deposited in another commercial bank. It may take one of more days after the date of deposit for payments presented in this form to be credited and available to the recipient. Compare: Federal Funds. *
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Term
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Definition
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The procedure taken by either party to a transaction when the contra broker defaults. The disappointed purchaser may "buy in" and the rejected seller may "sell out", or liquidate. (See "Reclamation," "Rejection.")
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Term
| CLOSED-END MANAGEMENT COMPANY |
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Definition
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An investment company whose equity capitalization remains constant. In other words, a fixed number of shares is outstanding. The shares trade based on supply and demand, either on an exchange or Nasdaq, and are not redeemable.
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Term
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Definition
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A mortgage bond provision in the indenture that, in the event of default or liquidation, entitles first bondholders to a claim upon assets senior to second and subsequent bondholders, whenever the same real assets are used as collateral for more than one issue of debt.
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Term
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Definition
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A transaction in which an investor wishes to buy an option having exactly the same terms as an option which he had previously sold, thus terminating his obligation.
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Term
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Definition
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A transaction in which an investor wishes to liquidate an open position as an option holder by selling an option having the same terms as the option originally purchased.
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Term
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Definition
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See "Collateralized Mortgage Obligation."
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Term
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Definition
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A purchase of securities in behalf of a customer promising full payment immediately upon delivery of the certificates to an agent bank or broker/dealer, to be settled no later than the 35th calendar day. Also known as DVP (delivery versus payment.)
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Term
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Definition
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Rules established and maintained by the NASD Board of Governors to regulate arbitration of intramember and customer/member disputes involving securities transactions. All intra-industry disputes, other than those involving statutory discrimination claims, must go to arbitration.
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Term
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Definition
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Rules established and maintained by the NASD Board of Governors for the administration of disciplinary proceedings stemming from infractions of the Conduct Rules.
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Term
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Definition
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A bond issue that is protected by a portfolio of securities held in trust by a commercial bank. The bond usually requires immediate redemption if the market value of the securities drops below or close to the value of the issue.
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Term
| COLLATERALIZED MORTGAGE OBLIGATION (CMO) |
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Definition
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A debt security backed by mortgages. These mortgage pools are usually separated into different maturity classes called tranches (from the French word for "slice"). These securities are issued by private issuers as well as the Federal Home Loan Mortgage Corporation (Freddie Mac). As the mortgages are usually government-guaranteed, CMOs usually carry a AAA rating. The early versions of CMOs were known as "plain vanilla," but more recent developments in the industry have given us PACs (Planned Amortization Certificates) and TACs (Targeted Amortization Certificates). These are all variations on how principal repayments in advance of maturity date are treated.
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Term
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Definition
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An option strategy combining a call and a put (either both long or both short).
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Term
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Definition
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A combination of the major types of oil and gas programs - exploration, development and income programs - diversified to reduce risk.
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Term
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Definition
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A bank established primarily to accept demand deposits which can be withdrawn at any time, such as checking account deposits, and to make short-term loans to businesses.
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Term
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Definition
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Unsecured, short-term (usually a maximum of 270 days) obligations in denominations from $100,000 to $1 million, issued principally by industrial corporations. It is usually traded in the securities market at a price discounted from face value.
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Term
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Definition
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A broker's fee for handling transactions for a client in an agency capacity.
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Term
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Definition
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A member of the NYSE executing orders in behalf of his own organization and its customers.
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Term
| COMMITTEE ON UNIFORM SECURITY IDENTIFICATION PROCEDURES (CUSIP) |
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Definition
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An agency of the NASD responsible for issuing identification numbers for virtually all publicly owned stock and bond issues.
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Term
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Definition
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Owners of this kind of stock exercise greater control, and therefore benefit more from dividends and capital appreciation, than owners of preferred stock or bonds. They are paid, however, only after preferred stocks and bondholders, and their interest in the assets in the event of liquidation are junior to all others.
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Term
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Definition
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A mutual fund whose portfolio consists primarily of common stocks. The emphasis of such funds is usually on growth.
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Term
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Definition
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A term used to refer to an inter-dealer confirmation. (See "Confirmation.") *
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Term
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Definition
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A method of submitting proposals for the purchase of a new issue of municipal securities by which the securities are awarded to the underwriting syndicate presenting the best bid according to stipulated criteria set forth in the notice of sale. The underwriting of securities in this manner is also referred to as a competitive or public sale.
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Term
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Definition
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(1) In the sale of a new issue of municipal securities, the amount of reduction from the public offering price a syndicate grants to a dealer not a member of the syndicate, expressed as a percentage of par value. (See "Spread.") (2) In the secondary market, bonds are usually offered to other dealers "less a concession, "that is, at a price expressed in terms of a net offering price (in basis or dollar price terms) minus a differential (in points or dollars per security) granted between professionals; this differential is called the "concession". *
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Term
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Definition
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A set of rules established and maintained by the NASD Board of Governors regulating the ethics employed by members in the conduct of their business.
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Term
| CONFIRMATION (COMPARISON) |
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Definition
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A written summary of a transaction involving the purchase or sale of securities, which a broker or dealer provides to the contra-party. The confirmation must contain certain information describing the securities and the parties to the transaction. *
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Term
| CONTINIUING EDUCATION REQUIREMENTS |
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Definition
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See "Firm Element"; "Regulatory Element"
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Term
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Definition
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The securities professional or customer to whom a person has sold securities or from whom a person has purchased securities. *
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Term
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Definition
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Number of units of an underlying security covered by the option contract. The usual size on equity contracts is 100 shares.
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Term
| CONTRACTUAL (PERIODIC PAYMENT) PLAN |
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Definition
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An investment plan for a mutual fund by which an investor agrees to invest a fixed sum of money at specified intervals over an extended period.
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Term
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Definition
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(1) A bond feature by which the owner may exchange his bonds for a specified number of shares of stock. Interest paid on such bonds is lower than the usual interest rate for straight debt issue. (See "Conversion Parity," "Conversion Price.") (2) A feature of some preferred stock by which the owner is entitled to exchange his preferred for common stock of the same company in accordance with the terms of the issue. (3) A feature of some mutual fund offering's allowing an inv | |
