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[STOCKING GLOSSARY ] |
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Arbitrage
Buying securities in one country, currency or market and selling in another to take advantage of price differentials.
Bear
An investor who has sold a security in the hope of buying it back at a lower price.
Bear Market
A market in which bears would prosper, that is a falling market.
Bearer stocks/shares
Securities for which no register of ownership is kept by the company. A bearer certificate has intrinsic value. Dividends are not received automatically from the company, but must be claimed by removing and returning coupons attached to the certificate.
Bed and breakfast deal
Selling shares one day and buying them back the next day for tax purposes at the end of the financial year.
Bid
(1) The price at which the market maker will buy shares (2) An approach made by one company wishing to purchase the majority share capital of another.
Blue Chip
Terms for most highly regarded shares. Originally an American term, derived from the colour of the highest value poker chip.
Bull
An investor who has bought a security in the hope of selling it at a higher price.
Bull Market
One in which bulls would prosper - a rising market.
Call
The amount due to be paid to a company by the purchases of new or partly-paid shares.
Call option
The right to buy stock or shares at an agreed price on a future date.
Capitalisation Issue
The process whereby money from a company's reserves is converted into issued capital, which is then distributed to shareholders. Also known as a bonus or scrip dividend.
Commission
The fee that a broker may charge clients for dealing on their behalf.
Consideration
The money value of a transaction (number of shares multiplied by the price) before adding or deducting commission, stamp duty, time of deal etc.
Contract Note
On the same day as a transaction takes place, a member firm sends to the client a contract note detailing the transaction, including full title of the stock, price, stamp duty (if applicable), consideration, commission etc.
Coupon
(1) On the bearer stocks, the detachable part of the certificate exchangeable for dividends. (2) Denotes the rate of interest on a fixed interest security - a 10 per cent coupon pays interest of 10 per cent a year on the nominal value of the stock.
Cover
The total net profit a company has available for distribution as dividend, divided by the amount actually paid, gives the number of times the dividend is covered.
CREST
CRESTCo's The share dealing settlement system which can settle in dematerialised or certificated form. Introduced in July 1996.
Cum
Latin word for 'with' used in the abbreviations cum cap, cum div, cum rights etc. to indicate that the buyer of a security is entitled to participate in the forthcoming capitalisation issue, dividend or rights issue. See Ex.
Debenture
A loan raised by a company, paying a fixed rate of interest and secured on the assets of a company.
Depository receipts
Marketed internationally to sophisticated investors, these are negotiable certificates that give evidence of ownership of a company's shares. They are a good medium for international investors because they maybe more liquid and more easily traded than the underlying shares.
Dividend
That part of a company's post-tax profits distributed to shareholders, usually expressed in pence per share. See Final dividend and interim dividend.
Equity
The risk-sharing part of a company's capital, usually referred to as the ordinary shares.
Eurobond
A long-term loan issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax.
Ex
The opposite of cum , and used to indicate that the buyer is not entitled to participate in whatever forthcoming event is specified. Ex cap, ex dividend, ex rights, etc.
Final Dividend
The dividend paid by a company at the end of its financial year, recommended by the directors, but authorised by the shareholders at the company's Annual General Meeting.
Fixed Interest
Loans issued by a company, the Government (gilt or gilt-edged) or local authority, where the amount of interest to be paid each year is set on issue. Usually the date of repayment is also included in the title.
Floatation
The occasion on which a company's shares are offered on the market for the first time.
Futures
Securities or goods bought or sold for future delivery. There may be no intention to take them up but to rely upon price changes in order to sell at a profit before delivery.
Gearing
A company's debts expressed as a percentage of its equity capital. High gearing means debts are high in relation to equity capital.
Gilts or gilt-edged securities Loans issued on behalf of the government to fund spending. 'Longs': those with a redemption date greater than 15 years. 'Mediums': those with a redemption date between 7-15 years. 'Shorts': those with a redemption date within 7 years.
Index Linked Gilt
A gilt, the interest and capital of which changes in line with the retail price index (inflation).
Interim dividend
A dividend declared part way through a company's financial year.
Investment trust
Company whose sole business consists of buying, selling and holding shares.
Letter of Renunciation
This applies to a rights issue and is the form attached to an allotment letter which is completed should the original holder wish to pass his entitlement to someone else, or to renounce his rights absolutely.
Listing Particulars
The details a company must publish about itself an any securities it issues before these can be listed in the Daily Official List. Often called a prospectus.
Loan Stock
Stock bearing a fixed rate of interest. Unlike a debenture, loan stocks may be unsecured.
Market Maker
An Exchange member firm, which is obliged to make a continuous two-way price, in a particular security. In Ireland, Market Making is confined to the Bond market.
Net Asset Value
The value of a company after all debts have been paid, expressed in pence per share.
New Issue
A company coming to the market for the first time or issuing additional shares.
Nil Value Shares
Shares newly issued by a company. These shares can usually be transferred on renounceable documents.
Nil Paid
A new issue of shares, usually as the result of a rights issue, on which no payment has yet been made.
Nominee Name
Name in which a security is registered and held in trust on behalf of the beneficial owner.
Offer
The price at which the market market will sell shares to investors.
Offer for sale
A method of bringing a company to the market. The public can apply for shares directly at a fixed price. A prospectus containing details of the sale must be printed in a national newspaper.
Option
The right (but not the obligation) to buy or sell securities at a fixed price within a specified period.
Ordinary shares
The most common form of share. Holders receive dividends which vary in amount in accordance with the profitability of the company and recommendation of directors. The holders are the owners of the company.
Par
The nominal value of a security.
Portfolio
A grouping of shares or securities owned by an investor constitute his or her portfolio.
Preference shares
These are normally fixed-income shares whose holders have the right to receive dividends before ordinary shareholders but after debenture and loan stock holders have received their interest.
Premium
(1) If the market price of a new security is higher than the issue price, the difference is the premium. If it is lower, the difference is called the discount. (2) The cost of purchasing a traded option.
Price/Earnings Ratio (P/E ratio)
The current share price divided y the last published earning per share, where earnings per share is net profit divided by the number of ordinary shares. The P/E ratio is a measure of the level of confidence investors have in a company (rightly or wrongly). Generally, the higher the figure, the higher the confidence.
Privatisation
Conversion of a state run company to public limited company status, often accompanied by a sale of its shares to the general public.
Prospectus
Document is giving the details that a company is required to make public to support a new issue of shares. See Listing particulars.
Proxy
A person empowered by a shareholder to vote on their behalf at company meetings.
Put Option
The right to sell stock at an agreed price at or within a stated future time.
Redemption Date
The date which a security (usually a fixed interest stock) is due to be repaid by the issuer at its full face value. The year is included in the title of the security; the actual redemption date being that on which the last interest is due to be paid.
Registrar
An organisation that takes responsibility for maintaining a company's share register
Rights Issue
An invitation to existing shareholders to purchase additional shares in the company.
Rolling Settlement
The system of settling share transactions whereby deals are settled a set number of days after being transacted.
Securities
General name for all stocks and shares in all types. In common usage, stocks are fixed interest securities and shares are the rest, though strictly speaking the distinction is that stocks are denominated in money terms.
Settlement
Once a deal has been made, the settlement process transfers stock from seller to buyer and arranges the corresponding movement of money to transfer between buyer and seller (see CREST).
Settlement day
The day on which purchases and sales of stock are due for payment.
Stag
One who applies for a new issue in the hope of being able to sell the shares allotted to him/her at a profit as soon as dealing starts.
Stamp Duty
A tax currently levied on the purchase of shares.
Traded Options
Transferable options with the right to buy and sell a standardised amount of a security at a fixed price within a specified time period (see Call and Put options above).
Transfer
The form signed by the seller of a security authorising the company to remove his/her name from the register, and substitute that of the buyer.
Underwriting
An arrangement by which a company is guaranteed that an issue of share will raise a given amount of cash, because the underwriters for a commission agree to subscribe for any of the issue not taken up.
Unit Trust
A portfolio of holdings in various companies, divided into units and managed by professionals.
Yield
The return earned on an investment, taking into account the annual income and its present capital value. There are a number of different types of yield, and in some cases different methods of calculation each type.
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