| Daisy
Chain |
Artificial
volume created by market manipulators that gives
the appearance of activity in shares so as to
lure genuine investors. |
| Dated
Date |
The
first day that interest starts to accrue on
newly issued bonds. |
| Day
Order |
An
order that, if not executed on the day it is
entered, expires at the close of that day's
trading. |
| Day
Trade |
The
buying and selling of the same security on the
same day. |
| Dead-Cat
Bounce |
An
Americanism used to describe a temporary market
recovery after a significant fall as opposed
to the reversal of a bear trend. This is often
a result of short covering rather than genuine
buying. The analogy describes a temporary respite
in a lifeless market which will inevitably keep
falling. |
| Dealer |
A
firm that functions as a market maker and that,
as such, positions the security to buy and sell
versus the public and/or brokerage community. |
| Death
Taxes |
Taxes
incurred at death, including federal estate
taxes, federal and state generation-skipping
transfer taxes, and state estate or inheritance
taxes. See State death taxes. |
| Debenture
Bond |
A
debt that is issued by a corporation and that
is backed or secured by the good name of the
issuing company. |
| Debit
Balance |
The
amount of loan in a margin account. |
| Decedent |
A
person who has died. |
| Deductible
Liability |
A
debt on which the interest payments are deductible
for income tax purposes, such as a home mortgage
or home equity loan, trade or business loan,
investment loan, etc. |
| Deed |
A
legally binding document that has been signed,
sealed, witnessed and delivered and that sets
out the terms of and confirms an agreement between
two or more parties. |
| Deed
Of Trust |
The
trust agreement drawn up when a corporation
plans to issue bonds or other debt securities.
It includes such items as assets, interest payments,
maturity dates, etc. Also, see indenture. |
| Default |
An
issuer's failure to pay accreted interest when
a zero coupon issue matures. Treasury securities
are considered default-free. |
| Deferred
Annuity |
A
contract purchased from an insurance company
that offers tax-deferred growth of the contract
owner's investment until earnings are withdrawn.
It can be tailored to meet the specific needs
of the individual during retirement. See Annuity. |
| Deferred
Pension |
An
employee in a pension scheme who leaves before
retirement is entitled to a deferred or preserved
pension. This is calculated in the same way
as a normal pension by multiplying the number
of years of service by a fraction (usually 1/60th).
The purchase money in a deferred pension should
not normally be less than the member's total
contributions. |
| Deferred
Sales Charge |
A
type of back end load sales charge, a deferred
sales charge is a fee charged when shares are
redeemed within a specific period following
their purchase. |
| Defined-benefit
plan |
A
qualified retirement plan that specifies the
benefit a participant will receive at retirement,
commonly expressed as a percentage of pre-retirement
compensation. |
| Defined-contribution
plan |
A
qualified retirement plan that specifies the
annual contributions to the plan, commonly expressed
as a percentage of the employee's compensation.
The contributions may be made by the employer,
the employee or both, depending on how the plan
is designed. |
| Delivery
Balance Order (DBO) |
An
order issued by the clearing corporation to
any firm that, after the day's trades are netted,
has delivery or sale position remaining. The
order defines what is to be delivered to whom. |
| Delivery
Versus Payment (DVP) |
Settlement
of security transactions used by institutional
customers. Certificates are delivered to a bank
designated by the customer whereupon the bank
makes payment on delivery. |
| Denomination |
1).
The face value of a security, i.e. the sum to
be paid on its redemption or its par value.
2). Nominating the currency used by the parties
to a contract |
| Depository |
A
central location for keeping securities on deposit. |
| Depository
Trust Company (DTC) |
A
corporation, owned by banks and brokerage firms,
that holds securities, arranges for their receipt
and delivery, and arranges for the payments
in settlement. |
| Depreciation |
A
decline in an investment's value. |
| Deregulation |
1).
The regulation of an industry by private bodies
rather than by statute. This often increases
the form of regulation but allows all the rules
to be enforced by the industry's elected governing
body rather than civil servants. The government
can provide broad outlines within which the
regulatory bodies can operate and supervise
their effectiveness. See: Securities and Investments
Board.
2). Deregulation of an economy involves, for
example, privatisation of public industry, making
provisions for greater competition, removal
of exchange rate controls, removal of state
subsidies, and leaving interest rates to market
forces. |
| Derivative |
A
financial security whose value is based on,
or "derived" from, a traditional security, asset,
or market index. |
| Derivative
Zeros |
Zero
coupon bonds created by stripping coupon and
principal payments from a U.S. Treasury Security. |
| Designated
Order Turnaround (DOT) |
An
order routing and execution reporting system
of the NYSE. |
| Diagonal
Spread |
A
spread of the same class of options but with
different exercise prices and different expiration
dates. |
| Differential |
The
fraction of a point added to the purchase price
or subtracted from the sale price of odd lot
orders. The charge represents compensation to
the dealer/specialist for executing the odd
lot order. |
| Director |
A
corporate board member elected by stockholders. |
| Discount |
When
the market price of a newly issued security
is lower than the issue price. |
| Discount
Market |
The
element of the primary money market dominated
by banks, discount houses and bill brokers.
By borrowing money at short notice from commercial
banks or discount houses, bill brokers can profitably
discount bills of exchange, especially Treasury
bills, and trade them in the discount market. |
| Discretionary
Account |
A
client account in which the account executive
is permitted to buy and sell securities for
the client without the client's prior permission.
The opening of such an account requires the
special permission of the firm's management. |
| Discretionary
Expenses |
Living
expenses that could be reduced, resulting in
savings that could be used to meet specific
financial goals. These expenses may include
personal enjoyment or luxury items such as vacations,
entertainment, home improvements and new cars.
See Committed expenses. |
| Discretionary
Income |
The
difference between your income and expenses.
It is money you have available to invest to
help reach your financial goals. |
| Distribution |
The
payment of dividends and capital gains to shareholders |
| Distributor |
The
organization arranging for the sale of fund
shares either directly to the public or through
intermediaries, such as financial advisers. |
| District
Business Conduct Committee (DBCC) |
Part
of the NASD that investigates, reviews, and
renders a verdict on customer complaints or
other industry improprieties. |
| Diversification |
The
practice of spreading investments among different
securities to reduce risk. Diversification works
best when the returns of the securities are
varied, so that losses incurred by securities
falling in price are offset by gains of those
rising in price. By nature, mutual funds are
a diversified investment. Diversification may
also mean the participation of a large corporation
in a wide range of business activities. |
| Dividends |
Earnings
paid by a corporation to its stockholders. In
preferred stock, dividends usually are fixed;
with common shares, dividends vary with the
fortunes of the company. Preferred stock is
supposed to pay a regular and prescribed dividend
amount. Common stock pays varying amounts when
declared. |
| Do
Not Reduce (DNR) |
An
instruction that informs the order handling
personnel not to reduce the price of the order
by the amount of dividends, if and when paid
by the corporation. DNR is placed on buy limit,
sell stop and sell stop limit GTC orders. |
| Dollar
Cost Averaging |
A
method of investing that calls for the investment
of a set dollar amount at regular intervals,
regardless of the fund's share price. As a result,
more fund shares are bought when prices are
low than at high prices, usually bringing down
an investor's average cost per share over time.
Dollar cost averaging does not, however, guarantee
a profit or protect against a loss. |
| Dollar-Denominated |
Foreign
securities that pay interest and principal in
U.S. dollars. |
| Double
Exempt Fund |
A
fund that only invests in tax-exempt bonds of
issuers from a single state. Income from a double
exempt fund is free of federal and state income
taxes for investors residing in the same state
as the issuers of the bonds. Double-exempt funds
have been particularly popular in the high-tax
states of California and New York. Double tax
exempt funds are usually subject in part or
whole to the Alternative Minimum Tax (AMT).
AMT percentage calculations for income tax purposes
are available after each year end by contacting
the fund directly. |
| Double
Taxation |
Corporations
pay taxes on revenue before paying dividends.
The dividends, in the hands of the stockholder,
are taxed again as ordinary income. Hence "double"
taxation. |
| Dow
Jones Industrial Average (DJIA) |
A
widely quoted stock market index. The DJIA reflects
a price-weighted average of 30 actively traded
blue chip stocks. These 30 securities represent
between 15-20% of the market value of the New
York Stock Exchange traded stocks. |
| Downstairs
Trader |
A
trader who operates on the floor of an exchange
and who "trades" positions against the public
market. See also Upstairs Trader. |
| Downtick |
A
listed equity trade whose price is lower than
that of the last different sale. |
| Dual
Purpose Fund |
A
closed-end fund offering two classes of stock
in approximately equal amounts. One class (income
shares) is entitled to all the income from the
fund's portfolio (i.e., dividends from investments).
The second class (capital shares) is entitled
to all of the capital appreciation from the
fund's holdings. At the time a dual purpose
fund is established, a date is set on which
the fund will be liquidated. At that time, income
shareholders receive preference up to the par
value of their shares and capital shareholders
receive any excess. |
| Due
Diligence Meeting |
The
last meeting between corporate officials and
underwriters prior to the issuance of the security.
At the meeting, the content of the prospectus
is discussed, and relevant parts of the underwriting
are put into place. |
| Durable
Power Of Attorney |
A
document that authorizes someone to act as the
agent or ''attorney in fact" for another person
(called the ''principal'') even if the principal
becomes incapacitated or incompetent. Ordinarily,
a power of attorney loses its validity when
the principal becomes incompetent. A durable
power must specifically state that it will remain
valid in spite of the principal's incapacity
or incompetence. |
| Earned
income |
Income
received as compensation for work, such as salary,
wages and self-employment income. By contrast,
unearned income includes income from investments.
This distinction is used for certain income
tax purposes. |
| Earnings
Per Share (EPS) |
Net
income divided by the number of shares of common
stock outstanding. |
| Earnings
Report |
A
corporate financial statement that reports and
nets out all earning and expenses to a profit
or loss. It is therefore sometimes referred
to as the profit and loss (P&L) statement. |
| Economic
Risk |
The
risk created by changes in the economy. Business
cycles affect businesses and industries differently.
For example, some prosper during an economic
expansion and do poorly during an economic contraction,
while others are largely unaffected by business
cycles. See Investment risk. |
| EE
Savings Bond |
A
zero coupon bond issued directly by the Treasury
in par values ranging from $5 to $10,000. Purchased
at half of par, EE savings bonds mature in 12
years and are eligible for extended maturity. |
| Effective
Date |
The
first date after the cooling-off period of a
new issue that the security can be offered. |
| Emerging
Markets Funds |
A
fund that invests primarily in the stocks of
companies in, or doing business in, developing
countries and emerging markets. Emerging market
funds usually have an investment objective of
long-term growth and are generally considered
aggressive stock funds. |
| Employee
Stock Ownership Plan (ESOP) |
A
retirement plan in which contributions are invested
primarily in the employer's stock. The stock
is distributed when the employee retires or
leaves the company. |
| Endorsement |
Signature
on the back of a stock certificate of the person
whose name appears on the face of the same.
Makes the certificate negotiable. |
| Energy
Stock Funds |
A
fund that invests primarily in the stocks of
companies in the energy business. |
| Environmental
Securities Funds |
A
fund that invests primarily in securities issued
by environmental-related companies. These include
companies involved in hazardous waste treatment,
waste recycling, and other related areas. |
| Equipment
Trust Bonds |
Debt
instruments that are issued by some corporations
that are backed by "rolling stock" (such as
airplanes or locomotives and freight cars). |
| Equity |
The
portion in an account that reflects the customer's
ownership interest. |
| Equity
Assets |
Assets
that represent ownership, such as common stocks,
in contrast to assets that represent debt, such
as bonds. Equity assets fluctuate in value and
provide opportunities for growth. |
| Equity
Income Funds |
A
fund that seeks to provide relatively high current
income and growth of income by investing a large
portion of its assets in stocks. |
| Estate |
All
assets owned and liabilities owed at the time
of a person's death. |
| Estate
Settlement Costs |
Expenses
incurred in distributing assets and paying off
debts and taxes as a result of a person's death,
including probate costs, administrative expenses,
mortgages, personal debts, funeral expenses,
state death taxes and federal estate taxes. |
| Ethical
Fund |
A
fund that only invests in the securities of
firms meeting certain social standards. For
example, an ethical fund might exclude securities
of companies that are known to practice discrimination,
that operate in certain countries, or that produce
specific products such as alcohol, tobacco,
or nuclear weapons. |
| Eurobonds |
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. |
| Eurodollar
CDs |
Certificates
of deposit held in U.S. dollars by European,
British, and Eastern depository institutions
and available to U.S. investors. |
| European
Stock Funds |
A
fund that invests primarily in the stock of
Western European companies. |
| Ex-Dividend
Date |
The
first day on which the purchaser of the security
is not entitled to the dividend. It is also
the day that the price of the security drops
to the next highest fraction of the dividend
amount. The date on which a fund's net asset
value will fall by an amount equal to a dividend
or capital gains distribution. |
| Ex-Rights
Date |
The
date after which stocks are traded without subscription
rights. |
| Ex-Warrants
Date |
The
date after which stocks are traded without buyers
being entitled to warrants which are to be distributed |
| Excess
Equity |
Equity
in a margin account above that which is required
by Regulation T. |
| Exchange
Privilege |
A
shareholder service that allows shareholders
to move their assets from one fund to another
fund within the same mutual fund family, usually
without any additional sales charge or fees.
Fund groups vary in the specific parameters
detailing when or how many times an investor
may use the exchange privileges. |
| Execution
Broker ($2.00 Broker) |
Broker
who owns memberships on various exchanges and
executes trades on the exchanges for other brokers
- execution only services on listed exchanges.
The name of the clearing broker is "given up"
when each trade is executed to industry clearance
facilities and the trade is reported back to
the introducing firm for the customer and street
side processing. The charge for this service
used to be $2.00 - thus the name "$2.00 Broker." |
| Executor |
A
person appointed by the last will of the deceased
to carry out the provisions of the will. |
| Exercise
Price |
The
price per share the holder or owner of a call
option would pay to buy the stock from the writer
or the price the holder would receive should
he sell the stock to the writer when exercising
an option. See also Strike Price. |
| Expense |
A
fund's cost of doing business. All of a fund's
expenses are disclosed in the prospectus as
a percentage of assets. |
| Expense
Ratio |
A
fund's operating expenses, expressed as a percentage
of its average net assets. Funds with lower
expense ratios are able to distribute a higher
percentage of gross income returns to shareholders. |
| Expiration |
The
day on which an option contract becomes void. |
| Expiration
Month |
The
month in which an option or futures contract
ceases to exist (expires). |
| Extended
Maturity |
A
provision whereby a bond continues to pay interest
beyond its stated maturity. |
| Face
Value |
The
debt (or loan) amount that appears on the face
of the certificate and that the issuer must
pay at maturity. |
| Factor |
A
decimal between 0 and 1 that represents the
amount of mortgages remaining in a pool of mortgage-backed
securities. |
| Factor
Book |
A
tabular presentation that shows relevant information
about factors, value of remaining mortgages,
and interest rates on mortgage-backed securities. |
| Factor
Table |
A
table used to compute the outstanding principal
on Pass-Throughs - Ginnie Maes, Freddie Macs
and Fannie Maes. |
| Family
Of Funds |
An
investment management company offering funds
with many investment objectives. Fund families
often allow investors to transfer money between
funds for either a nominal charge or no charge
at all. Thus, an investor with shares in a growth
fund could transfer all or part of his or her
assets into another fund without paying a new
sales charge if each of these funds is managed
by a single investment firm. |
| Federal
Reserve Board |
The
US government agency that regulates credit. |
| Federal
Reserve System |
The
USA's central monetary authority and the Treasury
Department's agent for selling new issues of
Treasury bills, notes, and bonds. |
| FHA
Experience |
An
estimate of the average life of a pool of mortgage-backed
securities in relation to experience tables
developed by the Federal Housing Administration. |
| Fiduciary |
A
person legally appointed in the P&S department. |
| Fill
Or Kill (FOK) |
An
order that requires execution of the entire
quantity immediately. If not, the order is canceled. |
| Final
Dividend |
The
dividend paid by a company at the end of its
financial year, recommended by the directors
but authorized by the shareholders at the company's
annual general meeting. |
| Financial
Advisor |
A
professional who helps individuals and businesses
in an ongoing process to arrange and coordinate
their personal and business financial affairs
to enable them to achieve their objectives. |
| Financial
Services Funds |
A
fund that invests primarily in the stocks of
companies engaged in providing financial services,
including banks, finance companies, insurance
and securities or brokerage firms. |
| Financing
Corporation |
An
agency created to assist the S&L industry
by retailing securities to the public. Also
the nickname for its securities. |
| Fiscal
Agent |
The
authority who is responsible for issuing new
securities of federal agencies. |
| Fiscal
Year |
The
twelve-month period during which a business
maintains its financial records. Since this
cycle does not have to coincide with the calendar
year, it is known as the fiscal year. |
| Fixed
Annuity |
Insurance
company guarantees dollar amount of payments
to the annuitant for the period covered under
the contract. |
| Fixed
Assets |
Assets
that generate fixed income, including investment
certificates, certificates of deposit, fixed
annuities and most bonds. |
| Fixed
Income |
Income
that is paid at the same rate until the investment
(typically bonds) matures or is sold. |
| Fixed
Income Security |
A
security that pays a fixed rate of return. This
term is usually used in reference to government,
corporate or municipal bonds, which pay a fixed
rate of interest until the bonds mature, and
to preferred stock, which pay a fixed dividend.
Fixed income securities offer the guarantee
of a fixed return, but do not offer an investor
much, if any, potential for growth. |
| Flat |
A
bond trading without accrued interest is said
to be trading "flat." |
| Flexible
Portfolio Funds |
A
fund that can invest in stocks, bonds and cash
in whatever proportion the manager deems appropriate,
providing the manager total flexibility to achieve
maximum returns. Flexible portfolio funds are
sometimes called asset allocation funds. |
| Floor
Broker |
An
exchange member who, as such, is permitted to
conduct business on the exchange floor. |
| Flotation |
The
occasion on which a company's shares are offered
on the market for the first time. |
| Flower
Bond |
A
specially identified series of Treasury bonds
accepted at full par in payment of estate taxes. |
| Foreign
Issuer |
A
company or government outside the U.S. that
uses securities to raise money. |
| Fourth
Market |
Trading
directly between institutional investors on
a system named Instinet. |
| Free
Stock |
Loanable
securities; that is, securities that can be
used for loan or hypothecation. These securities
are the stock in a margin account that represents
the debit balance. |
| Front-End
Load |
One
of three possible sales charge schedules imposed
by funds that charge fees. A front end load,
or "upfront charge" is a fee charged on the
initial purchase of fund shares, and can range
from 3% to 8% of the purchase amount. Funds
sold under several sales charge options usually
refer to the shares sold with a front end load
as "Class A shares." |
| Frozen
Account |
An
account in which all purchases must be paid
for in cash in advance for a period of 90 days
because of failure to make timely or proper
payment in the past. |
| FT
Index |
Refers
to the Financial Times Industrial Ordinary Share
Index, also known as the "30 Share Index." This
started in 1935 at 100, and is based on the
prices of 30 leading industrial and commercial
shares. They are chosen to be representative
of British industry, rather than of the Exchange.
Government stocks, banks and insurance companies
are not included. The Index is calculated hourly
during the day with a "closing index" at 4:30
p.m. |
| FT-SE
100 Share Index |
Popularly
known as "Footsie"; an index of 100 leading
UK shares listed on the London Stock Exchange
providing a minute-by-minute picture of how
share prices are moving. It started on January
3, 1984 with the base number of 1,000. Also
forms the basis of a contract in the London
Traded Options Market (LTOM) and the London
International Financial Futures Exchange (LIFFE). |
| FT-SE
Eurotrack 200 Index |
Denominated
in ECUs, this comprises the stocks of the FT-SE
100 Index plus the constituents of the FT-SE
Eurotrack 100 Index. The UK component is weighted
to ensure that the 200 Index closely tracks
the major benchmark indices. It started on Monday,
February 25, 1991 with a base value of 1,000
as at close of business on Friday, October 26,
1990. |
| Full
Trading Authorization |
Owner
of the account gives power to another person
to buy, sell and make withdrawals from the account. |
| Fully
Disclosed |
All
customer accounts of the Introducing Broker
are introduced to another Broker/Dealer who
clears the customers' trades. This second broker
is called a Clearing Broker. The names and addresses
of the customer accounts are "fully disclosed"
to the Clearing Broker whose name is also disclosed
to the customers on the statements and confirmations.
The Clearing Broker does all the bookkeeping
involved in settling the trades and keeping
the customer accounts in proper form. |
| Fully
Invested |
The
investment of nearly all available assets in
securities other than short-term securities
(such as savings and money market accounts).
When a fund is said to be "fully invested,"
it usually implies that the fund's manager is
confident that the securities markets will be
improving. |
| Fully
Paid |
Applied
to new issues, when the total amount payable
in relation to the new shares has been paid
to the company. |
| Fund
Exchange |
Ability
to shift a mutual fund investment from one fund
to another sponsored by the same mutual fund
family. |
| Fund
Family |
An
investment management company that offers several
types of mutual funds. |
| Fund
of Funds |
A
fund that invests only in the shares of other
open-end funds. Fund of funds were popular during
the 1960s but have subsequently fallen out of
favor with most investors. |
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