| Treasury
Bill (T- Bill) |
A
fixed-income security issued by the U.S. Government. |
| Takeover |
The
acquisition of control over a corporation by
another company, which normally ousts the current
management. The takeover can occur by means
of a proxy fight or the acquisition of a controlling
quantity of common stock. |
| Talisman |
The
Exchange's computerized settlement system. |
| Target
Fund |
A
mutual fund containing bonds that mature in
a single year, giving the entire fund a terminal
maturity in that year. |
| Target
Maturity Fund |
A
fund that invests primarily in zero coupon U.S.
Treasury securities, or in coupon-bearing U.S.
government securities targeted to mature in
a specific year. |
| Tax
Anticipation Bill |
Short-term
security similar to a T bill that is accepted
at par in payment of corporate federal taxes. |
| Tax
Anticipation Note |
A
municipal note issued in anticipation of revenues
from a future tax. |
| Tax
Exempt Bonds |
Municipal
securities (whose interest is free from federal
income tax). |
| Tax
Preferences |
Certain
tax-related benefits that create unusual tax
savings, such as accelerated depreciation and
tax-exempt interest from certain municipal bonds. |
| Tax-Deferred |
Tax
treatment of certain products and investments
that results in income taxation only upon maturity
or withdrawal of funds. |
| Tax-Deferred
Life Insurance Cash Value |
Funds
held in a life insurance policy that exceed
the amount used in the current year for administrative
and mortality expenses. Earnings on these funds
are generally not taxed until withdrawn. |
| Tax-Exempt
Bond Fund |
A
fund that invests in municipal bonds. While
investors do not pay federal income taxes on
the income from these funds, they may be subject
to state or local taxes. |
| Tax-Exempt
Bonds |
Securities
issued by states, cities and other public authorities,
the interest from which is either wholly or
partly exempt from federal income tax and possibly
from state or local income taxes. |
| Tax-Exempt
Interest |
The
interest earned on tax-exempt securities is
not included in the investor's gross income
for regular federal income tax purposes. Depending
on the original use of the money when the security
was issued, the interest may be subject to alternative
minimum tax. In most states, the income from
municipal bonds issued within that state is
tax-exempt to residents of the state. |
| Tax-Sheltered
Annuity (TSA) |
A
403(b) plan that invests in an annuity. See
403(b) plan. |
| Tax-Sheltered
Custodial Account (TSCA) |
A
403(b) plan that invests in mutual funds. See
403(b) plan. |
| Taxable
Asset Status |
Assets
that are not tax-exempt or tax-deferred are
considered "taxable." This means the income
derived from the asset is taxed in the year
it is produced. Tax-deferred assets include
assets held in an IRA, 401(k) plan, 403(b) plan,
non qualified tax-deferred annuity, tax-deferred
annuity, tax-deferred life insurance cash value
and other qualified assets. |
| Taxable
Equivalent Yield |
The
yield that would have to be earned on a security
to pay as much, after tax, as what is earned
from a tax-exempt bond. |
| Taxable
Income |
The
amount of income used to compute tax liability.
It is calculated by starting with adjusted gross
income, subtracting itemized deductions or the
standard deduction and then subtracting the
amount allowed for personal exemptions. |
| Technology
Fund |
A
fund that invests primarily in the stocks of
companies engaged in the technology industry. |
| Telephone
Switching |
The
movement of an investor's funds from one mutual
fund to another on the basis of an order given
via telephone. |
| Tenancy
by the Entirety |
Joint
tenancy ownership between spouses. This type
of property ownership is used only in certain
states. See Joint tenancy. |
| Tenancy
In Common |
Type
of ownership of property by two or more persons
in which each owns an undivided interest in
the whole. Upon the death of a co-tenant, the
deceased person's interest passes as part of
the estate through probate: the interest does
not pass directly to the remaining co-tenant(s). |
| Tender
Offer |
The
offer made by one company or individual for
shares of another company. The offer may be
in the form of cash or securities. |
| Term
Life Insurance |
Life
insurance that provides financial protection
for a specified period of time. If death occurs
during this period, the face amount of the policy
is paid to the beneficiary. If the insured person
survives through the period of coverage, no
payment is made. |
| Term
Maturity |
Bonds
of an issue all mature on the same date. |
| Term
Structure Of Interest Rates |
A
graph representing the yield to maturity of
Treasury securities at identified years of maturity. |
| Testator |
A
person who dies leaving a will. The female form
is Testatrix. |
| Top
Down |
An
investment approach that first seeks to define
major economic and industry trends, and then
proceeds to identify specific companies that
are likely to benefit from those trends. (See
also "bottom-up.") |
| Total
Income |
All
income received during a year including taxable
income and tax-exempt income. It does not include
tax-deferred income. |
| Total
Return |
A
measure of a fund's performance that takes three
factors into account: income dividends, capital
gains distributions, and share price appreciation/depreciation. |
| Trade
Confirmation |
Written
verification and information concerning a transaction
that is sent to the customer on or before the
first business day following the trade date. |
| Trade
Date |
The
date on which a purchase or redemption of mutual
fund shares is conducted. |
| Traded
Options |
Transferable
Options with the right to buy and sell a standardized
amount of a security at a fixed price within
a specified period. |
| Trading
Authorization |
Written
permission for one to trade in another's account. |
| Transfer |
The
process by which securities are reregistered
to new owners. The old securities are canceled
and new ones issued to the new registrants. |
| Transfer
Agent |
A
commercial bank that retains the names and addresses
of registered securities owners and that reregisters
traded securities to the name of the new owners. |
| Treasuries |
Fixed
income securities issued by the U.S. government.
Treasuries include: |
| Treasury
Bills |
Obligations
issued by the Department of the Treasury maturing
in 13, 26, or 52 weeks. |
| Treasury
Bond |
Long-term
(10 to 30 years), fixed interest government
debt security. |
| Treasury
Direct |
The
program through which investors may purchase
new issues of Treasury bills, notes, and bonds
directly from the Federal Reserve. |
| Treasury
Note |
Medium-term
(1 to 10 years), fixed interest government debt
security. |
| Triple
Tax-Exempt Fund |
A
municipal bond mutual fund whose dividends and
interest are exempt from federal, state and
local income taxes for residents of a particular
state. |
| Trust |
A
form of property ownership under which the legal
title to property is held by one person ("trustee")
for the benefit of another person ("beneficiary"). |
| Trust
(Irrevocable) |
A
trust which may not be terminated after its
creation by the grantor |
| Trust
(Living) |
A
trust created by a person during his or her
lifetime |
| Trust
(Revocable ) |
A
trust in which the grantor reserves the right
to terminate the trust. |
| Turnover
Rate |
The
rate at which the fund buys and sells securities
each year. For example, if a fund's assets total
$100 million and the fund bought and sold $100
million of securities that year, its portfolio
turnover rate would be 100%. |
| Two-Dollar
Broker |
An
exchange member who executes orders from other
member firms and charges a fee for each execution. |
| Underlying
Security |
The
security on which options are being bought or
sold. |
| Underwriter |
The
organization that acts as the distributor of
new shares to broker/dealers and investors.
In a municipal underwriting, a brokerage firm
or bank that acts as a conduit by taking the
new issue from the municipality and reselling
it. In a corporate offering, the underwriter
must be a brokerage firm. |
| Underwriting |
The
process by which investment bankers bring new
issues to the market. |
| Underwriting
Manager |
(1)
In a negotiated underwriting, the investment
banker whose client is the corporation wanting
to bring out a new issue. (2) In a competitive
underwriting, the lead firm in a group that
is competing with other group(s) for a new issue. |
| Unified
Credit |
A
once-in-a-lifetime credit that may be applied
against an individual's federal gift or estate
taxes. The current credit is $192,800, which
is equivalent to exempting $600,000 from federal
gift or estate taxes. |
| Uniform
Gift to Minors Accounts (UGMA) |
A
method of securities ownership whereby parents
or other relatives may contribute cash or securities
to children. Portions of returns generated by
the securities are taxed at the children's tax
bracket instead of parents' presumably higher
bracket. |
| Uniform
Practice Code |
Part
of the NASD rules that govern the dealing of
firms with each other. |
| Unit |
At
issuance, a "package" of securities, such as
a bond and warrant, which become separable at
a later date. |
| Unit
Investment Trust |
See
Unit Trust |
| Unit
Trust |
An
investment similar to a mutual fund (that is,
the trust receives money from investors and
uses it to purchase a portfolio of securities)
that has a specific date on which the holdings
will be sold and all the earnings and gains
returned to investors. Commonly, the portfolio
of securities is comprised of bonds and is left
unchanged after it is originally selected. |
| Universal
Life Insurance |
A
type of permanent life insurance that permits
the owner to vary the amount of protection and
premiums to reflect changing needs. Earnings
on the cash value accumulate tax-deferred. |
| Unlisted
Securities Market (USM) |
The
Exchange's market for medium-sized companies
which do not qualify for, or do not wish to
have a full listing. |
| Unlisted
Security |
(1)
A security which has not been admitted to the
Stock Exchange's Daily Official List. Usually
the issuer will be an unlisted company, but
not always; it is not uncommon for a company
to apply for its Ordinary Shares to be listed
but not its loan stocks, or vice versa. (2)
A security traded on the USM. |
| Unrealized
Gain or Loss |
Increases
or decreases in the prices of securities held
by the fund. Unscheduled repayment of principal
: can shorten the maturity of the bonds. (See
"Prepayment Risk.") |
| Unwind |
An
advanced option order that is used with the
intention of closing an existing Buy/Write or
Sell/Write position. |
| Uptick |
A
listed equity trade at a price that is higher
than that of the last sale. |
| Utility
Fund |
A
fund that invests primarily in securities issued
by companies in the utilities industry. |
| Value
Investing |
The
investment style of attempting to buy underpriced
stocks that have the potential to perform well
and increase in price. |
| Variable
Annuity |
A
type of insurance contract that guarantees future
payments to the holder, or annuitant. Capital
accumulates tax-free, often through investment
in a mutual fund, and is converted to an income
stream at a future date (usually retirement).
All monies held in the annuity accumulate on
a tax-deferred basis. |
| Variable
Universal Life Insurance |
A
type of permanent life insurance that permits
the owner to vary the amount of protection and
premiums and also builds cash value that can
be invested in a variety of investment portfolios.
Investment earnings on the cash value accumulate
tax-deferred and the policy owner can transfer
funds among investment portfolios with varying
objectives. |
| Volatility |
The
amount by which the price of a security fluctuates
as market conditions change. |
| Voluntary
Accumulation Plan |
A
plan to acquire additional shares in a mutual
fund on a more or less regular basis, at the
discretion of the shareholder. |
| Voting
Trust |
The
deposit of shares with a trustee to gain long-term
corporate control. |
| Warrant |
A
security that allows the owner to purchase the
issuing corporation's stock for a certain price
over stated period. That period could be 10
or 20 years, and the price of the conversion
is much higher than the current price of stock
issue. A warrant is usually issued with another
security, such as one warranty plus one bond,
both of which form one unit. |
| Weighted
Average Maturity |
The
arithmetic mean of maturities of securities
held by a mutual fund. |
| White
Knight |
A
company that rescues another in financial difficulty,
especially one which saves a company from an
unwelcome takeover bid. |
| Whole
Life Insurance |
Life
insurance that provides protection for the entire
life of the insured person, generally with a
fixed face amount and fixed premiums. |
| Will |
A
document that directs how a person's property
is to be distributed after death. It may also
be used to nominate a person to serve as the
guardian of minor children and the executor
of the estate. |
| Withdrawal
Plan |
A
program in which shareholders receive payments
from their mutual fund investments at regular
intervals. |
| Work-Out
Quote |
Subject
quote in which the trader estimates the price
at which he thinks the security can be bought
or sold if given time to find a market. |
| Writer |
Seller
of an option contract to open. |
| X-Inefficiency |
A
term from microeconomics describing the difference
between the actual output cost of one unit of
production and the minimum attainable cost of
one unit of that product. This difference may
be the result of management shortcomings, inefficient
use of resources, bureaucratic rigidities, motivation
of employees etc. |
| Yellow
Sheets |
Wholesale
quote sheet for corporate bonds used by dealers. |
| Yield |
The
rate of return on an investment. There are as
many computations as there are different yields,
such as current yield and yield to maturity.
For example, bonds provide income in the form
of interest, and stocks in the form of dividends. |
| Yield
Advantage |
The
additional income an investor will receive on
purchasing a convertible security instead of
the ordinary share of the same company assuming
that the security can be converted into those
same ordinary shares. For the calculation to
be meaningful, allowance must be made for the
conversion costs, reflected in the differential
between the conversion price and the current
market price. |
| Yield
Curve |
A
graph depicting yield as it relates to maturity.
If short-term rates are lower than long-term
rates, it is called a positive yield curve.
If short-term rates are higher, it is called
a negative, or inverted, yield curve. If there
is little difference, it is called a flat yield
curve. |
| Yield
Elbow |
The
point on the yield curve that indicates the
year at which the economy's highest interest
rates occur. |
| Yield
To Call |
The
percentage a bond will yield to the date at
which it is eligible to be redeemed by its issuer. |
| Yield
To Maturity (YTM) |
The
effective annual rate of return earned by a
bond if held to maturity. This rate takes into
account the amount paid for the bond, the length
of time to maturity, and assumes coupon payments
can be reinvested at the yield to maturity.
<!-- End Index--><DL> |
| Zero
Coupon Bond |
Bond
issued at a discount which accrues interest
that is paid in full at maturity. |
| Zero
Coupon CD |
A
certificate of deposit that pays interest only
upon maturity. |
| Zero-Minus
Tick |
A
stock trade at a price equal to the preceding
trade but lower than the last different price. |
| Zero-Plus
Tick |
Term
given to a sale made at the same price as the
trade that preceded it providing that the previous
trade was above the price of the sale it proceeded. |
| Zero-Sum
Game |
A
situation in which one party's gain is always
equal to the other party's loss. The gains and
losses in this situation always sum to zero,
hence the term. A bet is a zero-sum game where,
if the punter makes a profit, the bookmaker
makes an equivalent loss (ignoring tax) and
vice versa. This is the same for derivatives
and options where the punter is the investor
and the bookmaker is the writer, either another
punter or an institution. It is, however, quite
different in physical markets, where actual
stocks, bonds or tangible assets are traded.
If an investor buys a share and its value rises,
this is not matched by a corresponding loss
but made up by an increase in the intrinsic
value of the holding and the worth of the yield
or dividend, which represents profits earned
by a trading companywealth is actually created
in these circumstances. There is no net wealth
creation in a zero-sum game. |
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