Glossary of London

Exchange Terms

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Contents

1. Introduction 1. Glossary of London Terms 19. Further Information

Glossary of Terms

• 1 American depositary receipts Introduction (ADRs) - ADRs are a convenient way In this publication, we provide an for domestic to own shares in explanation of terms used by the London foreign companies. Denominated in US Stock Exchange (LSE). dollars, ADRs allow American investors to invest in a foreign company. However, ADRs are also traded in This glossary is limited to LSE terms but we London. publish several other glossaries as well – • American style covered warrant - check our website or call us for details. An American style covered warrant allows the holder to exercise the covered warrant at any time on or before the expiry date. Glossary of London • American style option - Gives the buyer the right to exercise the option at Stock Exchange any time before its expiry. • Annual General Meeting (AGM) - An Terms annual meeting called by the directors • Abandon - The choice made by the of a company that allow shareholders holder of a covered warrant to allow the to stay informed and involved with warrant to expire without exercise. company decisions and workings. • • Accountants - They are the Anonymous Order - An order that is ‘gatekeepers’ of the public securities displayed without the mnemonic of the markets. Accountants ensure that the participant that submitted it. financial statements are correct and • Applicant - An issuer that is proposing complete and give an accurate picture to apply, or is applying, for admission of the company. to trading of any of its securities. • Acquisitions - One company takes • Arbitrage - Buying securities in one over another by purchasing its assets country, currency or market, and or shares. Acquisitions can be friendly selling in another to take advantage of or hostile. price differences. • Active fund - A fund in which the fund • At best order - An order submitted to manager actively manages investments an to deal in a specified (see active management). number of shares. It may execute, • Active management - Fund managers either in part or in full, against eligible strive to outperform the market by orders (at the price of those orders). identifying that could produce Unexecuted portions of at best orders better returns and beat the overall are rejected from the order book. market (or target index). Sometimes referred to as an 'Aggressive Type A' order. • ADMN - Admin. Period. • At-the-Money (covered warrant) - A • Admission and Disclosure covered warrant is At-the-Money when Standards - The London Stock the strike price is the same or very Exchange's Admission and Disclosure close to, the price of the underlying. It Standards are for companies admitted applies to both Calls and Put warrants. or seeking to be admitted to trading. • Attribute groups - A grouping of • Admission or admission to trading - certain companies admitted to trading Admission to trading on the Exchange’s which are identified by common markets for listed securities and attributes to provide additional profile ‘admitted’ and ‘traded’ shall be and which satisfy the eligibility criteria construed accordingly. For the for that grouping. avoidance of doubt this does not • include ‘when issued dealings’. Auction Call Period - A period of time when there is no automatic execution • Advisory broker - An advisory broker on an order book. Orders that are advises (and executes) buy and sell allowed during auctions may be entered decisions on behalf of the client. during this period. However, the final decision to buy and • sell always rests with the client. Auction Match Trade (UT) -The total volume of trades executed at the • AESP - Automatic Execution auction match price are disseminated to Suspended. the market as a single trade denoted by • AGM - See Annual General Meeting. UT. • AIM - The Exchange’s global market for smaller and growing companies. • Alternative investment market (AIM) - See AIM.

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Glossary of London Stock Exchange Terms

• Auction Matching / Auction Match • Basket - A portfolio consisting of more Algorithm - The process that matches than one security that may or may not orders at the end of an auction and replicate an index. For example, a determines the auction price. share or equity basket is one that • Auction period - A period of time contains shares in more than one company. during which an auction is in operation. This includes the auction call and any • Bear - An who sells a security extensions to the auction. The auction in the hope of buying it back at a lower period ends with an auction match. price, as he thinks the market will go • Auction price - The price at which down. A bear market is a falling market orders execute during an auction match in which bears would prosper. - uncrossing price. • Best bid - The highest bid price for a • Auction volume - The auction volume specific tradable instrument (i.e. the highest price any buyer has declared is the total executed volume as a result that they are willing to pay for a of an auction. Auditing Documenting specific security at a given time). and recording all business activities and Determined by the current quotes and transactions of an individual or a firm. orders in the trading system. Such a historic record allows to piece together the chronology of a trade. • Best offer - The lowest offer price for a • Authorisation - The process by which specific tradable instrument (i.e. the organisations are vetted and licensed to lowest price any seller has declared conduct investment business under the that they are willing to accept for a Financial Services and Markets Act specific security at a given time). 2000. Such organisations are known as Determined by the current quotes and Authorised Persons. orders in the trading system. • • Authorised - The total Bid offer spread - The difference between the bid and offer prices of a number of shares a company is security. authorised to issue with regard to its memorandum and articles of • Bid price - The price at which a market association. participant is bidding to buy shares. • Automatic Execution - An automatic • Bidding Company (in a Takeover) - trade executed by the trading system. The company that is planning to Automatic trades are executed by acquire another company. matching buy and sell orders. • Bid Situation - This security is • Automatic Execution Suspension currently engaged in a bid situation, Period (AESP) - The period during whether hostile or otherwise. which automatic execution is • Big Bang - 27 October 1986, when the suspended. An AESP is applied to a Exchange's new regulations took effect security during continuous trading, if and the automated price quotation the potential execution price of that system was introduced. security breaches the price tolerance levels. • - The transaction was reported using the block trade facility, • Automatic Trade (AT) - A trade which is at least 75 times the NMS for a generated by the system through security with an NMS of 2,000 shares automatic execution. OR above 50 times the NMS for a • Average Price - The transaction was security with an NMS of 1,000 shares. effected at a price based on a volume • Blue chip - A term used to describe weighted average price over a given large, well-known companies that offer period. stable earnings and consistent • Balance sheet - One of the main record. Blue-chip companies are components of a company’s financial reputed to be reliable investments. statements, the balance sheet provides • price - The market price of a an overview of the company’s assets bond depends on the coupon rate, the (what it owns) and liabilities (what it market interest rate and the number of owes) at the end of a financial year. years to maturity. Bond prices are • Bank Interchange Code (BIC) - A inversely related to interest rates. unique code identifying a participant. • Bonds - Debt securities issued by • Bargain Conditions Apply - Certain governments and companies as a Conditions were agreed between the means of raising capital which generally two participants at the time of trading. entitle the holder to a fixed-rate of interest during their life and repayment of the amount of the bond at maturity.

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Glossary of London Stock Exchange Terms

• Bonus issue - The issue by a company • Capitalisation issue - The issue by a of new shares which do not require any company of new shares which do not payment to be made by the require any payment to be made by the shareholder. This has the effect of shareholder. This has the effect of making the company's shares more making the company's shares more marketable because of the increased marketable because of the increased number available and the lower market number available and the lower market price. price. A Capitalisation Issue is the • Bonus shares - It is the issue of new same as a Bonus Issue and Scrip Issue. fully paid-up shares to existing • Cash-settlement - The investor shareholders on a pro-rata basis. The receives cash if the covered warrant impact of a bonus issue is to reduce the can be exercised profitably at expiry. share price as the same market The gain achieved on the warrant is capitalisation of the company is spread transferred to the holder without the over a larger number of shares, which holder having to enact a buy or sell in turn benefits the liquidity of the trade. scrip. • CAUC - Closing Auction Execution • Broker - See . followed by End of Order Book Trading. • Broker/Dealer - An Exchange • CCAL - Closing Auction Call. member firm, which provides advice • Certificate representing shares - An and dealing services to the public and instrument which confers a contractual can deal on its own account. right (other than an option) to acquire • Broker To Broker - The transaction shares otherwise than by subscription. was between two member firms where • Change - The difference between the neither firm is registered as a market previous day's closing price and the maker in the security in question and most recent price of a security. neither is a designated fund manager. Brokers may also apply this indicator • Chinese Wall - A ‘Chinese Wall’ when buying or selling domestic equity separates two departments within an market securities through a broker, investment bank to ensure that which is not a member firm. conflicts of interest do not arise. • Bull - An investor who buys a security • Churning - Is the unethical practice of in the hope of selling it at a higher buying and selling shares simply in price, as he thinks the market will go order to earn more commission. up. A bull market is a rising market in • City Code on Takeovers and which bulls would prosper. Mergers - The principles and rules • Business day - Any day upon which governing takeovers and mergers of UK the Exchange is open for business. companies. • Buy/sell percentages - The total • Class - Securities, the rights attaching volumes on each side of the order book to which are or will be identical and expressed as percentages in real-time. which form a single issue or series of issues. • Call (covered warrant) - A covered warrant that gives the holder the right, • CLOS – Closed. but not the obligation, to buy the • Close Period (CLOS) - The period underlying at a future date and during which the trading service specified price. remains closed. • Call (option) - It is an option that • Closed-end fund - These funds have a gives the buyer the right to buy an fixed number of shares, which are listed underlying asset at a future date at a on the stock exchange. The market specified price. price of the shares is determined by • Call (warrant) - A call warrant allows demand and supply factors. Investment the holder to benefit from a rising trusts are closed-end funds. market. It rises in value when the • Closing 52 week high - The highest underlying asset rises in value. closing price for a specific security over • Capital appreciation - This occurs the last 52 weeks. when the market value of the shares • Closing 52 week low - The lowest exceeds the purchase price. closing price for a specific security over • Capital Gains Tax (CGT) - The tax an the last 52 weeks. individual is liable to on realised capital gains which accrue in a year of assessment during any part of which the individual is resident in the UK.

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Glossary of London Stock Exchange Terms

• Closing Price - The closing price is the • Convertible preference shares - last price for a tradable instrument at These can be converted into ordinary the time the market closes. For SETS, shares at a given price at a future the closing trade price is the uncrossing date. trade price at which orders execute • COREDEAL - An electronic exchange during an auction, or a Volume for international debt-related securities. Weighted Average Price (VWAP). For SEAQ, SEATS and AIM securities the • Corporate Actions - This includes a closing price is the best bid, offer and wide range of corporate actions, mid price calculated from including takeovers, rights issues, quotes at the end of the mandatory demergers, scrip and quote period. conversions to name but a few. • Code of Market Conduct - The • Corporate finance - Any financial standards that are to be observed in activity that deals with a company and the UK markets. The Code is issued and its money. These include raising capital enforced by the Financial Services and mergers and acquisitions. Authority (FSA). • Correction - This covers any • Combined code - The current corrections made to trade reports. benchmark for best practice corporate • Counterparty - The participant with governance. The code is amended to whom a trade is being transacted. the UKLA’s Rules. • Coupon - This is a regular payment • Committed Principal - A participant received by the bondholder over the who registers to provide continuous lifetime of the bond. The coupon rate is two-way orders (buy and sell expressed as a percentage of the face committed principal orders) for a value of the bond. particular security. • Covered warrant - A security issued • Consolidations - When a company by a party other than the issuer or reduces the number of shares it has in originator of the underlying asset, circulation by consolidating its share giving the holder the right (but not an capital e.g. shareholders would receive obligation) to acquire a share or bond 1, 50p share for every 2, 25p shares at a specific price and date. held. • Creating a false impression - The • Consols - Consols are British bonds market abuse of deliberately creating that have no specified maturity date false or misleading impressions and pay a coupon forever. regarding the supply, demand, price or • Continuous Trading - The period of a value of an investment. trading day when orders are • CREST - The paperless share automatically matched and executed settlement system through which against one another. trades executed on the Exchange's • Contra Trade - The trade was reported markets (and elsewhere) can be for a transaction previously executed settled. CREST is operated by through the order book. CRESTCo, and was introduced in 1996. See Settlement. • Conversion price - It is the price of the underlying shares at which the • Criminal proceeds - Benefit from a bond may be converted (see conversion criminal or illegal activity. ratio). • Cross - The transaction was effected as • Conversion ratio - Convertible bond an agency cross or a riskless principle - It is the number of shares that a trade between two member firms at the holder of a convertible bond receives at same price and on the same terms. conversion. It is the ratio of the face • Cumulative preference shares - value of the bond and the conversion These preference shares accumulate price (see conversion price). unpaid dividend, which is then paid out • Conversion ratio - Covered warrant when the company next declares it. - This ratio is the number of warrants • Currency - The currency that the that must be held and exercised in security is traded in. order to buy or sell a single unit of the • asset e.g. one share. A higher Currency Conversion - The trade was conversion ratio will produce a lower executed in one currency but converted warrant price. for trade reporting. • • Convertible bond - These bonds can Daily change - The daily change in the be converted into a specified number of price of a security, i.e. the difference shares of the issuing company at a pre- between the most recent price of a determined price. security and the previous day's closing price.

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Glossary of London Stock Exchange Terms

• Daily high - The highest price reached • Derivatives - A derivative is an by a given security or index during a instrument whose value depends on the given day. performance of an underlying asset or • Daily low - The lowest price reached security, which may be a commodity or a financial instrument. by a given security or index during a given day. • Deutsche Borse - Deutsche Borse • Daily Official List (DOL) - The daily operates the record setting out the prices of all (FWB), the largest of the eight German trades in securities conducted on the stock exchanges. Exchange. • Disciplinary and Appeals Handbook • Dealer - Dealers buy and sell securities - The Disciplinary and Appeals Handbook as issued by the Exchange on behalf of the broking firm (or from time to time, setting out investment bank) itself. Securities procedures for issuers in relation to bought by the bank may be sold to appeals regarding the Exchange's clients or other firms or becomes part application and interpretation of of the bank’s own holdings. Standards. • Debenture - These are secured • Discretionary - A discretionary broker corporate bonds that are used to raise -term debt capital. buys and sells shares on behalf of the client and also has the authority to • Debt - See Bonds. make investment decisions without the • Debt Management Office (DMO) - prior approval of the client. An Executive Agency of the Treasury, • Distorting the market - The market which has responsibility for issuing gilts abuse of manipulating market prices by to fund the Government's borrowing interfering with the normal supply and activities. demand process. • Debt securities - Debentures, • Diversification - The process of debenture or loan stock, bonds and investing across a range of investments notes whether secured or unsecured. in order to diversify (or minimise risk). • Default schedule -The schedule that As a result, if one investment performs securities of a particular trading service poorly, better performance from the follow during a trading day. rest of the portfolio helps to reduce the risk of loss. • Demutualisation - Demutualisation involves the conversion of a not-for- • Dividend - That part of a company's profit association owned by its profits after tax which is distributed to members into a for-profit company shareholders - usually expressed in owned by its shareholders. pence per share. Also see Scrip Issue. • Department of Trade and Industry - • DSRY - Disaster Recovery. The government department that aims • Due diligence - Due diligence is a to generate wealth for everyone in the process carried out by accountants and UK by helping people and businesses to lawyers when a company is about to become more productive and acquire another. It involves verifying a successful. company’s liabilities and financial • Depository receipt - Commonly performance. known as 'DRs', Depositary Receipts • ECN - An electronic communication are negotiable certificates that enable network (ECN) is an electronic system domestic investors to own shares in that attempts to eliminate third party foreign companies. DRs are created orders by a market maker, and permits when a broker purchases a non-UK such orders to be executed either in company's shares in the home stock whole or in part. market and delivers those shares to the • EDS - Electronic Data Services (EDS) depositary's local custodian bank. The custodian then instructs the depositary gives historical turnover information bank to issue DRs to the investor. Each about securities traded on the DR represents a given number of a Exchange. company's shares and can trade as • Efficient - A market freely as any other security in the UK. that offers transparency, liquidity, low Several types of DRs can be listed and transaction costs and price movements. traded in London, including Global • EFIQ - End of Firm/Indq Quote Period. Depositary Receipts (GDRs) and American Depositary Receipts (ADRs) • EIQP - End of IMQP. that are denominated in US dollars.

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Glossary of London Stock Exchange Terms

• Elasticity - covered warrant - • Euronext.liffe - International Sometimes called leverage. It derivatives business of Euronext measures the theoretical increase comprising Amsterdam, Brussels, LIFFE (decrease) in the price of a covered (London International Financial Futures warrant (in percentage terms) based in and Options Exchange), Lisbon and a one percent move in the underlying Paris derivatives markets which was asset. formed following the purchase of LIFFE • Eligibility criteria - The requirements by Euronext NV in 2001. for eligibility and admission to be • European style covered warrant - A followed by issuers seeking admission European style covered warrant is one to an attribute group as published by that may only be exercised on the last the Exchange and amended from time trading day. to time. • European style option - It gives the • EMQP - End of MQP. buyer the right to exercise the option • Enhanced best price - The number only on the expiry date. and volume of orders are best on each • EUTC - Euro Testing Closed. side of the order book updated in real- • EUTO - Euro testing Open. time. • Ex - When a stock or dividend is issued • Entitlement Issue (Open Offer) - by a company it is based upon an "on Shareholders are given the right to register" or "record date". However, to subscribe for the new fully paid share. create a level playing field when shares The new shares are not issued in nil are traded on the London Stock. paid form. Exchange during this benefit period an • EOA - End of Admin. "ex" date is set. Before this "ex" date if • EOBT - End of Order Book Trading. shares are sold the selling patty will need to pass on the benefit or dividend • EODR - End of Order Hitting. to the buying party. • EPIC - Exchange Price Input Computer • Ex Capitalisation - Trading has (EPIC) code that has been replaced by previously commenced "ex" Tradable Instrument Display Mnemonic capitalisation on this stock. (TIDM) code. • Ex Capitalisation Today - Trading has • Equity - The risk-sharing part of a commenced "ex" capitalisation on this company's capital, usually made up of stock today. ordinary shares. • Ex Dividend - Trading has previously • Equity option - Equity options give the commenced "ex" capitalisation on this option buyer the right to buy or sell stock today. shares of companies. The standard • LIFFE contract size for equity options is Ex Dividend Today - Trading has 100 or 1000 shares. commenced "ex" dividend on this stock today. • ERRR - Error Code Incorrect. • Ex Liquid - Trading has previously • ETF (Exchange traded fund) - A commenced "ex" liquidation payment collective investment vehicles which on this stock. track indices - they can allow low cost • exposure to the performance of an Ex Liquid Today - Trading has index as quickly and efficiently as the commenced "ex" liquidation payment most liquid UK stocks. on this stock today. • • EUR - Euro - common currency of the Ex Other - Trading has previously commenced "ex" a benefit on this European Union. stock. • Euro Depositary Receipt (EDR) -As • Ex Other Today -Trading has with other depositary receipts, the EDR is a certificate representing ownership commenced "ex" a benefit on this stock of the issuer's underlying shares. The today. EDR is denominated and quoted in • Ex Stabilisation - Stabilisation is Euros. operating on the market in this security • Eurobond - An interest-bearing today. security issued across national borders, • Ex Stabilisation Today - Stabilisation often in a currency other than that of is operating on the market in this the issuer's home country. security today. • Euronext - The first cross-border • Ex Repayment - Trading has exchange in Europe, it was formed by previously commenced "ex" repayment the merger of the Amsterdam, Paris on this stock. and Brussels stock exchanges.

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Glossary of London Stock Exchange Terms

• Ex Repayment Today - Trading has • Expiry date - Every option/covered commenced "ex" Repayment on this warrant contract has a specified date in stock today. the future when it expires. The option • Ex Rights - Trading has previously contract becomes worthless if it remains unexercised on the expiry commenced "ex" rights on this stock. date. • Ex Rights Today - Trading has • Face value - This is the value of the commenced "ex" rights on this stock today. bond or security as printed on the document. The face value represents • Ex Stock - Trading has previously the amount that the issuing company commenced "ex" stock distribution on promises to pay at the time of this stock. maturity. • Ex Stock Today - Trading has • FAST - Fast Market. commenced "ex" stock distribution on • Fill or Kill Order - An order submitted this stock today. to the electronic order book with a • Exchange - An exchange provides specified size and, at the option of the access to capital and facilitates member firm, a specified limit price securities dealing through speedy and which either executes in full against innovative trading platforms and eligible orders at the price of those services. An exchange is also orders or is rejected in full from the responsible for delivering an orderly order book. market. • Financial Investigation Unit (FIU) - • Exchange traded contracts - The police unit that investigates cases Exchange traded futures contracts are related to money laundering. standardised in terms of delivery date, • Financial Services Authority (FSA) - contract terms and amount. These are traded on the LIFFE. An independent body which regulates the financial services industry in the • Ex-dividend list - The London Stock UK. Exchange's ex-dividend list service • provides advance details of securities Financial year - The year for which that will be marked 'ex-dividend' in the corporate tax rates apply. It runs from following week. The ex-dividend date April 1 of one year to March 31 of the defines the date from which the next year. dividend is excluded from the share • FIQP - Firm/Indq Quote Period. price. • Firm exposure order - An order that • Execute and Eliminate order - An is displayed on the trading system with order submitted to an order book to the mnemonic of the member firm. deal in a specified number of shares at • Firm quote - A quote whose price is a price no higher than a specified limit guaranteed. That is, market price. It may execute, either in part or participants are obliged to deal at the in full, against eligible orders (at the displayed prices or volumes, when their price of those orders). Unexecuted quotes are firm. Firm quotes are portions of execute and eliminate displayed during the mandatory quote orders are rejected from the order period. book. • Fixed interest securities - Securities • Execution only - An execution only which attract a fixed rate of interest broker merely buys and sells shares on each year. the instructions of the client. • Flotation - The process by which a • Exercise - The process of using the company obtains a listing from the right to buy or sell the underlying at UKLA and is admitted to trading on the the specified price. Exchange. • Exercise price - The exercise (or • Forwards - The buying and selling of strike) price is the price at which the underlying assets such as commodities option can be exercised, regardless of and financial securities at a specified the actual market price of the stock. future date at a fixed price. • Ex-Marker - An indicator used to • Fraud Squad - The police department highlight that a particular ex-benefit that deals with financial crime. condition is in effect on a tradable instrument. For example, Ex-Rights, • Free float - The number of shares not Ex-Dividend (as above), Ex-Liquidation held by corporate insiders that are Distribution, Ex-Entitlement, Ex- freely tradable in the public market or Capitalisation, Ex-Stock Distribution, markets on which a company's Ex-Repayment. securities are listed.

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Glossary of London Stock Exchange Terms

• Front running - A type of misuse of • Globalisation - The tendency of world information, where the employees of a investment and business to move from brokerage firm or a bank trade in national and domestic markets to a equity shares using price-sensitive worldwide environment. information that is privately available to • Going long - Buying futures involves a the firm. commitment to buy the underlying • FSA - See Financial Services Authority. asset at a future date at a specified • FST1 - Fast Market. price. This is called going long. • • FST2 - Fast Market. Going - Selling futures involves a commitment to sell the underlying • FTSE™ 100 - An index of the share asset at a future date at a specified prices of the UK’s 100 largest price. This is called going short. companies (by market capitalisation). • Gross - The total amount before • FTSE™ Indices - Indices, including the deductions (e.g. before tax FTSE 100 index, which are calculated deductions). and maintained by FTSE International • Ltd to illustrate the performance of HALT - Trading Halt. various sectors of the UK and European • Hedge - A hedge is typically markets. accomplished by making approximately • FTSE™ International Ltd - A jointly offsetting transactions that will largely eliminate one or more types of risk. owned company by the London Stock Hedging Investors can use derivatives Exchange and the Financial Times that and covered warrants to hedge provides financial indices. investments. For instance, if an • FTSE™ MID 250 Index (FTSE 250) - investor owns a particular stock, he or Financial Times Stock Exchange Mid she can neutralize the impact of an 250 Index comprises the share prices impending fall in price by buying a put of the 250 companies that follow the option, selling futures or buying a put top 100 (comprising the FTSE 100). warrant. • Fund - A fund is a collective • High - The highest price that a security investment scheme where money is traded at during a certain time period. pooled, which is invested in a portfolio • High- bonds - High-yield bonds, of securities with a common investment popularly known as junk bonds, are purpose. lower than investment-grade securities. • Fund manager - A fund manager is a These bonds are considered to be professional who decides how fund ‘speculative’ because the issuing money is invested (see Fund). company’s ability to meet the debt • Futures - A futures contract is an obligations is less certain. agreement or obligation to buy or sell a • Historic Price Service (HPS) - An given quantity of a particular security, internet and telephone enquiry service at a specified future date at a pre- for historic share price information. determined price. • Hit Order - An order submitted to the • GBP - Pound Sterling. trading system to execute automatically • GBX - Pence Sterling. against a firm exposure order. • Gearing - Gearing is a feature of • HLT1 - Local Market Trading Halt. leveraged instruments such as covered • HLT2 - Local Market Trading Halt. warrants, options and futures. In an • HM Treasury - Her Majesty’s Treasury option, by investing a small amount is the government department that called the option premium, investors formulates and implements the UK's can multiply their gains since returns financial and economic policy. are magnified. • Holder - covered warrant - The • GEMMs - Gilt-edged market makers. owner of the covered warrant. • Gilts or Gilt-Edged Securities - Debt • securities issued on behalf of the Hostile bid - A takeover bid by one Government. company for another, in which the directors of the target company oppose • Global Depositary Receipt (GDR) - the bid. Certificate which represents ownership • Hybrid Service - A trading service that of a given number of a company's shares and which can be listed and combines the features of an order- traded independently from the driven trading service and a quote- underlying shares. Denominated in US driven trading service. dollars, GDRs are traded in London. • IMQ1 - IMQP No Automatic Execution. • IMQP - Indq Quote MQP.

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Glossary of London Stock Exchange Terms

• Infolect ™ - The London Stock • International order book (IOB) - An Exchange’s real-time information order-driven trading service for service, used to disseminate market international equities. data to customers. • International Petroleum Exchange - • In the money - Options and covered The world's second largest and Europe's warrants have a ‘positive intrinsic leading energy futures and options value’. In a call option / warrant, the exchange. underlying asset price exceeds the • International Retail Service (IRS) - exercise price. In a put option / An order and quote-driven trading warrant, the underlying asset price is service for international equity market less than the exercise price. For a Call securities. covered warrant, this is where the strike price is less than the price of the • Introduction - Introduction is a underlying. For a Put covered warrant, process that allows a company to join a this is where the strike price is greater stock exchange without raising capital. than the price of the underlying. A company does not issue any fresh shares; it merely introduces its existing • Intrinsic value -A term used in shares in the market. options and covered warrants. For a call option / warrant, a ‘positive intrinsic • ISIN - International Securities value’ denotes the difference between Identification Number (ISIN). the current underlying asset price and International code for a listed security. the exercise price. For a put option / • Insider dealing - The purchase or sale warrant, a ‘positive intrinsic value’ of securities by someone who denotes the difference between the possesses 'inside' information affecting exercise price and the underlying asset securities which has not yet been made price. available to the market and which, if • Index - A statistical measure of the made available, would significantly changes in a portfolio of stocks affect the share price. In the UK such representing a portion of the overall deals are a criminal offence. market. For instance, the FTSE 100 and • Insolvency - The inability of a person the S&P500 are examples of indices. (or a company) to settle debts. • Index fund - See Tracker fund. • Issued capital - Issued share capital • Index futures - Index futures are is the total number of shares based on the projected movement of a subscribed to by the shareholders. share price index, such as the FTSE • Issuer - Any company or other legal 100. person or undertaking (including a • Indicative Auction Price - The price public sector issuer) any class of whose at which the orders participating in an securities has been admitted or is, or is auction will be executed, if the auction proposed to be, the subject of an match were to occur at that point. application for admission to trading. • Indicative Quote - A quote whose • Issuer Implementation team - The price and volume are not guaranteed. Exchange’s department responsible for That is, market participants are not dealing with applications for admission obliged to deal at the displayed prices to trading. or volumes, when their quotes are • Investment bank - An investment indicative. Indicative quotes are bank is a financial intermediary that displayed during the pre-mandatory offers a range of services and advice to quote period. its clients. The role of an investment • Individual Turnover Report (ITR) - bank includes corporate finance, The Exchange's Individual Turnover securities trading, research, investment Report (ITR) provides historic turnover management and international finance. data for individual Equity and Fixed • Investment trust - A collective interest securities, in a report format, investment fund in the form of a listed on a daily, monthly or yearly basis. company which holds a portfolio of • INDQ – Indicative. securities on behalf of its own shareholders. Because an investment • Initial (IPO) - Also trust is itself a listed company, its known as flotation, it is the company’s shares can be bought and sold in the first offer of shares in the . usual way. The shares may be offered at face value or at a premium. Also see Offer • Investor relations- A department in for sale. most medium and large public companies that provide investors with • INQ1 – Indicative. an accurate account of the company. • INQ2 – Indicative. • Jobbers -A dealer in shares prior to the Big Bang in October 1986.

9

Glossary of London Stock Exchange Terms

• Junk bonds - See High-Yield Bonds. • Listing Rules - The Listing Rules of the • Last trade price - The most recent UKLA. price at which a specific security was • LMIL™ - LMIL - London Market traded. Information Link (LMIL™) was the • Late Reported Trade - The legacy real-time information service, transaction was not reported in replaced by Infolect in September accordance with the Exchange's rules 2005. on trade reporting. • London International Financial • Leverage - See Gearing. Futures and Options Exchange • LIFFE - See Euronext.liffe. (LIFFE) - A Recognised Investment Exchange (RIE) that deals with futures • Limit order - An order submitted to and options. the electronic order book with a • London Metal Exchange (LME) - An specified size and price which is either held on the order book or executes, international market for the trading of either in part or full, against eligible non-ferrous metals (copper, aluminium, orders with any remaining unexecuted lead, nickel, tin and zinc). portion being added to the order book. • Long - A long is when • Limited company - A limited company someone buys (holds) a warrant or is privately owned with less than 50 holds the underlying asset. Contrasts shareholders having limited liability. with Short position. Nearly all newly formed companies in • Low - The lowest price a security the UK are incorporated as limited reached in a certain period of time. companies. Opposite of high. • Limited liability - When the liability of • Main Market - The Exchange’s the shareholders is limited to the principal market for listed companies nominal value of their shares, it is from the UK and overseas. called limited liability. • Management fee - investment trust • Liquid security - A security that has a - A fixed fee that a fund manager sufficient number of buyers and sellers. charges for his services. Liquid securities can be easily traded on • Mandatory quote period (MQP) - the Exchange. The period during which market makers • Liquidation - When a company on the Exchange’s quote driven SEAQ becomes insolvent, it may go into and SEAQ International services are liquidation, wherein all its assets are obliged to make a firm two-way quote sold and the proceeds are distributed for the securities in which they are among the debtors and shareholders, in registered. This is 0800-1630 hours for that order. SEAQ and 0930-1530 hours for SE. • Liquidity - The ease with which a • - An account with a broker security can be traded on the market, where a client is able to purchase usually defined by turnover. securities on credit after the margin has • Liquidity provider - A market been deposited. participant that is obliged to buy and • Market Abuse - A conduct that sell less liquid securities that it is adversely affects a financial market and registered in. In the process, it falls below the standards expected by facilitates trading and improves liquidity the regular user of that market. The in those securities. Financial Services Authority (FSA) can • Listed - Admitted to the Official List of enforce disciplinary action against those the UKLA and ‘listing’ shall be who commit such abuses. construed accordingly. • Market capitalisation - Market • Listed company - A company whose capitalisation is used to indicate the securities have been admitted to the value of a company by multiplying the UKLA’s Official List and admitted to number of shares in issue by the trading on the London Stock Exchange. current share price. • Market maker - A Securities firm • Listing -The process of being listed. which is obliged to offer to buy and sell • Listing particulars - When a company securities in which it is registered applies for a listing of its securities, in throughout the mandatory quote some circumstances listing particulars period. (or a ) are required in • accordance with the UKLA’s Listing Market Maker to Market Maker - The Rules, giving information on the transaction was between two market company, its accounts, directors and makers registered in the security in the securities. question. This may also include those executed through an inter-dealer broker or a public display system.

10

Glossary of London Stock Exchange Terms

• -The offence of • MOEX - Market Order Extension. illegally inflating or deflating the price • Money flow per security - The of a security. cumulative value of trades executed • Market offence - An illegal/criminal and the value of orders residing on conduct that adversely affects the each side of the order book for each market. security in real-time. • Market order - An unpriced order • Money laundering - The process of submitted to an order book to deal in a disguising money obtained from specified number of shares. Unexecuted criminal activity. portions of a market order are added to • Money Laundering Reporting the order book. Officer (MLRO) - An official of a • Market order extension - A time financial firm who is responsible for extension to the auction call period. It monitoring and reporting suspicions occurs if market orders are going to related to money laundering. remain unexecuted after the auction Employees of the firm must report such match. The extension allows further suspicions to the MLRO. entry and deletion of orders. • MQP - Firm Quoted MQP. • Market price - The price of a security. • MQP1 - MQP No Automatic Execution. For shares, there are two prices quoted on the exchange – bid price and offer • MQP2 - Mandatory Quote Period with price. Order Deletion at Start. • Market Regulation Department - A • MTN - Medium-term note (MTN). An department that monitors and enforces unsecured note issued in a euro- the rules of the Exchange. currency with a maturity of 3 to 6 years. • Market Share - Dissemination of market share and ranking information • Mutual fund - A collective investment to member firms. scheme in the US that pools investors’ money to be invested in stocks, bonds • Maturity period -This is the life of a and other securities. bond or security. A bond usually ranges from 5 to 15 years but a few • Named order - A limit order that is government bonds may even have a displayed alongside the mnemonic of lifespan of 25 to 50 years. the participant that submitted it. • Maximum spread - The maximum • - National Association of permissible difference between the bid Securities Dealers Automated Quotation and offer prices of a security. (NASDAQ) – the first electronic stock market in the world. • Member firm - An investment firm which is a member of the Exchange and • Net - The amount remaining after which may deal in securities on our deductions (e.g. after tax adjustments market on behalf of its clients, or on have been made). behalf of the firm itself. • (NAV) - In the • Mergers - In a merger, two companies context of trusts and funds, NAV is the come together to become one. The total value of the fund’s portfolio less shareholders of the merging companies liabilities. often become joint owners of the • New issue - An issue of shares: when combined entity. a company either comes to the market • Mid price - A price between the offer for the first time or issues extra shares. and bid price. The mid price is equal to • Nominated Adviser (NOMAD) - the sum of the best bid price and the Exchange-approved adviser for AIM best offer price divided by two, and companies. AIM companies must retain rounded up to be consistent with the a nominated adviser at all times. relevant price format. • Nominated Broker (NOMBRO) - The • Mid-cap shares - A company with a broking firm for AIM companies that medium-sized market capitalisation. brings buyer and sellers of the • Misuse of information - The abuse of company's shares together. dealing in securities based on • Non-anonymous order - An order information that is not publicly that is displayed alongside the available. This abuse is similar to the mnemonic of the participant that offence of insider dealing. submitted it. • MOC1 - Closing Market Order Extension, no Price Monitoring Extension, supports volume check. • MOCX - Closing Market Order Extension. • MOE1 - Market Order Extension, no Price Monitoring Extension.

11

Glossary of London Stock Exchange Terms

• • Non-Protected Portfolio - The Open Period (OPEN) - The period transaction was reported as a non- that defines when the trading service is protected portfolio transaction or a fully opened. disclosed portfolio transaction. • Open-ended fund - These funds have • Non-Risk Trade - These trades are no limit to the number of units (or shares) they can issue. The price of the the same as Ordinary trades but units (or shares) remains closely specifically for SEATS based segments aligned to the NAV of the fund. Unit only (i.e. SEQ1, AIM, SEAT). trusts and OEICs are open-ended • Normal market size (NMS) - A value funds. assigned to a security by the Exchange. • The NMS indicates the liquidity of that Option - The right (but not the security. For quote-driven securities, obligation) to buy or sell securities at a the NMS is used to calculate the fixed price within a specified period. minimum quote size within which • Option premium - It is the price paid market makers are obliged to trade. by a buyer to acquire the option right. • NOTR - Non Trading Day. The amount is typically expressed as pence per share. • NTR1 - Non Trading Day. • Order - An offer to buy or sell a • NTR2 - Non Trading Day. tradable instrument with a variety of • NYSE - The conditions attached. See limit, at best, (NYSE), the world’s largest stock fill or kill, execute and eliminate and exchange, with a combined market market orders. capitalisation of £6 trillion in 2002. • Order book - An automatic execution • OB15 - Order Book Trading 15. facility operated by the Exchange. Order books facilitate the trading of • OB25 - Order Book Trading 25. order book securities. • OBC - Order Book Closed. • Order book security - A security that • OBT - Order Book Trading. is admitted to trading on the order book. • OBT1 - Order Book Trading 1. • Order management - The period of a • OBT2 - Order Book Trading 2. trading day when no automatic • OBT3 - Order Book Trading 3. execution occurs. During order • OBTD - Order Book Trading Dynamic management, participants are only Monitoring. allowed to delete their orders. • • OBTS - Order Book Trading Static Order matching - The process of Monitoring. automatically matching and executing buy and sell orders. Order matching is • ODR1 - No Order Hitting Allowed. carried out by the system. • ODRH - Order hitting Allowed. • Order-driven - Trading services that • ODRM - Order Removal. are based on the order book. • ODRS - Order Entry Suspended. • Ordinary - The transaction was not covered by any of the other trade types • OEICs - These are Open-Ended listed. Investment Companies. OEICs are a ‘hybrid’ of unit trusts and investment • Ordinary shares - The most common trusts (see unit trusts and investment form of share. Holders may receive trusts). dividends in line with the company's profitability and recommendation of its • OESP - Order Execution Suspended. directors. • OETY - Order Entry. • Out-the-money - For a Call covered • Offer for sale - A method of bringing a warrant, this is where the strike price is company to the market. The public can greater than the price of the apply for shares directly at a fixed underlying. For a Put covered warrant, price. Details of the sale must be this is where the strike price is less printed in a national newspaper. than the price of the underlying. • Offer for subscription - A method of • Over the counter (OTC) contracts - bringing a company to the market. The OTC contracts are off-exchange futures public can apply for shares directly at a contracts that are individually fixed price. negotiated. These are tailor-made and • Offer price - The selling price for illiquid. securities in the market. • Official List - A list of securities maintained by the UK Listing Authority. The Official List includes all securities that are approved for trading in the UK. • OPEN – Open.

12

Glossary of London Stock Exchange Terms

• Overbought - A term describing a • Period name - Name given to a market (or a particular security), which particular period. A period is defined by is at an artificially high price level due a specific set of rules which are to excessive buying. When a market (or effective for a specified period of time. security) is believed to be overbought, • PFIQ - Pre Firm/Indq Quote Period it is also believed to be due for a downward correction. On the other • Physically settled - Settlement of a hand, when a market (or security) is warrant by the delivery or receipt of an believed to be oversold, it is believed actual underlying asset. This contrasts that there has been excessive selling with cash settlement, where no delivery and the price is due for an upward of an underlying physical asset takes correction. place just a cash difference. • Overnight Trade - The transaction • PIQP - Pre IMQP. was reported after 17:15 and before • Placing - It is a method of flotation in 7:15 the following day. which a company issues shares to a • Panel on Takeovers and Mergers select group of institutional investors. (POTAM) - The body that regulates the • Plc - See public limited company. conduct of takeovers and mergers in • the UK. PMC1 - Closing Price Monitoring Extension, no Market Order Extension, • Pari Passu - This is the result of a line supports volume check. of stock being issued with a constraint • on it, i.e. Not ranking for a particular PMCX - Closing Price Monitoring dividend. Once this constraint is passed Extension, supports volume check. the line of stock will be merged with the • PME1 - Price Monitoring Extension, no existing. Market Order Extension. • Partial execution - When only a part • PMEX - Price Monitoring Extension. of an order is executed. • PMON - Price Monitoring Override. • Participant - An investor or • PMQP - Pre MQP. intermediary acting in a trading capacity. • POB1 - Pre order Book Trading 1. • Participating preference shares - • POBT - Pre Order Book Trading. Participating preference shareholders • Portfolio - A group of investments held have the right to participate in the across asset classes (stocks, bonds, surplus profits of the company, after real estate, gold) or within the same payment of equity and preferred asset class (exposure to stocks across dividend. companies and industries). • Partnership - In a partnership, two or • POTAM - See Panel on Takeovers and more people jointly own the business. Mergers. While general partners are fully liable • for the debts of the business, limited Pound cost averaging - A disciplined partners have limited liability. investment technique where fixed amounts are invested over regular • Passive fund - A fund in which the periods (typically monthly) to fund manager passively manages accumulate wealth in shares, unit trusts investments (see passive and investment trusts. management). • Preference shares - These are • Passive management - Fund normally fixed-income shares whose managers do not attempt to beat the shareholders have the right to receive market. Instead, they try to mirror the dividends before ordinary shareholders performance of a selected market index would rank above ordinary such as the FTSE 100. shareholders for the repayment of their • Pension fund - A fund set up by a investment in the company. company or government to invest the • Premium - A term used to describe the pension contributions of members and price paid for a covered warrant. employees. These are then paid out • when the beneficiaries reach the Price - The price of a tradable retirement age. instrument. This is the last automatic trade or uncrossing price for a security • Percentage (%) change - The in SETS or the mid-price for a security percentage change in the price of a in SEAQ, SEATS, AIM or an security, i.e. the percentage of change international security (that is securities between the last trade and the previous in EULQ, LSTD, NLLD or OINT market day's closing price. segment. • Price monitoring - Automatic price monitoring capability that is used to limit extreme price deviations.

13

Glossary of London Stock Exchange Terms

• Price monitoring extension - A time listed companies. extension to the auction call period. It • Public offer - It is a method of occurs if the auction match price flotation in which a company issues breaches price tolerance limits. The shares to the public at large, including extension allows further entry and private and institutional investors. deletion of orders. • Public relations - Public relations • Price priority - Orders are first consultants are employed by companies prioritised for execution according to to keep their business on the financial their price. This is price prioritisation. pages and in the minds of investors. • Price sensitive information - • Public sector issuers - States and Information which, if made public, is their regional and local authorities, likely to have a significant effect on the state monopolies, state finance price of the company’s securities. organisations, public international • Price tolerance level - The bodies and statutory bodies. percentage up to which the price of a • Put - covered warrant - A covered security can increase or decrease from warrant that gives the holder the right, the base price. but not the obligation, to sell the • Price/Earnings ratio (P/E ratio) - A underlying at a future date and measurement of a company’s rating, specified price. calculated by dividing the share price • Put – option - It is an option that by the annual . A gives the buyer the right to sell an high P/E ratio means the company is underlying asset at a future date at a highly-rated by the stock market, specified price. suggesting that investors think its • Put – warrant - A put warrant allows prospects are good. the holder to benefit from a falling • Price-time priority - How orders are market. It rises in value when the prioritised for execution. Orders are underlying asset falls in value. first ranked according to their price. • Quote - An offer to buy or sell a quote Orders of the same price are ranked driven security. Quotes are displayed depending on when they are entered. by market makers that are registered in • Primary market - The function of a that security. stock exchange in bringing securities to • Quote book - An electronic facility the market for the first time. Money is operated by the Exchange. A quote raised either for the company at book facilitates the display of buy and admission or through further issues to sell quotes made by market makers. fund future growth. • Quote-driven - A service that does not • Private company - A company which allow automatic execution. Trading of is not a public company and which is quote-driven securities is conducted via not allowed to offer its shares to the telephone dealing. general public. • Rating agencies - Rating agencies • Privatisation - Conversion of a state- determine the issuer’s ability to meet run company to public limited company their debt obligations to the investors. status - often accompanied by a sale of Agencies include Moody’s, Standard & its shares to the public. Poor’s (S&P) and Fitch IBCA. • Professional DRs - These are • Recognised Investment Exchange depositary receipts that are traded only (RIE) - An investment exchange in by the institutional investors in the UK. relation to which a recognised order • Prospectus - When a company applies granted by the FSA is in force. for a listing of its securities which are to • Redeemable preference shares - be offered to the public in the UK, a The issuing company reserves the right prospectus is required in accordance to redeem these preference shares. The with the UKLA’s Listing Rules, detailing shares may, or may not, have a specific information on the company, its redemption date. accounts, directors and its securities. • Redemption - Certain stocks are • Protected Portfolio -The transaction repayable at a future date set by the was reported as a protected portfolio issuing company. or, was as a result of a worked principle agreement for portfolio transaction. • Registrar - An organisation responsible for maintaining a • Protection Applied - The transaction company's share register. was protected at the time of reporting it. • Result of Exercising Option - The transaction was reported as a result of • Public limited company (plc) - A exercising a traditional option or a company whose shares may be negotiated option. purchased by the public and whose share capital is not less than a statutory minimum. Not all plcs are

14

Glossary of London Stock Exchange Terms

• Result of Stock Swap - The Stock Exchange. transaction was reported as a result of • S&P 500 - Standard & Poor’s a stock swap or stock switch (one Composite Index – an index comprising report is required for each line of stock shares of 500 US companies reflecting swapped or switched). the general trend in the US stock • Retail consumer - A private user of market. the financial markets. The retail • SAUC - Auction Execution. investor is typically a small investor, • Scheme of Arrangement - A non- who buys and sells shares through optional event proposed by a company his/her broker. on its share capital. • Retail DRs - These are depositary • Scrip dividend - An issue of shares receipts that are traded by all available to shareholders that replaces investors, including private individuals, a dividend payment. Shareholders have in the UK. the option to forgo their dividend for • RIE - See Recognised Investment the share alternative. Exchange. • Scrip issue - The issue by a company • Rights issue - An invitation to existing of new shares which do not require any shareholders to purchase additional payment to be made by the shares in the company. shareholder. This has the effect of • Rights shares - Companies issue more making the company's shares more shares at a later stage to fund further marketable because of the increased projects. These are issued to existing number available and the lower market shareholders on a pro-rata basis. price. Shareholders have an opportunity to • SEAQ - The Stock Exchange Automated subscribe to these shares at a price Quotations system. SEAQ is a lower than the prevailing market price. continuously updated electronic notice • RIS - Regulatory Information Service board containing price quotations of UK (RIS) – which ensures that information securities. Market makers use the from listed and AIM companies, and system to display the prices at which certain other bodies, is disseminated to they are prepared to buy or sell shares. all subscribers (such as major • SEAQ Crosses - SEAQ Crosses information vendors) at the same time supplements SEAQ (market maker for onward transmission to the market. quote-driven system) by providing an • Risk - Risk is the probability that the alternative order-driven execution actual return of an investment will be mechanism. different from the expected return. • SEAQ International - The Stock Higher the risk, higher will be the Exchange Automated Quotations probability of gain or loss on the system for international equities. investment. • SEAQ Trade - This is used for the • Risk Trade - The transaction was single uncrossing trade, detailing the reported by a market maker registered total executed volume and uncrossing in either a SEATS security, an AIM price as a result of a SEAQ auction. security or a covered warrant market • - Marketplace for security. trading in securities. • Riskless Principal - The trade was • Securities - General name for stocks reported as a riskless principal and shares of all types. transaction between two non-members, where the two transactions are • Securities Management - The executed at different prices or on Exchange’s department responsible for different terms (requiring two separate dealing with applications for admission trade reports). OR a market make is to trading. reporting a riskless principal transaction • Securities Masterfile (SMF ) - SMF where the two transactions are provides up-to-date information on executed at different prices. securities traded on UK and • RNS - The Exchange’s Regulatory International markets. Information Service – which ensures • Securities trading - Investment banks that information from listed and AIM offer securities trading by maintaining companies and certain other bodies is broker-dealer operations. Many disseminated to all RNS subscribers, investment banks also provide market such as major information vendors at making for securities. the same time for onward transmission. • Security Suspended - This security • RSD1 - Security Restored. has been suspended from trading by • RSD2 - Security Restored. the Exchange. • RSTD - Security Restored. • SEDOL - Stock Exchange Daily Official List code, a 7 digit alphanumeric • Rule Book - The rules of the London reference for a listed security.

15

Glossary of London Stock Exchange Terms

• Sell note - Published by a • Specialist securities - Securities, brokerage/research firm, a sell note is which, because of their nature, are a report that recommends the selling of normally bought and traded by a a particular stock. On the other hand, a limited number of investors who are ‘buy note’ recommends the buying of a particularly knowledgeable in particular stock. investment matters. • SEOD - Special End of ODRH. • - The process of selecting • Serious Fraud Office (SFO) - An a high-risk investment to profit from an independent government department anticipated price movement. that investigates and prosecutes • Sponsor - A company’s adviser who is serious fraud. approved by the UKLA. The role of a • SETS - Stock Exchange Electronic sponsor is to ensure that the company Trading Service (SETS), an order- is suitable for listing. driven trading service. • SPT1 - Start of Pre Trading Period. • SETS participant - A partnership, • SPT2 - Start of Pre Trading Period. corporation, legal entity or sole • SPTP - Start of Pre Trading period. practitioner approved by the Exchange to trade in order book securities only. • SQAL - Mandatory Quote period with Auction Call. • Settlement - The process of transferring stock from seller to buyer • SSPD - Segment Suspended. and arranging the corresponding • Stabilisation - A stabilisation may movement of money between the two occur after a new issue in accordance parties. with FSA rules. It will entail the • SFA (Securities and Futures stabilising manager buying shares in Authority) - Now included within the the market to counter selling pressure FSA, the Securities and Futures in the initial market. This stabilisation Authority (SFA) was the Self Regulating period must be fully disclosed by way of Organisation responsible for regulating a daily notice and last for a maximum the conduct of brokers and dealers in of 30 days. securities, options and futures - • Stamp duty - A government tax levied including most member firms of the on share dealing. Exchange. • STBY – Standby. • SFST - SETS Fast Index Expiry. • Stock Situation Notices (SSNs) - • Share - The authorised share capital of Stock Situation Notices which contain a company is divided into a number of extensive details of a corporate action. equal parts. Each part is called a share. • See Ordinary shares, Preference Stockbroker - A securities firm which shares, Securities. provides advice and dealing services to the public and which can deal on its • Shares in public hands - A company own account. seeking admission to the Official List • must have at least 25 per cent of its Stock-settlement - The warrant shares in public hands. Shares are not holder receives the underlying if the deemed to be in public hands where warrant can be exercised profitably at they are held by a director of the expiry. company or its subsidiaries, individuals • Strike price - covered warrant - The connected with the directors and any price at which the investor may buy or person holding 5 per cent or more of sell the underlying during (if American the shares. style) or at the end (if European style) • Short - A short position is when of the expiry period. Also referred to as someone sells a warrant or the 'expiry price' and 'exercise price'. It is underlying asset. Contrasts with Long known when the warrant is issued. position. • Subdivisions - When a company • SIMQ - Special End of IMQP. increases the number of shares it has in circulation by subdividing its share • Single Protected Trade - the trade capital e.g. shareholders would receive was reported as a result of a single 2, 25p shares for every 1, 50p share protected transaction. held. • SMQP - Special End of MQP. • SUS1 - Security Suspended 1. • SOBT - Special End Order Book • SUSP - Security Suspended. Trading. • Suspension of trading - Any • Sole trader - The sole promoter has cessation of trading imposed by the unlimited liability. In other words, the Exchange, including a trading halt. sole promoter is fully liable for the • debts of the business. Swaps - Complex derivative products which are cash settled.

16

Glossary of London Stock Exchange Terms

• SWIFT - Society for Worldwide company information may be entered. Interbank Financial • Trade - A trade is a deal made on the Telecommunications. International body London Stock Exchange. Sometimes which sets protocols and standards for referred to as a 'bargain'. international payment systems, such as electronic money transfers. • Trade reporting period - The period during each working day (between • Syndication - In a public offer, 07:15 and 17:15) when the Exchange usually, a syndicate of investment accepts trade reports. banks is formed to underwrite the issue. Each member of the syndicate is • Trade value - The trade value of each assigned a certain amount of liability of the last 5 trades. and (number or quota of) shares to • Trade volume - The volume figure for sell. each of the last 5 trades. • SYSP - LSE System Problem. • Trading platform - A trading platform • Takeover - The acquisition of one is the technology infrastructure in a business or company by another. stock exchange that is used to support one or more trading services. • Target company (in a Takeover) - The company that is going to be • Trading service - A configuration of acquired by another company. system and market rules that support the trading activity of a market. • TDEX - Trading Extended. • Transparent market - A market that • techMARK™ - The Exchange’s provides timely and accurate international market for innovative information regarding all transactions. technology companies. • Trust - A fiduciary relationship that • techMARK mediscience™ - The empowers one or more people Exchange’s international market for (trustees) to safeguard and administer healthcare companies. the assets (money or property) of the • Third party account - A bank account beneficiaries or investors. that does not belong to the client. • UKLA - The Financial Services Money laundering transactions often Authority acting in its capacity as the use third party accounts. United Kingdom Listing Authority • Time priority - Orders of the same (UKLA). price are prioritised depending on when • Uncrossing Trade - This is used for they are entered. This is time the single uncrossing trade, detailing prioritisation. the total executed volume and • Time value - Time value is the intrinsic uncrossing price as a result of a SETS value subtracted from the market price. auction. Time value represents the remaining • Underlying - covered warrant - The value that has been attributed to the asset on which the covered warrant is warrant by the market, and the fact based and derives its value. The that the market might move before the underlying may be a security (such as expiry date. shares), a share index (e.g. FTSE 100), • Time weighted average spread - a commodity or a currency. Some The average spread (calculated hourly) warrants are based on a 'basket' of weighted by the length of time a spread underlyings, which gives an invest. applies. • Underlying asset - The value of a • Touch - The best buying and selling derivative instrument depends on the prices available on SETS or from a performance of the underlying asset or market maker on SEAQ or SEAQ security. These may be commodity International in a given security at any derivatives such as gold, sugar, jute, one time. pepper, iced broilers or coffee. They • Tracker fund - A fund that aims to could also be financial in nature such as mirror the performance of a chosen stocks, bonds, gilts, currencies and share index. The amount invested in money market instruments. each company is proportional to the • Underlying share price - See company’s weighting on the target Underlying Asset. index. Management fees for a passively • Underwriter - See . managed tracker fund are lower than an active fund. • Underwriting - An arrangement by which a company is guaranteed that an • Tradable instrument display issue of shares will raise a given mnemonic (TIDM) - The mnemonic amount of cash. Underwriters code is allocated by the Exchange and undertake to subscribe for any of the used to identify a tradable instrument. issue not taken up by the public. They Used to be called an EPIC code. charge commission for this service. • Tradable instrument - A security for which orders, trade reports and

17

Glossary of London Stock Exchange Terms

• Unit trusts - These are open-ended • Worked Principle Trade - The funds where private investors pool their reported trade was from a worked money to be invested in a portfolio of principle agreement for a single securities. Unit trusts issue units to security. investors. • Working capital - The capital used by • Units - Unit trusts issue units in the company to run its day-to-day response to demand. Being open- operations. It is the difference between ended, unit price is closely aligned to current assets and current liabilities of the net asset value (NAV) of the fund. the business. • Unlimited liability - When a promoter • Writer - The issuer of a covered is fully liable for the debts of the warrant is sometimes referred to as the business, it is called unlimited liability. writer. • USD - US Dollars. • XONE - Execution Only - no order • USM - Unlisted entry. (USM) set up in 1980 to provide an • Yellow Book - see Listing Rules. easier route to the market for small or • Yellow strip - The yellow band on a new companies. The market closed at SEAQ or SETS screen which displays the end of 1996. (USM companies could the highest bid and the lowest offered move to the main market or AIM.) prices that competing market makers • virt-x - A cross-border stock exchange are offering in a security. They are for European blue chips. known colloquially as the ‘touch’ or • - A measure of the amount ‘yellow strip’ prices. of movement in the price of an • Yield - The return earned on an instrument. investment taking into account the • Volume - The daily cumulative volume annual income and its present capital for each security. value. There are a number of different types of yield, and in some cases • Voting rights - The entitlement of different methods of calculating each ordinary shareholders to vote in person type. or by proxy at annual meetings or • Yield to maturity (YTM) - Yield to annual general meetings. maturity or YTM is the • VWAP (Volume weighted average anticipated on a bond if it is held until price) - Volume weighted average the maturity date. price (VWAP), which is calculated by • Zero coupon bonds - Zero coupon dividing the value of trades by the volume over a given period. A closing bonds are corporate or municipal debt 10 minute VWAP is used to set closing securities that trade at a deep discount prices on the order book. from the face value, as the bond pays no interest to the bondholders during • VWPT - Volume Weighted Price its lifetime. trading. • VWPX - Volume Weighted Price Uncrossing. • Warrants - Securities giving the holder a right to subscribe to a share or a bond at a given price and from a certain date. • WFE - Also called the World Federation of Exchanges. The Federation is a private international organisation that promotes co-operation between international exchanges. • Winding up - See Liquidation.

18

Glossary of London Stock Exchange Terms

Further Information Important Notice This guide is for general interest - it is always essential to take advice on specific issues. © Copyright 2001- 2012, Bizezia Limited. We believe that the facts are correct as at the All Rights Reserved. date of publication, but there may be certain errors and omissions for which we cannot be This publication is published on our responsible. behalf by Bizezia Limited. It is If you would like to receive further protected by copyright law and reproduction information about this subject or other in whole or in part publications, please call us – see our contact without the publisher’s written permission is details on the next page. strictly prohibited. The publisher may be contacted at [email protected] (telephone 01444 Acknowledgement 884220).

1 Articles and © This glossary is derived from information published by the London Stock information contained Exchange and their copyright is acknowledged. herein are published without responsibility by us, the publisher or any contributing author for any loss howsoever occurring as a consequence of any action which you take, or action which you choose not to take, as a result of this publication or any view expressed herein. Whilst it is believed that the information contained in this publication is correct at the time of publication, it is not a substitute for obtaining specific professional advice and no representation or warranty, expressed or implied, is made as to its accuracy or completeness. The information is relevant within the United Kingdom. These disclaimers and exclusions are governed by and construed in accordance with English Law.

Publication issued or updated on: 17 February 2012

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