Acc – Ann S The world puts its stock in us.® Here’s a fairly comprehensive ADR — American Depositary list of commonly used terms Receipt. A security issued by a (and their definitions) in the U.S. bank in place of the securities and financial foreign shares held in trust by industries: that bank, thereby facilitating the trading of foreign shares in U.S. markets.

A American Stock Exchange — The second largest stock GLO S SAR Y Accountant’s Opinion — (see exchange in New York, located Auditor’s Report) in the financial district of New York City. Accounts Payable — Money a OF TER M S company owes for services and Amortization — Accounting supplies. For example, a record for expenses or charges as company would list as applicable rather than as paid. accounts payable the bill from Includes such practices as a wax company that supplied depreciation, depletion, write-off &ACR O N Y M S the raw material for making of intangibles, prepaid expenses records. and deferred charge s .

Accrued Interest — The Annual Report — The formal interest due on a bond since the financial statement issued last interest payment was yearly by a publicly owned made. The buyer of the bond corporation. The report shows pays the market price plus assets, liabilities, revenues, accrued interest. expenses and earnings. The report also shows the Acquisition — Acquiring company’s financial condition control of one corporation by at the close of the business another. In “unfriendly” take- year and other basic over attempts, the potential information of interest to buying company may offer a shareholders. price well above current market values, new securities and other inducements to stockholders. The management of the subject company might ask for a better price or try to join up with a third company. (also see Merger, Proxy)

New York Stock Exchange

1 Arb – Ave Bal– Blu

Arbitrage — A technique York Stock Exchange. Buyers Bearer Bond — A bond that employed to take advantage of compete with other buyers B does not have the owner ’s differences in price. If, for while sellers compete with name registered on the books example, ABC stock can be other sellers for the most of the issuer. Interest and prin- Balance Sheet — A condensed bought in New York for $10 a advantageous price. cipal, when due, are payable to financial statement showing the share and sold in London at the owner (see Coupon Bond, nature and amount of a $10.50, an arbitrageur may Auditor’s Report — Often Registered Bond) company’s assets, liabilities simultaneously purchase ABC called the accountant’s and capital on a given date. In stock here and sell the same opinion, it is the statement of Bid and Asked — Often dollar amounts the balance amount in London, making a the accounting firm’s work and referred to as a quotation or sheet shows what the company profit of 50 cents a share, less its opinion of the corporation’s quote. The bid is the highest owned, what it owed, and the expenses. Arbitrage may also financial statements, especially price anyone wants to pay for a ownership interest in the involve the purchase of rights if they conform to the normal security at a given time, the company of its stockholders. to subscribe to a security, or and generally ac c e p t e d asked is the lowest price (see Assets, Earnings Report) the purchase of convertible practices of accountancy. anyone will take at the same security – and the sale at or time. (see Quote) Basis Point — One gradation about the same time of the Averages — Various ways of on a 100-point scale represent- security obtainable through measuring the trend of Block — A la r ge holding or ing one percent; used exercise of the rights or of the securities prices, one of the transaction of stock — po p u l a r l y especially in expressing security obtainable through most popular of which is the considered to be 10,000 shares or variations in the yields of conversion. (see Convertible, Dow Jones average of 30 mo r e . bonds. Fixed income yields Rights) industrial stocks listed on the vary often and slightly within New York Stock Exchange. Blue-Chip Stock — Stock in a one percent and the basis point Arbitration — A low-cost The prices of the 30 stocks are company with a national scale easily expresses these alternative to settling disputes totaled and then divided by a reputation for quality, changes in hundredths of one over securities transactions in divisor that is intended to reliability and the ability to percent. For example, the the court system. The NYSE compensate for past stock operate profitably in good and difference between 12.83% and administers this service. splits and stock dividends and bad times. 12.88% is 5 basis points. that is changed from time to Asset — Anything a person, time. As a result, point changes Blue Sky Laws — A popular Bear — Someone who believes company, or group owns or is in the average have only the name for laws various states the market will decline. (see owed, including money, vaguest relationship to dollar have enacted to protect the Bull) investments and property. price changes in stocks public against securities fraud. included in the average. (also The term is believed to have Bear Market — A condition of Assignment — Notice to an see NYSEComposite Index) originated when a judge ruled the stock market when prices option writer that an option that a particular stock had of stocks are generally holder has exercised the option Averaging — (see Dollar Cost about the same value as a declining. and that the writer will now be Averaging) patch of blue sky. required to deliver (receive) under the terms of the contract.

Auction Market — The system of trading securities through brokers or agents on an exchange such as the New

2 3 Bon – Bro Bul – Cer

Bond — Basically an I.O.U. or Borrowing — A way of Bull — One who believes the and common. (see Common promissory note of a corpora- acquiring necessary capital. market will rise. (see Bear) Stock, Preferred Stock) tion or municipality, usually One form of borrowing is issued in multiples of $1,000 when an individual or a Bull Market — A condition of Capitalization — Total amount or $5,000. A bond is an company asks a bank to loan the stock market when prices of of various securities issued by evidence of debt on which the them a certain amount of stocks are generally rising. a corporation. Capitalization issuing company usually money, over a certain period may include bonds, debentures, promises to pay the bondholder of time, and agrees to pay a Buttonwood Agreement — A preferred and common stock, and a specified amount of interest certain amount of interest. 1792 trade agreement banding su r p l u s . for a specified length of time, the original 24 brokers in New and to repay the loan on the Broker — An agent who York together into an invest- Cash Flow — Reported net ex p i ration date. A bondholder handles the public’s orders to ment community. The income of a corporation plus is a creditor of the corporation, buy and sell securities, agreement was named for a amounts charged for not a part owner as is the commodities or other Buttonwood tree that served as depreciation, depletion, shareholder. While the interest property. For this service a their informal meeting place on amortization, extraordinary paid on corporate bonds is commission is charged. Wall Street. charges to reserves, which are fully taxable, the interest on bookkeeping deductions and Broker Booth Support System municipal bonds is usually Buy Side — An institution who not paid out in actual dollars (BBSS) — A state-of-the-art exempt from federal income buys services from a and cents. (see Amortization, order-management system tax and state and local taxes broker/dealer, i.e., pays a Depreciation) designed exclusively for within the state of the issue. commission on the execution NYSE members. BBSS en- of an order. Cash Sale — A transaction on ables member firms to quick- Book Value — An accounting the floor of the Stock ly and efficiently process and term. Book value of a stock is Exchange that calls for manage their orders and determined from a company’s delivery of the securities the selectively route orders via records, by adding all assets C same day. In “regular way” SuperDot directly to either then deducting all debts and the trading post or the booths trades, the seller is to deliver other liabilities, plus the on the NYSE Trading Floor. Call — (see Option) on the third business day, liquidation price of any except for bonds, which are the preferred issues. The sum Brokers’ Loan — Money Callable — A bond issue, all or next day. (see Regular Way arrived at is divided by the borrowed by brokers from parts of which may be Delivery) number of common shares banks or other brokers for a redeemed by the issuing outstanding and the result is variety of uses. It may be corporation under sp e c i f i e d Certificate — The actual piece book value per common share. used by specialists to help conditions before maturity. Th e of paper that is evidence of Book value of the assets of a finance investments of stock term also applies to preferred ownership of stock in a company or a security may they deal in; by brokerage shares that may be redeemed by corporation. Watermarked have little relationship to firms to finance the the issuing corporation. paper is finely engraved with market value. underwriting of new issues of delicate etchings to discourage corporate and municipal Capital Gain — Profit made on forgery. Booths — About 1,400 securities; to help finance a securities, either through workspaces, each equipped fi r m ’ s own investments; and dividends or by selling the Certificate of Deposit (CD) — with a computer system, to help finance the purchase securities for a higher price than An agreement with a bank that around the perimeter of the of securities for customers they originally cost. you will leave your money on Trading Floor where member who prefer to use the deposit for a specified period firms and independent brokers broker’s credit when they buy Capital Stock — All shares of time in return for a specific receive orders. securities. (see Margin) representing ownership of a amount of interest. business, including preferred

4 5 Cft – Con Cur – Day

CFTC — The Commodity common stockholders are Corporate Bond — A bo n d number of their shares by the Futures Trading Commission, paid after bondholders and issued by a corporation. number of directorships being created by Congress in 1974 to preferred stockholders. (also voted on and to cast the total regulate exchange trading in see Pre f e r red Stock) Correspondent — A securities for one director or a selected futures. firm, bank or other financial group of directors. A 10- Competitive Trader — A organization that regularly shareholder normally casts 10 Closed-End Investment member of the Exchange who performs services for another votes for each of, say, 12 Company — (see Investment trades in stocks on the Floor in a place or market to which nominees to the board of Company) for an account in which the the other does not have direct directors. One thus has 120 member firm has an interest. access. Securities firms may votes. Under the cumulative Collateral — Securities or Also known as Registered have correspondents in foreign voting principle, one may do other property pledged by a Trader. countries or on exchanges of that or may cast 120 (10x12) borrower to secure repayment which they are not members. votes for only one nominee, 60 of a loan. Conglomerate — A Correspondents are frequently for two, 40 for three, or an y corporation that has diver- linked by private wires. other distribution one chooses. Commercial Paper — De b t sified in operations usually Member organizations of the Cumulative voting is required instruments issued by companies by acquiring enterprises in NYSE with offices in New under the corporate laws of some to meet short-term financing widely varied industries. York City may also act as states and is permitted in most ne e d s . correspondents for out-of-town ot h e r s . Consolidated Balance Sheet member organizations that do Commission — The broker’s — A balance sheet showing not maintain New York offices. Current Assets — Those assets basic fee for purchasing or the financial condition of a of a company that are selling securities or property as corporation and its Coupon Bond — Bond with reasonably expected to be realized in cash, or sold, or an agent. subsidiaries. (see Balance interest coupons attached. The Sheet) coupons are clipped as they consumed during one year. These include cash, U.S. Commission Broker — An come due and presented by the Consolidated Tape — The holder for payment of interest. Government bonds, agent who executes the ticker tape reporting (See Bearer Bond, Registered receivables and money due public’s order for the purchase transactions in NYSE listed Bond) usually within one year, and or sale of securities or securities that take place on inventories. commodities. the NYSE or any of the Covered Option — An option participating regional stock position that is offset by an Current Liabilities — Money Commodities — (see Futures) exchanges and other markets. equal and opposite position in owed and payable by a Similarly, transactions in the underlying security. company, usually within one Common Stock — One of two Amex listed securities, and year. types of stock an investor may certain other securities listed Cumulative Preferred — A purchase in a company. Most on regional stock exchanges, stock having a provision that if Current Return — (see Yield) stock is common stock. are reported on a separate one or more dividends are Investors who purchase it have tape. omitted, the omitted dividends voting rights at the company’s must be paid before dividends annual stockholders’ meeting. Convertible — A bond, may be paid on the company’s D Common Stockholders are not debenture or preferred share common stock. guaranteed dividends, buy they that may be exchanged by the Day Order — An order to buy may receive higher dividends owner for common stock or Cumulative Voting — A or sell which, if not executed, during the company’s another security, usually of the method of voting for corporate expires at the end of the prosperous periods. If a same company, in accordance directors that enables the trading day on which it was company fails or liquidates, with the terms of the issue. shareholders to multiply the entered.

6 7 Dea – Dir Dis – Dow

Dealer — An individual or Depletion Accounting — Discount — The amount by brokerage firm. DRIPallows firm in the securities business Natural resources, such as which a preferred stock or investors to use their dividends who buys and sells stocks and metals, oil, gas and timber, bond may sell below its par to purchase additional shares bonds as a principal rather than which conceivably can be value. Also used as a verb to of stock in the company. an agent. The dealer’s profit or reduced to zero over the years, mean “takes into account” as loss is the difference between present a special problem in the price of the stock has Dollar Cost Averaging — A the price paid and the price capital management. Depletion discounted the expected system of buying securities at received for the same security. is an accounting practice dividend cut. (see Proxy) regular intervals with a fixed The dealer’s confirmation must consisting of charges against dollar amount. Under this disclose to the customer that earnings based upon the Discretionary Account — An system investors buy by the the principal has been acted amount of the asset taken out account in which the customer dollars’worth rather than by upon. The same individual or of the total reserves in the gives the broker or someone the number of shares. If each firm may function, at different period for which accounting is else discretion to buy and sell investment is of the same times, either as broker or made. A bookkeeping entry, it securities or commodities number of dollars, payments dealer. (see NASD, Specialist) does not represent any cash including selection, timing, buy more shares when the outlay nor are funds earmarked amount, and price to be paid or price is low and fewer when it for that purpose. Debenture — A promissory received. rises. Thus temporary note backed by the general downswings in price benefit Depository Trust Company credit of a company and Diversification — Spreading investors if they continue (DTC) — A central securities usually not secured by any investments among different periodic purchases in both certificate depository through specific collateral, such as a types of securities and various good times and bad and the which members effect security mortgage or property. companies in different fields. price at which the shares are deliveries between each other sold is more than their average via computerized bookkeeping Debit Balance — In a Dividend — The payment cost. (see Formula Investing) entries thereby reducing the customer’s margin account, designated by the Board of physical movement of stock Down Tick — (see Up Tick) that portion of the purchase certificates. Directors to be distributed pro price of stock, bonds or rata among the shares out- Dow Theory — commodities that is covered by Depreciation — Normally, standing. For preferred shares, A theory of credit extended by the broker charges against earnings to the dividend is usually a fixed market analysis based upon the to the margin customer. (see write off the cost, less salvage amount. For common shares, performance of the Dow Jones Margin) value, of an asset over its the dividend varies with the industrial and transportation estimated useful life. It is a fortunes of the company and stock price averages. The Delayed Opening — The bookkeeping entry and does the amount of cash on hand, Theory says that the market is postponement of trading of an not represent any cash outlay and may be omitted if business in a basic upward trend if one issue on a stock exchange nor are funds earmarked for the is poor or if the directors of these averages advances beyond the normal opening of purpose. determine to withhold earnings above a previous important a day’s trading because of to invest in plants and equip- high, accompanied or followed market conditions that have Director — Person elected by ment. Sometimes a company by a similar advance in the been judged by exchange shareholders, usually during an will pay a dividend out of past other. When the averages both officials to warrant such a annual meeting, to serve on the earnings even if it is no t dip below previous important delay. Reasons for the delay Board of Directors of a corpor- currently operating at a profit. lows, this is regarded as may be an influx of either buy ation. The directors appoint the confirmation of a downward or sell orders, an imbalance of president, vice president and all Dividend Reinvestment Plan trend. The Dow Jones is one buyers and sellers, or pending other operating officers. (DRIP) — A program offered by type of market index. (see NY S E corporate news that requires Directors decide, among other companies that allow investors Composite Index) time for dissemination. matters, if and when dividends to buy their stock directly from shall be paid. the company, without using a

8 9 Ear – Ex Ext – Flo

payable to holders of record on Extra — The short form of after the Christmas rush. For E the books of the company on a “extra dividend.” A dividend in that reason many stores wind given Friday. Since three the form of stock or cash in up their accounting year business days are allowed for addition to the regular or usual January 31. Their fiscal year, Earnings Report — A statement delivery of stock in a “regular dividend the company has been therefore, runs from February 1 – also called an income state- way” transaction on the New paying. of one year through January 31 ment – issued by a company York Stock Exchange, the of the next. The fiscal year of showing its earnings or losses Exchange would declare the other companies may run from over a given period. The stock “ex-dividend” as of the July 1 through the following earnings report lists the income opening of the market on the F June 30. Most companies, earned, expenses and the net preceding Wednesday. That though, operate on a calendar result. (see Balance Sheet) means anyone who bought it Face Value — The value of a year basis. on or after that Wednesday bond that appears on the face Economic Indicator — A key would not be entitled to that of the bond, unless the value is Fixed Charges — A company’s statistic in the overall economy dividend. When stocks go ex- otherwise specified by the fixed expenses, such as bond that experts use as a yardstick dividend, the stock tables issuing company. Face value is interest, which it has agreed to to predict the performance of include the symbol “x” ordinarily the amount the pay whether or not earned, and the stock market. following the name. (see Cash issuing company promises to which are deducted from Sale, Net Change, Transfer) pay at maturity. Face value is income before earnings in Equipment Trust Certificate — not an indication of market equity capital are computed. A type of security, generally Exercise — Action taken by an value. Sometimes referred to as issued by a railroad, to pay for option holder that requires the par value. (see Par) Flat Income Bond — This term new equipment. Title to the writer to perform the terms of means that the price at which a equipment, such as a locomo- the contract. Fair Market Price — A bond is traded includes tive, is held by a trustee until reasonable price for securities consideration for all unpaid the notes are paid off. An Exercise Prices — The prices based on supply and demand. accruals of interest. Bonds that equipment trust certificate is at which an option may be are in default of interest or usually secured by a first claim exercised. Also called strike Financial Futures — Futures principal are traded flat. on the equipment. prices. contracts based on financial Income bonds that pay interest instruments such as U.S. only to the extent earned are Equity — The ownership inter- Expiration Date — The date Treasury bonds, CDs and other usually dealt in “and interest,” est of common and preferred the option contract expires. interest-sensitive issues, which means that the buyer stockholders in a company. currencies and stock market pays to the seller the market Ex-Rights — Without the indicators. (see Futures, Stock price plus interest accrued Ex-Dividend — A synonym for rights. Corporations raising Index Futures) since the last payment date. “without dividend.” The buyer additional money may do so by of a stock selling ex-dividend offering their stockholders the Fiscal Year — A co r p o r a t i o n ’ s Floor — The huge trading area does not receive the recently right to subscribe to new or accounting year. Due to the – about the size of a football declared dividend. Every additional stock, usually at a nature of that particular field – where stocks are bought dividend is payable on a fixed discount from the prevailing business, some companies do and sold on the New York date to all shareholders market price. The buyer of a not use the calendar year for Stock Exchange. recorded on the books of the stock selling ex-rights is not their bookkeeping. Aty p i c a l company as of a previous date entitled to the rights. (see Ex- example is the department store of record. For example, a Dividend, Rights) that finds December 31 too dividend may be declared as early a date to close its books

10 11 Flo – Giv Gol – Ind

Floor Brokers — The largest Futures — A contract Gold Fix — The setting of the Holding Company — A single membership group of the specifying a future date of price of gold by dealers (esp- corporation that owns the NYSE. There are two main delivery or receipt of a certain ecially in a twice-daily London securities of another, in most types: Commission brokers, amount of a specific tangible meeting at the central bank); cases with voting control. employed by brokerage houses, or intangible product. The the fix is the fundamental buy and sell securities on the commodities traded in futures worldwide price for setting Hypothecation — The pledging NYSE floor for the general markets include stock index price of gold boullion and of securities as collateral – for public. Independent floor futures; agricultural products gold-related contracts and example, to secure the debit brokers work for themselves. like wheat, soybeans and pork products. balance in a margin account. They execute orders for bellies; metals; and financial brokerages without full-time instruments. Futures are used Good Delivery — Certain basic commission brokers or for by business as a hedge against qualifications must be met overly busy brokers. unfavorable price changes and before a security sold on the I by speculators who hope to Exchange may be delivered. Formula Investing — An profit from such changes. The security must be in proper Income Bond — Ge n e r a l l y , investment technique. One form to comply with the income bonds promise to repay formula calls for the shifting of contract of sale and to transfer principal but to pay interest only funds from common shares to G title to the purchaser. when earned. In some cases preferred shares or bonds as a unpaid interest on an income selected market indicator rises Good ‘Til Canceled (GTC) Order bond may accumulate as a claim above a certain predetermined General Mortgage Bond — A — An order to buy or sell at a against the corporation when the point – and the return of funds bond that is secured by a blan- specific price until the investor bond becomes due. An income to common share investments ket mortgage on the company’s cancels the order. bond may also be issued in lieu of as the market average declines. property but may be outranked preferred stock. (see Dollar Cost Averaging) by one or more other Going Public — When a com- mortgages. pany sells shares of itself to the Income Statement — A report Free and Open Market — A public to raise capital. on a company’s financial status market in which supply and Gilt-Edged — High-grade bond over a period of time. It totals demand are freely expressed in issued by a company that has Go v e r nment Bond — A bo n d profits, subtracts expenses and terms of price. Contrasts with a demonstrated its ability to earn issued by the federal pinpoints how much money the controlled market in which a comfortable profit over a go v e r n m e n t . company can reinvest. supply, demand and price may period of years and pay its all be regulated. bondholders their interest Growth Stock – Stock of a Income Stock — Co m m o n without interruption. co m pany with a record of stocks that pay large dividends Fundamental Research — earnings growth at a relatively that an investor could use as Analysis of industries and Give-Up — A term with many high rate. in c o m e . companies based on such different meanings. For one, a factors as sales, assets, member of the Exchange on Indenture — earnings, products or services, the floor may act for a second A written markets and management. As member by executing an order H agreement under which bonds applied to the economy, for him with a third member. and debentures are issued, setting forth maturity date, fundamental research includes The first member tells the third Hedging — The purchase or interest rate, and other terms. consideration of gross national member that he is acting on sale of a derivative security product, interest rates, behalf of the second member (such as options or futures) in unemployment, inventories, and “gives up” the second order to reduce or neutralize all savings, etc. (see Technical member’s name rather than his or some portion of the risk of Research) own. holding another security.

12 13 Ind – Inv Inv – Leg

Independent Broker — In t e r est — Pa y m e n t s Investment — The use of Investment Counsel — One Member on the floor of the borrowers pay lenders for the money for the purpose of whose principal business con- NYSE who executes orders for use of their money. A making more money, to gain sists of acting as investment other brokers having more corporation pays interest on its income or increase capital, or adviser and rendering invest- business at that time than they bonds to its bondholders. both. ment supervisory services. can handle themselves, or for firms who do not have their Interest Rate — An o t h e r Investment Banker — Also Investment Portfolio — A Exchange member on the floor. im p o r t a n t economic indicator. known as an underwriter, the variety of securities owned by Formerly known as two-dollar The price, calculated as a “middleman” between a an individual or an institution. brokers from the time when percentage of the money corporation issuing new these independent brokers loaned, that banks are charging securities and the public. The IRA — Individual Retirement received $2 per hundred shares borrowers for the use of the usual practice is for one or Account. A pension plan with of executing such orders. Th e i r banks’money. more investment bankers to tax advantages, IRApermits fees are paid by the buy outright from a corporation investment through intermedi- commission brokers. (see Intermarket Trading System a new issue of stocks or bonds. aries like mutual funds, insur- Commission Brok e r ) (ITS) — An electronic network The group forms a syndicate to ance companies and banks or of U.S. exchanges and NASD sell the securities to individuals directly in stocks and bonds Index — Astatistical yardstick broker/dealers. The ITS system and institutions. In v e s t m e n t through stockbrokers. (see Keogh Plan) expressed in terms of displays quotes of stocks bankers also distribute very large percentages of a base year or traded on multiple exchanges. blocks of stock or bonds — Issue — Any of a company’s years. For instance, the NYSE This allows specialists and perhaps held by an estate. securities, or the act of distri- Composite Index of all NYSE traders to get the best possible buting such securities. common stocks is based on price of a stock for their Investment Company — A ye a r -end 1965 as 50. An index customers. company or trust that uses its Ave r - is not an average. (see capital to invest in other ages, NYSE Composite Index) Interrogation Device — A companies. There are two K computer terminal that pro- principal types: the closed end Inflation — Increase in the vides market information – last and the open end, also known prices for goods and services. Keogh Plan — Tax advantaged sale price, quotes, volume, etc. as a mutual fund. Shares of personal retirement program – on a screen or paper tape. closed-end investment Inflation Rate — An important that can be established by a companies, most of which are economic indicator. The rate at self-employed individual. Intrinsic Value — The dollar listed on the NYSE, are readily which prices are rising. (see IRA) amount of the difference between transferable in the open market the exercise price of an option and are bought and sold like Initial Public Offering (IPO) — and the current cash value of the shares of stock. Capitalization A corporation’s first offering underlying security. Intrinsic of these companies remains the of stock to the public. L value and time value are the two same unless action is taken to components of an option change, which is rare. Open- Institutional Investor — An Legal List — A list of invest- premium, or price. end funds sell their own new or ganization whose primary ments selected by various shares to investors, stand ready purpose is to invest its own states in which certain institu- Inventory — All the raw to buy back their old shares, assets or those held in trust by tions and fiduciaries, such as it for others. Includes pension materials and finished products and are not listed. Open-end insurance companies and funds, investment companies, a company has in its funds are so called because banks, may invest. Legal lists insurance companies, possession. their capitalization is not fixed; are often restricted to high qua- insurances and banks. they issue more shares as lity securities meeting certain people want them. specifications. (see Prudent Man Rule)

14 15 Lev – Loa Loc – Mon

Leverage — The effect on a not very liquid. (2) The ability Locked In — Investors are said Market Order — An order to company when the company of the market in a particular to be locked in when they have buy or sell at the best price has bonds, preferred stock, or security to absorb a reasonable profit on a security they own currently available on the both outstanding. Example: If amount of buying or selling at but do not sell because their Trading Floor. the earnings of a company with reasonable price changes. profit would immediately 1,000,000 common shares Liquidity is one of the mo s t become subject to the capital Market Price — The last increases from $1,000,000 to important characteristics of a gains tax. reported price at which the $1,500,000 – earnings per good market. stock or bond sold, or the share would go from $1 to Long — Signifies ownership of current quote. (see Quote.) $1.50, or an increase of 50 Listed Stock — The stock of a securities. “I am long 100 U.S. percent. But if earnings of a company that is traded on a Steel” means the speaker owns Maturity Date — The date that company that had to pay securities exchange. The 100 shares. (see Short Position, a bond comes due and must be $500,000 in bond interest various stock exchanges have Short Sale) paid off. increased that much – earnings different standards for listing. per common share would jump Some of the guides used by the Member Corporation — A from 50 cents to $1 a share, or New York Stock Exchange for M securities brokerage firm, 100 percent. an original listing are national or ganized as a corporation, interest in the company and a with at least one member of the Liabilities — All the claims minimum of 1.1 million shares Manipulation — An illegal New York Stock Exchange who against a corporation. publicly held among no less operation. Buying or selling a is an officer or employee of the security for the purpose of Liabilities include accounts, than 2,000 round-lot co r p o r a t i o n . creating false or misleading wages and salaries payable; stockholders. The publicly held appearance of active trading or dividends declared payable; common shares should have a Member Firm — A se c u r i t i e s for the purpose of raising or accrued taxes payable; fixed or minimum aggregate market brokerage firm, organized as a depressing the price to induce long-term liabilities, such as value of $40 million. The corporation, partnership or sole purchase or sale by others. mortgage bonds, debentures company should have net proprietorship with at least one and bank loans. (see Assets, income in the latest year of member of the NYSE who is an Margin — The amount paid by Balance Sheet) over $2.5 million before of ficer or employee of the the customer when using a federal income tax and $2 co r p o r a t i o n . broker’s credit to buy or sell a Limit Order — million in each of the An order to buy security. Under Federal or sell when and if a security preceding two years. Reserve regulations, the initial Member Organization — This reaches a specific price. margin required since 1934 has term includes New York Stock Load — The portion of the ranged from 40% of the Exchange Member firms and Liquidate — When a company offering price of shares of purchase price up to 100%. Member Corporations. fails, the process of converting open-end investment Since 1974 the current rate of all of its assets back into cash companies in excess of the 50% has been in effect. (see Merger — Combination of two and distributing it to those with value of the underlying assets. Brokers’ Loans, Equity) or more corporations. a claim on it. Covers sales commissions and all other costs of distribution. Margin Call — A demand upon Money Market Account — An Liquidity — (1) How easily The load is usually incurred a customer to put up money or account in which your money one’s assets can be converted only on purchase, there being, securities with the broker. The is reinvested in short-term back into cash. For example, in most cases, no charge when call is made when a purchase is securities by the bank or money in an account that can’t the shares are sold (redeemed). made; also if a customer ’s investment firm managing the be withdrawn for ten years is (see Investment Company) equity in a margin account account. declines below a minimum standard set by the Exchange or by the firm.

16 17 Mon – New New – Ord

Money Market Fund — A Nasdaq — An automated New York Stock Exchange mutual fund whose information network that (NYSE) — The largest O investments are in high-yield provides brokers and dealers organized securities market in money market instruments with price quotations on the United States, founded in Odd Lots — Stock transactions such as federal securities, CDs securities traded over-t h e - 1792. The Exchange itself does that involve less than 100 and commercial paper. Its co u n t e r . (see Ov e r- T h e - C o u n t e r ) not buy, sell own, or set the shares. intent is to make such instru- price of securities traded there. ments, normally purchased in Negotiable — Refers to a The prices are determined by Off-board — This term may large denominations by security, title to which is the public supply and demand. refer to transactions over-the- institutions, available transferable by delivery. The Exchange is a not-for- counter in unlisted securities or indirectly to individuals. (see profit corporation of 1,366 to a transaction of listed shares Certificate of Deposit, Net Asset Value — Usually individual members, governed that is not executed on a Commercial Paper) used in connection with by a Board of Directors investment companies to mean consisting of 12 public national securities exchange. Mortgage Bond — A bond net asset value per share. An representatives, 12 member Offer — The price at which a secured by a mortgage on a investment company computes firm representatives, and a fulltime chairman, executive person is ready to sell. Opposed property. The value of the its assets daily, or even twice vice chairman and president. to bid, the price at which one is property may or may not equal daily, by totaling the market value of all securities owned. ready to buy. (see Bid and the value of the bond issued All liabilities are deducted, and Noncumulative — A type of As k e d ) against it. (see Bond, the balance divided by the preferred stock on which un- Debenture) number of shares outstanding. paid dividends do not accrue. Open-End Investment Company The resulting figure is the net Omitted dividends are, as a — (see Investment Company) Municipal Bond — A bond asset value per share. (see rule, gone forever. (see issued by a county, city, Assets, Investment Company) Cumulative Preferred) Open Interest — In options district or authority. and futures trading, the Net Change — The change in NY S E Composite Index — Th e number of outstanding option Mutual Fund — (see the price of a security from the composite index covering price contracts, at a given point in Investment Company) closing price of one day to the movements of all common time, which have not been closing price on the next day stocks listed on the New Yor k exercised and have not yet on which the stock is traded. Stock Exchange. It is based on reached expiration. N The net change is ordinarily the close of the market the last figure in the newspaper December 31, 1965 as 50.00 Open Order — (see Good ‘Til 1 stock price list. The mark +1 /8 and is weighed according to the Canceled Order) Naked Option — An option means up $1.125 a share from number of shares listed for each position that is not offset by an the last sale on the previous issue. The index is computed Options — A right to buy or equal and opposite position in day the stock traded. continuously and printed on the sell a fixed amount of a given the underlying security. ticker tape. Point changes in the stock at a specified price New Issue — A stock or bond index are converted to dollars within a limited period of time. NASD — The National sold by a corporation for the and cents so as to provide a If the right is not exercised the Association of Securities meaningful measure of changes first time. Proceeds may be option expires and the buyer Dealers, an association of in the average price of listed used to retire outstanding forfeits the money. brokers and dealers in the securities of the company, for stocks. The composite index is over-the-counter securities new plants or equipment, for supplemented by separate Orders — Specific instructions business. additional working capital, or indexes for four industry for handling transactions. to acquire a public ownership groups: industrial, interest in the company for transportation, utility and private owners. finance. (see Ave r a g e s )

18 19 Ove – Poi Por – Pro

Overbought — An opinion as Participating Preferred — A Portfolio — Holdings of company’s securities. (see to price levels. May refer to a preferred stock, that is entitled securities by an individual or Investment Banker) security that has had a sharp to its stated dividend, and, in s t i t u t i o n . rise or to the market as a whole also, to additional dividends on Primary Market — The after a period of vigorous a specific basis upon payment Pre f e r red Stock — Aclass of process by which a buying which, it may be of dividends on the common stock with a claim on the com- corporation’s stock is issued argued, has left prices “too stock. pa n y ’ s earnings before payment for the first time. It is then sold high.” may be made on common stock to the public on the secondary Partnership — A business rela- and usually entitled to priority market. Oversold — The reverse of tionship in which two or more over common stockholders if overbought. Asingle security or people agree to share the risks the company fails or liquidates. Prime Rate — The lowest a market which, it is believed, and profits of running a Preferred stock also is entitled interest rate charged by has declined to an unreasonable business. to dividends at a specified rate commercial banks to their le v e l . when declared by the most creditworthy and largest Passed Dividend — Omission co m p a n y ’ s board of directors corporate customers; other Over-The-Counter (OTC) — A of a regular or scheduled and before payment of a interest rates such as personal, market for securities made up of dividend. dividend on the common stock. automobile, commercial and Preferred stock normally does financing loans are often dealers who may or may not be Penny Stocks — not include voting rights. pegged to the prime. members of a securities Low-priced issues, often highly exchange. The OTC market is speculative, selling at less than Premium — The amount by Principal — The person for conducted over the telephone $1 a share. Frequently used as which a bond or preferred whom a broker executes an and deals mainly with stocks a term of disparagement, stock may sell above its par order or dealers buying or of companies without although some penny stocks value. For options, the price selling for their own accounts. sufficient shares, stockholders have developed into that the buyer pays the writer The term “principal” may also or earnings to warrant listing investment-caliber issues. for an option contract (“option refer to a person’s capital or to on an exchange. OTC firms premium” is synonymous with the face amount of a bond. may act either as principals or Point — In the case of shares “the price of an option”). May dealers (buying or selling stock of stock, a point means $1. If refer, also, to redemption price Profit-Taking — Selling stock from their own inventory and ABC shares rise 3 points, each of a bond or preferred stock if which has appreciated in value charging a markup) or as a share has risen $3. In the case it is higher than face value. since purchase, in order to broker or agent and charging a of bonds a point means $10, (see Discount) realize the profit. The term is commission. since a bond is quoted as a often used to explain a down- percentage of $1000. A bond Price-Earnings Ratio — A turn in the market following a that rises 3 points gains 3 popular way to compare stocks period of rising prices. (see percent of $1000, or $30 in selling at various price levels. Paper Profit) P value. An advance from 87 to The PE ratio is the price of a 90 would mean an advance in share of stock divided by earn- Prospectus — A document Paper Profit (Loss) — An dollar value from $870 to ings per share for a twelve- that provides details about a unrealized profit or loss on a $900. In the case of market month period. For example, a new offering of securities for security still held. Paper profits averages, the word point stock selling for $50 a share sale to the public. It gives a and losses become realized only means merely that and no that earned $5 a share is said to detailed financial background when the security is sold. (see more. If, for example, the be selling at a price-earnings of the issuing company, how Pro f i t - Ta k i n g ) NYSE Composite Index rises ratio of 10. the proceeds of the securities from 90.25 to 91.25, it has will be used, and other Par — Equal to the nominal or risen a point. A point in this Primary Distribution — Also pertinent information investors face value of a security. index, however, is not called primary or public offer- will need to make an informed equivalent to $1. (see Indexes) ing. The original sale of a decision.

20 21 Pro – Ref Reg – Reg

Proxy — Written authorization Registered Bond — A bond 1933. A registration statement given by a shareholder to R that is registered on the books is filed with the SEC by the someone else to represent him of the issuing company in the issuer. It must disclose and vote his shares at a name of the owner. It can be pertinent information relating Rally — A brisk rise following a sh a r e h o l d e r s ’m e e t i n g . transferred only when endorsed to the company’s operations, decline in the general price level by the registered owner. (see securities, management and of the market, or in an Proxy Statement — In f o r m a t i o n Bearer Bond, Coupon Bond) purpose of the public offering. individual stock. given to stockholders in Before a security may be conjunction with the solicitation Registered Competitive Market admitted to dealings on a Rate of Return — In stocks and of proxies. Maker — Members of the New national security exchange, it bonds, the amount of money York Stock Exchange who must be registered under the returned to investors on their Prudent Man Rule — An trade on the floor for their own Securities Exchange Act of investments. Also known as investment standard. In some or their firm’s account and who 1934. The application for yi e l d . states, the law requires that a have an obligation, when registration must be filed with fiduciary, such as a trustee, called upon by an Exchange the exchange and the SEC by Recession — A period of no or may invest the fund’s money official, to narrow a quote or the company issuing the negative economic growth and only in a list of securities improve the depth of an securities. high unemployment. designated by the state – the existing quote by their own bid so-called legal list. In other or offer. Regular Way Delivery — Record Date — The date on states, the trustee may invest in Unless otherwise specified, which you must be registered as a security if it is one that Registered Representative — securities sold on the New a shareholder of a company in would be bought by a prudent The person, normally York Stock Exchange are to be order to receive a declared man of discretion and employed by a brokerage firm delivered to the buying broker dividend or, among other things, intelligence, who is seeking a or broker/dealer, who acts as by the selling broker and to vote on company affairs. (see reasonable income and an account executive for payment made to the selling Ex-Dividend, Transfer) preservation of capital. customers to buy and sell broker by the buying broker on securities. The term registered the third business day after the Redemption Price — The price Public Offering — (see Primary means the individual has transaction. Regular delivery at which a bond may be Distribution) passed qualifying securities for bonds is the following redeemed before maturity, at the examinations and is registered business day. (see Transfer) option of the issuing company. Puts and Calls — (see Option) with the SEC. Redemption value also applies Regulation T — The federal to the price the company must Registrar — Usually a trust regulation governing the pay to call in certain types of company or bank charged with amount of credit that may be preferred stock. (see Callable) Q the responsibility of keeping a advanced by brokers and record of the owners of a dealers to customers for the Red Herring — (see Prospectus) Quote — The highest bid to corporation’s securities and purchase of securities. (see buy and the lowest offer to sell preventing the issuance of Margin) Refinancing — Same as any stock at a given time. more than the authorized refunding. New securities are amount. (see Transfer) Regulation U — The federal sold by a company and the regulation governing the money is used to retire existing Registration — Before a public amount of credit that may be securities. Object may be to offering may be made of new advanced by a bank to its save interest costs, extend the securities by a company, the customers for the purchase of maturity of the loan, or both. securities must be registered listed stock. (see Margin) under the Securities Act of

22 23 Reg – Sea Sec – Sho

Regulatory Pyramid — A ordinarily have a market value SEC — The Securities and Securities Investors Protection network of safeguards that of their own and are actively Exchange Commission, estab- Corporation (SIPC) — A surrounds the securities traded. In most cases they must lished by Congress to help safeguard for investors capital industry – from individual be exercised within a relatively protect investors. The SEC created by Congress. The SIPC brokerages all the way up to short period. Failure to administers the Securities Act insures that cash and securities the U.S. Congress. exercise or sell rights may of 1933, the Securities on deposit with a brokerage result in monetary loss to the Exchange Act of 1934, the are insured up to $500,000 per Reinvest — Funneling of holder. (see Warrant) Securities Act Amendment of customer, in the event that the profits back into a company to 1975, the Trust Indenture Act, brokerage goes out of enhance its operations. An Right to vote — The right of the Investment Company Act, business. individual stockowner can also common stockholders to vote the Investment Advisers Act, reinvest by designating that on matters of corporate policy and the Public Utility Holding Self-Regulation — The way in dividends paid on stock will be at an annual stockholder’s Company Act. which the securities industry used to purchase additional meeting. The impact of a monitors itself to create a fair shares of that stock. stockholder’s vote is Secondary Distribution — Also and orderly trading proportionate to the amount of known as secondary offering. environment. REIT — Real Estate Investment stock owned. The redistribution of a block of stock some time after it has Trust, an organization similar Sell Side — A broker/dealer been sold by the issuing to an investment company in Round Lot Order — An order to who sells expertise in research, company. The sale is handled some respects but buy or sell in multiples of 100 order execution or any other off the NYSE by a securities concentrating its holdings in shares. service to an individual or firm or group of firms and the real estate investments. The institution. shares are usually offered at a yield is generally liberal since fixed price related to the REITs are required to Seller’s Option — A special current market price of the distribute as much as 90% of S transaction on the NYSE, that stock. Usually the block is a Investment their income. (see large one, such as might be gives the seller the right to Scale Order — Company) An order to buy involved in the settlement of an deliver the stock or bond at (or sell) a security, that estate. The security may be any time within a specified Retained Earnings — Profits a specifies the total amount to be listed or unlisted. (see period, ranging from no less company keeps for its bought (or sold) at specified Investment Banker, Primary than two business days to no operations, after paying taxes price variations. Distribution) more than 60 days. and dividends. Scripophily — A term coined Secondary Market — When Serial Bond — An issue that Rights — When a company in the mid-1970s to describe stocks or bonds are traded or matures in part at periodic wants to raise more funds by the hobby of collecting antique resold, they are said to be sold stated intervals. issuing additional securities, it bonds, stocks and other on the secondary market. The may give its stockholders the financial instruments. Values majority of all securities Settlement — Conclusion of a opportunity, ahead of others, to are affected by beauty of the transactions takes place on the securities transaction when a buy the new securities in certificate and the issuer’s role secondary market. customer pays a broker/dealer proportion to the number of in world finance and economic for securities purchased or shares each owns. The piece of development. Securities and Exchange delivers securities sold and paper evidencing this privilege Commission (SEC) — A wa t c h - receives from the broker the is called a right. Because the Seat — The traditional term do g agency created by the U.S. proceeds of a sale. (see additional stock is usually for the right to trade on the Congress to monitor the secur- Regular Way Delivery, Cash offered to stockholders below Trading Floor of the NYSE. ities industry and enforce pun- Sale) the current market price, rights The owners of seats are ishments of those that violate considered members of the NYSE. the industry’s regulations.

24 25 Sho – Sol Spe – Sto

Short Covering — Buying commission and taxes. But if corporation created, however, new company in proportion to stock to return stock you have to pay more for the by an Act of Congress. their original holding and the previously borrowed to make stock than the price you total value remains delivery on a short sale. received, that is the amount of Sole Proprietorship — Any approximately the same. your loss. Stock exchange and business that is owned and Short Position — Stock federal regulations govern and operated by a single individual. Split — The division of the options, or futures contracts limit the conditions under outstanding shares of a sold short and not covered as which a short sale may be Specialist — A member of the corporation into either a larger of a particular date. On the made on a national securities NYSE who has two primary or smaller number of shares, NYSE, a tabulation is issued exchange. Sometimes people functions. First, to maintain an without any immediate impact once a month listing all issues will sell short a stock they orderly market in the securities in individual shareholder on the Exchange in which already own in order to protect assigned to the specialist. To equity. For example, a 3-for-1 there was a short position of a paper profit. This is known do this, the specialist must, to a forward split by a company 5,000 or more shares and as selling short against the box. reasonable degree, buy or sell with 1 million shares issues in which the short for their own account when outstanding results in 3 million position had changed by 2,000 SIAC — Securities Industry there is a temporary disparity shares outstanding. Each or more shares in the Automation Corporation, an between supply and demand. holder of 100 shares before the preceding month. Short independent organization Second, the specialist acts as a split would have 300 shares position also means the total established by the New York broker’s broker. When worth less, although the amount of stock an individual and American Stock Exchanges commission brokers on the proportionate equity in the has sold short and has not as a jointly owned subsidiary to Exchange Floor receive a limit company would stay the same. covered, as of a particular date. provide automation, data order, say, to buy at $50 a A reverse split would reduce processing, clearing and stock then selling at $60, they the number of shares Short Sale — A transaction by communication services. cannot wait at the post where outstanding and each share a person who believes a the stock is traded to see if the would be worth more. security will decline and sells Sinking Fund — Mo n e y price reaches the specified it, though the person does not regularly set aside by a level. They leave the order Stock — (see Capital Stock, own the security. For instance: company to redeem its bonds, with the specialist, who will try Common Stock and Preferred You instruct your broker to sell debentures or preferred stock to execute it in the market if Stock) 100 shares of XYZ. Your from time to time as specified and when the stock declines to broker borrows the stock so in the indenture or charter. the specified price. At all times Stock Exchange — An orga n - delivery of the 100 shares can the specialists must put their ized marketplace for securities be made to the buyer. The SIPC — Securities Investor customers’interests above their featured by the centralization of money value of the shares Protection Corporation, which own. supply and demand for the borrowed is deposited by your provides funds for use, if transaction of orders by member broker with the lender. Sooner necessary, to protect Speculation — The employ- brokers for institutional and or later you must cover your customers’cash and securities ment of funds by a speculator. individual investors. (see New short sale by buying the same that may be on deposit with a Safety of principal is a second- York Stock Exchange) amount of stock you borrowed SIPC member firm in the event ary factor. (see Investment) for return to the lender. If you the firm fails and is liquidated Stock Dividend — A dividend are able to buy XYZ at a lower under the provisions of the Spin Off — The separation of a paid in securities rather than price than you sold it for, your SIPC Act. SIPC is not a subsidiary or division of a cash. The dividend may be profit is the difference between Government Agency. It is a corporation from its parent by additional shares of the issuing the two prices – not counting non-profit membership issuing shares in a new corpor- company, or in shares of ate entity. Shareowners in the another company (usually a parent receive shares in the

26 27 Sto – Sup Swa – Tra subsidiary) held by the Machines), S (Sears Roebuck) traded or to the member firm’s holders are asked to “tender” company. and XRX (Xerox). booth. After the order has been (surrender) their holdings for completed in the au c t i o n stated value, usually at a Stockholder of Record — A StockWatch — The NYSE’s market, a report of execution is premium above current market stockholder whose name is state-of-the-art computer returned directly to the member price, subject to the tendering registered on the books of the surveillance unit. StockWat c h firm office over the same of a minimum and maximum issuing corporation. (see monitors the stock market for electronic circuit that brought number of shares. Registrar) suspicious signals and detects the order to the Trading Floor. illegal transactions. Third market — Trading of Stockholders’ Equity — The Swapping — Selling one stock exchange listed securities value of all the stock owned by Stop Limit Order — A stop security and buying a similar in the over-the-counter market the shareholders of a particular order that becomes a limit one almost at the same time to by non-exchange-member company. Also known as net order after the specified stop take a loss, usually for tax brokers. worth. price has been reached. (see purposes. Limit Order, Stop Order) Ticker — A telegraphic system Stock Index — A way of using Syndicate — A group of that continuously provides the a select group of stocks for Stop Order — An order to buy investment bankers who last sale prices and volume of long term evaluation. The at a price above or sell at a together underwrite and securities transactions on performance of a group of price below the current market. distribute a new issue of exchanges. Information is stocks that experts regard as Stop buy orders are generally securities or a large block of either printed or displayed on a important is averaged, and used to limit or protect an outstanding issue. moving tape after each trade. over time that average serves unrealized profits on a short as an indicator of the market’s sale. Stop sell orders are Time Value — The part of an general movement. generally used to protect option premium that is in unrealized profits or limit loss T excess of the intrinsic value. Stock Index Futures — Fu t u r e s on a holding. A stop order contracts based on market becomes a market order when Technical Research — Trader — Individuals who buy in d e x e s . the stock sells at or beyond the Analysis of the market and and sell for their own accounts specified price and, thus, may stocks based on supply and for short-term profit. Also, an Stock Ticker Symbols — not necessarily be executed at demand. The technician studies employee of a broker/dealer or Every corporation whose that price. price movements, volume, financial institution who spe- transactions are reported on the trends and patterns, which are cializes in handling purchases NYSE or AMEX ticker or on Street Name — Securities held revealed by charting these and sales of securities for the Nasdaq has been given a in the name of a broker instead factors, and attempts to assess firm and/or its clients. (see unique identification symbol of of a customer’s name are said the possible effects of current Investor, Speculator) to be carried in “street name.” up to four letters. These market action or future supply This occurs when the securities symbols abbreviate the and demand for securities and Trading Floor — (see Floor) have been bought on margin or complete corporate name and individual issues. (see when the customer wishes the facilitate trading and ticker Fundamental Research) Trading Posts — The 17 security to be held by the reporting. Some of the most horseshoe-shaped counters broker. famous symbols are: Tender Offer — A public offer manned by clerks and T (American Telephone & to buy shares from existing specialists on the Trading Floor SuperDot — The electronic Telegraph), XON (Exxon), stockholders of one public order-routing system through GM (General Motors), IBM corporation by another which NYSE member firms (International Business company or other organization transmit market and limit under specified terms good for orders directly to the trading a certain time period. Stock- post where the security is 28 29 Tra – Unl Upt – Wor of the NYSE are like stores credit of the government. The according to the terms of an portfolio. Its objective is to where individual stocks are interest of Treasuries is exempt option contract. enhance, through stock bought and sold. Each trading from state and local taxes but investment, the purchasing post is responsible for over 100 is subject to federal income Underwriter — (see value of the annuity which stocks. The actual buying and tax. There are three types of Investment Banker) otherwise is subject to erosion selling takes place around each treasuries: Treasury Bills, with through inflation. post. maturities of one year or less; Unlisted Stock — A security Treasury Notes, with maturities not listed on a stock exchange. Volume — The number of Transfer — This term may ranging from one to 10 years; (see Over-the-Counter) shares or contracts traded in a refer to two different and Treasury Bonds, long-term security or an entire market operations. For one, the instruments with maturities of Up Tick — A term used to during a given period. Volume delivery of a stock certificate 10 years or more. designate a transaction made at is usually considered on a daily from the seller’s broker to the a price higher than the preced- basis and a daily average is buyer’s broker and legal Treasury Stock — Stock issued ing transaction. Also called a computed for longer periods. change of ownership, normally by a company but later “plus tick.” A “zero plus” tick accomplished within a few reacquired. It may be held in is a term used for a transaction Voting Right — The common days. For another, to record the the company’s treasury at the same price as the stockholders’right to vote their change of ownership on the indefinitely, reissued to the preceding trade but higher than stock in the affairs of a books of the corporation by the public, or retired. Treasury the preceding different price. company. Preferred stock transfer agent. When the stock receives no dividend and Conversely, a down tick, or usually has the right to vote purchaser’s name is recorded, has no vote while held by the “minus” tick is a term used to when preferred dividends are dividends, notices of meetings, company. designate a transaction made at in default for a specified proxies, financial reports and a price lower than the period. The right to vote may all pertinent literature sent by Triple Witching Hour — The preceding trade. A plus sign, or be delegated by the the issuer to its securities last trading hour on the third minus sign, is displayed stockholder to another person. holders are mailed direct to the Friday of March, June, throughout the day next to the (see Cumulative Voting, Proxy) new owner. (see Registrar, September and December last price of each stock at the Street Name) when options and futures on trading post on the floor of the stock indexes expire New York Stock Exchange. Transfer Agent — A transfer concurrently. (see Options and W agent keeps a record of the Futures) name of each registered Warrant — A certificate giving shareowner, his or her address, Turnover Rate — The volume V the holder the right to purchase the number of shares owned, of shares traded in a year as a securities at a stipulated price and sees that certificates percentage of total shares listed Variable Annuity — A life within a specified time limit or presented for transfer are on an Exchange, outstanding insurance policy where the perpetually. Sometimes a properly cancelled and new for an individual issue or held annuity premium (a set amount warrant is offered with certificates issued in the name in an institutional portfolio. of dollars) is immediately securities as an inducement of the new owner. (see turned into units of a portfolio to buy. (see Rights) Registrar) of stocks. Upon retirement, the policyholder is paid When Issued — Ashort form Treasuries — Debt obligations U accordingly to accumulated of “when, as and if issued.” of the U.S. government. units, the dollar value of which The term indicates a Treasuries are among the safest Underlying — The security that varies according to the conditional transaction in a investments, since they are one has the right to buy or sell performance of the stock security authorized for issuance secured by the full faith and but not as yet actually issued.

30 31 Wor – Zer

All “when issued” transactions Yield to Maturity — The yield are on an “if” basis, to be of a bond to maturity takes into settled if and when the actual account the price discount security is issued and the from or premium over the face exchange or National amount. It is greater than the Association of Securities current yield when the bond is Dealers rules the transactions selling at a discount and less are to be settled. than the current yield when the bond is selling at a premium. Working Capital — The assets a company has that can be poured into the company’s operations. Z ACR O N Y M S Working Control — Theoreti- Zero Coupon Bond — A bond cally, ownership of 51 percent which pays no interest but is of a company’s voting stock is priced, at issue, at a discount necessary to exercise control. from its redemption price. In practice — and this is particularly true in the case of a large corporation — effective Acronyms describe many of the Exchange control sometimes can be community’s key organizations, committees exerted through ownership, systems, and programs. This reference individually or by a group guide describes the most common acting in concert, of less than acronyms used today. 50 percent.

Writer — A person who assumes the obligation to sell (call) or buy (put) the underlying security at an option’s exercise

Y

Yield — In stocks and bonds, the amount of money returned to investors on their invest- ments. Also known as rate of return.

32 33 NYSE Affiliated Organizations Non-NYSE Affiliated Organizations

DTC — The Depository Trust SIAC — Securities Industry CTA — Consolidated Tape Company – Provides a central Automation Corporation – Association – Oversees the securities certificate depository Operates New York and operations of the consolidated through which brokers deliver American Stock Exchange tape, which it developed, under securities by computerized automation and communi- a formal “CTA Plan” filed with bookkeeping entries, vastly cations systems; supporting the Securities and Exchange reducing physical transfer of trading, market data reporting, Commission. CTA is an stock certificates. DTC is and surveillance activities. independent, industry-wide operated by a separate SIAC also supports NSCC’s organization. management and has an nationwide clearance and independent board of directors settlement systems, and is the FIBV — Federation systems processor for Internationale des Bourses de NSCC — National Securities industry-wide National Market Valeurs – The International Clearing Corporation – System components, such as Federation of Stock Exchanges Facilitates trade processing, the Consolidated Tape Associ- – Encourages cooperative clearance, delivery and ation, Consolidated Quotation policies designed to stimulate a settlement of equities, and System, Options Price Report- freer flow of capital across corporate and municipal bond ing Association, and the Inter- national boundaries. The transactions. NSCC is owned market Trading System. SIAC NYSE is a member of this equally by the New York and is separately managed by an Paris-based organization. American Stock Exchanges independent board of directors. and the National Association SIA — Securities Industry of Securities Dealers. Association – Represents the collective business interests of OCC — Options Clearing more than 500 brokerages and Corporation – Clears options investment banking firms. transactions. Partly owned by Membership includes most the NYSE. NYSE member organizations, major firms of all U.S. and SECTOR — Securities Canadian exchanges, and the Telecommunications over-the-counter market. Organization – Provides the financial industry with SIPC — Securities Industry communications lines. An Protection Corporation –A industry-wide policy board nonprofit membership corpor- oversees mutualized operations ation established by Congress of this SIAC division. in 1970 to protect investors’ securities and cash held by broker-dealers in the event of liquidation. SIPC derives its annual assessments from U.S.- registered broker-dealers who are legally required to join.

34 35 Other Financial Organizations Advisory Committees

ACE – American Commodity NASDAQ – National Blue-ribbon committees keep trading rules on NYSE traders, Exchange Association of Securities the NYSE Board of Directors their needs and interests, and Dealers Automated accurately informed of the ways to strengthen AMEX – American Stock Quotations. Provides price views, needs, and concerns of communication with them. Exchange quotation for securities traded its many key constituents. over the counter. These committees are: ICM — International Capital BSE – Boston Stock Exchange Markets Advisory Committee NFA – National Futures APAC — Asia Pacific Advisory – Advises on policies to CBOE – Chicago Board Association Committee – Advises on strengthen the position of the Options Exchange matters involving international U.S. as a world capital center NSTA – National Security capital markets and the views and the NYSE as an interna- CBT – Chicago Board of Trade Traders Association and concerns of the business tional market. The committee’s and financial communities of widely respected international CFTC – Commodity Futures PHLX – Philadelphia Stock the countries represented. finance experts receive and Trading Commission Exchange react to the NYSE’s EAC — European Advisory prospective international Committee – Provides views policies and programs, and CHX – Chicago Stock PSE – Pacific Stock Exchange and attitudes of the European advise on operating systems Exchange corporate community and procedures to facilitate SEC – Securities and Exchange regarding the NYSE’s role in nonresidents’trading in U.S. CME – Chicago Mercantile Commission international matters. The securities. They recommend Exchange committee consists of active or programs to encourage the former chief executive officers listing of foreign companies’ COMEX– Commodity of European-based companies securities in the U.S., and Exchange of New York or financial institutions. They advise the staff on fulfilling provide views on strengthening the NYSE’s obligations as a CSE – Cincinnati Stock NYSE policies and programs member of the International Exchange on internationalization, Federation of Stock facilitating multinational Exchanges. FIA – Futures Industry corporate securities offerings, Association and strengthening IIAC — Individual Investors communication with European Advisory Committee – KCBT – Kansas City Board of corporations. Provides counsel on the needs Trade and concerns of individual ETAC — Exchange Traders investors. The committee NAIC – National Association of Advisory Committee – Advises advises the board on policies Investment Clubs on ways to strengthen the and programs to advance the efficiency and expand the use interests of individuals who NASD – National Association of NYSE markets, and reviews invest in equities, options, of Securities Dealers policy issues affecting NYSE futures, and fixed income traders. The members, repre- securities. In addition, the sentatives of major NYSE committee serves as a liaison member organizations, also and enhances communications advise the NYSE staff on the between individual share- prospective impact of proposed holders and the NYSE board.

36 37 Advisory Committees Advisory Committees

ITAC — Institutional Traders LAAC — Latin America NYAC — New York Area RFAC — Regional Firms Advisory Committee – Advisory Committee – Firms Advisory Committee – Advisory Committee – Keeps Advises on policies and Provides the representative Advises on the likely impact of the board informed of the procedures for strengthening views and attitudes of the important policy decisions on policy needs, preferences and the efficiency of NYSE Latin American corporate specialty firms, and presents concerns of regionally based markets. Its members, who community on the role of the its views on the problems and firms, as well as its views on represent leading financial NYSE in international matters, needs of these firms. Its the operation of the Exchange institutions, also assist the including such areas as: members are principals of marketplace. Its members are NYSE staff in developing strengthening Exchange smaller, non-specialist member principals of NYSE member ways to improve policies and programs dealing firms headquartered in the firms headquartered outside communication with investing with the internationalization of New York metropolitan area. metropolitan New York. institutions. They provide the capital markets; facilitating views on the prospective multinational offerings of PMAC — Pension Managers UTAC — Upstairs Traders impact of proposed trading corporate securities; Advisory Committee – Advisory Committee – rules on institutional investors’ monitoring legislative and Provides counsel on the Advises on policies and needs and interests. regulatory proposals that concerns of pension managers procedures designed to impose duties or responsib- and the impact of proposed enhance the efficiency of LAC — Legal Advisory ilities on corporate boards of rules and related matters on the NYSE markets from the Committee – These directors of publicly owned interests of pension managers. perspective of member distinguished members of the issuers; and strengthening Further, the committee organizations’upstairs traders. legal profession primarily communications between the enhances communications It also guides the staff on ways advise on matters relating to Exchange and the Latin between pension managers and to improve communication corporate governance. They American corporate the NYSE. between the trading floor and also advise on other subjects community. upstairs trading desks. Its involving broad legal issues or RAC — Regulatory Advisory members are senior officers principles directly or indirectly LCAC — Listed Company Committee – Advises on issues who daily transact large orders affecting the NYSE, the Advisory Committee – of regulation, self-regulation, for individuals and institutions. securities industry or capital Provides a forum for the and regulatory systems as they markets. The committee also securities-related concerns of directly or indirectly affect the advises the Exchange staff on listed companies, and advises NYSE, the securities industry, policies relating to the NYSE the board on contemplated and capital markets. In addi- Listed Company Manual, the policies and programs tion, the committee advises the American Law Institute’s affecting listed companies. It board on the role of regulation Corporate Governance Project, also acts as an NYSE staff in business and government. financial services industry sounding board on The committee also provides regulation, and the legal contemplated policies and counsel to NYSE staff on the aspects of industry rules and programs affecting listed com- implications of regulatory regulations. panies’interests and recom- trends and developments. mends, on its own initiative, policies or actions aimed at promoting those interests.

38 39 Board Committees NYSE Trading Systems

Allocation Committee — QOMC — Quality of Markets The NYSE’s long-standing and adjusted to the market value of (Not an Acronym) – Allocates Committee – Oversees and ongoing commitment to adapt- the underlying security by stocks and options under advises on the quality and ing state-of-the-art computer- charges or credits to firms with board-granted authority. competitiveness of the NYSE based technology to support unsettled transactions. Members are selected from market, as well as on issues essential trading and market operations is evident in the among the specialists, related to market structure. CRR/HHT — Card Reader wide range of automated nonspecialist floor members, The QOMC, a standing board Replacement/Hand Held systems, most of which are Terminal – Wireless devices and allied members serving on committee, is assisted by two identified by acronyms. the allocation panel. operating committees and an used to report trades and quotes to the market data system. Also ad hoc advisory committee. ABS — Automated Bond used for supervisory functions ARC — Allocation Review They include: System – Processes orders in relating to Trading Halt, Delay, Committee – Convened from all listed nonconvertible bonds Indication, etc. time to time, the ARC reviews and suggests matches for and makes recommendations possible execution. EMT — Entitlement to the Quality of Markets Management Tool – Basis of Committee with respect to the BBSS — Broker Booth Support network security. Allows user Exchange’s policies and System – An order access to specific services procedures for the allocation management and routing delivered through the of listing securities to system for brokers. Integrated Network. specialist units. BITS — Broker ITS – Pre- FDDI — Fiber Digital Data MPC — Market Performance opening indications service rec- Interface – Trading floor eived on trading floor at broker Committee – Focuses network connecting all trading terminals. Copies of Pre- primarily on evaluating and floor terminals. seeking to strengthen the opening Indications delivered through the Broker to Booth performance of NYSE FID — Floor Information System in relevant issues. specialist organizations, Devices – Displays consoli- administering trading CMS dated close, NYSE last sale, procedures, and — Common Message Switch – Handles virtually all quotes, net change, regional recommending to the QOMC orders, and reports between ITS Quotes, ex-dividend and ways to improve NYSE member firms and NYSE and Dow Jones news indicators. markets’quality and AMEX trading floors. CMS, competitiveness. Members designed and operated by HHD — Hand Held Device – include specialists, SIAC, simplifies firms’order- Wireless device utilized by nonspecialist floor members, delivery report procedures, and brokers, and Exchange trading allied members, and eliminates equipment and com- floor personnel. institutional traders. munications line duplication. IGS — Information Generation CNS — Continuous Net System – Reads information Settlement – Clears securities lines, calculates best bid offer, transactions, with the total index calculation, best price settlement payable and quotes (pricing for odd lots), receivable for each security and forms and sends balanced daily. Excess information to trading floor payables and receivables are overhead screen (FID). 40 41 NYSE Trading Systems Market Systems

IIEDS — Individual Investor OCS — On-Line Comparison National Market System Other national and regional Express Delivery Service –A System – Processes Real-time (NMS) — In the Securities markets have developed Service for individual comparison on trade data to Acts Amendments of 1975, automated order-processing C o n g ress called for develop- systems identified by investors which put their reduce exposure to errors. ment of a National Market acronyms. orders to the head of any System to provide an eff e c t i v e Tandem Systems Queue. PSS — Post Support System – and efficient nationwide AMOS — American Stock (CMS, SuperDot & PSS) Links a Local Area Network trading environment for corporate securities. The Exchange Options Switching (LAN), allowing data to be System ITPN — Integrate Technology component elements of a transmitted to trading floor National Market System, Plan Network – High-speed devices. developed and implemented BEACON — Boston Exchange secure environment to over the years, are commonly Automated Communications integrate services and identified by acro n y m s . SUPER DOT — Super and Order Routing Network functions supporting the Designated Order Turnaround trading floor. CQS — Consolidated System – Transmits member MAX — Midwest Exchange firms’market and day limit Quotation System – Collects MDS Automated Execution System — Market Data System – orders, up to specified sizes in and disseminates, electroni- Captures and displays, virtually all listed stocks, cally, current bid and asked worldwide, trade and volume NASDAQ — National through the common message quotations, with volume, from information continuously Association of Securities switch to the proper trading and to all market centers generated by trading floor Dealers Automated Quotations floor workstation. Specialists trading listed stocks. activity. MDS is the core of – over-the-counter market. receiving orders through the NYSE international CTRS – CTS — Consolidated SuperDot execute them in the communications network. Transaction Reporting System NSTS — National Security trading crowd at their posts, as or Consolidated Tape System – Trading System – Operated by quickly as market interest and OARS — Opening Automated Receives and disseminates, the Cincinnati Stock Exchange activity permit, and return Report Service – Provides electronically, listed stock last- reports to the originating improved accuracy and sale prices in all markets in PACE — Philadelphia firm’s offices via the same efficiency for handling certain which they trade. CTS is under Automated Communications electronic circuit that brought orders sent before trading the operational guidance of the and Executions System opens. OARS receives, stores, them to the floor. Super Dot Consolidated Tape Association and continuously tabulates can handle daily volume (CTA). PER — Post Execution market orders – up to a exceeding 2 billion shares. Reporting System – American specified size – routed through ITS — Intermarket Trading Stock Exchange equities the common message switch. WDS — Wireless Data System System – Links the NYSE and trading system. It matches buy and sell interest New technology for other national market centers in each stock, calculates transmitting orders, reports, in a communications and data- REAS — Retail Execution imbalances, and reports them and administrative messages processing network. ITS, Automation System – Chicago to specialists. Seconds after between brokers and clerks. cooperatively developed by the Board of Options Exchange. the specialist notifies OARS of Also used by CRR as path to system’s competing markets, an opening price, the system ITPN. enables brokers and partici- SCOREX — Securities automatically generates and pating market-makers to reach Communications Order Report returns execution reports to electronically into any of the and Execution System – originating firms, and submits markets within seconds, Pacific Stock Exchange. the trade for automatic whenever the Consolidated clearance and settlement. Quotation System indicates the possibility of better execution. 42 43 NYSE Regulation & Surveillance NYSE Regulation & Surveillance

The increasing complexity of EMIP — Exchange Market FORCE — Financial and wide cooperative efforts for the financial services industry Information Program – Seeks Operational Reporting in a exchanging market data. Their underscores the importance of to promote constituent Computerized Environment – goal is to enhance intermarket the Exchange’s self-regulatory role in helping to safeguard confidence in and support for Consolidates all available surveillance to assure the public customers’ legitimate the NYSE trading mechanism, member organization financial, integrity of trading in options interests. Some acronyms are: and to strengthen the mutuality operational, sales practice, and and equities, and to enhance of purpose between the NYSE other regulatory information. public protection. AMPS — Account and member firm listed The system gives the NYSE Management Profile System – company and institutional regulatory staff on-line ISIS — Intermarket Provides access to information investor. Teams of NYSE staff viewing, editing, retrieval, and Surveillance Information helpful to the NYSE staff in members, floor brokers, and monitoring capabilities. System – Houses detailed and managing day-to-day relation- specialists present programs summarized equity and option ships with listed companies, tailored to constituent ICASS — Integrated Computer transaction, quotation and member firms, and institutions. audiences in cities nationwide. Assisted Surveillance System – clearance data from all the ISG Accesses data from many participants, as well as the ASAM — Automated Search EDGAR — Electronic Data sources to provide on-line proprietary data of And Match – Researches and Gathering, Analysis and stock watch and follow-up participants. An NYSE cross-references publicly Retrieval System – The case studies. product, ISIS is currently used available information on Securities and Exchange by the American, Boston, and individuals, corporations, and commission’s system for the IOSCO — International Philadelphia stock exchanges. service organizations possibly electronic submission by direct Organization of Securities Providing surveillance connected to a particular transmission, magnetic tape or Commissioners – Encourages personnel with easy on-line trading situation. diskette, of most filings and cooperative policies on market access to complete, accurate, related correspondence. regulation, surveillance, and and timely data makes Audit Trail — enforcement at the domestic surveillance tasks more (Not an Acronym) – Recon- FOCUS — Financial and and international levels in efficient and effective. structs trading by explicitly Operational Combined order to maintain just and aligning all member firms Uniform Single Report – efficient securities markets. MSRB — Municipal Securities involved in a specific trade. Gives the Exchange a Rule-making Board complete, detailed picture of ISCC — International CRD — Central Registration member firms’financial and Securities Clearing NASAA — North American Depository – Provides operational conditions. Firms Corporation Securities Rule-making Board information on securities sales must file monthly summaries representatives and super- of their financial and ISG — Intermarket QT — Questioned Trade – visory personnel. This data operational data, and must Surveillance Group – Allows Indicates a trade in which, base is compiled from applica- respond quarterly to several regulatory staffs of the national during the comparison process, tion forms, Exchange devel- hundred questions about securities exchanges and the one participant is discovered to oped examinations, reported financial and operational NASD to coordinate industry- be incorrectly identified. enforcement actions, and conditions and activities. related information. The NASD owns the CRD system and its facilities, operating them on behalf of the NYSE, state regulators, and other users.

44 45 NYSE Regulation & Surveillance

RCMM — Registered SRO — Self-Regulatory Competitive Market Maker – Organization – Describes a Identifies NYSE floor national securities exchange, members with a specific registered securities Exchange-imposed obligation association or registered to enhance the quality of clearing agency authorized by NYSE markets by injecting the Securities Exchange Act of their own or their firms’ 1934 to regulate the conduct capital into difficult market- and activities of its members, making situations. At the subject to oversight by a request of an Exchange specified government official, an RCMM must make regulatory agency. a bid or offer that narrows an existing quote spread or improves its depth. An RCMM may also be asked to assist a commission broker or floor broker in executing a customer’s otherwise unexecutable order.

RR — Registered Representative (Also known as account executive, customers’ broker, or similar title) – Describes full-time NYSE member organization sales persons who have met the NYSE’s background and industry knowledge requirements.

SPEQ — Specialist Performance Evaluation Questionnaire – Surveys floor brokers quarterly to assess how well the specialists maintain the auction market; and how effectively they fulfill their dealer, agency, communication, and administrative functions.

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