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earnings are withdrawn.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