The ever increasing number of investment products and financial services in the marketplace today can be confusing. We have put together this glossary of financial definitions designed to help you understand some of the more common investment and financial terms you may encounter. Your financial advisor can explain these terms more completely and discuss with you those which are relevant to your situation.

Rally – A brisk rise following a decline in the general price level of the market, or in an individual stock.

Record Date – The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs.

Redemption Price – The price at which a bond may be redeemed before maturity, at the option of the issuing company. Redemption value also applies to the price the company must pay to call in certain types of preferred stock.

REIT – Real Estate Investment Trust, an organization similar to an investment company in some respects but concentrating its holdings in real estate investments. The yield is generally liberal since REITs are required to distribute as much as 90% of their income.

Refinancing – Same as refunding. New securities are sold by a company and the money is used to retire existing securities. Object may be to save interest costs, extend the maturity of the loan, or both.

Registered Bond – A bond that is registered on the books of the issuing company in the name of the owner. It can be transferred only when endorsed by the registered owner.

Registered Competitive Market Maker – Members of the New York Stock Exchange who trade on the floor for their own or their firm’s account and who have an obligation, when called upon by an Exchange official, to narrow a quote or improve the depth of an existing quote by their own bid or offer.

Registered Representative – The man or woman who serves the investor customers of a broker/dealer. In a New York Stock Exchange member organization, a Registered Representative must meet the requirements of the Exchange as to background and knowledge of the securities business. Also known as an Account Executive or Customer’s Broker.

Registrar – Usually a trust company or bank charged with the responsibility of keeping record of the owners of a corporation’s securities and preventing the issuance of more than the authorized amount.

Registration – Before a public offering may be made of new securities by a company, the securities must be registered under the Securities Act of 1933. A registration statement is filed with the SEC by the issuer. It must disclose pertinent information relating to the company’s operations, securities, management and purpose of the public offering. Before a security may be admitted to dealings on a national securities exchange, it must be registered under the Securities Exchange Act of 1934. The application for registration must be filed with the exchange and the SEC by the company issuing the securities.

Regular Way Delivery – Unless otherwise specified, securities sold on the New York Stock Exchange are to be delivered to the buying broker by the selling broker and payment made to the selling broker by the buying broker on the third business day after the transaction. Regular way delivery for bonds is the following business day.

Regulation T – The federal regulation governing the amount of credit that may be advanced by brokers and dealers to customers for the purchase of securities.

Regulation U – The federal regulation governing the amount of credit that may be advanced by a bank to its customers for the purchase of listed stocks.

Rights – When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder.

Round Lot – A unit of trading or a multiple thereof. On the NYSE the unit of trading is generally 100 shares in stocks and $1,000 or $5,000 par value in the case of bonds. In some inactive stocks, the unit of trading is 10 shares.

Scale Order – An order to buy (or sell) a security, that specifies the total amount to be bought (or sold) at specified price variations.

Scripophily – A term coined in the mid-1970’s to describe the hobby of collecting antique bonds, stocks and other financial instruments. Values are affected by beauty of the certificate and the issuer’s role in world finance and economic development.

Seat – A traditional figure-of-speech for a membership on an exchange.

SEC – The Securities and Exchange Commission, established by Congress to help protect investors. The SEC administers the Securities Act of 1933, the Securities Exchange Act of 1934, the Securities Act Amendments of 1975, the Trust Indenture Act, the Investment Company Act, the Investment Advisers Act, and the Public Utility Holding Company Act.

Secondary Distribution – Also known as secondary offering. The redistribution of a block of stock some time after it has been sold by the issuing company. The sale is handled off the NYSE by a securities firm or group of firms and the shares are usually offered at a fixed price related to the current market price of the stock. Usually the block is a large one, such as might be involved in the settlement of an estate. The security may be listed or unlisted.

Seller’s Option – A special transaction on the NYSE that gives the seller the right to deliver the stock or bond at any time within a specified period, ranging from not less than two business days to not more than 60 days.

Serial Bond – An issue that matures in part at periodic stated intervals.

Settlement – Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale.

Short Covering – Buying stock to return stock previously borrowed to make delivery on a short sale.

Short Position – Stocks, options, or futures contracts sold short and not covered as of a particular date. On the NYSE, a tabulation is issued once a month listing all issues on the Exchange in which there was a short position of 5,000 or more shares and issues in which the short position had changed by 2,000 or more shares in the preceding month. Short position also means the total amount of stock an individual has sold short and has not covered, as of a particular date.

Short Sale – A transaction by a person who believes a security will decline and sells it, though the person does not own any. For instance: You instruct your broker to sell short 100 shares of XYZ. Your broker borrows the stock so delivery can be made to the buyer. The money value of the shares borrowed is deposited by your broker with the lender. Sooner or later you must cover your short sale by buying the same amount of stock you borrowed for return to the lender. If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices – not counting commissions and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and federal regulations govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes people will sell short a stock they already own in order to protect a paper profit. This is know as selling short against the box.

SIAC – Securities Industry Automation Corporation, an independent organization established by the New York and American Stock Exchanges as a jointly owned subsidiary to provide automation, data processing, clearing and communications services.

Sinking Fund – Money regularly set aside by a company to redeem its bonds, debentures or preferred stock from time to time as specified in the indenture or charter.

SIPC – Securities Investor Protection Corporation, which provides funds for use, if necessary, to protect customers’ cash and securities that may be on deposit with a SIPC member firm in the event the firm fails and is liquidated under the provisions of the SIPC Act. SIPC is not a government agency. It is a non-profit membership corporation created, however, by an act of Congress.

Specialist – A member of the New York Stock Exchange who has two primary functions: first, to maintain an orderly market in the securities registered to the specialist. In order to maintain an orderly market, the Exchange expects specialists to buy or sell for their own account, to a reasonable degree, when there is a temporary disparity between supply and demand; second, the specialist acts as a broker’s broker. When commission brokers on the Exchange floor receive a limit order, say, to buy at $50 a stock then selling at $60 – they cannot wait at the post where the stock is traded to see if the price reaches the specified level. They leave the order with a specialist, who will try to execute it in the market if and when the stock declines to the specified price. At all times the specialists must put their customers’ interest above their own.

Speculation – The employment of funds by a speculator. Safety of principal is a secondary factor.

Speculator – One who is willing to assume a relatively large risk in the hope of gain.

Spin Off – The separation of a subsidiary or division of a corporation from its parent by issuing shares in a new corporate entity. Shareowners in the parent receive shares in the new company in proportion to their original holding and the total value remains approximately the same.

Split – The division of the outstanding shares of a corporation into a larger number of shares. A 3-for-1 split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the 3-for-1 split would have 300 shares, although the proportionate equity in the company would remain the same; 100 parts of 1 million are the equivalent of 300 parts of 3 million. Ordinarily splits must be voted by directors and approved by shareholders.

Stock Exchange – An organized marketplace for securities featured by the centralization of supply and demand for the transaction of orders by member brokers for institutional and individual investors.

Stock Dividend – A dividend paid in securities rather than in cash. The dividend may be additional shares of the issuing company, or in shares of another company (usually a subsidiary) held by the company.

Stockholder of Record – A stockholder whose name is registered on the books of the issuing corporation.

Stock Index Futures – Futures contracts based on market indexes, e.g. NYSE Composite Index Futures Contracts.

Stock Ticker Symbols – Every corporation whose transactions are reported on the NYSE or AMEX ticker or on NASDAQ has been given a unique identification symbol of up to four letters. These symbols abbreviate the complete corporate name and facilitate trading and ticker reporting. Some of the most famous symbols are: T(American Telephone & Telegraph), XON (Exxon), GM (General Motors), IBM (International Business Machines), S (Sears Roebuck), and XRX (Xerox).

Stop Limit Order – A stop order that becomes a limit order after the specified stop price has been reached.

Stop Order – An order to buy at a price above or sell at a price below the current market. Stop buy orders are generally used to limit loss or protect unrealized profits on a short sale. Stop sell orders are generally used to protect unrealized profits or limit loss on a holding. A stop order becomes a market order when the stock sells at or beyond the specified price and, thus, may not necessarily be executed at that price.

Street Name – Securities held in the name of a broker instead of a customer’s name are said to be carried in “street name.” This occurs when the securities have been bought on margin or when the customer wishes the security to be held by the broker.

Swapping – Selling one security and buying a similar one almost at the same time to take a loss, usually for tax purposes.

Syndicate – A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue.

Technical Research – Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effect of current market action on future supply and demand for securities and individual issues.

Tender Offer – A public offer to buy shares from existing stockholders of one public corporation by another public corporation under specified terms good for a certain time period. Stockholders are asked to “tender” (surrender) their holdings for stated value, usually at a premium above current market price, subject to the tendering of a minimum and maximum number of shares.

Third Market – Trading of stock exchange listed securities in the over-the-counter market by non-exchange member brokers.

Ticker – A telegraphic system that continuously provides the last sale prices and volume of securities transactions on exchanges. Information is either printed or displayed on a moving tape after each trade.

Time Value – The part of an option premium that is in excess of the intrinsic value.

Trader – Individuals who buy and sell for their own accounts for short-term profit. Also, an employee of a broker/dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/or its clients.

Trading Post – The structure on the floor of the New York Stock Exchange at which stocks or options are bought and sold.

Transfer – This term may refer to two different operations. For one, the delivery of a stock certificate from the seller’s broker to the buyer’s broker and legal change of ownership, normally accomplished within a few days. For another, to record the change of ownership on the books of the corporation by the transfer agent. When the purchaser’s name is recorded, dividends, notices of meetings, proxies, financial reports and all pertinent literature sent by the issuer to its securities holders are mailed direct to the new owner.

Transfer Agent – A transfer agent keeps a record of the name of each registered shareowner, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly canceled and new certificates issued in the name of the new owner.

Treasury Stock – Stock issued by a company but later reacquired. It may be held in the company’s treasury indefinitely, reissued to the public, or retired. Treasury stock receives no dividends and has no vote while held by the company.

Turnover Rate – The volume of shares traded in a year as a percentage of total shares listed on an Exchange, outstanding for an individual issue or held in an institutional portfolio.

Underlying – The security that one has the right to buy or sell according to the terms of an option contract.

Unlisted Stock – A security not listed on a stock exchange.

Up Tick – A term used to designate a transaction made at a price higher than the preceding transaction. Also called a “plus-tick.” A “zero-plus” tick is a term used for a transaction at the same price as the preceding trade but higher than the preceding different price. Conversely, a down tick, or “minus” tick, is a term used to designate a transaction made at a price lower than the preceding trade. A plus sign, or a minus sign, is displayed throughout the day next to the last price of each stock at the trading post on the floor of the New York Stock Exchange.

Variable Annuity – A life insurance policy where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of stocks. Upon retirement, the policyholder is paid according to accumulated units, the dollar value of which varies according to the performance of the stock portfolio. Its objective is to preserve, through stock investment, the purchasing value of the annuity which otherwise is subject to erosion through inflation.

Volume – The number of shares or contracts traded in a security or an entire market during a given period. Volume is usually considered on a daily basis and a daily average is computed for longer periods.

Voting Right – The common stockholders’ right to vote their stock in affairs of a company. Preferred stock usually has the right to vote when preferred dividends are in default for a specified period. The right to vote may be delegated by the stockholder to another person.

Warrant – A certificate giving the holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with securities as an inducement to buy.

When Issued – A short form of “when, as and if issued.” The term indicates a conditional transaction in a security authorized for issuance but not as yet actually issued. All “when issued” transactions are on an “if” basis, to be settled if and when the actual security is issued and the exchange or National Association of Securities Dealers rules the transactions are to be settled.

Working Control – Theoretically, ownership of 51 percent of a company’s voting stock is necessary to exercise control. In practice – and this is particularly true in the case of a large corporation – effective control sometimes can be exerted through ownership, individually or by a group acting in concert, of less than 50 percent.

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

Yield – Also known as return. The dividends or interest paid by a company expressed as a percentage of the current price. A stock with a current market value of $40 a share paying dividends at the rate of $3.20 is said to return 8 percent ($3.20 $40.00). The current yield on a bond is figured the same way.

Yield To Maturity – The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.

Zero Coupon Bond – A bond which pays no interest but is priced, at issue, at a discount from its redemption price.

A complete listing of financial definitions can be found by visiting

Roger Sorensen

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