Glossary of Series 7: Glossary (Work in progress)

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acceptance, waiver, and consent
A process for settling a charge or complaint that is quicker and less formal than the NASD's regular complaint procedure. Related item(s): Code of Procedure.
accredited investor
As defined in Rule 502 of Regulation D, an institution or individual meeting minimum net worth requirements for the purchase of securities qualifying under the Regulation D registration exemption.
An accredited investor is generally accepted to be one who:

- has a net worth of $1 million or more; or
- has had an annual income of $200,000 or more in each of the two most recent years (or $300,000 jointly with a spouse) and who has a reasonable expectation of reaching the same income level in the current year.
accretion of bond discount
An accounting process whereby the initial cost of a bond purchased at a discount is increased annually to reflect the basis of the bond as it approaches maturity.
accrual accounting
A method of reporting income when earned and expenses when incurred, as opposed to reporting income when received and expenses when paid.
accrued interest
The interest that has accumulated since the last interest payment up to, but not including, the settlement date and that is added to a bond transaction's contract price.
There are two methods for calculating accrued interest: the 30-day-month (360-day-year) method for corporate and municipal bonds and the actual-calendar-days (365-day-year)method for government bonds. Income bonds, bonds in default and zero-coupon bonds trade without accrued interest (flat). Related item(s): flat.
accumulation account
An account established to hold securities pending their deposit into a municipal securities unit investment trust.
accumulation stage
The period during which contributions are made to an annuity account. Related item(s): accumulation unit; distribution stage
accumulation unit
An accounting measure used to determine an annuitant's proportionate interest in the insurer's separate account during an annuity's accumulation (deposit) stage. Related item(s): accumulation stage; annuity unit; separate account.
acid-test ratio
A measure of a corporation's liquidity, calculated by adding cash, cash equivalents, and accounts and notes receivable, and dividing the result by total current liabilities. It is a more stringent test of liquidity than current ratio. Syn. quick ratio. Related item(s): cash assets ratio; current ratio.
adjacent acreage
Producing or non-producing oil or gas leases located within the area of an existing well site. Adjacent acreage may prove valuable for continued development of the original oil or gas prospect.
adjusted basis
The value attributed to an asset or security that reflects any deductions taken on, or capital improvements to, the asset or security. Adjusted basis is used to compute the gain or loss on the sale or other disposition of the asset or security.
adjusted gross income (AGI)
Earned income plus net passive income, portfolio income and capital gains. Related items(s): tax liability.
(1) A person authorized by a court of law to liquidate an intestate decedent's estate.
(2) An official or agency that administers a state's securities laws.
ad valorem tax
A tax based on the value of real or personal property. Property taxes are the major source of revenues for local governing units. Related items(s): assessed value.
advance/decline line
A technical analysis tool representing the total of differences between advances and declines of security prices. The advance/decline line is considered the best indicator of market movement as a whole. Related item(s): breadth-of-market theory.
advance refunding
Refinancing an existing municipal bond issue prior to its maturity or call date by using money from the sale of a new bond issue. The proceeds of the new bond issue are used to purchase government securities, and the municipality puts the principal and interest received from these securities into an escrow account; it the uses these funds to pay off the original bond issue at the first call date. Syn. prerefunding. Related item(s): defeasance; refunding.
Any promotional material designed for use by newspapers, magazines, billboards, radio, television, telephone recording or other public media where the firm has little control over the type of individuals exposed to the material. Related item(s): sales literature.
advisory board
Under the Investment Company Act of 1940, a board that advises an investment company on matters concerning its investments in securities, but does not have the power to make investment decisions or take action itself. An advisory board must be composed of persons who have no other connection with, and serve no other function for, the investment company.
(1) A person who directly or indirectly owns, controls or holds with power to vote 10% or more of the outstanding voting securities of a company.
(2) With respect to a direct participation program, any person who controls, is controlled by or is under common control with the program's sponsor and includes any person who beneficially owns 50% or more of the equity interest in the sponsor.
(3) Under the Investment Company Act of 1940, a person who has any type of control over an investment company's operations, which includes anyone with 5% or more of the outstanding voting securities of the investment company or any corporation of which the investment company holds 5% or more of outstanding securities. Related item(s): control person; insider.
agency basis
See agency transaction.
agency issue
A debt security issued by an authorized agency of the federal government. Such an issue is backed by the issuing agency itself, not by the full faith and credit of the US government (except GNMA and Federal Import Export Bank issues). Related item(s): government security.
agency transaction
A transaction in which a broker/dealer acts for the accounts of other by buying or selling securities on behalf of customers. Syn. agency basis. Related item(s): agent; broker; principal transaction.
(1) An individual or a firm that effects securities transactions for the accounts of others.
(2) A person licensed by a state as a life insurance agent.
(3) A securities salesperson who represents a broker/dealer or an issuer when selling or trying to sell securities to the investing public; this individual is considered an agent whether he actually receives or simply solicits orders. Related item(s): broker; broker/dealer;dealer;principal.
aggressive investment strategy
A method of portfolio allocation and management aimed at achieving maximum return. Aggressive investors place a high percentage of their investable assets in equity securities and cash equivalent, and they pursue aggressive policies including margin trading, arbitrage and option trading. Related item(s): balanced investment strategy; defensive investment strategy.
agreement among underwriters
The agreement that sets forth the terms under which each member of an underwriting syndicate will participate in a new issue offering and states the duties and responsibilities of the underwriting manager. Related item(s): syndicate; underwriting manager.
agreement of limited partnership
The contract that established guidelines for the operation of a direct participation program, including the roles of the general and limited partners.
allied member
A general partner of an NYSE member firm who is mot an NYSE member, an owner of 5%or more of the outstanding voting stock of an NYSE member corporation, or a principal executive director or officer of a member corporation. Allied members do not own seats on the NYSE.
all or non order (AON)
An order that instructs the firm to execute the entire order. Firm does not have to execute immediately.
all or none underwriting (AON)
A form of best efforts underwriting in which the underwriter agrees that if it is unable to sell all the shares (or a prescribed minimum), the issuer will cancel the offering. This type of agreement may be used when the issuer requires a minimum amount of capital to be raised; if the minimum is not reached, the securities sold and the money raised are returned. Commissions are not paid unless the offering is completed. Related item(s): underwriting.
alpha coefficient
A measure of the projected rate of change in a security's price independent of market-related factors but based instead on such indicators as the strength of the company's earnings and the expected level of sales. Related item(s): beta coefficient.
alternative minimum tax (AMT)
An alternative tax computation that adds certain tax preference items back into adjusted gross income. If the AMT is higher than the regular tax liability for the year, the regular tax and the amount by which the ATM exceeds the regular tax are paid. Related item(s): tax preference item.
alternative order
An order to execute either of two transactions--for example, placing a sell limit (above the3 market) and a sell stop (below the market) on the same stock. Syn either/or order; one cancels other order.
AMBAC Indemnity Corporation (AMBAC)
A corporation that offers insurance on the timely payment of interest and principal obligations of municipal securities. Bonds insured by AMBAC usually receive a AAA rating from rating from rating services.
American depositary receipt (ADR)
A negotiable certificate representing a given number of share of stock in a foreign corporation. It is bought and sold in the American securities markets, just as stock is traded. Syn. American depositary share.
(1) The paying off of debt in regular installments over a period of time.
(2) The ratable deduction of certain capitalized expenditures over a specified period of time.
amortization of bond premium
An accounting process whereby the initial cost of a bond purchased at a premium is decreased to reflect the basis of the bond as it appraches maturity. Related item(s): accretion of bond discount.
annual compliance review
The annual meeting that all registered representatives must attend, the purpose of which is to review compliance issues.
annual ROI
The annual return on a bond investment, which equals the annual interest either plus the prorated discount or minus the prorated premium.
A person who receives an annuity contract's distribution.
To change an annuity contract from the accumulation (pay-in) stage to the distribution (pay-out) stage.
A contract between an insurance company and an individual, generally guaranteeing lifetime income to the individual on whose life the contract is based in return for either a lump sum or a periodic payment to the insurance company. The contract holder's objective is usually retirement income. Related item(s): deferred annuity; fixed annuity; immediate annuity; variable annuity.
annuity unit
An accounting measure used to determine the amount of each payment during an annuity's distribution stage. The calculation takes into account the value of each accumulation unit and such other factors as assumed interest rate and mortality risk. Related item(s): accumulation unit; annuity; distribution stage.
The increase in an asset's value.
The simultaneous purchase and sale of the same or related securities to take advantage of a market inefficiency.
One who engages in arbitrage.
The arrangement whereby the NASD or a designated arbitration association hears and settles disagreemets between members, member organizations, their employees, and customers.
ascending triangle
On a technical analyst's trading activity chart, a pattern which indicates that the market has started to move back up; considered to be a bullish indicator. Related item(s): descending triangle.
An indication by a trader or dealer of a willingness to sell a security or a commodity; the price at which an investor can buy from a broker/dealer. Syn. offer. Related item(s): bid; public offering price; quotation.
assessed value
The value of a property as appraised by a taxing authority for the purpose of levying taxes. Assessed value may equal market value or a stipulated percentage of market value. Related item(s): ad valorem tax.
An additional amount of capital that a participant in a direct participation program may be called upon to furnish beyond the subscription amount. Assessments may e mandatory or optional and must be called within 12 months.
(1) Anything that an individual or a corporation owns.
(2) A balance sheet item expressing what a corporation owns.
asset allocation fund
A mutual fund that splits its investment assets among stocks, bonds and other vehicles in an attempt to provide a consistent return for the investor. Related item(s): mutual fund.
A person who has acquired a beneficial interest in a limited partnership from a third party but who is neither a substitute limited partner nor an assignee of record.
assignee of record
A person who has acquired a beneficial interest in a limited partnership and whose interest has been recorded on the books of the partnership and is the subject of a written instrument of assignment.
(1) A document accompanying or part of a stock certificate that is signed by the person named on the certificate for the porpose of transferring the certificate's title to another person's name.

(2) The act of identifying and notifying an account holder that the option owner has exercised an option held short in that account. Related Item(s): stock power.
associated person of a member (AP)
Any employee, manager, director, officer or partner of a member broker / dealer or another entity (issuer, bank, etc.), or any person controlling, controlled by or in common control with that member. Related item(s): registered reprsentative.
assumed interest rate (AIR)
The net rate of investment return that must be credited to a variable life insurance policy to ensure that at all times the variable death benefit equals the amount of the death benefit. The AIR forms the basis for projecting payments, but it is mot guaranteed.
at-the-close order
See market-on-close-order
The term used to describe an option when the underlying stock is trading precisely at the exercised price of the option. Related item(s): in-the-money: out-of-the-money.
at-the-opening order
An order that specifies it is to be excuted at the opening of the market or of trading in that security or else it is to be canceled. The order will be executed at the opening price. Related item(s): market-on-close order.
auction market
A market in which buyers enter competitive bids and sellers enter competitive offers simultaneously. The NYSE is an auction market. Syn. double auction market.
audited financial statement
A financial statement of a program, a corporation or an issuer (including the profit and loss statement, cash flow and source and application of revenues statement, and balance sheet)that has been examined and verified by and independent certified public accountant.
authorized stock
The number of shares of stock that a corporation can issue. Ths number of shares is stipulated in the coporation's state-approved charter and may be changed by a vote of the corporation's stockholders.
authorized resolution
The document enabling a municipal or state government to issue securities. The sreolution provides for the establishment of a revenue fund in which receipts or income is deposited.
Automated Confirmation Transaction (ACT) Service
The post-execution, on-line transaction reporting and comparison system developed by the NASD.
A price at a midpoint among a number of prices. technical analysts frequently use averages as market indicators. Telated item(s): index.
average basis
An accunting method used when an investor has made multiple purchases at different prices of the same security; the method averages the purchases prices to calculate an investor's cost basis in shares being liquidated. The difference between the average cost basis and the selling price determines the investor's tax liabilty. Telated item(s): first in, last out; share identification.
average price
A step in determining a bond's yield to maturity. A bond's average price is calculated by adding its face value to the price paid for it and dividing the result by two.
Consolidated Tape maket identifier for the Boston Stock Exchange.
See banker's acceptance.
back away
The failure of an over-the-counter market maker to honor a firm bid and asked price. The violates the NASD Conduct Rules.
back-end load
A commission or sales fee that is charged when mutual fund shares or variable annuity contracts are redeemed. It declines annually, decreasing to zero over an extended holding period - up to eight years - as described in the prospectus. Syn. contingent-deferred sales load. Related item(s): front-end load.
balanced investment strategy
A method of portfolio allocation and management aimed at balancing risk and return. A balanced protfolio may combine stocks, bonds, packaged porducts and cash equivalents.
balance of payments (BOP)
An international accounting record of all transactions made by one particular country amount of foreign currency the country has taken in to the amount of its own currency it has taken in to the amount of its own currentcy it has paid out. Related item(s): balance of trade.
balance of trade
The largest component of a country's balance of payment; it concerns the export and import of merchandise (not services). Debit items include imports, foreign aid, domestick spending abroad and deomestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy and foreign investments in the domestic economy. Related item(s): balance of payments.
balance sheet
A report of a corporation's financial condition at a specific time.
balloon maturity
A repay ment schedule for an issue of bonds wherein a large number of the bonds com due at a prescribed time (normally at the final maturity date); a type of serial maturity. Related item(s): maturity date.
See bond anticipation note.
banker's acceptance (BA)
A money-makret instrument used to finance international and domestic trade. A banker's acceptance is a check drawn on a bank by an importer or exporter of goods and represents the bank's conditional promise to pay the face amount of the not at maturity (normally less than three months).
bank guarantee letter
The document supplied by a commercial bank in which the bank cerifies that a put writer has sufficient funds on deposit at the bank to equal the aggregate execise price of the put; this releases the option writer from the option margin requirement.
banking act
See Glass-Steagall Act of 1933.
bar chart
A tool used by technical analysts to track the price movements of a commodity over several consecutive time periods. Related item(s): Moving average chart; point-and-figure chart.
basis point
A measure of a bond's yield, equal to 1/100 of 1 percent of yield. A bond whose yield increases from 5.0 percent to 5.5 percent is said to increase by 50 basis points. Related item(s): point.
basis quote
The price of a security quoted in terms of the yield that the purchaser can ewpect to receive.
See broker / dealer.
An investor who acts on the belief that a security or the market is falling or will fall. Related item(s): bull.
bearer bond
See coupon bond.
bear market
A market in which prices of a certain group of securities are falling or are expected to fall. See bull market.
best efforts underwriting
A new issue securities underwriting in which the underwriter acts as an agent for the issuer and puts forth its best efforts to sell as many shares as possible. The underwriter has no liability for unsold shares, unlike in a firm commitment underwriting. Related item(s): underwriting.
beta coefficient
A means of measuring the volatilty of a security or a portfolio of securities in comparison with the market as a whol. A bata of 1 indicates that the scurity's price will move with the market. A beta greater than 1 indicates that the security's price will be more volatile than the market. A beta less than 1 means that it will be less volatile than the market.
An indication by an investor, a trader or a dealer of a willingness to buy a security; the price at which an investor can sell to a broker / dealer. Related item(s); offer; public offering price; quotation.
bid form
The form submitted by underwriters in a competitive bid on a new issue of municipal securities. The underwriter states the interest rate, price bid and net interest cost to the issuer.
blind pool
A direct participation program that does not state in advance all of the specific properties in which the general partners will invest the partnership's money. At least 25 percent of the proceeds of the offering are kept in reserve for the purchase of nonspecified properties. Syn. nonspecified property program.
block trade
In general, 10,000 shares of stock would be considered a black trade.
blue chip stock
The equity issues of financially stable, well-established companies that have demonstrated their abilty to pay dividends in both good and bad times.
To register a securities offering in a particular state. Related item(s): blue-sky laws; registration by coordination; registration by filing; registration by qualification.
blue-sky laws
The nickname for state regulations governing the securities industry. The term was coined in the early 1900s by a Kansas Supreme Court justice who wanted regulation to protect against "speculative schemes that have no more basis than so many fet of blue sky." Related item(s): Series 63, Uniform Securities Act.
board of directors
(1) Individuals elected by stockholders to establish corporate management policies. A board of dirctors decides, among other issues, if and when dividends will be paid to stockholders.

(2) The body that governs the NYSE. It is composed of 20 members elected for a term of two years by the NYSE general membership.
bona fide quote
An offer from a broker / dealer to by or sell securities. It indicates a willingness to execute a trade under the terms and conditions accoupanying the quote. Related item(s): firm quote; norminal quote.
An issuing company's or government's legal obligation to repay the principal of a loan to bond investors at a specified future date. Bonds are usually issued with par or face values of $1,000, representing the amount of money borrowed. The issuer promises to pay a percentage of the par value as interest on the borrowed funds. the interest payment is stated on the face of the bond at issue.
bond anticipation note (BAN)
A short-term municipal debt security to be paid from the proceeds of long-term debt when it is issued.
bond attorney
See bond counsel.
Bond Buyer Indexes
Indexes of yield levels of municipal bonds, published daily by The Bond Buyer. The indexes are indicators of yields that would be offered on AA- and A-rated general obligation bonds with 20-year maturities and revenue bonds with 30-year maturities.
bond counsel
An attorney retained by a municipal issuer to give an option concerning the legality and tax-exempt status of a municipal issue. Syn. bond attorney. Related item(s): legal opinion of counsel.
bond fund
A muntual fund whose investment ovjective is to provide stable income with minimal capital risk. It invests in income-roducing instrments, which may include corporate, govenment or municipal bonds. Related item(s): mutual fund.
bond interest coverage ratio
An indication of the saftey of a corporate bond. It measures the number of times by which earnings before interest and taxes exceeds annual interest on outstanding bonds. Syn. fixed charge coverage ratio; times fixed charges earned ratio; times interst earned ratio.
bond rating
An evaluation of the possibility of a bond issuer's default, based on an analysis of the issuer's financial condition and profit potential. Standard & Poor's, Moody's Investors Service and Fitch Investors Sevice, among others, provide bond rating sevices.
bond ratio
One of several tools used by bond analysts to assess the degree of safety offered by a corporation's captialization that is provided by long-term debt financing, calclated by dividing the total face value of the outstanding bonds by the total capitalization. Syn. debt ratio.
bond swap
the sale of a bond and the simultaneous purchase of a different bond in a like amount. The technique is used to control tax liability, extend maturity or update investment objectives. Syn. tax swap. Related item(s): wash sale.
book-entry security
A security sold without delivery of a cerificat. Evidence of ownership is maintained on records kept by a central agency; for example, the Teasury keeps records of Treasury bill purchasers. Transfer of ownership is recorded by entering the change on the books or electronic files. Related item(s): coupon bond; registered; registered as to principal only.
book value per share
A measure of the net worth of each share of common stock. it is calculated by sbutracting intangible assets and perferred stock from total net worth, then dividing the result by the mumber of shares of common outstanding. Syn. net tangible assets per share.
branch office
Any location identified by any means to the public as a place where a registered broker / dealer conducts business.
breadth-of-market theory
A technical analysis theory that predicts the strength of the market according to the number of issues that advance or decline ing a particular trading day. Related item(s): advance / decline line.
breakeven point
The point at which gains equal losses.
In technical analysis, the movement of a security's price through an established support or resistance level. Related item(s): resistance level; support level.
The schedule of sales charg discounts a mutual fund offers for lup-sum or cumulative investments.
breakpoint sale
The sal of mutual fund shares in an amount just below the level at which the purchaser would qualify for reduced sales charges. the violates the NASD Conduct Rules.
broad-based index
An index designed to reflect the movement of the market as a whole. Examples include the S&P 100, the S&P 500, the AMEX Major Market Index and the Value Line Composite Index. Related item(s): index.
(1) An individual or a firm that charges a fee or commission for executing buy and sell orders submitted by another individual or firm. (2) The role of a firm when it acts as an agent for a customer and charges the customer a commission for its sevices. Related item(s): agent; broker / dealer; dealer.
broker / dealer (BD)
A person or firm in the business of buying and selling securities. A firm may act as both broker (agent) and dealer (principal), but not in the same transaction. Broker / dealers normally must register with the SEC, the appropriate SROs and any state in which they do business. Related item(s): agent; broker; dealer; principal.
broker fail
See fail to deliver.
broker's broker
(1) A specialist executing orders for a commission house broker or another brokeragefirm.

(2) A floor broker on an exchange or a broker / dealer in the over-the-counter market executing a trade as an agent for another broker.
broker's loan
Money loaned to a brokerage firm by a commercial bank or other lending insitution for financing customer's margin account debit balances. Related item(s): call loan; rehypothecation.
Accepting customer orders without executing them immediately.
An investor who acts on the belief that a security or the market is rising or will rise. Related item(s): bear.
bulletin board
See OTC Bulletin Board.
bull market
A market in which prices of a certain group of securities are rising or will rise. Related item(s): bear market
business cycle
A predictable long-term patternof alternating periods of economic growth and deline. The cycle passes through four stages: expansio, peak, contration and trough.
business day
A day on which financial markets are open for trading. Saturdays, Sundays and legal holidays are not considered business days.
buyer's option
A settlement contract that calls for delivery and payment according to a number of days specified by the buyer. Related item(s): regular way; sell's option.
The procedure that the buyer of a security follows when the seller fails to complete the contract by delivering the security. The buyer closes the contract by buying the seller for transaction fees and any loss caused by changes in the markets. Related item(s): sell-out.
buying power
The amount of fully margined securities that a margin client can purchase using only the cash, securities and special memorandum account balance and without depositing additional equity.
buy stop order
An order to buy a security that is entered at a price above the current offering price and that is triggered when the market price touches or goes through the buy stop price.
Consolidated Tape market identifier for the Cincinnati Stock Exchange.
canlendar spread
See horizontal spread.
(1) An option contract giving the owner the right to buy a specified amount of an underlying security at a specified price within a specified time.

(2) The act of exercising a call option. Related item(s): put
callable bond
A type of bond issued with a provision allowing the issuer to redeem the bond before maturity at a predetermined price. Related item(s): call price.
callable prefered stock
A type of preferred stock issued with a provision allowing the corporation to call in the stock at a certain price and retire it. Related item(s): call price; preferred stock.
call buyer
An investor who pays a premium for an option contract and receives, for a specified time, the right to buy the underlying security at a specified price. Related item(s): call writer; put buyer; put writer.
call date
The date, specified in the prospectus of every callable security, afterwhich the security's issuer has the option to redeem the issue at par or at par plus a premium.
call feature
See call provision.
call loan
A collateralized loan of a brokerage firm having no maturity date that may be called (terminated) at any time. The loan has a fluctuating interest rate that is recomputed daily. Generally the loan is payable on demand the day after it is contracted. If not called, the loan is automatically renewed for anthoer day. Related item(s): broker's loan; time loan.
call loan rate
The rate of interest a brokerage firm carges its margin account clients on their debit balances.
call price
The price, usually a premium over the issue's par value, at which preferred stocks or bonds can be redeemed before an issue's maturity.
call protection
A provision in a bond indenture stating that the issue is noncallable for a certain period of time (5 years, 10 years, etc.) after the original issue date. Related Item(s): call provision.
call risk
The potential for a bond to be called before maturity, leaving the investor without the bond's current income. As this is more likely to occur during times of falling interest rates, the investor may not be able to reinvest his pricipal at a comparable rate of return.
call spread
An option investor's position in which the investor buys a call on a security and writes a call on the same security but with a different expiration date, exercise price, or both.
call writer
An investor who receives a premium and takes on, for a specified time, the obligation to sell the underlying security at a specified price at the call buyer's discretion. Telated intem(s): call buyer; put buyer; put writer.
Accumulated money or goods available for use in producing more money or goods.
capital appreciation
A rise in an asset's market price.
capital asset
All tangible property, including securities, real estate and other property, held for the long term.
capital contribution
The amount of a participant's investment in a direct participation program, not including units purchased by the sponsors.
capital gain
The profit realized when a capital asset is sold for a higher price than the purchase price. Related item(s): capital loss; long-term gain.
The sum of a corporation's long-term debt, stock and surpluses. Syn. invested capital. Related item(s): capital structure.
capitalization ratio
A measure of an issuer's financial status that calculates the value of its bonds, preferred stock or common stock as a percentage of its total capitlization.
capital loss
The loss incurred when a capital asset is sold for a lower price than the purchase price. Related item(s): capital gain; long-term loss.
capital market
The segment of the securities market that deals in instrments with more than one year to maturity-- that is, long-term debt and equity securities.
capital risk
The protential for an investor to lose all money invested owing to cicumstances unrelated to an issuer's financial strength. For example, dervative instruments such as options carry rick independent of the underlying securities' changing value. Related item(s): dervative.
capital stock
All of a corporation's outstanding perferred stock and common stock, listed at par value.
capital structure
The composition of long-term funds (equity and debt) a corporation has as a source for financing. Related item(s): capitalization.
capital surplus
The money a corporation receives in excess of the stated value of stock at the time of first sale. Syn. paid-in capital; paid-in surplus. Related item(s): par.
capped index option
A type of index option issued with a capped price at a set interval above the strike price (for a call) or below the strike price (for a put). the option is automatically exercised once the underlying index reaches the capped price. Related item(s): index option.
Placing selling pressure on a stock in an attempt to keep its price low or to move its price lower; this violates the NASD Conduct Rules.
carried interest
A sharing arrangement in an oil and gas dirct participation program whereby the general partner shares the tangible drilling costs with the limited partners but pays no part of the intangible drilling costs. Related item(s): sharing arrangement.
cash account
An account in which the customer is required by the SEC's Regulation T to pay in full for securities purchased not later than two days after the standard payment period set by the NASD's Uniform Practice Code. Syn. special cash account.
cash assets ratio
The most stringent test of liquidity, calculated by dividing the sum of cash and cash equivalents by total current liabilities. Related item(s): acid-test ratio; current ratio.
cash dividend
Money paid to a corporation's stockholders out of the corporation's current earnings or accumulated profits. The board of directors must declare all dividends.
sash equivalent
A security that can be readily coverted into cash, Example include Treasury bill, certificates of deposit and money-market instrments and funds.
cash flow
The money received by a business minus the money paid out. Cash flow is als equal to net income plus depreciation or depletion.
cashiering department
The department within a brokeage firm that delivers securities and money to and recives securities and money from other firms and clients of the brokerage firm. Syn. security cage.
cash market
Transactions between buyers and seller of commodities that entail immediate delivery of and payment for a physical commodity. Syn. cash-and-carry market; spot market.
cash trade
See cash transaction.
cash transaction
A settlement contract that calls for delivery and payment on the same day the trade is executed. Payment is due by 2:30 pm ET or within 30 minutes of the trade if it occurs after 2:00 pa ET. Syn. cash trade. Related item(s): regular way; settlement date.
catastrophe call
The redemption of a gbond by an issuer owing to disaster (for example, a power plant that has been built with proceeds from an issue burns to the ground).
See Ceriticate of Accrual on Treasury Securities.
See Chicago Board Options Exhange.
See negotiable certificate of deposit.
Certificate of Accrual on Treasury Securities (CATS)
One of several types of zero-coupon bonds issued by brokerage firms and collateralized by treasury securities. Related item(s); Treasury receipt.
certificate of deposit (CD)
See negotiable certificate of deposit.
(1) for an index or average, the difference between the current value and the previous day's market close. (2) For a stock or bond quote, the difference between the current price and the last trade of the previous day.
A securities analyst who uses charts and graphs of the past price movements of a security to predict its future movements. SYN. technician. RELATED ITEMS(S): technical analysis.
See commission house broker.
Chicago Board Options Exchange (CBOE)
The self-regulatory organization with jurisdiction over all writing and trading of standardized options and related contracts listed on that exchange. Also, the first national securities exchange for the trading of listed options
Chicago Stock Exchange (CSX)
Regional exchange that provides a listed market for smaller businesses and new enterprises. In 1949, the exchange merged with the St. Louis, Cleveland and Minneapolis/St. Paul exchanges to form the Midwest Stock Exchange, but in 1993, the original name was reinstated. RELATED
ITEMS(S): regional exchange
Chinese Wall
A descriptive name for the division within a brokerage firm that prevents insider information from passing from corporate advisers to investment traders, who could make use of the information to reap illicit profits. RELATED ITEM(S): Insider Trading and securities Fraud Enforcement Acot of 1988.
Excessive trading in a customer's account by a registered representative who ignores the customer's interests and seeks only to increase commissions. This violates the NASD conduct Rules. SYN. overtrading.
Options of the same type (that is, all calls or all puts)on the same underlying security. RELATED ITMES: series; type.
Class A share
A class of mutual fund share issued with a back-end sales load. A mutual fund offers different classes of shares to allow investors to choose the tpye of sales charge they will pay. ; front-end load.
Class B share
A class of mutual fund share issued witha back-end load. A mutual fund offers different classes of shares to allow investors t choose the type of sales carge they will pay. RELATED ITEMS: back-end load; Class A share; Class C share; Class D share
Class C share
A class of mutual fund share issued with a level load. A mutual fund offers different classes of shares t allow investors t choose the type of sales carge they will pay. RELATED ITEMS: Class A share; class B share; Class D share;level load.
Class D share
A class of mutual fund sahre issued with borh a level loadna nd a back-end load. A mutual fund offers different classes of shares to allow investors to choose the type of sales charge they will pay. RELATED ITEM(S): back-end load;Class A share, Class B share; Class C share; level load.
classical economics
The theory that the maximum economic benefit will be achieved if government does not attempt to influence the economy, that is, if businesses are allowed to seek prifitable opportunities as they see fit.
clearing agency
An intermediary between the buy and sell sides in a securites transaction that receives and delivers payments and securities.
Any organization that fills this function, including a securities depository but not including a Federal Reserve Bank, is considered a clearing exchange.
clearing broker/dealer
A broker/dealer that clears its own trades as well as those of introducing brokers. A clearing broker/dealer can hold customer' securities and cash. SYN. carrying broker.
See construction loan note.
The price of the last transaction for a particular security on a particular day.
closed-end covenant
A provision of a bond issue's trust indenture stating that any additional bonds secured by the same assets must have a subordinated claim to those assets. RELATED ITEM(S) junior lean debt; open-end covenat.
closed-end management company
An investment company that issues a fixed number of shares in an actively managed portfolio of securities.
The shares may be of several classes; they are traded in a secondary marketpace, either on an exhange or over the counter. The shares' market price is determined by supply and demand, not by net asset value. SYN. publily traded fund. RELATED ITEMS(S): dual-purpose fund.
closing date
The date designated by the general partners in a direct participation program as the date when sales of units in the program cease; tpyically the offering period extends for one year.
closing purchase
An options transaction in which the seller buys back an option in the same series; the two transactions effectively cancel each other out and the position is liquidated. RELATED ITEM(S): closing sale; opening purchase.
closing range
The relatively narrow range of prices at which transactiOns take place in the final minutes of the trading day. RELATED ITEM(S): close.
closing sale
An options transaction in which the buyer sells an option in the same series; the two transaction effectively cancel each other out and the position is liquidated. RELATED ITEM(S) closing purchase; opening sales.
SEE collateralized mortgage oblication.
SEE current maket value
SEE delivery vs. payment.
Code of Arbitration Procedure
The NASD's formal procedure for handling securities-related disputes or clearing controversies between memebers, public customers, clearing corporations or clearing banks. Any claim, dispute or controversey between member firms or associated persons must be submitted to arbitration.
Code of Arbitration Procedure
The NASD's formal procedure for handling trade practice complaints involving violations of the Conduct Rules. The NASD Department of Enforcement is the first body to hear and judge complaints. The NASD National Adjudicatory Council handles appeals and review of DOE decisions. .
coincident indicator
A measurable economic factor that varies directly and simultaneously with the business cycle, thus indicating the current state of the economy. Examples include nonagricultural employment, personal income and industrial production. RELATED ITEM(S): lagging indicator; leading indicator.

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