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financial glossary

a position trader: he who holds a position long term. 
mifid: markets in financial instruments directive (MIFID) is EU financial regulation 
lit market: a market where the order book can be oublicly viewed by all who subsribe, like any major exchanges or their ECNs, as opposed to dark pool, hence the term lit. 
vesting period; the period in which an employee has to hold his stock option before selling out or exercising. 
pink sheet; otc price info provider. for small companies. 
turnover: a few variants of definition. e.g. 1: daily trade vol / outstanding shares. 2: daily sum of individual trade price * trade size (aka total value), 3. how long you hold your position on avg. (or how frequently/much you trade)  4. order book size / trade size  (you get the idea) 
cross trades; when sell and buy orders from clients of the same broker are offset without going to the exchange. regulated but not completely illegal, as long as you can prove to SEC it was benefitial to both parties. 
topix versus nikkei index; topix is market cap based. nikkei is average of selective names. when they reshuffle the constituents of the index, or the member names have corporate actions such as split or dividend, they need to adjust what they call the divisor to maintain the continuity. also topix changed their logic to include only floating shares, i.e. not counting shares owned by the company itslef or mochi-ai. 
a locate: in equity mkt, a locate is an approval from some broker to borrow stock so you can do short sell. otherwise you naked SS, which may not be allowed or differently restricted in some mkts. e.g. in singapore, you can naked SS, but the exch forces settle positions by eod for naked short. 
reconciliation : an accounting process to compare two sets of data. e.g. money leaving an account matches the amount it was spent from the account. in a bank where a series and combination of complex financial transaction happens, we need to reconcile periodically to make sure everything is processed as expected. 
warrants: a warrant is the right to buy shares of an issuing company at the fixed price until the expiration date. much like call equity options. but the diff is warrants are issued by the company for its own shares, and when the warrant is exercised, the company issues new shares. expiration window is longer (window of years, instead of months typical for options). warrants often come with bonds or preferred shares, and can be detached and traded separately. 
rights issue: a rights issue is the right to buy additional securities(often shares) of a company for the existing security holders. from the company perspectives, doesnt matter as long as it can raise more equity capital. but from the investor side, any additional public offering to the general public can lead to dilution. thus it makes sense they are given the chance to buy additional shares (usually at the discounted price or some tax benefits) first. still it can be unwelcomed. (wikipedia example of the dilutive effect is good.) 
preferred stock : details can vary case by case, but usually comes with features like a hybrid property of common stock and bond. better dividends but no voting rights, priority in the payment in the event of liquidation, convertibility to common stock, etc. 
bill VS note VS bond: X = fixed income products maturity term(yrs). bills 0<X<1, notes 1<X<10, bonds 10<X 
combination options: a series of option contracts consisting of at least one call and one put with the same underlying asset. the combination option is written as a single unit but each of the component contracts may be resold on the secondary market separately. each of the contracts has different strike prices and/or different expirations dates. combination options exist in order to hedge one's investments. also read cliquest, straddle, strangle. 
leg: 1. an example is when a broker attempts to execute an option straddle as two separate transactions. the possibility for profit and loss occurs through the fluctuating price of the options. sometimes called a leg plant. 2. a straddle has two legs, one put and one call. 
ETF : exchange traded fund. 
like a mutual fund, can construct a basket of securities that track the target economic/financial indicator like sp500 index, nikkei 225, etc. 
of course the tracking target can be anything, the opposite of SP500 tripled, global atuomobile, african economy, russian oil industry, real estate price of beverly hills, wine consumption in EU, etc. 
of course, sometimes it is costly or impossible to perfectly track the target. if it's nikkei255, then maybe yes as we can buy precisely the right mix of the real index constituents names. but even for such basket, to save cost, we may use other methods where we statistically analyze and decide to sample only those most influential ones. 
unlike mutual fund, ETF is listed in exchanges, thus more publicly accessible to investors. being listed on exchange means, facilitates real time trades, dynamic trade/ask/bid updates throughout the trading hours, while the mutual fund you can usually buy or sell at the fixed price that gets updated daily, etc. 
the biggest difference is how much of the balancing of its underlying basket of securities is automated with ETF. thus leading to the scalability, less commission fee. often, to make it accessible to retail investor, the min participation unit price is lower. 
this is enabled by having a pool of authorized participants (AP) in the ETF creation/redemption (aka primary) market. and the secondary mkt any investors can trade via their brokers. in mutual fund, those two mkts are all intertwined, investors first need to contact their brokers who in turn contact the asset mgnt company who in turn may need to buy more stock from the exchange to balance or issue their fund. in ETF, APs are banks, and insurance companies, pension funds, etc. they all can create/redeem ETFs with whatever components shares they already own, instead of always paying cash to the ETF issuer asset mgnt entity, thus saving cost. 
as of 2009 Jan, 7 out of top 10, 12 out of top 25 most traded names in NYSE/NASDAQ are ETFs, SPY being the no.1 
Zarababike: tse term where a stock has no trade at the close. this means either (1) no mkt order at close, or (2) special quotation 
KTB futures: korea tresury bond. major rate instrument traded in krx deriv market, e.g. 3yr/5yr KTB futures, 3yr KTB futures options 
cross trade: a practice where buy and sell orders for the same stock are offset without recording the trade on the exchange, which is outlawed on most major stock exchanges. this also occurs when a broker executes both buy and sell for the same security from one client account to another where both accounts are managed by the same portfolio manager. 
block trade: a permissible, non-competitive, privately negotiated transaction either at or exceeding an exchange determined minimum threshold quantity of shares, which is executed apart and away from the open outcry or electronic markets. it is a way to execvute a big size trade without influencing the market. 
expit: expit trade is like OTC 
MSCI: a dominant provider of financial indicators. indices, portofolio risk, and performance analytics in all asset classes. 
cts: consolidated tape system, just like cqs but covers less exchanges. the idea behind it is NBBO 
cqs: electronica service providing quetes on issues traded on the NYSE, american stock exchange, regional stock exchanges, and the nasdaq. nasdaw reprocesses the info and provides it to subscribers to its cqs. 
drop copy: in tse arrowhead order system, drop copy means a connection session for order result notification. not for actual order flow. 
scrip issue: it is a form of secondary issue. share price will be diluted. 
forward: just like futures. but done only as a private deal, not as exchange traded product. i.e. also risk of other party going default. also less unified in format. while futures contracts often get desolved before full maturity but forwards is more used as a hedge tool at full maturity date. 
outright: a forward currency contract with a locked-in exchange rate and delivery date. an outright forward contract allows an investor to buy or sell a currency on a specific date(or time window). FX forward contracts function in a very similar way to standard forward contracts. the term outright is used in the FX market to describe a type of transaction in which two parties agree to buy or sell a given amount of currency at a predetermined rate at some point in the future. this type of of transaction is also known as a forward outright, an FX foward or currency forward. often used by companies as a hedge measure. 
NDF: non deliverable forwards. an outright forward or futures contract in which counter parties settle the difference between the contracted NDP price or rate and prevailing spot price or rate on an agree notional amount. often used in FX and commodities mkt. NDFs are prevalent in countries where forward FX trading is banned by the gov. (usually to prevent fx rate volatility) 
nikkei teguchi: teguchi info is the info about which firm bought/sold how much stuff. currently teguchi for individual stocks are not disclosed but teguchi for nikkei225 futures are available. people especially see teguchi by foreign firms to know how foreign investors are reacting to nikkei. 
last look: last look is a feature in ECN that has liquidity provider. some ECN only helps matching between participants. but other ECN has this liquidity provider which is usually some bank that can match any order. but this bank retains the right to take a last look before the execution and cancel/rejects orders slightly. this is one of the reasons why participants sometimes see slippage and re-quote request from ECN. of course slippage can happen as a result of natural mkt volatility also. 
SEF: swap execution facility, a platform for regulated trading and clearing of swaps to be required in the US by the dodd frank wall street reform and consumer protection ack. since swap mkt exploded internationally and mostly done OTC, SEC wants to regulate it more by more trightly forcing reporting, clearing and settlement functions. 
fungible: inter-changable. like options and futures. but not forwards and swaps. e.g. money has fungibility because there is no difference between one dollar and another dollar. likewise, stocks of the same type in the same company and commodities of the same quality are generally fungible. 
ETF basket: creation/redemption basket = trading basket(only cash component) + excluded asset(non cash component like tracking fund, dividends, creation fees, tax accruals, expense, restricted securities, etc ). 
NAV: net asset value. theoretical, intrinsic value of the asset. ETF nav can be calculated by adding up the price of index securities and dividing by the number of issued shares. often NAV is announced once at EOD. obviously real time NAV and the market price can be a good target for arbitrage trading. 
why no last trade price in fx mkt: in fx mkt, unlike stock exchange, there is no central place that knows all the trades and their execution price. so for fx, we only have ap/bp provided by some dealers/banks. 

  1. 2013-11-28 23:04:00 |
  2. Category : financial
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