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All or None (AON) Order
An order with this condition should be matched either with the entire order quantity or none at all.
The business of taking advantage of difference in price of a security traded on two or more stock exchanges, by buying in one and selling in the other (or vice versa). Quite simply it means you try to buy something cheap in one place, to make a profit selling it somewhere else. Given the speed at which the financial markets now operate, in practice the simultaneous purchase of foreign exchange, securities, commodities or any other financial instrument in one market and the sale in another at a higher price.
American Depository Receipt (ADR)
A stock representing a specified number of shares in a foreign corporation. ADR's are bought and sold in the American markets just like regular stocks. An ADR is issued by a U.S. Bank, consisting of a bundle of shares of a foreign corporation that are being held in custody overseas. The foreign entity must provide financial information to the sponsor bank. ADR's are listed on either the NYSE, AMEX, or NASDAQ.
American Depository Share (ADS)
A share issued under deposit agreement that represents an underlying security in the issuer's home country. The term ADR and ADS are thought to be the same, they sort of are. ADS is the actual share trading while ADR represents a bundle of ADSs.
An instruction from the client to the broker authorizing him to use his discretion and try to execute an order at the best possible price. An 'at best' order is valid only for the day it is placed.
The process of gradually buying more and more securities in a declining market (or selling in a rising market) in order to level out the purchase (or sale) price
Settlement of claims differences or disputes between one member and another and between a member and his clients, authorized clerks, sub-brokers etc., through appointed arbitrators.
This is a bond or a share for which there is no other proof of ownership than the physical possession of the security. No official record or register of ownership is kept, the owner is the "bearer" of the share or bond certificate. This means that these certificates are easily traded without formality. If you own bearer securities, look after them! No dividend is paid to such shares and no interest paid to such bonds. Instead the certificate will have several coupons attached. These must be physically removed from the certificate and presented to the originating company for payment of any dividend or interest to be made.
These stock market animals are pessimists, they expect share prices or any other type of investment to fall. In a 'bear market' the general sentiment is that prices are going to go lower and majority of dealers will sell as quickly as possible for fear of holding shares which diminish in value. Bears, like 'bulls' drive the market.
Basis Point (BP)
The smallest measure used in quoting yields on fixed income securities. One basis point is one percent of one percent, or 0.01%.
A prolonged period of falling securities prices in a stock market.
A debt security, or an IOU, issued by a company or government agency is called a bond. A bond investor lends money to the issuer and, in exchange, the issuer promises to repay the loan amount on a specified maturity date; the issuer usually pays the bondholder periodic interest payments over the period of the loan.
Carrying forward of transaction form one settlement period to the next without effecting delivery or payment. Badla involves carrying forward of a transaction from one settlement period to the next. The carry-forward is done at the making up price, which is usually the closing price of the last day of settlement.
A badla transaction attracts the following payments / charges :
(a) ‘margin money’ specified by the stock exchange board; and
(b) contango or badla charges (interest charges) determined on the basis of demand and supply forces.
Transaction between two members of the exchange. The terms "dealings" and "contracts" also have identical meanings.
Blue Chips are shares of large, well established and financially sound companies with an impressive records of earnings and dividends. Generally, Blue Chip shares provide low to moderate current yield and moderate to high capital gains yield. The price volatility of such shares is moderate.
A free allotment of shares made in proportion to existing shares out of accumulated reserves. A bonus share does not constitute additional wealth to shareholders. It merely signifies recapitalization of reserves into equity capital. However, the expectation of bonus shares has a bullish impact on market sentiment and causes share prices to go up.
Dates between which a company keeps its register of members closed for updating prior to payment of dividends or issue of new shares or debentures.
A bull is one who expects a rise in price so that he can later sell at a higher price.
A rising market with abundance of buyers and few sellers.
This is the price of a security at the beginning of the trading day which is used to determine the Day Minimum/Maximum and the Operational ranges for that day.
The trading member who has placed the order for the purchase of the securities
Bid and offer
Bid is the price at which the market maker buys from the investor and offer is the price at which he offers to sell the stock to the investor. The offer is higher than the bid.
Brokerage is the commission charged by the broker. The maximum brokerage chargeable is determined by SEBI.
Basket trading is a facility by which investors are in a position to buy/sell all 30 scrips of Sensex in the proportion of current weights in the Sensex, in one go.
It is a standard measure of risk for an individual stock. It is the sensitivity of the movement of the past share price of a stock to the movement of the market as a whole. The beta of the market is taken as 1. A benchmark index (the Sensex, for instance) is taken as the proxy for the market.
Stocks with betas greater than 1 tend to amplify the movement of the market. If a stock has a beta of 1.20, it means that if the market has moved by 1%, the stock price would have moved by an extra 1.2%.
This is the highest price at which an investor is willing to buy a stock . Practically speaking, this is the available price at which an investor can sell shares.
When physical share certificates along with transfer deeds are delivered in the market there are certain details to be filled in the transfer deed. Any improper execution of these details result in a bad delivery. A bad delivery may pertain to the transfer deed or the share certificate, and maybe because of the transfer deed being torn, mutilated, overwritten, defaced etc.
Buy limit order
An order of buying a security with a condition that order will not be executed above the specific mentioned price.
Buy on close
An order of buying a stock, but only at the end of the trading day. Security will be bought in the closing price range.
When the price of a stock surpasses its initial high (resistance level) or falls below the initial low (support level), it is termed as break out in technical analysis.
Institution that arranges and manages the book building process for the new public issue.
The actual owner of the security, irrespective of who is holding the security.
The lowest price at which a stock is quoted to be sold.
The highest price quoted for a particular stock to be bought.
The difference between the ask price and bid price.
The floor of a Stock Exchange.
Payment for transactions on the due date as distinct from carry forward (Badla) from one settlement period to the next.
Clearing Days or Settlement Days
Dates fixed in advance by the exchange for the first and last business days of each clearance. The intervening period is called settlement period.
Each Exchange maintains a clearing house to act as the central agency for effecting delivery and settlement of contracts between all members. The days on which members pay or receive the amounts due to them are called pay-in or pay-out days respectively.
A situation where by an individual or a group acquires such control on a security that it cannot be obtained or delivered for performance of existing contracts except at exorbitant prices. In such situations, the Governing Board may intervene to regulate or even prohibit further dealings in that security.
Temporary reversal of trend in share prices. This could be a reaction (a decrease following a consistent rise in prices) or a rally (an increase following a consistent fall in prices).
Reckless heavy short-sales leading to unduly depressed prices. In such a situation, the Governing Board may prohibit short sales, fix minimum prices below which sells or purchases are not permitted and limit further dealings only to closing out of existing contracts.
Means "with". A cum price includes the right to any recently declared dividend (CD) or right share (CR) or bonus share (CB).
The trade price of a security at the end of a trading day. Based on the closing price of the security, the base price at the beginning of the next trading day is calculated.
When a trading member enters an order, any other trading member with an order on the opposite side is referred to as the counterparty.
Carry forward trading
Trading where the settlement of trades is postponed on the stock exchange until a future settlement period involving payment of interest on the account. It refers to the trading in which the settlement is postponed to the next account period on payment of contango charges (known as ‘vyaj badla’) in which the buyer pays interest on borrowed funds or the backwardation charges (a.k.a ‘unda badla’) in which the short seller pays a charge for borrowing securities.
Clearing refers to the process by which mutual indebtedness among members is settled. The clearing corporation matches the final buyers and sellers through multilateral netting. The members of the clearing corporation also known as clearing members settle their dues with the clearing house that is operated by the clearing corporation. The clearing corporation is the legal counter-party to both legs of every trade.
An investor sends the certificate along with the transfer deed to the company for transfer. In certain cases the registration is rejected if the shares are fake, forged or stolen or if there is a signature difference etc;. In such cases the company returns the shares along with a letter which is termed as a company objection.
This is the right, but not the obligation, to purchase shares at a specified price at a specified date in the future. See Options. For this privilege, the buyer pays a premium which would be a fraction of the price of the underlying security. You are gambling that the share price will rise above the option price. If this happens you can buy the shares and sell them immediately for a profit. If the share price does not rise above your option price, you do not exercise the option and it expires - all you have lost is the initial payment made to purchase the option.
The demand by a company or any other issuer of shares for payment. It may be the demand for full payment on the due date, such as, for example, with a rights issue. It may, alternatively, be the demand for a further payment when the total amount is payable by instalments. The calls are usually made several months apart by call letter and the shares are said to be paid-up when the final call has been paid. A call by a company should not be confused with a call option.
The test of a securities business's ability to meet its financial obligation. Capital adequacy rules mean that a bank/financial institution has to have enough money to conduct its business
The total value of the company in the stockmarket. This value is arrived at by multiplying the number of shares in issue by the company's share price. This market capitalization obviously fluctuates as the share price moves up and down. It's an important figure - if your company is worth £2 billion, you'll have more credibility with bankers and other companies you want to take over than if you're a little minnow with hardly any value.
Money from a company's reserves is converted into issued capital, which is then distributed to shareholders in place of a cash dividend. This is also known as a Scrip Issue.
The risk that bonds will be redeemed (or "called") before maturity. This possibility increases during periods of falling interest rates.
An increase in the value of an investment, measured by the increase in a fund unit's value from the time of purchase to the time of redemption.
The amount by which an investment's selling price exceeds its purchase price.
A market where debt or equity securities are traded.
Debt instruments issued by corporations to meet their short-term financing needs. Such instruments are unsecured and have maturities ranging from 15 to 365 days.
A fee charged by a broker or distributor for his/her service in facilitating a transaction.
Interest rate on a debt security that the issuer promises to pay to the holder until maturity. Usually expressed as a percentage of the face value
Consideration is the total purchase or sale amount associated with a transaction. The amount you 'pay' or 'receive'. It may also be the basis for working out the commission, taxes and any other charges you are asked to pay.
On any securities market this is the agreement between a buyer and a seller buy or sell securities. The written agreement between the seller and the buyer to transfer ownership of the property from the former to the latter. It is a legally binding agreement for sale. In two identical parts, one signed by seller and one by purchaser. When the two parts are exchanged (exchange of contracts) both parties are committed to the transaction.
Any security is described as convertible when it carries the right or option for the holder to at some stage convert it in for another form of security at a fixed price. Convertibles are often bonds or loan stock (but sometimes preference shares) which carry the right to be converted into ordinary shares at some date in the future at a previously specified price.
A corporate bond is an IOU issued by a public company, such as HLL, ITC, TELCO etc. When you invest in a corporate bond, you are lending money to the company. In return you will receive interest at a fixed rate and the promise that your capital will be repaid at a certain date in the future. The guarantee that our capital will be returned is only as good as the company you are lending money to. While HLL, ITC, TELCO are considered 'good risks' by investment pundits because they are blue chip companies, other smaller companies are likely to be a less good risk.
A correction is a term to describe a downward movement in share prices. In other words, a shake out or even a crash or mini-cash. Stockbrokers and fund managers like the term correction, perhaps because
they believe if they use the term crash or 'heavy fall', it'll cause panic. Whatever you decide to call a downward jolt in share prices, if you lose money, it may be described as a correction, but you'll feel pretty sick all the same!
Clearing refers to the process by which all transactions between members is settled through multilateral netting.
The share is described as cum-bonus when a potential purchaser is entitled to receive the current bonus.
The share is described as cum-rights when a potential purchaser is entitled to receive the current rights.
Carry Over Margin
The amount to be paid by operators to the stock exchange to carry over their transactions from one settlement period to another.
Payment for transactions on the due date as distinct from carry-forward (badla) from one settlement period to the next
The negative difference between the selling price of the stock and purchase price of the stock.
The markets where securities (assets) have to be delivered immediately.
Capital Asset Pricing Model (CAPM)
A model describing the relationship between risk and expected return, and serves as a model for the pricing of risky securities. CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium. If this expected return does not meet or beat required return then the investment should not be undertaken.
When a stock price increases or decreases by a certain percentage in a single day it hits the circuit breaker. Once the stock hits the circuit breaker, trading in the stock above (or below) that price is not allowed for that particular day.
The fees charged by the custodian for keeping the securities.
Cumulative preference share
Preference shares whose dividends will get accumulated, if the issuer does not make timely dividend payments.
Convertible preference shares
Preference shares that can be converted into equity shares at the option of the holder.
Commercial Paper (CP)
CPs are negotiable, short-term, unsecured, promissory notes with fixed maturities, issued by well rated companies generally sold on discount basis.
It is the risk that the other party to a contract may not fulfill the terms of a contract.
Deep Discount Bond
It is loan instrument different from an ordinary debenture which is usually offered at its face value and earns periodic interest till redemption and is redeemed with or without premium. Deep discount bond is offered at a discount and fetches no periodic interest and is redeemed at the face value
This is the income you receive as a shareholder from a company. When you buy an ordinary share in a company, you become a shareholder (an owner of the business) and to that extent you will have certain entitlements including the right to receive dividend payments as set by the board of directors and approved by the shareholders (sometimes called members.) A dividend is a cut of the profits earned by the business for the year. This pay-out is not guaranteed and where it exists at all, the amount you'll receive will vary from company to company and year to year.
Day trading is the buying and selling of stocks during the trading day by individuals known as day traders on their own account. The aim is to make a profit on the day and have no open positions at the close of the trading session, the day.
A loan raised by a company, paying a fixed rate of interest and which is secured on the assets of the company. Debentures are fixed interest securities in return for long-term loans, they tend to be dated for redemption between ten and forty years ahead of the date of issue. They may be secured by a floating charge on the company's assets or they may be tied to specific, named assets. Debenture interest has to be paid by a company whether it makes a profit or not - if the debenture holders do not get paid they can legally force the company into liquidation to realize their claims on the company's assets.
Instruments derived from securities or physical markets. The most common types of derivatives that ordinary investors are likely to come across are futures , options , warrants and convertible bonds.
Beyond this, the range of derivatives possible is only limited by the imagination of investment banks. In other words, new derivatives are being created all the time. It is likely nowadays that any person who has funds invested will unwittingly perhaps be indirectly exposed to derivatives.
A transaction may be for "spot delivery" (delivery and payment on the same or next day) "hand-delivery" (delivery and payment on the date stipulated by the exchange, normally within two weeks of the contract date), special delivery (delivery and payment beyond fourteen days limit subject to the exact date being specified at the time of contract and authorized by the exchange) or "clearing" (clearance and settlement through the clearing house).
Day Minimum/Maximum range
The minimum/maximum price range for a security on a trading day. Buy orders outside the Maximum of the range and sell orders outside the Minimum of the range are not allowed to be entered into the system. It is calculated as a percentage of the Base price.
A day order, as the name suggests, is an order which is valid for the day on which it is entered. If the order is not matched during the day, at the end of the trading day the order gets cancelled automatically
A user belonging to a Trading Member. Dealers can participate in the market on behalf of the Trading Member.
Disclosed Quantity (DQ)
A dealer can enter such an order in the system wherein only a fraction of the order quantity is disclosed to the market. If an order has an undisclosed quantity, then it trades in quantities of the disclosed quantity.
Demat trading is trading of shares that are in the electronic form or dematerialised shares. Dematerialisation is the process by which shares in the physical form are cancelled and credit in the form of electronic balances are maintained on highly secure systems at the depository
Date of payment
Date on which dividend cheques are mailed.
Amount allocated during an accounting period to cover tax liabilities that have not yet been paid and also may not have accrued. For instance, a heavy advertisement expenditure capitalized may give significant tax break.
The price fixed by the clearing house at which deliveries on futures are to take place. In practice, at this price contracts are settled by payment or receipt of the difference.
The date on which forward or futures contract for sale falls due.
Annual dividend paid on a share of a company divided by current share price of that company.
Investing in a basket of shares with different risk-reward profile and correlation so as to minimize unsystematic risk.
Discounted payback period
Period in which future discounted cash in- flows equal the initial outflow.
Discount factor :-
Expected rate of return by which, future cash flows are deflated. The discount rate is annual rate and deflating future cash flow takes place in a compounded manner.
Refers to lowering of ratings for a share by analysts, intermediaries or investors.
Disclosed Value (DV) orders allows the user to disclose only a portion of the order value to the market. For example, an order of Rs. 1000 lakhs with a disclosed value condition of Rs. 200 lakhs will mean that Rs. 200 lakhs is released into the market. After this is traded, another Rs. 200 lakhs is released and so on till the full order is exhausted. Every time a fresh lot of the disclosed value is released it is time-stamped (becomes an active order) again at the time of its release into the market and not the time at which the original DV order was placed.
Means "without". A price so quoted excludes recently declared dividend right or bonus shares.
The share is described as ex-bonus when a potential purchaser is not entitled to receive the current bonus, the right to which remains with the seller.
The share is described as ex-rights when a potential purchaser is not entitled to receive the current rights, the right of which remains with the seller.
Earnings Per Share (EPS)
It is the most important measure of how well (or otherwise) the board of directors are doing for the shareholders. This measure expresses how much the company is earning for every share held. The calculation is 'pre-tax profit dividend by the number of shares in issue'. Earnings per share is more
important than the overall reported profit figure ! The reason is that EPS provides a more pure measure of profitability.
A Eurobond is a medium or long-term interest-bearing bond created in the international capital markets. A Eurobond is denominated in a currency other than that of the place where it is being issued. Eurobonds are only issued by major borrowers, such as governments, other public bodies or large multinational companies.
This is a share sold without the right to receive the declared dividend payment which is marked as due to those shareholders who are on the share register at a pre-announced date. The stock market authorities usually specify the date on which a share will begin trading ex div. The share price invariably drops when the share goes ex dividend, taking the known income of the dividend out of the share price.
A stock or bond sold without the right of receipt of the next due interest payment.
Employee Stock Option Plan is a trust established by a company to allot some of its paid-up equity capital to its employees over a period of time. They are used to reward employees.
The pre-determined price at which the underlying future or options contract may be bought or sold.
Exercising the option
The act of buying or selling the underlying asset via the option contract.
Efficient capital market :-
A market in which all the players have all the material information at their disposal at the same time.
This is the dividend paid by a company to its shareholders out of profits at the end of the financial year.
A motion to pay a final dividend must be approved at the shareholder's Annual General Meeting (AGM) - where they have the option of accepting the dividend recommended by the directors or of reducing it - they cannot vote to increase it!
The first occasion on which a public company’s shares are offered widely to investors on the market. Flotations are often referred to as new issues although it is possible for companies already in the stockmarket to issue new shares
A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price at a fixed date in the future. Futures contracts were originally invented to allow those who regularly buy and sell goods to protect themselves against future changes in the price of those goods. In other words, the futures markets evolved to allow producers or consumers to hedge their risk.
It is the price quoted by a market-maker at which he is committed to deal with a broker or other market-maker. The only occasion in which a market-maker may vary from offering a firm price is when the
Stock Exchange has declared a fast market.
Shareholders risk resulting from the use of debt. Debt causes financial risk by increase of the variability of shareholders return and threatening the solvency of the firm.
Forward trading refers to trading where contracts traded today are settled at some future date at prices decided today. Thus a contract to buy dollars at Rs.42 per dollar after 3 months is a forward contract. The price is fixed today but the settlement will be after 3 months.
The fraction of the paid-up equity capital of a company which normally participates in day to day trading.
A forward purchase is when one agrees to purchase shares at a future period at a certain price. He does this in the belief that the prices will fall in future.
Foreign Institutional Investor (FII)
An overseas institutional investor permitted under Securities and Exchange Board of India (SEBI) guidelines to trade in Indian bourses.
Orders entered into the system with price outside the Operational range and orders with quantity greater than the Order Quantity Freeze percentage is sent to the Exchange for approval. Such orders are not reflected in the books and are 'frozen' till the Exchange approves them.
Fully Paid Shares
Fully paid shares are those shares which have been fully paid for (the face value).
Good Till Cancelled (GTC) orders
A Good Till Cancelled (GTC) order remains in the system until it is cancelled by the user. It will therefore be able to span trading days if it does not get matched. The Exchange may however set an upper limit to the number of working days an order can stay in the trading system. At the end of this period, GTC orders are cancelled automatically from the system.
Good Till Date (GTD) orders
A Good Till Day (GTD) order allows the user to specify the number of days up to which the order should stay in the trading system. At the end of this period, the order gets flushed out from the system if it is not traded or is not cancelled by the trading member.
A stock exchange functions under the direction and supervision of its Governing Board. It generally consists of a specified number of elected members, a whole time Executive Director and representatives of the Government, SEBI, and public. The size and structure of the board varies from exchange to exchange.
When the market opens above or below the previous day's close the price on a bar chart will show a "gap". This may then be "closed" if the market trades at prices between the opening level and the previous day's close.
Gilts, sometimes referred to as Government bonds are those used by the Government to raise money from large financial institutions like pension funds and from private investors. Money is needed by the Government because the Treasury so often finds that its expenses exceed its income. Gilts are sometimes referred to as 'gilt edged securities' or 'bonds' or 'fixed interest securities'. In any event, gilts are issued by the Treasury and in nearly all cases, the investor hands over his cash and then receives a fixed rate
of interest for the life of the gilt. When the gilt matures, its capital value is repaid at par value.
Gilts are bought at their par value or at face value.
Global Depositary Receipt (GDR)
These are negotiable certificates which prove ownership of a company's shares. They are marketed internationally, mainly to financial institutions. GDRs allow purchasers to gain exposure to companies which are listed on foreign markets without having to purchase the shares directly in the market
in which they are listed.
Trading in shares outside a recognized market. This has come to mean trading in shares ahead of their issue on the stockmarket.
Growth stock Investing
Growth stock investing focuses on well-managed companies whose earnings and dividends are expected to grow faster than both inflation and the overall economy. The real test for a growth company is its ability to sustain earnings momentum even during economic slowdowns. Such companies will provide long-term growth of capital, preserving the investor's purchasing power against erosion from rising prices.
A share certificate together with its transfer form which meet all the requirements of transfer, e.g., unmutilated certificate, the necessary endorsements, signature of the transferor tallying with what is registered with the company, etc. The buying broker is obliged to accept such a delivery.
A mutual funds which invests only in equity shares which offer chances of good capital growth, rather than current income.
Offsetting or guarding against investment risk. A perfect hedge is a no-risk-no gain precaution. A conservative strategy for reduction of risk through futures, options or some other derivative, by opening an opposite position to that already held in the underlying market. Taking positions in securities so that each offsets the other.
Holding Period Return (HPR)
The rate of return for the period of holding of an investment.
The buyer of an option.
The Initiator is the trading member who starts the auction. The Initiator can be a buyer or a seller.
Trading on information which is not really available to the general public. Trading in a Company's shares by a connected person having non-public, price sensitive information, such as expansion plans, financial results, takeover bids, etc., by virtue of his association with that Company, is called insider trading.
An investment is said to be illiquid if it cannot easily be turned back into cash quickly and at a low cost.
Shares in smaller companies are more likely to be illiquid than those in larger companies; they will be less easy to sell and you are likely to find that the spread or difference between the buying and selling price is much wider. So, in other words blue chip shares are more liquid than unquoted companies.
Someone who trades a security on the back of knowledge which is not available to the world at large and who, thereby, makes a profit.
This is a member of the Issuing Houses Association, responsible for sponsoring the issue of a new security on the Stock Exchange or an over the counter market. The definition has also spread to include any merchant bank or dealer in securities which is involved in such an issue. The issuing house will have been closely involved in the process leading up to the flotation and will have advised the company on its timing, pricing, etc.
Issued Share Capital
This is the total number of shares a company has made publicly available multiplied by the total nominal value of the shares.
Immediate or Cancel (IOC)
An Immediate or Cancel (IOC) order allows a user to buy or sell a security as soon as the order is released into the market, failing which the order is removed from the market. There could be a partial match for such an order resulting in one or more trades, in which case the balance order will be removed from the market.
Shares which are seldom bought and sold in the stock exchange, although they are listed. A share which is transacted less than four times a year may be called inactive or dead. It is quite difficult to find a buyer or a seller for such shares. The Spread between buying and selling prices can be large.
A jumbo share certificate is a single composite share certificate formed by consolidating/aggregating a large number of market lots. This is issued by the company in favor of the custodian of the shares and is used to reduce the problems of multiple share certificates for large trades.
Member brokers of a stock exchange who specialize in buying and selling of specific securities from and to fellow members. Jobbers do not have any direct contact with the public, but they render a useful function of imparting liquidity to the market. A jobber quotes his ‘bid’ price (the price at which he is willing to buy) and ‘ask’ price (the price at which he is willing to sell ).
The difference between the price at which a jobber is prepared to sell and the price at which he is prepared to buy. A large difference reflects an imbalance between supply and demand.
Transactions done among members after the closing of the official trading hours.
A position in which a person's interest in a particular series of options is as a net holder, meaning that the number of contracts bought is more than the number of contracts sold. It is similar for the futures contracts. A bull position in a security.
A public limited company which satisfies certain listings conditions and signs a listing agreement wit the stock exchange for trading in it securities. One important listing condition is that 25% of its issued capital should be offered to the public.
Is an order for which the price (limit price) has been specified at the time of making the order entry. A limit order describes the instruction an investor gives to his broker setting out how much he's prepared to pay for shares (or any other asset for that matter).
LIBOR stands for London Inter Bank Offer Rate. It's the rate of interest at which banks offer to lend money to one another in the so-called wholesale money markets in the City of London. Money can be borrowed overnight or for a period of in excess of five years.
Banks also offer to borrow money in the wholesale money markets. The rate is called the London Inter Bank Bid Rate (LIBID).
Market makers are players in the stockmarket who trade as principals and may actively try to encourage/discourage trading by changing the prices they quote to tempt buyers and sellers into the market.
A member firm is a trading firm which has membership of the stock exchange. The firm is permitted to deal in shares on behalf of its clients or on behalf of the firm itself.
Is an order for which no price has been specified at order entry.
When a buy and a sell order satisfy the price - time priority, they can result in a trade. This process is called as matching. The match can be full or partial depending on the order conditions.
Minimum Fill (MF) Order
This is one of the special conditions where a minimum quantity is specified for an order. The quantity of the trade involving an order with a MF attribute should at least be this minimum quantity specified.
Market lot is the minimum number of shares of a particular security that must be transacted on the Exchange. Multiples of the market lot may also be transacted.
The membership of the exchange consists of such number of members as the exchange in general meeting may from time to time determine. According to the stock exchange rules, no person shall be a member if he is less than 21 years or is not an Indian citizen or has been adjudged bankrupt or proved an insolvent or has been compounded by this creditors or has been convicted of an offence involving fraud or dishonesty or is engaged as principal or employee in any business other than that of securities.
Auspicious trading on Diwali day during specified hours.
Market capitalization is the market value of the equity of a company. Simply put, it is the number of outstanding shares multiplied by the market price of the company. The total market value at the current stock exchange list prices of the total number of equity shares issued by company It is also the currency which can be used in case of acquisitions (in terms of stock swaps).
The amount a buyer/seller of a futures contractor an uncovered (naked) option seller (writer) is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intra day price changes.
Minimum Fill (MF) orders allow the user to specify the minimum amount by which an order should be filled. For example, an order of Rs. 1000 lakhs with Minimum Fill Rs. 200 lakhs will require that each trade be for at least Rs. 200 lakhs. This could result in a partial match or a maximum of 5 possible trades of Rs. 200 lakhs each and a minimum of one trade of Rs.1000 lakhs.
This arises whenever one invests in a specific market. This is the risk that every business operating in that market must bear - and is thus not avoidable by diversification. The only way to evade market risk is by moving to alternate forms of investment or exiting that specific market.
The nominal value is the face value of share. If the face value of a share is Rs. 10 then it may also be stated that its nominal value is Rs. 10.
Shares traded directly between brokers, and not cleared through the stock exchange clearing house. Also called non-specified Securities, B-group Securities, or Cash Shares.
National Association of Securities Dealers Automatic Quotation System An American stock exchange. It’s also known as the technology heaven for companies in that category.
Two Trading members can negotiate a trade outside the system. However this trade is accepted by the system only if Control approves. Both the parties enter each side of their trade in the system specifying each other's identity.
The orders entered in the system for normal trade matching depends primarily on a price/time priority. These orders can be Regular Lot, Special Terms, Stop Loss orders or Negotiated Trade entries. Each order must be equal to or be a multiple of the regular lot for that security.
Whenever a book closure or record date is announced by a company, the Exchange sets a no-delivery period for that security. During this period, trading is permitted in that security. However, these trades are settled only after the no-delivery period is over. This is done to ensure that investor’s entitlement for corporate benefits is clearly determined.
Odd Lot market
The market in which odd lot orders are recorded. Odd Lot orders have a quantity less than one regular lot. A number of shares that are less than the market lot are known as odd lots. These shares are illiquid in nature, as they cannot be transacted on the Exchange.
A time period in the trading day for the different markets that the exchange deals in. Order entry, matching, inquiries and other functions at the workstation will be allowed during this period.
The price range for a security on a trading day such that buy orders outside the Maximum of the range and sell orders outside the Minimum of the range causes a price freeze and are sent to the Exchange for approval. It is calculated as a percentage of the Base price.
A buy or a sell offer/bid for any of the Capital Market securities entered by the dealer in the system. The system generates a unique order number for each order entry.
Order Quantity Freeze percentage
A percentage of the outstanding quantity of a security is ascertained. An order with quantity exceeding this percentage causes a freeze and is sent to the Exchange for approval.
One For One
This is meant to denote that in a bonus issue declared a bonus share has been given for every share held. In effect the share capital of the company doubles. Other terms commonly used to denote the proportion of bonus shares issued are two for three, three for five and the like.
The holder of an option contract has the right but not the obligation to buy (call option) or sell (put option) a specific quantity of a given asset at a specified price at or before a specified date in the future. The purchaser pays a non-refundable, one time fee (option premium) to the seller (writer) to acquire this right. If the holder chooses to exercise the right to buy or sell the asset, the writer of the option has to deliver or take delivery of the asset. The potential loss to the option writer is therefore unlimited.
Order Driven Trading
In an order driven system, only different types of orders supply liquidity to the market without the intervention of a market maker or jobber. Order execution follows a strict price time, priority unlike a quote driven system, where preference is given to jobber orders at the expense of public orders. This reduces the problems of high spreads, monopoly power and market manipulation. Orders which are allowed into the system are conditional upon price (market and limit orders), time (GTD, GTC, etc.), quantitity (AON, MF, etc.) and other special conditions such as IOC, etc.
Over The Counter (OTC)Trading
A secondary market in which shares are bought and sold to the general public by jobbers and brokers outside an organized market place. Generally, the OTC market consists of geographically diffused dealers.
A company may offer for sale a certain number of shares. If applications are received for shares in excess of the number offered, the issue is termed as oversubscribed.
A condition of the stock market in which not only inexperienced investors, but also sturdy bulls, take fright and start selling. It may be caused by sudden unfavorable news or rumour, or a Random Walk by shares downwards, or simply, in bear market conditions, the absence of financial institutions from the market.
This is a Latin term and it means, "having equal rights". When shares (bonus or otherwise) are issued pari passu with existing shares it means that the new shares would be equal to and have identical rights with the existing shares.
A company is termed to have "passed dividend" if it has not declared its usual annual dividend. P/E Ratio or Price-Earnings Ratio: An indicator of how highly a share is valued in the market. Arrived at by dividing the price or a share by the earnings per share (EPS).
The price of an option (call or put) contract, determined in the competitive market place, which the buyer (holder) of the option pays to its seller (writer) for the rights granted to the former by the option contract.
An entity responsible for the settlement of a trade is deemed to be a participant. Every order in the trading system has a participant associated with it.
A time period in the trading day for the Normal market. Trading members are allowed to enter orders during this period. These orders in the system take part in the algorithm for the calculation of the opening price during this period.
Price Time Priority
All orders received on the system are sorted with the best priced order getting the first priority for matching i.e. the best buy order matches the best sell order. Within similar priced orders, they are sorted on time i.e. the one that came in early gets priority over the later one.
Pay-in day is the designated day on which the securities or funds are paid in by the members to the clearing house of the Exchange.
Pay-out day is the designated day on which securities and funds are paid out to the members by the clearing house of the Exchange.
Price bands set te upper and lower limit within which a security price can fluctuate on a given day/settlement. In case of intra-day, the price band is determined over the closing price of the previous day and in the case of intra-settlement, the price bands are determined over the closing price of the last day of the previous settlement cycle. Orders outside these price bands will not be executed by the system.
When persons acting In concert with each other collude to artificially increase or decrease the prices of a security, that process is called price rigging.
The group name for the entire collection of investments belonging to an investor or held by a financial organization such as a bank, pension fund or investment trust. The idea of a portfolio is that you should invest in a diversified selection of investments. Don't have all your eggs in one basket
Price sensitive information
Price sensitive information is information about a company's trading or other affairs which would, if generally known, be expected to have an influence on its share price.
a place where money is raised by companies to pay for expansion or pay off existing investors. In the futures markets, the primary market is the main underlying market for the financial instrument on which the futures contract is based.
This is a virtual circuit through which the system can download report data to all workstations. In this mode, the system does not await the response from the workstations.
P/E Ratio or Price-Earnings Ratio:
An indicator of how highly a share is valued in the market. Arrived at by dividing the price or a share by the earnings per share (EPS).
The right to sell stock at an agreed price at or before a stated future time. Contrast this will call options.
It arises from the variability of prices of shares in the market. The share prices can move either way and are extremely volatile. The risk arising from the fact that your portfolio value may decrease or increase is the price risk.
Quote Driven Trading
This is a trading system where a market maker offers two-way quotes for each security. A buy quote and a sell quote are provided by the market maker. Thus the price at which a trade will be executed is known at the time of placing the order.
Regular Lot Order
The minimum quantity of an order entered into the Normal, Spot and Auction markets. The order that does not carry any special conditions (Minimum Fill, All or None) is treated as a regular lot order.
Record date is the date on which the beneficial ownership of an investor is entered into the register of members. Such a member is entitled to get all the corporate benefits.
The issues of new shares to existing shareholders in a fixed ratio to those already held at a price which is generally below the market price of the old shares. These are the relatively rare occasions in a company's life when it will create new shares, the proceeds of which will go directly into its bank account, instead of giving a profit (or a loss) to an existing shareholder. The issue of additional equity shares to the existing shareholders on a pre-emptive basis. Typically, the subscription price of a rights issue is significantly below the market price of the old shares.
The rate return earned on an investment after adjusting for the rate of inflation.
This is the system by which shares are bought, sold and paid for. Rolling Settlements is a mechanism of settling trades. in Rolling Settlements, trades done on a single day are settled separately from the trades of other day on Trade day + 5 days. As such netting of trades is done only for the day and not for multiple days. As such, in Rolling Settlement, settlement is carried out on a daily basis.
Real Interest Rate
Current interest rate less the rate of inflation.
Short- term money market instrument; transaction where one party agrees to sell a security to another party for cash. The seller agrees to repurchase the security later.
A position in which a person's interest in a particular series of options is as a net seller (writer) meaning that the number of contracts sold exceeds the number of contracts bought. It is similar in case of futures contracts.
A Short sale occurs when a person believing that the prices of shares will fall, sells shares that he does not own with the intention of purchasing the shares at lower price at the time delivery has to be made. This is also known as forward sale.
The bottom of a trade cycle when prices and employment are at their lowest, reflected in the downward movement of share prices, Recovery from a slump is often slow.
Spot purchase or sale implies that the deal is for immediate cash and the shares are to be delivered immediately.
Options and futures transactions involving two or more series of the underlying asset.
A stag is an investor or speculator who subscribes to a new issue with the intention of selling them soon after allotment to realise a quick profit.
also called exercise price. The price for which the underlying stock index or other asset may be purchased (in the case of a call) or sold (in the case of a put) by the option buyer (holder) upon exercise of the option contract.
The market in existing securities provided by the Stock Exchange. The secondary market, by providing a method of buying and selling securities, overcomes the basic mis-match between the needs of
savers/investors who provide new money and the requirements of capital raisers/borrowers.
The payment of cash for securities and, conversely, the delivery of securities against payment - the conclusion of a securities transaction by delivery. Settlement is the payment or receipt of an outstanding due at the end of the settlement period.
The day on which bought securities are due for delivery to the buyer and the appropriate consideration to the seller.
This is a legal document which can be used as proof of ownership of a shareholding. But with 30,000 plus share transactions a day going through the London stockmarket in the early 1990's, a lot of paper was being
generated. A more efficient way of handling share settlements is to do it electronically as happens in many other countries.
A Security is a valid and unique combination of Symbol and Series. Securities are traded in the Capital Market. Shares and Debentures are some examples of securities.
The trading member who has placed the order for selling the security.
The dealer can place an order that carries special conditions and restrictions regarding the way the order value can be matched. These terms are called Special Terms. The typical special terms are Minimum Fill and All or None.
Orders that have spot settlement are entered into the Spot market.
The dealer can enter a regular lot or a special term order with a 'trigger' price. Such orders are called Stop Loss orders. The stop loss orders are not taken for matching unless the trigger price is either reached or if it is surpassed by the last traded price for the security. Once the market price reaches or surpasses the trigger price, the 'stop loss' attribute is removed and the order is taken up for regular matching process.
Settlement guarantee is the guarantee provided by the clearing corporation for settlement of all trades. This implies that the trade will be settled even if one of the parties to the trade viz; the buyer or the seller defaults. This prevents a cascading effect in the market due to the default of one party. The clearing corporation has set up a settlement guarantee fund through contributions from the members which is used for this purpose.
The process of splitting shares that have a high face value into shares of a lower face value is known as splitting. For e.g: A share with a face value of Rs 100/- may be split into ten shares of Rs 10/- each. The reverse process of combining shares that have a low face value into one share of higher value is known as consolidation.
A market in which securities are traded for immediate delivery, as distinct from a forward market. Spot in this context means ‘immediately effective’, so that spot price is the price for immediate delivery. The actual delivery of securities takes place either on the same day of the contract or on the next day. Trading by delivery of shares and payment for the same on the date of purchase or on the next day.
The instruction given by a registered holder of shares to the company to stop the transfer of shares as a result of theft, loss etc,. This is done in order that the shares are not unlawfully transferred in the event of loss or theft of the share certificates.
For administrative convenience, the stock exchange divides the year into a number of settlement periods each of generally one week duration. The first and the last day trading of each settlement period are fixed in advance and so are settlement days for delivery and payment.
For the purpose of trading, a security is categorized either as a 'specified' shares or a 'non-specified' shares. This is done by stock exchange authorities.
The ad valorem duty of 1/2 per cent payable by buyers for transfer of shares in their name.
An arrangement by which shares of one company are swapped for another in a specified ratio
An option given to a person to buy stock at a predetermined price at a future date
Screen Based Trading
Screen based trading uses modern telecommunications and computer technology to combine information transmission with trading in financial assets. Trading members are connected to the Exchange from their workstations to the central computer located at the Exchange via satellite using VSATs (Very Small Aperture Terminals). Buy and sell orders from the brokers reach the central computer located at NSE and are matched by the computer.
A Solicitor is the auction participant who is on the opposite side of the Initiator's order. If the Initiator is a buyer then the solicitor will enter sell orders for the same security.
Splits are about as exciting as getting change for a Rs100 note. Depending upon the split ratio one share of a company is split into the decided number. This is done by reducing the face value of the scrip. Stock splits are expected to improve liquidity in a stock.
When a buy order matches with a sell order following the price-time priority logic, a trade takes place. The system generates a unique trade number for each trade.
This indicates the aggregate trade value limit on a daily basis set for a trading member. The Exchange sets the limit for each trading member of the Capital Market. The trade value for both buy and sell for a day are accumulated and the total is checked against this upper limit after every potential trade match.
Trade guarantee is the guarantee provided by the clearing corporation for all trades that are executed on the Exchange. In contrast the settlement guarantee guarantees the settlement of trade after multilateral netting.
Trading for delivery
Trading conducted with an intention to deliver shares as opposed to taking up a position and squaring off within the settlement.
A transfer deed is a form that is prescribed by the Registar of Companies for effecting share transfer and is valid for a specified period. This transfer deed is the instrument that accompanies the share certificate while registering a transfer with a company. The transfer deed must be duly stamped and signed by or on behalf of the transferor and be complete in all respects.
DAY - A day order, as the name suggests is an order which is valid for the day on which it is entered. If the order is not matched during the day, the order gets cancelled automatically at the end of the trading day.
GTC - A Good Till Cancelled (GTC) order remains in the system until it is cancelled by the user. It will therefore be able to span trading days if it does not get matched. The Exchange may however set an upper limit to the number of working days an order can stay in the trading system. At the end of this period, GTC orders are cancelled automatically from the system.
GTD - A Good Till Day (GTD) order allows the user to specify the number of days up to which the order should stay in the trading system. At the end of this period, the order gets flushed out from the system if it is not traded or is not cancelled by the trading member.
IOC - An Immediate or Cancel (IOC) order allows a user to buy or sell a security as soon as the order is released into the market, failing which the order is removed from the market. There could be a partial match for such an order resulting in one or more trades, in which case the balance order will be removed from the market.
All reference to days in the trading system would refer to working days. Thus, each day is counted on a working day basis i.e. intervening holidays are not considered. The days counted are inclusive of the day on which the order is placed. However, for Repo term, days are counted on a calendar basis.
A dealer can participate in the Capital Market only from the trader workstation, where the trading functions are available.
It refers to a member of the BSE/NSE who is authorised to place orders in the Capital Market System. The term Broker or Brokerage house is also used to convey the same meaning.
Transmission is the lawful process by which the ownership of securities is transferred to the legal heir/s of the deceased.
Unit of Trading
The minimum number of shares of a company which are accepted for normal trading on the stock exchange. All transactions are generally done in multiple of trading units. Odd lots are generally traded at a small discount.
Shares in some companies, often smaller ones, are not traded on any stock exchange. Companies are not quoted (or listed) because either: they do not wish to be and prefer to run their businesses in relative privacy, or They do not meet the listing requirements, such as minimum market capitalisation. In other words they are too small to join a stockmarket. For people interested in investing in unquoted shares, there are investment trusts which specialise in this area.
A person is recognised as a user of the Capital Market system, when he or she possess a valid user identifier and password, both of which are essential requirements for accessing the system.
Under writing is effectively a guarantee wherein the underwriter (usually a bank, broker or financial institution) agrees to purchase a certain number of shares in the event the issue is under-subscribed for a certain fee.
The rate by which the price of a security fluctuates in changing market conditions.
Volume of Trading
The total number of shares which change hands in a particular company's securities. It is the sum of either purchases or sales which necessarily equal. This information is useful in explaining and interpreting fluctuations in share prices.
1. DV - Disclosed Value (DV) orders allow the user to disclose only a portion of the order value to the market. For example, an order of Rs. 1000 lakhs with a disclosed value condition of Rs. 200 lakhs will mean that Rs. 200 lakhs is released into the market. After this is traded, another Rs. 200 lakhs is released and so on till the full order is exhausted. Every time a fresh lot of the disclosed value is released, it is time-stamped (becomes an active order) again at the time of its release into the market and not the time at which the original DV order was placed.
2. MF - Minimum Fill (MF) orders allow the user to specify the minimum amount by which an order should be filled. For example, an order of Rs. 1000 lakhs with Minimum Fill Rs. 200 lakhs will require that each trade be for at least Rs. 200 lakhs. This could result in a partial match or a maximum of 5 possible trades of Rs. 200 lakhs each and a minimum of one trade of Rs.1000 lakhs.
3. AON - All Or None order allows the user to avoid multiple trades i.e. partial match against one order. However, if the full order cannot be matched at the same time, it stays as an outstanding order (passive order) in the market till cancelled or till it is fully matched at the same time.
Payment made in order to restore or maintain initial margin on adverse positions resulting from price movements in futures/options transactions undertaken.
In a wash sale, the seller repurchases the security immediately. The purpose of a wash sale, which is not a genuine sale, is merely to establish a record of sale for tax purposes or for misleading others by creating a false impression of rise or fall in prices.
Warning Quantity Percentage
It refers to a percentage which reflects the quantity outstanding on a certain security. An order with quantity exceeding this percentage causes the system to force the dealer to confirm the entered order.
A company that has issued shares in excess of the real value of the business is said to have watered its capital. It is in effect similar to the deficit financing done by some governments.
Yield is the annual return you receive from holding a stock, share or unit trust - it is expressed as a percentage of its price. In the case of shares, the yield is calculated by expressing the dividend as a percentage of the cost of the investment. To calculate a yield on a share, take the dividend paid (this will be net of the basic rate of tax), add back the tax to get the gross yield and then divide by the share price and
multiply by 100
A graph depicting yield vis-a-vis maturity. If short-term rates are lower than long-term rates, it is a positive yield curve, if short-term rates are higher, it is a negative or inverted yield curve. If there is isn't much
difference, it is a flat yield curve.
Yield To Maturity (YTM)
The yield earned by a bond if held to maturity.
Zero Coupon Bond
A bond issued at a discount which accrues interest that is paid in full at maturity.