Glossary

Aa

ABS

An asset-backed security (ABS) is an investment security—a bond or note—which is collateralized by a pool of assets, such as loans, leases, credit card debt, royalties, or receivables. An ABS is similar to a mortgage-backed security, except that the underlying securities are not mortgage-based.

AGM

An annual general meeting (AGM) is a mandatory yearly gathering of a company's interested shareholders.

Arbitrage
The simultaneous purchase of a security on one stock market and the sale of the same security on another stock market at prices which yield a profit.

Arbitrageur

An arbitrageur is a type of investor who attempts to profit from market inefficiencies. These inefficiencies can relate to any aspect of the markets, whether it is price or dividends or regulation. The most common form of arbitrage is price.

Assets
Everything a company or person owns, including money, securities, equipment and real estate. Assets include everything that is owed to the company or person. Assets are listed on a company's balance sheet or an individual's net worth statement.

Asset Management

Asset management is the direction of all or part of a client's portfolio by a financial services institution, usually an investment bank, or an individual. Institutions offer investment services along with a wide range of traditional and alternative product offerings that might not be available to the average investor.

Asset Class

An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations.

Averages and Indices

Statistical tools that measure the state of the stock market or the economy, based on the performance of stocks, bonds or other components.

Averaging Down

Buying more of a security at a price that is lower than the price paid for the initial investment. The aim of averaging down is to reduce the average cost per unit of the investment.

AML

Anti-money laundering (AML) refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. Though anti-money-laundering laws cover a relatively limited range of transactions and criminal behaviors, their implications are far-reaching.

Basis Risk

Basis risk is the financial risk that offsetting investments in a hedging strategy will not experience price changes in entirely opposite directions from each other.

Better-Price-Limit Orders
An order with a limit price better than the best price on the opposite side of the market.

Book
An electronic record of all pending buy and sell orders for a particular stock.

Booked Orders

Orders that do not trade immediately upon entry. These orders are also known as outstanding orders.

A type of underwriting where the brokerage firm acts as principal. The brokerage firm risks its own capital to purchase all of the securities to be issued. If the price of the securities decreases before the brokerage firm has had a chance to resell the securities to its clients, the firm absorbs the loss.

Broker or Brokerage Firm

A securities firm or a registered investment advisor affiliated with a firm. Brokers are the link between investors and the market. When acting as a broker for the purchase or sale of listed stock, the investment advisor does not own the securities but acts as an agent for the buyer and seller and charges a commission for these services.

Bonus shares 

Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares.

Business Day
Any day from Saturday to Wednesday, excluding statutory holidays.

Buy-In
If a broker fails to deliver securities sold to another broker on the settlement date, the receiving broker may buy the securities at the current market price of the stock and charge the delivering broker the cost difference of such a purchase.

Backwardation

Backwardation is when the current price—spot—price of an underlying asset is higher than prices trading in the futures market. Backwardation is sometimes confused with an inverted futures curve. 

Bid-Ask Spread

A bid-ask spread is the amount by which the ask price exceeds the bid price for an asset in the market. The bid-ask spread is essentially the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept.

Cc

Call Option

An option, which gives the holder the right, but not the obligation, to buy a fixed amount of a certain stock at a specified price within a specified time. Calls are purchased by investors who expect a price increase.

Capital
To an economist, capital means machinery, factories and inventory required to produce other products. To investors, capital means their cash plus the financial assets they have invested in securities, their home and other fixed assets.

Capital Gains Distribution

A taxable distribution out of taxable gains realized by the issuer. It is generally paid to security holders of trusts, partnerships, and funds. Like all distributions, it may be paid in securities or cash. The amount, payable date, and record date are established by the issuer. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement.

Capital Stock
All shares representing ownership of a company, including preferred and common stocks.

Capital Trust

A form of financial trust that differs from other trusts in that it looks more like a fixed income instrument than an equity issue. Capital trusts are generally issued by banks or other financial intermediaries.

Capitalization Change

Any change in the issued and outstanding listed securities of an issuer. This change may involve the issuance, repurchase, or cancellation of listed securities or listed securities that are issuable upon conversion or exchange of other securities of an issuer.

Capitalization Effective Date

The date that the capitalization change is reflected in the issuer’s, share register, regardless of when it is reported to the Exchange.

Cash Dividend / Distribution
A dividend/distribution that is paid in cash.

Changes in Stock List

Any modification to the list of tradable issues of an exchange. These modifications include new listings, supplemental security listings, substitutional listings, deletions, name changes, and stock symbol changes.

Close Price
The price of the last board lot trade executed at the close of trading.

Closed- End Fund

A closed-end fund is a portfolio of pooled assets that raises a fixed amount of capital through an initial public offering (IPO) and then lists shares for trade on a stock exchange.

Closed-End Investment Fund

An investment trust that issues a fixed number of securities that trade on a stock exchange or in the over-the-counter market.

Commission
The fee charged by an investment advisor or broker for buying or selling securities as an agent on behalf of a client.

Common Stock or Ordinary Share

Securities that represent part ownership in a company and generally carry voting privileges. Common shareholders may be paid dividends, but only after preferred shareholders are paid.

Corporate Action

A corporate action is any activity that brings material change to an organization and impacts its stakeholders, including shareholders, both common and preferred, as well as bondholders.

CAPM

The Capital Asset Pricing Model (CAPM) is a model that describes the relationship between the expected return. The return on the investment is an unknown variable that has different values associated with different probabilities. and risk of investing in a security.

CSD

A central securities depository (CSD) is a specialist financial organization holding securities such as shares either in certificated or uncertificated (dematerialized) form so that ownership can be easily transferred through a book entry rather than the transfer of physical certificates.

CCP

Central Counterparty Clearing House (CCP) is an entity that helps facilitate trading in equities markets. Typically operated by the major banks in each country, CCPs strive to introduce efficiency and stability into various financial markets. It reduces counterparty, operational, settlement, market, legal, and default risk for traders.

Clearing House

A clearing house acts as an intermediary between a buyer and seller and seeks to ensure that the process from trade inception to settlement is smooth. Its main role is to make certain that the buyer and seller honor their contract obligations.

Collateral

Collateral is an asset that a lender accepts as security for extending a loan. If the borrower defaults, then the lender may seize the collateral.

Credit Risk

Credit risk is the possibility of loss due to a borrower's defaulting on a loan or not meeting contractual obligations.

Crowdfunding

Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. 

Circuit Breaker

Circuit breakers are regulatory measures to temporarily halt in trading on an exchange, which are in place to curb panic-selling.

Contango

Contango is a situation where the futures price of a commodity is higher than the spot price. Contango usually occurs when an asset price is expected to rise over time.

Capital Gain

Capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.

Capital Loss

A capital loss is the loss incurred when a capital asset that has decreased in value is sold for a lower price than the original purchase price.

Capital Structure

The capital structure is the particular combination of debt and equity used by a company to finance its overall operations and growth. 

Capital Budgeting

Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. 

Corporate Governance

It is the collection of mechanisms, processes and relations by which corporations are controlled and operated.

Credit Rating Agency

A credit rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money—an individual, corporation, state or provincial authority, or sovereign government.

CFT

Combating the Financing of Terrorism (CFT) involves investigating, analyzing, deterring, and preventing sources of funding for activities intended to achieve political, religious, or ideological goals. CFT is achieved through violence and the threat of violence against civilians.

Cross Listing

Cross-listing is the listing of a company's common shares on a different exchange than its primary and original stock exchange.

Dd

Distribution
The portion of the issuer's equity paid directly to the security holders. It is generally paid to security holders of trusts, partnerships, and funds. The issuer or its representative provides the amount, frequency (monthly, quarterly, semi-annually, or annually), payable date, and record date.

Dividend
The portion of the issuer's equity paid directly to shareholders. It is generally paid on common or preferred shares. The issuer or its representative provides the amount, frequency (monthly, quarterly, semi-annually, or annually), payable date, and record date.

Default Risk

Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make the required payments on their debt obligation.

Derivative

A derivative is a financial security with a value that is reliant upon or derived from, an underlying asset or group of assets—a benchmark. The derivative itself is a contract between two or more parties, and the derivative derives its price from fluctuations in the underlying asset.

Dual Listing

Dual listing refers to a listing of any security on two or more different exchanges. Companies use dual listing because of its benefits such as additional liquidity, increased access to capital, and the ability for its shares to trade for longer periods if the exchanges on which its shares are listed are in different time zones outweigh the costs of a second listing.

Ee

EBIT

Earnings before interest and taxes (EBIT) is an indicator of a company's profitability. EBIT can be calculated as revenue minus expenses excluding tax and interest.

Equity Option

An option contract that grants the holder the right to buy or sell a specific number of shares of stock at a specified price during a specific period of time.

Equity Share

Equity shares are long-term financing sources for any company. These shares are issued to the general public and are non-redeemable in nature. Investors in such shares hold the right to vote, share profits and claim assets of a company.

Exchange-Traded Fund (ETF)

 A special type of financial trust that allows an investor to buy an entire basket of stocks through a single security, which tracks and matches the returns of a stock market index. ETFs are considered to be a special type of index mutual fund, but they are listed on an exchange and trade like a stock.

E-AGM

A virtual AGM sees your annual shareholders meeting taking place exclusively online without a corresponding physical meeting, and shareholders are only able to participate and vote online.

E-Voting

Electronic voting (also known as e-voting) is voting that uses electronic means to either aid or take care of casting and counting votes.

Embedded Put Options

An embedded option is a component of a financial security that gives the issuer or the holder the right to take a specified action in the future.

Endowment

An endowment is a donation of money or property to a nonprofit organization, which uses the resulting investment income for a specific purpose. An endowment can also refer to the total of a nonprofit institution's investable assets, also known as its principal or corpus, which is meant to be used for operations or programs that are consistent with the wishes of the donor(s).

 

Ff

Frequency
Frequency refers to the given time period on an intraday, daily, weekly, monthly, quarterly or yearly perspective. Typically, choosing a weekly or monthly perspective when looking at several years of data makes it easier to identify long-term trends. Daily charts are useful for active traders and short-term time period charts.

Futures
Contracts to buy or sell underlying assets at a future date.

Forward Contracts

A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging.

Financial Inclusion

It is defined as the availability and equality of opportunities to access financial services. It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. 

Financial Leverage

Financial leverage which is also known as leverage or trading on equity, refers to the use of debt to acquire additional assets. The use of financial leverage to control a greater amount of assets (by borrowing money) will cause the returns on the owner's cash investment to be amplified.

Financial statements

Financial statements are written records that convey the business activities and the financial performance of a company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. 

 

Gg

Growth Stock

The shares of companies that have enjoyed better-than-average growth over recent years and are expected to continue their climb.

Hh

Hedge
A strategy used to limit investment loss by making a transaction that offsets an existing position.

Halt

A trading halt is a temporary suspension of trading for a particular security or securities at one exchange or across numerous exchanges.

Hair Cut

In financial markets, a haircut refers to a reduction applied to the value of an asset. It is expressed as a percentage.

Hedger

A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.

Hurdle Rate

A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor. It allows companies to make important decisions on whether or not to pursue a specific project. The hurdle rate describes the appropriate compensation for the level of risk present—riskier projects generally have higher hurdle rates than those with less risk.

Ii

Index
A statistical measure of the state of the stock market, based on the performance of stocks.

Initial Public Offering (IPO)
A company's first issue of shares to the general public.

Investment
The purchase or ownership of a security in order to earn income, capital or both.

Investment Advisor

A person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products.

Investment Capital

Initial investment capital necessary for starting a business. Investment capital usually consists of inventory, equipment, pre-opening expenses and leaseholds.

Investment Counsellor

A specialist in the investment industry paid by fee to provide advice and research to investors with large accounts.

Investment Dealer

Securities firms that employ investment advisors to work with retail and institutional clients. Investment dealers have underwriting, trading and research departments.

Investment Fund

A closed-end fund that offers investors the ability to buy a security that represents a portfolio of investments with a specific investment strategy. These products use funds raised through a public offering to invest in a portfolio of securities, which are actively managed to create income streams for investors, typically through a combination of dividends, capital gains, interest payments, and in some cases, income from derivative investment strategies.

Investment Bank

An investment bank is a financial services company or corporate division that engages in advisory-based financial transactions on behalf of individuals, corporations, and governments.

Intellectual Property

Intellectual property is a broad categorical description for the set of intangible assets owned and legally protected by a company from outside use or implementation without consent. An intangible asset is a non-physical asset that a company owns.

Ijarah SUKUK

Ijarah SUKUK are certificates of equal value which are issued by the owner of an existing property or asset either on his own or through a financial intermediary, for the purpose of leasing it against a rental from the subscription proceeds.

Istisna SUKUK

Certificates of equal value (sukuk) that are issued for the purpose of mobilizing funds to be used in the production of goods or construction of buildings. Once produced, the istisna'a goods become owned by the sukuk holders. These sukuk are issued by the manufacturer (al-mustasni’) who sells the intended product to the sukuk subscribers.

Issue Status

The trading status of a class or series of an issuer's listed securities, such that a class or series of listed securities of an issuer may be halted, suspended, or delisted from trading.

Issued and Outstanding Securities

Commonly refers to the situation where the number of issued securities equals the number of outstanding securities.

IOSCO

The International Organization of Securities Commissions (IOSCO) is the international body that brings together the world's securities regulators and is recognized as the global standard setter for the securities sector.

IFSB

The Islamic Financial Services Board (IFSB) is an international standard-setting organization that promotes the soundness and stability of Islamic banking, by issuing global prudential standards and guiding principles in the areas of capital adequacy, corporate governance, risk management, and transparency, among others.

ISIN

An International Securities Identification Number (ISIN) is a code that uniquely identifies a specific securities issue. The organization that allocates ISINs in any particular country is the country's respective National Numbering Agency (NNA).

ICO

An Initial Coin Offering (ICO) is the cryptocurrency industry’s equivalent to an Initial Public Offering (IPO). ICOs act as a way to raise funds, where a company looking to raise money to create a new coin, app, or service launches an ICO. 

 

Kk

KYC

The Know Your Customer or Know Your Client (KYC) guidelines in financial services requires that professionals make an effort to verify the identity, suitability, and risks involved with maintaining a business relationship.

 

Li

Limit Order

An order to buy or sell stock at a specified price. The order can be executed only at the specified price or better. 

Liquidity
This refers to how easily securities can be bought or sold in the market. A security is liquid when there are enough units outstanding for large transactions to occur without a substantial change in price. Liquidity is one of the most important characteristics of a good market. 

 

Mm

Market Capitalization

The number of issued and outstanding securities listed for trading for an individual issue multiplied by the board lot trading price. Should a trading price not be available, a bid price, a price on another market, or if applicable, the price for an issue of the same issuer which the first issue is convertible into, may be used. Total market capitalization for a market is obtained by adding together all individual issue market capitalizations (warrants and rights excluded).

Market Maker

A trader employed by a securities firm who is required to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities up to a specified minimum guaranteed fill. 

Mortgage

A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.

Mutual Fund

A fund managed by an expert who invests in stocks, bonds, options, money market instruments or other securities. Mutual fund units can be purchased through brokers or, in some cases, directly from the mutual fund company.

Murabaha Sukuk

Murabaha, also referred to as cost-plus financing, is an Islamic financing structure in which the seller and buyer agree to the cost and markup of an asset.

Musharakah Sukuk

Certificates of equal value that are issued for the purpose of investing the mobilized funds of musharakah for establishing a new project, developing an existing project or financing a business activity on the basis of Shari’a complied partnership contract. In these sukuk, the sukuk holders become the owners of the project or the assets of the activity according to respective shares. 

 

MBS

A mortgage-backed security (MBS) is a type of asset-backed security which is secured by a mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals (a government agency or investment bank) that securitizes, or packages, the loans together into a security that investors can buy.

Margin

Margin is the money borrowed from a brokerage firm to purchase an investment. It is the difference between the total value of securities held in an investor's account and the loan amount from the broker.

 

MARR

The Minimum Acceptable Rate of Return, often abbreviated MARR, or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other projects.

 

 

Nn

New Issuer Listing - IPO (Initial Public Offering)

An IPO (initial public offering) is an issuer's first offering of its securities made to the public in accordance with a prospectus. The offering is often made in conjunction with an issuer's initial application for listing on an exchange.

 

Oo

Option
The right, but not the obligation, to buy or sell certain securities at a specified price within a specified time. A put option gives the holder the right to sell the security, and a call option gives the holder the right to buy the security.

Offsetting

An offset involves assuming an opposite position in relation to an original opening position in the securities markets. The goal of offsetting is to reduce an investor's net position in an investment to zero so that no further gains or losses are experienced from that position.

Open-End Fund

An open-end fund is a diversified portfolio of pooled investor money that can issue an unlimited number of shares. The fund sponsor sells share directly to investors and redeems them as well.

 

Pp

Portfolio
Holdings of securities by an individual or institution. A portfolio may include various types of securities representing different companies and industry sectors.

Pledge

A pledged asset is a valuable possession that is transferred to a lender to secure a debt or loan. A pledged asset is collateral held by a lender in return for lending funds.

Private Equity

Private equity is an alternative investment class and consists of capital that is not listed on a public exchange. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.

Portfolio Management

Portfolio management is the art and science of selecting and overseeing a group of investments that meet the long-term financial objectives and risk tolerance of a client, a company, or an institution.

Private Placement

It is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion.

 

Rr

Revenue
The total amount of funds generated by a business.

Risk
The future probability of loss.

Repurchase Agreement (Repo)

It is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.

Right Offering

A rights offering (rights issue) is a group of rights offered to existing shareholders to purchase additional stock shares, known as subscription warrants, in proportion to their existing holdings.

 

 Ss

Securities
Transferable certificates of ownership of investment products such as notes, bonds, stocks, futures contracts and options.

Settlement
The process that follows a transaction when the seller delivers the security to the buyer and the buyer pays the seller for the security.

Social Trading

It is a form of investing that allows investors to observe the trading behavior of their peers and expert traders and to follow their investment strategies using copy trading or mirror trading.

SGF

Settlement Guarantee Fund (SGF) is assumed as a financial container to ensure fulfillment of the obligations of all parties involved in securities transactions by assuming counter-party risks.

Systematic Risk

Systematic risk refers to the risk inherent to the entire market or market segment. Systematic risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market, not just a particular stock or industry. 

Specific (unsystematic) Risk

Unsystematic risk, or specific risk, is that which is associated with a particular investment such a company's stock. Unsystematic risk can be mitigated through diversification, and so is also known as diversifiable risk. Once diversified, investors are still subject to market-wide systematic risk.

Swap

A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything.

Speculator

A speculator is a person or an entity that trades securities essentially as bets that the price will go up or down, and as such, typically has an above-average risk tolerance.

Securitization

Securitization is the procedure where an issuer designs a marketable financial instrument by merging or pooling various financial assets into one group. The issuer then sells this group of repackaged assets to investors.

Short Selling

The selling of a security that the seller does not own (naked or uncovered short) or has borrowed (covered short). Short selling is a trading strategy. Short sellers assume the risk that they will be able to buy the stock at a lower price, cover the outstanding short, and realize a profit from the difference.

SUKUK
A sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Islamic religious law commonly known as Sharia.

 

Treasury Bills

A Treasury Bill (T-Bill) is a short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less.

Treasury Notes

A Treasury note (T-note for short) is a marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years.

Treasury Bonds

Treasury bonds (T-bonds) are government debt securities issued by the federal government that have maturities greater than 10 years. T-bonds earn periodic interest until maturity, at which point the owner is also paid a par amount equal to the principal. 

Tokenization

The process of converting a sensitive piece of data, such as a primary account number, into a unique, nonsensitive equivalent — a “token” — that retains the original data’s essential information without compromising security. 

 

Uu

Underwriting
The purchase for resale of a new issue of securities by an investment dealer or group of dealers who are also known as underwriters. The formal agreements for these transactions are called underwriting agreements.

Vv

VC

Venture capital is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks and any other financial institutions.

VC Fund

Venture capital funds are investment funds that manage the money of investors who seek private equity stakes in startup and small- to medium-sized enterprises with strong growth potential. These investments are generally characterized as high-risk/high-return opportunities.

 

Ww

WACC

The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.

Warrant
A security giving the holder the right to purchase securities at a stipulated price within a specified time limit. Exercise of the warrant is solely at the discretion of the holder. Warrants are not exercisable after the expiry date. A warrant is often issued in conjunction with another security as part of a financing. A warrant may be traded as a listed security or it may be held privately.

Wealth management

Wealth management is an investment advisory service that combines other financial services to address the needs of affluent clients. It is a consultative process whereby the advisor gleans information about the client's wants and tailors a bespoke strategy utilizing appropriate financial products and services.

 

Yy

YTM

Yield To Maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. Yield to maturity is considered a long-term bond yield but is expressed as an annual rate.

 

Zz

Zero-coupon

A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.