This percentage has significance for a number of reasons. Ownership or control of 10% of a class of securities may make an investor an “insider” subject to SEA Section 16. A 10% owner may also be deemed an “affiliate” of an issuer for purposes of SA Rule 144 and other rules as to common control. Under certain limited circumstances, where one investor in a hedge fund is more than 10% owned by another person (an indirect investor), it may be necessary to treat that indirect investor as an owner of the hedge fund for purposes of the Investment Company Act.
Under the CEA, in general, natural persons and entities who have a 10% or more financial interest in the applicant or registrant (either by equity ownership or contribution of capital), even if that financial interest is held indirectly through holding companies, must be listed as principals of the registrant. Commodity pools with more than 10% ownership by U.S. persons beneficially owned by U.S. persons (by economic ownership, not number of investors) are generally treated as a U.S. pools, while those with less than 10% ownership by U.S. persons are treated as non-U.S. pools
Generally speaking, private funds that rely on the ICA Section 3(c)(1) exemption from registration under the Investment Company Act are limited to having 100 holders
A letter from a party’s counsel, sometimes referred to as a due diligence opinion, generally based upon an investigation of facts or documents specified in the letter, that relates to the material accuracy and completeness of an offering or other document. The opinion generally states that, subject to the limitations in the opinion, that nothing has come to such counsel’s attention indicating that the relevant document contains any misstatements of material facts or any material omissions. The language in the opinion generally draws from the requirements of SEA Rule 10b-5.
An exemption from CFTC registration for CTAs who furnish commodity trading advice to 15 or fewer persons and who do not hold themselves out to the public as commodity trading advisors.
Historically, there was a similar exemption from SEC registration for advisers, but that exemption under the securities laws was eliminated by Dodd-Frank.
The meeting of creditors required by Bankruptcy Code Section 341 at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Also called the “creditors’ meeting.”
A 401(k) plan is an employer sponsored retirement savings plan.
Employee benefit plan authorized by Internal Revenue Code Section 401(k), whereby an employer establishes an account for a employee who may deposit a portion of the employee’s salary into the account. The amount deposited is not subject to income tax.
A 403(b) plan, sometimes known as a tax-sheltered annuity (TSA) or a tax-deferred annuity (TDA), is an employer sponsored retirement savings plan for employees of not-for-profit organizations, such as colleges, hospitals, foundations and cultural institutions.
Ownership or control of 5% of a class of securities may make an investor subject to Section 13(d) of the Exchange Act (see HF Guide: Ownership Chapter).
Generally speaking, a company (including a find) that has over 500 holders of any class of its equity securities in the United States is required to register with the SEC under the Exchange Act. [check numbers]
An organization recognized by the Internal Revenue Service as a not-for-profit organization operated for charitable or other exempt purposes and not for private interests.
A generic term for a “qualified tuition program” established under Section 529 of the Internal Revenue Code. Both 529 college savings plans and pre-paid tuition plans are generally considered 529 plans.
An a fortiori argument /ˈɑː fɔːrtɪˈoʊriː/ is an "argument from a yet stronger reason." (The phrase a fortiori is Latin for "from [something] stronger".)
An a fortiori argument draws upon existing confidence in a proposition to argue in favor of a second proposition that is held to be implicit in the first. The second proposition may be considered "weaker," and therefore the arguer adduces a "stronger" proposition to support it.
For example, if a person is dead (the stronger reason), then one can with equal or greater certainty argue that the person is not breathing. "Being dead" trumps other arguments that might be made to show that the person is not breathing, such as, for instance, not seeing any sign of breathing.
To elect not to exercise or offset a long option position.
Abatement of debts and legacies is a common law doctrine of wills that holds that when the equitable assets of a deceased person are not sufficient to satisfy fully all the creditors, their debts must abate proportionately, and they must accept a dividend.
In the case of legacies when the funds or assets out of which they are payable are not sufficient to pay them in full, the legacies abate in proportion, unless there is a priority given specially to any particular legacy. Annuities are also subject to the same rule as general legacies.
Abeyance (from the Old French abeance meaning "gaping") is a state of expectancy in respect of property, titles or office, when the right to them is not vested in any one person, but awaits the appearance or determination of the true owner. In law, the term abeyance can only be applied to such future estates as have not yet vested or possibly may not vest. For example, an estate is granted to A for life, with remainder to the heir of B. During B's lifetime, the remainder is in abeyance, for until the death of B it is uncertain who is B's heir. Similarly the freehold of a benefice, on the death of the incumbent, is said to be in abeyance until the next incumbent takes possession.
The term Hold in abeyance is used in lawsuits and court cases when a case is temporarily put on hold.
A swap or security-based swap that either the CFTC or SEC determines to be detrimental to the stability of a financial market, or participants in a financial market.
Method that records greater depreciation than straight-line depreciation in the years immediately following the purchase of the asset. And less depreciation than straight-line in the later years of an asset’s holding period.
A provision in many agreements, particularly lending agreements, that all obligations of the defaulting party become due following an event of default, even if the contractual due date for such obligations has not occurred.
A requirement that a trading center make standing bids and offers on the center readily available to be traded against.
Generally an off-market trade that may be entered into by one party to provide improper assistance to another party, such as a trade at an above market price intended to inflate the apparent value of a security.
Under the CEA and CFTC Rules, one of the various types of accounts that are recognized by bankruptcy rules as a separate from other types for purposes of allocating customer funds of an insolvent futures commission merchant.
The net worth of an account as determined by adding the value of the assets in the account and subtracting the value of the debt obligations and short positions.
Amount owed to a creditor for delivered securities, commodities, goods or services.
Claim against a debtor for an uncollected amount.
Formal document that communicates an independent accountant’s: (1) expression of limited assurance on financial statements as a result of performing inquiry and analytic procedures (review report); (2) results of procedures performed (agreed-upon procedures report); (3) non-expression of opinion or any form of assurance on a presentation in the form of financial statements information that is the representation of management (compilation report); or (4) an opinion on an assertion made by management in accordance with the statements on standards for attestation engagements (attestation report). An accountants’ report does not result from the performance of an audit.
Recording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the financial statements.
Change in (1) an accounting principle; (2) an accounting estimate; or (3) the reporting entity that necessitates disclosure and explanation in published financial reports.
The current value of a zero coupon l bond, taking into account interest that has been accumulating and automatically reinvested in the bond.
The process by which an increment of value is added, actually or theoretically, to an asset.
Often the last tranche in a structured obligation, the accretion bond, or Z-tranche, receives no cash payments until the other tranches are retired. While the other tranches are outstanding, the Z-tranche receives credit for periodic interest payments that increase its face value but are not paid out. After the other tranches are retired, the Z-tranche begins to receive cash payments that include both principal and continuing interest.
An accounting process by which the book value of a security purchased at a discount from par is increased during the security’s holding period. The accretion reflects the increase in the security’s value as it approaches the redemption or maturity date.
The recognition of an expense or revenue that has occurred but has not yet been recorded.
The attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur rather than only in the periods in which cash is received or paid by the business.
Method of accounting that recognizes (i) revenue when earned, rather than when collected and (ii) expenses when incurred rather than when paid.
See accretion bond.
An expense that has occurred but is not recognized.
Interest deemed to be earned on a security but not yet paid to the investor.
Total depreciation pertaining to an asset or group of assets from the time the assets were placed in services until the date of the relevant financial statement.
Profits that are not paid out as dividends but are instead added to the company’s capital base.
The relationship of a company’s current assets that can be converted into cash to its current liabilities: determined by dividing quick assets by current liabilities.
A private fund as defined in section 202(a) of the Investment Advisers Act of 1940, that is not a third-party subaccount and that executes 200 or more swaps per month. [CHECK]
The nearest base contract month that is not the current delivery month.
A security eligible for the OTC Bulletin Board® (OTCBB®) that meets the frequency of quotation requirement (see SEC Rule 15c2-11) or the so-called “piggyback” exception (see SEA Rule 15c2-11(f)(3)).
Market participants who trade many times a day.
A tranche in a structured obligation that is currently paying principal payments to investors.
The physical or cash commodity, as distinguished from a derivative contract. See also the “underlying.”
An ad valorem tax (Latin for "according to value") is a tax based on the value of real estate or personal property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax (VAT). However, an ad valorem tax may also be imposed annually, as in the case of a real or personal property tax, or in connection with another significant event (e.g. inheritance tax, expatriation tax, or tariff). In some countries a stamp duty is imposed as an ad valorem tax.
A tax based on the value (or assessed value) of real property.
An issue of bonds having a lien on the same revenues or other security pledged to outstanding bonds.
The financial test, sometimes referred to as a “parity test,” that must be satisfied under the bond contract securing outstanding revenue bonds or other types of bonds as a condition to issuing additional bonds. Typically, the test would require that historical revenues (plus, in some cases, future estimated revenues) exceed projected debt service requirements for both the outstanding issue and the proposed issue by an agreed ratio.
Amounts paid for stock in excess of its par value.
See: VARIABLE RATE.
A mortgage loan on which interest rates are adjusted at regular intervals according to predetermined criteria.
Adjustments to a taxpayer’s basis in property upward to include any additions of capital to the property and reduced by any returns of capital to the taxpayer. Additions might include improvements to the property and subtractions may include depreciation or depletion.
The cash-price equivalent reflected in the current futures price. This is calculated by taking the futures price times the conversion factor for the particular financial instrument (e.g., bond or note) being delivered.
Gross income reduced by business and other specified expenses.
The capital that registered intermediaries are required to maintain.
An offsetting pair of transactions, executed in violation of the SEC’s anti-fraud rules and the MSRB’s pricing rules, in which a municipal securities dealer purchases a security above or below the prevailing market price while executing an offsetting trade to reflect a gain or loss on the sale of those securities at a price not at market, and the contra-party purchases a different security from the municipal securities dealer at an adjusted price that exceeds the security’s market value by approximately the same amount. These trades are sometimes used to permit a party to the transaction to liquidate portfolio holdings without accurately reflecting profits or losses.
A trial balance prepared after all adjusting entries have been recorded and posted to the accounts.
Short for American Depository Receipt
A financing structure under which new bonds are issued to repay an outstanding bond issue prior to its first call date. Generally, the proceeds of the new issue are invested in government securities, which are placed in escrow. The interest and principal repayments on these securities are then used to repay the old issue, usually on the first call date.
A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court. A nonexclusive list of adversary proceedings is set forth in Fed. R. Bankr. P. 7001.
Expression of an opinion in an auditors’ report which states that financial statements do not fairly present the financial position, results of operations and cash flows in conformity with GAAP.
For purposes of financial institution regulation, a sales document that is generally distributed to the public or that is sent to a substantial number of individuals.
The general securities law definition of an “affiliate” is an entity controlling, controlled by, or under common control with another entity. See, e.g., Rule 144 under the Securities Act. However, be aware, that affiliation may have different meanings for different purposes. For example, Form BD, with which broker-dealers register with the SEC, generally looks to 25% ownership as a measure of affiliation.
The significance of being an affiliate of a regulated entity can be quite substantial. For example, if you run a search on the word “affiliate” in the Exchange Act Rules and in the Exchange Act Regulations, you will find a very substantial number of matches.
A person that, in addition to an issuer, can benefit from the safe harbor with respect to purchases of the issuer’s securities pursuant to Rule 10b-18 under the Exchange Act.
An acknowledgment transmitted by an institutional customer or its agent through the facilities of an automated confirmation system indicating that the customer agrees with the details of a transaction previously confirmed through the system by the municipal securities dealer on the other side of the transaction.
– Return after Taxes on Distributions includes the effect of taxable distributions on an asset to its holders.
A transaction generally used by two hedgers who want to exchange futures for cash positions. Also referred to as “Exchange for Physicals” (EFP) or “versus cash.”
Debt security issued or guaranteed by an agency of the federal government or by a government-sponsored enterprise (GSE). These securities include bonds and other debt instruments. Agency securities are typically only backed by the “full faith and credit” of the U.S. government if they are issued or guaranteed by an agency of the federal government, such as Ginnie Mae. Although GSEs such as Fannie Mae and Freddie Mac are government-sponsored, they are not government agencies.
A transaction executed by a firm acting as agent (broker) and not as principal (dealer).
Position limits imposed on the aggregate number or amount of positions in contracts based upon the same underlying commodity or security.
The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative position limits.
Annual General Meeting.
A letter from an auditor to the underwriters of a new issue of municipal securities setting forth the procedures undertaken with respect to the review of specified financial information (e.g., interim period financial statements or other information not covered by audited statements) appearing in the official statement and providing certain conclusions regarding the information with respect to which such review procedures were applied.
Compare: COMFORT LETTER.
The contract among the members of an underwriting syndicate establishing the syndicate rules, including the rights, duties and commitments of the senior manager and the other syndicate members with respect to the new issue of municipal securities being underwritten. In a competitive bid underwriting, the AAU is sometimes referred to as a syndicate account letter. The agreement among underwriters is also sometimes referred to as the underwriting agreement.
See: SYNDICATE; SYNDICATE ACCOUNT LETTER; UNDERWRITING AGREEMENT.
Compare: SELLING GROUP AGREEMENT.
An agricultural commodity is defined in Commission regulation 1.3(zz) as a commodity in one of four categories: (1) the enumerated commodities listed in section 1a of the Commodity Exchange Act, including such things as wheat, cotton, corn, the soybean complex, livestock, etc.; (2) a general operational definition that covers: “All other commodities that are, or once were, or are derived from, living organisms, including plant, animal and aquatic life, which are generally fungible, within their respective classes, and are used primarily for human food, shelter, animal feed, or natural fiber;” (3) a catch-all category for commodities that would generally be recognized as agricultural in nature, but which don’t fit within the general operational definition: “Tobacco, products of horticulture, and such other commodities used or consumed by animals or humans as the Commission may by rule, regulation, or order designate after notice and opportunity for hearing;” and (4) “Commodity-based indexes based wholly or principally on underlying agricultural commodities.”
A swap in an agricultural commodity as defined by CFTC Rule 1.3 (zz). See CPO/CTA Guide: Product Jurisdiction.
Off-exchange options on agricultural commodities that are transacted directly between commercial market participants for hedging or risk management purposes.
Any person that is in the business of soliciting or entering option transactions involving an enumerated agricultural commodity that are not conducted or executed on or subject to the rules of an exchange.
National professional membership organization that represents practicing certified public accountants (CPAs).
Generally, an actionable assistance of another person in a violation, either by direct and deliberate assistance or, in some cases, by recklessness. See, e.g., Section 20 of the Exchange Act; see generally Lofchie’s Guide to Broker-Dealer Regulation, Supervision Chapter.
Liability imposed by the CEA upon persons who provide substantial assistance and encouragement to another person who violates the CEA or CFTC rules. See CPO/CTA Guide: Supervision.
A mathematical formula that directs the purchase, sale or holding of certain securities. Often such formulae are used by high frequency traders. Lofchie’s Guide to Broker-Dealer Regulation, Trading Chapter.
A set of rules for accomplishing a task in a set of carefully defined steps. For example, algorithmic trading is trading that uses formulae to determine which assets are to be bought and sold, as well as the timing, pricing and quantity of transactions.
(1) A measurement of the total cost of a financing, expressed as a discount rate calculated using the present value of all debt service payments on the issue and the total proceeds of the issue. For purposes of this calculation, the amount of proceeds is adjusted by any accrued interest, original issue discount, original issue premium and costs of the financing (e.g., costs of issuance, credit enhancement fees, underwriter’s spread, etc.).
(2) For a variable rate demand obligation issue, the measure of costs expressed as a percentage that includes the cost of the liquidity facility, remarketing fees, interest payments and administrative fees.
An order type, if the order can execute in total, then it executes. Otherwise it stays in the order book until it can execute in total.
The splitting up of a trade execution between multiple accounts. Allocation decisions may raise fairness issues, particularly where the decisions as to how to allocate are being made after execution when prices have changed or, in some cases, when there is a shortage of the security to be allocated.
(1) The process of determining which purchasers are awarded which portion of an offering.
Reduction to accounts receivable reflecting money owed that may not be paid.
The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par (or basis) grade or location specified in the futures contract. See also Differentials.
A provision of a futures contract that allows buyers and sellers to make and take delivery under terms or conditions that differ from those prescribed in the contract.
The ADF is a FINRA facility for the display of quotations and the reporting and comparison of trades.
An entity that provides a platform for bringing together purchasers and sellers of securities or for otherwise performing functions commonly performed by an exchange but that does not have all of the regulatory powers over its participants that an exchange has over its member firms. Participants are typically broker-dealers, including municipal securities dealers, or institutional investors that purchase securities or offer securities for sale by way of an offering or a bid-wanted procedure. The system operator must be registered under SEC Rule ATS as a broker-dealer or a securities exchange.
A U.S. security that is a repackaged foreign security. A U.S. bank creates an ADR based on evidence of ownership of a specified number of shares in the foreign security, while the underlying shares are held in a depositary in the issuing company’s home country. U.S. investors may buy shares in the foreign company in the form of an ADR. The certificate, transfer, and settlement practices for ADRs are identical to those for U.S. securities.
Receipts for shares of foreign company stock maintained by an intermediary indicating ownership.
American Gas Association.
National professional membership organization that represents practicing certified public accountants (CPAs).
U.S. oil industry trade association.
A federal law that, among other things, authorized the issuance of Build America Bonds and certain other municipal securities, through December 31, 2010, as taxable tax-credit bonds or direct pay subsidy bonds. The Act also and temporarily expanded the scope of bonds that could be issued as bank qualified bonds.
Type of option contract that can be exercised at the buyer’s discretion on any trading day up to and including the expiration date. This differs from a European style option, which may only be exercised on its expiration date.
The individual at a firm who is primarily responsible for the development and maintenance of the firm’s AML procedures.
Anti Money Laundering Task Force
Liquidation of a debt through installment payments.
An accounting process by which the book value of a security purchased at a premium above par or the accreted value is decreased during the security’s holding period.
A table showing the periodic repayment of an amount of indebtedness. This table often shows interest payments in addition to principal repayments.
Alternative minimum tax imposed to back up the regular income tax imposed on corporation and individuals with income exceeding certain thresholds pay at least some income tax amount .
A tax-exempt bond whose interest is subject to the alternative minimum tax.
A type of financial security that is backed by specified pool of assets such as credit card receivables, auto loans, student loans, or other loan and lease obligations.
Person who makes buy or sell recommendations on the securities of particular companies and industry groups.
Those services necessary to support the transmission of electric power from seller to purchaser, given the obligations of control areas and transmitting utilities within those control areas, to maintain reliable operations of the interconnected transmission system. Ancillary services supplied with generation include load following, reactive power-voltage regulation, system protective services, loss compensation service, system control, load dispatch services, and energy imbalance services.
A pledge typically found in the bond contract for lease revenue bonds or securing a certificate of participation financing that commits the issuer or other obligor to make lease payments or other periodic debt service payments but only to the extent that funds are budgeted and appropriated on an annual basis by the issuer’s governing body.
A review mandated by FINRA Rule 3130 as to a firm’s compliance and supervisory procedures.
Financial information or operating data of the type included in the final official statement with respect to the issuer or an obligated person. Rule 15c2-12 obligates underwriters for primary offerings of municipal securities to ensure that the issuer or other obligated person has undertaken to provide such information or data on an annual basis to the MSRB’s EMMA system.
Report to the stockholders of a company which includes the company’s annual, audited balance sheet and related statements of earnings, stockholders’ or owners’ equity and cash flows, as well as other financial and business information.
Series of payments, usually payable at specified time intervals.
Refers to any market structure in which the identity of the parties placing bids and asks is not disclosed, making it more difficult for one trader to effectively discriminate against another.
Advanced Notice of Proposed Rulemaking
Condition that may increase the computation of earnings per share (EPS) or decrease loss per share solely because of the inclusion of common stock equivalents, such as stock options, warrants, convertible debt or convertible preferred stock, nomination or selection of the independent auditors.
This term usually refers to the provisions of law prohibiting fraud (typically in the form of material omissions or misstatements or deceptive devices, schemes or conduct) in the issuance, purchase and sale of securities. These include Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 and other related rules. Similar provisions appear in the securities laws of certain states as well as in the Commodity Exchange Act.
The term AML refers to the various procedures that financial institutions must follow in order to determine that funds that customers put with or through them do not derive from an improper source.
The scale created by the American Petroleum Institute to indicate the ‘lightness’ or ‘heaviness’ of crude oils and other liquid hydrocarbons.
Increase in the value of an asset.
The primary U.S. federal regulator of a bank depending on the type of bank, i.e., the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Federal Reserve Board.
Carriers approved by a market for the transportation of, for example, precious metals.
Any bank, stockyard, mill, storehouse, plant, elevator, or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.
Any warehouse which has been officially approved by the exchange and from which actual deliveries of commodities may be made on futures contracts.
A strategy involving the simultaneous purchase and sale of identical or equivalent assets across two or more markets in order to benefit from a discrepancy in their price relationship.
Bonds initially issued on a tax-exempt or other federally tax-advantaged basis that are formally deemed by the Internal Revenue Service to violate federal arbitrage regulations. If the Internal Revenue Service finds that tax-exempt bonds are “arbitrage bonds,” the interest becomes retroactively taxable and therefore is included in each bondholder’s gross income for federal income tax purposes.
A document executed by the issuer of tax-exempt or other federally tax-advantaged bonds at the time of initial issuance certifying as to various matters relating to compliance with federal income tax laws and regulations, including arbitrage rules.
A process for settling disputes between parties that does not involve going to court.
A futures price that has been affected by manipulation and is thus higher or lower than it would have been if it reflected the forces of supply and demand of the cash market. An artificial price does not reflect the equilibrium or efficient price of the market.
An unmatched trade from a previous day that is resubmitted “as of” the original trade date.
The interest rate structure which exists when long-term interest rates exceed short-term interest rates.
An option whose payoff depends on the average price of the underlying asset during some portion of the life of the option.
The price level of an offer to sell.
The return an investor would receive on a security if the investor paid the ask price.
To test a metal or an oil for purity or quality.
The appraised value of a property as set by a taxing authority for purposes of ad valorem taxation.
Asset allocation means dividing assets on a percentage basis among different categories of investments.
Different categories of investments that provide returns in different ways are sometimes described as asset classes. Asset classes may include equities, debt, cash and cash equivalents, real estate, and commodities including energy or precious metals.
A requirement that the total assets of an obligor be proportionally larger than total debt.
Buying or selling assets from affiliates, either directly or through third parties.
Buying securities with the intention of reselling these assets in the short term.
An exchange of assets. For example, exchanging fixed rate debt to floating rate debt to change the cash flow of a firm’s assets to provide a more favorable payment stream.
The asset swap spread (also called the gross spread) is the aggregate price that bondholders would receive by exchanging fixed rate bonds for floating rate bonds using the swaps market, mainly used to reduce interest rate risk.
Net sales divided by average total assets.
A security that is backed by a pool of assets, rather than by the general earnings flow of an issuer. See Section 27B of the Exchange Act (.
Assets are anything tangible or intangible of economic value owned by a business or individual.
The amount over which an adviser has authority to make trading or investment decisions.
A contract that allows the holder to convey his rights to a third party.
Designation by a clearing organization of an option writer who will be required to buy (in the case of a put) or sell (in the case of a call) the underlying contract when an option has been exercised.
The Advisers Act contains a general prohibition on the “assignment” of advisory agreements without the prior consent of the advised clients. In the context of advisors to private funds, the bar on assignments is generally most significant when a management company is sold as the sale of the advisor is generally deemed, unless exemptions are available, to constitute an assignment of the advisory agreements of that advisor.
Generally refers to an individual who is under the control of a regulated entity, such as a broker-dealer, futures commission merchant, CPO or CTA and is engaged in the conduct of the regulated entity’s business. t.
An agreement to continue performing duties under a contract or lease.
The number of open positions in the contract at the close of trading on the selected trading day.
At a price equal to the face, or nominal, value of a security.
An order to buy or sell at whatever price is obtainable when the order reaches the market. See Market Order.
When an option’s strike price is the same as the current trading price of the underlying commodity, the option is at-the-money.
Alternative trading system rule which requires an ATS that accounts for over 5% of the average daily volume in a security over four of the preceding six months, to:
1. establish written standards for granting access to trading on its system, and
2. not unreasonably prohibit or limit any person in respect to access to services offered by such system by applying these written standards in a unfair or discriminatory manner.
This term generally refers to a situation in which ownership by one person must be treated as ownership by the owners or other affiliates of that person. See also aggregation. .
A financial institution responsible for conducting the auction used in connection with the periodic interest rate reset and remarketing of auction rate securities.
A market in which trading in a particular asset is conducted at a particular electronic or physical venue.
A debt or other interest-bearing security that is periodically put up for rebid through a process established by the issuer so that the security is automatically transferred to the person willing to accept the lowest interest rate on the security.
A professional examination of a company’s financial statement by a professional accountant or group to determine that the statement has been presented fairly and prepared using GAAP.
The written record of the basis for the auditor’s conclusions that provides the support for the auditor’s representations. Also called working papers.
Agreement between an accounting firm and its client to perform an audit.
The report prepared by an auditor following its audit or investigation of an entity’s financial position and results of operations for a given period of time. As a general rule, the report should include: (a) a statement of the scope of the audit; (b) explanatory comments concerning exceptions from generally accepted accounting principles and auditing standards; (c) expression or disclaimer of opinions; (d) explanatory comments concerning verification procedures; (e) financial statements and schedules; and (f) statistical tables, supplementary comments and recommendations.
Application of an audit procedure to less than 100% of the items within an account for the purpose of analysis.
A step-by-step record by which accounting data can be traced to their source.
The record of trading information identifying, for example, the brokers participating in each transaction, the firms clearing the trade, the terms and time or sequence of the trade, the order receipt and execution time, and, ultimately, and when applicable, the customers involved.
A financial statement that has been examined by an auditor and upon which the auditor has expressed or disclaimed an opinion.
Guidelines to which an auditor adheres, such as GAAP.
Person who audits financial accounts and records kept by others.
A certification, usually by the trustee under a bond contract, appearing on a bond certificate attesting that the certificate is authentic.
A separate state or local governmental issuer expressly created to issue bonds or run an enterprise, or to do both. Certain authorities issue bonds on their own behalf, such as transportation or power authorities.
The par value at which a debt security can be purchased as authorized by the bond contract.
Maximum number of shares of any class a company may legally create under the terms of its articles of incorporation.
Issuer document which states the legal basis for debt issuance, and states the general terms of the financing.
A facility that processes debit and credit transfers under rules established by a Federal Reserve Bank operating circular on automated clearinghouse items or under rules of an automated clearinghouse association.
A service provided by National Securities Clearing Corporation used by financial institution so transfer customer accounts from one firm to another.
Systems that permit investors , particularly large institutions, to seek counter parties to their trades with minimal publicity and price impact.
A quotation-as long as there has not been any human intervention to determine any action to be taken with respect to the order once the order is received-that is displayed by a trading center that permits an incoming order to be marked as an “immediate-or-cancel” quotation and, with respect to such quotation, immediately and automatically:
1. Executes against the displayed quotation up to its full-size;
2. Cancels any unexecuted portion of the incoming order without sending the order elsewhere, and
3. Transmits a response to the sender of the order indicating the action taken, while also immediately and automatically updating its displayed quotation. [Regulation NMS Rule 600(b)(3)].
Automated quotation means a quotation displayed by a trading center that:
1. Permits an incoming order to be marked as immediate-or-cancel;
2. immediately and automatically executes an order marked as immediate-or-cancel against the displayed quotation up to its full size;
3. Immediately and automatically cancels any unexecuted portion of an order marked as immediate-or-cancel without routing the order elsewhere;
4. Immediately and automatically transmits a response to the sender of an order marked as immediate-or-cancel indicating the action taken with respect to such order; and
5. Immediately and automatically displays information that updates the displayed quotation to reflect any change to its material terms.
A trading center that is capable of displaying automated quotations. [Regulation NMS Rule 600(b)(4)].
A provision in an option contract specifying that it will be exercised automatically on the expiration date if it is in-the-money by a specified amount.
The automatic regulation of the power output of electric generators within a prescribed range in response to a change in system frequency, or tie-line loading, to maintain system frequency or scheduled interchange with other areas within predetermined limits.
An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor after a bankruptcy petition is filed. Notwithstanding the automatic stay, various provisions of the Bankruptcy Code allow counterparties to certain contracts (“protected contracts”) to terminate or exercise other contractual rights.
The funds obligated for the payment of debt service and the making of other deposits required by the bond.
Average annual yield is the average yearly income on an investment, such as a bond, expressed in percentage terms.
Refers to the average daily volume of trading (e.g., number of shares traded) in a particular security.
Volume for a specified time period divided by the number of business days within that same time period.
With respect to an issue of bonds, the weighted period of time required to repay half of the issue through scheduled principal payments (e.g., maturity, sinking fund redemption, etc.). The average life, also referred to as the “weighted average life” or “weighted average maturity” or “WAM,” is a reflection of the rapidity with which the principal of an issue is expected to be paid.
The average price when a larger trade is executed in multiple trades at different prices. Executing firms may be allowed to allocate a series of trades executed at various prices to multiple customers at the average price rather than at the price at which any particular execution was done.
A way of arriving at the cost of inventory that computes the average cost of all goods available for sale during a fixed period in order to determine the value of inventory.
The ability of the trustee to negate a pre-petition transfer made by an insolvent debtor.
The official acceptance by the issuer of a bid or offer to purchase a new issue of securities by an underwriter.
Futures delivery months other than the spot or front month (also called deferred months ).
The department in a financial institution that processes and deals and handles delivery, settlement, and regulatory procedures.
Fixing the price of a commodity for which the commitment to purchase has been made in advance. The buyer can fix the price relative to any monthly or periodic delivery using the futures markets.
A delta-neutral ratio spread in which more options are bought than sold.
Indicates the percentage of an income that is used to pay debts.
A sales charge or commission payable by an investor at the time of redemption of a fund security. This charge is typically reduced (potentially to zero) the longer the investor holds its investment.
Selling one or more at-the-money options and buying a larger number of out-of-the-money options.
Market situation in which futures prices are lower in succeeding delivery months. Also known as an inverted market. The opposite of contango.
A person who is subject to "statutory disqualification" under the Securities Laws or the CEA.
Firms with a significant number of employees who previously worked for other firms that were disciplined for customer-related misconduct to a degree that is significantly above the average in the financial industry. Such firms are subject to enhanced supervisory requirements (i) by the NFA in the case of the futures industry and (ii) by FINRA in the case of broker-dealers. [refer to rules].
Individuals who have been the subject of regulatory sanctions or who have worked for “Bad Boy Firms.”
Amount owed considered to be uncollectible.
Limitations imposed by the Internal Revenue Code that restrict the amount of bond proceeds that may be used for non-qualifying activities.
An instruction, generated by a registered clearing agency operating a system for the comparison and netting of inter-dealer transactions, that reflects an obligation of a securities dealer to deliver securities to (a “deliver balance order” or “DBO”), or receive securities from (a “receive balance order” or “RBO”), another securities dealer.
The requirement imposed by electricity grids or natural gas pipelines that supply and demand be equal over a certain time period.
A particularly large principal payment required to be made on a debt security, typically at maturity (as opposed to repayment in relatively even installments). .
Trading a large volume at closing time for the purpose of moving the closing market price.
For various purposes, a “bank” may include a commercial a bank, an insured bank, a mutual savings bank, a savings bank, an insured credit union, a savings association, an agency or a branch of a foreign bank, and members of a Federal Home Loan Bank. The term “bank” also includes any person engaged in the business of banking, as well as a Federal Reserve Bank, a Federal Home Loan Bank, and even a state or unit of general local government to the extent that the state or unit of general local government acts as a paying bank. It is important to be aware of For purposes of the Exchange Act, the term bank is defined in Section 3(a)(6); and the SEC has further indicated that it will treat a U.S. savings and loan as a bank for purposes of the broker-dealer exemptions provided to banks by Section 3(a)(4) and Section 3(a)(5) of the Exchange Act. the relevant statutory or regulatory definition. On the other hand, non-U.S. offices of non-U.S. banks are not “banks” as defined in the Exchange Act.
A bank or separately identifiable department or division of a bank engaged in the business of effecting securities transactions.
Securities in which banks are permitted to invest under relevant banking laws.
A company that controls a bank.
Determines whether and why there is a difference between the balance shown on a bank statement and the balance of the cash account in the firm’s records.
Common name for the Currency and Foreign Transactions Reporting Act.
A draft or bill of exchange accepted by a bank where the accepting institution guarantees payment.
Means that part of any business day on which an office of a bank is open to the public for carrying on substantially all of its banking functions.
An affiliate of a bank that is thereby subject to the Volcker Rule.
A banknote (often known as a bill, paper money, or simply a note) is a type of negotiable instrument known as a promissory note, made by a bank, payable to the bearer on demand. When banknotes were first introduced, they were, in effect, a promise to pay the bearer in coins, either gold or silver, but gradually became a substitute for the coins and a form of money in their own right. Banknotes were originally issued by commercial banks, but since their general acceptance as a form of money, most countries have assigned the responsibility for issuing national banknotes to a central bank. National banknotes are legal tender, meaning that medium of payment is allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Historically, banks sought to ensure that they could always pay customers in coins when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of central banks backing their currencies in gold or silver. Today, most national currencies have no backing in precious metals or commodities and have value only by fiat. With the exception of non-circulating high-value or precious metal issues, coins are used for lower valued monetary units, while banknotes are used for higher values.
The idea of using a durable light-weight substance as evidence of a promise to pay a bearer on demand originated in China during the Han Dynasty in 118 BC, and was made of leather. The first known banknote was first developed in China during the Tang and Song dynasties, starting in the 7th century. Its roots were in merchant receipts of deposit during the Tang Dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage in large commercial transactions. During the Yuan Dynasty, banknotes were adopted by the Mongol Empire. In Europe, the concept of banknotes was first introduced during the 13th century by travelers such as Marco Polo, with European banknotes appearing in 1661 in Sweden.
A legal procedure for dealing with debt problems of individuals and businesses including, a case filed under the United States Bankruptcy Code.
The common name for title 11 of the United States Code (11 U.S.C. §§ 101-1330).
The bankruptcy judges in regular active service in each district; a unit of the district court.
All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)
A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.
The document filed by the debtor (in a voluntary case) or by creditors (in an involuntary case) by which opens the bankruptcy case.)
A unit of volume measure used for petroleum and refined products. 1 barrel = 42 U.S. gallons.
Copper, aluminum, lead, nickel, and tin.
In electric markets, refers to an agreed-upon level of electricity consumption from which deviations are measured.
The minimum amount of electric power delivered or required over a given period of time at a steady rate.
The difference between the spot or cash price and the futures price of the same or a related commodity. Basis is usually computed to the near future, and may represent different time periods, product forms, qualities and locations. The local cash market price minus the price of the nearby futures contract is equal to the basis.
The price difference between otherwise identical products in different markets (in this report, different geographical natural gas markets)
The grade of a commodity used as the standard or par grade of a futures contract.
One basis point equals 1/100 of one percent.
A price of a security expressed in terms of the yield or percentage of return to be realized by the purchaser.
Offer or sale of a cash commodity in terms of the difference above or below a futures price (e.g., 10 cents over December corn).
The risk associated with an unexpected widening or narrowing of the spread between an underlying position and a hedge position.
A swap whose cash settlement price is calculated based on the basis between a futures contract (e.g., natural gas) and the spot price of the underlying commodity or a closely related commodity (e.g., natural gas at a location other than the futures delivery location) .
Exchange of fixed price for a floating for a defined basis product.
A measured amount in which crude oil and refined product shipments are sent through a pipeline.
An automated quotation displayed by an automated trading center that is protected from trade-throughs.
Basel Committee on Banking Supervision
In reference to a Natural Gas measure of capacity or supply, a billion cubic feet.
A beach bum trust provision, in the law of trusts, ties the ability of a trust beneficiary to take from the trust to the beneficiary's own earnings. Such a provision serves to prevent a beneficiary from lazily living off the trust funds (i.e. a "beach bum"). If the beneficiary earns no income, then he reaps nothing from the trust.
One who expects a decline in prices. The opposite of a bull.
A market in which prices generally are declining.
A temporary rise in prices during a bear market.
In most commodities and financial instruments, the term refers to selling the nearby contract month, and buying the deferred contract, to profit from a change in the price relationship.
A vertical spread involving the sale of the lower strike call and the purchase of the higher strike call, called a bear call spread. Also, a vertical spread involving the sale of the lower strike put and the purchase of the higher strike put, called a bear put spread.
A physical bond that does not identify its owner and is presumed to be owned by the person who holds it.
A benchmark is a standard against which investment performance is measured.
Permits trade-throughs for the execution of orders at a price that is not based, directly or indirectly, on the quoted price of the NMS stock at the time of execution and for which the material terms were not reasonably determinable at the time the commitment to execute the order was made (e.g., VWAP orders). [Regulation NMS Rule 611(b)(7)].
Generally refers, in common parlance, to the entry that is the economic owner of an asset, as opposed to the legal owner. For purposes of Section 13(d) and Section 13(g), and the Rules thereunder, of the Exchange Act, the term refers to an entity that is either the owner or that has the power either to vote an asset or to direct its disposition (or that can have this power within sixty days). See Rule 13d-3 under the Exchange Act.
Legal process, governed by federal statute, whereby the debts of an insolvent person are liquidated after being satisfied to the greatest extent possible by the debtor’s assets.
An exotic option which can be exercised on a specified set of predetermined dates during the life of the option
A highly customized swap.
The highest quoted bid.
These terms generally refer to the highest bid price and the lowest offer price for a particular asset in a market or, in the case of the NBBO, across all markets.
The obligation of intermediaries to achieve the best possible result when executing customer orders.
A measure of how a stock’s movement correlates to the movement of the entire stock market. y.
Measure of a stock’s relative volatility. The beta is the covariance of a stock in relation to the rest of the stock market.
Bank Holding Company
The price a buyer is willing to pay for an asset. The opposite of Offer or Ask.
A document, often included with the notice of sale for a competitive bid underwriting, to be completed by underwriters submitting a bid on a new issue of municipal securities to be sold at a competitive sale.
Inventory of bonds distributed by a holder in order to obtain bids.
The difference between the bid and offer prices of an asset.
The restrictions established by the issuer in the notice of sale for a competitive bid underwriting on the terms of bids submitted by prospective underwriters.
Generally a letter in which a buyer represents and warrants that it is sophisticated and that it is able to perform its own due diligence or assessment of risk. In some cases, a buyer in such a letter may waive the protection of federal securities laws, although such a waiver may not be enforceable in court.
A direct contract between a seller and buyer.
Short-term obligations that mature in one year or less and are sold on the basis of a rate of discount.
Futures delivery months other than the spot or front month (also called deferred months ).
Bank for International Settlements
Trading based on algorithms.
An option pricing model initially developed by Fischer Black and Myron Scholes for securities options and later refined by Black for options on futures.
The combination and average of two points on the yield curve to find a yield at the midpoint.
A blind auction, also called a sealed bid auction, is a market structure in which the traders place offers to buy or sell without seeing current bids and offers, as opposed to an order book format where standing bid and offer prices are continuously visible to all market participants.
Colloquially, a large trade of or position in securities.
Generally, a broker-dealer that is deemed to be a market marker by virtue of its willingness to take large positions in a security.
A large transaction that is privately negotiated between sophisticated market participants before being executed on an exchange’s trading facility in accordance with the rules of the exchange. See CPO/CTA Guide: Trading.
Common name for questionnaires distributed by the regulators to broker-dealers asking for information on a particular security pursuant to Rule 17a-25 under the Exchange Act.
A colloquial term for state securities laws derived from a statement that such laws were directed at unethical promoters who “would sell building lots in the blue sky.” Although these laws vary from state to state, most contain provisions concerning (a) prohibitions against fraud, (b) regulation of broker-dealers and investment advisors doing business in the state, and (c) registration of securities.
A memorandum typically prepared by underwriter’s counsel describing the treatment of a particular new issue of municipal securities under the blue-sky laws of the various states.
The Board of Directors of and entity.
The Board of Governors of the Federal Reserve System.
Individuals responsible for overseeing the affairs of an entity, including the election of its officers.
Any organized exchange or other trading facility for the trading of futures and/or option contracts. Each type of board of trade has a set of self-regulatory responsibilities it must satisfy in order to obtain registration and maintain its designation with the CFTC.
Bank of England
An enterprise that often is operated out of inexpensive, low-rent quarters (hence the term ‘boiler room’), that uses high pressure sales tactics (generally over the telephone), and possibly false or misleading information to solicit generally unsophisticated investors.
Transactions in a derivative that serve as a substitute for transactions in physical marketing channel and reduce actual risks that a business would otherwise face.
A debt instrument, also considered a loan, that an investor makes to a corporation, government, federal agency or other organization (known as an issuer) in which the issuer typically agrees to pay the owner the amount of the face value of the bond on a future date, and to pay interest at a specified rate at regular intervals.
Notes issued by a governmental unit, usually for capital projects, that are to be repaid from the proceeds of the issuance of long-term bonds.
An agreement outlining the obligations of the issuer with respect to the issuance and repayment of bonds.
A lawyer or law firm that delivers a legal opinion which deals with the issuer’s authorization to issue bonds and the tax-exempt nature of the bond.
The amount below par value that a bond sells for.
The return on a discounted security figured on a basis that permits comparison with interest-bearing securities.
An adjustment to a CMO yield which reflects its greater present value, created because CMOs pay monthly or quarterly interest, unlike most other types of bonds, which pay interest semiannually.
The 12-month accounting period, established under some bond contracts, used in connection with an issue of bonds. Principal and interest payments are scheduled in accordance with the bond fiscal year. The bond fiscal year may not necessarily coincide with the issuer’s own fiscal year.
An investment company that invests in debt securities.
An additional agreement to a bond issue that defines the rights, privileges, and limitations of bondholders.
A guarantee by a bond insurer of the payment of the principal of and interest on bonds as they become due.
An insurance company or consortium of insurance companies that issues bond insurance policies to guarantee the payment of principal of and/or interest on bonds.
A separate document attached to a certificated registered security that is used in lieu of an assignment form to authorize the transfer of the security.
The money paid to the issuer by the purchaser or underwriter of a new issue of municipal securities.
The contract between the underwriter and the issuer setting forth the final terms, prices and conditions upon which the underwriter purchases a new issue of securities. It is also called the purchase contract.
A rating is based on an examination of the issuer’s financial strength and the likelihood that it will be able to meet scheduled repayments. Ratings range from AAA (best) to D (worst). Bonds receiving a rating of BB or below are not considered investment grade because of the relative potential for issuer default.
A process whereby the voters of a governmental unit are given the opportunity to approve or disapprove a proposed new issue of municipal securities.
A record, kept by a transfer agent or registrar on behalf of the issuer, that lists the names and addresses of the holders of registered bonds.
The document or documents in which the issuer authorizes the issuance and sale of securities.
The sale of a block of bonds and the purchase of another block of similar market value. Swaps may be made to establish a tax loss, upgrading credit quality, extending or shortening maturity, etc.
All legal and financial documents, including bond counsel’s legal opinion and other opinions, associated with the offering of a new issue of l securities.
A unit of $1,000 of debt outstanding for one year.
The semi-annual discount rate that equates the principal and interest payments to the original issue proceeds.
The portion of an issuer’s total tax-supported debt represented by outstanding bonds.
Long-term obligations that mature in ten years or more.
A method of recording and transferring ownership of securities electronically, eliminating the need for physical certificates.
A series of accounting or bookkeeping entries used to reflect change in ownership of assets.
The value at which an asset is carried on the financial records of its owner. This value may be the original cost of acquisition of the asset or original cost adjusted by amortization of a premium or accretion of a discount. The book value may differ from the asset’s current market value.
A system for the transfer of ownership of securities through entries on the records of a centralized agency.
A security that is not available to purchasers in physical form.
A forward pricing sales arrangement in which the cash price is determined either by the buyer or seller within a specified time.
The process of recording financial transactions and keeping financial records.
Generally, refers to the documents that a regulated entity is required to maintain.
The line in a financial statement that shows net income or loss.
Securities sold through negotiated direct placements or competitive bids.
An option position in which the owner establishes a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same asset.
Groupings of underwriters determined by underwriting commitment of each firm in a syndicate. Tombstone advertising is normally in bracket order, with each firm appearing alphabetically within a given bracket.
A location, other than the head office where a registered entity does business or meets with the public.
The person designated to supervise the activities of a branch office.
A rapid and sharp price decline.
The point at which total revenues equals total costs.
The point at which an option buyer or seller experiences no loss and no profit on an option. Call breakeven equals the strike price plus the premium; put breakeven equals the strike price minus the premium.
Mutual funds with front-end loads or sales may charge lesser amounts as the amount of the investment increases to certain levels called “breakpoints”.
A statutory interpretation issued by the CFTC clarifying that a wide variety of commercial contracts are forward contracts notwithstanding the fact that such transactions “may ultimately result in performance through the payment of cash as an alternative to actual physical transfer or delivery of the commodity.” The interpretation in effect supplanted the intent to deliver test previously used to distinguish between forwards and futures. n.
Generally referring to an index, it indicates that the index is composed of a sufficient number of stocks or of stocks in a variety of industry groups. Compare Narrow-Based.
A futures contract based upon an index that is not considered narrow-based as defined in Section 1a(25) of the Commodity Exchange Act.
Any index of securities that does not meet the legal definition of narrow-based security index.
Common terms for Parts 2A and 2B of Form ADV, the investment adviser registration forms.
A person paid a fee or commission for executing buy or sell orders for a customer. An intermediary (or middleman) who matches a willing seller to willing buyer for all contract terms (price, volume, location, physical or financial) to effect a transaction.
In commodity futures trading, the term may refer to: (1) Floor broker, a person who actually executes orders on the trading floor of an exchange; (2) Account executive or associated person, the person who deals with customers in the offices of futures commission merchants; or (3) the futures commission merchant.
The term “broker” is defined in SEA Section 3(a)(4). In common parlance, the term may refer to the individual sales representative who deals with customers, but that usage is not consistent with the legal terminology under which the legal employer is the “broker” and the salesperson is an “associated person.”
Two or more persons with exchange trading privileges who (1) share responsibility for executing customer orders; (2) have access to each other’s unfilled customer orders as a result of common employment or other types of relationships; or (3) share profits or losses associated with their brokerage or trading activity.
A securities firm that may act as agent (broker) or as principal (dealer).
A Regulation T account (Section 220.7 of Regulation T) in which a broker-dealer may record transactions with another broker-dealer that are not subject to a Regulation T lending limit.
Common name for an over-the-counter-derivatives-dealer or OTCDD, as defined in Rule 3b-12 under the Exchange Act.
A FINRA-provided research tool that is intended to allow investors to check on the backgrounds of registered broker-dealers and their associated persons.
A dealer or a separately operated and supervised division or unit of a dealer that principally effects transactions for other dealers or that holds itself out as a broker’s broker.
Banking Supervision Committee
A brokerage enterprise that ‘books’ (i.e., takes the opposite side of) retail customer orders without actually having them executed on an exchange. See also boiler room.
Directly or indirectly taking the opposite side of a customer’s order into a broker’s own account or into an account in which a broker has an interest, without open and competitive execution of the order on an exchange.
Taxable municipal securities issued through December 31, 2010 under the American Recovery and Reinvestment Act of 2009 (ARRA).
One who expects a rise in prices. The opposite of bear
A market in which prices are rising.
In most commodities and financial instruments, the term refers to buying the nearby month, and selling the deferred month, to profit from the change in the price relationship.
A vertical spread involving the purchase of the lower strike call and the sale of the higher strike call, called a bull call spread. Also, a vertical spread involving the purchase of the lower strike put and the sale of the higher strike put, called a bull put spread.
A long-term obligation that has no amortization of principal prior to maturity.
A bond that pays regular interest, but that does not repay principal until maturity.
A one-time, lump-sum repayment of an outstanding loan.
Bars or ingots of precious metals, usually cast in standardized sizes.
A discretionary order entered on behalf of multiple customers. Such orders are generally subject to post-execution allocation procedures that allocate the trades to individual clients provided certain procedures are followed to ensure that such allocation is fair and equitable
The simultaneous sale or purchase of one each of a series of consecutive futures contracts.
Standards applicable to swap dealers and major swap participants, as well as other regulated entities, related to due diligence and disclosure obligations, including duties to communicate in a fair and balanced manner based on principles of fair dealing and good faith, as well as outright prohibitions against certain practices.
A written plan that outlines procedures to be followed in the event of an emergency or significant business disruption whether relating to the external world (hurricanes, floods, wars), its own technology (computer failure) or its own personnel (swine flu).
A calendar day other than a Saturday or a Sunday or a holiday. See also Exchange Business Day and Banking Day.
An executed trade cancelled by the parties or by a regulator, perhaps because the trade was deemed to have been executed in error.
A three-legged option spread in which each leg has the same expiration date but different strike prices. For example, a butterfly spread in might consist of one long call at a $5.50 strike price, two short calls at a $6.00 strike price, and one long call at a $6.50 strike price. The strategy that has both limited risk and limited profit potential.
To buy (or sell) at the end of the trading session within the closing price range.
To buy (or sell) at the beginning of a trading session within the opening price range.
Investing with the strategy of holding any position for the long term.
See also close-out.
See also Covered Call.
A market participant who takes a long position or buys an option.
A purchase of a specified quantity of a specific grade of a commodity at a fixed number of points above or below a specified delivery month futures price with the buyer allowed a period of time to fix the price either by purchasing a futures contract for the account of the seller or telling the seller when he wishes to fix the price.
A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that previously prevailed.
Collection of formal, written rules governing the conduct of a corporation’s affairs (such as what officers it will have, what their responsibilities are, and how they are to be chosen).
Cost and Freight’ paid to a point of destination and included in the price quoted; same as C.A.F.
Cost, insurance, and freight paid to a point of destination and included in the price quoted.
A trade to close out a deep out-of-the-money option contract position at price less than the minimum trading tick.
A benefit plan maintained by an employer for the benefit of the employees under which each employee has the opportunity to make some choices between the benefits offered.
Colloquial term for a list of new securities issues scheduled to come to market in the near future.
Also called an intra-commodity spread. The simultaneous purchase and sale of the same futures contract, but different contract months. (i.e., buying a September futures contract and selling a December futures contract on the same underlying).
The simultaneous purchase and sale of options on futures contracts of the same strike price, but different expiration dates.
An option contract that gives the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position at a specified price on or prior to a specified expiration date. The opposite of put.
The requirement that a financial instrument such as a bond be returned to the issuer prior to maturity, with principal and accrued interest paid off upon return. See also redemption.
An auction in which the traders place limit bids and offers over a specified time period and those orders are subsequently matched, as opposed to an order book format where standing bid and offer prices are continuously available to all market participants.
The date on which bonds may be called for redemption as specified by the bond contract.
Loan repayable on demand.
The dollar amount paid to the investor by the issuer of debt securities for exercising a call provision that is usually stated as a percent of the principal amount called.
The specified price at which a bond will be redeemed or called prior to maturity, typically either at a premium (above par value) or at par.
A feature of some callable bonds that protects the investor from calls for a specified period of time.
The risk that a bond will be called prior to its maturity date, causing the bond’s principal to be returned sooner than expected. As a consequence, investors may have to reinvest their principal at a lower rate of interest
Bonds that are redeemable by the issuer prior to the maturity date, at a specified price at or above par.
The maximum interest rate that can be paid on a floating-rate security or the maximum amount or delivery that may be required.
In reference to electricity, the maximum load that a generating unit or generating station can carry under specified conditions for a given period of time without exceeding approval limits of temperature and stress.
The amount of electric energy and capacity available for purchase.
Average output compared to maximum potential output over a given period of time, usually expressed as a fraction.
The amount of capacity above planned peak system demand available to provide for scheduled maintenance, emergency outages, system operating requirements, and unforeseen demand.
A market for the trading of capacity credits (the ability to produce electricity in the market area during a defined period) usually between parties obligated to deliver electricity to customers and power plant owners.
A security on which the investment return on an initial principal amount is reinvested at a stated compounded rate until maturity. At maturity the investor receives a single payment (the “maturity value”) representing both the initial principal amount and the total investment return.
Model of the relationship between expected risk and expected return.
Outlay of money to acquire or improve capital assets such as buildings and machinery.
Portion of the total gain that is not taxed as ordinary income.
Tax assessed on profits from the sale of a capital asset, such as stock, bonds or real estate.
Capital markets are the markets in which equities, bonds and other financial instruments are sold to investors.
A stock index which is computed by adding the capitalization (float times price) of each individual stock in the index, and then dividing by the divisor. The stocks with the largest market values have the heaviest weighting in the index.
Convert a schedule of income into a principal amount, called capitalized value, by dividing by a rate of interest.
A portion of the proceeds of an issue that is set aside to pay interest on the securities for a specified period of time. Capitalized interest is sometimes referred to as “funded interest.”
Lease recorded as an asset acquisition accompanied by a corresponding liability by the lessee.
Capital Asset Pricing Model.
An option that is automatically exercised when the underlying security closes at or above (for a call) or at or below (for a put) the Option’s cap price.
Effecting manipulative transactions in an instrument underlying an option shortly before the option’s expiration date to depress or prevent a rise in the price of the instrument so that previously written call options will expire worthless, thus protecting premiums previously received. See Pegging.
A contract or unit of trading. Originally, one contract, or “car,” was the quantity of a commodity that would fill a railroad car. See also lot.
The cost of borrowing funds to finance a position. A positive carry happens when the rate on the securities being financed is greater than the rate on the funds borrowed. A negative carry is when the rate on the funds borrowed is greater than the rate on the securities that are being financed.
A trade where one borrows a currency or commodity commodity or currency with a low cost of carry and lends a similar instrument with a high cost of carry in order to profit from the differential.
A broker-dealer or FMC through which another broker-dealer, or FCM elects to clear or custody its trades or positions.
For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity.
Amount, that an asset shows on the balance sheet of a company. Also known as book value.
Last year’s ending stocks of a storable commodity.
Provision of tax law that allows current losses or certain tax credits to be utilized in the tax returns of future periods.
A situation in which the execution of market orders or stop loss orders on an electronic trading system triggers other stop loss orders which may, in turn, trigger still more stop loss orders. This may lead to a very large price move if there are no safety mechanisms to prevent cascading.
The Regulation T account (see Section 220.8 of Regulation T) in which broker-dealers settle trades with customers that are deemed not involve an extension of credit.
Method of bookkeeping by which revenues and expenditures are recorded when they are received and paid.
The physical or actual asset as distinguished from the derivative. Also referred to as Actuals.
Short-term (generally less than three months), highly liquid investments that are convertible to known amounts of cash.
Net of cash receipts and cash disbursements relating to a particular activity during a specified accounting period.
A place where people buy and sell the actual cash commodities.
A multicolumn journal used to record sums of cash paid out for expenses.
Current market price of the actual or physical commodity. Also called the spot price.
Ratio of cash and marketable securities to current liabilities.
The sale of commodities in local cash markets.
A method of settling futures, options and other derivatives whereby the seller (or short) pays the buyer (or long) the cash value of the underlying commodity or a cash amount based on the level of an index or price according to a procedure specified in the contract rather than making physical delivery of the underlying. Also called Financial Settlement. Compare to Physical Delivery.
A securities transaction in which the settlement date is the same as the trade date.
An extraordinary redemption triggered by the destruction of or substantial damage to the facilities from which the revenues of the bond were payable.
These terms generally refer to the different types of offering restrictions imposed under Regulation S (which is the Regulation under the Securities Act that permits the sale of securities outside the United States without registration of those securities with the SEC).
The Chicago Board Options Exchange.
The Board of Trade of the City of Chicago, Inc.
China Banking Regulatory Commission
Commodity Credit Corporation.
Clearing Corporation of India
Central Counterparties. Also may be referred to as Derivatives Clearing Organizations (DCOs).
Certificate of Deposit.
Collateralized Debt Obligation
Credit Default Swap
Commodity Exchange Act
Committee of European Banking Supervisors
Committee of European Insurance and Occupational Pensions Supervisors
A government bank that regulates a country’s banks and manages a nation’s monetary policy. The Federal Reserve is the central bank in the United States.
A single order book covering an entire market that accepts limit orders.
A market where market participants execute all transactions with the central entity operating under a set of rules (product specifications, execution procedures, credit requirements, dispute resolution, code of conduct, etc.) that apply to a range of products offered through this entity.
Chief Executive Officer.
A time deposit with a specific maturity traditionally evidenced by a certificate.
Proof of ownership document.
An instrument evidencing a pro rata share in a specific revenue stream.
A security evidenced by a physical document.
Individual who is trained to develop and implement financial plans for individuals, businesses, and organizations, utilizing knowledge of income and estate tax, investments, risk management analysis and retirement planning. ce, ethics and an exam. CFPs are not regulated by a governmental authority.
Accountant who has satisfied the education, experience, and examination requirements of his or her jurisdiction necessary to be certified as a public accountant.
Stocks of a commodity that have been inspected and found to be of a quality deliverable against futures contracts.
Committee of European Securities Regulator
A measure of the ignitability of diesel fuel.
Cancel Former Order.
Certified Financial Planner I.
Commodity Futures Trading Commission.
An act that significantly broadened the CFTC’s regulatory authority over Exempt Commercial Markets by creating a new regulatory category--ECMs with Significant Price Discovery Contracts and subjecting them to regulatory and reporting requirements.
The Chairman of the Board of Directors, or one acting in lieu of and with the authority of the Chairman of the Board.
The day-over-day change in open interest.
An extraordinary redemption that results from a change in use of a project financed with bond proceeds that may cause interest on tax-exempt bonds to become taxable.
The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership.
The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer,” or a “family fisherman” as those terms are defined in the Bankruptcy Code.
The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income.
The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.
The chapter of the Bankruptcy Code providing for “liquidation,”(i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.)
The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).
The use of graphs and charts in the technical analysis of markets to plot trends of price movements, average movements of price, volume of trading, and open interest.
Usually refers to the selection of a class of bonds or notes deliverable against an expiring bond or note futures contract.
Is (1) A negotiable demand draft drawn on or payable through or at an office of a bank; (2) A negotiable demand draft drawn on a Federal Reserve Bank or a Federal Home Loan Bank; (3) A negotiable demand draft drawn on the Treasury of the United States; (4) A demand draft drawn on a state government or unit of general local government that is not payable through or at a bank; (5) A United States Postal Service money order; or (6) A traveler\’s check drawn on or payable through or at a bank. (7) The term check includes an original check and a substitute check.
The Board of Trade of the City of Chicago, Inc.
The person in a registered entity who assumes primary responsibility for the proper workings of the firm’s compliance program.
Chief officer of a firm principally responsible for the its activities.
Executive officer who is responsible for handling funds, keeping financial records, and financial planning for a corporation.
Commonly used term to describe the separation between that part of a firm that may possess material nonpublic information (the private side) and the part of the firm that does not have access to such information and is able to continue sales and trading in the public markets (the public side).
An exotic option that is transacted in the present, but that at some specified future date is chosen to be either a put or a call option.
Excessive trading of a discretionary account by a person with control over the account for the purpose of generating commissions while disregarding the interests of the customer.
Refers to a measure at which trading on an exchange or market is stopped for a period, generally in response to a sharp decline in asset prices, in the hope that investors will regroup and step in as buyers.
Generally refers to the location at which gas changes ownership or transportation responsibility from a pipeline to a local distribution company or gas utility.
A creditor’s assertion of a right to payment from the debtor or the debtor’s property.
A bank that submits a claim for a recredit for a substitute check to an indemnifying bank under 12 CFR 229.55.
A single mutual fund, with one portfolio, may offer more than one “class” of shares to investors. Each class represents a similar interest in the mutual fund’s portfolio, but has different fees and expenses.
Option contracts of the same type (call or put) and Style (American, European or Capped) that cover the same underlying asset.
A utility’s sales categories such as residential, commercial, industrial, other, and sales for resale.
Refined products such as kerosene, gasoline, home heating oil, and jet fuel carried by tankers, barges, and tank cars.
Also known as “sequential-pay CMO,” the most basic type of CMO, in which all tranches receive regular interest payments, but principal payments are directed initially only to the first tranche until it is completely retired. Once the first tranche is retired, the principal payments are applied to the second tranche until it is fully retired, and so on.
Audit opinion not qualified for any material scope restrictions nor departures from GAAP or otherwise applicable accounting principles.
Price of a bond excluding accrued interest. Bond prices are usually quoted clean.
Bonds issued to finance certain types of renewable energy projects such as solar, wind and geothermal.
The process by which a clearinghouse maintains records of all trades and settles margin flow on a daily mark-to-market basis for its clearing members.
The process of matching and novating (the act of replacing one participating member of a contract with another) interdealer trades.
A swap that is submitted for clearing to a DCO.
Refers to OTC contracts that although not executed or traded on an organized market but are subsequently submitted for clearing.
The procedure through which the clearing organization becomes the buyer to each seller of a futures contract or other derivative, and the seller to each buyer for clearing members.
An entity that acts as an intermediary between broker-dealers, banks or FCMs in activities related to the settlement of transactions.
A broker-dealer or bank that handles the clearance and settlement of securities transactions on behalf of its clients. The term generally is not used to refer to one of the registered clearing agencies.
A clearing broker may provide such back office and related recordkeeping functions on either a fully disclosed or omnibus basis. In a “fully disclosed” relationship, the introducing broker must disclose the identity and other relevant information regarding the client to the clearing broker.
A registered clearing agency that provides specialized comparison, clearance and settlement services for its members.
A fee charged for each contract cleared.
A firm approved to clear trades. Clearing members are responsible for the financial commitments of customers that clear through their firm.
The alpha-numeric firm ID under which the firm’s trades will clear.
The requirement in the Dodd-Frank Act that certain swap transactions be cleared through a derivatives clearing organization.
A member of an exchange clearinghouse responsible for the financial commitments of its customers. All trades of a non-clearing member must be registered and eventually settled through a clearing member.
Composed of transfers, exchange-for-physicals (EFPs), blocks and give-ups.
A Guide: Chapters on Product Jurisdiction and Insolvency.
A fund maintained by a clearing organization financed by mandatory assessments imposed on clearing members that the clearing organization can draw upon in the event the clearing member defaults on a margin call.
An association or place where banks exchange checks and drafts drawn on each other, and settle their daily balances.
Margin requirements that a clearinghouse imposes on its members to guarantee a member’s obligations for trades presented to the clearinghouse for clearance and settlement.
Refers to a trade that may be “broken”, i.e., declared null and void, by a market or other regulator on account of a disruption or malfunction in a market place or extraordinary market conditions resulting in trade prices that materially diverged from “true” market prices.
A firm’s employee who has been registered by the exchange to work on the trading floor.
The period at the end of a trading session.
A procedure that permits a person that is owed delivery or the settlement of obligation that had not been performed d) to take action to complete the transaction or otherwise settle the obligation.
A fund that does not continuously offer shares or allow the redemption of shares.
A general characterization of the security provisions on a revenue bond where these provisions preclude the issuer from issuing any additional bonds that have an equal claim on the pledged revenues or other security.
Mutual fund with a fixed number of shares outstanding that may be bought or sold.
The exchange of securities for payment.
Signal which indicates the conclusion of normal daily trading hours.
T settlement date for a new issuance of securities.
A journal entry made at the end of an accounting period in order to prepare for the next accounting period by clearing the balances of temporary accounts and summarizing the period’s revenues and expenses.
The price at which a security, asset or contract closed for the end of trading on a given day. The price (or price range) recorded during trading that takes place in the final period of a trading session’s activity that is officially designated as the ‘close’.
A transaction to close out an open position; e.g., the purchase of a security to close out an open short.
Liquidating an existing position with an equal and opposite transaction. Also known as Offset.
CHICAGO MERCANTILE EXCHANGE INC. On July 9, 2007.
An owner of various derivatives market places and clearing corporations formed by the 2007 merger of the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT).
Collateralized Mortgage Obligation.
Generally refers to a trading entity establishing its computerized trading systems in a facility provided by an exchange in order to obtain access to the exchange’s markets with a minimum of latency (delay).
Mixing assets, e.g. customer-owned securities, with those owned by a firm in its proprietary accounts.
May be used to refer to the Internal Revenue Code or the Bankruptcy Code.
A Code of Ethics is essentially that part of an investment adviser’s compliance procedures that deals with personal trading issues, and as such it is one of the most important compliance issues for advisers.
A generating facility that produces electricity and another form of useful thermal energy (such as heat or steam), used for industrial, commercial, heating, or cooling purposes.
A derivative typically used to establish minimum and maximum payment obligations of the parties.
Upper and lower limits (cap and floor, respectively) on the payment obligations of a security.
Assets pledged against obligations owed. See also margin.
The process by which a borrower pledges securities or property or other types of financial assets in order to provide security or collateral toward repayment of a loan or debt.
A financial instrument that entitles the purchaser to some portion of the cash flows from a portfolio of assets, which may include bonds, loans, mortgage-backed securities, or other CDOs.
Asset-backed securities consisting of securitized interests in pools of mortgage loans. Typically, multiple classes or tranches of CMOs are issued secured by the same pool of mortgage loans. The mortgage repayments from the pool are applied to payments on the various classes of CMOs in a pre-determined order of priority, resulting in different rates of payments and different levels of risk with respect to the various classes of CMOs.
Any bank handling a check for forward collection, except the paying bank.
Puts and calls held either long or short with different strike prices and/or expirations.
A combination of buy and/or sell orders for the same account or accounts with the same ownership.
A utility which provides both gas and electric service.
Financial statement comprising the accounts of two or more entities.
An independent accountant’s letter delivered to the underwriter at the sale and closing of the issue that provides information concerning certain financial matters that may have occurred since the last audited financial statements of the issuer or other borrower.
An entity involved in the production, processing, or merchandising of a commodity. Generally distinguished from a financial entity.
An exception to Dodd-Frank’s mandatory clearing and trading requirements for swaps used for hedging purposes provided the entity seeking to avail itself of the exemption is not a “financial entity,” is using the swap to “hedge or mitigate commercial risk” and notifies the CFTC as to how it generally meets its financial obligations associated with entering into uncleared swaps.
Domestic grain in store in public and private elevators at important markets and grain afloat in vessels or barges in lake and seaboard ports.
A financial instrument that is backed by a commercial real estate mortgage or a group of commercial real estate mortgages that are packaged together.
Short term, unsecured bond notes issued by a corporation or a bank to meet immediate short term needs for cash. Maturities typically are less than 270 days. Commercial paper is usually issued by corporations with high credit ratings and sold at a discount from face value. Commercial paper may quality for an exemption from the definition of security under SA Section 3(a)(3).
A fee paid to a broker, as an agent of the customer, for executing a trade.
When capitalized, the term likely refers to a regulatory agency such as the SEC, the CFTC or FERC.
The amount of markup that is charged on a riskless principal transaction where a dealer is effectively acting in an agency capacity.
A communication from the senior manager to syndicate members setting forth the final terms of a new issue of municipal securities sent prior to the award of the securities. Syndicate members will be committed to the underwriting at the terms set out in the wire unless such members withdraw as may be permitted in the agreement among underwriters or other mutual agreement.
A weekly report from the CFTC providing a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. Open interest is broken down by aggregate commercial, non-commercial, and non-reportable holdings.
Refers to a variety of tangible and intangible assets that are subject to the CEA, including agricultural, physical, natural resource, and financial commodities, and all other goods and articles, services, rights, and interests in which contracts for future delivery are presently or in the future dealt in.
Definition of “commodity broker,” a category of protected party under the safe harbors.
A unique symbol used to identify a particular commodity traded on CME for purposes of submitting data into the Clearing System.
A futures or options contract or swap . See CPO/CTA Guide: Insolvency.
A type of protected agreement under the Bankruptcy Code safe harbors
A Government-owned and operated entity that was created to stabilize, support, and protect farm income and prices.
An exchange that lists designated derivatives contracts.
The Commodity Exchange Act, 7 USC 1, et seq., provides for the federal regulation of commodity future, options and swaps.
A regulatory agency of the U.S. Department of Agriculture established to regulate futures trading under the Commodity Exchange Act between 1936 and 1975. The Commodity Exchange Authority was the predecessor of the Commodity Futures Trading Commission.
Also referred to as “commodity ETFs,” they are commodity pools whose units of participation or shares are publicly offered and listed for trading on a national securities exchange.
The CFMA created exclusions and exemptions for an array of OTC derivatives and transformed the CFTC from a front-line regulatory agency to an oversight regulator in which it largely oversaw the exchanges, and changed the regulatory model under which it operated from a prescriptive model to one that set out fundamental or “core” principles for product-offering and market operation. The CFMA was in large part repealed by Dodd-Frank.
CFTC: The Federal regulatory agency established by the Commodity Futures Trading Act of 1974 to administer the Commodity Exchange Act.
Law that overhauled the CEA and created the Commodity Futures Trading Commission. The 1974 legislation is effectively the birth of the modern expansive CEA.
An index of a specified set of (physical) commodity prices or commodity futures prices.
An investment fund that enters into futures or commodity swap positions for the purpose of replicating the return of an index of commodity prices or commodity futures prices.
A swap whose cash flows are intended to replicate a commodity index.
An entity that conducts futures trades on behalf of a commodity index fund or to hedge commodity index swap positions.
Contracts that are subject to the CEA, i.e., commodity futures and options, security futures products, swaps, retail foreign currency transactions, and leverage contracts.
An option on a commodity or a futures contract.
An investment trust, syndicate, or similar form of enterprise operated for the purpose of trading commodity interests. Typically thought of as an enterprise engaged in the business of investing the collective or “pooled” funds of multiple participants in trading commodity futures or options, where participants share in profits and losses on a pro rata basis. Also referred to as a Pool.
The sponsor or organizer of a fund that is a “commodity pool.” The commodity pool operator either itself makes trading decisions on behalf of the pool or engages a commodity trading advisor to do so. Managers at hedge funds or their advisors are often registered with the CFTC as CPOs or CTAs. See 7 USC 1a(11).
The advisor to an account that enters into commodity interest contracts.
A bond in which payment to the investor is dependent to a certain extent on the price level of a commodity, such as crude oil, gold, or silver, at maturity.
Currency that is eliminated when calculating a cross rate between two currencies when their exchange rates are expressed in terms of the common currency; most commonly the US dollar.
A share representing participation in the ownership of an enterprise, generally with the right to participate in dividends and in most cases to vote on major matters affecting stockholder interests.
Generally is used in a regulatory sense to refer to written and oral messages from a regulated entity to its customers.
A CMO tranche that absorbs a higher level of the impact of collateral prepayment variability in order to stabilize the principal payment schedule for a PAC or TAC tranche in the same offering.
Financial statement presentation in which the current amounts and the corresponding amounts for previous periods or dates also are shown.
The process of matching the data concerning an inter-dealer transaction specified by each party to the transaction in order to determine that both parties agree on the details of the transaction.
A term used to refer to an inter-dealer confirmation.
To pay or make payment for something.
Funds that a borrower must keep on deposit as required by a bank.
A method of sale chosen by an issuer, requesting underwriters to submit a firm offer to purchase a new issue of securities.
A trust that is to be distinguished from a simple trust in the fact that it permits accumulation or distribution of current income during the tax year and provides for charitable contributions.
Review of financial, transactional or other records to determine whether the entity is complying with specific procedures or rules.
Generally the written policies and procedures that describe a broker-dealer’s processes to monitor its own obedience to laws and regulations.
A settlement reached between a debtor and a creditor prior to bankruptcy. The settlement discharges the debt owed to the creditor for an amount less than the original amount owed.
The nominal value, at any given point in time, of a security such as a capital appreciation bond, zero coupon bond or some deeply-discounted original issue discount bond on which all or a portion of the investment return is received in the form of an accretion from an initial principal amount to a maturity or redemption value.
Interest that is calculated on both principal and unpaid but accrued interest.
A calculation method that assumes that all coupon payments are reinvested on the same frequency basis (and at the same rate) as the computed yield.
Interest computed on principal plus interest earned in previous periods.
A report issued by a governmental entity that includes the entity’s audited statements for the fiscal year as well as other information about the entity. Such report must meet specific standards established by the Governmental Accounting Standards Board (GASB) in order to be considered a comprehensive annual financial report.
Change in equity of a business enterprise during a period from transactions and other events and circumstances from sources not shown in the income statement. The period includes all changes in equity except those resulting from investments by owners and distributions to owners.
A process for the systematic decrease in the number of outstanding contracts by attempting to offset equivalent or near equivalent contracts or to represent a larger number of contracts with a smaller number.
OFFICE OF THE COMPTROLLER OF THE CURRENCY.
Fractional discount from the public offering of new securities at which the underwriter sells the bonds to dealers not in the syndicate.
A financial statement for external reporting that presents only the major categories of information.
A notice of redemption published by an issuer in which the issuer retains the right to rescind the notice and cancel the redemption.
A borrower of bond proceeds in a conduit financing.
The issuance of municipal securities by a governmental unit (referred to as the “issuer” or “conduit issuer”) to finance a project to be used primarily by a third party, which may be a for-profit entity engaged in private enterprise, a 501(c)(3) organization, or another governmental entity (referred to as the “conduit borrower”). In a conduit financing, the conduit borrower is liable for making debt service payments on the bonds. Industrial development bonds, multi-family housing revenue bonds and qualified 501(c)(3) bonds are common types of conduit financings.
An issuer of municipal securities that issues securities on behalf of another entity.
A written summary of the details of a transaction involving the purchase or sale of assets provided by a regulated entity to a customer.
Bankruptcy judge’s approval of a plan of reorganization or liquidation in chapter 11, or payment plan in chapter 12 or 13.
Generally, a situation where a regulated entity has proprietary interests that are different from its obligations to a particular customer.
A market situation in which shorts attempting to cover their positions are unable to find an adequate supply of contracts provided by longs willing to liquidate or by new sellers willing to enter the market, except at sharply higher prices.
A shipment made by a producer or dealer to an agent elsewhere with the understanding that the commodities in question will be cared for or sold at the highest obtainable price.
Accounting postulate which stipulates that, except as otherwise noted in the financial statement, the same accounting policies and procedures have been followed from period to period by an organization in the preparation and presentation of its financial statements.
A display mandated under Regulation NMS that shows the price, size and market identification of the NBBO for a security.
Combined financial statements of a parent company and one or more of its subsidiaries as one economic unit.
Together with the Consolidated Tape Association Plan, governs the collection, processing, and distribution of quotation and transaction information for NMS stocks.
A broker-dealer whose parent company and affiliates are subject to regulation and that qualifies for special treatment under the SEC’s capital rules. See Rule 15c3-1e and Rule 15c3-1g under the Exchange Act.
The electronic market data feed that reports quote and execution transactions from all registered national stock exchanges in the U.S.
A series of indexes of various maturities (one, three, five, seven or ten years) published by the Federal Reserve Board and based on the average yield of a range of Treasury securities adjusted to a constant maturity corresponding to that of the index.
Notes issued to fund construction of projects (typically housing projects). CLNs are repaid by the permanent financing, which may be provided from bond proceeds or some pre-arranged commitment.
A taxpayer is considered to have received the income even though the income is not actually received, as in the case of certain zero coupon debt instruments.
Under SEC Regulation S-P, which regulates and safeguards consumer financial information, a “consumer” is an individual who obtains or has obtained a financial product or service that is to be used primarily for personal, family or household purposes.
Any account used primarily for personal, family, or household purposes.
A debtor whose debts are primarily consumer debts.
Debts incurred for personal, as opposed to business, needs.
Goods bought for personal or household use, as distinguished from capital goods or producer’s goods, which are used to produce other goods.
A measuring the average price of consumer goods and services purchased by U.S. households. The CPI can be used to index (i.e., adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices.
Market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month; the opposite of contango is backwardation.
Those matters, other than objections to claims, that are disputed but are not within the definition of adversary proceeding contained in Rule 7001.
An event that might happen but that is not certain or planned.
An order which becomes effective only upon the fulfillment of some condition in the marketplace.
A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loan and that person fails to pay.
A type of convertible bond intended to provide insurance for companies like banks during a financial crisis. For example, a CoCo bond would mandatorily convert into the company’s common shares when one or more triggers occur, such as capital levels falling below a pre-specified level.
A type of deferred sales charge that normally declines each year and is eliminated after a number of years.
Potential liability arising from a past transaction or a subsequent event.
Ongoing requirement to provide public disclosure of material information relating to an issuer or securities.
The agreement or undertaking by the issuer of municipal securities or an obligated person with respect to such securities to disseminate annual financial information, certain operating information and disclosures concerning certain events to the marketplace as provided for under SEC Rule 15c2-12.
The regulatory requirement for associated persons of a regulated entity to maintain appropriate and current training related to their activities.
An application of a FINRA member broker-dealer to make changes in the firm’s ownership, control or business operations.
Portion of a business entity expected to remain active.
A redemption of bonds that may occur at any time after the initial call date upon any required notice.
A primary offering of securities in which the issuer issues and delivers the securities to the underwriter for redelivery to customers over an extended period of time, rather than issuing and delivering the securities to the underwriter on a single date.
The period of a trading day when orders are matched and executed against one another.
Account considered to be an offset to another account. Generally established to reduce the other account to amounts that can be realized or collected.
Brokers that will take the opposing side of a buy or sell order from the initiating broker, who is submitting the order a client’s behalf.
A deduction from a liability, such as discounts on notes payable, which is a deduction from the balance of notes payable.
The dealer or customer to whom a person has sold securities or from whom a person has purchased securities.
A term of reference describing a unit of trading for a commodity future or option or other derivative.
An agreement to buy or sell an asset, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable.
Federal and state constitutional provisions prohibiting state governments from enacting any law that impairs the obligation of an existing contract.
Those grades of a commodity that have been officially approved by an exchange as deliverable in settlement of a derivatives contract.
A board of trade, or exchange, designated by the CFTC to trade futures or options contracts on a particular commodity.
The month in which delivery is to be made in accordance with the terms of the futures contract. Also referred to as Delivery Month.
The actual amount of a commodity or asset represented in a contract.
For mortgage-related securities, the risk that declining interest rates will accelerate the assumed prepayment speeds of mortgage loans, returning principal to investors sooner than expected and compelling them to reinvest at the prevailing lower rates.”
With respect to a bank, means a branch of another bank that accepts a deposit on behalf of the first bank.
Provides an exception from the automatic stay and the anti-ipso facto provisions to allow specified parties to terminate a “protected contract.” .
The stockholders’ investment in a corporation.
A large geographic area within which a utility (or group of utilities) regulates electric power generation in order to maintain scheduled interchanges of power with other control areas and to maintain the required system frequency.
An electric entity that operates generating capacity to meet area demand, monitors actual interchange (electric energy flowing between control areas), and can dispatch generating resources to ensure that actual interchange equals scheduled interchange.
This exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
Refers to the concept that a person who controls another person may be liable for the violations of the controlled person unless the controlling person had taken appropriate supervisory measures.
Generally refers to securities that are owned by a controlling person of the issuer of the relevant securities. Such control may arise either through management of the issuer (such as by being on the board of directors) or by having a large ownership position in the issuer (generally over 10%).
An account for which trading is directed by someone other than the owner. Also called a Managed Account or a Discretionary Account.
Generally encompasses supervisors, principal officers, and large shareholders of a firm and includes anyone who has the power or ability to control a specific transaction or activity.
A mortgage loan that is based solely on real estate as security, is not insured or guaranteed by a government agency, and is eligible for purchase or insurance by Fannie Mae or Freddie Mac.
The tendency for prices of physicals and futures to approach one another, usually during the delivery month. Also called a ‘narrowing of the basis.’
A position created by selling a call option, buying a put option, and buying the underlying instrument (for example, a futures contract), where the options have the same strike price and the same expiration. See Reverse Conversion.
Generally a fixed income security that may be exchanged or converted into equity securities of the issuer. Note that “convertible debt” securities are “equities” for purposes of the Exchange Act definition. See Section 3(a)(11) of the Exchange Act. The rate at which the shares of the bond or are convertible into the common is called the conversion ratio
A class of fund shares will convert to another class of shares after a period of time.
Stock that may be exchanged for other securities of the issuer.
A measure of the price sensitivity of a fixed income security to changes in interest rates. The more convex a security is, the more its duration will change with interest rate changes.
A group organized under law into a utility company that will generate, transmit, or distribute supplies of electric energy to a specified area not being serviced by another utility. Typically, a co-op is a not- for-profit organization.
A copy of an original check means any paper reproduction of an original check, including a paper printout of an electronic image of the original check, a photocopy of the original check or a substitute check.”
Criteria that a DCM, DCO, or SEF must comply with as a condition of obtaining and maintaining designation as a contract market, clearing organization, or swap execution facility. Also refers to the regulatory model of the CFMA where general regulatory guidelines and goals, rather than prescriptive rules, are set forth to govern market activity. See CPO/CTA Guide: Introductory Chapter and Chapter on Trading.
(1) Securing such relative control of a commodity that its price can be manipulated, that is, can be controlled by the creator of the corner; or (2) in the extreme situation, obtaining contracts requiring the delivery of more commodities than are available for delivery. See Squeeze, Congestion.
A bond issued by a corporation to raise money for capital expenditures, operations and acquisitions.
Form of doing business pursuant to a charter granted by a state or federal government.
A temporary decline in prices during a bull market that partially reverses the previous rally.
The sending and receipt of mail and other communications with individual customers is generally governed by FINRA’s rules.
Procedures used for rationally classifying, recording, and allocating current or predicted costs that relate to a certain product or production process.
Original price of an asset, used in determining capital gain.
Rate of return that a business could earn if it chose another investment with equivalent risk.
See Carrying Cost.
A bank index reflecting the weighted average interest rate paid by savings institutions on their sources of funds.
Figure representing the cost of buying raw materials and producing finished goods.
Total of various charges incurred when a commodity is certified and delivered on a futures contract.
Method of revenue recognition which recognizes profits only after costs are completely recovered.
Cost, Insurance, Freight. Term refers to a sale in which the buyer agrees to pay a unit price that includes the free on board (FOB) value at the port of origin plus all costs of insurance and transportation. This type of transaction differs from a “delivered” agreement in that it is generally ex-duty, and the buyer accepts the quantity and quality at the loading port rather than paying for quality and quantity as determined at the unloading port. Risk and title are transferred from the seller to the buyer at the loading port, although the seller is obliged to provide insurance in a transferable policy at the time of loading.
Expenses associated with the sale of a new issue of securities, including such items as underwriter’s discount and financial advisory, bond counsel, other counsel and rating agency fees and other expenses.
See Commitments of Traders Report.
The opposite party in a bilateral agreement, contract, or transaction, such as a swap.
The credit or performance risk associated with the financial stability of the party with whom one has entered into contract.
Risk associated with a doing business in a particular country or investing in companies or assets located in that country or in the currency of that country.
A feature of a bond that denotes the amount of interest due and the date payment is to be made. Coupons are generally payable semiannually.
An interest-bearing bond.
The actual dollar amount of interest paid to an investor.
A party’s pledge, typically in a financing or sales document, to do or to avoid from doing certain practices and actions.
Covenants commonly made in connection with a bond issue may include covenants to charge fees sufficient to provide required pledged revenues (called a “rate covenant”); to maintain casualty insurance on the project; to complete, maintain and operate the project; not to sell or encumber the project; not to issue parity bonds or other indebtedness unless certain tests are met ( “additional bonds” or “additional indebtedness” covenant); and not to take actions that would cause tax-exempt interest on the bonds to become taxable or otherwise become arbitrage bonds (“tax covenants”). A covenant whereby a party is affirmatively obligated to undertake a duty in order to protect the interests of bondholders (e.g., to maintain insurance) is referred to as an “affirmative” or “protective covenant.” A covenant whereby the issuer obligates itself to refrain from performing certain actions (e.g., not to sell the project) is referred to as a “negative covenant.”
Purchasing longs to offset a short position (same as Short Covering); see Offset, Liquidation.
The second-highest bidder in a competitive sale.
The ratio of available revenues available annually to pay debt service over the annual debt service requirement.
A short option or other derivative is considered to be covered if the writer also has an opposing market derivative or cash market position in equal amounts and on the same terms; e.g., exercise date.
Covered bonds, at their most basic, are debt securities backed by a guarantee from the issuing entity and secured by a dynamic pool of assets on that entity’s balance sheet.
An option strategy in which a call option is written against long stock (or a long futures) on a one-for-one basis.
Market or limit orders, including immediate-or-cancel orders, received and executed by a market center during regular trading hours at a time when the consolidated best bid and offer is being disseminated.
A strategy in which one sells put options and simultaneously is short an equal number of shares of the underlying security.
An option strategy in which one call and one put with the same strike price and expiration are written against 100 shares of the underlying stock. In actuality, this is not a “covered” strategy because assignment on the short put would require purchase of stock on margin. This method is also known as a covered combination.
An option pricing model developed by John Cox, Stephen Ross, and Mark Rubinstein that can be adopted to include effects not included in the Black-Scholes Model (e.g., early exercise and price supports).
Usually the Federal Reserve Commercial Paper Composite, calculated each day by the Federal Reserve Bank of New York by averaging the rate at which the five major commercial paper dealers offer “AA” industrial commercial paper for various maturities.
Certified Public accountant.
The index for measuring the inflation rate is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS).
See Commodity Pool Operator.
Credit Rating Agencies
The simultaneous purchase or sale of crude oil against the sale or purchase of refined petroleum products.
Capital Requirements Directive
Database operated by FINRA that maintains registration information in regard to regulated entities and their associated persons. A portion of the information in CRD is made available to the public through BrokerCheck.
Money received in an account. A credit transaction is one in which the net sale proceeds are larger than the net buy proceeds (cost), thereby bringing money into the account. See also Debit.
Arrangement in which one party borrows or takes possession in the present by promising to pay in the future.
Balance remaining after one of a series of bookkeeping entries. This amount represents a liability or income to the entity.
A put option that makes a payoff in the event the issuer of a specified reference asset defaults.
A contract in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments; the most common type of credit derivative; also called a credit swap; similar to credit default option.
Typically, the buyer of protection pays a premium-a fixed periodic payment—usually on a quarterly basis, to the seller of protection until a credit event occurs or the contract matures, whichever is earlier
A derivative contract designed to assume or shift credit risk, that is, the risk of a credit event such as a default or bankruptcy of a borrower.
The use of the credit of a stronger entity to strengthen the credit of a weaker entity in bond or note financing. This term is used in the context of guarantees, bond insurance, bank facilities and government programs.
An event such as a debt default or bankruptcy that will affect the payoff on a credit derivative, as defined in the derivative agreement.
A rating determined by a rating agency that indicates the agency’s opinion of the likelihood that a borrower such as a corporation or sovereign nation will be able to repay its debt.
A company that analyzes the credit worthiness of a company or security, and indicates that credit quality by means of a grade, or credit rating.
The possibility that a party may default on payment or other obligations.
A measure of a counterparty’s creditworthiness.
The difference between the yield on the debt securities of a particular corporate or sovereign borrower (or a class of borrowers with a specified credit rating) and the yield of similar maturity obligations of another issue, most commonly U.S. government securities.
An option whose payoff is based on the credit spread between the debt of a particular borrower and similar maturity Treasury bills, notes, or bonds.
An announcement issued by a rating agency to the market of potential changes, either positive or negative, in the rating of an issue of outstanding securities. Such securities sometimes are said to be placed on a “watchlist” or on “rating watch.”
A person or entity that is owed money by another person or entity.
A group representing several entities that have claims against a business in a bankruptcy proceeding.
see 341 meeting
Pipeline issuances that provide information on conditions that affect natural gas scheduling or adversely affect scheduled gas flow.
Reports compiled by the U.S. Department of Agriculture on various ag commodities that are released throughout the year. Information in the reports includes estimates on planted acreage, yield, and expected production, as well as comparisons to production from previous years.
The time period from one harvest to the next, varying according to the commodity (e.g., July 1 to June 30 for wheat; September 1 to August 31 for soybeans).
Hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures markets follow similar price trends (e.g., using soybean meal futures to hedge fish meal).
The process of calculating margin based on overall risk in different positions, which generally results in a reduction of margin requirements as overall risk is less than the sum of individual position risk.
A trade where an agent buys from one customer and sells t to another customer simultaneously.
In futures, offsetting or noncompetitive match of the buy order of one customer against the sell order of another, a practice that is permissible only when executed in accordance with the Commodity Exchange Act, CFTC rules, and rules of the exchange
The exchange rate between two currencies, in which the home country’s currency is not included. In the U.S., the Euro/Yen rate would be considered a cross rate, while in Europe or Japan it would be considered a primary pair.
Hedging a cash market position in a futures or option contract for a different but price-related commodity.
A form of portfolio margining for related securities, options, and futures positions when different clearing organizations clear the transactions. The essence of cross-margining arrangements is the use of a single collateral pool to secure both futures and options positions. See CPO/CTA Guide: Margin.
Permits trade-throughs for orders executed at a time when there is a crossed market, that is the protected bid is higher than the protected offer.
A method of advance refunding in which the revenue stream originally pledged to secure the refunded bonds continues to be used to pay debt service on the refunded bonds until they mature or are called. At that time the pledged revenues “crossover” to pay debt service on the refunding bonds and escrowed securities are used to pay the refunded bonds.
Crude is the raw material which is refined into gasoline, heating oil, jet fuel, propane, petrochemicals, and other products.
In the soybean futures market, the simultaneous purchase of soybean futures and the sale of soybean meal and soybean oil futures to establish a processing margin.
China Securities Regulatory Commission
Commodity Trading Advisor.
These consist of four identifiers that describe transactions by the type of customer for which a trade is effected. The four codes are: (1) trading by a person who holds trading privileges for his or her own account or an account for which the person has discretion; (2) trading for a clearing member’s proprietary account; (3) trading for another person who holds trading privileges who is currently present on the trading floor or for an account controlled by such other person; and (4) trading for any other type of customer. Transaction data classified by the above codes is included in the trade register report produced by a clearing organization.
Usually used to quantify the rate of flow of a gas well or pipeline.
The most common measure of gas volume, referring to the amount of gas needed to fill a volume of one cubic foot at 14.73 pounds per square inch absolute pressure and 60 degrees Fahrenheit. One cubic foot of natural gas contains, on average, 1,027 Btus.
A type of stock that requires a defined dividend payment. If the company does not pay the dividend, it still owes the missed dividends to the owner of the stock.
Trading by telephone or by other means that takes place after the official market has closed and that originally took place in the street on the curb outside the market.
Report filed with the Department of the Treasury Financial Crimes Enforcement Network (“FinCen”) on FinCen Form 105 regarding the physical transportation of “currency or other monetary instruments” in an aggregate amount exceeding $10,000 from or into the U.S.
The potential for a shift in exchange rates, which would be detrimental to a trader’s position.
A swap that involves the exchange of one currency (e.g., U.S. dollars) for another (e.g., Japanese yen) on a specified schedule.
Report by a financial institution filed on FinCen Form 104 regarding transactions in excess of $10,000 conducted by, or on behalf of, one person, as well as multiple currency transactions that in the aggregate exceed $10,000 in a single day.
Asset that one can reasonably expect to convert into cash, sell, or consume in operations within a single operating cycle, or within a year if more than one cycle is completed each year.
See Spot Month.
The current remaining monthly principal on a security.
A bond on which interest payments are made to the bondholders on a periodic basis.
Obligation whose liquidation is expected to require the use of existing resources classified as current assets, or the creation of other current liabilities.
The average monthly income received by the debtor over the six calendar months before commencement of a bankruptcy case, including regular contributions to household expenses from nondebtors and income from the debtor’s spouse if the petition is a joint petition, but not including social security income and certain other payments made because the debtor is the victim of certain crimes. 11 U.S.C. § 101(10A).
Used as an indicator of a company’s liquidity and ability to pay short-term debts. This is found by dividing current assets by current liabilities.
A refunding transaction where the securities being refunded will all mature or be redeemed within 90 days or less from the date of issuance of the refunding issue.
Value of an asset at the present time as compared with the asset’s historical cost.
The yearly coupon payment divided by the bond’s price, stated as a percent.
Electricity deliveries that are subject to interruption by the grid operator.
A bond trading with a coupon rate higher than the then prevailing coupon rates, and therefore trading at a higher dollar price. Such bonds are typically priced to the call and create a substantially higher yield to maturity as compared to yield to call. The bond “cushions” because the dollar value of one basis point (.01) priced to the call is less than if priced to maturity; therefore, the volatility is reduced.
The amount of gas required in a storage pool to maintain sufficient pressure to keep the working gas recoverable.
The Committee on Uniform Security Identification Procedures was established by the American Bankers Association to develop a uniform method of identifying securities. CUSIP numbers are unique nine-character alphanumeric identifiers assigned to each series of securities.
A unique nine-character alpha/numeric code assigned to a security by Standard & Poor’s Corporation. The primary use of the number is to expedite the clearance and settlement process.
Secondary market products that represent an indirect interest in securities held by a custodian that is the issuer of the receipts.
Generally a reference to the obligation of a financial intermediary to keep possession and control of assets.
Generally, a client of a regulated entity.
A statement alleging a grievance involving the activities of a regulated entity or its associated persons.
The requirement that regulated entities establish, document and maintain a written program that includes risk-based procedures for verifying the identity of the firm’s customers and for determining whether a customer appears on designated lists of known or suspected terrorists or terrorists organizations.
In general, property held by a financial institution that is required to be held separate from proprietary assets and that will not be part of the estate of the financial institution should it become insolvent.
The name sometimes given to Rule 15c3-3 under the Exchange Act, which is primarily important for its requirements as to the safekeeping of securities and the maintenance of a reserve account.
Published (Platts, NGI, Dow Jones, SNL, ICE, NGW) price indices for commodities (gas or electricity) to be delivered the next day based on transactions occurring between certain hours during the current day.
Usually transactions done on a day for delivery or settlement or both, the next day.
The maximum price advance or decline from the previous day’s settlement price permitted during one trading session, as fixed by the rules of an exchange.
An ATS in which the bids and offers submitted by each participants are not visible to other participants on the market.
The date of a bond issue from which a bond begins to accrue interest.
An open order that expires automatically at the end of a day’s trading session.
A trader who takes positions and then offsets them during the same trading session prior to the close of trading so as to avoid the risk of taking overnight market exposure.
Forward markets for electricity to be supplied the following day.
The convention used to calculate the number of days in an interest payment period. A 30/360 convention assumes 30 days in a month and 360 days in a year. An actual/360 convention assumes the actual number of days in the given month and 360 days in the year. An actual/ actual convention uses the actual number of days in the given interest period and year.
The amount of discount, sometimes referred to as the “cut-off price,” at which, for federal income tax purposes, interest on an original issue discount bond is not required to be included as income in advance of receipt.
The notional amount of swap positions connected to swap dealing activity below which a person engaged in such activity is not required to register with the CFTC or SEC as a swap dealer.
A person or firm engaged in the business of effecting transactions for that person’s or firm’s own account.
Department of commercial bank that engages in the underwriting, trading and sale of securities.
A large trader that declares itself a “Dealer/Merchant” on CFTC Form 40, which provides as examples “wholesaler, exporter/importer, shipper, grain elevator operator, crude oil marketer.”
Unsecured debt obligation, issued against the general credit of a corporation, rather than against a specific asset.
Stock issued under a contract providing for fixed payments at scheduled intervals and more like preferred stock than a debenture, since their status in liquidation is equity and not debt.
An expense, or money paid out from an account. A debit transaction is one in which the net cost is greater than the net sale proceeds. See also Credit.
General name for money, notes, bonds, goods or services which represent amounts owed.
Providing capital by selling bonds, bills, or notes to individuals or institutions.
The maximum principal amount of debt that an issuer of securities is permitted to have outstanding at any time.
Comparative statistics showing the relationship between the issuer’s outstanding debt and other financial or economic factors.
Repayment of debt.
Securities that provide the owner with a claim for the payment of principal and/or interest but do not grant the owner any ownership interest (other than in some cases a security interest) in the issuer.
Document which is evidence of an obligation or liability.
The amount of money necessary to pay interest on outstanding bonds, the principal of maturing or redeemed bonds and any required contributions to a sinking fund for term bonds.
The ratio of net revenues to the debt service requirements.
A fund into which the issuer makes periodic deposits to assure the timely availability of sufficient funds for the payment of debt service requirements.
A table listing the periodic payments necessary to meet principal and interest requirements over the period of time securities are to be outstanding.
The relationship of debt to equity, or the extent to which a company is leveraged.
A person who has filed a petition for relief under the Bankruptcy Code.
A company which is operating under Chapter 11 bankruptcy protection, which still technically owns its assets but is operating them to maximize the benefit to its creditors.
A credit line used during Chapter 11 proceedings to maintain the value of a company’s asset base.
Individual who has died.
A system where security prices are quoted using a decimal format rather than fractions.
The orders for purchase or sale of futures and option contracts held by a floor broker.
Authorize the payment of dividend on a specified date, an act of the board of directors of a corporation.
An accelerated method of depreciating a tangible long-lived asset by applying a fixed-rate based on some multiple of the straight-line depreciation rate to its carrying value.
Termination of the rights and interests of the trustee and bondholders under a trust agreement or indenture upon final payment or provision for payment of all debt service and premiums, and other costs, as specifically provided for in the trust instrument.
An entity against whom a lawsuit is filed.
Income received but not earned until all events have occurred. Deferred income is reflected as a liability.
The distant delivery months in which futures trading is taking place, as distinguished from the nearby futures delivery month.
Assets or liabilities that arise from timing or measurement differences between tax and accounting principles.
The distinguishing feature of forward contracts. Thus, futures, which are defined as contracts “for future delivery,” exclude sales of cash commodities for “deferred shipment or delivery” (forward contracts).
A fee that may be charged when on the disposition of fund shares.
The standard grades of commodities or instruments listed in the rules of the exchanges that must be met when delivering cash commodities against derivatives contracts. Grades may be accompanied by a schedule of discounts and premiums allowable for delivery of commodities of lesser or greater quality than the standard called for by the exchanges.
The quantity of a commodity that can be made readily available for delivery under contract terms.
The tender and receipt of the actual asset, the cash value of the commodity, or of a delivery instrument covering a commodity (e.g., warehouse receipts or shipping certificates), used to settle a contract.
The delivery of securities (commonly to a bank) against payment for them.
The date on which the commodity or instrument of delivery must be delivered to fulfill the terms of a contract.
A document used to effect delivery on a futures contract, such as a warehouse receipt or shipping certificate.
The specified month within which a futures contract matures and can be settled by delivery or the specified month in which the delivery period begins.
The written notice given by the seller of his intention to make delivery against an open short position on a particular date. This notice, delivered through the clearing organization, is separate and distinct from the warehouse receipt or other instrument that will be used to transfer title.
A provision of a futures contract that provides the short with flexibility in regard to timing, location, quantity, or quality in the delivery process.
Those locations designated by the exchange at which actual commodities may be delivered in fulfillment of a futures contract.
The traditional methodology to distinguish between forwards and futures. Under this theory, a forward is a contract between commercial users in which the parties “intend” to settle by delivery of the underlying asset and a futures contract is one in which the parties “intend” to settle by cash payment.
The nearest traded month, the front month. In plural form, one of the nearer trading months.
A calculation of the expected change in an option’s price given a one-unit change in the price of the underlying commodity or asset. For example, the price of an option with a delta of 0.5 would be expected to change $0.50 when the underlying commodity or asset’s price moves $1.00.
Refers to a position involving options with a value that is independent of the value of the underlying instrument, i.e. that is designed to have an overall delta of zero.
The quantity of a commodity that buyers are willing to purchase in the market at a given price.
Loan repayable on demand. Also known as a call loan.
The face amount, or par value, of a bond or note that the issuer promises to pay on the maturity date.
The regulatory agency responsible for the promulgation and interpretation of regulations under ERISA.
Method of computing a deduction to account for a reduction in value of extractable natural resources.
Sometimes used to refer to a bank that issues American Depositary Receipts in respect of securities that it holds.
Is the first bank to which a check is transferred even though it is also the paying bank or the payee. A check deposited in an account is deemed to be transferred to the bank holding the account into which the check is deposited, even though the check is physically received and indorsed first by another bank .
Depositary Receipts are negotiable certificates that enable domestic investors to own shares in foreign companies.
A registered clearing agency that provides immobilization, safekeeping and book-entry and settlement services to its participants.
A document issued by a bank, warehouse or other depository indicating ownership of a stored commodity.
The parent corporation of the main securities clearing agencies (other than the Options Clearing Corporation), including the Depository Trust Company (“DTC”), the National Securities Clearing Corporation (“NSCC”), the Fixed Income Clearing Corporation (“FICC”), including the FICC’s Government Securities Division and Mortgage-Backed Securities Division. Clearing agencies must registered with the SEC pursuant to Section 17A of the Securities Exchange Act.
Decline in the value of one currency relative to another. O
A financial instrument whose value is based on (“derived from”) a different underlying asset, indicator, or financial instrument.
Financial instruments whose value varies with the value of an underlying asset (such as a stock, bond, commodity or currency) or index such as interest rates.
A clearing organization registered with the CFTC that, in respect to a contract (1) enables each party to the contract to substitute, through novation or otherwise, the credit of the derivatives clearing organization for the credit of the parties; (2) arranges or provides, on a multilateral basis, for the settlement or netting of obligations resulting from such contracts; or (3) otherwise provides clearing services or arrangements that mutualize or transfer among participants in the derivatives clearing organization the credit risk arising from such contracts. See 7 USC 1a(15).
A trading facility for institutional traders that was subject to less extensive regulation than DCMs. DTEFs were eliminated by Dodd-Frank.
A board of trade or exchange designated by the CFTC to trade futures, swaps, and/or options under the CEA. A contract market can allow both institutional and retail participants and can list for trading contracts on any commodity, provided that each contract is not readily susceptible to manipulation.
Self-regulatory organizations (i.e., the commodity exchanges and registered futures associations) that enforce minimum financial and reporting requirements for their members, among other responsibilities outlined in the CFTC’s regulations. When a futures commission merchant (FCM) is a member of more than one SRO, the SROs may decide among themselves which of them will assume primary responsibility for these regulatory duties and, upon approval of the plan by the Commission, be appointed the ‘designated self-regulatory organization’ for that FCM.
A government’s reduction of the value of its currency, generally through an official announcement.
A noticeable or marked departure from the norm, plan, standard, procedure, or variable being reviewed. Similar to variance.
Deposit Guarantee Schemes
A spread between two call options or two put options with different strike prices and different expiration dates.
Distillate fuel oil used in compression-ignition engines. It is similar to home heating oil, but must meet a cetane number specification of 40 or more.
Price differences between classes, grades, and delivery locations of various stocks of the same commodity.
See Binary Option.
An arrangement whereby a member of a market permits its customers to enter orders into the market using the broker-in the member’s name. See SEA Rule 15c3-5.
An investment vehicle that provides for flow-through tax consequences for distributions regardless of the structure of the legal entity or vehicle. Includes, but is not limited to, oil and gas programs, real estate programs, agricultural programs, cattle programs, condominium securities, and Subchapter S corporate offerings, various types of limited partnerships.
A federal cash subsidy paid directly to the issuer of municipal securities in an amount that may be equal to a percentage of the interest paid on the municipal securities. Such subsidy is typically provided in lieu of the exemption from gross income for federal income tax purposes of the bondholders of such municipal securities.
Selling efforts directed into a particular country under SA Regulation S.
Trading strategies designed to speculate on the direction of the underlying market.
A colloquial term for bonds secured by land values, often on unimproved property.
Those petroleum products which leave significant amounts of residue in tanks. Generally applies to crude oil and residual fuel oil.
Price of a bond including accrued interest. May also be called the all-in price.
Term used when a prime broker elects not to accept trades from a customer and effectively requires the executing brokers to settle with the customer. Note that a disaffirmation of a trade, which must be done in accordance with the Prime Brokerage Letter, is not the same as a DK.
A court action that releases a debtor from liability for certain types of debts.
A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.
Any offense as set forth in Rule 300.E.
Statement by an auditor indicating inability to express an opinion on the fairness of the financial statements provided and the reason for the inability.
An attorney or law firm retained by the issuer to provide advice on issuer disclosure obligations and to prepare the official statement and/or continuing disclosure agreement.
The statement that some regulated entities must provide to customers. It describes trading strategy, fees, performance, etc.
The pages on the Form BD and Forms U-4/U-5 that detail problematic responses to the disclosure questions on such forms.
A written document prepared by the chapter 11 debtor or other plan proponent that is designed to provide “adequate information” to creditors to enable them to evaluate the chapter 11 plan of reorganization.
Portion of a business that is planned to be or is discontinued.
Agency bond no-coupon discount notes (“discos”) issued by federal agencies to meet short-term financing needs that are issued at a discount to par value.
The amount by which the par value of a security exceeds its purchase price. For example, a $1,000 par amount bond which is currently valued at $980 would be said to be trading at a two percent discount.
A bond sold at less than par.
A method of paying interest by issuing a security at less than par and repaying par value at maturity. The difference between the higher par value and the lower purchase price is the interest.
Short-term obligations issued at a discount from face value, with maturities ranging from one to 360 days. Discount notes have no periodic interest payments; the investor receives the note’s face value at maturity.
The key interest rates central banks charge on overnight loans to commercial and member banks.
The interest rate that an eligible depository institution is charged to borrow short-term funds directly from a Federal Reserve Bank
Federal Reserve facility that lends short-term money directly to eligible institutions.
Present value of future cash estimated to be generated.
A security that is sold at a discount below par, with the investment return realized solely from the accretion of this discounted amount to the security’s maturity value. This is commonly known as bank discount basis. The most common type of discounted security is the U.S. Treasury bill.
Freedom given to a financial institution by a customer to make investment decisions on behalf of the customer. The degree of discretion can be limited (for example, only as to the time of execution) or extremely broad (what to buy and sell).
An arrangement by which the holder of an account gives authority to someone else to buy and sell without prior approval of the holder; often referred to as a ‘managed account or controlled account.
Absent any restrictions, a “DRT” (Not-Held Order) means any order giving a person complete discretion over price and time in execution of the order, including discretion to execute all, some, or none of the order.
Any trading, practice, or conduct on that: (A) violates bids or offers; (B) demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or (C) is, is of the character of, or is commonly known to the trade as, “spoofing.”
Termination of a corporation.
See Back Month.
Products of refinery distillation sometimes referred to as middle distillates; kerosene, diesel fuel, and home heating oil.
A public offering of securities, as opposed to a private placement. See, e.g., Section 2(a)(11) of the Securities Act (using the term in connection with the definition of an underwriter).May also refer to a dividend or other payment with respect to a security.
Expense of selling, advertising, and delivery of goods and services.
Return of principal,.
Payment by a business entity to its owners of items such as cash assets, stocks, or earnings.
An investment strategy for allocating assets available for investment among different markets, sectors, industries and securities.
A method for determining liability in an underwriting of a new issue of securities, as set out in the agreement among underwriters, in which each member of an underwriting syndicate is liable only for the amount of its participation in the issue and not for any unsold portion of the participation amounts allocated to the other underwriters.
A portion of the company’s earnings that are paid out to equity investors.
Distribution of earnings to owners of a corporation in cash, other assets of the corporation, or the corporation’s capital stock.
Dividends on cumulative preferred stock that remain unpaid in the year they are due.
A liability for payment of a company’s earnings to its shareholders.
Used to measure the current return to an investor in a stock.
The Division of the SEC that is primarily responsible the rules that govern investment advisers and funds.
The division of the SEC that is primarily responsible for drafting rules relevant to broker-dealers ,securities markets clearing systems, and self-regulatory organizations.
A mathematical quantity used to compute an index. It is initially an arbitrary number that reduces the index value to a small, workable number. Thereafter, the divisor is adjusted for stock splits (price-weighted index) or additional issues of stock (capitalization-weighted index).
A designation (derived from an abbreviation of the words “don’t know”) indicating that a party does not have a record of a transaction another party is confirming to it or has no instructions or records indicating that it should accept a delivery being tendered to it.
The Wall Street Transparency and Accountability Act of 2010.
A bond that is quoted and traded in dollar prices rather than in terms of yield.
A quoted price of a security, expressed in terms of dollars per $100 par value.
The futures contract having the largest amount of open interest.
Securities that are exempt from state and local as well as federal income taxes are said to have double or triple tax-exemption.
As used by the CFTC, it implies a situation where a trader holds a long position in the futures market in excess of the speculative position limit as an offset to a fixed price sale, even though the trader has an ample supply of the commodity on hand to fill all sales commitments.
The act of taxing corporate earnings twice, once as the net income of the corporation and once as the dividends distributed to stockholders.
A bond is said to be “double-barreled” when it is secured by the pledge of two (or more) sources of payment. In some states a bond secured in the first instance by a user charge, e.g., water or sewer, may be additionally secured by ad valorem taxes if the user charges don’t bring enough revenue.
Method of accelerated depreciation, approved by the internal revenue service (IRS), permitting twice the rate of annual depreciation as the straight-line depreciation method.
Method of recording financial transactions in which each transaction is entered in two or more accounts and involves two-way, self-balancing posting. Total debits must equal total credits.
The lowering of a bond rating by a rating agency due to a deterioration of the credit quality of the issue.
Generally used in connection with covered call writing, this is the cushion against loss, in case of a price decline by the underlying security, that is afforded by the written call option.
A Petroleum industry term referring to commercial oil and gas operations beyond the production phase; oil refining and marketing, and natural gas transmission and distribution.
Signed, written order by which one party (drawer) instructs another party (drawee) to pay a specified sum to a third party (payee).
A schedule of estimated expenditures to be made from bond proceeds and other available funds on a construction project. Such schedule typically shows periodic payments, or “draws,” to the contractor at progressive stages of completion of the project.
Gas that does not contain liquid hydro-carbons.
Securities that are eligible for book-entry depository delivery and settlement services through DTCC.
A joint service offering of DTC and NSCC that allows dealers to combine their affirmed institutional trades in NSCC’s Continuous Net Settlement (CNS) system.
Dual trading occurs when: (1) a floor broker executes customer orders and, on the same day, trades for his own account or an account in which he has an interest; or (2) a futures commission merchant carries customer accounts and also trades or permits its employees to trade in accounts in which it has a proprietary interest, also on the same trading day.
Dual-currency bonds are bonds in which principal payments are in one currency and coupon payments are in another currency.
A generating unit that can produce electricity using two or more fuels.
The term commonly used to refer to the investigation made by underwriters, usually with the assistance of counsel, in part to determine the accuracy and adequacy of the offering document.
A measure of the timing of cash flows (i.e., the interest payments and the principal repayment) to be received from a given fixed income security. Duration is used to assess price volatility for given changes in interest rates, the reinvestment risk associated with a given portfolio or the interest rate risk associated with matching particular interest-rate-sensitive assets and liabilities.
An auction of a debt instrument (such as a Treasury note) in which all successful bidders receive the same yield (the lowest yield that results in the sale of the entire amount to be issued).
A person with trading privileges at an exchange with an electronic trading facility who trades electronically (rather than in a pit or ring) for his or her own account.
In the case of a securities that provide for early prepayment, such as ABS, the risk to holders that early prepayments of principal will reduce their returns.
The risk to holders of debt that high-yielding bonds will be called early, with the result that proceeds may be reinvested at lower interest rates.
The exercise or assignment of an option contract before its expiration date.
Wages, salaries, professional fees, and other amounts received as compensation for services rendered.
Measure of performance calculated by dividing the net earnings of a company by the average number of shares outstanding during a period.
Relationship of earnings per share (EPS) to current stock price.
A method for determining liability in an underwriting of a new issue of securities, as set out in the agreement among underwriters, in which each member of the underwriting syndicate is liable for any unsold portion of the issue according to each member’s percentage participation in the syndicate. Most syndicates are structured as undivided accounts..
European Banking Authority
European Central Bank
Electronic Communications Network, refers to a electronic system for trading in stocks or futures that is not a fully regulated exchange. See also ATS.
Economic risk describes the vulnerability of a financial instrument to downturns in the economy.
That portion of the deliverable supply of a commodity that is in position for delivery against a futures contract, and is not otherwise unavailable for delivery.
Be responsible for a trade, without necessarily performing the actual execution. See SEA Rule 11a2-2(T).
A way of amortizing bond discounts or premiums by applying a constant interest rate to the carrying value of the bonds at the beginning of each interest period.
The actual rate of interest earned by the investor on securities, which takes into account the amortization of any premium or the accretion of any discount over the period of the investment.
Total income taxes expressed as a percentage of net income before taxes.
A market that offers transparency, liquidity, low transaction costs and price movements.
In economic theory, an efficient market is one in which market prices adjust rapidly to reflect new information.
Exchange for Physical.
Exchange for Risk. An EFR is a privately negotiated trade that entails the exchange of a futures position for a corresponding OTC instrument. The number in this column represents the number of EFR transactions for the given date.
Exchange for Swap. An EFS is a privately negotiated trade in which a position in a futures contract is exchanged for a swap position in the same contract.
An enterprise that is engaged in the generation, transmission, and/or distribution of electric energy primarily for use by the public and is the major power supplier within a designated service area. Electric utilities include: investor-owned, publicly owned, cooperatively owned, and government-owned entities.
The process of submitting a competitive bid for a new issue of securities or a bid on a secondary market trade through services that facilitate the collection of bids by electronic means.
As defined pursuant to Regulation NMS Rule 600(b)(23), an electronic system that widely disseminates to third parties orders entered therein by an exchange market maker or OTC market maker and permits such orders to be executed against in whole or in part. ECNs are relevant to the obligation under Regulation NMS of certain market participants to disseminate their best priced order but are not otherwise subject to any additional regulatory requirements beyond that which would otherwise apply on account of the activities in which they are engaged, e.g., Regulation ATS. An ECN does not include any system that matches or crosses orders on a periodic basis or that is operated by a market maker and executes primarily against the account of such market maker as principal, other than as riskless principal. See Lofchie’s Guide to Broker-Dealer Regulation, Trading Chapter.
Purely electronic trading markets as opposed to a floor market.
A centralized online source for free access to municipal disclosures, market transparency data and educational materials about the municipal securities market operated by the MSRB.
An order placed electronically (without the use of personal communications).
An automatic execution facility operated by an exchange or market.
Device to maintain firm records in a non-paper format,.
A trading facility that operates by an electronic or telecommunications network instead of a trading floor and maintains an automated audit trail of transactions. See 7 USC 1a(16).
An ECP that has a demonstrable ability to make or take delivery of an underlying commodity of a contract; incurs risks related to the commodity; or is a dealer that regularly provides risk management, hedging services, or market-making activities to entities trading commodities or derivative agreements, contracts, or transactions in commodities. See CPO/CTA Guide: Product Jurisdiction.
An entity, such as a financial institution, an insurance company, or commodity pool, that is classified by the Commodity Exchange Act or the Securities Exchange Act as an eligible contract participant based upon its regulated status or the amount it invests on a discretionary basis. This classification permits these persons to engage in specific transactions (such as trading on a swap execution facility or entering into a bilateral swap trade) not directly available to non-eligible contract participants, i.e., retail customers.
The types of securities in which investments are permitted by law or under a contract
Types of securities authorized under the bond contract to be held in escrow for the purpose of defeasing bonds.
A security for which one or more Market Makers has received clearance to quote the issue on the OTCBB in the last 30 days. Securities receive eligible status if they are cleared following the filing of a Form 211 or a 15c2-11 Exemption Request Form – “Piggyback Exemption”.
A provision that gives the issuer or bondholder an option, but not the obligation, to take an action against the other party. The most common embedded option is a call option, giving the issuer the right to call, or redeem, the principal of a bond before the scheduled maturity date.
A payment term in a debt or other security that has the economics of an option; e.g., it increases the amount payable as the value of a referenced asset increases.
Any market occurrence or circumstance which requires immediate action and threatens or may threaten such things as the fair and orderly trading in the market.
Emerging market bonds usually include government (or “sovereign”) bonds; sub-sovereign bonds of an emerging market country and corporate bonds of issuers primarily located within such country. .
The Municipal Securities Rulemaking Board’s, Electronic Municipal Market Access website, www.emma.msrb.org, which is the repository for municipal issuers’ continuing disclosure documents.
Compensation arrangement used by employers in addition to salary or wages. Most common qualified retirement plans are: (1) defined benefit plans - a promise to pay participants specified benefits that are determinable and based on such factors as age, years of service, and compensation; or (2) defined contribution plans - provide an individual account for each participant and benefits based on items such as amounts contributed to the account by the employer and employee and investment experience.
The statute administered by the DOL that governs certain relationships between “plans” and either fiduciaries or parties in interest.
Stock bonus plan of an employer that acquires securities issued by the plan sponsor.
Mortgage or other lien on the entity’s assets.
The Dodd-Frank Act’s provision that exempts non-financial entities that are end users from the clearing mandate thus allowing end users to execute swaps bilaterally for the purpose of hedging or mitigating commercial risk.
The amount of a storable commodity remaining at the end of a year.
The process by which the payee transfers ownership of a check to a bank or another party by writing his or her name on the back of it.
An agency of the US Department of Energy that provides statistics, data, analysis on resources, supply, production, consumption for all energy sources. EIA data includes weekly inventory statistics for crude oil and petroleum products as well as weekly natural storage data.
An NFA requirement imposed on Bad Boy firms to tape record and retain conversations that occur between their APs and existing or potential customers.
The commodities specifically listed in) of the Commodity Exchange Act: wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice.
See “exchange of options for options trade.”
Earnings per Share.
The price at which the quantity demanded of a commodity is equal to the quantity supplied.
Instrument traded on the cash market representing a share in the capital of a company. See also stock.
As defined at Section 3(a)(11) of the Exchange Act, any stock or similar security; or any security future on any such security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right; or any other security which the SEC so deems
As used on a trading account statement, refers to the residual dollar value of a customer account, assuming it was liquidated at current prices.
The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered.
A commitment to invest equity capital in a firm under certain future conditions.
Provision of capital through the sale of common or preferred stock to investors.
Options on shares of an individual common stock.
Capital stock and other securities that represent ownership shares, or the legal rights to purchase or acquire capital stock.
The Employee Retirement Income Security Act.
The SEC has exempted from Rule 611 trades to correct bona fide errors in the execution of customer orders. The exemption requires, among other things, that the firm have objective evidence of the error, the transaction is recorded in an error account, and the trading center has in place policies and procedures to address errors.
European Supervisory Authorities
European System of Central Banks
Money or property put into the custody of a third party for delivery only after fulfillment of specified conditions.
A fund established to hold funds pledged and to be used solely for a designated purpose, typically to pay debt service on an outstanding issue in an advance refunding.
An agreement that typically provides for the deposit of funds or securities in an escrow account to refund an outstanding issue of securities.
A receipt issued by a bank in order to verify that a customer (who has written a call) in fact owns the stock and therefore the call is considered covered.
Securities that are held, typically in an escrow account, to be used solely for a designated purpose.
European Securities and Markets Authority
Employee Stock Ownership Plan.
Exchange Traded Fund.
Refers to a CEA requirement that new registrants attend ethics training within six months of registration, and all registrants attend periodic training sessions to ensure they understand their responsibilities to the public, including responsibilities to observe just and equitable principles of trade, and rules of the CFTC, contract market, or SRO.
The average interest rate at which euro interbank term deposits within the euro zone are offered by one prime bank to another prime bank.