a 1 Scanned with |\CamScannerFOREWORD Eynamic nature of the financial sys. tom makes change and innovation inevita- ble. Thus, new products and variants of existing ones are developed frequently. The ‘Nigerian financial system is not immuned to these, and has, in fact, experienced some innovative developments. For instance, the rket recently witnessed the emer- gence of “trading in rights" and the establish- ment of a "Central Securities Clearing Sys- tem," with an "Automated Trading System" on the verge of taking off, However, an understanding of these and other developments requires a simple but accurate conceptual framework. Itis fr this purpose that the Securities and Exchange Commission has embarked on the publica- tion of this Glossary of Capital Market Terms, as part uf its Commitment to public enlight- cenment and pursuit of its market develop- ment objectives, While the dynamism of the financial sys- lem, earlier alluded to, makes it practically impossible to include all terms in this edi- tion, every effort has been made to include as many terms as possible to assist practi- tioners arid investors in the market as well as students of finance, economics and business. Lis; therefore, hoped that this present effort of the Securities and Exchange Commission would be another step in bridging the ob- served information gap. Finally, we wish to state that in compil- ing this glossary of terms, several references were used and comments received for which we are grateful. AS, CAPITAL MARKET GLOSSARY Accrued Interest: Interest which has bee accumulated on a debt instrument sinc the last interest payrnent date. ion: The purchase of controllir equity interest in a company by anoth: company. Acquisition may be finance by cash or the issuance of securities Active Market: A stock market with hig transaction volumes. Such markets ust ally display high liquidity Additional Offering: Subsequent issue + securities tothe public or to a select grou of investors after an initial (the frst) offe ing of securities. It provides addition funds to a company and enlarges its ov standing shares. Aftermarket: Trading in the securities of company in the period immediately fc lowing a new issue. Allotment: The allocation of securit among various subscribers to a sccuri issue. In Nigeria, preference is given ! small subscribers in the allotment of s+ Curities in line with the widespread shai ownership philosophy of the Feder. Government. . American Depository Receipts (ADR): method of accessing United States! cap tal market by foreign issuers. Under tr system, the certificate relating to a sect tity issue is registered in the name of ar held by a US entity usually a bank, whic then issues receipts to investors (subscril 3 Scanned with |\CamScannerF ers). These receipts are then traded nor- mally in the market. Amottization:’ The instalmental re-pay- ment of a loan by a debtor over the life span of the loan. This is usually by creat- ing. sinking fund account into which the debtor would make periodic payment which would then be utilized to redeem the loan, Amortization in accounting parlance, however, refers to the gradual reduction of the book value of an intan- gible asset until completely written-off. + Akin to depreciation except that depre- ion is used in respect of tangible as- sets. ‘Annual Report: A document published yearly by a company and distributed to its shareholders showing its operations including financial performance during the fiscal year. The report, which is man- datory for public companies, contains the financial statements, auditors report, chairman's statement and directors’ re- port, among others. | AnticTrust Law: A Legislation which is + aimed at preventing business combina- tions which could create monopolies or restrain competition, : ‘Annuity: An agreed sum payable to an in- vestor at specified intervals over a period of time or perpetuity, as in the case of terest payment in annuity bonds. Appreciation: An upward movement in the price of a secirrity or in the value of as- sets. : 4 Arbitrage: The purchase of a finanig, strument or commodity in one market, the sale of it simultaneously in anct ne market in order to profit from exisy, price lferentials in both markets, 1 ther word, the arbitrageur takes advay tage of two different price quotations fy, the same instrument or commodity in di. ferent markets or in the same market ay with rights trading. He buys inthe mar ket with the lower quotation and sel where itis higher. Ask Price: The lowest price offered for z security on an exchange or overthe-coun: ter market. It denotes the lowest price ar investor is willing to sell a security at < particular time. It is also called the offe price. ‘Asset: An item of commercial or exchange value owned by a company, individual government, etc. It also refers tothe cul mination ofall the items a company own: —totdl assets, Asset Mix: The percentage distribution o assets held by an individual or corporate entity under the various categories of as sets such as equities, debt instruments ‘cash, and short-term instruments. Asset Diversification: Investment in a va riety of financial instruments in orde?'t. spread risk. Asset Stripping: The sale of a company’ assets or other component parts (e.g. sub sidiaries) bit by bit for profit. 3 ‘Scanned with |CamScanner‘Auction Market: A market where orders to buy or sell financial instruments or com- modities are effected under given rules. Trade is usually sealed at the highest bid price and the lowest offer price. The auc- tion system in the securities market, how- ever, differs from other forms of auction markets as there are several buyers and sellers represented by their stockbrokers, unlike the latter type of auction where just one seller and several buyers participate. Authorised Share Capital: The permissi- ble number of shares a company may is- sue as stated in its Memorandum and Ar- licles of Association, The authorised shares are subject to change only by a resolution at a general meeting of share- holders Bear: One who expects a general depre- ciation in the value of securities or com- modities or in a particular security or com- modity traded on an exchange or over - the - counser. Bear Market: A general decline in prices of securities or commodities in a stock or commodity market. Bearer Security: A security which does not carry (indicate) the name of the owner in the books of the issuer or on the certifi- cale. Any one in possession of it (bearer) is, therefore, presumed to be the owner. Beneficial Owner: Real owner of a secu- rity who may, for convenience or safety, register the security in the name of a nomi- nee such as a bank, trustee or portfolio manager. Best Effort Underwriting: An underwri ing agreement in which the underwrite ation to purchase the secur ties from the issuer but merely uses h "best efforts" to market and distribute th securities. All unsold securities are sut sequently relurned to the issuer, An ur derwriter may prefer this type of arrange ment when the issuer is Considered ur seasoned. ‘The maximum price investors are pre pared to pay for a security on the stoc ‘exchange at a given point in time. Blue Chip: Companies which are wiclel known for good financial performance product acceptance, high-quality rar agement and regular dividend paymen Owing to these features, blue chips sect rities are usually in high demand, Block Holding: Large holdings of the share of a company by an investor usuall, b an institutional investor or corporate b->dh Block Trading: Trading in large quantitie of a security. The size of transactions re garded as ‘block’ is usually deterrrine by a stock exchange and varies from on exchange to another exchange. Book Entry System: A system which elim nates the issuance of certificates to ev dence ownership of securities but i which changes are effected by mere er tries usually in a computer. Book Value: The value of an asset as show in a company’s balance sheet. The boo 7 ‘Scanned with |CamScannerValue ually difiert, woenetemes Comead. natty, fromm thar martiet walae whach is the Current price Crimean wear are Me ing 10 pray for an acvet Domus ewes. Chaves distriouted tree to chareholiden out of a Company's reverve in proportion to the number of shares hel, ¢¢. shareholders could receive one new share for every two held. Such shares add to the shareholder's holdings as well as the company’s outstanding shares {paid-up capital) but does not generate additional fund for the company. 1 is also Called share dividend because it is a por- thon of post tax profit that is declared by a company and distributed to shareholder in form of shares in proportion to the number of shares already held. Bond: interest-bearing securities (i.e. debt securities) issued by corporate entities and governments. However, in Nigeria, Fed- eral Government long-dated instruments are generally not called bonds but stock. iridging Loan: A short-term credit facility 10 an individual, corporate body or gov- ernment as an interim measure to meet olanned expenditure needs while expect- ng a medium to long-term fund. ‘oker: See Stockbroker. ‘oker Amount: An odd amount, such as ixty-nine shares which is not a,normal market quantity. (see odd lot) sroker/Dealer: A financial intermediary ‘who combines the functions of a stock- - braker and a securities dealer t Brokerage Commission: Fee changed! Q stockbroker for services rendered course of buying and selling securities On behalf of a client : Bull: One who expects a general the value of securities or commodities or a particular security of commodity. Bull Market: Stock or commodity market witnessing a general rise in price: Call Feature: The provisions in’ interes bearing securities, giving the issuer the ‘option to redeem the security at a prede- termined price before the date of matu- rity. Call-over: A system of trading in some stock exchanges where stockbrokers as- semble at the trading floor at designated times to bid or make offers as the list of securities is read aloud i. e. as the board is called. Cash Account: An account maintained by a stockbroker for cash settlerpent of trans- actions. Cash Dividend: The portion of after-tax ~ profit that is declared by a company and distributed to shareholders in proportion to their holdings in the company: Capital Gains: Gains made at the disposal (sale) of securities by an investor. Itis the difference between the price at which the securities were bought and the price at Scanned with |\CamScanner‘ual interest (income) by the market price investment Custodian: An institution which holds for sale keeping, for clients, documents and assels stich as securities. In many in- stances, (in respect of securities), custo- dians ave given powers to vote and exer- cise other rights including collection of investment income on behali of their cli- ents. Covenant: A provision which spells out the dos and don'ts of the debtor in a trust deed tor the purposes of protecting the credi- tors of a company of government in a loan arrangement Collateral: Financial or physical assets pledged by a borrower as a guarantee for the repayment of a loan or bond in the event of a default. Cum Dividend: With dividend. The buyer of an equity cum dividend is entitled to the dividend already declared or to be declared by the company whose security was bought. Delisting: The removal of a security from the official list of a stock exchange result- ing usually from the failure of a company to comply with post-listing requirements, maturity of debt instruments or merger between quoted companies. Once delisted, the security ceases to be traded ‘of the exchange. Dealer: A financial intermediary who buys or sells securities for his own account and not on behalf of clients as stockbrokers 4 Ke do. A dealer thus acts as a principal in security transaction. A dealer resells t securities to clients at approved marg, aboye the transaction price. The marg, is what the dealer gets since he dues n earn a commission Dealing Member: A member of a stor ‘exchange authorized to buy and sell s: Curities on behalf of the public or for the own account. Debentures: interest-bearing securities « corporate bodies representing indebter ness by the issuer to subscribers. The i suer pays subscribers interest at stated ir tervals and redeems the principal on ms turity. Debt/Equity Ratio: Indicates the exten to which shareholders’ fund can absor creditors’ claims int the event of a comp: ny's liquidation; derived by dividing th long-term debt of a company by its ec uity capital (sharcholders’ fund). Debt Service: Settlement of interest an principal of a loan as they fall due withi a period usually a year. Debt Instruments: interest-bearing secu rities of governments and corporate boc s. Interest is paid to creditors at state: intervals throughout the life of the secu rity, and on maturity, the debt (principa is redeemed. Debt Financing: The issuance of debt se curities by a company to raise funds t finance a specific project, working capi tal and/or retire current indebtedness. / 15 ‘Scanned with |CamScannersluding fees to various advisers, issuing houses, other operators, and regulatory authorities. Also included are publicity, printing and distribution expenses. Completion Board Meeting: The meeting of the board of directors of a company making a security offering with all the parties to the issue such as issuing house, solicitors, accountants and registrars. It is during this meeting that all documents relating to the issue are signed by the di- rectors and the parties. Its only after the ‘completion board meeting and the lodg- ment of copies of the signed documents with the SEC that the securities can be distributed to the public. Convertible Security: A security which , carties a provision giving the holder and/ or the issuer the option to turn the secu- fity into another class of security of the issuer at a later date e.g. to convert a debt instrument into equity of the company. Counterparty: An individual or institution which is party to a contract. Counterparty Risk: The probability that a Party to an agreement (counterparty) would default on his obligaticin. Coupon Rate: The rate of interest paid by a corporate entity or a government on its bond (debt) issue. The coupon rate could either be fixed or floating Conglomerate: A company having a group of subsidiaries engaged in unrelated ac- tivities. 2 Ge o™”"”"— sti—ie Conglomerate Merger/Acquisitioy business combination in which the grating companies are in unrelated j of business. Consolidation of Companies: A merge two or more companies in which an tirely new company evolves to take ¢ the assets and lial of the merg companies. . Cross-Border Listing/Offering: Securi listings or offerings by an entity (cor rale oF government) in a country or co tries other than the home country. Cumulative Preference Shares: Prefere: shares having a provision which alle dividends not paid in a particular'yea period to be accumulated and carried ward toa later date, Cum Rights: With rights. A buyer of a curity marked cum rights is entitled participate in an impending rights is of the company. Current Asset: Short-term assets of a cc pany such as cash and other instrume which are convertible into cash wit one year. These include inventory, mot market instruments, etc. Current Liabilities: Obligations of acc pany expected to be Seltled by it wit one year. Current Yield: The income earned on investment within a year, expressed a percentage of the present value of the vestment. For equity, it is derived by Viding the annual dividend by the mar price and for bonds, by dividing the 1B ‘Scanned with |CamScannerwhich they were sold. When such differ ence is positive, itis said to be a capital gain. When the difference is negative, this is a capital loss. Capitalization Issue: A new allotment of shares made in proportion to-existing shares out of accumulated reserves. Usu- ally known as a ‘scrip’ or a ‘bonus’ issue. Such issues only increase the outstand: ng shares but add nothing to the assets of a company. (See bonus issues). Capital Market: Financial market which trades in medium to long-term financial instruments (stocks and bonds) with ma- turily in excess of one year. It is a net- work of participants, instruments and fa- cilities which function basically to facili- tate efficiently, the flow of savings into long-term investment for socio-economic development. Capital Structure: The various components ‘of a company’s long-term capital such as debentyres, ordinary and preference shares. Call Option: The right but not the obliga~ tion of an investor to buy a specified quan- lity of a financial instrument at a prede- termined price and period. Cash Settlement: Payment for securities Uransactions in the secondary market in cash as distinct from normal account set- tlement. Circuit Breaker: A mechanism which tem- porarily stops trading in US stock and commodity exchanges when the price in- 0 >” dex drops by a specified point within a specified period. The device was intio- duced following the 1987 stock maiket crash : Clearing House: An organization, usvally i a subsidiary oF an arm of a futures ex- change which stands as a counterparty in every futures transaction in order to guar ante performance of the contract. the clearing house thus registers, matches, monitors and settles every transaction Clearing System: Procedure put in place by a securities exchange to compare tad- | ing details between stockbrokers betore | settlement takes place. Closed-End Investment Company: An in- vestment company quoted on a secri- ties exchange which pools funds from the public through the flotation of equities, and invests the monies usually in listed securities. The securities of the company are thus tradeable like any other securi- ties on an exchange. Unlike the open- end funds (unit trust or mutual furs), closed-end companies have fixed capital and thus do not stand ready to redeem or issue additional securities. They-are sometimes referred to as investment trast company. Closing Prices: Final prices at the close of transaction on an exchange. Cost of Raising Capital: The price paid by an issuer of securities to raise funds in the capital market. There are usually several cost components borne by the issuer, in- ul . ‘Scanned with @camscannergovernment could also issue debt securi- ies to finance specific projects. Debt Security: See debt instruments. Default: The non-performance of the terms of a bond such as the inability of a com- pany or government to meet its financial obligations e.g. the payment of interest or principal to its bond holders. (creditors). \ Peregulation: Relaxation or removal of economic and legal controls (restrictions) in a country essentially to promote com- Petition, efficiency, and ultimately foster socio-economic progress. Derivative Instrument: A financial instru- | ment whose value is derived from an un- derlying instrument or product such as a security.(e.g. stock index) or commodity (eg. cocoa). Depreciation: A decline in the value of a security or an asset. < Depository: An institution which provides custodial services by holding, for Safe keep- ing, documents relating to an investment in securities or other assets (see also custodian). Development Loan Stock: Long-term, in- terest-bearing securities of the Federal Government of Nigeria traded on the Stock Exchange. Disclaimer Clause: A requirement by some jons that issuers carry on the front cover page of a prospectus, a clause which states that the commission has not approved (endorsed) the merit of 16 the securities on offer to the public, markets also carry a liability clause ing the liabilities for providing false , misleading information in a prospectus any vending document. , + Disclosure: The release of information ty \ ‘a company or government to existing ang prospective investors and other member, of the public, about its activities. The se. curities laws require that any informatior which is material to an offer of security o: to investment in the secondary ‘market must be disclosed to the public. Disclosure Requirement: Information which is required of issuers by regulatory agencies such as securities commissions ‘and stock exchanges to be provided in an offer document or released from time to time to shareholders and the public. Discretionary Account: A client account kept by a broker-dealer carrying the man- date of the client to buy and sell securi- ties on his behalf without his (client’s) prior consent but for his notification after the transaction has been effected. Discount: When the market price of a se- curity is below the par value, the security is said to be trading ata discount. Dis- count also means transaction price below the market price. Divestment: The disposal of all or a por- tion of an equity interest in a company. The term is usually used in respect of rela- lively large disposal. Dividend Cover: The number of times the 17 ‘Scanned with |CamScannernet prof of a company ‘covers’ the divi. Gend declared. Fast growing companies, which need capital for reinvestment, are Whely to have higher dividend cover than mete mature ones. Dividend Warrant: A cheque iswed by a company to its shareholders for the pay- ment of dividends Dividend Yield: The ratio of current dend to the market price of a security. Double Option: The right to buy and sell a security at an agreed price within an agreed period which is usually not more than three months. Due Date: The date when interest on a debt instrument or the principal falls due for payment to creditors/investors. Dual Capacity: When a securities firm acts both asa stockbroker (ie. agent to its cli- cents) and market-maker (i.e. dealer or prin- Cipal trading for its account). Dual Listing: ‘The listing of a security on more than ane stock exchange. This usu- ally improves the liquidity of the security and could encourage arbitrage trading. Earnings Per Share: Gross profit of a com- pany (less taxes and obligations to prefer- ence shares and bond holders), divided by the company’s paid-up capital. It shows how much a company had earned on its ordinary shares. Efficient Market Hypoth esis which states that the pi ‘An hypoth- of a secu- tity fs a reflection of all available infor ration about it and thes represents its true value. ft states alse that the Current price of a security isthe most appropriate meas. ure of future retires Equity: Ownership capital held by indi- viduals, corporate bodhes and sometirnes governments in a company. Also called ordinary shares. Ex-Dividend: Without dividend. The buyer of a security marked ex-dividend will not be entitled to receive current or impend- ing dividend of the company whose se- Curities were bought. ; Euro-Bond: An international bond issue sold in countries other than the one in whose currency the instrument is denoni- nated e.g. US dollar-dlenominated bond sold outside the United States. Equity Capital: Monies supplied to a com- pany by persons and institutions having ‘ownership interest in it Equity Financing: ‘The issuance of shares to generate money to finance a compa- ny’s planned projects and/or working capital. Exercise Price: The price al which the un- derlying securities of an option can be bought or sold by the holder of the op- tion during a stated period. Expiration Date: The date of maturity of an option contract. Extra-Ordinary General Meet 0y f - eee Cl fret profit of a company ‘covers’ the divi- Send declared. Fast growing companies, which need capital for reinvestment, are Vikely to have higher dividend cover than more mature ones. Dividend Warrant: A cheque issued by a company to ils shareholders for the pay’ ment of dividends. Dividend Yield: The ratio of current divi- dend to the market price of a security. Double Option: The right to buy and sell security at an agreed price within an reed period which is usually not more than three months. Due Date: The date when interest on a debt instrument or the principal falls due for payment to creditors/investors. Dual Capacity: When a securities firm acts booth as a stockbroker (i.e. agent to its cli- cents) and market-maker (ie. dealer or prin- Cipal trading for its account). Dual Listing: The listing of a security on more than one stock exchange. This usu- ally improves the liquidity of the security and could encourage arbitrage trading. Earnings Per Share: Gross profit of a com- pany (less taxes and obligations to prefer- ence shares and bond holders), divided by the company’s paid-up capital. It shows how much a company had earned on its ordinary shares. Efficient Market Hypothesis: An hypoth- esis which states that the price of a secu- 18 tity is a reflection of all available infor tmation about it and thus represents its tre value. It states also that the current price of a security is the most appropriate meas ure of future returns. Equity: Ownership capital held by indi- viduals, corporate bodies and sometimes governments in a company. Also called ordinary shares Ex-Dividend: Without dividend. The buyer of a security marked ex-dividend will not be entitled to receive current or impend- ing dividend of the company whose se- curities were bought Euro-Bond: An international bond issue sold in countries other than the one in whose currency the instrument is denomi- nated e.g. US dollar-denominated bond sold outside the United States. Equity Capital: Monies supplied toa com- pany by persons and institutions having ‘ownership interest in it. Equity Financing: The issuance of shares to generate money to finance a compa- ny’s planned projects and/or working capital. Exercise Price: The price at which the un- derlying securities of an option can be bought or sold by the holder of the op- tion during a stated period. Expiration Date: The date of maturity of an option contract. Extra-Ordinary General Meeting: A spe- ro) Scanned with |CamScanner‘Gal meeting of the shareholders of a com- Financial Market: A market “Fi pany ordered by the board of directors to | ‘a mechanism for the efficient yw discuss specific issues of concem to the | tion of funds from the surplU! ie company. units apie e as ° uo a nomic units (users of funds). The Exchange-Traded Derivatives: Derivi is made up of two principal Segn, products which are traded on a secur the money and the capital markets, \ or futures exchange. Financial Intermediary: An institution such as a bank, stockbroking firm or issuing house, which mobilizes, or facilitates the mobilization of funds from surplus to defi- cit economic units. Financial Instrument: (A financial product such as stock, bonds, treasury bill, and’ certificate, commercial paper and bankers’ ac- ceptances which is created to facili- tate the flow of funds from surplus to deficit economic units. (ii) Any document which denotes owner- ship of a financial asset or evidences credit to a company or government. Fidelity Bond: Insurance policy taken by an organization against losses which may aise as a result of dishonest activities of employees. Financial Future: A future contract whose underlying product is a financial instru- ment such as stock, bond, currency, treas- ury bill or centficate, Financial Leverage: The proportion of debt to equity in a company’s capital structure. _ Accompany is highly leveraged when the [Link] debt is higher than equity. 20 al Dividend: The last dividend , bution during a company’s fiscal However, some companies pay divi ‘only once in a year. Fixed Capital: Funds invested by a pany in fixed assets such as pl machineries and equipments. Fixed Rate Securities: A debt sec whose interest rate does not vary, (ff ate) but is fixed throughout the life « instrument. F Flight Capital: Monies which are take of a country as a result of instability political, economic or social environ Flotation: Public offering of new s¢ ties by a company or government. Floating Rate Note: Debt instrument: variable interest rates. Foreign Bond: Bond issued by a go ment or company in a foreign countr denominated in that (foreign) cou currency. Usually, the issuer does take advantage of more favourable ket conditions in the country of isst the international capital market, c: coinages linked to the country of a ‘Scanned with |CamScannerNave lovelaped te 4 hanes, Those inetud ae Hones tasted in the U8), Sanural onds Gapan) and Wulldog bonds United Kingdon) torward Contract Similarto a futures con tract hut neither traded on an exchange nor carty standarehizod terns, A forward Contact can thus be customized to suit tho special needs of the parties to the con Wace Hranked Income: Investment income on Which tay has already been paid (usually deducted at souree) and thus exempted fromm additional tax by the investor, In come on-unit ust is franked in many COUNTS, Front Running: The sale or purchase of securities by a brokerdealer for his ac: count ahead of client's order and based 11 privileged information available to the Irokerdealer about the client's order flow, Full Disclosure: ‘The provision of compre- hensive information and material facts relevant to an issue of securities to the public to enable rational and informed investment decision. Fully Paid-up Capital (Shares): The por- tion of a company's authorized share capi- lal that has been issued and paid for by shareholders. Futures Contract: An agreement to buy or sell a specified quantity of a financial in- strument or commodity at a price and time 2 ayroedl hy the partion, Fut veloped to hedge against a tuations in the prices of financial snstau ents oF commodities, and have alsa Come lnportant speculative instrurnents Unlike forward contracts, futures contracts ave standardized and traded on an ex. change Futures Exchange: An organized marker for trading in futures contracts, Gilt-tdged Securities: Securities issued by fovernments, They are usually consid: cored high-grade and safe investment ow- ing to the almost zero probability of de- fault on interest and principal payments, Global,Bond: A bond issue which is of fered for subscription simultaneously in many jurisdictions, accessing the international capital market through the issuance of depository re- ceipts which are traded in major stock markets such as the International Stock Exchange, London, and the over-the- counter market in the U.S. Global Offering: A security issue - equity oF debt which is offered simultaneously in many countries. The equities could be new issues or existing securities such as privatization issues. Gross Profit: Corporate profit fram which 1 taxes and other deductions are yet to be made, Itis derived by deducting total cost ‘of production from total revenue from sales. 2B Scanned with |\CamScannertarowth Stocks Securities of a Company which display relatively faut growth in earings” Such securaies are usually Priced well above par value and inves tor benef shenuigh capstal appreciation. Going Public: The process of conversion of corporate status from private limited habslity company (private ownership) to public limited liability company (public ‘ownership). 1s also used in relation toa company offering its securities to the pub- Nic for the first time (IPO). Maireut: The amount taken off the value. ‘f securities for the purpose of calculat- ing the net capital of broker/dealers. A number of criteria such as market risk, maturity (for debt instruments) and type of security would usually be considered in the determination of the most appro- priate haircut Hedging: strategy used by business con- ccosns and investors to reduce the risk of adverse price fluctuation in the prices of commodities or financial instruments. Hedge Fund: Mutual funds which employ hedging techniques to minimize risk. Highs: The highest movement of a stock index or price of a security during a given period e.g. a day, month, year, etc, Lows are the opposite of highs. Historic Cost Accounting: The traditional “method of accounting for profit and other balance sheet figures, making no allow- ance for inflation as in current cost ac- 4 vy Counting. Stock is valued at its Orig, coat, not its current replacement, Fixed assets are entered al original c,, minus a depreciation figure based ony, cost. Holders of Record: The list of shareho), ers as shown on a company’s register , shareholders at a given date. The dist bution of dividends, annual reports, et are restricted to holders of record. In N geria, these are members of a public con pany at the close of the company’s regi ter on a given date. ‘ Holding Company: A company whic ‘owns sufficient equity capital in anothe company and thus exercises contro] ove the latter. Horizontal Merger: A merger betwee companies in similar lines of business: Hot Issue: A public offering of securitie with exceedingly high demand. Hot Money: Highly volatile foreign inves ment capital. It refers to monies broug! into a country by investors taking advar tage of high returns such as favourabl interest rates and stock market returns, bt which are quickly moved out as fund: mentals change or as returns in other je risdictions become more favourabl« These are thus, essentially, flows of sho duration. Hypothecation: The pledging of securitie as collateral to purchase other securitie ‘on a margin account. 25 wet * ‘Scanned with |CamScannera income Bands: Securities, the interest on which is payable only out of profit. ladex: Statistical data computed to meas- ure changes in the value of commodities, securities, etc. An index is derived from the prices of all or some market constitu- ents, usually expressed in percentage change from the base period. Indices are important measures of the performance of an economy or a financial market. Institutional Investors: Institutions such as insurance companies, pension funds, in- vestment trusts and unit trusts which, by virtue of their activities, pool substantial funds with a good percentage of the mon- ies invested in the securities market. In some stock markets, over 50 per cent of equities ‘s held by this class of investors while up to 70 per cent of trading is con- ducted on their behalf. They are, there- fore, considered important players in stock markets. Internationalization: The opening up of a country’s capital market to foreign partici- pation by removal of entry and exit barri- ers, and permission to nationals to freely participate in foreign capital markets. Investor: A person (or institution) who buys and sells financial instruments with the aim of enhancing income and/or diversi- fying risk. Investor Protection Fund: An insurance fund established to compensate clients of stockbroking firms and other capital mar- ket institutions which have collapsed or 26 defaulted on their obligations. There is often a limit placed on the amount of com pensation receivable by a client, Insider: Principal officers and directors 0 a company and those with business rela tionship with it such as auditors, report ing accountants and lawyers as well a: those holding a specified percentage (ir most countries 5 per cent or above) of the ‘outstanding shares of a company. Investment Banker: A financial institutior which performs a variety of capital mar. ket and corporate finance functions fo: clients. Such functions usually include assisting in raising capital, underwriting of securities, arranging mergers/acquisi tion activities, as well as reorganizing anc restructuring corporate entities. An invest ment banker may also engage in broker age services through ils brokerage arm ano deal for its own account. Investment Company or Fund: A financial institution or fund whose business is to pool monies basically from small inves- tors for a fee. The monies are then in- vested in securities and/or other instru- ments in line with the investment policy and objectives of the company/fund, Two types of investment company/fund exist: the open-end and the closed-end, Issue: Securities of a company or govern- ment sold by way of a public offering or private placement ata given point in time. Issued Capital: The portion of the author- ized capital of a company which has ac- tually been issued to subscribers (inves- 7 ‘Scanned with |CamScannerors) which may or may not have been paid for, The issued capital may be equal 10 or less than the authorized capital but ever greaier than it. (see outstanding, shares). A Issuer: A company of government which makes an offering of securities to the pub- lic or a select group of investors. Investment Adviser: A market operator who, for compensation, engages in the business of advising others as to the value of securities or as to the advisability of investing in, purchasing or selling securi- ties or who for compensation and as part of a regular business, issues and publishes analyses or reports concerning securities. Interim Dividend: Dividend declared and distributed by a company to its sharehold- ers prior to the determination of final profit position for the financial year. Insider Dealing: Trading in the securities of a quoted company based on unpub- lished price-sensitive information of the cofnpany, to make a profit or minimize loss. Indenture: A formal agreement between issuers of securities and bondholders (creditors) stating the terms and conditions ‘of payment such as the interest rate, in- terest payment and maturity dates. Irredeemable Debenture Stock: Interest- bearing securities issued by corporate entities Which cannot be redeemed until the instruments mature. 28 Initial Public Offering IPO): The firs, lic offering of securities by 4 Corp, 0% entity. e Interest: Payments made at regular ir vals by issuers of debt securitiés and 0 borrowers to lenders (creditors) for 5 ing with their funds. Investment Income: Income such as ¢ dend, interest and capital gains ear from investment in securities and ot assels. Investment In Securities: The purchas: financial assets e.g. stocks and bonds v the objective of enhancing inco through returns such as dividends, in est and capital gains or, in some cat with the objective of gaining aseat on board or diversifying risk. Investment Risk: The normal risk whicl associated with investment in securit or any form of business venture, The include normal price fluctuations or bt ness vagaries. Junk Bond: A speculative, low-grade, hig tisk, high- yield bond, issued by a co pany with short track record or poor cre rating. Leverage-Buy-Out: The financing of ac porate takeover largely through borrow funds (loans), with the assets of the tary company usually serving as the secur for the loan The right which can be exercised 29 x ° ye v ‘Scanned with |CamScannerY + onpaid creditor aver the property of a aor in his possession. ait Order: A directive (order) given to a “hoc kboroker by his client to buy or sell a se quantity of a security at a specified | pace. The client may also state the pe: jor which the order would be valid. Listed Options: Options which are waded ‘on an exchange. Listing by Introduction: An arrangement whereby shares of a company already widlely held by the public and meets other listing requirements, are granted quota- tion on an exchange without a prior pub- lic offering. The securities are usually it troduced to the stock exchange by a bro- ker/dealer firm. Listed Securities: Corporate or government securities granted quotation by a stock exchange and subsequently traded on it. Listing Requirements: The conditions that must be fulfilled by a company or gov- ernment betore its securities can be ad- mitted for trading and continue to be traded on a stock exchange. Such require- ments usually include minimum number of shareholders, percentage of shares in the hands of the public, submission of audited financial statement for a specified number of years, public corporate status and prompt disclosure of financial and other material facts. -iquidity: The ease at which a financial in- strument can be converted into cash. An 30 fh cam be quick sevteed #5 cre tsb Tepe wey woe Cannot be easily converted is cegardier a8 Higgs, A stock market ered lig nd when H can abnor Lange wohumes of trading without significant change in Management Buyout (MBO): Fhe pure hurse of a Company from us owners by the ex isting The managers in other words "buy out the over anagement team of the company Management Buy-In (MBH: The purchase of a company frorn its owners by an out side agement tearn Margin Account: A brokerage account that enables an investor purchase securities with loan from his stockbroker Margin Loan: A credit facility which is ex tended by stockbrokers to their clients to purchase securities, Given the monetary policy implications of margin credits, such activities are usually regulated by central banks as well as securities market regula- tors. Market Float: The percentage vf the ag- Bregate number of shares quoted on a stock exchange or the outstanding shares of a quoted company, which is traded freely on the stock exchange. Markets where the bulk of the outstanding shares is held by institutions and individuals who rarely trade their holdings, would exhibit low float while the reverse would be the 3 ‘Scanned with |CamScanner4.8. Case im tnarkets wnere investors do not buy and hold?. Market-Maker: A dealer who stands ready to buy and sell'securities for his own ac- count at his own risk, By so doing, amar- ket-maker provides liquidity to and main- stability in the market. (See dealers, specialists). Marketable Amount: The amount of stock ‘or number of shares in which a jobber quoting @ price would reasonably be ex- pected to deal. As circumstances differ considerably between active and inactive securities, the amount varies. Market Capitalization: The market value ‘of a company’s paid-up capital, deter mined by multiplying the current quoted price by the total number of shares out- standing. The market capitalization of a securities exchange is the aggregate mar- ket capitalization of all its quoted securi- ties. Money Market Mutual Fund: A mutual fuhd whose policy is to invest in short- term instruments such as treasury bills/cer- Uificates, commercial papers, certificates of deposit, etc. Mark to Market: The daily settlement of obligations on a future position. Market Order: An order given to a stock- broker by his client to buy or sell a given = quantity of a security at the best price pre- vailing in the market. 32 a Market Price: The prevailing price Of a. ‘curity in the stock market, Maturity Date: The redemption oF expi date of a debt Market Manipulation: The sale or purcha of a security with the intention of crez ing an antficial market if it, i.e by givir a semblance of a bull or bear market the security. a Merger: The fusion of two or more comp nies usually on equal terms Member Firm: A firm licensed by.a stor exchange to carry out brokerage servic and deal for its own account. National Association of Securities Deale Automated Quotation Syste (NASDAQ): A securities market .in th United States which does not-have ar physical trading floor but uses compute and telecommunications network to € fect transactions. Owned by the Nation Association of Securities Dealer NASDAQ is one of the largest securit markets in the world. National Association of Securities Deale (NASD): A self-regulatory organizatic of broker/dealers operating in th NASDAQ market. The. NASD owns ar operates the NASDAQ. ‘In Nigeria, tl NASD would operate the over-the-cou ter market. Net: Any figure from which some Ilabili such as tax, has beeh deducted. Thus, r dividend is one from which standard rz 3 ‘Scanned with |CamScanner Jyv / income tax has been deducted. Net Asset: The [Link] less total liabi lies of a company. It is also referred to as net worth. Net Asset Per Share: Net assets of a com- pany divided by the number of its shares ‘outstanding. (See net assets value). Net Assets Value: The amount by which the assets of a company exceed its liabili- ties including loan and preference capi- tal, divided by the number of equity shares in issue. For example, if the net asset is (N30 million and there are 20 million, 50 kobo ordinary shares outstanding, the Net Asset Value per share is N1.50. Net Capital Rule: A capital standard issued by securities commissions to operators, particularly broker/dealers, to maintain, at all times, a prescribed ratio of indebt- ‘edness to liquid assets. Under the rule, a firm is expected to always maintain a po- sition where its liquid assets would at all limes, surpass its indebtedness. This is aimed, essentially, at ensuring that inter- mediaries are in a state of readiness to ‘meet their obligations. New Issues: Securities of a government or corporate entity newly created and offered for subscription to the public, or to a se- lect group of inyestors, in the case of pri- vate placement, or to a company’s exist- ing shareholders as with rights issues. New issues are a means of raising funds for development financing, and do enlarge the paid-up capital of a company. 4 uv Negative Pledge Clause: A clause attached to a debenture stock barring the issuer {rom pledging the assets of the company if doing so would jeopardise the ability of the company to meet its commitments to the bondholders under the particular indenture. (also called covenant of equal coverage) Non-Convertible Securities: Securities which do not give the holder the right to convert his holdings into another class of secutities of the issuer. Non-Cumulative Preference Shares: Pref- erence shares on which unpaid dividends do not accrue and cannot be claimed in arrears. Non-Voting Securities: Securities which do not carry voting rights and thus preclude the holders from voting on corporate reso- lutions or elections. Preference shares are examples of non-voling securities. Odd Lot: Equity transactions which are l:3s than the established trading units of a stock exchange. Trading in units of 1-99 are considered odd lots in Nigeria, Offer For Subscription: An invitation to in- vestors to purchase newly igsued securi- ties of a company or a government. The proceeds go to the issuer. Offer for Sale: An invitation to investors to purchase the existing shares of a company being divested by one or more sharehold- ers. The proceeds of sale go to the divest- ing investor(s). This happens when an in- 35, ‘Scanned with |CamScanner beTew Mittional investor or government with subsargial holdings divests e.g during pri vatization exercise of government assets. Outstanding Shares: Shares which have been issued by a company and paid for by sutncribers. The chares represent capi- tal invested by shareholders and could be @ portion oF all of the authorized shares Of the company. (Same as paid-up capi- tal), Option: A contract which gives an inves- tor the right but not the obligation to buy ‘oF sella given amount of a financial in- strument or commodity at a specified price and time. A call option confers on the holder the right to buy while a put option confers the right to sell on the holder. Over-The-Counter (OTC) Market: A secu- tities market for trading in the securities of public companies not listed on a stock exchange. Transactions are essentially conducted among brokers over the tel- ‘ephones. ‘Over-Subscription: An offering of securi- ties in which investors’ demand exceeds Supply. An issue is, in other words, con- sidered over-subscribed when more ap- plications are received than there are se- curities. Ordinary Shares: Securities representing ‘ownership in a business (i.e equity par- ticipation in a company) which eniitle the holder to dividends, voting right and the residual share of a company's assets in 36 the event of liquidation i after it has lies. Non-voting ordir shares, however, do not confer ve all its Hi fights on the holder, although they er him to dividends when declared (see wity) Paid-Up Capital: See outstanding shar Par-Value (Par Price): The nominal v or face value of a security. It is the v. assigned to the security in the compa memorandum. (See face valu Portfolio: The totality of the v. of securities and other instruments (stock, bonds, tr etc.) held by an investor. We). jarious ty an feasuty t Althoug mostly refers to financial instruments, estate investments are often includec Porth Manager: A intermediary who uses his finan professic skills to manage for a fee, the portfoli investments of his clients. Preference Shares: A class of s holders have a prior claim hares wh over eq holders on the earnings of the issuer do not have a priority claim.c obligations to creditors of the comp. Dividends paid ». to shareholders, unlike equity based on a pre-determined rat prefere holders, te. There variants of preference shares. Participating Preference Shares: Prefere shares which entitle the holders to par in additional dividends of a company apart from the stipulated dividenc 37 Scanned with |\CamScanner—_—S ACENCeE shareholders) under stated ditions This contrasts with non- wtticipating preference shares which are sticted to the stipulated dividend. xice-Earnings Ratio: The ratio of price to earnings per share i. e the value of orclinary shares in relation to earnings for ‘a period. It is derived by dividing the market price by the earnings per share of = company. The P/E ratio is a measure of the price being paid by investors for a given earnings of a company and shows the time it would take an investor to recoup his investment in a company if profit and distributed income are held constant. Program Trading: Automatic buying and selling of shares on the instruction of a computer, according to whether prices are rising or falling. En-masse program trading destabilises markets. Prospectus: A document issued by a company giving detailed information about itself and the securities being offered to the public. Such documents are usually required by law to be filed and vetted by securities commissions for completeness and subsequent registration before their release to the public. The prospectus is, in other words, a vending document which enables investors evaluate the securities being offered and decide whether or not to participate. Proxy: (i) An authority given by a shareholder to someone else to act on his behalf at a meeting of shareholders. 38 Usually, a proxy card would be completed and sent to the company giving authority to the proxy to vote on his behalf, (i) A document issued by a public company to its shareholders providing information on matters to which they would voteby proxy. Price-Sensitive-Information: Information about a company which could influence the price of its securities on a stock exchange. Such information is required by law to be disclosed to the public immediately while insiders are prohibited from taking undue advantage of price- sensitive information to trade in the stock market. PI fate Placement: The sale of securities to a select group of investors as opposed to the general public. It usually by-passes the normal sales mechanism. Primary Market: The market for the sale and purchase of freshly issued (additional) securities of a corporate entity or government. (also called new issues market) Poison Pill: A strategy sometimes ginployed by target companies in a take-over bid to reduce the attractiveness of their securities, to the companies intending the take-over. This is often done by enlarging the outstanding shares of a target company through a new issue of shares to its shareholders at a discount to the market price, thus making the take-over quite expensive to the company intending the take-over. 39 ‘Scanned with |CamScannerPreeniem: The chiirwern e between par vale and market price and same time between tramaction prce and the previous market Frce when the difference it positive. Principat: (1) The value of a debt security as iewed by » company ot government. The principal of a debt instrument does not include interest and premium on the bond. it is the amount redeemed by the ixwuer on maturity. (2) Principal also refers to a dealer who ‘acts for his own account in a stock market transaction (Also refers to a stockbroker's client for whom the stockbroker is an agent. Public Offering: An invitation by a com. pany or government to the general pub- Nic 10 purchase its securities on offer. (see offer for subscription and offer for sale). Quick Assets: Current assets less invento- ries. Quick Ratio: A measure of short-term sol- vency of a company. It is derived by di- * viding quick asset (liquid assets) by the current liabilities. Quotation: The admission of a security for trading on a stock exchange. (see listed securities) Quoted Company: A company whose se- ‘curities are traded on a stock exchange. Quoted Price: The price at which a secu- Tity listed on a stock exchange is traded ata given time, Rally: A rapid increase in stock + prices or in the price of a particula rity, mH Rating: The assessment of the inve: quality of a bond by ascribing a such as AA, BB, CC to it. Ratings € with changes in the financial con of the issuer, Rating Agencies: Institutions whic! business, professionally evaluate 1 vestment qualities of debt issues. Random Walk Theory: A theory states that past prices of a security « be a means of predicting future pri stock prices are a reflection of the mation coming into the market in dom fashion. In other words, changes in stock prices are at rando such changes have similar probabili tribution, Regulation: The formulation and ap tion of rules and the introduction 0 cal standards to guide business cor Protect investors, maintain st b promote the efficiency of a capita ket. Registrar: A capital market operat. pointed by a public company to tain a comprehensive list of its’| shareholders; dispatches annual r dividend warrants and return monic other documents to shareholders. H also arrange annual general and ex! dinary general meetings on behalf ‘company and perform other related tions, Registrars’ activities are n 41 Scanned with |\CamScanner Vv‘ock Ply pot an rr Or —— stricted t© public companies but extend © Rovernment issues Registered Securities: Securities of a com. pany or government for which a registra- tion has been obtained from a securities Commission and could thus be offered to the public. It also refers to a security which has had its owner's name registered ‘on the list of members maintained by the issuer oF its agent. Restricted Securities: Stocks and bonds of ‘companies which are not open to the pub- lic for subscription. Retained Earnings: Undistributed profits of a company accumulated for reinvest- ment. Sent Rights Issue: A new issue of securities of a company offered to its existing sharehold- ers in proportion to their holdings. To en- hance attractiveness, rights issues are usu- ally offered at a discount to the market price of the securi ights Trading: Trading on a stock ex- change of rights in respect of a right issue by shareholders who dlo not wish to exer- cise all or a portion of the securities alloted lo them. Such rights are only tradeable during the offer period. Round Lot: A standard trading unit in a stock exchange, e.g. 100 shares which indicate the minimum units of a particu- lar security an investor could purchase or sell. (also called board lod. 2 Secured Debt: Debi guaranteed tyy the pledge of some assets of the bortowver Seat: The term often used to describe mem bership of some stock and commodity exchanges notably New York and Toky« exchanges. Such exchanges have fixer tumber of seats (membership) which at bought and sold at prices determined by demand and supply. In other words, prospective member can only be admit ted when an existing member wishes t sell his seat. Securities Market: A market, physical o otherwise, where financial instruments art bought and sold. Securities Acts: Laws enacted to regulat. activities in the securities industry. Such laws are usually administered by a gov ernment agency which may delegat: some of its functions to Self-Regulator Organizations (SROs). Most securitie laws are primarily focused on investo protection. Securities and Exchange Commissior (SEC): A government agency establishec by statute to administer securities laws Such laws usually empower these agen cies to regulate the capital market witl the primary aim of protecting investors In some countries, market developmen is added to their functions. Secondary Market: A securities marke such as a stock exchange or an overthe counter market where existing securitie of corporate bodies and governments ar 43 ‘Scanned with |CamScanner————————__——rt ‘ Pw” hought and cold. Such securities have been previously issued and sold in the Prirhary market by the issuing entity. The secondary market allows holders of se- ies 1d sell, and those desirous of buy- ing existing securities to do so whenever they wish to. Thus, unlike the primary market where proceeds of sale of securi- ties goto the issuer, in the secondary mar- ket, proceeds go to the selling investor. The secondary market, therefore, provides fiquidity to investors by ensuring easy con- vertibility of securities into cash. Second-Tier Securities Market (SSM): A second market established by The Stock Exchange in Lagos in 1985 to list the se- urities of smaller companies which are unable to meet the requirements for list- ing on the more stringent segment (main market) of the Exchange. Self-Regulatory Organizations (SROs): These are membership organizations in the securities industry such as stock ex- changes and National Association of Se- curities Dealers which set and enforce + rules to direct the professional activities of their members and, in some cases, pro- vide trading facilities for members to con- + duct business in securities. Settlement: The completio’ of a transac- tion in securities on a stock exchange or ‘onan over-the-counter market by the pay- ment after delivery of securities. Shares: See equity and preference shares. Share Certificate: A certificate issued by a company 16 its shareholders evidencing 44 V ownership of a stated number of in the company. i Share Transfer Form: A orm which | be completed by investors to facilita transfer of shares from seller to buy: Shareholder: An individual or instit having ownership interest in a com and thus entitled to certain rights privileges accruing to holders of e shares. { Shareholders’ Funds: Derived) by subi ing a company’s liabilities from its a: indicates the amount that would b with shareholders should the assets c company be sold and liabilities set Ialso gives an indication of the solv or otherwise of a company, (also ci niet worth), Shelf Registration: A system adopter the US SEC which allows a company ing certain features to file a master r tration statement with it in respect ¢ issue which the company hopes to.« within the next two years. Following master registration, the company may the security any time within the per provided it files short statements. The tures for qualification include: (i) an investment grade rating: (il) no default on its debt in the past year; (ii) agiven size of market capitalizat and (iv) non-violation of the Securities within the past one year. 45 Scanned with |\CamScannershort Sale: The sale of a security or fue tures contiact which the seller does not posses This is with the hope of buying back the security or contract ata later date when prices drop thus profiting from the ale. 11 is essentially a speculative prac ice. Sinking Fund: A special fund created by an issuer of a debt security, into which regular payments are made, to meet cer- tain obligations of the issuer such as the retirement of the debt. Specialist: A member of a stock exchange who is assigned to a particular security or securities for which he has to maintain order and stability in their trading. He does this by standing ready to buy and sell the securities for his account when there is a temporary imbalance in demand and sup- ply. The activities of the specialist pre- vent wide movements in prices which could destabilize a stock market. The specialist, unlike the floor broker, has no direct dealings with investors (the publicl, but in addition to buying for his own ac- count, ine assists floor brokers execute limit orders Spread: The difference between the bid and ask prices of a security. The spread would narrow or widen depending on the supply and demand position. Speculator: Market participant who en- ages in high-risk transactions in antici Pation of quick profit arising from price increase. Unlike a risk-averse investor, the safety of principal is of secondary im- portance to the speculator. 46+ Stamp Duties: The "advalorem’ duty pay. able on the consideration money in the transfer of securities to a buyer. Stock Split: The sub-cividing of the shares of a company in order to enlarge the number of shares of the company with ‘out a change in the shareholders’ equity, proportional holding, or an increase in the market value of the company at the time of the stock split. A company having, out standing shares of one million and whic! makes a split of 2 for 1 would have new outstanding shares of two million Standby Underwriting: An underwiiting arrangement in which the underwtiter only underwrites the unsubscribe por tion of an issue. The funds in respect of the unsubscribe portion would normally bbe mde available tothe issuer at the close of the offer, when the subscription level has been established. The standby un- derwriter would subsequently hotd the unsubscribed securities for eventual dis- tribution, Stock Exchange: An organization which provides facilities for trading in securities by its members and also sets rules for the admission and trading of existing secur ties as well as rules to guide the business conduct of members. Stock Index: A measure of stock market trends and performance. Iis often usec! as a barometer for monitoring upswings and downswings in the economy. (see index) 47 ‘Scanned with @camscannerThe sale of a security on he contact which the seller Bek the security or cont auhen prices crap thas p fale Wisc lee, wetata later hate otitiyg fron the entially a speculative prac A special fund created by suier oF a debt security, into whieh regular payments are made, to meet cer N obligations of the Issuer such as the ment of the debt Amember of a stack exchange «]Muhols amlgned oa particulor vecuvlty or | Securities for which he has to munintoln } Grader a stability tn utr trating. He {this by standing fendy to buy and acl the securities for his account when there isa temporary imbalance in demand ancl sup : ply. The activities of the specialist pre- i vent wicle movements in prices whieh could destabilize a stock market. The specialist, unlike the floor broker, has no direct dealings with investors (the public), t but in addition to buying for his awn ac COUNL, he assists floor brokers exccule limit orders Spread: The difference between the bid and ask prices of a security. The sproad would narrow or widen depending on the supply and demand position Speculal Market participant who en- ages herisk transa in antici pation of quick profit arising from price | Increase. Unlike a risk-averse investor the safety of principal is of secondary im- portance to the specylator | 46 \ tthe atv y In ore enlarge We umber of shares of the cory ‘out a ehange tn the sha nitlonal hota, value of the con i of the stock split, Aeon NL Of 2 for) would have: ‘outstanding shares of two riltion Standby Underwriting: An undersiting In which the undertitar riten the unsubsen bed ron Th funds hn Feepee S woul normally ‘of the offer, when the subscription has been established, Th by a derwriter would subsequi unsubscribed secu Stock Exchange: An organization which provides faclities for trading, in securities by its members and also sets rules for the admission and trading of existing secur ties as well as rules to guide the f conduct of members. : Stock Index: A measure of stock market e trends and performance. tis often used fas. barometer for monitoring upswinyss and downswings in the economy. index 47 Scanned with |\CamScanner—V—_—_— ——w — = Stock Purchase Plan: A corporate pro= ‘gramme which enables employees to buy shares of the company, The plan usually takes various forms including compensa- tion for executives, dividend reinvestment, and periodic deduction of a certain amount from the salaries of participating staff, for the purchase of the shares of the company. Street Name: Securities held in the name of a broker rather than the client. Subsidiary: A company which has a large proportion ofits equity shares in the hands +of another. Such holding by the parent company has to be substantial enough to control the affairs of the subsidiary com- pany - usually above 50%. Subscription Price: The price at which a new issue of securities is offered to inter ested subscribers, Swap: An agreement between two parties to exchange some financial instruments or commodities. Swap agreements are usually entered to hedge against adverse fluctuations in say, interest rates (i.e. in- terest rate swap) or currency as in currency swap. Interestrate swap may, for iristance, involve two parties agreeing to exchange a fixed rate for a floating rate interest pay- ment. Syndicated Loan: A loan packaged by a Broup of creditors agreeing to come to- Bether to provide credit facilities to a com- Pany, an individual or government. Syn- dicated loans are based on terms written 48 : | | ‘out in an agreement which specifies the level of obligation of each participant. Takeover: Basically refers to the purchase Of securities of a company from the stock market with the intention of acquiring sufficient holdings of its shares to control its activities. Technical Analysis: The study of share behaviour with the aim of anticipating future movements. Charts play a large part in this but other aspects of share activity also feature. Turnover: The total number of shares traded on a stock exchange at a given period e.g. day, month, year. In business, itrefers to a company’s total revenue from sales. Turnover Ratio: A measure of stock mar- ket liquidity. t is the total number of se- Curities traded in a stock exchange dur- ing a given period, usually a year, as a percentage of the market capitalization at the end of the period (usually year-end) Trustee: An institution holding property or investment for the benefit of others in a business or financial arrangement. The trustee is responsible for ensuring the op- eration of the trust deed, thus"protecting creditors of a company or unit holders in a unit trust scheme. ‘Trust Deed: See indenture Tranches: The division of a stock or bond issue into various portions for the purpose of sale to the public at different times. 49 ‘Scanned with |CamScanner