An institutional investor is an organization, such as a bank, insurance company, or pension fund, that trades in very large volumes of securities. Institutional investors tend to dominate stock exchanges in many countries.
The Intercontinental Exchange (ICE) is the world's leading electronic market for energy and soft commodities contracts, established in 2000.
The Investment Services Directive (ISD) of 1993 provided a regulatory framework for securities dealing within the European Union. It established that securities firms admitted by their domestic regulator could operate throughout Europe. From 2007, the ISD was superseded by the Markets in Financial Instruments Directive (MiFID), which further consolidated the single market for financial services.
Investment value represents the estimated worth of an investment to a specific individual or institutional investor. It can differ from market value based on the unique circumstances and requirements of the investor.
IOSCO is an international cooperative of securities regulatory agencies and organizations. It functions to develop, implement, and promote adherence to internationally recognized standards for securities regulation.
A term characterized in a 1996 speech by then-Federal Reserve Chairman Alan Greenspan, referring to market optimism that may distort asset value and lead to an undue escalation followed by a prolonged contraction.
LCH.Clearnet, now known simply as LCH, is a leading global clearing house that provides clearing and risk management services for various asset classes including equities, bonds, exchange-traded derivatives, commodities, and over-the-counter (OTC) derivatives.
LIBOR, an acronym for the London Inter Bank Offered Rate, is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
A listed company is one that has a formal listing agreement with a major stock exchange, ensuring that its shares are publicly quoted and traded on that exchange. In the UK, these companies were once referred to as quoted companies.
LCH is a leading multi-asset clearing house established in 1888, providing risk management, netting, and settlement services. It became well-known as the International Commodities Clearing House before merging with Clearnet in 2003 to form LCH.Clearnet.
The London Code of Conduct is a set of guidelines aimed at promoting ethical and professional behavior in the financial markets operating in London.
London Gold Fixing, also known simply as Gold Fixing, is a procedure by which the price of gold is determined in the London bullion market. It takes place twice daily and is a crucial process for the international gold market.
Learn about the London Inter Bank Mean Rate (LIMEAN), its definition, examples, frequently asked questions, related terms, and additional resources.
The London Interbank Offered Rate (LIBOR) is the interest rate that the most creditworthy international banks dealing in Eurodollars charge each other for large loans. Serving as the equivalent of the federal funds rate, LIBOR is often used as a base rate for other large Eurodollar loans issued to less creditworthy corporate and government borrowers.
An exchange in London where financial futures and options products are traded. Known for its influential role in the global financial markets.
The largest of the four stock exchanges in Spain, the others being located in Barcelona, Bilbao, and Valencia. All exchanges now use a centralized settlement system for trading and clearing.
A Margin Call is a demand, usually resulting from the price decline of a security bought on margin, that a customer deposit enough money or securities to bring a margin account up to the initial margin or minimum maintenance requirements. If a customer fails to respond, securities in the account may be liquidated.
A market maker is a dealer in securities introducing liquidity to the market by buying and selling as a principal and setting prices for transactions.
Dealers in the securities exchange who buy and sell securities for their own account to maintain liquidity and an orderly market.
A market order is a buy or sell order to be executed immediately at the current market prices. These orders guarantee execution but do not guarantee a specific price.
A market order is an instruction given to a broker to buy or sell a security at the best available price at the moment the order is placed. This is executed immediately under current market conditions.
A comprehensive summary and analysis of the daily activities of a stock exchange or other financial markets, including major stock indices, economic indicators, and notable events influencing the markets.
The market-risk premium is the additional return over a risk-free rate demanded by investors to compensate for the risk of holding a market portfolio instead of risk-free assets.
Marketability refers to the speed and ease with which a particular product or investment may be bought and sold. While it is often used interchangeably with liquidity, liquidity specifically implies the preservation of value when a security is bought or sold.
A bond with a maturity of 2 to 10 years, considered to be between short-term and long-term bonds in terms of maturity and risk.
A member firm, also known as a member corporation, is a brokerage firm that holds at least one membership on a major stock exchange. While exchange rules stipulate that the membership is officially in the name of an employee, it is the firm that utilizes the membership.
Mid-Cap stocks typically have a market capitalization between $1 billion and $5 billion, positioned between small-cap and large-cap stocks. These stocks often offer a blend of stability and growth potential.
MiFID (Markets in Financial Instruments Directive) is a regulatory framework that standardizes the financial markets across the European Union, enhancing transparency and protecting investors.
A Minus Tick, also known as a downtick, is a term used in trading and investing to describe a trade of a security that occurs at a price lower than the previous trade.
The Monetary Policy Committee (MPC) is a body within central banks that is responsible for setting the interest rates and other monetary policies to achieve economic stability and growth.
Canada's oldest stock exchange and second-largest in dollar value of trading, known for trading stocks, bonds, futures, and options through a specialist system combined with automated systems.
A computerized system that provides brokers and dealers with price quotations for securities traded over the counter (OTC) as well as for many New York Stock Exchange-listed securities. NASDAQ quotes are published in the financial pages of most newspapers.
Net Change refers to the difference between the closing price of a stock, bond, commodity, or mutual fund from one trading day to the next. It is a crucial metric for investors to gauge the daily performance of an asset.
Stock prices that have reached their highest or lowest levels within the past year. This data is often published in newspapers and financial websites to indicate companies experiencing significant price changes.
A new issue refers to a stock or bond being offered to the public for the first time, the distribution of which is covered by Securities and Exchange Commission (SEC) rules. It usually pertains to initial public offerings (IPOs) by previously private companies but can also include additional stock or bond issues by companies that are already public.
A 'New Listing' refers to a security that has just begun to trade on a stock or bond exchange. This type of security is typically scrutinized for having met all listing requirements and may be an initial public offering (IPO) or a security that was previously traded on another exchange such as NASDAQ.
A leading commodities exchange, specializing in cotton, which has been a subsidiary of the New York Board of Trade (NYBOT) since 1998.
The New York Stock Exchange (NYSE) is one of the largest and most well-known securities exchanges in the world. Established in 1792, the NYSE is located on Wall Street in New York City and is a symbol of global finance and capital markets.
The premier U.S. stock exchange, established in 1792 and recognized for its significant influence on global financial markets.
The New York Stock Exchange Composite Index is a market-value-weighted price index for all stocks listed on the New York Stock Exchange, reflecting the performance of the equities listed on this iconic exchange.
A nonmember firm is a brokerage firm that does not hold membership in an organized exchange. These firms execute trades through member firms, on regional exchanges, or in the third market.
The Official List refers to two primary components within the London Stock Exchange framework: a comprehensive list of all traded securities and a daily record of transactions, dividends, rights issues, prices, and other relevant data.
An offshore exchange rate is the market price of a regulated currency outside the legal jurisdiction of the regulating government. It operates similarly to a legal black market rate.
OMX is a company that owns and operates several stock exchanges in Scandinavia, the Baltic States, and Armenia. It also markets advanced electronic trading systems for derivatives products used worldwide. OMX was acquired by NASDAQ in 2008.
Online trading involves the buying and selling of stocks or other securities over the Internet without the need for a physical broker, leading to lower fees and faster transactions.
Open interest represents the total number of outstanding contracts in a commodity or options market, which have not yet been exercised, closed out, or allowed to expire.
Open outcry is a method of trading on a commodity exchange where traders shout out their buy or sell offers. When a trader shouts he wants to sell at a particular price and another trader shouts he wants to buy at that price, the two traders have made a contract that will be recorded.
The term 'Opening' in finance and business can refer to the initial price at which a security or commodity starts trading at the beginning of the day, or a short time frame in which market opportunities arise, often referred to as an 'opening in the market' or 'a window of opportunity.'
An option holder is someone who has bought a call or put option but has not yet exercised or sold it. Call option holders want the price of the underlying security to rise, while put option holders want it to fall.
An optionee is an individual or entity that receives or purchases an option, which grants them the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified time period.
A regulated quotation service providing real-time quotes and last-sale prices for equities sold in the US over-the-counter market. Created by the National Association of Securities Dealers, Inc. (NASD) in 1990.
Out of the Money (OTM) is a term used to describe an options contract that currently holds no intrinsic value. Specifically, a call option is OTM if the strike price is higher than the current market value of the underlying asset, whereas a put option is OTM if the strike price is lower than the current market value of the underlying asset.
An outcry market is a type of trading environment where prices are set through rapid and continuous verbal negotiations between buyers and sellers. These markets are typically found on the floors of commodity exchanges.
A condition where a security or market has seen an unexpectedly sharp price rise, leading to a high probability of a price drop, known as a correction. It indicates that there are few buyers left to push the prices further up.
Panic buying or selling involves a flurry of transactions characterized by high volume. This phenomenon occurs in response to news events that hint at sharply rising or falling prices, often leaving investors with inadequate time to assess the fundamentals of individual stocks or bonds.
A type of mutual fund that primarily focuses on achieving high capital growth by investing in high-growth companies that typically pay small or no dividends.
Petrodollars refer to the U.S. dollars paid to oil-producing countries and subsequently deposited in Western banks. The term gained prominence during the 1970s oil crisis when Middle Eastern oil producers accumulated substantial surpluses. These surplus funds were often lent to oil-importing countries, shaping global economic dynamics.
Premium income refers to the income received by an investor who sells a put option or a call option. This income serves as compensation for the risk taken by writing the options.
A presold issue refers to the issuance of municipal bonds or government bonds that is completely sold out before the price or yield is publicly announced. This typically happens through prerelease sales to institutional investors.
Primary distribution refers to the sale of a new issue of stocks or bonds, distinguishing it from secondary distribution, which involves previously issued stock. All issuances of bonds are primary distributions, and it is also known as a primary offering. It should not be confused with an initial public offering (IPO), which is a corporation's first distribution of stock to the public.
The market where new issues of securities are initially sold to investors. It contrasts with the secondary market where existing securities are traded among investors.
A profit-taking strategy is a method employed by investors and traders to sell an asset and secure profits after it has achieved a predefined target price.
A document that provides detailed information about a new issue of shares or debentures, inviting the public to invest. The prospectus must comply with regulatory requirements and be filed with the appropriate authority.
A public offering refers to the process where securities are offered for sale to the general public, typically through a stock exchange. This mechanism allows companies to raise equity capital from a broad investor base.
Quantitative easing (QE) is a form of unconventional monetary policy in which a central bank purchases longer-term securities from the open market to increase the money supply and encourage lending and investment.
A marked rise in the price of a security, commodity future, or market after a period of decline or sideways movement.
The Random Walk Theory posits that the movement of stock and commodity futures prices is inherently unpredictable, given that past price movements cannot accurately forecast future price trends.
The theory that financial market prices move without any memory of past movements, suggesting that their movements do not follow any predictable pattern.
A Reference Rate is an interest rate benchmark used as a basis for pricing financial products such as loans, mortgages, and derivatives. It is crucial for consistent pricing across financial markets.
Regular-Way Delivery and Settlement refer to the standard procedure for completing a securities transaction at the purchasing broker's office on the third full business day following the trade date, as mandated by the New York Stock Exchange.
A repurchase transaction, also known as a 'repo,' is a form of discounting where a corporation raises immediate funds by selling negotiable paper to a bank with the agreement to repurchase the paper upon its maturity.
Risk Arbitrage, also known as takeover arbitrage, is a strategy involving the simultaneous purchase of stock in a company being acquired and the sale of stock in its proposed acquirer.
Traders in financial markets who engage in high-frequency trading, dealing very frequently for small gains and may hold a position for only a few minutes.
Seasonality refers to the predictable changes or patterns in an economic or financial factor that occur at specific times of the year, which can impact business operations, financial markets, and economic planning.
**Seat** is a figurative term that refers to an individual's or firm's membership on a securities or commodities exchange. A seat grants the holder the right to trade on the floor of the exchange and to access various trading privileges. Traditionally, seats are bought and sold at prices determined by supply and demand within the marketplace. The ownership of a seat is often considered prestigious and can be highly valuable due to the privileges and opportunities it confers upon the holder.
The secondary mortgage market is a market for buying and selling mortgages that have already been issued or originated, providing significant liquidity to the mortgage market.
The Securities and Exchange Commission (SEC) is a federal agency empowered to regulate and supervise the selling of securities, prevent unfair practices on security exchanges and over-the-counter markets, and maintain a fair and orderly market for investors.
The SEC is a key regulatory body in the United States that enforces securities laws to protect investors and ensure fair and efficient markets.
The Securities Exchange Act of 1934 is a landmark piece of legislation that governs the securities markets in the United States. Enacted on June 6, 1934, this act was designed to regulate and oversee the secondary trading of securities (stocks, bonds, and debentures) to ensure fairness and transparency in financial markets. The act explicitly outlaws misrepresentation, fraud, manipulation, and other abusive practices related to the issuance and trading of securities. To enforce the provisions of both the Securities Act of 1933 and the Securities Exchange Act of 1934, the legislation established the Securities and Exchange Commission (SEC).
Securities markets are venues where securities are bought and sold, encompassing both organized exchanges and over-the-counter (OTC) markets. These markets facilitate the flow of capital from investors to companies, enabling economic growth and liquidity.
An abbreviation for the Stock Exchange of Hong Kong, a key financial hub for trading securities and providing a marketplace for investors and companies.
A sell-off refers to the rapid selling of securities due to underlying panic or to avoid further declines in prices, often resulting in a sharp decline in the market.
A sensitive market refers to a financial market easily swayed by the announcement of positive or negative news. Such a market's fluctuations are often more pronounced than those of a market in which investors exhibit greater confidence in the price outlook.
The term 'Settlement Date' refers to the specific date on which a transaction is finalized and the respective assets are transferred between the buyer and the seller. This term is relevant in various domains such as real estate and securities trading.
A shakeout is a market phenomenon where weaker or marginally financed participants are eliminated due to changing market conditions. In financial markets, it often results in speculators being forced to sell their positions, typically at a loss.
The Shanghai Stock Exchange (SSE) is the principal stock market of the People's Republic of China, established in its contemporary form in 1990. As the fifth-largest stock exchange globally by market capitalization, it plays a crucial role in Chinese and international finance. The main indicator is the SSE Composite Index.
A Share Broker, also known as a Stock Broker, is a professional who buys and sells stocks, bonds, and other securities on behalf of clients, typically in exchange for a fee or commission. Share brokers have extensive knowledge of the financial markets and help clients make informed investment decisions.
Short covering is the process by which a short seller purchases securities in the open market to repay the borrowed securities originally sold short. It is an essential action taken to mitigate potential losses or lock in profits.
A short sale can refer to both an arrangement within financial markets involving the sale of securities, as well as an arrangement between a mortgagor and mortgagee involving a real estate transaction.
A stock in which there is little investor interest but has significant potential to gain in price once its attractions are recognized. Sleepers are most easily recognized in retrospect, after they have already moved up in price.
**Soft Spot** refers to a minor weakness in selected stocks or stock groups within a generally strong and advancing market. It indicates areas that are underperforming relative to the broader market trends.
SPDR, also known as Standard & Poor’s Depositary Receipts, are a type of Exchange Traded Fund (ETF) designed to track a specific index, sector, commodity, or other asset.
A sponsor in financial markets plays a crucial role in the flotation of a company, acting as a guiding entity through the complex process of going public. They supervise the preparation of the prospectus and ensure the company comprehends the benefits and obligations associated with public listing.
The current delivery price of a commodity traded in the spot market, also referred to as the cash price. It is the price at which a commodity can be bought or sold for immediate delivery.
The Standard & Poor's Index, widely known as the S&P 500, is a broad-based measurement of changes in stock-market conditions based on the average performance of 500 widely held common stocks.
An advanced electronic order book trading system utilized by the London Stock Exchange (LSE) to facilitate the matching and execution of orders for securities.
The London Stock Exchange's order-driven electronic trading system that came into operation in 1997, replacing the previous quote-driven system. It facilitates automatic matching of buyers' and sellers' orders, price recording, and seamless transaction settlement.
Stock index futures are financial derivatives that blend traditional commodity futures trading characteristics with those of securities trading. They utilize composite stock indexes to enable investors to speculate on general market performance or to hedge long or short positions.
A stock symbol, also known as a trading symbol, is an abbreviation (typically one to four letters) that uniquely identifies publicly-traded companies on stock exchanges.
A stockjobber is an outdated term that refers to a professional trader who buys and sells stocks for their own account, not for clients. This term was more commonly used in historical contexts related to stock trading.
