Copy of `FINRA - Finance Terms`

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FINRA - Finance Terms
Category: Economy and Finance > Finance
Date & country: 24/09/2008, USA
Words: 340

American Arbitration Association

See Advanced Computerized Execution System

See Automated Confirmation Transaction ServiceSM

See American Depositary Receipt

advertising review
A regulatory service provided by FINRA to ensure that advertising and sales literature used by members conforms to FINRA and Securities and Exchange Commission standards of fairness and accuracy.

affirmative obligations
Requirements imposed on Nasdaq Market Makers by FINRA. These include quoting firm prices, making two-sided markets on a continuous basis, participating in the Small Order Execution System, and reporting price and volume data for each transaction in a Nasdaq security within 90 seconds of execution. (See Market Maker, Small Order Execution System, two-sided market)

Trading activity in a security immediately following its initial offering to the public.

agency order
An order that a broker-dealer executes for the account of a customer with another professional or retail investor and for which a commission is typically charged. (See principal orders)

American Depositary Receipt (ADR)
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 ...

American Stock Exchange.

Amivest Liquidity Ratio
The Amivest Liquidity Ratio is one type of liquidity measurement which represents the dollar value of trading associated with a one percent change in share price. Amivest is the 'creator' of this liquidity measurement. (See liquidity ratio)

See securities analyst

annual report (10 K)
Public companies are required to file an annual report with the Securities and Exchange Commission detailing the preceding year's financial results and plans for the upcoming year. Its regulatory version is called 'Form 10 K.' The report contains financial information concerning a company's assets, liabilities, earnings, profits, and other year-end statistics. The annual report is also the mos...

A respondent's written reply to a claim. (See arbitration, claim)

See Association of Publicly Traded Companies

arbitral immunity
Arbitrators are protected from suits arising out of their quasi-judicial conduct in arbitration proceedings. (See arbitrator)

Arbitrage involves the simultaneous purchase of a security in one market and the sale of it or a derivative product in another market to profit from price differentials between the two markets. (See derivative)

A method where conflict between two or more parties is resolved by impartial persons - arbitrators - who are knowledgeable in the areas in controversy. (See mediation)

A private, disinterested person chosen to decide disputes between parties. (See arbitration)

Arbitrators Code of Ethics
A guide for the conduct and ethical responsibilities of arbitrators in commercial disputes.

ask price (offer price)
The price at which a Market Maker is willing to sell a security. (See Market Maker, best ask)

associated person
A person engaged in the investment banking or securities business who is directly or indirectly controlled by a FINRA member, whether or not this person is registered or exempt from registration with FINRA. Every sole proprietor, partner, officer, director, or branch manager of any FINRA firm.

auction market
Stock exchanges, like the New York Stock Exchange and the American Stock Exchange, are auction markets where buyers and sellers meet through a specialist. (See dealer market, Market Maker, specialist)

The written determination of the arbitrator

bear and bull markets
A bear market is one in which prices are low or declining; a bull market is one in which prices are high or rising.

bear market
See bear and bull markets.

beneficial owner
A person who benefits from ownership of a security or mutual fund. Shares or title may be held by a bank or broker for safety and convenience, or in 'street name' to expedite transactions, but the real owner is the beneficial owner. (See street name.)

best ask
The lowest quoted offer of all competing Market Makers to sell a particular stock at any given time. (See Market Maker.)

best bid
 The highest quoted bid of all competing Market Makers to buy a particular stock at any given time. (See Market Maker, bid price.)

best-efforts underwriting
An investment bank, acting as an agent, agrees to do its best to sell an issue to the public, but does not make an outright purchase of the securities. (See underwriter.)

best-execution requirement
The obligation of Market Makers, broker-dealers, and others to execute customer orders at the best price available at the time the trade is entered. (See Market Maker.)

A statistical measure of a stock's volatility compared with the overall market. A beta of less than 1 indicates lower risk than the market; a beta of more than 1 indicates higher risk than the market. (See volatility.)

bid price (buy price)
The quoted bid at which a Market Maker is willing to buy a stock. (See Market Maker, best bid.)

bid/ask spread
The difference between the price at which a Market Maker is willing to buy a security (bid), and the price at which the firm is willing to sell it (ask). The spread narrows or widens according to the supply and demand for the security being traded. (See inside quote, spread.)

block trade
A purchase or sale of a large quantity of stock, generally 10,000 shares or more.

blue-sky laws
State laws that require issuers of securities to register their offerings with the state before they can be sold to its residents. Most blue-sky laws include provisions relating to fraudulent activities and the licensing of people selling securities. Nasdaq National Market securities, subject to higher qualifications standards, are exempted from registration requirements under most states' blue-s...

Board of Governors
The controlling body of the Financial Industry Regulatory Authority, Inc.

A long-term promissory note in which the issuer agrees to pay the owner the amount of the face value on a future date and to pay interest at a specified rate at regular intervals.

book manager or syndicate manager
See syndicate manager.

branch office
Any location identified by any means to the public or customers as a location at which a FINRA member conducts investment banking or securities business.

The investment level in a mutual fund at which an investor becomes eligible for a discount on the front-end sales charge or load.  Typically, there are several breakpoints, and if you invest more and reach each of these thresholds, the greater the reduction in the sales load.

An individual or firm who acts as an intermediary between a buyer and seller, usually charging a commission. (See dealer.)

FINRA firms that act as securities dealers or brokers, or perform both functions. (See broker, dealer.)

bull market
See bear and bull markets.

buy price
See bid price.

buy-side trader
An individual, such as a pension or mutual fund portfolio manager, who effects trades for an institutional investor. (See sell-side trader.)

See NASD By-Laws.

See Computer Assisted Execution System

Bonds: The right to redeem outstanding bonds before their scheduled maturity. Options: The right to buy a specific number of shares at a specified price by a fixed date. (See put)

capital commitment
The financial investment Market Makers carry in inventories of stocks in which they make markets. (See Market Maker)

Chinese Wall
A term used to describe procedures enforced within a securities firm that separate the firm's departments to restrict access to non-public, material information. The procedures help FINRA members avoid the illegal use 'inside' information.

See excessive trading

circuit breaker
A procedure that temporarily halts trading on all U.S. stock markets for one hour when the Dow Jones Industrial Average falls 250 points or more within a trading day. The pause is designed to allow time for the markets to absorb the news that precipitated the decline. Should the average fall another 150 points within the same day, trading would again be halted, this time for two hours.

A demand for money or other relief. (See arbitration)

The conclusion of an exchange of securities. (See settlement)

See co-underwriter

Almost all public offerings are co-managed by a 'co-underwriter.' (See underwriter)

comfort letter
An accounting firm's statement provided to a company preparing to go public. The letter indicates the accountants' comfort that unaudited financial data in the company's prospectus consistently follow generally accepted accounting principles, and no material changes have occurred since the report was prepared. (See Generally Accepted Accounting Principles, prospectus)

Fees paid to a broker for executing a trade based on the number of shares traded or the dollar amount of the trade.

common stock
A class of securities representing ownership and control in a corporation and that may pay dividends as well as appreciate in value. (See preferred stock)

compliance departments
Departments set up in all organized stock markets to oversee market activity and make sure that trading complies with Securities and Exchange Commission and other Exchange regulation.

Composite Quotation Service
See Consolidated Quotation System

Formal memorandum from a broker to a client giving details of securities transaction. When a broker acts as a dealer, the confirmation must disclose that fact to a customer.

Consolidated Quotation System (CQS)
An electronic service that provides quotations on issues listed on the New York and American stock exchanges, regional stock exchanges, and issues traded by FINRA member firms in the third market. Nasdaq processes this data and provides it to its subscribers as the Composite Quotation Service. The initials may be used either for the exchange system or Nasdaq service. (See third market)

Consolidated Tape Association (CTA)
Operating authority for exchange-listed securities information.

convertible bond
A bond that can be exchanged at the option of the holder into preferred or common stock at a preset ratio. (See common stock, preferred stock)

A claim against the claimant in an arbitration. (See claim)

cooling-off period
The period after a company's prospectus has been filed with the Securities and Exchange Commission and before offering is made to the public.

corporate financing review
A regulatory service of FINRA that ensures the underwriting terms and conditions of public companies are fair and in the interests of the issuing company and its investors.

corporate governance standards
The non-quantitative qualification standards for companies whose securities are traded on Nasdaq.

cost of capital
The rate that a company must pay for its capital or the minimum return that is required to maintain the market value of a company's common stock. Cost of capital reflects the market's perception of the risk associated with a company's common stock.

See Consolidated Quotation System

See Central Registration Depository

credit and debit balance
A credit balance represents monies owed to a customer by a broker-dealer, generally resulting from the customer's sale of securities. Debit balances are monies owed to a broker-dealer by a customer, generally resulting from the customer's purchase of securities.

credit balance
See credit and debit balance

crossed quotations
See locked or crossed quotations

See Consolidated Tape Association

See Computer-to-Computer Interface

CUSIP number
See Committee on Uniform Security Identification Procedures number

customer agreement
See new account information form

customer protection rule
An SEC rule that requires broker-dealers to establish separate reserve accounts into which customer credit balances are maintained. The rule prohibits a firm from using customer balances to finance its own trading. The rule also requires firms to gain possession of customers' fully paid and excess margin securities promptly, and to segregate them properly. (See prompt receipt and delivery of secu...

See District Business Conduct Committee

Any person or company in the business of buying and selling securities for his or her own account, through a broker or otherwise. (See broker)

dealer market
Nasdaq is a competing dealer market, different from an auction market in that many dealers, called Market Makers, use their own capital, research, retail, and/or systems resources to represent a stock. Many Market Makers can represent the same stock; thus, they compete with each other to buy and sell that stock. Auction markets have only one person, a specialist, who in a centralized location or ...

dealer spread
See house spread

An unsecured bond backed solely by the general credit of a company.

debit balance
See credit and debit balance

A security is no longer included in The Nasdaq Stock Market.

depositary bank
When a company decides to issue American Depositary Receipts, it appoints an authorized depositary, normally part of a large U.S. banking institution or trust company. (See American Depositary Receipts)

depth of market
The number of shares of a security that can be bought or sold at the bid and ask prices near the market without causing a dramatic change in price. (See liquidity ratio)

A generic term often applied to a wide variety of financial instruments that derive their cash flows, and therefore their value, by reference to an underlying asset, reference rate, or index.

direct participation programs (DPP)
Partnership agreements that provide a flow-through of tax consequences to the participants.

See Digital Interface Service/Character Interface Presentation Server

discretionary account
An account empowering a broker or adviser to buy and sell without the client's prior knowledge and consent.

distribution capability
An investment banker or underwriter's ability to sell shares.

Distributions to stockholders of cash or stock declared by the company's board of directors.

dividend notification
A requirement that companies notify the Uniform Practice Department of The Nasdaq Stock Market at least 10 days in advance of the record date of a stock dividend so that Nasdaq can set the ex-dividend date. (See ex-dividend date)

A transaction executed at a price lower than the preceding transaction in that security, or a new quote registered at a lower price than the preceding quote in that security. (See uptick)

See direct participation programs

due diligence
A thorough investigation of a company that is preparing to go public, undertaken by the company's underwriter and accounting firm.