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

ECN
See electronic communication network (ECN)

EDGAR
Electronic Data Gathering, Analysis, and Retrieval (EDGAR)--An electronic system developed by the Securities and Exchange Commission. EDGAR permits companies to file electronically with the SEC all documents required for securities offerings and ongoing disclosure obligations. EDGAR became fully operational mid-1995. (See Securities and Exchange Commission)

eligibility rules
The Code of Arbitration states that no claim shall be eligible for submission to arbitration where six years have elapsed from the occurrence or event giving rise to the controversy.

ENC
Excess Net Capital

equity
The ownership interest of stockholders in a company. Also, the excess of the market value of securities over debit balances in a margin account. (See credit and debit balance, margin)

excessive trading
A broker excessively trades an account for the purpose of increasing his or her commissions, rather than to further the customer's investment goals.

ex-dividend date
The date on or after which a security begins trading without the dividend (cash or stock) included in the contract price. (See dividend, dividend notification)

excess spread policy
A requirement that prohibits Market Makers from entering quotations on The Nasdaq Stock Market that exceed prescribed limits for maximum allowable spreads. (See Market Maker, spread, two-sided market)

ex parte communication
Communication by one party only with the arbitrator. (See arbitration)

executive sessions
A private conference between the arbitrators during the course of the hearing to determine matters that have arisen such as evidentiary objections or motions.

failure to execute
The failure of a broker to execute an order of his or her customer.

FAQS
See Firm Access and Query System

Federal Reserve System
A federal government institution created by Congress to administer the nation's credit and monetary policies. Among other things, the Board of Governors of the Federal Reserve System sets the initial amount of credit that broker/dealers (as well as other lenders) may extend to customers to purchase securities.

filing
Delivery to the Director of Arbitration of the statement of claim or other pleadings, to be kept on file as a matter of record and reference.

financial printer
An experienced financial printer that is familiar with Securities and Exchange Commission regulations governing the graphic presentation of a prospectus. (See prospectus, red herring prospectus)

FINRA
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business with the United States public—more than 5,000 firms employing more than 660,000 registered representatives.

Firm Access and Query System (FAQS)
FINRA system that allows participating members computer access to their registration and examination data maintained in the Central Registration Depository. Members may use FAQS to schedule qualification examinations, and review their CRD accounting, balance and activity. (See Central Registration Depository)

firm-commitment underwriting
See underwriter

firm quotation
A requirement that a Market Maker execute an order from another broker/dealer at its displayed Nasdaq price for the normal unit of trading, or for its displayed size, whichever is greater. (See Market Maker)

FOCUS
Financial and Operational Combined Uniform Single Report

foreign
A non-U.S. company with securities trading on The Nasdaq Stock Market.

Form 10 K
See annual report

Form 20-F
A Securities and Exchange Commission 1934 Act registration statement and annual report form typically used by foreign issuers.

Form 6-K
The Securities and Exchange Commission form for non-U.S. issuers to make periodic reports.

Form F-1
The Securities and Exchange Commission 1933 Act form registering the securities of a non-U.S. company to be issued as part of a public offering.

Form U-4
A uniform application for security industry registration or transfer.

Form U-5
A uniform termination notice for security industry registration.

forum fee
Fee charged by FINRA (or other forum) for the use of its facilities.

fourth market
The direct trading of large blocks of securities between institutional investors through a computer network. (See INSTINET, third market)

GAAP
See Generally Accepted Accounting Principles

going-concern value
The value of a company as an operating business to another company or individual. (See goodwill)

goodwill
The going-concern value of a company in excess of its asset value; goodwill is considered an intangible asset. Generally, it is the value of the business' good name, its customer relations, high employee morale, and other factors that might translate into earning power. Nasdaq's calculation of net tangible asset value excludes goodwill. (See going-concern value)

Government securities broker
Any person or company regularly engaged in the business of effecting transactions in government securities for the account of others. The definition does not include corporations that issue securities exempted by the Secretary of the Treasury, corporations that are empowered by law to issue exempt securities, banks or other insured financial institutions.

green shoe
A provision in an underwriting agreement that if there is an exceptional public demand, an issuer will authorize additional shares for distribution by the syndicate. (See issuer, syndicate, underwriter)

held
A situation where a security is temporarily not available for trading. Market Makers are not allowed to display quotes of held securities.

house
A person or company doing business as a broker or dealer in securities, investment banking, or related services.

house spread
Among Market Maker firms, the house spread is the difference between the highest price bid for a security, and the highest price asked the difference between best bid and best ask. (See best ask, best bid, inside market, inside quote)

hypothecation
Pledging of securities or other assets as collateral to secure a loan, such as a debit balance in a margin account. (See debit balance, margin)

ICI
See Investment Company Institute

ICSD
See International Councils of Securities Dealers

individual investor
A person who buys or sells securities for his or her own account. The individual investor is also called a retail investor or retail shareholder.

INSTINET
See The Institutional Networks Corporation

initial public offering (IPO)
A company's first sale of stock to the public. Companies making an IPO are seeking outside equity capital and a public market for their stock. (See syndicate, underwriter)

inside market
The highest bid and the lowest ask (offer) prices among all Market Makers competing in a Nasdaq security; the best bid and ask prices for a security. (See best bid, best ask)

inside quote
See inside spread

inside spread (inside quote)
The difference between the best bid and best ask among all securities is the highest bid and lowest offer being quoted among all of the Market Makers competing in a security. Since the spread is the aggregate of individual Market Maker spreads, it is narrower than an individual dealer spread or quote. (See Market Maker, Market Maker spread)

institutional investor
A bank, mutual fund, pension fund, or other corporate entity that trades securities in large volumes. (See also buy-side trader, fourth market, qualified institutional investor)

Intermarket Trading System (ITS)
A computer system that interconnects competing exchange markets for the purpose of choosing the best market. ITS is operated by Securities Industry Automation Corporation (SAC). (See Computer Assisted Execution System)

international linkages
Intermarket connections of world securities markets.

Investment Company Institute (ICI)
The U.S. trade association for the mutual fund industry. Investment companies create and maintain mutual funds and investment trusts.

investor
A person who buys or sells securities for his or her own account or the account of others. (See individual investor, institutional investor)

IOSCO
See International Organization of Securities Commissions

IPO
See initial public offering

ISG
See Intermarket Surveillance Group

ISIS
See Industry Support Information Services

issuer
A corporation that has distributed to the public securities registered with the Securities and Exchange Commission.

ITS
See Intermarket Trading System

ITS/CAES
See Intermarket Trading System/Computer Assisted Execution System

last-sale service
A service that allow real-time access to last-sale information reported by Market Makers. (See last-sale reporting)

last-sale reporting
The electronic notification by a Market Maker to The Nasdaq Stock Market of the price and the number of shares involved in a transaction in a Nasdaq security. The notification must be made within 90 seconds of the execution of an order.

letter of intent
A letter that formalizes the relationship between an underwriter and a company preparing to go public. The letter of intent outlines the underwriter fees, ranges for stock prices, and other terms of the underwriter's agreement. (See underwriter)

limit order
An order to buy or sell a security at a customer-specified price; a customer order to buy or sell a specified number of shares of a security at a specific price. (See stop-loss order)

limit-order file
A file maintained as a feature of Nasdaq's Small Order Execution System that stores customers' unexecuted limit orders. (See limit order)

liquidity
The liquidity of a stock is the ease with which the market can absorb volume buying or selling, without dramatic fluctuation in price.

liquidity ratio
A measure of the trading volume of a security associated with a 1 percent change in its price. The higher the ratio, the more shares that can be traded with little change in price. (See Amivest Liquidity Ratio)

listing and maintenance agreement
A written contract between a securities market and an issuing company. In it, the issuing company agrees to meet and maintain the market's qualitative and quantitative listing standards.

locked or crossed quotations
A temporary and unusual condition where the ask (offer) price of one Market Maker for a security is the same or lower than the bid (buy) price of another Market Maker. Locked or crossed quotations may occur in fast-moving markets. (See ask price, bid price, Market Maker)

locked-in trade
A securities transaction in which all of the terms and conditions of the trade are accepted by the buyer and seller. Once a transaction is locked in, last-sale reporting to Nasdaq and reporting to the clearing corporation are processed electronically. (See last-sale reporting)

Maloney Act
Also called the Maloney Amendment, provides for the regulation of over-the-counter securities markets through national associations registered with the Securities and Exchange Commission. The Act was passed in 1938 to add Section 15A to the Securities Exchange Act of 1934.

managing underwriter
See syndicate manager

margin
An account in which a customer purchases securities on credit extended by a broker-dealer. Rules of the Federal Reserve Board and FINRA govern margin accounts. (See Regulation T)

markdown and markup
A markdown is a charge subtracted from the selling price of a security that a customer is selling to a dealer-broker for the broker's-dealer own account. The broker-dealer adds a markup to the price when it sells a security to a customer from its own account. The markdown or markup are the equivalent of a commission on the sale.

market capitalization
The price of a stock multiplied by the total number of shares outstanding. Also, the market's total valuation of a public company.

market depth
See depth of market

Market Maker
A firm that maintains a firm bid and offer price in a given security by standing ready to buy or sell at publicly-quoted prices. The Nasdaq Stock Market is a decentralized network of competitive Market Makers. Market Makers process orders for their own customers, and for other broker-dealers; all Nasdaq securities are traded through Market Maker firms. Market Makers also will buy securities from i...

Market Maker spread
The difference between the price at which a Market Maker is willing to buy a security and the price at which the firm is willing to sell it. (See inside market)

market order
An order to buy or sell a stated amount of a security at the best possible price at the time the order is received in the marketplace.

market surveillance
A highly automated, centralized process of investigating and preventing abusive, manipulative, or illegal trading practices in The Nasdaq Stock Market. The Market Surveillance Department is called Market Regulation.

market value
The market value of a security is the last-sale price multiplied by total shares outstanding. It is calculated throughout the trading day, and is related to the total value of the index. (See last-sale reporting)

material news
News released by a public company that might reasonably be expected to affect the value of a company's securities or influence investors' decisions. Material news includes information regarding corporate events of an unusual and non-recurring nature, news of tender offers, unusually good or bad earnings reports, and a stock split or stock dividend. (See trading halt)

MBARSSM
See Municipal Bond Acceptance and Reconciliation Service

MD&A
See management's discussion and analysis

mediation
An informal, voluntary process used in securities industry disputes in which a mediator helps negotiate a mutually-acceptable resolution between disputing parties. Unlike arbitration or litigation, mediation does not impose a solution. If the parties cannot negotiate an acceptable settlement, they may still arbitrate or litigate their dispute. (See arbitration)

MIDAS
See Market Information Data Access System

misrepresentation
A false representation of a matter of fact that should have been disclosed, which deceives another so that he/she acts upon it to his/her injury.

most active
Most active Nasdaq National Market stocks.

motion
An application made to the arbitrator(s) for the purpose of obtaining a rule or order directing some act to be done in favor of the applicant.

MSRB
Municipal Securities Rulemaking Board

multiple
See price/earnings ratio

Municipal bonds
Bonds issued by states, cities, counties, and towns to fund public capital projects like roads, schools, sanitation facilities, bridges, as well as operating budgets. These bonds are exempt from federal taxation and from state and local taxes for the investors who reside in the state where the bond is issued.

Municipal securities
See Municipal bonds

Municipal securities broker
A broker engaged in the business of effecting transactions in municipal securities for the account of others. Banks are not included in this definition.

Municipal securities dealer
Any person, except a bank or department or division of a bank, engaged in the business of buying and selling municipal securities for his own account. Banks are not included in this definition.

mutual fund
A pool of money invested by an investment company in a number of securities like stocks, bonds, or government securities. Each mutual fund is different in its make-up and philosophy.  Because most mutual funds invest in a large number of securities, they offer investors the benefit of diversification, which can help reduce market risk.

NAC
See National Adjudicatory Council

NASAA
See North American Securities Administrators Association, Inc.

NASD Rules
The numbered rules set forth in the NASD Manual beginning with the Rule 0100 Series.

Nasdaq CompositeSM Index
A statistical measure that indicates changes in The Nasdaq Stock Market. The Nasdaq Composite Index measures all Nasdaq domestic and foreign common stocks. It is market-value weighted: each company's security affects the index in proportion to its market value. Securities in the Nasdaq Composite Index generally are assigned to subindexes based on their Standard Industrial Classification (SIC) cod...

Nasdaq National Market®
More than 3,900 companies that are the larger and generally more actively-traded Nasdaq securities. (See The Nasdaq SmallCap Market)

Nasdaq Workstation IITM
A computerized trading tool that provides access to all Nasdaq markets for Market Makers, brokers, and institutions. (Formerly named Service Delivery Platform)