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

National Adjudicatory Council (NAC)
The National Adjudicatory Council is a committee of FINRA Regulation, composed of representatives of member firms and the public, that is authorized to review disciplinary, membership, and exemptive proceedings, as well as applications for relief from statutory disqualifications.

net change
The difference between today's last trade and the previous day's last trade.

net capital rule
The Security and Exchange Commission requires that all broker-dealers maintain no more than a 15 to 1 ratio between indebtedness and liquid assets. Indebtedness includes money owed to the firm, margin loans, and commitments to purchase securities. Liquid assets include cash, and assets that are easily converted to cash.

net tangible assets
An accounting term defined as stockholders' equity minus goodwill. (See equity, goodwill)

neutral
One or more individuals assigned to mediate through negotiations or arbitrate by adjudication claims between or among disputing parties. (See arbitration, mediation)

new account information form
Document filled out by a broker that details vital facts about a new client's financial circumstances and investment objectives.

new issue
Securities being offered to the public for the first time; subject to the rules of the Securities and Exchange Commission. (See initial public offering, underwriter)

newspaper listings
The stock price coverage given to securities in newspapers, dependent upon in which market the company trades, the size of the company, and the level of trading activity in the company's stock.

no quote (NQ)
No Market Makers making an inside market at this time. (See inside market)

NQ
See no quote

NQDS
See Nasdaq Quotation Dissemination ServiceSM

NSCC
See National Securities Clearing Corporation

NTDS
See Nasdaq Trade Dissemination ServiceSM

NYSE
New York Stock Exchange

OCC
See Options Clearing Corporation

offer price
See ask or offer price

open order
An order to buy or sell a security that remains in effect until it is either canceled by the customer or executed.

operations
The back office of a brokerage firm where all clerical functions having to do with clearance, settlement, and execution of trades are handled. (See clearance, prompt receipt and delivery of securities, settlement)

OPRA
See Options Prices Reporting Authority

option
An instrument that gives the owner the right to buy or sell a specified number of shares of a specified stock at a specified price within a specified period of time. A call option allows the buyer to purchase the underlying stock at any time up to the expiration date of the contract. A put option allows the buyer to sell the underlying stock at any time up to the expiration date of the contract.

Options Clearing Corporation (OCC)
The issuer of standardized options traded on exchanges. OCC is owned by the options markets.

order flow
aggregated small orders to purchase or sell securities that brokers send to dealers often in return for cash payments.

order matching
The Market Maker practice of pairing buy and sell orders for like amounts of securities at identical prices. (See Market Maker, Small Order Execution System)

order ticket
A form completed by a registered representative of a brokerage firm upon receiving order instructions from a customer.

OSJ
See Office of Supervisory Jurisdiction

OTC
See over-the-counter securities

OTCBB
See OTC Bulletin Board Service

OTC Bulletin Board® Service
The OTC Bulletin Board® (OTCBB) is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (OTC) equity securities. An OTC equity security generally is any equity that is not listed or traded on Nasdaq® or a national securities exchange. OTCBB securities include national, regional, and foreign equity issues, warrants, units, Americ...

out-of-pocket loss
The difference between the value of what the purchaser parted with, and the value of what he or she has received.

over-the-counter (OTC) securities
Securities that are not listed and traded on an organized exchange

passive market-making
A process that allows a Market Maker firm to be both underwriter and buyer of a company's securities in a secondary public offering. A underwriting Market Maker may bid for the security during the issue's cooling-off period if its bid is no higher than a competing, non-underwriting, Market Maker's. Before the Securities and Exchange Commission adopted passive market-making in 1993, Market Maker...

penalty bid
A syndicate manager's or underwriter's offer to buy a security at specific price during a new issue distribution. The bid acts to stabilize the price of the stock, to facilitate distribution. The bid, also called 'pegging,' is permitted under Securities and Exchange Commission Rule 10b-7; otherwise the practice is prohibited. (See bid, new issue, syndicate manager, underwriter.)

pink sheets
Daily printed listings containing quotations for thousands of over-the-counter stocks that are not listed on any of the major stock markets. These quotations are entered by dealers acting as Market Makers in the individual securities. The pink sheets are printed by the National Quotation Bureau.

portfolio
The combined holding of more than one stock, bond, commodity, real estate investment, or other asset by an individual or institutional investor.

PORTAL
The Nasdaq's trading system for secondary trading of unregistered securities in transactions exempt from the registration and a prospectus delivery requirement of the Securities Act of 1933 pursuant to SEC Rule 144A.

pre-syndicate bid
A bid entered before the effective date of a secondary offering, made to stabilize the price during distribution. The bid is permitted under Securities and Exchange Commission Rule 10b-7; otherwise the practice is prohibited. (See penalty bid, secondary offering.)

preferred stock
A security that usually pays a fixed dividend and that gives the holder a claim on corporate earnings and assets that is superior to that of holders of common stock. (See common stock.)

previous day's close
The previous trading day's last reported trade.

price/earnings ratio
The price of a share of a stock divided by earnings per share, usually calculated using the latest year's earnings. The p/e ratio is also called the multiple.

price-to-earnings ratio
See price/earnings ratio.

principal orders
Activity by a broker-dealer when buying or selling for its own account and risk. Also called principal trades.

principal trades
See principal orders.

PROCTOR
See Professional Certification Testing Organization.

prospectus
A formal written offer to sell securities that sets forth the plan for a proposed business enterprise, or the facts concerning an existing one that an investor needs to make an informed decision.

proxy
Written power of attorney given by a shareholder of a corporation, authorizing someone to vote on his or her behalf at corporate meetings.

proxy statement
Material information required by the Securities and Exchange Commission to be given to a corporations stockholders as a prerequisite to solicitation of votes. It is required for any issuer subject to the provisions of the Securities Exchange Act of 1934.

public float
The portion of a company's outstanding shares that is in the hands of public investors; shares not held by company officers, directors, or investors who hold a controlling interest in the company.

put
A bondholder's right to redeem a bond before maturity; a contract that grants the right to sell at a specified price a specified number of shares by a certain date. (See call.)

QDS
See Quote Dissemination System

qualified institutional investor
An institutional investor permitted under Securities and Exchange Commission rules to trade privately-placed securities with other qualified institutional investors without registering the securities with the SEC. A qualified institutional investor must have at least $100 million under management.

quarterly report (Form 10 Q)
A report, required by the SEC of publicly-held companies, filed quarterly, that provides unaudited financial information and other selected material.

quotation size
The maximum number of shares per order of a particular security that a Market Maker is willing to buy or sell at his or her current price.

Quote Dissemination System (QDS)
Provides Nasdaq Market Maker quotations to outside services and vendors.

real-time trade reporting
A requirement that Market Makers report each trade in a Nasdaq security to Nasdaq within 90 seconds of execution.

record date
The date on which a company's records are closed to determine which stockholders are to be sent dividends, proxies, rights, etc.

red herring prospectus
Industry jargon for a preliminary prospectus issued by underwriters or issuers to gauge interest in a prospective offering. It receives its name from the warning, printed in red, that information in the document is incomplete or subject to change before the issue. (See prospectus, underwriters)

registered representative
The employee of a FINRA firm who gives advice on which securities to buy and sell, and who collects a percentage of the commission income he or she generates.

registrar
The registrar is responsible for keeping track of the owners of bonds and the issuance of stocks. Working with the transfer agent, the registrar keeps current files of the owners of a bond issue and the stockholders in a corporation. The registrar ensures that no more than the authorized amount of stock is in circulation. If the registrar and transfer agent are the same company, then there must be...

Regulation T
A rule of the Federal Reserve Board that governs the extension of credit by broker/dealers to customers to purchase and carry securities.

retail investor
See individual investor

retail shareholder
See individual investor

reverse split
See split

right
A privilege allowing existing shareholders in a company to buy shares of a new issue of common stock before it is offered to the public.

road show
A series of meetings with potential investors in key cities, designed and performed by a company and its investment banker as the company prepares to go public.

Rule 10b-21
Securities and Exchange Commission rule that prohibits covering a short position in a security with stock purchased out of a new offering of the security, if the short position was established between the filing of the registration statement and the beginning of the distribution of the offering. (See short sale)

Rule 10b-6
Securities and Exchange Commission rule that prohibits persons engaged in a distribution of securities from bidding for or purchasing those or similar securities until they have completed their participation in the distribution.

Rule 10b-6A
Securities and Exchange Commission rule that permits broker/dealers engaged in the distribution of a security to engage in 'passive' market making transactions in the security being distributed without being in violation of the provisions of SEC Rule 10b-6. (See passive market-making)

Rule 13d
The Securities and Exchange Commission rule requiring disclosures by anyone acquiring a beneficial ownership of 5 percent or more in any equity security registered with the SEC. (See beneficial owner)

Rule 15c3-1
Securities and Exchange Commission rule that requires broker-dealers maintain sufficient liquid assets to satisfy its net capital requirement. (See net capital rule)

Rule 15c3-3
Securities and Exchange Commission rule that ensures that the broker-dealer has possession or control of customers' securities, and properly segregates these securities from securities the firm owns. The rule also requires that the broker/dealer deposits customers' funds in a Special Reserve Bank Account.

Rule 17a-3
Securities and Exchange Commission rule that specifies the books and records related to the securities business that brokers and dealers have to make and keep current.

Rule 17a-4
Securities and Exchange Commission rule that specifies the time period that broker/dealers must preserve Rule 17a-3 records and other documents pertaining to the business. (See Rule 17a-3)

Rule 19b-4
Securities and Exchange Commission rule that provides procedures that self-regulatory organizations (SROs) follow to propose rule changes to the SEC. (See self-regulatory organization)

Rules of Fair Practice
Rules designed to promote high standards of commercial honor

safe harbor
The 'Safe Harbor for Forward-Looking Information' allows company management to discuss in good faith a company's prospects and financial projections with analysts and investors without fearing litigation. (From the Private Securities Litigation Reform Act of 1995.)

SAC
See Securities Industry Automation Corporation

secondary market
Markets where securities are bought and sold subsequent to original issuance.

secondary offering
A registered offering of a large block of a security that has been previously issued to the public. The blocks being offered may have been held by large investors or institutions, and proceeds of the sale go to those holders, not the issuing company. Also called secondary distribution. (See initial public offering, new issue, underwriter)

Securities Act of 1933
The 'disclosure statute' requires companies to register stock offerings to the public, and disclose important facts through a prospectus, and additional information filed with the Securities and Exchange Commission. (See prospectus, Securities and Exchange Commission)

Securities Acts Amendments of 1975
considered the most significant securities legislation since the 1934 Act, this act ended fixed commission rates, initiated action toward development of a national market system, and granted the Securities and Exchange Commission final say in the adoption of rules by any of the self-regulatory organizations (SROs). (See Securities Exchange Act of 1934, self-regulatory organizations)

Securities Exchange Act of 1934
This law created the Securities and Exchange Commission to regulate the securities industry. The law outlawed manipulative and abusive practices in the issuance of securities; it required registration of stock exchanges, brokers and dealers, and registration of exchange-listed securities; it also required disclosure of certain financial information and insider activity. The law gave the SEC survei...

securities analyst
An individual who does investment research and makes recommendations to buy, sell, or hold. Most analysts specialize in a single industry or business sector.

securities exchange
A physical facility in which buyers and sellers of securities, or their agents, meet to effect transactions.

SelectNetSM
An automated Nasdaq market service that enables securities firms to route orders, negotiate terms, and execute trades in Nasdaq securities, eliminating the need for verbal contact between trading desks.

self-regulatory
An entity, such as FINRA, responsible for regulating its members through the adoption and enforcement of rules and regulations governing the business conduct of its members.

sell-side trader
An employee of a retail broker, institutional broker and trader, or research department who engages in securities transactions. (See buy-side trader)

settlement
The conclusion of a securities transaction; a broker-dealer buying securities pays for them; a selling broker delivers the securities to the buyer's broker. (See clearance, prompt receipt and delivery of securities)

settlement date
The date specified for delivery of securities between securities firms, usually three business days after the execution of an order. (See prompt receipt and delivery of securities)

shareholder of record
The name of an individual or entity that an issuer carries on its books as the registered holder (not necessarily the beneficial owner) of the issuer's securities. (See beneficial owner)

short sale
The sale of shares of a security that the seller does not own. Such sales are made in anticipation of a decline in the price of the security to enable the seller to cover the sale with a purchase at a later date, at a lower price, and thus at a profit. Securities and Exchange Commission rules allow investors to sell short only when a stock price is moving upward. This prevents 'pool operators' f...

Short Sale Rule
A Nasdaq rule that prohibits FINRA members from selling a Nasdaq National Market stock at or below the inside best bid when that price is lower than the previous inside best bid in that stock. (See best bid, inside spread, short sale)

short interest
The total number of shares of a security that have been sold short by customers and securities firms that have not been repurchased to settle short positions in the market. (See short sale)

SIA
See Securities Industry Association

SIC codes
See Standard Industrial Classification codes

SIPC
See Securities Investor Protection Corporation

SIPA
See Securities Investor Protection Act of 1970

SmallCap
See The Nasdaq SmallCap Market

SMART
See Securities Market Automated Regulated Trading Architecture

SOESSM
See Small Order Execution System

soft dollars
Payment for brokerage services, such as research, through commissions or directed underwriting rather than fees.