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Glossary of Terms and Definitions

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  • Glossary of Terms and Definitions
    The stock market is a complex and ever-changing system that can be difficult to understand. To help make sense of it all, here are over 200 stock market phrases and their definitions. These terms cover everything from the basics such as stocks, bonds, and mutual funds to more advanced concepts such as short selling, derivatives, and market capitalization. Whether you’re a beginner or an experienced investor, this list of stock market phrases will help you navigate the world of investing.
  • Accrual
    The recording of revenue or expenses that have not yet been received or paid.
  • Accumulation
    The process of purchasing a security over a period of time, rather than all at once.This is typically done by an institutional investor, and is the opposite of distribution.
  • Accumulation/Distribution Line (A/D Line)
    A momentum indicator measuring the relationship between quantity of shares being bought or sold and the price trend.
  • Administrator
    A company or person who is responsible for managing an account. In the context of transfer agents, an administrator is the person responsible for managing shares in plan holdings. For Computershare, their administrator is Computershare Trust Company, N.A. and operates under the name of Computershare’s nominee: Dingo & Co.
  • After Hours (AH)
    Trading after hours is possible and is generally more illiquid and risky than regular market trading and many investors avoid it due to these risks. Before trading After Hours, it is important to understand the risks and do your research. Generally, online brokers require trading accounts to opt-in to After Hours trading.
  • Aggregate
    When a collection of things, such as trades, is gathered together. When a transfer agent batches buy and sell orders together, this makes them “aggregated orders”. Cede & Co. holds all broker-held shares (whole and fractional) in aggregate form.
  • Alpha
    A measure of performance on a risk-adjusted basis. It takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.
  • American Depositary Receipt (ADR)
    A negotiable certificate representing ownership of foreign-based stocks that is listed and traded on an American stock exchange. ADRs make it easier to invest in foreign companies because there is no need to concern oneself with foreign laws, accounting standards and settlement procedures.
  • American Stock Exchange (AMEX)
    A stock exchange that trades about 10% of the total dollar volume of U.S. equities. The AMEX is owned by the NASDAQ OMX Group, Inc.
  • Arbitrage
    A trading strategy that takes advantage of price differences between similar financial instruments on different markets or in different forms.
  • Ask Price
    Also known as the "offer price," is the lowest price a seller will accept for the security. The ask price is the best available price at which you can buy from the market.
  • Asset
    Anything owned by an individual or corporation that has commercial or exchange value.
  • Asset Allocation
    The process of deciding how to allocate assets among major asset classes (such as stocks, bonds and cash). The three main goals of asset allocation are to manage risk, increase returns and maximize diversification.
  • Assets Under Management (AUM)
    A measure of the total value of the assets that an investment firm, such as a mutual fund or hedge fund, manages on behalf of its clients. AUM can be used to track how well a firm is doing financially and how much money it has available to invest.
  • Auto Loan Asset Backed Securities (ALABS)
    A type of securities backed by auto loan payments. They are used to provide financing for auto loans and enable investors to earn returns from them. ALABS offer several benefits, such as liquidity, credit enhancement, diversification, and potential capital appreciation. However, there are some risks associated with investing in ALABS, including default risk and market volatility. Investors should research the specific security and consider their individual risk tolerance before investing in ALABS.
  • Average Down
    The process of buying additional shares of a stock that has declined in price since the initial purchase. The average down strategy is used to lower the average cost of a stock that is expected to rise in price.
  • Average Up
    The process of buying additional shares of a stock that has increased in price since the initial purchase. The average up strategy is used when a security is expected to continue rising in price through the long term.
  • Balance Sheet
    A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.
  • Bear
    An investor who believes a stock or the overall market will decline.
  • Bear Market
    A market in which prices are falling and widespread pessimism causes the negative sentiment to be self-sustaining.
  • Bear Raid
    A trading strategy that attempts to force the price of a stock down by heavy selling. Bear raids are illegal if they involve spreading false or misleading information about the stock.
  • Beneficial Ownership
    A form of indirect ownership where you purchase shares, but someone else is the legal owner (such as a bank or broker). The most common legal owner is Cede and Co, which owns the vast majority of publicly traded stocks in the United States.
  • Beta
    A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.
  • Bid/Ask (B/A)
    The highest price a buyer is willing to pay for a security and the lowest price a seller is willing to accept.
  • Bid Price
    The price a buyer is willing to pay for a security.
  • Block Trade
    A transaction that involves a significant quantity of shares or bonds. Block trades are generally initiated by institutional investors.
  • Blue Chip Stock
    A stock of a well-established and financially sound company. Blue Chip Stocks are often expected to retain value during Bear Markets.
  • Bollinger Bands
    Band lines plotted as two standard deviations above and below a simple moving average, used to indicate relative high and low price points over a period of time.
  • Book Entry Shares
    Held by the transfer agent or the broker/dealer on behalf of the investor in an electronic non-certificated form. Investors have the same rights and privileges for book entry shares as they have for shares issued in certificate form. Ownership is typically represented by a book entry transaction advice issued by the transfer agent, or a statement issued by the broker/dealer.
  • Book Holding
    A form of shareholdings with a transfer agent that is in the sole name of the investor, unfettered. Has been described by Computershare representative Paul Conn as “Pure DRS” and is also called ‘pure’ DRS in the Computershare FAQs.
  • Book Value
    The measure of what value shareholders would receive if a company were to liquidate all its assets.
  • Broker
    A middleman between investors and the market who buys and sells stocks on behalf of the clients.
  • Bull
    An investor who believes a stock or the overall market will rise.
  • Bull Market
    A market in which prices are rising or are expected to rise.
  • Bull Raid
    A trading strategy that attempts to force the price of a stock up by heavy buying. Bull raids are illegal if they involve spreading false or misleading information about the stock.
  • Call Option
    An option contract that gives the holder the right, but not the obligation, to buy a specified amount of an underlying security at a specified price within a specified time. Call options are purchased by investors who believe the price of the underlying security will rise.
  • Capital Gain
    The difference between the purchase price and the sale price of an asset.
  • Capitalization
    The total value of a company's outstanding shares of stock.
  • Cash Flow
    The net amount of cash and cash-equivalents being transferred into and out of a business.
  • Cash Dividend
    A dividend paid in cash to shareholders. It is the most common type of dividend.
  • Cash Reserve Ratio
    The minimum percentage of deposits that a bank must hold as reserves, as is set by the central bank of a country. In the United States, this has been 0% since 3/15/2020.
  • Cede and Company
    Founded in 1996 and is often referred to as Cede and Co or Cede, the name is shorthand for "certificate depository". Cede and Co is a specialist United States financial institution that processes transfers of stock certificates on behalf of Depository Trust Company, the central securities depository used by the United States National Market System, which includes the New York Stock Exchange, and Nasdaq. Cede technically owns the majority of the publicly issued stock in the United States. Thus, investors do not themselves hold direct property rights in stock, but rather have contractual rights that are part of a chain of contractual rights involving Cede. Securities held at Depository Trust Company are registered in its nominee name, Cede & Co., and recorded on its books in the name of the brokerage firm through which they were purchased; on the brokerage firm's books they are assigned to the accounts of their beneficial owners.
  • Certificated Holdings
    Paper certificates that are owned by the investor, the certificate is proof of the share. The investor is recorded in the company’s ledger the same way DRS holdings are held. The only difference is the physical nature of the certificates vs the electronically recorded nature of book/DRS holdings. Only electronically recorded shares that are directly registered in the investors name are considered “DRS Holdings”.
  • Charting
    The process of plotting the historical prices of a security on a chart. It is used to analyze and predict future price movements.
  • Chill/Freeze
    A method of preventing transactions from occurring on specific shares or a CUSIP involved in a corporate action. When shares are chilled, they cannot be moved.
  • Circuit Breaker
    A regulatory mechanism that halts trading on a stock exchange when prices move a specified percentage from the previous day's close.
  • Closed-End Fund
    A mutual fund with a fixed number of shares. It has a set number of shares that are bought and sold on a stock exchange. The fund's share price is determined by supply and demand.
  • Collateralized Debt Obligations (CDOs)
    Investments that pool together various types of debt instruments. A CDO is divided into different tranches, each with its own risk level and return rate. They are generally sold to investors as a way to diversify their investments, but can be risky due to the potential for default on the underlying assets.
  • Commercial Mortgage Backed Securities (CMBS)
    Financial instruments that are secured by commercial real estate properties, such as office buildings and shopping centers. They are created when a group of mortgages are pooled together and then sold as bonds to investors. CMBS can provide a steady stream of income for investors, but they also carry some risk due to the underlying real estate market conditions.
  • Commission
    A fee charged by a broker to execute a trade.
  • Commission Broker
    A broker who is paid a commission for executing buy and sell orders submitted by an investor, also known as a "discount broker”.
  • Common Stock
    A security that represents ownership in a corporation.
  • Compound Annual Growth Rate (CAGR)
    The rate of return at which money grows each year, including reinvestment of interest earned.
  • Computershare
    Computershare, is based in Australia, and the largest transfer agent in the world by market share. Some companies who have contracts with Computershare include: Apple, Amazon, Microsoft, Disney and GameStop. Transfer agents are hired by corporations to maintain any investor's financial records, and track said investor's holdings. Basically, they maintain an up to date ledger of the direct owners of share certificates. They also record transactions, cancel and issue certificates, process investor mail, and handle a variety of other issues to maintain a quality experience for investors. Computershare also hosts a helpful FAQ available here:
  • Committee on Uniform Securities Identification Procedures (CUSIP).
    A CUSIP number identifies most financial instruments, including: stocks of all registered U.S. and Canadian companies, commercial paper, and U.S. government and municipal bonds. The CUSIP system (formally known as CUSIP Global Services)—owned by the American Bankers Association and managed by Standard & Poor’s—facilitates the clearance and settlement process of securities. CUSIP numbers consist of nine characters (including letters and numbers) that uniquely identify a company or issuer and the type of financial instrument. For more information about how the CUSIP process works, you can contact CUSIP Global Services at (212) 438-6500 or
  • Computershare Investment Plan (CIP)
    The product name for Computershare’s investment plan with companies such as Walmart. With this plan, Computershare takes your money to the stock market and buys your shares through a broker.
  • Contract for Difference (CFD)
    A CFD is a financial arrangement designed to trade the price of an asset without owning the asset. Rather than an investor purchasing an underlying security, an investor and a broker enter into an agreement where the parties will exchange the difference between the price of an underlying asset at the opening and closing of the trade. Crucially, there is no delivery of, or change in ownership of actual securities when dealing with CFDs. Therefore, price is not affected upwards for the underlying security. CFDs enable traders to take both long and short positions, allowing them to make profits from rising or falling prices. Leverage is also allowed with CFDs giving traders the potential to magnify their returns. However, that leverage also carries more risk, so caution is advised when trading CFDs. Certain countries have put in place restrictions on CFD trading, which may make it illegal to trade including Belgium, France, Netherlands and the US.
  • Convertible Bond
    A bond that can be converted into a specified number of shares of common stock in the issuing company. Convertible bonds are issued with a conversion price, which is the price at which the bond can be converted into stock.
  • Corporate Action
    An action by a corporation that affects the outstanding shares for an issuer. Corporate actions include stock splits, stock dividends and other actions related to the reorganization of a company such as a merger, tender offer or spin-off.
  • Cost to Borrow (CTB)
    The cost to borrow money, usually expressed as an interest rate. It can vary depending on a number of factors such as the amount borrowed, the lender, and the borrower's creditworthiness. CTB is typically higher for borrowers with poor credit due to the higher risk associated with lending to them. Generally, anything above 10% is considered to be high. This can significantly affect short sellers, as the higher CTB could increase their cost of borrowing and reduce their potential profits.
  • Credit Default Swaps (CDS)
    Contracts between two parties that provide protection against losses from credit events such as default, bankruptcy, or restructuring. They allow the buyer of the CDS to transfer the risk of default by a third party to the seller of the CDS. The buyer pays a premium to the seller, who in turn agrees to cover any losses resulting from the credit event.
  • CUSIP International Numbering System (CINS)
    A similar system to CUSIP which is used to identify foreign securities . CINS employs the same nine character identifier as CUSIP, but also contains a letter in the first position to signify the issuer's country or geographic region.
  • Day Order
    An order to buy or sell a security that automatically expires if it is not executed on the day it is placed.
  • Day Trading
    The practice of buying and selling securities within the same trading day. Day traders close out all positions before the market closes for the trading day.
  • Direct Registration System (DRS)
    Allows for book entry ownership of shares directly registered to investors on the books of the corporation. The electronic system between transfer agent and broker/dealers via DTC allows transfer agents to move shares to broker/dealers as directed by the investor. The Direct Registration System is a DTC service which provides investors with the option to register shares under their own name with a transfer agent, rather than with a broker as a beneficial owner or in "street name". The DRS provides for electronic settlement of stock, without the need for physical share certificates. The shareholder retains full ownership of the shares, as well as all the traditional voting rights and privileges of being a share owner, (which can be skewed due to the possibility of fractional ownership, when held in beneficial or "street name"). The Direct Registration System was largely designed by Dr. Susanne Trimbath, a former Director of Operations at the DTCC, and CEO/Chief Economist of STP Advisory Services . She also holds a Ph.D in Economics from New York University, and received an MBA in Management from Golden Gate University. Her credentials far exceed what is listed here, for further reading (or listening), here's a podcast and transcript where Dr. Trimbath details the development of this system.
  • Deep Out Of the Money Puts (DOOMPS)
    Options contracts with a strike price well below the current market price of the underlying asset. These contracts generally have a higher risk profile than other options contracts, but they also offer larger potential rewards if the underlying asset moves significantly lower.
  • Depository Trust Company (DTC)
    Founded in 1973, is a New York Corporation that performs the functions of a central securities depository as part of the U.S. National Market System. It annually settles transactions worth hundreds of trillions of dollars, processes hundreds of millions of book-entry deliveries, and custodies millions of securities issues worth tens of trillions of dollars issued in the United States and over 100 other countries. I has been a subsidiary of the DTCC since 1999.
  • Depository Trust & Clearing Corporation (DTCC)
    The holding company that provides payment, clearing, settling, and record-keeping services to financial markets such as equities, fixed income, and derivatives. DTCC also offers depository services for many securities and facilitates the automation of processes related to the trading cycle. The DTCC has been praised for its ability to streamline post-trade processing, and has accomplished this by serving as a central depository for all trades in U.S. stocks and bonds. The DTCC and directly settles millions of securities transactions every day. Established in 1999, it is owned by its members, which include the entire universe of financial intermediaries involved in equities, corporate and municipal debt, and money market products. Controversy surrounding the DTCC has primarily revolved around its alleged misuse of customer funds, lack of transparency in its pricing structure and operations, and inadequate risk management practices that have exposed customers to risks they are not aware of. Additionally, critics have alleged that its services provided too much market concentration and reduced competition in the securities markets. It has also faced controversy due to concerns over corporate governance, potential conflicts of interest and its potential to squeeze smaller market players out of business.
  • Dematerialization
    The deposit of physical certificates into a book entry DRS position maintained on the books of the issuer by the transfer agent.
  • Derivative
    A financial instrument whose value is derived from the value of one or more underlying securities. These include futures, options, and swaps.
  • Derivative Security
    A financial security with a value that is dependent upon or derived from one or more underlying assets.
  • Dilution
    The decrease in earnings per share that results from the issuance of additional shares. Dilution can also occur when a company issues convertible bonds, stock options or warrants.
  • Directly Registered Holder
    The legal title holder of a physical paper stock certificate or shares in electronic book/pure DRS holdings.
  • DirectStock
    A Computershare plan product name used by GameStop and AMC as well as other companies. It is similar to the CIP, but it is an electronic only plan. This means the shares have to be held electronically (book entry), and all communications from Computershare have to be done electronically.
  • Direct Stock Plan (DSP)
    A Direct Stock Plan is when a company/issuer allows you to purchase or sell stock directly from them, eliminating the need to use or pay commissions to a broker. MGE Energy’s plan with Computershare offers both purchases directly with the issuer, and from the market.
  • Direct Stock Purchase Plan (DSPP)
    When shares are purchased directly from the company/issuer instead of the stock market. Companies/issuers have a shelf of reserves they sell to you from. Sometimes you buy straight from the company, other times the transfer agent facilitates the sale on behalf of the company. Home Depot’s Depot Direct Plan with Computershare is an example of a “true DSPP”.
  • Diversification
    The process of allocating capital in a way that reduces the exposure to any one particular asset or risk. It aims to maximize return by investing in different areas that would each react differently to the same event.
  • Dividend
    A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  • Dividend Reinvestment Plan (DRIP)
    Investment strategy that allows investors to reinvest their cash dividends into additional shares of the same company, instead of receiving the dividend as cash. A DRIP will take into account the investors certificated shares, DRS holdings, and plan holdings. The new shares are placed into “plan holdings”.
  • Dow Jones Industrial Average (DOW)
    A price-weighted average of the 30 blue-chip stocks on the New York Stock Exchange.
  • DRS Holdings
    Also known as “pure DRS”, refers to book holdings with a transfer agent.
  • DRS Guidelines
    A set of securities industry guidelines for the Direct Registration System developed to standardize DRS processing throughout the industry. The guidelines also assist those in the industry with the set-up and processing of DRS transactions. The most current version of these guidelines, maintained by STAI, can be found at
  • DTC Participant Number
    A 4-digit number assigned by the Depository Trust Company (DTC) to represent the clearing broker/dealer or financial institution. This number is usually the participant’s FINs number.
  • Earnings Momentum
    The speed at which a company's earnings are growing.
  • Earnings Per Share (EPS)
    The portion of a company's profit allocated to each outstanding share of common stock.
  • Earnings Yield
    The ratio of earnings per share to the price of the stock. The earnings yield is the inverse of the price-earnings ratio.
  • Equity
    The value of an asset less the value of all liabilities on that asset.
  • Equity Financing
    The process of raising capital through the sale of shares in an enterprise. It is a key component of the capital structure of a company.
  • Exchange
    A marketplace in which securities, commodities, derivatives and other financial instruments are traded.
  • Exchange-Traded Fund (ETF)
    A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
  • Ex-Dividend Date
    The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment.
  • Expiration Date
    The date on which an option contract expires. The expiration date for listed stock options in the United States is normally the third Friday of the contract month, which is the month when the contract expires.
  • Failure to Deliver (FTD)
    A term used to describe when one party fails to deliver a contract asset on the specified date as agreed upon in a contract. FTD can be caused by a variety of issues, including operational errors, delays in regulatory approvals or document processing, or an inability to settle on the asset's delivery price. In most cases, a dispute arises and must be resolved between both parties before the asset is delivered.
  • Fair Market Value
    The price that a willing buyer and a willing unrelated seller would agree to, assuming that both parties are knowledgeable about the asset and acting in their own best interests.
  • Fast Automated Securities Transfer (FAST)
    Under FAST, DTC leaves securities with transfer agents in the form of a balance certificate, registered in the depository’s nominee name, Cede & Co. The balances are adjusted daily based on DTC’s deposit and withdrawal activity.
  • Financial Leverage
    The degree to which an investor or business is utilizing borrowed money.
  • Financial Industry Regulatory Authority (FINRA)
    An independent, non-governmental organization that regulates the securities industry in the United States. It is a self-regulatory organization which was created by consolidation of the National Association of Securities Dealers and the New York Stock Exchange's regulatory operations. FINRA has enforcement authority over the activities of its registered brokers, dealers, and other market participants who are subject to its jurisdiction. FINRA has come under criticism for not sufficiently policing the actions of its members, including conflicts of interest, excessive commissions, broker misrepresentations, and insider trading among others.
  • Financial Times Stock Exchange(FTSE)
    An index of the top 100 UK companies traded on the London Stock Exchange.
  • Financial Institution Number (FINS)
    FINS can be requested from the Security Information Center (SIC) or from the DTC.
  • Float
    The number of shares of a security that are available for trading by the public.
  • Fundamental Analysis
    The examination of the underlying forces that affect the well being of the economy, industry groups and companies.
  • Fundamental Investing
    Using fundamental analysis as a method of evaluating a security that involves attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors.
  • Growth Investing
    An investment strategy that focuses on stocks that are expected to grow at an above-average rate relative to the market.
  • Hedge
    An investment made in order to reduce the risk of adverse price movements in an asset.
  • Hedge Fund
    A limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains. They leverage long, short, and derivative positions.
  • High-Frequency Trading(HFT)
    A type of automated trading that uses powerful computers to conduct large numbers of transactions at extremely high speeds. HFT is used to make profits from small price movements, often within milliseconds, and usually involves large volumes of trades.Citadel Securities and Virtue have been controversial in the field of high-frequency trading (HFT) due to their aggressive strategies. They have been accused of using predatory practices to manipulate stock prices, trading large volumes at insider prices, and destabilizing markets. These accusations have been met with strong criticism from industry regulators as well as public figures. The controversy around HFT and Citadel Securities and Virtue continues to be debated as market players seek to limit aggressive trading strategies and ensure fair access to financial products.
  • Holder of Record
    A shareholder that has shares registered either electronically or in certificated form with the company or their chosen transfer agent. There is no distinction between “pure DRS” and plan holdings with a holder of record.
  • Index
    A statistical measure of change in an economy or a securities market.
  • Index Arbitrage
    A trading strategy that attempts to profit from the price difference between an index and its underlying securities.
  • Index Fund
    A type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500).
  • Initial Margin
    The percentage of the purchase price of securities that must be paid for by an investor using margin.
  • Initial Margin Requirement
    The amount of money that must be deposited in a margin account before buying on margin or selling short.
  • Initial Public Offering (IPO)
    The first sale of stock by a private company to the public by a newly formed corporation.
  • Insider
    Any officer, director or owner of 10% or more of a class of a company's securities registered under Section 12 of the Securities Exchange Act of 1934.
  • Insider Trading
    The trading of a corporation's stock or other securities by individuals with access to nonpublic information about the company.
  • Institutional Investor
    A non-bank person or organization that trades securities in large enough share quantities to qualify for preferential treatment and lower commissions.
  • Issuer
    A company that issues shares.
  • Legal Title Owner
    The individual which has sole and absolute ownership of an asset. Is enforceable in the court of law.
  • Letter of Indemnity
    A letter that indemnifies the receiving party from any potential loss or liability resulting from a particular transaction. The originating party assumes all liability for the transaction.
  • Leverage
    The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
  • Leveraged Buyout (LBO)
    A transaction where a business is acquired using debt as the main source of consideration.
  • Leveraged Equity
    An investment that uses borrowed money to purchase additional investments.
  • Limit Order
    An order placed with a broker to buy or sell a set amount of a security at a specified price or better.
  • Limit up
    The maximum price movement permitted in a single trading day for futures or options contracts.
  • Limited Participant Account (LPA)
    An account established by the transfer agent with DTC to allow for the movement of shares between the broker/dealer and the transfer agent. As shares are moved between the broker/dealer and the transfer agent, the transfer agent’s limited participant account at DTC is debited and credited to record share movement.
  • Liquidation
    The process of bringing a business to an end and distributing its assets to claimants.
  • Liquidity
    The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.
  • London Stock Exchange (LSE)
    A major international stock exchange, listing companies from all around the world.
  • Margin
    The difference between the market value of a stock and the loan a broker makes.
  • Margin Account
    An account with a broker that allows the investor to borrow funds from the broker to buy securities.
  • Margin Call
    A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin.
  • Market Capitalization
    The total dollar market value of all of a company's outstanding shares. It is determined by multiplying a company’s share price by the number of its outstanding shares.
  • Market Maker (MM)
    A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. They purchase and sell assets in order to provide liquidity to a market. They often have large financial incentives to perform these activities, giving rise to questions of potential conflict of interest when they also operate as exchanges. Citadel is one example of a firm that has been accused of such conflicts, creating tension between traders and the exchange itself.
  • Market Order
    An order to buy or sell a stock at the best available price.
  • Market Index
    A hypothetical portfolio of securities representing a particular market or a portion of it.
  • Market Risk
    The risk of losses in positions arising from movements in market prices.
  • Momentum Investing
    An investment strategy that aims to capitalize on the continuance of existing trends in the market.
  • Money Market
    The global financial market for short-term borrowing and lending.
  • Money Market Fund
    A mutual fund that invests in short-term debt securities.
  • Mortgage Backed Securities (MBS)
    Financial instruments that are backed by a pool of mortgages. They are bought and sold in the secondary market, and their value is determined by the performance of the underlying mortgages. MBS can provide investors with a steady income stream and potential capital gains, but they also carry risks such as interest rate fluctuations, default risk, prepayment penalties, and liquidity risks.
  • Mutual Fund
    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
  • National Association of Securities Dealers Automated Quotations (NASDAQ)
    Is an electronic marketplace for buying and selling securities, listing over 8,000 companies, and owned by the NASD.
  • National Securities Clearing Corporation (NSCC)
    A DTCC subsidiary established in 1976 which provides clearing, settlement, risk management, central counterparty services and a guarantee of completion for certain transactions for virtually all broker-to-broker trades involving equities, corporate and municipal debt, American depository receipts, exchange-traded funds, and unit investment trusts.
  • Net Asset Value (NAV)
    The value of an entity's assets less the value of its liabilities.
  • New York Stock Exchange (NYSE)
    The largest stock exchange in the world, located on Wall Street in New York City.
  • Nominee
    The named entity on a security (shares, property, etc.). The nominee can be an individual, or a firm/company.
  • Non Fungible Token (NFT)
    Blockchain-based assets that are unique and cannot be exchanged for other assets of equal value. They are used to represent digital or physical assets such as art, music, tickets, etc. and can provide certain benefits such as provenance, ownership, copyright, etc.Unlike traditional assets, NFTs are not impacted by market fluctuations or earning potential and have the potential to provide a more secure way to digitally represent ownership.
  • Non-objecting Beneficial owner (NoBo)
    Someone who has beneficial ownership over the shares, but their name is still visible to the company on the ledger.
  • Obligation Warehouse (OW)
    A secure facility where investment asset owners can store financial and other valuable assets. They provide investors with a safe, secure and highly regulated environment where their assets are protected. The Obligation Warehouse allows investors to easily transfer and access their assets in an efficient manner. This type of warehouse also provides investors with peace of mind knowing that their investments are safe and protected from potential theft, fraud and other forms of misappropriation.
  • Omnibus/Trust Accounts
    A general account established by a broker/dealer and maintained on the transfer agent’s records that represent multiple investors on the records of the broker/dealer. Omnibus accounts may be established to maintain confidentiality for the beneficial holders. Plans A variety of investment plans including dividend reinvestment, direct stock purchase, employee plans and investor services plans, designed to allow investors to directly invest in the company with the investment of dividends, voluntary cash contributions, payroll deductions etc.
  • Open-End Fund
    A type of mutual fund that does not have a limit on the amount of shares it can issue.
  • Option
    A contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.
  • Option Exercise
    The act of exercising the right to buy or sell the underlying security at the specified strike price.
  • Option Expiration(OPEX)
    The date on which an option expires. On this date, the option contract and all rights associated with it become null and void. The expiration date for options contracts are determined by the exchange or marketplace where the option was traded.
  • Option Premium
    The income received by an investor who sells or "writes" an option contract to another party.
  • Over-the-Counter (OTC)
    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. These are stocks not listed on any major exchange, typically those of smaller companies.
  • Participant
    User of a bulk financial service. In the context of the DRS and transfer agents, the entity that participates in it is the individual investor. In the context of the DTC, it is mostly brokers who participate, but transfer agents are also considered participants.
  • Payment for Order Flow (PFOF)
    PFOF refers to private financial entities purchasing bulk retail orders and relative information from exchanges. They then use that information to profit from price differences in their trades as they execute the buys on behalf of brokers, which is on behalf of retail. These private entities use data and utilize more their access to more sophisticated information about market conditions - and then provide settlement for the order. If they are able to find a security that costs less than the buy order value, or sell a security for more than the sell order value, the difference is then pocketed as profit. Using High Frequency Trading (HFT, a method which employs computers to conduct a large number of transactions in fractions of a second), it is possible to make fractions of a penny in profit on millions of trades. This is due to a time disparity which causes minor price differences between retail purchases and the market makers executing the orders, which is a practice also known as latency arbitrage. The popularization of PFOF in modern financial markets is credited to Bernie Madoff.
  • Penny Stock
    A stock that trades for less than $5 per share.
  • Plan Holdings
    Describes any shares held through a transfer agent in a “plan” instead of “pure DRS’. Plans can be sponsored by the company, their chosen transfer agent, or even a broker. For example: plan holdings are held by Computershare’s administrator under their nominee name, Dingo & Co. However, the investor’s name is still visible to the company on the ledger, so this is not the same as “street name”.
  • Plunge Protection Team (PPT)
    A group of financial experts appointed by the US government to help stabilize the stock market.
  • Portfolio
    A collection of investments held by an individual investor or financial institution.
  • Position Close Only (PCO)
    A controversial policy used by Robinhood and other online stock brokerages. This policy prohibits users from executing new orders with existing positions, forcing them to close their position first before opening a new one. While such a policy may make sense financially, it has been criticized for limiting the trading activity of small-time investors and providing an unfair advantage to large traders who can transfer their existing positions elsewhere before opening a new position.
  • Preferred Stock
    A class of ownership that has a higher claim on assets and earnings than common stock.
  • Price-Earnings Ratio (P/E Ratio)
    A valuation ratio of a company's current share price compared to its per-share earnings.
  • Prime Brokerage (PB)
    A service offered by investment banks that provide an array of services for hedge funds. These services include financing, counterparty credit, portfolio management, securities lending, and trading. Hedge funds use the services provided by PBs to gain access to a variety of different markets and financial instruments, allowing them to manage their portfolios in ways not possible for individual investors. PBs give hedge funds a safe haven to manage transactions, provide custodial services, and take advantage of market opportunities. Additionally, Prime Brokers can help hedge funds reduce costs and streamline back office operations.
  • Private Equity
    Equity securities of unlisted companies.
  • Profile System
    An electronic system between the transfer agents and broker/dealers to facilitate the electronic movement of shares directly registered to investors. This system allows the broker to request DRS share movements from the investor’s account at the transfer agent to the investor’s account at the broker/dealer as directed by the investor. The system also allows for the transfer agent to request shares from the broker/dealer to be held in an account at the transfer agent as directed by the investor.
  • Profit Margin
    The percentage of profit a company produces from its total sales.
  • Profit Margin Ratio
    Is a profitability ratio that measures how much out of every dollar of sales a company actually keeps in earnings.
  • Public Float
    The number of shares in a company that are available to trade.
  • Put
    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.
  • Put Option
    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.
  • Quote
    The last price at which a stock traded, this includes the price and the volume of shares that were traded at that price.
  • Realized Gain
    A realized gain results from selling an asset at a price higher than the original purchase price.
  • Record Date
    A date set by the company to establish entitlement for corporate actions. For example, all investors who hold shares on the cash dividend record date are entitled to the cash dividend declared by the company.
  • Registered Holder
    A shareholder thats has shares registered electronically with the company or their chosen transfer agent. There is no distinction between “pure DRS” and plan holdings with a registered holder.
  • Registered Investment Advisor (RIA)
    An RIA is a financial advisor who has met certain requirements set forth by the Securities and Exchange Commission (SEC). RIAs have a fiduciary duty to act in the best interest of their clients.
  • Regulation SHO
    A set of SEC rules that require short sellers to deliver securities by settlement date with existing exceptions for market makers to avoid these delivery requirements.
  • Regulation T
    A Federal Reserve Board regulation that sets the amount of credit that a broker-dealer can extend to a customer for the purchase of securities, with loopholes allowing family practices to avoid these margin requirements.
  • Restricted Shares
    Shares that have been restricted from transfer by the company for a variety of reasons. Before a transfer or share movement can be completed, the shares must be reviewed and approved by either the issuer, or counsel for the issuer to clear any transfer restrictions.
  • Return on Investment (ROI)
    ROI is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
  • Risk
    The possibility of losing money. Risk is measured by the probability of an event and its consequences.
  • Secondary Market
    Where investors buy and sell securities they already own. It is what most people typically think of as the "stock market," though stocks are also sold on the primary market when they are first issued.
  • Sector
    A group of stocks that operate in the same part of the economy. They are defined by the Global Industry Classification Standard (GICS).
  • Securities
    Financial instruments that hold some type of monetary value. Stocks, bonds, options, and futures are all securities.
  • Securities Act of 1933
    A law which, among other things, requires companies to register their securities with the SEC before they can be sold to the public.
  • Securities and Exchange Commission (SEC)
    A U.S. government agency that regulates the securities markets and enforces federal securities laws. Its mission is to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation.Controversies involving the SEC have involved allegations of misconduct by staff, failure to properly regulate or investigate financial firms or products, and accusations of insider trading violations.
  • Securities Transfer Association (STAI)
    A national organization of Transfer Agents whose mission is to focus on the servicing of our ultimate customer, securities investors in the United States and Canada.
  • Self Regulatory Organization (SRO)
    A non-governmental entity which has the power to create and enforce stand-alone industry and professional regulations and standards.
  • Settlement Date
    The date a transaction settles. The expected lead time for settlement has decreased as technology has improved. Currently, settlement time is generally2 business days after the trade date. This can be abbreviated as T+2.
  • Share Movement
    The electronic movement of shares between the transfer agent and the broker/dealer, or the broker/dealer and the transfer agent as directed by the investor.
  • Short Hedge Fund (SHF)
    An investment fund that allows investors to make directional bets on the markets by shorting stocks, bonds, currencies, and commodities. The major difference between SHF and other investments is that SHF enables investors to anticipate and profit from market declines as well as gains, while most traditional investments limit investors to capitalizing on price increases. With SHF, investors have the potential to realize higher returns than with long-only strategies in volatile markets, but greater risks are also required.
  • Short Interest (SI)
    The number of shares of a company's stock that have been sold short by investors. It is a key indicator for assessing investor sentiment on a given stock, and can be used to identify potential price movements or as a consideration when deciding whether to buy or sell a particular security. By tracking the changes in Short Interest over time, investors can better understand the sentiment of the market and get a better understanding of how their investments may perform.
  • Short Interest Ratio (SRI)
    The number of shares sold short divided by the average daily volume.
  • Short Selling
    The sale of a security that is not owned by the seller, motivated by the belief that a security's price will decline, enabling the potential for it to be bought back at a lower price to make a profit before being returned to the original owner.
  • Spread
    The difference between the bid and ask prices of a security or asset.
    Medallion guarantee program used by Transfer Agents.
  • Standard & Poor's 500 (SPX)
    A U.S. stock market index made up of the 500 largest publicly traded stocks.
  • Stock Dividend
    A dividend payment made in the form of additional shares rather than a cash payout.
  • Stock Market
    A public entity for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.
  • Stock Split
    An action taken by a company to divide its existing shares into multiple shares. The price of the stock is adjusted by the company such that the before and after, market capitalization of the company remains the same and dilution does not occur.
  • Stock Warrant
    A security that entitles the holder to buy the underlying stock of the issuing company at a fixed price within a certain time period.
  • Stops/Provisional Stops
    Notations placed on an investor’s share position that may prevent the movement of those positions to a broker/dealer.
  • Stop Limit Order
    An order to buy or sell a stock that combines the features of a stop order and a limit order.
  • Stop Loss Order
    An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a position in a security.
  • Stop Market Order
    An order to buy or sell a stock when its price increases past a particular point, ensuring a higher probability of achieving a predetermined entry or exit price, limiting the loss or locking in the profit.
  • Street Name
    A slang term that refers to the kind of beneficial ownership that investors have with brokers. These shares are held by the broker/dealer on behalf of an investor in an account registered in the name of the broker/dealer, their nominee, or DTC’s nominee. Shares are represented on the transfer agent records either in the name of the broker/dealer, or in the name of DTC’s nominee. The beneficial owners of the shares are not known to the transfer agent or by DTC.
  • Student Loan Asset Backed Securities (SLABS)
    A type of asset-backed securities (ABS) that are backed by student loan debt. They are typically issued by financial institutions and can provide investors with higher returns than traditional investments. SLABS can also be used to fund educational initiatives, such as loan forgiveness programs.
  • Sub-class
    A sub-class is a subdivision of a class. Plan shares have investors names visible to the company, but in a “sub-class”.
  • Supplementary Leverage Ratio (SLR)
    A financial regulation measure that requires banks to maintain a certain level of capital in relation to their total assets. The purpose of the SLR requirement is to limit the amount of leverage a bank can use, thereby reducing its risk of becoming insolvent due to excessive borrowing. Banks must meet the SLR requirement in order to receive approval from banking regulators for certain activities and transactions.
  • Swing Trading
    A speculative activity in financial markets where a tradable asset is held for between one and several days in an effort to profit from price changes or “swings”.
  • Tax Lot Accounting
    A method of tracking individual blocks of securities purchased by the date and price for the calculation of a capital gain or loss upon sale. Tax Lot issues are not eligible for DRS due to the unique tracking requirements.
  • Tax Loss Selling
    The selling of securities at a loss in order to offset a capital gain realized earlier in the year or to reduce taxable income.
  • Technical Analysis
    A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.
  • Total Return
    The actual rate of return of an investment or a pool of investments over a given evaluation period.
  • Total Return Swaps (TRS)
    A swap agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains. The underlying asset is usually an equity index, a basket of loans or bonds. The asset is owned by the party receiving the set rate of payment.
  • Trading Range
    The high and low prices at which a security or commodity traded during a given period of time.
  • Transfer Agent
    An entity chosen by a company to record changes of ownership, maintain the issuer’s security holder records, cancel and issue certificates, and distribute dividends. Occasionally a company will be their own transfer agent. A transfer agent does not make trades on the market, a broker will do this on behalf of the transfer agent.
  • Transaction Advice
    A transaction statement issued by the transfer agent to represent issuance or transfer activity of directly registered shares. This advice is issued in lieu of a certificate by the transfer agent, and represents the investor’s directly registered share activity.
  • Transaction Types (S,Y,C,X)
    Used by Transfer Agents. S – A request that a transaction statement for book entry ownership in DRS be issued as opposed to a certificate. C – A request for a certificate. Y – A third party transfer for DRS transactions only. X – A request to reverse a prior DRS transaction.
  • Turnaround Requirements
    The Securities Exchange Commission requirements for the completion of certain transactions completed by transfer agents. All SEC turnaround requirements apply to DRS transactions.
  • Underwriter
    A company, usually an investment bank, that helps issue new securities.
  • Value Investing
    An investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value.
  • Volatility
    A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Common data that is used to measure volatility includes stock prices, bond yields, currency exchange rates, and commodity prices.
  • Volatility Index (VIX)
    An index used to measure the stock market volatility, calculated using the S&P 500 index option prices.
  • Voice Response Unit (VRU)
    A transfer agent’s telephone system that allows the caller to obtain specific account information without speaking to a customer service representative. The investor using VRU systems may request some DRS transactions.
  • X Date
    A period of time established by the stock exchange (generally 2 business days prior to the record date). If shares are traded on or after X date (and before record date), the seller receives the dividend. If shares are traded prior to X date, the purchaser receives the dividend.
  • Yield
    The annual return on an investment, expressed as a percentage.
  • Yield Curve
    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
If you have any questions or would like to know about terminology not mentioned on this page, reach out through the contact form, or join our subreddit: r/WhyDRS
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