Terms-A Flashcards
accredited investor
As defined in Rule 501 of Reg D, any institution or individual meeting minimum net worth requirements do the purchase of securities qualifying under the Reg D registration exemption. An accredited investor is generally one who:
- Has a net worth of $1 million or more, excluding equity in the principal residence.
- Has had an annual income of $200,000 or more in each of the two most recent years ($300,000 jointly) and has a reasonable expectation of reaching the same income level in the current year
- Is an officer or director of the issuer or
- Is an institutional investor.
Accretion of bond discount
An accounting process whereby the initial cost of a bond purchased at a discount is increased annually to reflect the basis of the bond as it approaches maturity.
Accrual accounting
A method of reporting income when earned and expenses when incurred, as opposed to reporting income when received and expenses when paid.
Accrued interest
The interest that has accumulated since the last interest payment up to, but not including, the settlement date and is added to a bond transaction’s contract price. There are two methods for calculating accrued interest:
- The 30 day method (360 day year) method for corporate and muni bonds
- The actual calendar days (365 day year) method for government bonds, income bonds, bonds in default, and zero coupon bonds trade without accrued interest (flat)
Accumulation account
An account established to hold securities pending their deposit into a municipal securities unit investment trust.
Accumulation stage
The period during which contributions are made to an annuity account.
Accumulation unit
An accounting measure used to determine an annuitant’s proportionate interest in the insurer’s separate account during an annuity’s accumulation (deposit) stage.
ACT
Automated Confirmation Transaction Service. Compares trade information provided by market participants and submits lock-in trades for clearance and settlement. Also disseminates last sale information to the public. The FINRA/Nasdaq TRF operates on the ACT technology platform. Upload functionality for the ACT platform is available through the Nasdaq Workstation/Weblink ACT.
Active,competitive market
A market where no market maker dominates trading activity and where inter dealer trades occur at competitive prices.
Add-on financing
An issue of stock by a public company subsequent to its IPO.
Administrator
An official or agency that administers the securities laws of a state.
ADR (American Depository Receipt)
A security created by a US bank that evidences ownership to a specified number of shares of a foreign security held on a depository in the country of the issuing company. ADRs are nearly identical to US securities and facilitate lower transaction costs as well as dividend distribution. Similar to GDR ( Global Depository Receipt), which is traded outside the US.
ACES (Advanced Computerized Execution Service)
A subscription service offered by Nasdaq that allows order entry firms to route orders to their preferred market makers internal trading systems.
ADTV
The average daily trading volume of a security as calculated over the preceding four calendar weeks.
Advertisement
Any promotional material designed for use by newspapers, magazines, billboards, radio, tv, telephone recording, or other public medium where the firm has no control over the type of individuals being exposed to the material.
AREF ( Advertising Regulation Electronic Files).
The web-based system for filing advertising materials with FINRA.
Affiliate
- A person who directly or indirectly owns, controls, or holds with power to vote 10% or more of the outstanding voting securities of a company.
- With respect to a direct participation program, any person who controls, is controlled by, or is under common control with the programs sponsor and includes any person who beneficially owns 50% or more of the equity interest in the sponsor.
- Under the Invest Company Act of 1940, a person who has any type of control over an investment company’s operation, which includes anyone with 5% or more of the outstanding voting securities of the investment company or any corporation of which the investment company holds 5% or more of the outstanding securities.
Agency bond
US dollar denominated debt security issued by an agency or issued or guaranteed by a government sponsored enterprise (GSE). Executions of agency debt is reportable to TRACE via the TRAQs website.
Agency transaction
A transaction in which a broker dealer acts for the accounts of others by buying or selling securities on behalf of customers.
Agent
- An individual or firm that effects securities transactions for the accounts of others.
- A person licensed by a state as a life insurance agent.
- A securities salesperson who represents a broker dealer or issuer when selling or trying to sell securities to the investing public.
Algorithmic trading
Algorithmic trading makes use of computer programs for entering pre-programmed trading instructions on electronic trading platforms. The algorithm, usually proprietary, has a set of automatic responses to many complex market conditions. Depending on the circumstances, the algorithm may generate low or ultra low latency orders.
ADF (Alternative Display Facility)
A display only facility that is operated by FINRA. The ADF provides FINRA members with a facility for the display of quotes (best bid and offer), trade reports, and the comparison of trades. CQS listed securities, as well as Nasdaq listed securities, are eligible for posting quotations through the ADF. ADF does not provide automated order routing functionality, execution facilities, or linkages between ADF trading centers.
ATS (Alternative trading system)
SEC approved non exchange trading system designed to match buyers and sellers. For example, WELX and CITICROSS. An ATS does not govern or discipline subscriber behavior. An ECN is a subset to an ATS.
American Stock exchange
A registered stock exchange that was purchased by NYSE Euronext in 2008. It was renamed NYSE Amex Equities and renamed again in May 2012 as NYSE MKT. the letters MKT are pronounced as individual letters. This exchange should not be confused with the NYSE Amex Options Exchange.
Annuity
A contract between an insurance company and an individual; it generally guarantees lifetime income to the individual whose life the contract is based in return for either a lump sum or a periodic payment to the insurance company. The contract holders objective is usually retirement income.
AIQ ( Anti internalization qualifier)
A modifier that allows market makers to execute only against the quotes of other market makers, not against their own quotes.
Appreciation
The increase in value of an asset.
Arbitrage
The simultaneous purchase and sales of the same or related securities to take advantage of a market inefficiency.
Arbitrageur
One who engages in arbitrage.
Arbitration
The arrangement whereby an SRO or a designated arbitration association hears and settles disagreements between members. Unresolved disputes with customers also are submitted to binding arbitration.
Artificial transaction
Attempts to stage a hot market for a stock; such transaction are strictly prohibited. Sometimes referred to as wash trading or painting the tape.
Ask
An indication by a trader or a dealer of a willingness to sell a security or a commodity; the price at which an investor can buy from a broker dealer.
Assignment
A document accompanying or part of a stock certificate that is signed by the person named on the certificate for the purpose of transferring the certificates title to another persons name.
Associated person of a member
Any employee, manager, director, officer or partner of a member broker dealer or other entity or any person controlling, controlled by, or in common control with that member.
Auction market
A market in which buyers enter competitive bids and sellers enter offers simultaneously. The NYSE is an auction market.
ACATS (Automated customer account transfer service)
An automated system that standardized procedures for transferring assets in a customer account for one brokerage from to another.
Automated Quotation System (Nasdaq)
The Nasdaq Stock Market is a US registered stock market exchange providing an automatic execution venue. Trade reporting for Nasdaq trades goes through the FINRA/Nasdaq Trade Reporting Facility (TRF)
