| Daisy Chain | Artificial volume created by market manipulators that gives the appearance of activity in shares so as to lure genuine investors. |
| Dated Date | The first day that interest starts to accrue on newly issued bonds. |
| Day Order | An order that, if not executed on the day it is entered, expires at the close of that day's trading. |
| Day Trade | The buying and selling of the same security on the same day. |
| Dead-Cat Bounce | An Americanism used to describe a temporary market recovery after a significant fall as opposed to the reversal of a bear trend. This is often a result of short covering rather than genuine buying. The analogy describes a temporary respite in a lifeless market which will inevitably keep falling. |
| Dealer | A firm that functions as a market maker and that, as such, positions the security to buy and sell versus the public and/or brokerage community. |
| Death Taxes | Taxes incurred at death, including federal estate taxes, federal and state generation-skipping transfer taxes, and state estate or inheritance taxes. See State death taxes. |
| Debenture Bond | A debt that is issued by a corporation and that is backed or secured by the good name of the issuing company. |
| Debit Balance | The amount of loan in a margin account. |
| Decedent | A person who has died. |
| Deductible Liability | A debt on which the interest payments are deductible for income tax purposes, such as a home mortgage or home equity loan, trade or business loan, investment loan, etc. |
| Deed | A legally binding document that has been signed, sealed, witnessed and delivered and that sets out the terms of and confirms an agreement between two or more parties. |
| Deed Of Trust | The trust agreement drawn up when a corporation plans to issue bonds or other debt securities. It includes such items as assets, interest payments, maturity dates, etc. Also, see indenture. |
| Default | An issuer's failure to pay accreted interest when a zero coupon issue matures. Treasury securities are considered default-free. |
| Deferred Annuity | A contract purchased from an insurance company that offers tax-deferred growth of the contract owner's investment until earnings are withdrawn. It can be tailored to meet the specific needs of the individual during retirement. See Annuity. |
| Deferred Pension | An employee in a pension scheme who leaves before retirement is entitled to a deferred or preserved pension. This is calculated in the same way as a normal pension by multiplying the number of years of service by a fraction (usually 1/60th). The purchase money in a deferred pension should not normally be less than the member's total contributions. |
| Deferred Sales Charge | A type of back end load sales charge, a deferred sales charge is a fee charged when shares are redeemed within a specific period following their purchase. |
| Defined-benefit plan | A qualified retirement plan that specifies the benefit a participant will receive at retirement, commonly expressed as a percentage of pre-retirement compensation. |
| Defined-contribution plan | A qualified retirement plan that specifies the annual contributions to the plan, commonly expressed as a percentage of the employee's compensation. The contributions may be made by the employer, the employee or both, depending on how the plan is designed. |
| Delivery Balance Order (DBO) | An order issued by the clearing corporation to any firm that, after the day's trades are netted, has delivery or sale position remaining. The order defines what is to be delivered to whom. |
| Delivery Versus Payment (DVP) | Settlement of security transactions used by institutional customers. Certificates are delivered to a bank designated by the customer whereupon the bank makes payment on delivery. |
| Denomination | 1). The face value of a security, i.e. the sum to be paid on its redemption or its par value. 2). Nominating the currency used by the parties to a contract |
| Depository | A central location for keeping securities on deposit. |
| Depository Trust Company (DTC) | A corporation, owned by banks and brokerage firms, that holds securities, arranges for their receipt and delivery, and arranges for the payments in settlement. |
| Depreciation | A decline in an investment's value. |
| Deregulation | 1). The regulation of an industry by private bodies
rather than by statute. This often increases the form of regulation
but allows all the rules to be enforced by the industry's elected
governing body rather than civil servants. The government can provide
broad outlines within which the regulatory bodies can operate and
supervise their effectiveness. See: Securities and Investments Board. 2). Deregulation of an economy involves, for example, privatisation of public industry, making provisions for greater competition, removal of exchange rate controls, removal of state subsidies, and leaving interest rates to market forces. |
| Derivative | A financial security whose value is based on, or "derived" from, a traditional security, asset, or market index. |
| Derivative Zeros | Zero coupon bonds created by stripping coupon and principal payments from a U.S. Treasury Security. |
| Designated Order Turnaround (DOT) | An order routing and execution reporting system of the NYSE. |
| Diagonal Spread | A spread of the same class of options but with different exercise prices and different expiration dates. |
| Differential | The fraction of a point added to the purchase price or subtracted from the sale price of odd lot orders. The charge represents compensation to the dealer/specialist for executing the odd lot order. |
| Director | A corporate board member elected by stockholders. |
| Discount | When the market price of a newly issued security is lower than the issue price. |
| Discount Market | The element of the primary money market dominated by banks, discount houses and bill brokers. By borrowing money at short notice from commercial banks or discount houses, bill brokers can profitably discount bills of exchange, especially Treasury bills, and trade them in the discount market. |
| Discretionary Account | A client account in which the account executive is permitted to buy and sell securities for the client without the client's prior permission. The opening of such an account requires the special permission of the firm's management. |
| Discretionary Expenses | Living expenses that could be reduced, resulting in savings that could be used to meet specific financial goals. These expenses may include personal enjoyment or luxury items such as vacations, entertainment, home improvements and new cars. See Committed expenses. |
| Discretionary Income | The difference between your income and expenses. It is money you have available to invest to help reach your financial goals. |
| Distribution | The payment of dividends and capital gains to shareholders |
| Distributor | The organization arranging for the sale of fund shares either directly to the public or through intermediaries, such as financial advisers. |
| District Business Conduct Committee (DBCC) | Part of the NASD that investigates, reviews, and renders a verdict on customer complaints or other industry improprieties. |
| Diversification | The practice of spreading investments among different securities to reduce risk. Diversification works best when the returns of the securities are varied, so that losses incurred by securities falling in price are offset by gains of those rising in price. By nature, mutual funds are a diversified investment. Diversification may also mean the participation of a large corporation in a wide range of business activities. |
| Dividends | Earnings paid by a corporation to its stockholders. In preferred stock, dividends usually are fixed; with common shares, dividends vary with the fortunes of the company. Preferred stock is supposed to pay a regular and prescribed dividend amount. Common stock pays varying amounts when declared. |
| Do Not Reduce (DNR) | An instruction that informs the order handling personnel not to reduce the price of the order by the amount of dividends, if and when paid by the corporation. DNR is placed on buy limit, sell stop and sell stop limit GTC orders. |
| Dollar Cost Averaging | A method of investing that calls for the investment of a set dollar amount at regular intervals, regardless of the fund's share price. As a result, more fund shares are bought when prices are low than at high prices, usually bringing down an investor's average cost per share over time. Dollar cost averaging does not, however, guarantee a profit or protect against a loss. |
| Dollar-Denominated | Foreign securities that pay interest and principal in U.S. dollars. |
| Double Exempt Fund | A fund that only invests in tax-exempt bonds of issuers from a single state. Income from a double exempt fund is free of federal and state income taxes for investors residing in the same state as the issuers of the bonds. Double-exempt funds have been particularly popular in the high-tax states of California and New York. Double tax exempt funds are usually subject in part or whole to the Alternative Minimum Tax (AMT). AMT percentage calculations for income tax purposes are available after each year end by contacting the fund directly. |
| Double Taxation | Corporations pay taxes on revenue before paying dividends. The dividends, in the hands of the stockholder, are taxed again as ordinary income. Hence "double" taxation. |
| Dow Jones Industrial Average (DJIA) | A widely quoted stock market index. The DJIA reflects a price-weighted average of 30 actively traded blue chip stocks. These 30 securities represent between 15-20% of the market value of the New York Stock Exchange traded stocks. |
| Downstairs Trader | A trader who operates on the floor of an exchange and who "trades" positions against the public market. See also Upstairs Trader. |
| Downtick | A listed equity trade whose price is lower than that of the last different sale. |
| Dual Purpose Fund | A closed-end fund offering two classes of stock in approximately equal amounts. One class (income shares) is entitled to all the income from the fund's portfolio (i.e., dividends from investments). The second class (capital shares) is entitled to all of the capital appreciation from the fund's holdings. At the time a dual purpose fund is established, a date is set on which the fund will be liquidated. At that time, income shareholders receive preference up to the par value of their shares and capital shareholders receive any excess. |
| Due Diligence Meeting | The last meeting between corporate officials and underwriters prior to the issuance of the security. At the meeting, the content of the prospectus is discussed, and relevant parts of the underwriting are put into place. |
| Durable Power Of Attorney | A document that authorizes someone to act as the agent or ''attorney in fact" for another person (called the ''principal'') even if the principal becomes incapacitated or incompetent. Ordinarily, a power of attorney loses its validity when the principal becomes incompetent. A durable power must specifically state that it will remain valid in spite of the principal's incapacity or incompetence. |
| Earned income | Income received as compensation for work, such as salary, wages and self-employment income. By contrast, unearned income includes income from investments. This distinction is used for certain income tax purposes. |
| Earnings Per Share (EPS) | Net income divided by the number of shares of common stock outstanding. |
| Earnings Report | A corporate financial statement that reports and nets out all earning and expenses to a profit or loss. It is therefore sometimes referred to as the profit and loss (P&L) statement. |
| Economic Risk | The risk created by changes in the economy. Business cycles affect businesses and industries differently. For example, some prosper during an economic expansion and do poorly during an economic contraction, while others are largely unaffected by business cycles. See Investment risk. |
| EE Savings Bond | A zero coupon bond issued directly by the Treasury in par values ranging from $5 to $10,000. Purchased at half of par, EE savings bonds mature in 12 years and are eligible for extended maturity. |
| Effective Date | The first date after the cooling-off period of a new issue that the security can be offered. |
| Emerging Markets Funds | A fund that invests primarily in the stocks of companies in, or doing business in, developing countries and emerging markets. Emerging market funds usually have an investment objective of long-term growth and are generally considered aggressive stock funds. |
| Employee Stock Ownership Plan (ESOP) | A retirement plan in which contributions are invested primarily in the employer's stock. The stock is distributed when the employee retires or leaves the company. |
| Endorsement | Signature on the back of a stock certificate of the person whose name appears on the face of the same. Makes the certificate negotiable. |
| Energy Stock Funds | A fund that invests primarily in the stocks of companies in the energy business. |
| Environmental Securities Funds | A fund that invests primarily in securities issued by environmental-related companies. These include companies involved in hazardous waste treatment, waste recycling, and other related areas. |
| Equipment Trust Bonds | Debt instruments that are issued by some corporations that are backed by "rolling stock" (such as airplanes or locomotives and freight cars). |
| Equity | The portion in an account that reflects the customer's ownership interest. |
| Equity Assets | Assets that represent ownership, such as common stocks, in contrast to assets that represent debt, such as bonds. Equity assets fluctuate in value and provide opportunities for growth. |
| Equity Income Funds | A fund that seeks to provide relatively high current income and growth of income by investing a large portion of its assets in stocks. |
| Estate | All assets owned and liabilities owed at the time of a person's death. |
| Estate Settlement Costs | Expenses incurred in distributing assets and paying off debts and taxes as a result of a person's death, including probate costs, administrative expenses, mortgages, personal debts, funeral expenses, state death taxes and federal estate taxes. |
| Ethical Fund | A fund that only invests in the securities of firms meeting certain social standards. For example, an ethical fund might exclude securities of companies that are known to practice discrimination, that operate in certain countries, or that produce specific products such as alcohol, tobacco, or nuclear weapons. |
| Eurobonds | A long-term loan issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax. |
| Eurodollar CDs | Certificates of deposit held in U.S. dollars by European, British, and Eastern depository institutions and available to U.S. investors. |
| European Stock Funds | A fund that invests primarily in the stock of Western European companies. |
| Ex-Dividend Date | The first day on which the purchaser of the security is not entitled to the dividend. It is also the day that the price of the security drops to the next highest fraction of the dividend amount. The date on which a fund's net asset value will fall by an amount equal to a dividend or capital gains distribution. |
| Ex-Rights Date | The date after which stocks are traded without subscription rights. |
| Ex-Warrants Date | The date after which stocks are traded without buyers being entitled to warrants which are to be distributed |
| Excess Equity | Equity in a margin account above that which is required by Regulation T. |
| Exchange Privilege | A shareholder service that allows shareholders to move their assets from one fund to another fund within the same mutual fund family, usually without any additional sales charge or fees. Fund groups vary in the specific parameters detailing when or how many times an investor may use the exchange privileges. |
| Execution Broker ($2.00 Broker) | Broker who owns memberships on various exchanges and executes trades on the exchanges for other brokers - execution only services on listed exchanges. The name of the clearing broker is "given up" when each trade is executed to industry clearance facilities and the trade is reported back to the introducing firm for the customer and street side processing. The charge for this service used to be $2.00 - thus the name "$2.00 Broker." |
| Executor | A person appointed by the last will of the deceased to carry out the provisions of the will. |
| Exercise Price | The price per share the holder or owner of a call option would pay to buy the stock from the writer or the price the holder would receive should he sell the stock to the writer when exercising an option. See also Strike Price. |
| Expense | A fund's cost of doing business. All of a fund's expenses are disclosed in the prospectus as a percentage of assets. |
| Expense Ratio | A fund's operating expenses, expressed as a percentage of its average net assets. Funds with lower expense ratios are able to distribute a higher percentage of gross income returns to shareholders. |
| Expiration | The day on which an option contract becomes void. |
| Expiration Month | The month in which an option or futures contract ceases to exist (expires). |
| Extended Maturity | A provision whereby a bond continues to pay interest beyond its stated maturity. |
| Face Value | The debt (or loan) amount that appears on the face of the certificate and that the issuer must pay at maturity. |
| Factor | A decimal between 0 and 1 that represents the amount of mortgages remaining in a pool of mortgage-backed securities. |
| Factor Book | A tabular presentation that shows relevant information about factors, value of remaining mortgages, and interest rates on mortgage-backed securities. |
| Factor Table | A table used to compute the outstanding principal on Pass-Throughs - Ginnie Maes, Freddie Macs and Fannie Maes. |
| Family Of Funds | An investment management company offering funds with many investment objectives. Fund families often allow investors to transfer money between funds for either a nominal charge or no charge at all. Thus, an investor with shares in a growth fund could transfer all or part of his or her assets into another fund without paying a new sales charge if each of these funds is managed by a single investment firm. |
| Federal Reserve Board | The US government agency that regulates credit. |
| Federal Reserve System | The USA's central monetary authority and the Treasury Department's agent for selling new issues of Treasury bills, notes, and bonds. |
| FHA Experience | An estimate of the average life of a pool of mortgage-backed securities in relation to experience tables developed by the Federal Housing Administration. |
| Fiduciary | A person legally appointed in the P&S department. |
| Fill Or Kill (FOK) | An order that requires execution of the entire quantity immediately. If not, the order is canceled. |
| Final Dividend | The dividend paid by a company at the end of its financial year, recommended by the directors but authorized by the shareholders at the company's annual general meeting. |
| Financial Advisor | A professional who helps individuals and businesses in an ongoing process to arrange and coordinate their personal and business financial affairs to enable them to achieve their objectives. |
| Financial Services Funds | A fund that invests primarily in the stocks of companies engaged in providing financial services, including banks, finance companies, insurance and securities or brokerage firms. |
| Financing Corporation | An agency created to assist the S&L industry by retailing securities to the public. Also the nickname for its securities. |
| Fiscal Agent | The authority who is responsible for issuing new securities of federal agencies. |
| Fiscal Year | The twelve-month period during which a business maintains its financial records. Since this cycle does not have to coincide with the calendar year, it is known as the fiscal year. |
| Fixed Annuity | Insurance company guarantees dollar amount of payments to the annuitant for the period covered under the contract. |
| Fixed Assets | Assets that generate fixed income, including investment certificates, certificates of deposit, fixed annuities and most bonds. |
| Fixed Income | Income that is paid at the same rate until the investment (typically bonds) matures or is sold. |
| Fixed Income Security | A security that pays a fixed rate of return. This term is usually used in reference to government, corporate or municipal bonds, which pay a fixed rate of interest until the bonds mature, and to preferred stock, which pay a fixed dividend. Fixed income securities offer the guarantee of a fixed return, but do not offer an investor much, if any, potential for growth. |
| Flat | A bond trading without accrued interest is said to be trading "flat." |
| Flexible Portfolio Funds | A fund that can invest in stocks, bonds and cash in whatever proportion the manager deems appropriate, providing the manager total flexibility to achieve maximum returns. Flexible portfolio funds are sometimes called asset allocation funds. |
| Floor Broker | An exchange member who, as such, is permitted to conduct business on the exchange floor. |
| Flotation | The occasion on which a company's shares are offered on the market for the first time. |
| Flower Bond | A specially identified series of Treasury bonds accepted at full par in payment of estate taxes. |
| Foreign Issuer | A company or government outside the U.S. that uses securities to raise money. |
| Fourth Market | Trading directly between institutional investors on a system named Instinet. |
| Free Stock | Loanable securities; that is, securities that can be used for loan or hypothecation. These securities are the stock in a margin account that represents the debit balance. |
| Front-End Load | One of three possible sales charge schedules imposed by funds that charge fees. A front end load, or "upfront charge" is a fee charged on the initial purchase of fund shares, and can range from 3% to 8% of the purchase amount. Funds sold under several sales charge options usually refer to the shares sold with a front end load as "Class A shares." |
| Frozen Account | An account in which all purchases must be paid for in cash in advance for a period of 90 days because of failure to make timely or proper payment in the past. |
| FT Index | Refers to the Financial Times Industrial Ordinary Share Index, also known as the "30 Share Index." This started in 1935 at 100, and is based on the prices of 30 leading industrial and commercial shares. They are chosen to be representative of British industry, rather than of the Exchange. Government stocks, banks and insurance companies are not included. The Index is calculated hourly during the day with a "closing index" at 4:30 p.m. |
| FT-SE 100 Share Index | Popularly known as "Footsie"; an index of 100 leading UK shares listed on the London Stock Exchange providing a minute-by-minute picture of how share prices are moving. It started on January 3, 1984 with the base number of 1,000. Also forms the basis of a contract in the London Traded Options Market (LTOM) and the London International Financial Futures Exchange (LIFFE). |
| FT-SE Eurotrack 200 Index | Denominated in ECUs, this comprises the stocks of the FT-SE 100 Index plus the constituents of the FT-SE Eurotrack 100 Index. The UK component is weighted to ensure that the 200 Index closely tracks the major benchmark indices. It started on Monday, February 25, 1991 with a base value of 1,000 as at close of business on Friday, October 26, 1990. |
| Full Trading Authorization | Owner of the account gives power to another person to buy, sell and make withdrawals from the account. |
| Fully Disclosed | All customer accounts of the Introducing Broker are introduced to another Broker/Dealer who clears the customers' trades. This second broker is called a Clearing Broker. The names and addresses of the customer accounts are "fully disclosed" to the Clearing Broker whose name is also disclosed to the customers on the statements and confirmations. The Clearing Broker does all the bookkeeping involved in settling the trades and keeping the customer accounts in proper form. |
| Fully Invested | The investment of nearly all available assets in securities other than short-term securities (such as savings and money market accounts). When a fund is said to be "fully invested," it usually implies that the fund's manager is confident that the securities markets will be improving. |
| Fully Paid | Applied to new issues, when the total amount payable in relation to the new shares has been paid to the company. |
| Fund Exchange | Ability to shift a mutual fund investment from one fund to another sponsored by the same mutual fund family. |
| Fund Family | An investment management company that offers several types of mutual funds. |
| Fund of Funds | A fund that invests only in the shares of other open-end funds. Fund of funds were popular during the 1960s but have subsequently fallen out of favor with most investors. |