Personal finance Chapter 12

Primary Market

A market in which newly issued, as opposed to previously issued, securites are traded

American Depository Receipt (ADR)

A marketable document that certifies a bank holds shares of a foreign firm's stock that backs the receipt. As a result the ADR trades just like a normal share of Stock

Margin or initial Margin

A maximum limit set on the percentage of the purchase price of a security that must initially be paid for by the investor, which is set by the federal reserve

Margin Call

A requirement that you repelish your margin account by adding cash or securites to brign it back to a minimum level

Seasoned New Issue

A stock offerin bya company that already has common stock traded in the marketplace

Day order

A trading order that expires at the end of the trading day during which it is made

Joint Tenancy with the Right of Survivorship

A type of Joint ownership in which athe surviving owner receives full ownership of the assets in the account when the joint owner dies

Specialist

An Exchange member who oversees the trading in one or more stocks and is responsible for maintaing a "fair and orderly" market in those stocks by buying or selling for his own account

Organized Exchange

An exchange that occupies a physical location where trading occurs, such as the New York Stock Exchanged

Cash Accounts

Securites trading accounts in which the investors pay in full for their securites purchases, with the payment due within three business days of the transaction

Underwriter

An investment banker who purchases and subsequently resells the new security issue. the issuing company sells its securites directly to the underwriter, who then sells the issue to the public and assumes the risk of selling the new issue at a satisfactory price

Discount broker

a "no-frills" broker who executes trades without giving any advice and thus charges much lower commision that a full-service broker

Round Lot

a group of 100 or more shares of common stock. Stocks are traded in round lots on the NYSE

Open or God-till-Cancelled order(GTC) Order

a trading order that remains effective until filled or cancelled

Day trader

individuals who trade, generally over the internet, with a very short time horizon, generally less than one day.

Limit order

specifies a securites trade is to be made only at a certain price or better

Tenancy-in-Common Account

type of joint ownership in which the deceased's portion of the account goes to the heirs of the deceased rather than to the surviving account holder

Continuous Markets

Markets in which trading can occur at any time, with prices free to fluctuate as trading occurs

Prospectus

A legal document that describes a securites issue and is made available to potential investors

Discretionary Account

A account that gives your broker the power to make trades for you.

Full-Service Broker or Account Executive

A broker who gives advice ad is paid on commision, where that commision is based on the sales volume generated

Short Selling

Borrowing stock from your broker and selling it with an obligation to replace the stock later

Asset Management Account

Comprehinsive financial services packages offered by a broerage firm that can include a checking account; credit and debit cards; a money market mutual fund; loans; automatic payment of fixed payments, such as mortgages or other debt; brokerage services; and a system for the direct payment of interest, dividends, and proceeds from securyt sales into the money market mutual fund

Churning

Excessive trading in a security account that is inappropriate for the customer and serves only to generate commissions

Margin Accounts

Securites trading accounts in which the investors borrow a portion of the price from their broker

Securities Markets

Term used to describe where financial securities or investments (common stocks and bonds) are traded

Ask price

The price at which an individual is willing to sell a security

Initial Public Offering (IPO)

The first time a company's stock is publicly traded

Secondary Markets

The markets in which previously issued securites are traded

Investment Banker

The middleman between the firm issuing securites and the buying public. This term describes both the firms That Specialize in selling securities to the public and the individuals who work for investment banking firms

Maintenance Margin

The minimum precentage margin of collateral that you must maintain

Margin requirement

The precentage that an investor must have on deposit with a broker when short selling

Organized Exchanges

There are two major organized exchanges the NYSE and the American Stock Exchange (AMEX)

Tombstone advertisment

an ad that provides a listing of the underwritng syndicate involved in the new offerin in addition to basic information on the offering

Odd lot

an order involving between 1 and 99 shares of stock

Market order

an order to buy or sell a set number of securites immediately oa the best price available

Stop or Stop-Loss order

an order to sell a securiy if the price drops below a specified level or to buy if the price climbs above a specified level

Bid price

the price at which an individual is willing to purchase a security