Chapter 8

Common Stock

A claim against the earnings and assets of the firm with the lowest precedence, but usually with voting rights. Shareholders have the right to elect directors who set corporate policy and select operating management

DMM's post

A fixed place on the exchange floor where the DMM operates.

Proxy

A grant of authority by a shareholder allowing another individual to vote his or her shares

Dividend Growth Model

A model that determines the current price of a stock as its dividend next period divided by the discount rate less the dividend growth rate

Dividends

A payment by a corporation to shareholders, made in either cash or stock

Straight Voting

A procedure in which a shareholder may cast all votes for each member of the board of directors

Cumulative Voting

A procedure in which a shareholder may cast all votes for one member of the board of directors

Dividend Yield

A stock's expected cash dividend divided by it's current price

Electronic Communications Network (ECN)

A website that allows investors to trade directly with each other

Broker

An agent who arranges security transactions among investors

Dealer

An agent who buys and sells securities from inventory

Member

As of 2006, a member is the owner of a trading license on the NYSE

NASDAQ

Computer network of securities dealers who disseminate timely security price quotes to NASDAQ subscribers

Common Stock

Equity without priority for dividends or in bankruptcy

Supplemental Liquidity Providers (SLPs)

Investment firms that are active participants in stocks assigned to them. Their job is to make a one-sided market (i.e., offering to either buy or sell). They trade purely for their own accounts

Capital Gain Yield

The dividend growth rate, or the rate at which the value of an investment grows

Order Flow

The flow of customer orders to buy and sell securities

Inside Quotes

The highest bid quotes and the lowest ask quotes for a security

Primary Market

The market in which new securities are originally sold to investors

Secondary Market

The market in which previously issued securities are traded among investors

Cumulative Voting

when the directors are all elected at once. Total votes that each shareholder may cast is usually equal to the number of shares times the number of directors to be selected. Good for getting minority shareholder representation on the board

Spread

the difference between the bid and ask price

Straight Voting

the directors are elected one at a time, and every share gets one vote. Good for freezing out minority shareholders

Bid Price

the price a dealer is willing to pay to acquire a security

Ask Price

the price at which a dealer is willing to sell a security

ECN

the website that allow investors to trade directly with one another

Stated value

value to be paid to preferred holders in the event of liquidation, usually $100 per share.

Proxy fight

Struggle between management and outsiders for control for the board, waged by getting shareholders' proxy

Designated Market Maker

NYSE members who act as dealers in particular stocks. Formerly known as "specialist."

Floor Brokers

NYSE members who execute customer buy and sell orders

Over-the-counter (OTC) market

Securities market in which trading is almost exclusively done through dealers who buy and sell for their inventories

Preferred Stock

Stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights

Dividends

a return on capital directly or indirectly contributed to the corporation by the shareholders

Cumulative dividends

current dividend plus all arrearage to be paid before common stock dividends can be paid

Proxy Voting

grant of authority by a shareholder to someone else to vote his or her shares.

Preferred Stock

has precedence over common stock in the payment of dividends and in case of liquidation. Its dividend is usually fixed and the stock is often without voting rights.