ALL TERMINOLOGY FOR SIE

SEC

Securities and Exchange Commission; primary federal securities regulator.

FINRA

Financial Industry Regulatory Authority; SRO regulating broker-dealers.

SRO

Self-Regulatory Organization operating under SEC oversight.

MSRB

Municipal Securities Rulemaking Board; creates muni securities rules.

SIPC

Securities Investor Protection Corporation; protects customer assets if BD fails.

FDIC

Federal Deposit Insurance Corporation; insures bank deposits up to $250,000.

Federal Reserve

Central bank controlling monetary policy and interest rates.

Treasury Department

Manages U.S. government debt and finances.

IRS

Internal Revenue Service; federal tax authority.

NASAA

North American Securities Administrators Association; state regulators.

Broker

Acts as agent executing trades for customers.

Dealer

Acts as principal trading for own account.

Broker-Dealer (BD)

Firm acting as both broker and dealer.

Principal

BD trading for its own account.

Agent

BD executing trades for customers.

Market Maker

Dealer providing continuous bid and ask quotes.

Underwriter

Firm that helps issuers sell securities.

Syndicate

Group of underwriters sharing risk.

Selling Group

Group that sells securities without underwriting liability.

Transfer Agent

Maintains shareholder records and transfers.

Custodian

Safeguards customer securities.

DTCC

Depository Trust & Clearing Corporation; clears and settles trades.

DTC

Depository Trust Company; holds securities electronically.

OCC

Options Clearing Corporation; guarantees options contracts.

Primary Market

Market where new securities are issued.

Secondary Market

Market where existing securities trade.

Third Market

OTC trading of exchange-listed securities.

Fourth Market

Direct institution-to-institution trading.

ECN

Electronic Communication Network; automated order-matching system.

Dark Pool

Private trading venue for institutions.

OTC

Over-the-counter market.

NBBO

National Best Bid and Offer.

Common Stock

Equity representing ownership and voting rights.

Preferred Stock

Equity with fixed dividends and priority over common.

Cumulative Preferred

Missed dividends must be paid before common.

Convertible Preferred

Can be exchanged for common stock.

Callable Preferred

Issuer may redeem before maturity.

ADR

American Depositary Receipt; foreign stock traded in the U.S.

Rights

Short-term right to buy shares at a discount.

Warrants

Long-term option to buy shares at a set price.

Treasury Stock

Previously issued shares repurchased by company.

Market Capitalization

Share price multiplied by shares outstanding.

EPS

Earnings Per Share; (Net income – preferred dividends) ÷ shares.

Bond

Debt security paying interest and returning principal.

Par Value

Bond face value, usually $1,000.

Coupon Rate

Annual interest based on par value.

Current Yield

Annual interest ÷ market price.

Yield to Maturity (YTM)

Total return if held to maturity.

Yield to Call (YTC)

Yield if bond is called early.

Discount Bond

Bond trading below par.

Premium Bond

Bond trading above par.

Zero-Coupon Bond

Issued at a discount; no periodic interest.

Callable Bond

Issuer may redeem early.

Putable Bond

Investor may redeem early.

Convertible Bond

Convertible into common stock.

Debenture

Unsecured corporate bond.

Secured Bond

Bond backed by collateral.

Senior Bond

Priority in liquidation.

Subordinated Bond

Ranks below senior debt.

Treasury Bill

U.S. Treasury maturing under 1 year.

Treasury Note

U.S. Treasury maturing 2–10 years.

Treasury Bond

U.S. Treasury maturing 20–30 years.

TIPS

Treasury Inflation-Protected Securities.

Agency Security

Debt issued by government-sponsored entities.

GNMA

Ginnie Mae; government-backed mortgage securities.

FNMA

Fannie Mae; GSE mortgage issuer.

FHLMC

Freddie Mac; GSE mortgage issuer.

Municipal Bond

Bond issued by state or local governments.

GO Bond

General Obligation bond backed by taxes.

Revenue Bond

Bond backed by project revenue.

Double-Barreled Bond

Backed by revenue plus taxing power.

Special Tax Bond

Backed by a specific tax source.

Special Assessment Bond

Backed by assessments on benefiting property owners.

Moral Obligation Bond

Legislature may choose to support payments.

Industrial Development Bond

Muni bond benefiting a private company.

Build America Bond (BAB)

Federally taxable municipal bond.

TAN

Tax Anticipation Note.

RAN

Revenue Anticipation Note.

BAN

Bond Anticipation Note.

TRAN

Tax and Revenue Anticipation Note.

VRDO

Variable Rate Demand Obligation with put feature.

Auction Rate Security (ARS)

Long-term bond with auction-reset rates.

Commercial Paper

Unsecured short-term corporate debt.

Banker’s Acceptance

Short-term trade finance instrument.

Repo

Repurchase agreement; short-term collateralized loan.

Certificate of Deposit (CD)

Bank time deposit with fixed maturity.

Systematic Risk

Market-wide risk that cannot be diversified away.

Unsystematic Risk

Company-specific risk that can be diversified away.

Interest Rate Risk

Risk bond prices fall when rates rise.

Credit Risk

Risk issuer defaults.

Reinvestment Risk

Risk proceeds reinvested at lower rates.

Liquidity Risk

Risk of not being able to sell quickly.

Call Risk

Risk bond is redeemed early.

Prepayment Risk

Risk principal returned early (MBS).

Extension Risk

Risk principal returned later than expected.

Inflation Risk

Loss of purchasing power.

Market Order

Executes immediately at best price.

Limit Order

Executes at specified price or better.

Stop Order

Becomes market order when triggered.

Stop-Limit Order

Becomes limit order when triggered.