Terms for SIE

SEC

Securities and Exchange Commission; primary federal regulator of securities markets.

FINRA

Financial Industry Regulatory Authority; SRO regulating broker-dealers.

SRO

Self-Regulatory Organization; non-government regulator under SEC oversight.

MSRB

Municipal Securities Rulemaking Board; writes rules for municipal securities.

SIPC

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

FDIC

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

Federal Reserve

Central bank that controls monetary policy and interest rates.

Treasury Department

Manages U.S. government finances and debt issuance.

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.

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 selling 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 exchange for institutional trading.

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.

EPS

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

Market Capitalization

Share price × shares outstanding.

Treasury Stock

Previously issued shares repurchased by company.

Bond

Debt security with fixed interest payments.

Par Value

Bond face value, typically $1,000.

Coupon Rate

Annual interest based on par value.

Current Yield

Annual interest ÷ market price.

YTM

Yield to Maturity; total return if held to maturity.

Discount Bond

Trades below par.

Premium Bond

Trades above par.

Zero-Coupon Bond

Issued at discount, no interest payments.

Interest Rate Risk

Risk from changing interest rates.

Credit Risk

Risk issuer defaults.

Treasury Bills

Treasuries with maturities under 1 year.

Treasury Notes

Treasuries with 2–10 year maturities.

Treasury Bonds

Treasuries with 20–30 year maturities.

TIPS

Treasury Inflation-Protected Securities.

Agency Securities

Debt issued by government-sponsored entities.

GNMA

Ginnie Mae; government-backed mortgage securities.

FNMA

Fannie Mae; government-sponsored mortgage entity.

FHLMC

Freddie Mac; government-sponsored mortgage entity.

Municipal Bond

Debt issued by state or local governments.

GO Bond

General Obligation bond backed by taxes.

Revenue Bond

Bond backed by project revenue.

BAB

Build America Bond; 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.

ARS

Auction Rate Security.

Money Market

Securities with maturities under one year.

Commercial Paper

Unsecured short-term corporate debt.

Banker’s Acceptance

Short-term trade finance instrument.

Repo

Repurchase agreement; short-term secured loan.

CD

Certificate of Deposit.

Option

Contract giving right to buy or sell.

Call Option

Right to buy stock.

Put Option

Right to sell stock.

Strike Price

Price at which option can be exercised.

Premium

Price paid for option.

Intrinsic Value

In-the-money amount.

Time Value

Premium minus intrinsic value.

Breakeven (Call)

Strike + premium.

Breakeven (Put)

Strike – premium.

Covered Call

Call sold against owned stock.

Protective Put

Put purchased to hedge stock.

Mutual Fund

Investment company pooling investor money.

NAV

Net Asset Value; (Assets – liabilities) ÷ shares.

POP

Public Offering Price; NAV ÷ (1 – sales charge).

Breakpoint

Sales charge discount for large purchases.

12b-1 Fee

Marketing and distribution fee.

ETF

Exchange-Traded Fund; trades intraday.

ETN

Exchange-Traded Note; unsecured debt instrument.

UIT

Unit Investment Trust; fixed portfolio.

Variable Annuity (VA)

Security with investment subaccounts.

Fixed Annuity

Insurance product with guaranteed return.

Surrender Charge

Penalty for early withdrawal.

1035 Exchange

Tax-free annuity exchange.

REIT

Real Estate Investment Trust; avoids double taxation.

Equity REIT

Owns income-producing properties.

Mortgage REIT

Invests in mortgages.