Use the glossary below to help build your understanding of key financial services terms.

In addition to our general Glossary of Financial Terms, we have included an abridged glossary (PDF 572KB) version designed especially for overseas delegates unfamiliar with UK financial markets terminology.

To find a term in the list below please hold down the Ctrl button and press F. This is Apple-F for Macs.

48-Hour Rule	The requirement that a company seeking a listing should submit any documents required in their final form, to the UK Listings Authority, 48 hours prior to the hearing of the application to obtain a listing.
AA	See Against Actual.
Abandon	The choice made by the holder of an option to allow an option to expire without exercise.
Accounting Bedrocks	The two accounting bedrocks, contained within FRS 18, Accounting Policies, are Accruals and Going Concern.
Accounting Standards Board	The body responsible for issuing Accounting Standards in the United Kingdom. See also Financial Reporting Review Panel, Urgent Issues Task Force and Financial Reporting Council.
Accrued Interest	See Interest Accrual.
ACD	See Authorised Corporate Director.
Acid Test Ratio	An accounting ratio, usually defined as current assets (with the exception of stocks) divided by creditors falling due within one year. It is designed to test the short-term solvency of a company, in a way similar to the current ratio. Its interpretation is also similar to the current ratio. It is also known as the quick ratio.
Acting in Concert	For the purpose of the Companies Act, this is when two or more people have an agreement to acquire interests in shares. For the purpose of the Blue Book, it is when two or more investors co-operate to obtain, or consolidate, control of a company.
ADP	See Alternative Delivery Procedure.
ADRs	See American Depository Receipts.
Advising	The act of giving advice on investments; an activity included in the definition of regulated activity and thus normally requiring authorisation under the Financial Services and Markets Act 2000.
Against Actual	The term used on the Euronext.liffe commodity market for an Exchange for Physical. See Exchange for Physical.
Agency Brokers	Brokers who only act as agents (on behalf of a customer) and do not deal as principals or as market makers.
Agency Cross	A trade between two customers of a broker executed through the office of the broker who acts as agent in the middle, with the two customers acting as principals. It will usually be carried out at the mid-market price for the stock in question. The broker will charge both customers commission.
Agent	A person, acting on behalf of somebody else, who is the principal to the trade when completing the trade. A common example is when a broker-dealer buys or sells shares on behalf of a customer with a market maker. See also Principal.
AGM	See Annual General Meeting.
AIM	See Alternative Investment Market.
Algorithm	See Uncrossing Algorithm.
Allocation	Often in open outcry markets the trader who has effected a bargain is not the owner of the trade, having initiated it on behalf of another firm. Allocation refers to the process of allocating, or `giving up' the trade within the trade registration system (TRS) to the originating firm, so that the trade ends up in the appropriate firm's account.
Alternative Delivery Procedure	Used on ICE Futures (formerly the International Petroleum Exchange (IPE)). This is where the long and short sides of a transaction agree to deliver either a different specification of the product from that stipulated in the contract specification, or to a different location from those included in the contract specification, or both. ADPs are not covered by the London Clearing House guarantee.
American Style Option	An option where the holder has the right to exercise up to and including the expiry date. Contrast with a European style option, where the holder has the right to exercise the option on the expiry date only. See Option.
AMPS	See Auction Market Preferred Stock.
Annual General Meeting	Also known as the AGM. All companies are required to hold an annual general meeting at least once every 15 months, however, the AGM must be held every calendar year. Shareholders must be given 21 calendar days' notice of the meeting and this may only be waived if all the shareholders agree.
Annuity	An annuity describes the situation where we have an equal annual cash flow for a set period of time.
Appointed Representative	A person conducting regulated activities, but exempt from the need to seek authorisation. The responsibility to control these persons, typically self-employed individuals, is borne by an authorised firm.
Approved Person	Someone performing a controlled function in an FSA firm who is required to show they are fit and proper.
Arbitrage	The purchase (or sale) of an instrument and the simultaneous taking of an equal and opposite position in a related instrument to exploit a mispricing. Also defined as the making of riskless, guaranteed profits by exploiting market inefficiencies. An activity undertaken by arbitrageurs. See also Conversion and Reversal.
Arbitrage Channel	An area that exists both above and below the fair value of a future, within which no arbitrage will take place. This is because additional costs, such as exchange fees, bid offer spreads and commissions, will exceed arbitrage profits within this channel. Thus, the width of the channel depends on the costs incurred by the participant in the market place.
Arbitrageur	An investor who trades in the markets with the intention of making riskless, guaranteed profits by exploiting market inefficiencies. For example, if the same index contract is traded in two different exchanges, it should trade at the same price in both exchanges. If the prices are not the same, an arbitrageur will buy at the cheaper price and immediately sell at the more expensive price in the other market, making a guaranteed profit.
Arithmetic Mean	The arithmetic mean is the simple average that is calculated by adding up the observed values and dividing by the number of observed items.
Articles of Association	The document that acts as a contract between a company and its shareholders, outlining the rights and duties of the shareholders with the company and between themselves. See also Memorandum of Association - the other main constitutional document of a company.
ASB	See Accounting Standards Board.
Asian Style Option	An option that is exercised at the average underlying price over a period.
Ask/Asking Price	The market selling price. See Offer Price.
Asset Allocation	Asset allocation is the stage where the investment manager decides what proportion of the total portfolio to invest in broad asset categories, such as shares, bonds, property, etc.
Assets	Resources owned and controlled by a company. Technically defined as access to future economic benefits as a result of past events or transactions. Assets are shown on a company's balance sheet.
Assignment	When an option is exercised by the holder, the clearing house will randomly match the exercise notice received against an open short position, and advise the chosen writer of the requirement to fulfil his contractual obligations. This is the process of assignment. Assignment is also the process by which a trade is directed into the appropriate account in the TRS, either into the house, segregated or non-segregated account of the firm.
Auction Market Preferred Stock	Preference shares issued by a company where the dividend is variable and is set at regular intervals to a market rate by means of an auction process between investors. Also known as AMPS.
Audit Trail	The range of documents, and other evidence including tape recordings, which records all business activities and transactions that the firm effects. Such a historic record allows the firm to piece together the chronology of a trade. It is also required for compliance purposes.
Auditor's Report	All companies above a certain size are required to have their financial statements audited, i.e. checked for truth and fairness, by a registered auditor. The auditor prepares a report, which is attached to the financial statements, stating his opinion as to whether or not the financial statements give a true and fair view of the company's results and financial position.
Authorisation	The process by which organisations are vetted and licensed to conduct investment business under the Financial Services and Markets Act 2000. Such organisations are known as Authorised Firms. The process of authorisation is sometimes referred to as Part IV Permission.
Authorised Corporate Director (ACD)	The Authorised Corporate Director (ACD) is responsible for the day-to-day management of the assets within an OEIC.
Automatic Exercise	A procedure whereby clearing houses exercise all manifestly in-the-money options at expiry without requiring instructions (in the form of an exercise notice) from the holder. Most automatic exercise routines will not exercise options that are only just in-the-money.
Automatic Matching	The process of instantly matching orders entered onto electronic dealing systems, such as SETS and LIFFE CONNECT.
Bad Delivery	A situation where the registrar rejects a request to transfer ownership so the transfer is not registered.
Balance of Payments	The statement that summarises cash inflows and outflows between the United Kingdom and the rest of the world as a result of imports, exports and capital investment. See also Current Account and Capital Account.
Balance Sheet	A statement of a company's financial position at a given point in time. It details the assets of the company and how these assets are being financed. Financing is broken down into two major categories, namely shareholders' funds and liabilities. Due to the way in which the balance sheet is prepared, total assets always equals total finance, i.e. the balance sheet will balance.
Balloon Maturity	See Bullet Form.
Bank of England	The UK's central bank with responsibility for the setting of interest rates through the Monetary Policy Committee (MPC). It is the lender of last resort to prevent a systemic collapse in the banking system. The Bank of England Registrar maintains the register of ownership of gilts.
Banking Consolidation Directive	A European Union Directive, similar in objective to the Investment Services Directive and aimed at the creation of a single market in banking and related activities. Formerly known as the Second Banking Co-ordination Directive.
Base Requirement	The amount of capital required by an FSA firm to cover its operating costs in periods of low activity.
Basis	The difference between the price of a futures contract and that of the underlying asset. Calculated by subtracting the futures price from the cash price.
Basis Point	One-hundredth of one percent (0.01%).
Basis Trading	Basis trading is the simultaneous entry into both a cash position for a particular product and an equal and opposite futures position on the same underlying. A basis trader looks to profit from a change in the relationship between the cash price and the future, i.e. from a change in the basis.
Basis Trading Facility (BTF)	A system operated on the Euronext.liffe market for certain bond futures which allows for the simultaneous execution of cash and futures trades (basis trades).
BCD	See Banking Consolidation Directive.
Bear	A person expecting a decline in prices; someone who is bearish.
Bear Spread	An example of a vertical spread, constructed by the purchase of a high strike call (put) and the sale of a low strike call (put), both options being on the same underlying asset and having the same delivery month. Entered into when moderately bearish.
Bearer Stock	An instrument for which there is no register of the owner held by the company. Evidence of ownership is given by physical possession of the instrument itself. Bearer stock is common in the Eurobond market.
Benchmark	In order to assess how well a fund manager is performing we need a benchmark for comparison. Once we have determined an appropriate benchmark, we can then compare whether the fund manager outperformed, matched, or underperformed that benchmark. The appropriate benchmark is one that is consistent with the preferences of the fund's trustees and the fund's tax status.
Best Execution	The act of taking reasonable care to achieve the most advantageous price for a transaction of a particular type and size.
Beta (()	The beta of an investment is a relative measure of the systematic risk of that investment. The sign of the beta (+/-) indicates whether, on average, the investment's returns move with (+) the market, rising and falling when it does, or in the opposite direction (-) to the market. The scale or value of the beta indicates the relative volatility.
Bid Ask Spread	See Bid Offer Spread.
Bid Offer Spread	The difference between the bid price and the offer price of a security.
Bid Price	The price at which a market maker is bidding to buy shares. It is usually lower than the Offer Price at which they will sell shares. For example, a quote of 510-515 indicates a bid price of 510 and an offer price of 515.
BIFFEX	The Baltic International Freight Futures Exchange.
Big Bang	27 October 1986. The day when the system of share trading in the UK was radically changed to remove fixed commissions and introduce screen-based trading.
Black Monday	19 October 1987. The day of the great Stock Market crash worldwide.
Black Scholes	The name of a theoretical option pricing model in widespread use in the market place. Named after Fischer Black and Myron Scholes who first developed the model.
Blue Book (The)	See Takeover Code (The). Also known as the City Code on Takeovers and Mergers.
Blue Chip	A phrase used to describe shares of the highest quality and lowest risk. Not to be confused with blue blood, which merely indicates a prestigious background.
Bobl	Medium-term German government debt.
Bond	A certificate indicating ownership of debt, giving details of the key terms of the underlying loan. Bonds are usually tradeable. See also Debenture.
Bond Washing	The process of selling a bond cum dividend and then repurchasing the bond ex-dividend, designed to convert the coupon element of the bond's price into a capital gain, rather than receiving the coupon as income. This does not, however, affect the investor's tax liability since the element of the gain on sale due to the interest accrual in the bond's price is taxed as income in the UK.
Book Entry	An electronic system of keeping records of ownership of shares and bonds so that all records are computerised. In the UK, the major example of a book entry system is CREST.
Book Value	The value at which a loan is shown in the balance sheet of the company that has borrowed the money. Note that book value is not necessarily the market value of the loan.
Books Close	This is relevant for corporate actions, such as dividend payments. Those investors whose names appear on the register as at the books closed date will receive the benefit from the company. Also referred to as the Record Date.
Borrowing	A futures trade on the LME involving the buying of near-dated contracts and the selling of long-dated contracts. An example of a `carry'. The equivalent of an intramarket spread trade sometimes known as `buying the spread'. See also Carrying and Intramarket Spread.
Bought Deal	A means of issuing Eurobonds. The lead manager of the issuer buys the whole issue on predetermined terms and price and then places the bonds with its own clients. See also Fixed Price Reoffer.
Breakeven Point	The underlying price at which a strategy is neither profitable nor unprofitable.
Bridge	The electronic link between Euroclear and Clearstream, the two Eurobond clearing houses.
Broker	A person who acts as an intermediary between two other persons, enabling them to complete a trade together.
Brokerage	Commission charges payable on securities transactions.
Broker-Dealer	A member of the Stock Exchange who may trade with customers either as principal or act as agent on their behalf, completing a trade for the customer with a market maker or doing an agency cross. See Dual Capacity.
BTAN	Bons Taux Annuel Normalis. Medium-term French government debt.
BTF	See Basis Trading Facility.
Building Society	A form of mutual organisation owned by its depositors and borrowers. Their original purpose was to take deposits and recycle these as mortgage loans for buying houses. However, modern large building societies have extended their role such that they are now virtually the same as banks.
Bull	Person expecting a rise in prices; someone who is bullish.
Bull Spread	An example of a vertical spread, constructed by the purchase of a low strike call (put) and the sale of a high strike call (put), both options being on the same underlying and having the same delivery month. Entered into when moderately bullish.
Bulldog Bond	A sterling bond issued in the United Kingdom by a foreign issuer.
Bullet Form	Also known as a balloon maturity. A debt issue where the capital is all redeemed on the final day of the bond's life, rather than in instalments over the life. The only payments over the bond's life are the coupon. Contrast to Sinking Fund or Purchase Fund.
Bund	Long-term German government bond.
Business Day	The period from 00:01-24:00 on any working day, i.e. excluding weekends and public holidays. Used to determine the intended settlement date of trades executed.
Business Risk	Business risk represents the uncertainty of cash flows generated by the firm's business.
Cabinet Trade	Sometimes used as an alternative to the simple abandonment of a long options position. This is where a worthless position is closed (sold) for a notional consideration in order to facilitate the crystallisation of losses for taxation and accounting purposes.
Cable	The market term used to describe the sterling/US dollar exchange rate.
CAC 40	The major French share index, comprising the top 40 listed shares.
CAD	Capital Adequacy Directive; an EU directive setting out rules for all ISD firms.
Calendar Spread	See Horizontal Spread.
Call Option	A long call option is an option that gives the holder (the buyer of the option) the right, but not the obligation, to buy (call) an asset at a given price, on or before a given date. See also Option.
Cap	This is a CREST member's credit limit with his payment bank. The payment bank guarantees to meet client obligations up to this maximum.
Capital Account	The part of the balance of payments which is due to transactions in long-term assets and liabilities, such as when a UK company acquires an overseas subsidiary.
Capital Adequacy	The measure of the sufficiency of a firm's funds to meet its business and regulatory obligations; see Financial Resources and Financial Resources Requirement.
Capital Employed	Usually defined as fixed assets plus working capital, although alternative definitions are possible. It can also be calculated by adding together shareholders' funds and long-term liabilities. Capital employed is essentially the underlying asset base a company needs to generate its profits and turnover.
Capital Gains Tax Exempt Band	The amount of capital gains in the fiscal year that are tax free. For an individual, the exempt band in 2004/2005 is 8,200. For a trust, the exempt band is 4,100.
Capitalisation Issue	See Bonus Issue.
CAPM	See Capital Asset Pricing Model.
Carrying (Carries)	Describes the borrowing or lending activity on the LME. Another term for an intramarket spread. See also Borrowing, Lending, and Intramarket Spread.
Cash Against Document	Settlement arrangements ensuring that neither the buyer nor the seller is at risk from default, i.e. not having the cash or the securities. CREST provides such a structure. See CREST and Delivery Versus Payment.
Cash and Carry Arbitrage	An arbitrage trade entered into where a futures contract is sold and the underlying asset is purchased in the cash market. Such a trade will be effected where the trader believes that the futures are trading relatively expensive to its fair value.
Cash Market	The market place for the immediate delivery of and payment for assets.
Cash Memorandum Account (CMA)	This is a record of each CREST member's payment obligations. These accounts do not represent cash, but rather obligations of members' payment banks to transfer funds at the end of the day.
Cash Settlement	This is settlement on the business day following the day of the trade and is normal settlement for gilts and new issues. In respect of derivatives, the settlement of futures and options contracts for cash instead of settlement involving the physical transfer of goods. Typically used for index-based products such as the FTSE 100 index future and option.
CBOE	Chicago Board Options Exchange.
CBOT	Chicago Board of Trade.
CCSS	See CREST Courier and Sorting Service.
CD	See Certificate of Deposit.
Central Counterparty	See London Clearing House and Novation.
Central Gilts Office	The former settlement agency for gilts. From 3 July 2000 gilts settle mainly through CREST.
Certificate of Deposit	A money market instrument, also known as a CD. The certificate is evidence of a deposit made with a bank, which will be redeemed on the maturity date with interest. The difference between a certificate of deposit and a normal deposit with a bank is that a certificate of deposit is a bearer instrument that can be sold on in-the-money markets to another investor.
CFTC	Commodity Futures Trading Commission - the US futures regulator.
CGO	See Central Gilts Office.
Chargeable Disposal	A disposal of an asset for Capital Gains Tax purposes. This will include the sale of an asset, the gift of an asset or when an asset becomes worthless, such as shares when a company becomes insolvent.
Chargeable Estate	The amount of an individual's estate that is liable to inheritance tax. The remainder is taxed at a rate of 40%.
Charterparty	A legal document produced when an agreement to charter a ship is made on the Baltic Exchange, setting out all the terms and conditions for the voyage to be undertaken.
Chinese Walls	Physical/procedural barriers erected to prevent the flow of information within a firm, e.g. between corporate finance and investment management. Under FSA rules, it is not obligatory to establish Chinese walls.
Churning	The act of engaging in excessive trading to generate commission whilst disregarding the best interests of customers.
Circles Processing	Although the majority of CREST transactions will settle in the normal way, sometimes there may be a number of mutually dependent transactions, i.e. a gridlock. CREST resolves this problem by simultaneously settling these transactions, whilst ensuring that no member has insufficient stock or credit.
CIS	See Collective Investment Scheme.
City Code on Takeovers and Mergers (The)	The full name of The Takeover Code, also known as the Blue Book.
Civil Offence	The aim of the Civil Law is to compensate victims (although the market abuse offence also provides for punishment via fines). A civil offence is punishable in either the County Court or High Court. Penalties include making contracts voidable, damages, compensation/restitutions orders and injunctions. The burden of proof is `the balance of probabilities'.
Class A Shares	Shares that usually carry no voting rights.
Clean Price	The price of the bond excluding the interest accrual. The underlying capital value of the bond. Bond prices are usually quoted on a clean basis. The actual price paid will be the clean price with an interest accrual adjustment. This total price is known as the dirty price. See also Interest Accrual.
Clearing	The process of matching, registration and settlement of securities and derivatives transactions.
Clearing Member	An entity that is a member of a clearing house and thus has the ability to clear transactions. Contrast with a non-clearing member, who cannot clear directly via the clearing house, and must therefore employ the services of a clearing member to clear trades on his behalf. See also General Clearing Member and Individual Clearing Member.
Clearstream	One of the two Eurobond clearing and settlement agencies. The other is Euroclear. It can also be used for settlement of German, French and UK government debt.
Click	The computer-based trading platform operated by the OM Exchange in Stockholm.
Client Agreement	A signed contract between the firm and customer outlining the basis on which services are to be provided by the firm.
Client Money	The money of segregated clients held in trust by an authorised firm. Such money should be protected against a default/failure of the authorised firm.
Close (Out)	A transaction that extinguishes commitments to the markets, i.e. a purchase if the initial transaction was a sale and vice versa. See also Closing Purchase and Closing Sale.
Close Period (The)	See Model Code.
Closing Auction	A period of five minutes (plus possible extensions), starting at 16:30, in which limit and market orders may be input into the SETS system. No automatic matching occurs until the end of the auction when the uncrossing algorithm is run. This will normally give the closing price for that security.
Closing Order	An order type used where the order must be executed during the official closing period in the market concerned.
Closing Purchase	A transaction in which a position is purchased to cancel a sold position already established. See also Offset.
Closing Sale	A transaction in which a position is sold to cancel a purchased position already established. See also Offset.
CMA	See Cash Memorandum Account.
CME	Chicago Mercantile Exchange.
COBS	See Conduct of Business Sourcebook.
Code of Market Conduct	The Code provides guidance on what constitutes market abuse and which `safe harbours' are deemed not to be abusive.
Code of Practice for Approved Persons	This sets out conduct that the FSA believes would breach the FSA's Statements of Principle.
Combination	An options trade involving both calls and puts on the same underlying asset, e.g. buy a call and buy a put option with the same strike price for the same delivery month in the same underlying product (known as a long straddle). Contrast with an option spread trade, where the trade consists of either all calls or all puts.
COMEX	Commodities Exchange in New York.
Commercial Bills	Also known as trade bills. IOUs issued by companies (usually medium sized) and usually guaranteed (`accepted') by a bank. They pay no interest and hence are issued at a discount to nominal value. They have varying maturities. They may be eligible bills, indicating that the Bank of England is prepared to purchase them in the money markets.
Commercial Paper	Borrowing in the form of short-term paper issued by companies. Also known as CP or ECP (Euro Commercial Paper). Usually redeemable at par value and pays no interest. Hence it is issued and trades at a discount.
Commodities Exchange Act	US legislation governing the commodities and futures markets.
Commodities Modernization Act	US legislation aimed at liberalising the US derivatives markets. In particular, it has amended the law to allow the trading of single stock futures in the US.
Common Stock	See Equity Shares.
Compensation Order	The power of the FSA to require a defendant to pay an unlimited compensation order.
Competent Authority (The)	The UK Listing Authority, which has been designated as the competent authority under the Financial Services and Markets Act 2000 Part VI for the purpose of regulating companies that are seeking an official listing.
Complaints Procedure	Written procedure that all FSA firms must establish to deal with complaints.
Complements	Complements are goods that are normally consumed in combination, for example cars and petrol. As the price of cars falls, the demand for cars will rise and, as a consequence, so will the demand for petrol.
Concert Parties	See Acting in Concert.
Conduct of Business Sourcebook	Detailed rules that govern a firm's relationship with its customers.
Confirmation	The document which outlines the details of a trade just undertaken; must be sent out promptly (end of next business day).
CONNECT	The screen-based trading system for Euronext.liffe's derivative products. It replaces Automated Pit Trading and open outcry trading.
Consistency	One of the fundamental accounting principles. A company must prepare its accounts on a consistent basis year on year to facilitate comparisons.
Consolidated Stock	A name for several issues of UK government bonds, the most common of which is 2.5% Consolidated Stock. Also known as Consols.
Consolidation of Control	A Blue Book concept. Defined as, where an investor owns between 30% and 50% inclusive of the voting rights in a company and adds on any more shares. If this occurs, the investor will be required to make a mandatory offer for all the other shares in the company.
Consols	See Consolidated Stock.
Consumer Price Index	A harmonised measure used across the EU to measure the rate of change of prices, i.e. inflation. It is the measure targeted by the MPC of the Bank of England in their monetary policy. See also Retail Price Index.
Consumer's Hedge	An alternative term used to describe a long hedge. See Long Hedge.
Contango	A term used in the futures markets to describe the situation when the spot or nearby prices (cash prices) are lower than longer term prices (futures prices). The opposite of backwardation. Sometimes such markets are said to be at a premium. See also Premium and Backwardation.
Contingent Liability Transaction	A derivative transaction under which the customer may be required to pay money after the trade date, i.e. any type of margined trade.
Continuing Obligations	The ongoing rules of the UK Listing Authority, detailed in the Listing Rules which have to be followed by a listed company. For example, to disclose price-sensitive information via a Regulatory Information Service.
Continuous Auction	See Instant Auction.
Contract	The standard unit of trading for futures and options - sometimes also referred to as a `lot'. Trades can only be effected in whole contracts - it is not possible to trade fractions of one contract.
Contract for a Difference	A term used in the Financial Services and Markets Act to describe cash-settled instruments, e.g. FTSE 100 index futures, FRAs, swaps and spread betting. The difference between two numbers, one agreed at the start of the contract, e.g. FTSE 100 = 4200, and the other determined later, e.g. FTSE 100 = 4500, is paid in cash, e.g. 300 points at 10 per point.
Contract Note	A former name for a confirmation (see above).
Contract Size	The amount of the underlying asset which one futures contract represents, e.g. the contract size for a copper contract is 25 tonnes. This means that underlying one copper future is 25 tonnes of copper that the investor has the obligation to buy (long future) or sell (short future).
Contract Specification	The legal document produced by the relevant exchange that sets out the details of a future or options contract, e.g. trading times, delivery procedures, quantities of underlying per one contract, etc. The use of contract specifications leads to standardised products and thus maintains liquidity.
Controlled Function	Specific roles within an FSA firm which require the persons performing them to prove they are fit and proper and become approved persons.
Controlling Shareholder	For the purpose of the Listing Rules, an investor holding 30% or more of a listed company's shares. Such a shareholder will only be permitted for a listed company if it can be demonstrated that any conflicts of interest arising between the controlling shareholder and the interests of other shareholders will be suitably managed.
Conventional Gilts	The term used to describe all gilts except index-linked gilts.
Convergence	The process by which future prices and cash prices move together as delivery approaches. Convergence occurs on the final day of trading of the future, when there is no longer any cost of carry included in its price. At this point the futures price equals the cash price.
Conversion	An example of an arbitrage trade, where the future is purchased and a synthetic future is sold by buying a put option and selling a call option with the same maturity and strike price on the same underlying asset. Entered into when the relationship described as put/call parity has broken down, and the future is relatively cheap to the synthetic. The opposite of a reversal. See also Arbitrage and Reversal.
Convertible Debt	Debt where the lender has the option to convert the debt into ordinary shares in the company rather than receiving repayment in cash.
Convertible Gilt	UK government bond, where the holder of the bond has the option to convert the bond into another issue of government bonds rather than receive repayment in cash.
CoredealMTS	A Recognised Investment Exchange for electronic trading in bonds.
Corporate Actions	A generic term referring to actions taken by a company with its shareholders. This will include payment of dividends, bonus or right issues and voting at meetings.
Corporation Tax	Taxation payable by companies, as opposed to individuals and trusts that pay income and Capital Gains Tax.
Cost of Carry	The costs incurred in buying an asset today and carrying it through to the delivery day of a future. Such costs may include finance costs, insurance, storage, etc. and will be reduced by the benefits of holding certain assets such as dividends and coupons.
Coupon	The rate of interest payable on a bond. For example, a bond with a 10% coupon and a nominal value of 100 will pay gross annual interest of 10 in total, regardless of the price at which the bond is trading in the market.
Coupon Stripping	Taking a coupon paying bond and selling on each of its coupons separately as zero-coupon bonds in their own right.
Covenant	A stipulation in a loan agreement that restricts the borrower's freedom of action while the loan is outstanding. Designed to protect the interests of the lender.
Covered	A position is described as covered if the cash or asset to be delivered by the contractual obligation in the derivatives position is already held, e.g. if you sell a copper future and thereby become obligated to deliver 25 tonnes of copper, you would be covered if you already held the copper. Not to be confused with Margin. Contrast with Naked.
Covered Warrant	A call option on the shares of a company issued by a bank, where the bank has hedged its position in the underlying stock, usually by holding shares of the company in question.
CP	See Commercial Paper.
CPI	See Consumer Price Index.
Credit	A credit item is a liability, provision, or shareholders' funds balance in the balance sheet, as well as an item of income or increasing profits in the profit and loss account.
Creditors	Part of a company's liabilities representing amounts due to third parties. Creditors are analysed in the balance sheet into those due within one year and those due after more than one year.
CREST Courier and Sorting Service	Part of CREST that deals with paperwork associated with settlement.
CREST Member	A CREST participant holding dematerialised stock (see dematerialised holdings) in stock accounts. A member is the legal owner of the securities and will appear in the company register. Typical CREST members include market makers, broker-dealers, inter-dealer brokers, stock borrowing and lending intermediaries, institutional investors and custodians. The term generally means that the participant is a CREST user.
CREST Member Accounts	This facility permits a member with an undesignated (house) account to segregate different holdings, such as client holdings, in designated accounts.
CREST Participant	A person or organisation who has a formal relationship with CREST. This would include members, payment banks, registrars and the Inland Revenue.
CREST Sponsored Members	Certain investors, such as private investors and institutions who are active traders, wanting to hold stock in CREST accounts, but lacking the direct technical access to CREST, can rely on another member or user of CREST. A sponsored member will appear in the register as the legal owner.
CREST Stock Account	Within each member account there is a stock account reflecting each individual line of stock held.
CREST User	A person or organisation with technical access permitting electronic communications with CREST.
Criminal Justice Act 1993 (CJA93)	Legislation dealing with insider dealing.
Crossing	A term used to describe the situation in which a firm has both the buy side and the sell side of an order. Rules exist on derivative exchanges governing the crossing of trades. Also known as Matching and Self Trading.
CSCE	Coffee, Sugar and Cocoa Exchange, New York.
CTD	See Cheapest to Deliver.
Cum Dividend/Cum Interest	The trading status of a bond or share such that the purchaser of the bond or share is entitled to receive the next interest or dividend payment. The alternative is ex-dividend or ex-interest, where the seller of the bond or share retains the right to receive the next interest or dividend payment.
Current Account	The part of the balance of payments that is due to trade flows. It can be broken down into visibles, which are physical goods imported into and exported from the United Kingdom, and invisibles, which are services imported to or exported from the UK, such as advertising, insurance and training.
Current Assets	All assets apart from fixed assets. Usually assets that have been acquired with the intention of converting them into cash or cash itself, e.g. stocks, debtors, short-term investments, cash and bank balances.
Current Ratio	An accounting ratio, usually defined as current assets divided by creditors falling due within one year. The ratio is designed to assess the solvency of a company in the short term. If the current ratio exceeds one, then the value of current assets is greater than the value of the short-term creditors, indicating that the company is able to pay its short-term debts as they fall due. Note that this interpretation is fairly simplistic.
Custody	The safekeeping (and often settlement) of investments that is a category of regulated activity under the Financial Services and Markets Act 2000.
Customer Borrowing	Funds lent to customers by firms. Credit may normally only be extended to private customers with prior written consent and with agreement as to the maximum amount of the loan and charges.
Daily Official List	A Stock Exchange publication giving details of share trading in the previous day. Sometimes referred to as SEDOL (Stock Exchange Daily Official List).
DAX	The major German share index, comprising 30 shares.
Dealing	Entering into transactions in investments either for customers or for the firm's own account.
Debenture	A bond issued with security. See Charges. Note that this is the UK terminology. In the US, a debenture refers to an unsecured bond.
Debit	A debit item is an asset balance in the balance sheet, as well as an expense item, decreasing profits, in the profit and loss account.
Debt Management Office	An Executive Agency of HM Treasury responsible for the issuance of gilts and Treasury Bills.
Debtors	Amounts owed to a company by its customers and other third parties. Debtors are shown as part of current assets in a company's balance sheet.
Debt-to-Equity Ratio	See Gearing Ratio.
Declaration Day	An LME term used to describe the expiry day of an option contract. See Expiry Date.
Deep Discount Bonds	Bonds issued at a discount to par value and redeemed at par or a premium to par. They may either pay a low coupon over their lives (low coupon bonds) or no coupon at all (zero-coupon bonds). The difference between the issue price and the redemption price is effectively interest on the amount borrowed.
Default	Failure by a party to fulfil its obligations on a future or options contract when they fall due, e.g. failure to meet a margin call, or to make or take delivery.
Defined Benefit Pension Scheme	A defined benefit pension scheme offers a specific return based on the employee's salary and number of years' service with the company - also known as a final salary pension scheme.
Defined Contribution Pension Scheme	A defined contribution pension scheme offers a general increase in value of the contributions paid on behalf of the employee - also known as a money purchase pension scheme.
Delivery	The settlement of a futures or options contract via the delivery of a physical asset or cash.
Delivery by Value	The system by which CREST settles repos.
Delivery Versus Payment	Settlement arrangements ensuring that neither the buyer nor the seller is at risk from default, i.e. not having the cash or the securities. CREST provides such a structure. See CREST and Cash Against Document.
Delta Hedged	See Delta Neutral.
Demand	Within microeconomics, demand represents the quantity that individuals will buy at a given price. In this context, we are talking about effective demand, i.e. a want that the consumer has the resources to satisfy.
Dematerialised Holdings	This describes stock that is held in electronic accounts within CREST, i.e. in uncertificated form, instead of being held as paper certificates, i.e. in certificated form. See CREST.
Deposit Set	This is a collection of documents required for a stock deposit to be made at CREST; a transfer form and the certificate or certified transfer form. See Stock Deposit and Certification.
Derivatives	A term used to encompass products such as futures, options and swaps, which derive their value from the movement in price of an underlying asset. Owing to their potentially high risk, special rules often apply.
Designated Client Account	A type of client money bank account whose monies may not be pooled with other `general' client accounts.
Designated Investment Business	Activities defined by the FSA that relate generally to investments, such as stockbroking and fund management. It therefore does not include the other areas regulated by the FSA, such as general insurance and banking.
Designated Investment Exchange (DIE)	An overseas exchange, not operating in the UK, deemed by the Financial Services Authority to provide an appropriate level of investor protection. Examples of DIEs include the Tokyo Stock Exchange and the New York Stock Exchange.
Designated Professional Body (DPB)	These are the professional bodies who govern the members of certain professions such as lawyers, accountants and actuaries. Although these professionals may sometimes be giving investment advice, they are usually exempt from the need to be authorised under FSMA 2000.
Diagonal Spread	An option spread where one option is purchased and a different option is sold. The sold option has a different strike price and expiry date from the purchased. The spread will be constructed with either all calls or all puts on the same underlying asset.
DIE	See Designated Investment Exchange.
Difference Account	A document that sets out the profit/loss arising from the closing of a futures position.
Dilution	A general phrase, describing the fact that as more shares are issued by a company, the interests of existing shareholders will be diminished. The specific impact is that the earnings per share of the company may be reduced as a result of the increased number of shares. A more specific meaning is used in the context of Fully Diluted Earnings per Share.
Direct Offer Financial Promotion	An advertisement (financial promotion) incorporating a tear-out coupon, the completion of which alone creates an investment agreement; often referred to as an `off the page' advert.
Direct Quote	A direct quote arises in the foreign currency markets where the variable currency is the US dollar and the other currency is fixed as one unit. For example, sterling is quoted directly against the dollar. This means that the quote is always expressed in terms of 1 and the number of dollars it takes to buy 1 or the number of dollars 1 will buy. Most currencies are quoted indirectly against the dollar, rather than directly.
Directors' Report	Part of a company's annual report. It is a legal requirement that the directors write a report summarising the company's performance over the year, its future prospects and with certain other required disclosures.
Dirty Price	The total price payable on the purchase of a bond, given by the clean price with an interest accrual adjustment.
Disallowed Expenditure	Expenses charged by a company in arriving at its accounting profit before tax which are not allowable as a deduction when calculating its taxable profits on which its corporation tax charge is based. Examples include entertainment expenditure and depreciation. Note, however, that although a company is not allowed to charge depreciation, it is permitted to charge in its place capital allowances, which is effectively the same thing.
Discount	When a bond is trading at a discount to par, this indicates that its price is lower than its nominal value. When a currency is at a discount in the foreign currency forward markets, this indicates that it is weakening in the forward market relative to the spot market. The forward discount is added to the spot rate quote as a result. See also Backwardation.
Discretionary Fund Management	An investment arrangement where the firm decides when and what investments to invest in within restrictions/objectives outlined by the customer.
Dispersion	Dispersion is the measure of variability or spread of values around a central point of location.
Diversification	The process of holding a range of investments in order to diversify risk, so that if one investment performs badly, this is compensated by better returns from the remainder of the portfolio.
Dividend Yield	An accounting ratio, defined as the dividend per share divided by the share price. Broadly speaking, the lower the dividend yield, the higher the company's share price and the more highly rated the company.
Dividends	Amounts paid to shareholders, usually annually or semi-annually, representing a return on their investment in a company. Preference shares receive a fixed dividend while for equity shares the level of dividend depends on the profitability of the company. Dividends are effectively declared and paid net of 10% income tax.
DJIA	See Dow Jones Industrial Average.
DMO	See Debt Management Office.
Domicile	A legal term, indicating the country to whose legal system an individual is attached. When an individual is domiciled in the United Kingdom, they are liable to pay inheritance tax on their worldwide assets at death. Individuals who are not domiciled in the UK will only be liable to inheritance tax on their UK assets. Most people acquire their domicile at birth, being the domicile of their father. This is referred to as the domicile of origin.
Double Tax Relief	See Overseas Tax Relief.
Double-Dated Stocks	Bonds where the issuer has the option to redeem the stock on or between two specified dates.
Dow Jones Industrial Average	The US equivalent of the FTSE Ordinary Share Index, comprising 30 shares. This is an equally weighted, or unweighted, index.
DTI	See Department of Trade and Industry.
Dual Capacity	The ability of a firm to act either as principal with the customers when trading or to act as agent on behalf of their customers. See also Agent, Principal and Broker-Dealer.
Duration	A measure of a bond's volatility or sensitivity of the bond's price to changes in interest rates. (Defined as the weighted average of the number of years in the bond's life, the weighting factor being the present value of the cash flows in the year discounted at the internal rate of return of the bond's cash flows.)
Earnings Per Share	A measure of a company's profitability from the point of view of equity shareholders. It is defined as earnings attributable to equity shareholders divided by the number of equity shares in issue over the year. See also Earnings.
Earnings Yield	An accounting ratio defined as net earnings per share divided by the share price. Broadly speaking, the lower the earnings yield, the higher the company's share price and the more highly rated the company.
ECP	See Commercial Paper.
EDC	See Electronic Data Capture.
EDSP	See Exchange Delivery Settlement Price.
EEA	European Economic Area. European Union (EU) countries plus Norway, Iceland and Liechtenstein.
EFFAS	See European Federation of Financial Analysts' Societies.
Efficient Market Hypothesis (EMH)	EMH states that markets that can immediately and fully reflect all available information in the market place can be referred to as informationally efficient.
Efficient Portfolio Management (EPM)	The EPM regulations set out the ways in which certain types of unit trust may use derivatives. EPM requires that all derivatives positions of the trust are covered.
EGM	See Extraordinary General Meeting.
Elasticity	Elasticity is the concept that economists use to explain the degree of sensitivity demand exhibits in respect of various factors. The factors include the price of the good, i.e. price elasticity of demand (PED), incomes, i.e. income elasticity of demand (YED) and the price of other goods, i.e. cross elasticity of demand (XED).
Electronic Data Capture	This is the input into CREST of the details of a stock deposit. See Stock Deposit.
Eligible Bills	Bills that the Bank of England is prepared to purchase in the money markets.
EMH	See Efficient Market Hypothesis.
Endowment Policies	Endowment policies combine life insurance and savings. These policies are generally associated with mortgages where the savings element is designed to pay off the capital borrowed at the end of the term of the policy, and the life insurance will repay the mortgage should the policyholder die before the end of that term. See Life Assurance.
Equilibrium	There is one price and one level of output at which supply and demand are in balance. This is the point of equilibrium. At this point and at this price, the amount which consumers are prepared to demand and the amount that the producers supply are in balance.
Equity	See Shareholders' Funds and Equity Shares.
Equity Market Makers	See Market Makers.
Escrow Account	In takeover situations this is a CREST facility that permits dematerialised stock to be transferred on behalf of accepting shareholders into this special account. The stock remains in the name of the holder, but under the control of the receiving agent (Escrow).
ETF	See Exchange-Traded Funds.
ETS	Energy Trading System; the screen trading system used on the International Petroleum Exchange.
EUREX	A European derivatives exchange formed in 1998 by the merger of the Deutsche Terminbrse and SOFEX.
Eurobond	A bond issued outside of the country in whose currency it is denominated. For example, a Eurobond denominated in US dollars is issued outside of the US.
Euroclear	One of the two Eurobond clearing and settlement agencies. The other is Clearstream. It can also be used for settlement of German, French and UK government debt.
Euronext	A European securities and derivatives exchange formed through the merger of the Paris, Amsterdam and Brussels Stock Exchanges and MATIF. They now also own LIFFE.
Euronext.liffe	See LIFFE.
European Economic Area (EEA)	Economic grouping incorporating all European Union states plus Iceland, Liechtenstein and Norway. The Investment Services Directive passport applies to the EEA.
European Federation of Financial Analysts' Societies	The EFFAS has established a permanent commission on performance measurement. The commission is attempting to establish standards that are compatible with both local and global requirements.
European Style Option	An option where the holder has the right to exercise the option only on its expiry date. Contrast to an American style option, where the holder can exercise up to and including the expiry date. See Option.
European Union (EU)	Political and economic grouping of European member states.
Evidential Provision	These are linked to rules and set out circumstances in which the FSA will assume that the rule has been followed or breached.
Exceptional Items	Part of a company's profit and loss account. Items which are material, derived from events or transactions within a company's ordinary activities and which need to be disclosed separately to ensure that the company's accounts give a true and fair view. Contrast with an Extraordinary Item.
Exchange (of Future) for Physical (EFP)	The exchange between two customers of a physical and futures position, which is agreed directly between the two parties outside of the exchange on which the futures are dealt. EFPs are reported to the exchange, and documentary evidence of a physical transfer of goods may be required by the exchange. Also known as Against Actuals on the LIFFE Commodity market.
Exchange Delivery Settlement Price (EDSP)	The price at which futures contracts are settled upon delivery. The EDSP is determined by the exchange, and is often an average of traded prices over a set period.
Exchange-Traded Funds (ETFs)	Shares in an OEIC that can be traded on the London Stock Exchange's ExtraMARK.
Ex-Dividend/Ex-Coupon	The trading status of a bond or share such that the seller of the bond or share retains the right to receive the next interest or dividend payment. The alternative is cum dividend or cum interest, when the purchaser has the right to receive the next interest or dividend payment.
Execution Only	The relationship between a firm and client under which the client merely instructs the firm to buy or sell.
Exempt Legacies and Transfers	Gifts during an individual's life or death, i.e. by means of a will, which, by virtue of the nature of the gift or the recipient, are automatically exempt from inheritance tax. Examples include transfers between spouses, gifts to charities and gifts to political parties. The charity and the political party must be recognised as such by the Inland Revenue.
Exercise	The process by which an option holder takes up his right to buy (call) or sell (put) the asset underlying the option contract.
Exercise Notice	The document sent by the holder of the option to indicate they wish to exercise their rights under the option.
Exercise Price	The price at which an option holder has the right to buy (call) or sell (put) the asset underlying the option contract. The contract specification will set out the exercise price intervals, e.g. 10p intervals. Also known as Strike Price and Strike.
Exercise Style	Defines the date(s) that an option holder has the right to exercise his option. See American Style Option and European Style Option.
Expiry (Date)	The date after which an option can no longer be either exercised or traded. This date will be specified in the contract specification for the product in question.
ExtraMARK	The part of the London Stock Exchange that trades ETFs (shares in OEICs).
Extraordinary General Meeting	Ad hoc shareholders' meetings held by a company for a specific purpose, such as to approve a major transaction. Fourteen calendar days' notice must be given of such a meeting, if only ordinary resolutions are to be discussed. If a special resolution is to be discussed, 21 calendar days' notice is required. The notice period may only be shortened if at least 95% of shareholders agree.
Extraordinary Item	Part of a company's profit and loss account. Items that are material and possess a high degree of abnormality are not expected to recur and are derived from events or transactions outside of the ordinary activities of a company. Note that, because the definition of ordinary activities is extremely wide, it is extremely unlikely that a company will show an extraordinary item in its accounts in any one year. Contrast with an Exceptional Item.
Fair Value	The theoretical price at which a futures or options contract should trade.
Fast Market	A situation where markets are hectic and turbulent such that prices are rapidly changing. As a result, prices quoted on electronic trading systems may not be up to date. In the UK, SEAQ prices become indicative rather than firm during a fast market as a result.
Federal Reserve System	The central banking system of the US, made up of a number of regional Federal Reserve banks that regulate banking activities.
FII	See Franked Investment Income.
Fill	The execution of an order on the derivatives market.
Final Salary Pension Scheme	See Defined Benefits Pension Scheme.
Financial Gearing	See Gearing. For a company, financial gearing is measured either by its Gearing Ratio or by Interest Cover.
Financial Promotion	The regulatory term under FSMA for an advertisement of investments and related services. See also Real-Time Financial Promotions and Non-Real Time Financial Promotions.
Financial Promotions Order	This order contains exemptions from Section 21 of FSMA 2000.
Financial Reporting Council	The body that provides the strategic direction behind the development of Accounting Standards in the UK. It owns two subsidiary companies, the Accounting Standards Board and the Financial Reporting Review Panel, which issue and enforce accounting standards in the UK.
Financial Reporting Review Panel	The body responsible for ensuring that companies in the UK follow accounting standards. See also Accounting Standards Board and Financial Reporting Council.
Financial Reporting Standards (FRS)	See Accounting Standards.
Financial Resources (FR)	A conservative measure of the capital of an authorised firm. The capital adequacy rules require that the financial resources must at all times exceed the financial resources requirement.
Financial Services Act 1986	The original UK legislation relating to the regulation of the financial services industry now replaced by the Financial Services and Markets Act 2000 (FSMA) from 1 December 2001.
Financial Services and Markets Act 2000 (FSMA)	The new principal UK legislation relating to the regulation of the financial services industry. It came into force on 1 December 2001.
Financial Services and Markets Tribunal	Part of the Department for Constitutional Affairs which re-hears cases relating to discipline and authorisation/approval of firms/individuals under FSMA 2000.
Financial Services Authority	Formerly known as the Securities and Investment Board (SIB). The FSA is the single statutory regulator under the Financial Services and Markets Act 2000 and thus the regulator of exchanges, clearing houses, banks, wholesale money markets and other investment businesses.
Financial Services Compensation Scheme	A scheme run by the Financial Services Authority to compensate investors if authorised firms default. The maximum payout by the Financial Services Compensation Scheme for investment activities is 48,000 plus interest per investor.
Financial Statements	Accounts prepared by companies, comprising a balance sheet, profit and loss account, cash flow statement, related notes and other statements required by regulation.
Financial Year	The year for which corporation tax rates apply. It runs from 1 April one year to 31 March next year and is denoted by the year in which it starts. Contrast this with the fiscal year, which is the tax year for income tax and capital gains tax suffered by individuals.
Firm Price	A guaranteed price.
First Notice Day	For futures contracts where notice of delivery can be given by the seller before expiry of the contract, the first day on which such notice can be given.
Fiscal Year	The tax year by reference to which an individual's personal tax liability for income tax and capital gains tax is calculated. It runs from 6 April one year to 5 April the next year and is denoted by both years in which it falls. For example, the fiscal year 2004/2005 starts on 6 April 2004 and ends on 5 April 2005.
Fit and Proper Test	A prerequisite for the authorisation of a business or the approval of an individual. The test involves the FSA scrutinising the competence, reputation and financial integrity of the applicant.
Fixed Assets	Assets acquired for continuing use in the business and not with the intention to resell, e.g. land and buildings, cars, plant and machinery, and fixtures and fittings.
Fixed Charge	See Charges.
Flat Yield	The annual gross coupon on a bond divided by its price and expressed as a percentage. For example, a bond with a 10% coupon and a price of 95 has a flat yield of 10 95 = 10.5%. The flat yield is also known as the income yield or the running yield.
Flex (Contract)	A derivatives contract traded on an exchange where the contract specification allows certain terms of the contract to be negotiated between buyer and seller, unlike a normal standardised derivative contract, where only the price is negotiated. Flexible terms may include maturity, strike price and exercise style of the contract.
Floating Charge	See Charges.
Floating Rate	A rate of interest that varies over time, depending on market rates of interest.
Floating Rate Note (FRN)	A bond that pays a floating rate of interest. The rate of interest payable on the bond will be reset at regular intervals, for example, each three months or six months.
FOF	See Futures and Options Fund.
Forward Currency Transaction	A currency transaction where a rate of exchange is agreed today but delivery occurs on an agreed date in the future. The rate of exchange is known as the forward exchange rate.
Forward Rate	The rate of exchange agreed today for a currency transaction to be settled on an agreed date in the future. The difference between the forward rate and the spot rate is the mathematical result of the difference in interest rates of the two countries concerned.
Forward Rate Agreement (FRA)	An agreement where the counterparties agree to pay or receive the difference between LIBOR on the expiry date of the FRA and the agreed FRA rate. An example of a contract for a difference and thus an investment.
FRA	See Forward Rate Agreement.
Franked Investment Income	Franked investment income is dividends received from a UK company. It does not matter whether the dividend is a preference or ordinary dividend. For a corporate investor, franked investment income is free of any further corporation tax, on the basis that the company paying the dividend must already have paid corporation tax on the underlying profits.
FRC	See Financial Reporting Council.
Free Delivery/Free Payment	A settlement situation whereby one side of the trade is delivered in the absence of the other side, i.e. the free delivery of securities in a bonus issue or the free payment of dividends.
Free Issue	See Bonus Issue.
FRN	See Floating Rate Note.
FRS	See Financial Reporting Standard.
FSA	See Financial Services Authority.
FSA Handbook	A term used to collectively describe all the principles, codes and rulebooks the FSA has issued.
FSA'86	See Financial Services Act 1986.
FSMA 2000	See Financial Services and Markets Act 2000.
FTSE 100	Financial Times Stock Exchange 100 Index - the index containing the top 100 listed shares in the UK. The FTSE 100 is an arithmetic weighted index, weighted by market capitalisation.
FTSE 250	The index containing the second largest 250 listed shares in the UK after the FTSE 100 index.
FTSE 350	The index containing the top 350 listed UK shares. This index is used for calculating the industry baskets, which give average ratios for the companies in each sector.
FTSE All Share Index	The index containing virtually all major listed shares in the UK, comprising some 900 shares.
FTSE Eurotop 100	The index containing the top 100 shares in Europe (including UK).
FTSE Eurotop 300	The index containing the top 300 shares in Europe (including UK).
FTSE Ordinary	The index containing the top 30 shares in the UK. This index is an equally weighted (unweighted or price-relative) index. The index is also geometrically calculated.
Full Listing	See Official Listing.
Fund	A term used to describe a collective investment scheme, which is where investors' monies are pooled together and managed as a single entity with a common investment aim.
Fundamental Accounting Principles	The basic assumptions that all companies must follow when preparing their accounts. When a set of accounts is prepared, it is assumed that these principles have been followed. The fundamental accounting principles are going concern, accruals (also known as matching), consistency, prudence and no netting off. The first two are also known as accounting bedrocks.
Fundamental Analysis	A person who uses fundamental analysis will study the various supply and demand factors affecting prices in a particular market, in order to forecast future price movements in that market. Such factors may include macroeconomic factors, crop reports, shipping conditions, weather forecasts, etc.
Funeral Plan Contracts	An investment whereby a person makes payments during their lifetime to pay for their funeral expenses upon death.
Future	A legal agreement to buy or sell a standard quantity of a specified asset for delivery at a fixed future date at a price agreed today. Futures are traded on futures exchanges, such as Euronext.liffe or the London Metal Exchange. They are available in a range of assets, such as wheat and copper and also on indices, such as the FTSE 100.
Future Value	See Terminal Value.
Futures and Options Fund (FOF)	A type of UK authorised unit trust that is allowed to invest in futures and options within specific criteria. No gearing is allowed in the fund, and it is therefore relatively safe as an investment when compared with a geared futures and options fund (GFOF). See Geared Futures and Options Fund.
Gamma	The rate of change of delta with respect to the price of the underlying. It describes how fast an option's position is becoming increasingly or decreasingly bullish or bearish.
GCM	See General Clearing Member.
GD	Good for the Day, an order type. An order which must be filled during the day, otherwise it is cancelled. Contrast with a GTC (good `til cancelled) order, which if not filled on one trading day, is carried forward indefinitely until it is either filled or cancelled by the investor. Orders are GD unless otherwise specified. See GTC.
GDR	Global depository receipt. See American Depository Receipts.
Geared Futures and Options Fund (GFOF)	A type of UK authorised unit trust that is allowed to invest in futures and options within specific criteria. Limited gearing is allowed in the fund, and therefore returns are likely to be more variable than when compared to a futures and options fund (FOF). See Futures and Options Fund.
Geisha Bond	A Yen bond issued both inside and out of Japan, as opposed to a EuroYen bond (outside Japan) or a domestic Yen bond (inside Japan).
GEMM	See Gilt-Edged Market Maker.
General Clearing Member	A clearing member of a clearing house who has the capacity to clear for the firm, its clients and other investment businesses. Contrast with individual clearing members, who can clear for the firm and its clients only, not for other investment businesses.
General Client Account	A client money bank account for segregated customers. These accounts, unlike designated accounts, may be pooled upon default.
General Prohibition	The requirement that persons carrying out a regulated activity in the UK by way of business must either be authorised by the FSA or granted exemption. This requirement is within Section 19 of FSMA 2000.
GFOF	See Geared Futures and Options Fund.
Gift Aid	An evidenced donation to charity that is an allowable deduction from gross income for income tax.
Gilt-Edged Market Maker	A LSE member firm which is obliged to quote firm two-way prices, i.e. guaranteed prices at which they will buy and sell, for all conventional gilts or all index-linked gilts. The latter is known as an IG GEMM.
Gilt-Edged Stocks	Also known as gilts. Bonds (excluding Treasury bills) issued by the UK government through the Debt Management Office. Capital gains and losses arising on disposal of gilts are exempt from capital gains tax. The two main types are conventional and index-linked gilts.
GIPS	See Global Investment Performance Standards.
Give Ups	See Allocation.
Global Depository Receipts	See American Depository Receipts.
Global Investment Performance Standards	An global standard of fund performance reporting set up by the CFA Institute
GLOBEX	A screen trading system developed by the CME and the quote vendor, Reuters. CME, CBOT and Euronext Paris products trade upon it.
Going Concern	One of the fundamental accounting principles and bedrocks of accounting. It is assumed that a company will continue in operational existence for the foreseeable future.
Goodwill	The difference between the total value of a business and the value of its net assets in its balance sheet. It represents the ability of the business to generate profits and cash in the future.
Grandfathering	The process by which a firm or individual regulated under the FSA 86 has their regulatory status automatically transferred into the new regulatory regime.
Grantor	An LME term for an options writer. See Writer and Taker.
Gratis Issue	See Bonus Issue.
Grey Market	Trading in a bond prior to the formal issue of the bond. Trading is completed on an `if, as and when issued' basis. Settlement takes place when the bond is finally issued.
GRY	See Gross Redemption Yield.
GTC	Good `til cancelled, an order type. An order which, if not filled on the day it was received, is carried forward indefinitely until it is either traded or cancelled by the customer. Contrast with a GD order, where the order must be filled the same day or is cancelled.
Guarantee Fund Contributions	Contributions made to a guarantee fund by the clearing members of a clearing house operating a mutual guarantee. The guarantee fund will be used in the event of a default of a clearing member causing losses, and must be exhausted before the resources of the clearing house are then used.
Guarantee Stock	A bond where the lender's performance of its obligations is guaranteed by a third party. These often arise where a subsidiary company raises external finance and the bond is guaranteed by its holding company.
Guaranteed Fund	A fund that promises to return at least the original sum invested to the investor after a set period (normally 5-7 years), and in addition, further profits if the fund has traded successfully.
Guaranteed Stop	An order type where the investor is guaranteed that the stop order will be filled at the stop level specified and not the prevailing market price when the stop is filled. Such an order involves large risks for the broker, and therefore such orders are rare and incur high charges.
Guidance	This is non-binding elaboration on a rule. The FSA makes guidance via its powers granted under Section 138 of FSMA 2000.
Hang Seng	The major Hong Kong share index, consisting of 33 shares.
Headroom	This equates to the difference between a CREST member's cap, i.e. the credit they have available, and the net CMA balance, i.e. the cash movements from that day's activities.
Hedge	A futures or options transaction motivated by the wish to reduce risk.
Hedger	A person who uses the markets to reduce the risk of his underlying position by undertaking a hedge. For example, a wheat farmer may sell wheat futures (i.e. a short hedge) to guarantee him a fixed selling price for his wheat. Contrast with a Speculator.
Her Majesty's Treasury (HMT)	The government department responsible for implementing the 1986 Financial Services Act and the Financial Services and Markets Act 2000.
High Level Standards	A term used to collectively describe the Principles for Businesses and Statements of Principle and the rest of Block 1 of the FSA Handbook.
High Net Worth Individual	An individual who has been certified by their employer or accountant as having met the criteria for classification as a High Net Worth Individual and consequently may be the recipient of certain types of financial promotions.
High Yielding Bond	Also known as a junk bond. Any bond that is not of investment grade.
Higher Rate of Tax	The higher rate of tax is 40% and is applied to taxable income above the basic rate band. For up to date bands see www.hmrc.gov.uk . For dividend income, it is charged at a rate of 32%. See also Starting Rate of Tax, Basic Rate of Tax and Taxable Income.
Historic Volatility	The volatility of the price of an asset during a past period. This can be used by a trader to forecast future volatility of the price.
Holder	The buyer of an option. Also known as the long. The holder of the option has the right, but not the obligation, to exercise the option. See Option.
Holding Company	A company that controls one or more subsidiary companies in which it owns shares. See also Subsidiary Company.
Horizontal Spread	An option spread where one option is purchased and a different option is sold. The sold option has the same strike price but a different expiry date from the purchased option. The spread will be constructed with either all calls or all puts on the same underlying asset. This spread is sometimes known as a Time Spread or a Calendar Spread.
House	An account or transaction designated for the firm's own purposes, rather than for those of its segregated customers, known also as a principal account or transaction.
Hybrid	A security, such as a convertible debt instrument, that has the main characteristics of a bond and an equity instrument.
ICM	See Individual Clearing Member.
ICO	International Coffee Organisation, a trade organisation active in the coffee markets.
ICVC	See Investment Company with Variable Capital.
IDB	See Inter-Dealer Broker.
Idiosyncratic Risk	See Unsystematic Risk.
IDR	International depository receipt. See American Depository Receipts.
If As and When Issued	See Grey Market.
IFA	See Independent Financial Adviser.
IG GEMM	See Gilt-Edged Market Maker.
ILG	See Index-Linked Gilts.
Illiquid	An investment that is difficult to sell. Unlisted securities and over-the-counter products are relatively illiquid. Contrast with Liquid.
IMA	See Investment Management Association.
Immunisation	Immunisation is the process where it is possible to create a portfolio that will provide an assured return over a specific time horizon irrespective of any changes in the interest rate. Therefore, if we need to match a liability, we should select a bond portfolio with the same duration as the liability it is intended to meet.
Implied Volatility	Associated solely with options, the market's perception as to future volatility can be implied by the input of the market price of an option into the theoretical option pricing model, along with the other known inputs, namely time to expiry, exercise price, underlying asset price and interest rates in order to find the unknown volatility.
IMRO	See Investment Management Regulatory Organisation.
Independence Policy (Policy of Independence)	A written policy used by certain FSA firms to manage conflicts of interest. A policy of independence requires that the firm and its employees disregard the firm's interests. An alternative to a Chinese wall.
Independent Financial Adviser (IFA)	An advisor that offers advice on all the products in the market.
Independent Guarantee	A type of guarantee operated by clearing houses where losses caused by clearing member defaults are covered initially from the defaulting clearing member's assets (if any), and then from the clearing house's own resources. There is no guarantee fund contributed to by the clearing members with this type of guarantee, unlike the mutual guarantee where such a fund exists. See Mutual Guarantee.
Indexation	See Passive Fund Management.
Index-Linked Gilts	Gilts where the coupon payments and capital redemption value are linked to the increase in the retail price index over the period the bond has been in issue. The bigger the increase in the retail price index, the bigger the value of the coupon and the capital value. Designed to give inflation protection to investors.
Indirect Quote	An indirect quote in the foreign currency market is where the quote is expressed in terms of US$1, with the other currency amount varying. For example, the US dollar/Swiss franc quote is indirect. This means that the quote will give the number of francs that $1 will buy or the number of Swiss francs required to buy $1.
Individual Clearing Member	A clearing member of a clearing house who has the capacity to clear for the firm and its clients only. Contrast with General Clearing Members, who can clear for the firm, its clients and other investment businesses.
Individual Savings Account (ISA)	A tax-free savings scheme that allows investors to hold shares and cash free of income and capital gains tax. The maximum contribution is 7,000 per fiscal year. However, the 10% tax credit on dividend income is no longer recoverable.
Inheritance Tax	Tax payable on worldwide chargeable estate of a UK domiciled individual on death.
Initial Capital Requirement	An absolute minimum amount of resources that an FSA firm must exceed when first seeking authorisation.
Initial Margin	The returnable deposit required by clearing houses when opening certain futures and options positions. Initial margin is usually calculated by taking the worst probable one-day loss that the position could sustain, and can be paid in either cash or collateral. See also Margin.
Initial Public Offer (IPO)	A share issue done when a company comes to the market for the first time.
Injunction	A court order that makes certain acts illegal.
Insider Dealing	A criminal offence under the Criminal Justice Act 1993 of acting with price-sensitive information that is not publicly available. The maximum penalty is seven years' imprisonment and an unlimited fine.
Instant Auction	A system of trading used on virt-x, also known as continuous auction or automatic matching. It is an order-driven system where buy and sell orders are instantly matched by the system if the prices at which the buyer and seller are prepared to deal match up.
Intangible Assets	A sub-category of fixed assets in the balance sheet of a company. Fixed assets that are not physical and cannot be touched, e.g. goodwill, brands. Note that not all intangible assets are shown on the balance sheet on the basis that they are too difficult to measure reliably.
Intended Settlement Date	This is the date on which a trade will settle if the stock and the cash are available.
Interest Accrual	Interest earned but not yet paid on a bond. When a bond is sold, the purchaser will have to compensate the seller for interest accrued up to the date of sale. This is achieved by means of adding on an interest accrual to the clean price being quoted in the market, to give the dirty price payable by the purchaser. See also Clean Price and Dirty Price.
Interest Cover	An accounting ratio, measuring the level of a company's profits relative to its interest charge in the profit and loss account. It is usually defined as profits before interest and tax divided by interest charges, but the precise definition will vary depending on the circumstances. The higher the ratio, the less `gearing' a company has. See also Gearing and Gearing Ratio.
Interest Rate Risk	Interest rate risk is the variability in return caused by changes in the level of prevailing interest rates.
Interest Rate Swaps	An agreement to pay or receive a sum of money calculated by reference to the difference between a floating rate of interest and a fixed rate of interest, based on a notional principal sum. This definition relates to a plain vanilla swap, which is the simplest form of interest rate swap available.
Intermarket Spread	A transaction involving the purchase of a future on one asset and the sale of a future in another, usually related, asset. For example, purchasing a Brent crude oil future and selling a gas oil future. Such spreads are entered into in order to profit from a change in the price differential between the two products.
Intermediaries Offer	An issue of shares where intermediaries such as brokers and investment banks apply for shares on behalf of their own client base. A method of issuing shares used by companies which are obtaining a listing of their shares for the first time. See also Offer for Subscription, Offer for Sale, Placing, Introduction and Marketing Operation.
Internal Rate of Return	The internal rate of return is the rate of interest that discounts the investment flows to a net present value of zero.
International Depository Receipts	See American Depository Receipts.
Intraday Margin	If a market suddenly becomes highly volatile, the clearing house may call in additional margin payments at short notice in order to reduce the increased risk it would otherwise suffer. This is known as intraday margin.
Intramarket Spread	A futures spread trade where one delivery month is sold and another bought in the same underlying product. Such a trade is entered into in order to take advantage from an expected change in the price differential between the two delivery months. This could occur, for example, because of short-term supply problems with the near-dated future. See also Borrowing, Carrying and Lending.
Inventories	See Stocks.
Investigation	A formal FSA examination into the activities of a firm or approved person. Firms or individuals involved are normally served with a written `Notice of Investigation' unless the FSA believe the notice would prejudice their investigation.
Investigators	FSA officials responsible for reviewing the compliance with FSA rules by firms and approved persons.
Investment Company with Variable Capital	The regulatory term for open-ended investment companies.
Investment Grade	Bonds that are a high level of credit quality. A bond rated BBB or above by Standard and Poor's and a bond rated Baa or above by Moody's. Any other bond is known as a Junk Bond or High Yielding Bond.
Investment Management	Investment management is the management of an investment portfolio on behalf of a private client or an institution, the receipt and distribution of dividends and all other administrative work in connection with the portfolio.This management may be conducted on either<ul><li>A discretionary basis; orA non-discretionary basis.</li></ul>
Investment Management Association	The Investment Management Association (IMA) represents the UK unit trust and investment management industry.
Investment Management Regulatory Organisation (IMRO)	One of the former self-regulatory organisations for fund managers. Now replaced by the FSA.
Investment Manager	An FSA firm that provides continuing advice to a customer or has discretion over the composition of his portfolio and acts under a discretionary or non-discretionary investment management agreement. See Investment Management.
Invisibles	See Current Account.
Invoice Amount	The amount paid by the buyer to the seller when a future is delivered, the invoice amount is calculated by taking the reference price set by the exchange, known as the exchange delivery settlement price (EDSP), and multiplying it by the number of contracts and the scaling factor, which converts the quotation into the price of one contract. Further adjustments may take place for certain futures, e.g. accrued interest on bond futures.
IOU	An abbreviation (I Owe You) used for any debt instrument.
IPE	See International Petroleum Exchange.
IPO	See Initial Public Offer.
IRR	See Internal Rate of Return.
ISA	See Individual Savings Account.
ISMA	International Securities Market Association; a designated investment exchange responsible for the market place in international securities such as Eurobonds. Trades undertaken are reported into a system known as TRAX. Recognised as a designated investment exchange by the FSA.
Jensen Measure	The Jensen measure calculates the excess return that a portfolio generates over that predicted by CAPM based on the beta of the funds and is also known as Jensen's Alpha.
Junk Bond	Also known as a high yielding bond. Any bond that is not of investment grade.
Kassenvereine	The previous domestic settlement agency for German government bonds. Now the Bund settles through Clearstream and Euroclear.
Kerb	A trading method on the LME when open outcry transactions may occur in all metal futures at the same time. Kerb trading takes place twice a day, at the end of both the first and second trading sessions. Each of the two trading sessions has two rings that immediately precede the kerb trading. See also Ring.
Laspeyre Index	The Laspeyre index is a base-weighted index, i.e. all prices are weighted by the base date quantities.
Last Trading Day	The last day on which a derivatives contract may be traded.
LCH.Clearnet	See London Clearing House.
Lender of Last Resort	A description of the Bank of England, indicating that the Bank is prepared, in the money markets, to provide cash and liquidity to the market by means of repurchasing bills.
Lending	An example of a `carry' which takes place on the LME, this is the sale of near-dated futures and purchases of longer dated futures. On other markets such an intramarket spread trade it is known as `selling the spread'. See also Carrying and Intramarket Spread.
Less Liquid SEAQ Securities	A SEAQ stock with a normal market size of 500 or less. Since these securities have less liquid trading than other SEAQ securities, details of trades done by market makers in such stocks are not normally displayed on SEAQ. This enables the market maker to cover his position in the stock. See also Maximum Publication Level and Block Trades.
Letter of Acceptance	Also known as a letter of allotment. Where an investor applies for shares on a new issue and his application is successful, he will receive a letter of acceptance as evidence of his ownership of the shares in the short term.
Letter of Allotment	See Letter of Acceptance.
Leverage	See Gearing.
Liabilities	Financing provided to a business by third parties other than shareholders. Major examples include trade creditors (suppliers who sell goods to the company on credit) and bank loans and overdrafts. See also Balance Sheet.
LIBID	See London Inter Bank Bid Rate.
LIBOR	See London Inter Bank Offered Rate.
Life Assurance	Life assurance is a form of insurance against an eventuality that is assured to arise, i.e. that people will die. Life assurance policies take a number of forms, including<ul><li>Term assurance policies.Whole of life policies.Endowment policies.</li></ul>
LIFFE (now called Euronext.liffe)	The London International Financial Futures and Options Exchange. A recognised investment exchange and the main derivatives exchange in the UK. Trades derivatives in equities, bonds, interest rates, indices and commodities and is now part of Euronext.
LIFFE CONNECT	The screen-based automated trading order book system for Euronext.liffe products.
LIMEAN	See London Inter Bank Mean Rate.
Limit (Up or Down)	The maximum price advance or decline from the previous day's closing price permitted by exchange rules. See also Price Limit.
Limit or MOC Order	Limit or market on close is a type of order used in the derivatives market. It refers to an order that may be filled at or better than the limit during the trading day, but which if not already traded, must be filled at the prevailing market price during the official closing period.
Limited Liability	See Equity Shares.
Liquidator	The person responsible for winding up a company, converting its assets into cash and distributing those assets to investors according to a legally defined priority, starting with creditors and ending with ordinary shareholders.
Liquidity	Refers to the ease with which an investment may be realised in cash. Cash is the most liquid of all assets, since it can be used to buy any other asset. Investments traded on an RIE or DIE are considered to be more liquid than off-exchange traded products. Contrast with Illiquid.
Listed Company	See Official Listing.
Listing Agent	See Sponsor.
Listing Rules (The)	The rules of the UK Listing Authority to which companies must adhere in order to obtain and keep a listing on a Recognised Investment Exchange. See also Competent Authority.
Lloyd's of London	An insurance market authorised as a regulated activity under the Financial Services and Markets Act 2000.
LME	See London Metal Exchange.
Local	Private trader operating on an exchange floor, whose activities help provide liquidity.
Location	A location measure attempts to indicate a central, long run average value or return achieved. There are four location measures of importance, being arithmetic mean, median, mode, and the geometric mean.
LondonClearing House (LCH) (now called LCH.Clearnet)	A Recognised Clearing House (RCH) under the FSA. Responsible for the clearing and settlement of derivative transactions effected on LIFFE, LME and IPE, and also securities transactions on virt-x. On 26 February 2001, it became the central counterparty to all SETS transactions. See Novation.
LondonGold Fix	The open fixing of a price for gold which takes place twice a day in London.
LondonInter Bank Bid Rate	Known as LIBID. The rate at which leading banks offer to take deposits on the money markets from other leading banks. See also London Inter Bank Offered Rate and London Inter Bank Mean Rate.
LondonInter Bank Mean Rate	Known as LIMEAN. The average of LIBOR and LIBID.
LondonInter Bank Offered Rate	Known as LIBOR. The rate at which leading banks offer to make deposits on the money markets with other leading banks. See also London Inter Bank Bid Rate and London Inter Bank Mean Rate.
LondonMetal Exchange (LME)	The UK derivatives exchange that trades base metal futures and options, e.g. copper futures. LME is the largest world exchange for base metal derivatives. LME is a Recognised Investment Exchange.
LondonSilver Fix	A similar process to the gold fix. The silver fix takes place once a day.
LondonStock Exchange (LSE)	The principal London exchange for equity and bond trading; a Recognised Investment Exchange.
Long (Position)	Any position that has been purchased. For example, a long futures position means that you have bought a future. Contrast with Short. A long call option or a long put option means that you have bought the option, which gives you, the holder, the right to exercise the option.
Long Hedge	A transaction that involves the purchase of a futures contract in anticipation of actual purchases in the cash market. Such a transaction seeks to ensure that any increase in the cash price on the subsequent cash market purchase is offset by a profit on the futures position. Sometimes described as a consumer's hedge or as a price fix hedge.
Lot	Another term for a contract.
LSE	See London Stock Exchange.
M0	The narrow measure of money supply in the United Kingdom, also known as high-powered money. Defined as notes and coins in circulation plus banks' operational deposits with the Bank of England.
M2	The measure of money supply, which takes into account all money that can be used to settle transactions. It is defined as notes and coins in circulation plus non-interest bearing bank deposits plus other retail deposits with banks and building societies.
M4	The widest measure of money, defined as M2 plus wholesale deposits with banks and building societies, including certificates of deposit.
Macroeconomics	Macroeconomics is the study of the economy as a whole, concerning itself with the `big picture' issues such as unemployment and growth.
Managing	The activity of determining the way in which money should be invested; a regulated activity under the Financial Services and Markets Act 2000.
Mandatory Offer	Under the Blue Book, when an investor either obtains control or consolidates control in a company that is covered by the Blue Book, he must make a mandatory offer to buy out all the other shareholders. See also Control and Consolidation of Control.
Mandatory Quote Period	The period during the day when a market maker must make firm (i.e. guaranteed), two-way (i.e. buy and sell) prices in stocks in which they are registered. It varies from market to market. For domestic SEAQ, it runs from 08:00 to 16:30.
Margin	A payment made by buyers and sellers of exchange-traded futures contracts and writers of exchange-traded options to demonstrate their ability to cover their potential losses on their position. The payment is made to the relevant clearing house. See also Initial Margin, Variation Margin, Maintenance Margin and Intraday Margin.
Margin Call	A request for money by a clearing house to cover the losses arising from a derivatives position.
Market Abuse	Market abuse is a civil offence introduced by FSMA to provide an alternative regime for prohibiting insider dealing and misleading statements. It is behaviour that will or would distort the market in the view of a regular market user.
Market Counterparty	A professional investment business whose status requires only a low degree of protection under the FSA rules.
Market Order	On the derivative exchanges, it is an order that is to be immediately executed at the best available price.On SETS it is an at best order entered during an auction call period which will have highest priority for matching.
Market Portfolio	The market portfolio is a portfolio that is representative of the whole stock market.
Market Risk	See Systematic Risk.
Market Timing	An investment manager engages in market timing when he does not accept the consensus about the market portfolio, i.e. he is more bullish or more bearish than the market. The purpose of market timing is to adjust the &#946; (beta) of the portfolio over time.
Marketing Operation	An issue of shares to raise cash. For example, offer for subscription, offer for sale, intermediaries offer, placing or rights issue. Note that an introduction is not a marketing operation as it does not involve the issue of shares for cash.
MarketMatch	A matching service for trades in international securities trading on SEAQ International.
Marking to Market	The process of valuing open positions each evening at closing prices in order to determine that day's unrealised profit or loss. This process is carried out each evening by LCH.Clearnet in order to determine variation margin payments to be made the next business day.
Match	A matched trade is one in which the details recorded by buyer and seller are equal and opposite. Contrast with an Out Trade where there is a disagreement of some sort on the details of the trade.
Matched Bargain	See Order-Driven System.
Matched Transaction	Where two CREST members, the counterparties to a trade, have both entered identical or corresponding information. See Unmatched Transaction.
Matching	See Crossing and Accruals.
Matching Rules	See Share Identification Rules.
MATIF	March Terme International de France - the Paris futures market. Now part of Euronext Paris.
Maturity	The final date on which the capital value of a bond is redeemed, i.e. the nominal value (par) is repaid.
MCP	See Market Counterparty.
MEFF	The Spanish derivatives exchange.
Memorandum of Association	A constitutional document of a company, detailing its name, its registered office, the fact that it has limited liability, its trading objects and other relevant facts. See also Articles of Association, the other main constitutional document of a company.
MFR	See Minimum Funding Requirement.
Microeconomics	Microeconomics is the study of the reaction of individuals and firms to economic stimuli, and the effects upon demand and supply.
Mid-Price	A page of SETS or SEAQ that gives the current mid-price between the best bid and offer prices of stocks. Where the colour of the price is blue, this indicates that the most recent price movement has been upwards. Where the colour of the price is red, this indicates that the most recent movement was downwards.
Minimum Funding Requirement	The minimum funding requirement requires a defined benefit pension fund's liabilities to be 100% funded. If the scheme falls below this level, the deficit must be remedied within ten years. In the case of falling below 90%, this must be remedied within three years.
Minimum Quote Size	The smallest quantity at which a market maker is allowed to quote at for a SEAQ security. It is defined as 1  &#215;  the Normal Market Size (NMS) of the stock. For example, if a stock has a NMS of 25,000, a market maker registered in the stock must be prepared to deal in at least 25,000 shares.
Minority Interests	Minority interests arise when a company has a subsidiary company in which it does not own all of the shares. The shareholders apart from the holding company are referred to as the minority interests. For example, where a holding company owns 80% of the shares in a subsidiary company, the remaining 20% of shareholders are the minority interests.
Misconduct	Failure to comply with the law or rules of the FSA.
Misleading Statements and Practices	Section 397 of the Financial Services and Markets Act 2000 makes it a criminal offence to try and mislead the market or investors. Misleading statements are intended to make individuals or the market move in a particular direction. To be actionable, the misleading statement must be made recklessly or with dishonest intent.
MIT	See Market-if-Touched.
Modified Duration	A measure closely linked to duration. Can be used to predict a change in price for a bond given a change in interest rates. Defined as duration divided by (1 + the gross redemption yield of the bond).
MONEP	The Paris options market. Now part of Euronext Paris.
Monetary Policy Committee (MPC)	The Bank of England's Monetary Policy Committee sets UK official interest rates. The MPC includes Bank of England representatives and industry experts.
Money Laundering	The process by which the sources of illegally obtained money is disguised. The process is comprised of three phases: placement, layering and integration. The Proceeds of Crime Act 2002 identifies three offences that carry individual liability: assisting, tipping off and failure to report a suspicion.
Money Markets	The wholesale market for short-term (usually less than one year maturity) money. Money can be put on deposit in the money markets for various maturities up to one year. Alternatively, short-term instruments such as Treasury bills, Commercial bills and Certificates of Deposit may be traded.
Money Purchase Pension Scheme	See Defined Contribution Pension Scheme.
Money-Weighted Return	A money-weighted return is the internal rate of return of the fund opening and closing values along with any deposits into/withdrawals from the fund.
Monopoly	A monopoly is the other extreme of perfect competition where there is only one seller. The one seller can also be referred to as the price maker, as they represent the entire industry.
MPC	See Monetary Policy Committee.
MPL	See Maximum Publication Level.
MPS	See Market Place Service.
MQP	See Mandatory Quote Period.
MQS	See Minimum Quote Size.
Mutual Funds	The American term for Collective Investment Schemes.
Mutual Guarantee	A type of guarantee operated by clearing houses where losses caused by a clearing member's default are covered initially from the defaulting clearing member's assets (if any), and then from the guarantee fund contributed to by the clearing members. Only once this guarantee fund has been exhausted does the clearing house use its own resources to meet losses. Contrast with an independent guarantee, where no such fund exists.
N2	30 November 2001. The date on which the Financial Services and Markets Act 2000 came into force, replacing the Financial Services Act 1986.
Naked	A position in which the writer does not own the underlying asset (call) or does not have the cash to purchase the asset (put), i.e. he has an uncovered option position. Such a position involves effectively unlimited risks. Contrast with a covered position, where the risks are limited.
NAPF	See National Association of Pension Funds.
NASDAQ	National Association of Securities Dealers Automated Quotation System; a screen-based system for certain US shares; a recognised overseas investment exchange.
National Association of Pension Funds	The UK leader in the promotion of performance measurement standards.
National Savings and Investments	Part of the UK government's borrowing programme targeted towards retail investors. Major forms of borrowing include National Savings Certificates, Premium Bonds and other National Savings and Investments products. They are exempted from the provisions of FSMA 2000, as they are part of the UK government.
NCM	See Non-Clearing Member.
Net Assets	Part of a company's balance sheet. Net assets equals total assets on the balance sheet less total liabilities. The net assets will be the same as the shareholders' funds.
Net Assets Per Share	An accounting ratio, defined as net assets divided by the number of shares in issue. It is also known as net worth per share. The purpose of the ratio is to compare the net assets per share with the share price. The share price will either be at a premium to net asset value or a discount. Generally speaking, a discount to net asset value indicates a company that is less popular for some reason.
Net Current Assets	Part of a company's balance sheet. Net current assets equal total current assets less total creditors falling due within one year. It is also known as working capital. When short-term creditors exceed current assets, it is referred to as net current liabilities.
Net Current Liabilities	See Net Current Assets.
Net Debt	Total loans less cash balances.
Net Debt-to-Equity Ratio	See Gearing Ratio.
Net Redemption Yield	The gross redemption yield on a bond less any tax charges suffered by the investor. For a private investor investing in gilts, it is usually calculated as [{(Gross coupon &#247; Market price) &#215; (1 - individual's marginal tax rate)} + ({Par - Market price} / No. of years to redemption) &#247; Market price] &#215; 100%
Net Worth	See Shareholders' Funds.
NFA	National Futures Association - the US regulator responsible for the futures markets.
Nikkei 225	The major Japanese share index listing the top 225 leading stocks traded on the Tokyo Stock Exchange. This is an arithmetic, unweighted index.
NMS	See Normal Market Size.
No Netting Off	One of the fundamental accounting principles. The amounts of individual assets and liabilities must be disclosed separately in a set of accounts and not netted off against each other. For example, a company with cash deposits (a current asset) and an overdraft (a current liability) must not net them off to show a net figure in the accounts. Each must be disclosed separately.
Nominal Value	The face value of a bond or a share (which will not usually be the same as its price). Also known as par value. For a bond or redeemable share, it will usually indicate the value at which the bond or share will be redeemed by the issuer. It also enables the interest payment on a bond to be calculated, being given by the nominal value of the holding multiplied by the quoted coupon for the bond.
Nominee	This is the name used by a person or firm such as a custodian when holding securities on behalf of another. The nominee is the legal owner and it is their name that appears in the register. The nominee has contractual obligations to the underlying beneficial owner.
Non-Clearing Member	Firms who are not clearing members of a clearing house, and do not therefore have the capacity to clear. Such firms must use the services of a general clearing member in order to have their trades cleared. They are normally smaller firms who do not meet the capital requirements set down by the clearing house.
Non-Real Time Financial Promotion	A promotion that is not interactive and includes promotions communicated by letter, e-mail or included in publications disseminated in paper format, on a website or on radio or television.
Normal Market Size (NMS)	Each listed company is allocated a NMS on the basis of the level of trading in the company's shares. The more active the trading, the higher the NMS. Obligations of market makers and other parts of market regulation are set by reference to the NMS. See Minimum Quote Size and Maximum Publication Level.
Notifiable Interest	A holding of 10% or more of non-beneficial interests in the shares of a public company. When an investor has such a holding, he is obliged to notify the company within two business days. In addition, he must notify the company when the holding moves up or down through each next full percentage point, i.e. 10% to 11% and 15% to 14%.
Novation	The legal word that describes the conversion of a derivative contract from being one simple bilateral contract between the original buyer and seller in the market into two contracts in which the clearing house becomes principal to each, i.e. after novation, the clearing house is the counterparty (seller) to the buyer and separately the counterparty (buyer) to the seller.
NYMEX	New York Mercantile Exchange.
OAT	Obligation Assimilable du Trsor. Long-term French government debt.
Occupational Pension Schemes	Occupational pension schemes, where the scheme is set up by the employer for the benefit of the employees, tend to be defined benefit schemes, though defined contribution schemes are becoming increasingly popular.
OECD	Organisation for Economic Co-operation and Development.
OEICs	See Open-Ended Investment Companies.
OFEX	A facility that permits OFEX member firms to enter into matched bargains for securities that cannot be traded on the Stock Exchange itself. It is not a regulated market, although member firms must comply with any relevant rules set up by this facility or the FSA.
Offer for Subscription	An issue of shares by a company where investors are invited to subscribe for the shares directly with the company. A method of issuing shares when obtaining a listing for the first time on the Stock Exchange. See also Offer for Sale, Intermediaries Offer, Placing, Introduction and Marketing Operation.
Offer Price	The price at which a market maker is offering to sell shares. It is usually higher than the `bid price' at which they will buy shares. For example, a quote of 510-515 indicates a bid price of 510 and an offer price of 515. In the US, this is known as the asking price. See also Bid Price and Ask.
Office of Fair Trading	The Office of Fair Trading (OFT) is responsible for investigating mergers and takeovers to recommend whether the merger should be investigated by the Competition Commission.
Offset	The extinguishing of a futures/option position by undertaking an opposite transaction. A sale offsets a long position; a purchase offsets a short position. Sometimes known as a closing trade.
Offshore	A term used to indicate a legal regime outside of the United Kingdom. When an investment centre is offshore it is not subject to UK tax or regulation, including investment protection rules. For example, investments located in offshore centres cannot be the base for a claim on the Financial Services Compensation Scheme in the United Kingdom. Examples of commonly used offshore centres include the Isle of Man, the Channel Islands and Gibraltar.
OFT	See Office of Fair Trading.
OMX	The Swedish equity index.
OPEC	Organisation for Petroleum Exporting Countries, an organisation to which many of the major oil producing countries belong.
Open	Market positions that have not been offset, i.e. still capable of delivery.
Open Offer	An issue of shares by a company for cash to existing shareholders on a basis pro rata to existing shareholdings. It is similar to a rights issue. However, the key difference is that the right to subscribe for shares in an open offer is not renounceable, i.e. it cannot be sold on to another investor. In a rights issue, the investor can, if he wishes, sell the right to subscribe for the shares to another investor.
Open Outcry	A trading system in which members trade openly and verbally on a trading floor by `crying' out their prices in a designated area normally known as a pit. It is mainly used on derivative exchanges, although such exchanges are progressively moving to screen-based trading systems, such as LIFFE CONNECT.
Open Repo	A type of repo in which the term (length) of the repo is not specified at the outset. An open repo agreement can be terminated at any time by either party giving notice. Contrast with Term Repo.
Open-Ended	The ability of a collective investment scheme to issue an unlimited number of units. This is the case for unit trusts and OEICs. In contrast, investment trusts are closed-ended as they have a fixed number of issued shares.
Opening Auction	A period of ten minutes (plus possible extensions), starting at 07:50, in which limit and market orders may be input into the SETS system. No automatic matching occurs until the end of the auction when the uncrossing algorithm is run.
Opening Order	An order type which requires that the order be filled during the official opening period in the market at the prevailing market price, not necessarily the opening price.
Opening Purchase	A purchase transaction where rights or obligations are established. With an option purchase, the buyer becomes the holder of it.
Opening Sale	A sale transaction where rights or obligations are established. With an option sale, the seller becomes the writer of the option.
OPS	See Occupational Pension Scheme.
Optimisation	See Passive Fund Management.
Option	A contract which gives the holder (the long) the right to buy or sell a specified asset at an agreed price on or before an agreed date in the future. The right to buy an asset is referred to as a call option. The right to sell is referred to as a put option. Option contracts are sold by options writers (the short).
Order-Driven System	A trading system where anyone wishing to buy or sell stock must take their order to the market and state at which price they are prepared to buy or sell the stock in question. Other market participants can then take the other side of the deal, creating a Matched Bargain. Contrast with Quote-Driven System.
Ordinarily Resident Outside UK	A person who, for tax purposes, is deemed not to live in the UK. The regulatory significance of such persons is that agreement letters and risk warnings do not need to be signed by such people if the firm believes, on reasonable grounds, that they do not wish to consent in writing.
Ordinary Resolution	A shareholders' resolution to be voted on at the Annual General Meeting or Extraordinary General Meeting of a company, where a majority of votes cast at the meeting is needed for the resolution to be passed. See also Special Resolution.
Ordinary Share	See Equity Share.
OTC	See Over-the-Counter.
Out Trade	A transaction in which the buyer and seller disagree over the exact details of the trade, i.e. it does not match. Such disagreements may be over the number of contracts traded, or the price of the trade itself. Out trades should usually be resolved by the end of the business day on which they were traded.
Overseas Person	A non-UK investment business.
Overseas Tax Relief	Where an individual has an overseas source of income liable to UK tax on which he has already suffered overseas tax, he may be able to claim overseas tax relief, reducing the amount of UK tax that is due on the income. The purpose of this is to prevent individuals suffering unfairly high rates of taxation on their income, when both UK and overseas tax is taken into account.
Over-the-Counter (OTC)	Not traded on an exchange. The benefit of this is that the contract can be tailored to meet the investor's own particular requirements. In contrast, exchange-traded products are standardised but offer greater liquidity. A major OTC market is the foreign exchange market, where banks trade directly with each other rather than through an exchange.
P/E Ratio	See Price-to-Earnings Ratio.
Paasche Index	The Paasche index is a current-weighted index, i.e. all prices are weighted by the current quantities.
Packaged Products	Investments that are formed from a collection of other investments. For example, a regulated collective investment scheme is created by combining a range of shares and other assets. Aside from regulated collective investment schemes, it also includes life policies, stakeholder pensions and investment trust savings schemes.
PAL	Provisional allotment letter. See Rights Issue.
Panel	The Panel on Takeovers and Mergers. A non-statutory body with responsibility for the rules governing takeovers/mergers, known as the City Code. Its Chairman is appointed by the Governor of the Bank of England.
Par Value	See Nominal Value.
Participating Preference Shares	See Preference Shares.
Partly Paid Shares	Shares where the shareholder is still liable to pay an additional sum of money to the issuer when the outstanding amount is called by the directors. If the shareholder does not pay the outstanding amount, his share will be cancelled with no compensation. If the company is insolvent, the liquidator has the ability to sue shareholders for any unpaid amounts on partly paid shares.
Pay As You Earn	Known as the PAYE scheme. A system whereby employees suffer income tax deduction at source from their salaries. Instead of paying the gross salary to the employee, the employer is obliged under law to deduct an appropriate amount of tax and remit this amount to the Inland Revenue.
PAYE	See Pay As You Earn.
Payment Banks	These are CREST participants who guarantee payment for securities delivered to their client via CREST. Payment banks respond to instructions from members' CMAs (see Cash Memorandum Account). All cash movements are effected outside CREST by debits/credits to their accounts at the Bank of England.
PCA/PoCA	See Proceeds of Crime Act 2002.
PEP	See Personal Equity Plan.
Periodic Statements	Valuations of a customer's investments which, under FSA rules, must be sent by the customer's investment manager or where there are uncovered derivatives. The maximum time between valuations is six months for securities and one month for derivatives.
Permanent Interest-Bearing Shares (PIBS)	Irredeemable debt instruments issued by building societies, usually paying a fixed rate of interest.
Permission	A term used to describe the regulated activities a firm is allowed to do.
Perpetuity	A perpetuity is an amount of money, an annual cash flow that will continue indefinitely.
Personal Account Notice	Terms that form part of the employees' relevant contract of employment detailing the rules to be obeyed when employed by an authorised firm but also when dealing for themselves.
Personal Allowance	In the fiscal year 2004/2005, this comes to 4,745. The first 4,745 of an individual's income is covered by the personal allowance and is not liable to income tax.
Personal Equity Plan (PEP)	A former tax subsidy to encourage investment in shares and bonds. No new PEPs may be opened after April 1999, but existing PEPs may continue and any income or capital gains generated within the PEP are tax free. However, the 10% tax credit on dividend income is no longer recoverable.
Personal Pension Schemes	Personal pension schemes, set up by an individual who is, perhaps, self-employed or is not a member of an occupational scheme, are known as defined contribution pension schemes.
PHLX	Philadelphia Stock Exchange.
Physical Delivery	Settlement of a contract by the delivery or receipt of a financial instrument or commodity. Contrast with cash settlement, where no delivery of an underlying physical asset takes place.
PIBS	See Permanent Interest-Bearing Shares.
PIDA	See Public Interest Disclosure Act 1998.
PIP	See Primary Information Provider.
Pit	Arena in which open outcry trading in a particular product takes place. Each product or range of products will have its own designated pit. See also Ring.
Pit Observer	An employee of an open outcry exchange, who is responsible for ensuring the orderly conduct of the market. Such an official will ensure compliance with the relevant regulations/trading rules, arbitrate in disputes, report trades and prices, and where applicable, trade public limit orders.
PoCA	See Proceeds of Crime Act.
Polarisation	The requirement that financial advisers selling packaged products in the United Kingdom should either be independent financial advisers, offering advice on all the products available in the market, or tied agents, offering advice on the products of only one company.
Pool	A small collective investment scheme operated in the US, which is limited to 35 members, and can only be marketed subject to a very restrictive regime.
Position	A long or short market commitment, an obligation, or right, to make or take delivery.
Potentially Exempt Transfers (PETs)	When an individual makes a gift to another person, the gift will usually be liable to inheritance tax only if the donor dies within seven years of making the gift. If the donor survives for seven years, the gift will be exempt from inheritance tax. At the date the gift is made, its final status is therefore uncertain and it is referred to as a potentially exempt transfer.
PPS	See Protected Payment System.
Pre-Emption Rights	When a UK company issues new shares, it is obliged by law to give existing shareholders the opportunity to purchase the new shares on a basis pro rata to their existing shareholding in the company. This right is usually implemented by means of a rights issue. Pre-emption rights may be disapplied where a shareholders' resolution to that effect has been passed.
Preferred Stock	See Preference Shares.
Premium Put	The right of an investor to redeem a bond for cash at a premium to nominal value.
Prepayments	Cash paid by a company for a service not yet received. Since the provider of the service effectively owes the cash back to the company until the service is performed, the cash paid is shown as a prepayment in the company's balance sheet and is included in debtors.
Prescribed Market	Markets that are covered by the market abuse offence. This covers all UK RIEs, as well as OFEX.
Present Value	The present value is today's value of a series of future cash flows, discounted back to their present value at an appropriate discount rate.
Price Factor	The figure used to convert the price of a bond future into the price of a deliverable bond. This is done to bring all deliverable bonds onto a common basis. Sellers will receive more for a higher coupon (more expensive) bond than for a lower coupon (cheaper) bond.
Price Fix Hedge	See Long Hedge.
Price-Driven System	See Quote-Driven System.
Price-to-Earnings Ratio (P/E Ratio)	An accounting ratio defined as the share price divided by the earnings per share. Broadly speaking, the higher a company's P/E ratio, the more expensive the company and the more highly rated it is.
Primary Dealers	The US name for gilt-edged market makers.
Primary Information Provider	An officially recognised provider of price-sensitive market news. Companies can make price-sensitive announcements under their continuing obligations of the Listing Rules through one of five information services approved by the UKLA. See also Regulatory Information Service.
Primary Market	The term used to describe the initial issue of securities by an issuer to investors, to be distinguished from the secondary market, where investors trade the security among themselves.
Primary Requirement	A component of the financial resources requirement for both ISD and non-ISD firms. It is broadly related to the running exposures of the firm.
Principal	A participant in the market who is acting for their own account when buying and selling, as opposed to acting as agent for another person.
Principal Private Residence	An individual's main home, which is exempt from capital gains tax on disposal.
Principles for Businesses	Eleven principles that all authorised firms must adhere to when they are doing regulated activities.
Priority	This determines the order in which a member's transactions will be settled within CREST once the intended settlement date has been reached. Priorities are either automatically assigned or selected by the member. Priorities range from 0-99 with higher priority transactions, e.g. 90 settling before lower priorities, e.g. 50.
Private Limited Company	A company with limited liability, but which is not permitted to issue shares to the public. Contrast with a Public Limited Company.
Private Person	A private person is an individual not doing a regulated activity (e.g. the private client of a stockbroker) who has the right of action under S150 of FSMA to sue for damages as a result of a contravention of certain rules by an authorised firm. A private person can also include businesses in very limited circumstances. For example, a company setting up an occupational pension scheme for its employees would be treated as a private person.
Probate Value	The value of an individual's estate at death.
Proceeds of Crime Act 2002 (PCA or PoCA)	The legislation that contains anti-money laundering provisions.
Producer's Hedge	See Short Hedge.
Production Possibility Frontier	The Production Possibility Frontier represents the range of possibilities from employing the resources of the economy.
Profit and Loss Account	A statement showing a company's income and expenditure over a period of time, usually one year. Part of the financial statements of the company. A reserve in a company's balance sheet, representing the accumulated profits that a company has generated since its incorporation. This reserve is distributable with regard to dividend distributions.
Prompt Date	The term used on the LME to describe a future's delivery day. LME contracts have daily prompt dates for all business days out to three months, then at less frequent intervals out to 27 months.
Prospectus	A document prepared by a company that is issuing securities to the public.
Provisional Allotment Letter	See Rights Issues.
Provisions	These are liabilities where the company is uncertain as to the amount or timing of the expected future costs. For example, if a company is subject to a lawsuit, it may provide now for the expected liability on loss of the lawsuit. This is an example of the prudence concept.
Prudence	One of the fundamental accounting principles. Accounts must be prepared on a prudent basis. Revenue must never be shown in the accounts until the cash realisation of the revenue is reasonably certain. On the other hand, costs arising as a result of past actions should be provided for immediately, even if the cash will not be paid over until the future.
PSNCR	See Public Sector Net Cash Requirement.
PTM Levy	A charge of 1 each, payable by both the buyer and seller in a share transaction of over 10,000 to fund the work of the Panel on Takeovers and Mergers.
Public Interest Disclosure Act 1998 (PIDA)	This legislation covers whistleblowing procedures that apply to authorised firms. See Whistleblowing.
Public Sector Net Cash Requirement	The amount by which government expenditure in a year exceeds or is less than government income. When a budget deficit results, this has to be financed by government borrowings in the year. When government income exceeds expenditure, the government can repay debt.
Purchase Fund	Where a bond is redeemed in instalments over its life, by means of bonds being repurchased prior to final maturity in the market at the current market price. See also Sinking Fund and Bullet Form.
Purchasing Power Parity	An explanation of long-term exchange rates between two currencies. It considers the effect of inflation and inflation differentials in each country, and how this impacts on the buying power of each currency.
Put Option	A contract that confers upon the holder the right, but not the obligation, to sell an asset at a given price on or before a given date.
Qualifying Corporate Bonds	Bonds that are non-convertible and denominated in sterling. They are exempt from capital gains tax.
Qualifying Investments	Investments covered by the market abuse offence. Generally these are investments that are traded on a prescribed market.
Quick Ratio	See Acid Test Ratio.
Quorum	The minimum number of members (two) of a company required to be present for a meeting to be legally effective under Companies Act
Quote-Driven System	A system whereby market makers provide quotes at which people can trade in stocks. Also known as a price-driven system. Contrast with an Order-Driven System.
Range	The range is the distance between the highest and lowest observed values in a set of data.
RDC	See Regulatory Decisions Committee.
Real-Time Financial Promotion	A promotion communicated in the course of a personal visit, telephone conversation or other interactive dialogue. Contrast with Non-Real Time Financial Promotion.
Recognised Clearing House (RCH)	An organisation that provides clearing services for a market(s). Recognition is granted by the Financial Services Authority to those clearing houses meeting its requirements. Currently LCH.Clearnet and CREST are RCHs. Only RCHs are able to operate as clearing houses in the UK.
Recognised Investment Exchange (RIE)	An organisation, based in the UK, providing a market place in investments and recognised by the Financial Services Authority. Whilst the exchanges must be licensed or `recognised', they are exempt from authorisation.
Recognised Overseas Investment Exchange (ROIE)	An exchange established outside the UK, yet able to act as an exchange within the UK often with a screen trading system, e.g. NASDAQ. No separate distinction is made between RIE or ROIE under FSMA, hence ROIEs are also exempt from FSA authorisation.
Record Date	The Record Date is also known as the on-register day. See Books Close.
Register Update Request (RUR)	This is a CREST instruction sent to a company registrar requesting that the register is amended to reflect a trade conducted. The registrar must register or reject within two hours of receiving this request. The registrar must be able to distinguish between CREST holdings (dematerialised) and non-CREST holdings (paper certificates). See Dematerialised Holdings.
Registered Securities	Shares or bonds whose ownership is recorded in a central register, as opposed to bearer securities, i.e. UK shares. Contrast with Bearer Stock.
Registrar	This is the department or organisation appointed by a company responsible for the upkeep of a legal record (the register) of the company's shareholders.
Regular Market User	A regular user is defined in S118 of FSMA as a reasonable person who regularly deals on that market in investments of the kind in question. The offence of market abuse uses this hypothetical person to test for inappropriate behaviour.
Regulated Activity	An activity such as dealing or advising on investments, which requires authorisation under FSMA 2000.
Regulated Collective Investment Scheme	A term used to describe an investment company with variable capital (ICVC), a unit trust or other recognised scheme that meets certain criteria enabling it to be freely marketed to private customers.
Regulatory Decisions Committee	The body separate from the FSA who will look at a disciplinary case and decide whether or not to take action.
Regulatory Information Service (RIS)	A body to whom disclosures are made in order to comply with the UK Listing Authority rules on disclosure, one example of which is the Regulatory News Service. See also Primary Information Provider.
Regulatory News Service	Part of the Stock Exchange system for ensuring announcements by listed companies are disseminated fairly through the market. It is also one of the Regulatory Information Services and is known as a Primary Information Provider (PIP).
Renounceable Document	A document for which legal title can be transferred to another person.
Repo	See Repurchase Agreement.
Repurchase Agreement	Meaning sale and repurchase agreement. An agreement to sell a bond (often a government bond) at one price with a simultaneous agreement to repurchase the bond at a later date at a price agreed today. Effectively, a repo trade enables the holder of a bond to borrow money while using the bond as financial collateral with the lender. The lender has done a reverse repo.
Reserves	Part of shareholders' funds on a company's balance sheet. All parts of shareholders' funds apart from share capital are reserves, such as the share premium account reserve, the profit and loss account reserve and the revaluation reserve.
Residual Settlement	This is settlement outside CREST whereby if the counterparties are CREST members, CREST permits the use of the CCSS and CREST payment instructions.
Restitution Order	An instruction to make good any losses and to place the investor in a similar financial position prior to any wrongdoing. Restitution orders are amongst the direct powers held by the Financial Services Authority.
Retail Sales	The indicator of the level of retail demand in the UK. The higher the level of retail sales, the higher the level of demand for goods and the greater the likelihood that prices will rise as a result.
Return on Capital Employed (ROCE)	An accounting ratio designed to assess the underlying profitability of a company. It is defined as profits before interest and tax divided by capital employed, expressed as a percentage. Broadly speaking, the higher the return on capital employed, the more successful the company.
Revaluation Reserve	Part of shareholders' funds. Arises when an asset is revalued in a company's balance sheet. The profit on revaluation is considered to be part of shareholders' funds but is shown in a separate reserve to highlight the fact that the profit is not realised, since the asset has only been revalued, not actually sold.
Reversal	An example of an arbitrage trade, where the future is sold and a synthetic future is purchased by buying a call option and selling a put option with the same maturity and strike price on the same underlying asset. Entered into when the relationship described as put/call parity has broken down, and the future is relatively expensive to the synthetic. The opposite of a conversion. See also Arbitrage and Conversion.
Reverse Cash and Carry Arbitrage	An arbitrage trade entered into where a futures contract is purchased and the underlying asset is sold in the cash market. Such a trade will be effected where the trader believes that the future is trading relatively cheaply to its fair value.
Reverse Repo	This describes the position of a lender in a repo who has bought a bond on the simultaneous agreement to sell it back again. See Repurchase Agreement.
Review Panel (The)	See Financial Reporting Review Panel.
Riding the Yield Curve	Riding the yield curve is a valid strategy when the yield curve is upward sloping. An investment manager can buy bonds with maturities in excess of his investment horizon. He proceeds to hold the bonds until the end of his investment period and then sells them.
RIE	See Recognised Investment Exchange.
Ring	The term used to describe the area on the trading floor of the LME in which open outcry trading takes place. In other markets, the designated trading area is normally known as a Pit.
Ring Member	A category of LME membership where the members are entitled to place traders in the ring and thus trade metal contracts by open outcry. Only ring members have this capacity. Other categories of LME members must therefore use the services of a ring member in order to effect trades in the ring.
Risk Warnings	Requirements under FSMA 2000 and other associated regulations to warn certain customers of the risks associated with certain transactions. See also Derivative and Warrant Risk Warnings.
RNS	See Regulatory News Service.
ROCE	See Return on Capital Employed.
Rolling Settlement	This is normal settlement for CREST eligible securities. The settlement date is based on a set number of business days (normally three business days) after the trade date, i.e. a trade dealt for T + 3 on a Monday would have an intended settlement date of Thursday.
RPI	See Retail Price Index.
Rules	Authorised firms must follow any provision that has this status. In general, private persons may sue under Section 150 where they suffer loss resulting from a breach of a rule.
RUR	See Register Update Request.
S&P 100 & S&P 500	Standard and Poor's US equity market indices.
Safe Harbours	The defences against the civil offence of market abuse set out in the Code of Market Conduct.
Samurai Bond	A Yen bond issued in Japan by a foreign issuer.
SBLIs	See Stock Borrowing and Lending Intermediaries.
Scanning Loss	A term used to describe the initial margin calculated by SPAN. The scanning loss will be the worst-case potential risk in a portfolio of derivatives across a range of changes in price and volatility as calculated by the SPAN system.
Schatz	Relatively short-term (usually two years) German government debt.
Scrip Dividend	An issue of shares to an investor in lieu of a cash dividend. The value of the shares will be designed to equal the value of the cash dividend foregone. This may be useful for investors who wish to increase their investment in the company without incurring the costs of buying shares in the market.
Scrip Issue	See Bonus Issue.
SDRT	See Stamp Duty Reserve Tax.
SEATS Plus	See Stock Exchange Alternative Trading Service.
SEC	The Securities and Exchange Commission. This is the US Government agency that has responsibility for regulating the securities industry. The SEC also has responsibility for regulating certain areas concerning derivatives, namely stock options, stock index derivatives, currency transactions undertaken on exchanges and the Chicago Board Options Exchange (CBOE).
Secondary Market	The term used to describe the market where investors trade securities among themselves, to be distinguished from the primary market, where an issuer originally issues securities to investors.
Secondary Requirement	An additional component of the Financial Resources Requirement for ISD firms that may be levied at the discretion of the FSA.
Section 150	Part of the Financial Services and Markets Act 2000, which allows private persons to sue for damages if an authorised firm has breached certain rules. S150 actions may not be brought for breaches of the FSA principles or the guidance notes.
Section 19	Part of the Financial Services and Markets Act 2000 which requires firms to be authorised to conduct regulated activities. See General Prohibition.
Section 21	Part of Financial Services and Markets Act 2000 which makes it a criminal offence to issue a financial promotion in the UK unless it is issued or approved by an authorised firm or exempt via the Financial Promotions Order.
Section 397	Part of the Financial Services and Markets Act 2000 that makes it a criminal offence to mislead a market or investors. See Misleading Statements and Practices.
Section 71	Part of the Financial Services and Markets Act 2000, very similar to Section 150. It allows private persons to sue a firm for damages if a person performing a controlled function is not approved.
Security	See Charges.
Security Selection	Having decided on the asset allocation, the investment manager must select specific securities within each asset category. Security selection, or stock picking, is important whenever the investment managers are prepared to accept the overall consensus for the market as a whole, but believe that certain individual securities are misvalued.
Segregation	The separation of client assets and money from those of the firm. This policy is enforced by the Financial Services Authority to ensure that client money is not misappropriated. Private customers always get client money segregation; intermediate customers and market counterparties have the right to opt out of such segregation if they wish.
Select	The electronic order matching system for LME products.
Selective Marketing	See Placing.
Self Trading	See Crossing.
SETS	Stock Exchange Electronic Trading Service of the London Stock Exchange. This is known as the order book, and allows trading of the most liquid shares in the UK. Automatic matching occurs on this electronic trading system.
Settlement	See Physical Delivery and Cash Settlement.
Settlement Due Date	This is the earliest a transaction can settle and can otherwise be referred to as the intended settlement date.
Settlement Queue	On CREST, each matched market transaction enters each member's settlement queue at the start of the intended settlement day, i.e. settlement queues are transactions awaiting settlement. There are two types of queue: cash queues (i.e. credit) and stock queues.
SGX	The Singapore Exchange which incorporates the derivatives exchange of SIMEX.
Share Capital	Part of shareholders' funds in a company's balance sheet. The share capital is given by the number of shares in issue (rather than the shares authorised for issuance) multiplied by the nominal value per share.
Share Identification Rules	The process by which the Inland Revenue identifies which shares have been sold out of a shareholding in a company when only part of the shareholding has been sold. It is based on the dates of purchase of the shares relative to the date of sale. Sometimes referred to as the matching rules.
Shareholders' Funds	Also referred to as a company's net worth or equity. It is comprised of the issued share capital of the firm together with retained reserves. See also Balance Sheet.
Short	A term used to describe an open sold futures or options position. Also used to describe someone who sells a cash asset not previously owned. Contrast with Long (Position).
Short Hedge	A transaction that involves the sale of a futures contract, which is used to hedge a long cash market position. Such a transaction seeks to ensure that any decrease in the cash price on the subsequent cash market sale is offset by a profit on the futures position. Sometimes described as a Producer's Hedge.
Significant Influence Functions	These are controlled functions that involve governing or managing the company.
SIMEX	The Singapore International Monetary Exchange. This has now merged into the Singapore Exchange (SGX).
Single Pricing	The term used to describe the obligation of an Authorised Corporate Director to provide one single price for both the purchase and the sale of the OEIC's shares.
Single Statutory Regulator	The title granted to the FSA under FSMA 2000.
Sinking Fund	Where a bond is redeemed in instalments over its life. The bonds that are redeemed early (at par) are determined by drawing of lots. See also Purchase Fund and Bullet Form.
Small Company	A company that fulfils two of the following three criteria.Its turnover is not more than 5.6 million in the year. Its total assets are not more than 2.8 million. It has no more than 50 employees. </li></ol>Note that this definition is only relevant for accounting purposes, not tax purposes. See Corporation Tax Rates for more detail on tax rules.
Small Company Tax Rate	See Corporation Tax Rates.
Soft Commission	An allowable type of inducement under which a guaranteed level of business is given in return for benefits such as research. There are strict rules with respect to the disclosure of such arrangements as well as to the type of benefits that may be supplied.
Solvency	The ability to pay debts as they fall due.
SPAN	Standard Portfolio Analysis of Risk, a margining system used by the LCH to calculate initial margins due from and to its clearing members. SPAN is a computerised system that calculates the effect of a range of possible changes in price and volatility on portfolios of derivatives. The worst probable loss calculated by the system is then used as the initial margin requirement. See also Scanning Loss.
Special Cum/Ex	The purchase of securities currently trading ex-dividend/coupon on the market such that the next income stream is received by the buyer (special cum); the purchase of securities trading cum dividend/coupon such that the next income stream remains the entitlement of the seller (special ex).
Special Resolution	A shareholders' resolution at an Annual General Meeting or Extraordinary General Meeting which requires a 75% majority of votes cast in order to be approved. Special resolutions are usually matters of importance for the company and include, for example, a resolution to wind up the company. Where a special resolution is to be discussed, 21 calendar days' notice will usually need to be given of the meeting. See also Ordinary Resolution.
Specific Risk	See Unsystematic Risk.
Specified Investments	See Investments.
Speculator	An investor or trader hoping for large profits from risky positions, i.e. a risk taker. Contrast with a hedger, who wishes to reduce risk from an existing position. It is the speculator who takes on the risk that has been transferred from the hedger.
Sponsored Member	Certain investors such as private investors and institutions who are active traders, wanting to hold stock in CREST accounts, but lacking the direct technical access to CREST, can rely on another member or user of CREST. A sponsored member will appear in the register as the legal owner.
Spot	Price of an asset for immediate delivery.
Spot Currency Transaction	A transaction completed in the foreign currency market for which delivery and settlement take place two business days after the day of the trade (T + 2).
Spread Order	An order in which a spread transaction is described. See Spread.
SSAP	Statement of Standard Accounting Practice. See Accounting Standards.
Stabilisation	The process of supporting the price of a new issue of securities by means of the management group of the issue buying the relevant bonds or shares in the market place for a limited period of time in the after market. This practice is only permitted if FSA rules and other regulatory requirements are followed.
Stags	Investors who apply for shares on a new issue, hoping to sell them at a profit immediately afterwards.
Stakeholder Pension	A type of pension regulated by the government aimed primarily at the middle to low income groups. Establishing and operating a stakeholder pension is a regulated activity under FSMA 2000.
Stamp Duty	A tax levied on the purchaser of securities bought in paper form. The UK rate is 0.5% (1.5% on the creation of depository receipts) of the consideration value rounded up to the next 5. The liability arises on the settlement date.
Stamp Duty Reserve Tax	A tax levied on the purchaser of securities bought in paperless form, i.e. via CREST. The UK rate is 0.5% (1.5% on the creation of depository receipts) of the consideration value rounded to the nearest penny. The liability arises on the trade date.
Standard Deviation	The standard deviation is a dispersion measure that is related to the arithmetic mean. The idea behind the calculation is to establish how far each observed value falls from the mean, the standard deviation being a function of this divergence, and the variance being the square of the standard deviation.
Starting Rate of Tax	This is the rate of tax (currently 10%) applied to the first band of taxable income. See also Basic Rate of Tax, Higher Rate of Tax and Taxable Income.
Statement of Standard Accounting Practice	See Accounting Standards.
Statement of Total Recognised Gains and Losses	Part of a company's financial statements. A statement that summarises all the gains and losses made by a company during the year, such as the retained profit or loss for the year and revaluations of fixed assets.
Statements of Principle	Seven principles that approved persons must adhere to when performing a controlled function. The first four principles apply to all approved persons. The final three only apply to approved persons who are performing a significant influence function.
Stock Borrowing and Lending Intermediaries	Stock Exchange member firms who act as brokers identifying pools of stock that are available for lending to other market participants by their beneficial owners.
Stock Deposit	This is a transaction to deposit stock currently in paper form, i.e. held outside CREST, into dematerialised form within a CREST member account. See Dematerialised Holdings.
Stock Picking	Stock picking involves attempting to maximise a portfolio return by selecting individual securities that are undervalued or perceived to have the greatest prospects for growth within an asset class. See Security Selection.
Stock Transfer Form	A legal document that is required to transfer ownership of registered securities settling in certificated format.
Stock Withdrawal	This is a transaction to withdraw stock held within CREST in dematerialised form for holding outside CREST in paper form. See Dematerialised Holdings.
Stocks	Goods purchased by a company to resell on to its customers. The three categories of stock are raw materials, work-in-progress (WIP) and finished goods. Included as part of current assets in the company's balance sheet. Also known as inventories in the US.
Stop Order	An order that is activated when a stipulated market level is reached. Once the stop level has been reached by the market, the order becomes a market order and trades at the prevailing market price, not necessarily the specified stop level. Stops to sell are entered below the market, stops to buy above the market. They are generally used to exit positions, unlike MIT orders, which are normally used to enter the market place. See also MIT.
STOXX 50	An index of the top 50 European shares.
Strike Price	See Exercise Price.
Strips	Separately Traded and Registered Interest and Principal Securities. The zero-coupon bonds that are traded are a result of the coupon stripping of a bond. See Coupon Stripping.
Subsidiary Company	A subsidiary company is a company that is controlled by another company, referred to as its holding company. Control is usually achieved either by owning shares with more than 50% of the voting rights in the subsidiary, or by having the right to appoint directors to the Board who have a majority of voting rights on the Board.
Substitutes	Substitutes are goods that may be consumed as an alternative to the first good, for example, tea and coffee. If the price of coffee rises, then the demand for tea will increase, as it now represents a lower cost alternative to coffee.
Supply	Supply represents the amount of a good that producers are prepared to supply to the market at a given price. Supply is an upward sloping function. As the price rises, producers will be prepared to supply more of that particular good. The supply function is determined by the costs of the company. See also Demand and Equilibrium.
Swaps	The agreement to pay or receive the difference between two cash flows such that the effect is to swap from one basis (e.g. fixed rated interest) to another (e.g. floating rate interest). They are complex derivative products that are contracts for differences and thus investments.
Switching	The act of engaging in excessive trading within a packaged product to generate commission whilst disregarding the best interests of customers. Prohibited for private discretionary and private advisory customers.
Synthetic Long	A long futures position synthetically created by the purchase of a call option and the sale of a put option with the same strike price and expiry date, and on the same underlying asset.
Synthetic Long Call	A long call option position created synthetically by the purchase of the future or underlying and the purchase of a put option.
Synthetic Long Put	A long put option position created synthetically by the sale of the future or underlying and the purchase of a call option.
Synthetic Short	A short futures position synthetically created by the purchase of a put option and the sale of a call option with the same strike price and expiry date, and on the same underlying asset.
Synthetic Short Call	A short call option position created synthetically by the sale of the future or underlying and the sale of a put option.
Synthetic Short Put	A short put option position created synthetically by the purchase of the future or underlying and the sale of a call option.
Systematic Risk	Systematic or market risk is something that impacts on the economy in general, which all companies are part of, hence this is the type of risk that cannot be eliminated through diversification. Contrast with Unsystematic Risk.
T&C	The abbreviation for the Training and Competence rules which contain five commitments to training and competence. The T & C rules require persons doing controlled functions and those overseeing certain administration functions to be appropriately trained and assessed as competent for their role.
Table A	A model set of Articles of Association in the Companies Act 1985. If a company does not write its own articles, it is assumed that Table A rules will apply.
Takeover Code (The)	The principles and rules of the Takeover Panel governing takeovers and mergers of UK resident public companies and certain private companies. Also known as the Blue Book, due to the colour of its cover. See also Takeover Panel (The).
Takeover Panel (The)	The regulatory body in the United Kingdom responsible for policing of takeovers and mergers of public companies and certain private companies resident in the United Kingdom. The Takeover Panel is a self-regulatory body and has no statutory powers. See also Takeover Code (The).
Taker	The LME term used for an options holder. See also Holder and Grantor.
Tangible Assets	A sub-category of fixed assets in the balance sheet of a company. Fixed assets which are physical and can be touched, such as land, vehicles and plant and machinery.
Taper Relief	This relief reduces the rate of capital gains tax payable on gains made after 6 April 1998. The rate of relief varies for business assets or personal assets. The general principle is that the longer the asset is held, the lower the rate of capital gains tax payable.
TAPO	Traded Average Price Option, an Asian Style Option traded on the London Metal Exchange.
Taxable Income	A tax term. Defined as total income in the year (excluding tax-free income) less all allowances available at the marginal rate. The major allowances that are deducted from income prior to reaching taxable income are the personal allowance, pension contributions (up to certain specified limits) and Gift Aid to charities. An individual's tax charge is calculated by reference to his taxable income for the year.
Taxable Profits	The profits on which a company calculates its corporation tax charge for a year. Note that the definition of taxable profits is not the same as accounting profits before tax. The reason for this is that the company has considerable flexibility in the way it calculates its accounting profit before tax. As a result, the Inland Revenue has different rules in some areas for the calculation of taxable profits. See Disallowed Expenditure.
Temporary Document of Title	A certificate acting as prima facie evidence of ownership of shares in the short term. Eventually it will be replaced by the permanent or definitive document of title. Examples of temporary documents of title include Provisional Allotment Letters and Letters of Acceptance.
Tender	The act of giving notice to the Clearing House of the seller's intention to physically deliver in satisfaction of a futures contract.
Term Assurance	Term assurance policies - where an individual's life is insured for a specific period or term (usually ten years or more) in a similar way to normal car or household insurance. See Life Assurance.
Term Repo	A repo in which the term (length) of the repo is predetermined as part of the agreement. After the time specified in the agreement, the funds lent to the borrower will be repaid with interest and the collateral will be returned to the borrower by the lender. Contrast with an open repo, where the repo remains open until either party to the contract decided to terminate it. See Open Repo and Repurchase Agreement.
Terminal Value	Also known as the future value. This is the value of a deposit at the end of a period of time, having received interest over that period.
Terms of Business	An unsigned one-way document sent by an authorised firm to certain of its customers as specified in COBS. Contrast with Client Agreement.
Thin Market	A market with little trading and poor liquidity.
Tick	The minimum permitted price movement in a futures or options contract. For example, if the tick for a wheat contract were 5p, this would mean that the price of the contract could move in multiples of 5p only. See also Tick Value.
Tick Value	The monetary value that a one tick movement on one futures contract represents, i.e. the profit or loss that such a price movement causes. Tick value is the product of multiplying the tick by the contract size. For example, if the tick for a wheat contract were 5p and a contract is for 100 tonnes, the tick value of a wheat contract is 5 (100  &#215;  5p).
Ticker Page	A page of a dealing screen that gives details of recent trades that have been completed on a chronological basis.
Tied Agent	Also known as appointed representatives. See Polarisation.
Time and Sales Report	A record kept by the exchange of the quotations and trades dealt in the market by time.
Time Decay	The propensity of time value for an option to erode as expiry draws near. Time decay is not linear; in the early life of an option time decay occurs slowly, but the rate of time decay begins to increase the nearer to expiry one goes. Time decay acts to the benefit of writers of options and to the detriment of holders of options.
Time Spread	See Horizontal Spread.
Timely Execution	To transact a customer order as soon as is reasonably practicable in the circumstances.
Time-Weighted Return	The time-weighted return is a measure that is unaffected by cash inflows to and outflows from the fund (deposits and withdrawals), over which the fund manager has no control. The method is to calculate the returns between any cash flow dates, using our original holding period formula, and then combine them in a similar fashion to compound interest to establish the return for the full period.
Tip Sheets	Publications solely containing investment advice. Unlike newspapers (media tip sheets), tip sheets published by firms require authorisation.
Trade Bills	A form of payment or IOU issued by a company and used primarily for commercial rather than investment purposes. Examples include Bills of Exchange and Letters of Credit. Trade bills are not specified investments under FSMA 2000.
Trade Registration System	The matching system used by the LIFFE and IPE markets for their trades. Once a deal has been struck on the floor of the IPE and deal tickets have been written out, the deals are input into this system. The system then compares the buy and sell sides of the trade to ensure that the details agree. LIFFE CONNECT reports them through automatically. Matched trades are then stored for transmission to the LCH.Clearnet at the end of the business day.
Trade Reporting Period	The period during each working day (07:15-17:15) when the Exchange will accept trade reports. Also known as the trading day.
Traded Options	Options that are traded on an exchange with standardised features. Contrast with over-the-counter (OTC) options, which are tailor-made for each investor's requirements. See Option.
Tranche	Issuing more of an existing gilt or part of an issue of any security.
Transaction Reporting	A report of a trade carried out on an exchange made to the exchange usually by the end of that day. This is for regulatory purposes to enable the RIE to monitor for market abuse.
TRAX	The trade reporting system used in the Eurobond markets.
Treasury	Government department holding legislative responsibility for the Financial Services and Markets Act and other legislation related to financial services.
Treasury Bills	Also known as T-bills. When issued by the UK government, they usually have a maturity of 91 days. They pay no interest and hence are issued at a discount to nominal value. The minimum nominal value of UK T-bills is 25,000. They are usually denominated in sterling but may also be denominated in euro. They are also issued by governments in other countries, such as the US government.
Treasury Bonds	Also known as T-bonds. Long-term bonds issued by the US government, with a life of more than ten years.
Treasury Notes	Also known as T-notes. Medium-term notes issued by the US government, with a life between two and ten years.
Trigger Page	A dealing screen page that gives details of the price movements on the day for FTSE 100 stocks. If a price change is in blue, this indicates a rise in price over the day. If it is in red, this indicates a fall, while green indicates no change.
TRS	See Trade Registration System.
Two-Way Document	A document that must be signed by the client and returned to the firm.
UCITS	See Undertakings for Collective Investment in Transferable Securities.
UITF	See Urgent Issues Task Force.
UKListing Authority (UKLA)	See Competent Authority.
Uncrossing Algorithm	A mathematical process for determining a single price at which limit and market orders entered in a SETS auction call period will be matched. No input or deletion is permitted during the running of the uncrossing algorithm. See SETS.
Undated Gilts	UK government bonds that do not have a predetermined maturity date (e.g. 3% War Loan). They are often referred to as irredeemables, since it is unlikely the government will choose to redeem them due to the low interest rates the existing issues are paying.
Underlying Asset	The security, stock, commodity, index or future upon which an options or futures contract is based.
Undertakings for Collective Investments in Transferable Securities	Also known as UCITS. Unit trusts that can be marketed throughout Europe provided they are registered with their domestic regulator as such. See also Collective Investment Scheme and Unit Trusts.
Underwriter	A market participant who agrees to buy a new issue at a specified price if no one else is prepared to purchase the securities offered. The underwriter will receive commission to compensate him for the risk taken that he will have to buy an unsuccessful issue and lose money as a result.
Ungeared	A position or fund that does not use derivatives to create any greater risk than the fund's value. See Gearing.
Unmatched Transaction	Transaction details reported by the relevant counterparties cannot be agreed because the details are inconsistent. An unmatched transaction also results from only one party having input details. Settlement cannot occur.
Unregulated Collective Investment Scheme	A collective investment scheme that does not meet the requirements of a Regulated Collective Investment Scheme and therefore cannot be freely marketed.
Unsolicited Real-Time Financial Promotion	A personal visit or telephone call made without the express invitation of the recipient. This is only allowed if permitted under the FSA's rules.
Unsystematic Risk	Unsystematic risk can be eliminated through diversification. This arises as a result of the trade between companies, hence, by investing in both companies we can eliminate this variability from our portfolio. Also referred to as idiosyncratic or specific risk. Contrast with Systematic Risk.
Unweighted Index	An index where all the constituents of the index are equally weighted when calculating the index value. This has a weakness in that it tends to overstate the importance of the smaller constituents of the index.  Examples of this include the Dow Jones Industrial Average, the Nikkei 225 and the FTSE Ordinary indices. See also Weighted Index.
Upstairs Trading	See Block Trade.
Urgent Issues Task Force	A sub-committee of the Accounting Standards Board that is set up to deal with urgent accounting issues on an ad hoc basis. It produces Abstracts, which are essentially mini Accounting Standards and must be followed by companies when preparing their accounts.
User Service Co.	A company providing CREST sponsored members with technical access permitting electronic communications with CREST.
Variance	Variance is the square of standard deviation. See Standard Deviation.
VAT	Value Added Tax. A sales tax currently charged at 17%.
Venture Capital	Occasionally referred to as private equity investment, where the investment is in the equity shares of an unquoted company.
virt-x	A recognised investment exchange in the United Kingdom, competing with the London Stock Exchange as a centre for share dealing. It is an order-driven system for European blue chip securities.
Visibles	See Current Account.
Volatility	1. Variability, usually with reference to returns available on a security.2. The risk that the price of a bond will vary due to change in interest rates. <br/>See also Implied Volatility and Historic Volatility.
War Loan	An undated bond issued by the UK government, for which the full name is 3.5% War Loan.
Warrant	On securities markets a warrant is an instrument issued by a company giving the holder the right to subscribe for new shares in the company at an agreed price (the strike price or exercise price) on an agreed date or range of dates.
Weekly Official Intelligence	Stock Exchange publication, giving information about general events for listed companies, such as dividend payments, etc.
When Issued Basis	See Grey Market.
Whistleblowing	Whistleblowing is the process whereby an employee seeks to make a protected disclosure to a regulator, in good faith, of information which shows that their employer is committing or deliberately concealing an activity covered by the Public Interest Disclosure Act 1998, PIDA.
Whole of Life Policies	Whole of life policies - where a capital sum will be paid upon the death of the policyholder, whenever that may be. See Life Assurance.
Winding Up Order	A court instruction for a company to cease trading; one of the direct powers held by the Financial Services Authority.
Withholding Tax	Tax deducted at source on the payment of dividends or interest.
Working Capital	See Net Current Assets.
Writer	Person who executes the opening sale of an option. The writer sells the option to the holder, giving the holder the right to exercise. The writer receives the premium from the holder as compensation for the level of risk he is willing to take on board.
Yankee Bond	A US dollar bond issued in the US by a foreign issuer.
Yellow Book (The)	This used to be used as the informal name for the Listing Rules, so called because of the colour of its cover. The rules that companies have to follow in order to obtain and keep a listing on an RIE. See also Model Code.
Yield to Maturity	See Gross Redemption Yield.
Zero-Coupon Bond	Zero-coupon bonds are issued at a discount to their face value, normally par. The level of discount given will be based upon the period between purchase and the bond's redemption date. There is no interest paid out with a zero-coupon bond. See Deep Discount Bonds.