Corretor forex loja de balde akron

O GLOSSÁRIO DE GELBERLAW O glossário da GelberLaw. Um Dicionário Enciclopédico da cópia da indústria de valores mobiliários, esforça-se por fornecer definições e explicações simples, claras, precisas e aprofundadas das palavras, expressões e terminologia normalmente utilizadas pelos advogados e pelo mercado de valores mobiliários Alguns termos estão sujeitos a interpretação, por favor consulte o seu advogado ( ou contador ou profissional da indústria de valores mobiliários) se uma definição for importante para sua circunstância particular. Alguns termos podem ter vários significados, nem todos são examinados. (Procure a palavra ldquosetrdquo em um dicionário integral). Por favor, volte com freqüência, pois esta página é atualizada, revisada e expandida regularmente. O ndash da conta é basicamente uma relação contratual entre um cliente e um corretor. O relacionamento permite que a corretora compre e venda títulos sobre a aprovação e para a conta do cliente e para cuidar de todas as funções administrativas envolvidas em tais transações, como manter saldos, manter os títulos, emitir confirmações de transações, emitir contas declarações entre outras funções. O executivo de contas obtém outro nome para o corretor que recebe as chamadas do cliente, oferece orientação e segue as instruções do cliente para comprar ou vender títulos em sua conta. Algumas corretoras chamam seus corretores de representantes registrados. Isso reflete o registro que todos os corretores devem ter após passarem em determinados testes e obterem a aprovação da NASD (e talvez da Bolsa de Valores de Nova York) e de vários reguladores de valores mobiliários do estado. Em outras palavras, os corretores devem ser licenciados. Extrato de Conta - descubra um pedaço de papel que lista todas as transações que ocorreram em uma conta, bem como as participações, juros e dividendos pagos e dinheiro disponível ou devido. Eles geralmente são emitidos uma vez por mês, mas se uma conta estiver inativa, eles só poderão ser emitidos uma vez a cada três meses. Um extrato de conta é um registro oficial do status e saldo de uma conta na data em que é emitida. É importante revisá-lo e contestar qualquer erro, de preferência por escrito e de preferência imediatamente. Investidor Credenciado - essa é uma classe de investidor especificamente definida nas leis federais de valores mobiliários. A definição oficial diz que um investidor acreditado é aquele que tem um patrimônio líquido de pelo menos 1 milhão de dólares (pode ser em conjunto com um cônjuge) ou deve ter ganhado pelo menos 200.000 em cada um dos dois anos mais recentes ou ter renda conjunta com um cônjuge de mais de 300.000 em cada um desses anos e tem uma expectativa razoável de alcançar o mesmo nível de renda no ano corrente. Alguns tipos de investimentos, como determinadas colocações privadas ou certas sociedades limitadas, entre outros, exigem que os investidores cumpram esse padrão sob certas circunstâncias. Obrigações de acréscimo ndash estes títulos não fornecem pagamentos de juros periódicos. Eles acumulam juros até que os títulos amadureçam. Eles fornecem uma maneira de bloquear as taxas de juros. Veja Obrigações de cupão zero. Conta ativa ndash uma conta que se envolve em muitas transações. Cada corretora pode ter seu próprio benchmark. As contas ativas provavelmente receberão extratos mensais de contas, possíveis descontos para comissões ou outros benefícios, como acesso a cotações de streaming gratuitas. Contas que não têm atividade há anos podem enfrentar problemas, como a imposição de taxas inativas, ou até mesmo serem vistas como abandonadas e os recursos enviados ao estado. Taxa ajustável As ações preferenciais têm preços menos voláteis do que as ações preferenciais de taxa fixa, o ARPS é um tipo de ação preferencial com um dividendo ajustável. O dividendo geralmente se ajusta trimestralmente com base em mudanças em algumas taxas do mercado monetário, como uma taxa de faturamento do Tesouro. Estes também são chamados de taxa flutuante ou taxa variável preferida. Base ajustada ndash Os ganhos e perdas de capital são medidos a partir da diferença entre o preço pago na compra e o preço recebido na venda. O preço de compra é chamado de base. A base é ajustada para contabilizar comissões e desdobramentos. Veja ldquoBasisrdquo. Consulte seu contador. Advance ndash simplesmente significando um aumento no preço, já que o mercado avançou 100 pontos hoje. O Affidavit ndash declarou declarado escrito voluntário (impresso) fatos pelos quais a pessoa fez a declaração, sob juramento feito na frente de uma pessoa autorizada a administrar juramentos, como um notário público. Em algumas circunstâncias (mas não em todas as circunstâncias), uma declaração pode ser admitida como evidência em um caso de arbitragem de valores mobiliários. As empresas de afiliadas ndash são consideradas afiliadas quando (a) ambas são subsidiárias de uma empresa controladora comum ou (b) quando uma possui menos que a maioria das ações com direito a voto da outra. Cada estado tem suas próprias leis relativas às corporações e a definição de afiliado pode ser uma questão de estatuto que difere de estado para estado. Vários estatutos, como o Investment Company Act de 1940, o Federal Reserve Act e outros, têm definições e usos específicos do termo. Os afegãos descobrem as unidades monetárias do Afeganistão. Após o expediente A negociação de títulos ndash pode ser negociada após (ou antes) as horas regulares de negociação das trocas organizadas. Notícias dramáticas, positivas ou negativas, muitas vezes desencadeiam um alto volume de tais negociações. Aftermarke t ndash Depois que um título é originalmente emitido, como uma ação em uma oferta pública inicial (IPO), os valores mobiliários são negociados nas várias bolsas com base nas vantagens e desvantagens percebidas que afetam o emissor dos títulos. Esta negociação é chamada aftermarket, ou mercado secundário, negociação. Assim, se a XYZ Corporation arrecada dinheiro no mercado primário vendendo suas ações ao público pela primeira vez em um IPO, depois do IPO, a ação XYZ então negocia no mercado secundário, ou pós-venda baseado nos princípios de oferta e demanda, que são afetado por boas e más notícias sobre a XYZ Corporation. Em outras palavras, a maioria das transações de estoque são transações de pós-mercado. Against the Box - O ato de vender títulos a descoberto que você já possui. Isso resulta em uma posição neutra em que seus ganhos em uma ação são iguais às perdas. Por exemplo, se você possuir 1000 ações da XYZ e disser à sua corretora para vender 1.000 ações da XYZ, você encurtará a caixa. Alternativamente, você pode obter o mesmo efeito comprando uma opção de venda no estoque, que pode ou não ser menos dispendiosa do que o curto-circuito em relação à caixa. A principal justificativa para o shorting contra a caixa é atrasar um evento tributável. Digamos que você tenha um grande ganho em suas ações da XYZ e acredite que a XYZ atingiu o pico no futuro previsível e você quer vender. No entanto, o imposto sobre o ganho deste ano pode deixá-lo sub-retido durante o ano e, talvez, sujeito a penalidades. Ou você está projetando renda pessoal mais baixa no ano que vem, colocando você em um suporte menor e seria benéfico ganhar o próximo ano. O ldquoboxrdquo é onde os títulos estão localizados fisicamente para custódia. Sempre consulte seu contador sobre mudanças nas leis tributárias relacionadas a tais estratégias. Transações de transação de agência em uma corretora são transações de agência ou transações principais. Em uma transação de agência, o corretor atua como intermediário entre o comprador e o vendedor e recebe uma comissão pelo serviço. O corretor não assume nenhum risco financeiro em uma transação desse tipo, sendo todo esse risco para a conta do cliente. Preço de Exercício Agregado - O preço de exercício de uma opção (uma opção de compra ou venda) vezes o número de títulos subjacentes no contrato de opção (geralmente 100 ações por contrato). Ao calcular o preço de exercício agregado, o preço, denominado preço ldquo, pago ou recebido nos contratos (100 ações por contrato de opção, equivalente a 1000 ações) da XYZ a 50 teria um preço de exercício agregado de 50.000 se exercido antes do contrato de opção expira. Na linguagem comum, a frase contraccção de controvérsias é encurtada para qualquer opção ou contrato. (Eu comprei dez contratos de compra que é o mesmo que dizer que comprei dez opções de compra.) As ações da Air Pocket Stock revelam uma ação que tem uma queda abrupta no preço após o anúncio de más notícias ou maus resultados. Acionistas correm para vender e poucos compradores podem ser encontrados. Parecia um avião caindo em uma bolsa de ar. Alligator Spread ndash Quando um corretor organiza uma posição que consiste em uma combinação de opções de venda e opções de compra que, coletivamente, criam comissões tão altas que é quase impossível obter lucro para o cliente, independentemente da direção em que a segurança subjacente se move. O termo origina-se da idéia do spread comendo o investidor vivo. Isso está relacionado ao conceito de ldquochurningrdquo. Tudo ou Nenhum ndash Uma instrução para um corretor. Por exemplo, se você quiser comprar 1.000 ações da XYZ Corporation a um preço-limite de 50,00 por ação e der uma instrução ldquoall ou nonerdquo, nenhuma parte do pedido será preenchida, a menos que todas possam ser preenchidas. Sem uma instrução completa ou nenhuma, o pedido pode ser preenchido aos poucos - toda vez que o preço atingir 50 ou menos, as ações serão compradas até que todo o pedido seja preenchido. Ndash da American Arbitration Association (AAA) Fundada em 1926, a AAA é uma empresa privada que oferece uma ampla gama de serviços alternativos de solução de controvérsias, incluindo educação e treinamento, publicações e mediação, arbitragem, eleições e outras técnicas de resolução extrajudicial. A AAA - com 34 escritórios nos Estados Unidos e na Europa e 59 acordos de cooperação com instituições arbitrais em 41 países - oferece um fórum para a audiência de disputas, administração de casos, regras e procedimentos testados e uma lista de neutros para ouvir e resolver casos. . As arbitragens sobre valores mobiliários são conduzidas de acordo com as Regras de Arbitragem Comercial e Procedimentos de Mediação da AAArsquos (incluindo Procedimentos para Grandes Disputas Comerciais Complexas) e seus Procedimentos Suplementares para Arbitragem de Valores Mobiliários. As corretoras no passado costumavam incluir uma opção de fórum AAA nas cláusulas do contrato de arbitragem de seus contratos com clientes, mas nos últimos anos essa opção foi em grande parte eliminada, e a maioria das arbitragens de títulos é realizada na NASD. Enquanto as taxas cobradas pela NASD pela arbitragem são altas, sendo cobrada uma sobretaxa pelas empresas associadas, as taxas na AAA podem ser muito altas porque, além de taxas de depósito, impõem uma taxa de manutenção relacionada ao período de tempo que o caso está pendente. Arbitrage ndashalso, conhecido como arbitragem sem risco, descreve a compra e venda simultânea de uma negociação de títulos em diferentes mercados ou trocas, a fim de aproveitar pequenos diferenciais / discrepâncias de preços que podem existir como resultado de certas ineficiências do mercado. Ineficiências podem resultar de relatórios inoportunos de transações ou taxas de câmbio, se os dois mercados estiverem em países diferentes. Por exemplo, um investidor compra uma ação nos Estados Unidos e a vende (ou calça) na Europa, quando o preço não se ajustou ao câmbio. Embora sejam distintos do Arbitragerdquo do ldquoRisk e do Arbitragerdquo do ldquoIndex, todas as formas de arbitragem envolvem o aproveitamento de pequenas discrepâncias de preços, em vez disso, evanescentes. Arbitragem ndash é uma alternativa para processar no tribunal quando você tem uma disputa, geralmente por dinheiro. A NASD administra a maior parte da arbitragem de títulos nos Estados Unidos. Quer você esteja apresentando uma reclamação ou defendendo uma reclamação, a NASD cobrará taxas por seus serviços. Você pode ser representado por um advogado e cada lado pode apresentar seu lado da história a um painel de arbitragem, que pode conceder dinheiro ou negar reivindicações emitindo uma sentença arbitral. A arbitragem está disponível para disputas entre clientes e corretores, e também entre corretores e corretoras. A Arbitragem da NASD é regida por um conjunto de regras chamado Código de Procedimento de Arbitragem. Peça ao ndash o preço mais baixo do lote no qual um distribuidor ou formador de mercado venderá um título. O preço de venda (também conhecido como a oferta ou o preço de oferta) será quase sempre maior do que o preço de oferta. Se a oferta e o pedido forem idênticos, o mercado é considerado como tendo sido negociado durante esse breve momento. Os criadores de mercado ganham dinheiro com a diferença entre o preço de compra e o preço de venda. Essa diferença é chamada de spread. O termo é flexível na medida em que pode ser expresso como o pricerdquo ou o lquoasking pricerdquo ou ldquoask pricerdquo ou simplesmente ldquoask. rdquo Se a XYZ Corp. estiver negociando atualmente, uma consulta a um corretor sobre uma cotação poderia gerar uma declaração como: ldquo49.78 por 49.84, último 49.79, rdquo significando que o lance é 49.78, o pedido é 49.84 e o último negócio foi 49.79 por ação. Pedir rendimento - O retorno que um investidor receberia em uma garantia do Tesouro dos Estados Unidos se pagasse o preço de venda. O ARPS é um tipo de título preferencial flutuante ou de taxa ajustável cujo rendimento de dividendos é determinado em um processo de leilão holandês, mantido em intervalos regulares de curto prazo, normalmente a cada sete ou 28 dias, por licitantes corporativos ou institucionais. A taxa assim estabelecida é fixa até que seja redefinida no próximo leilão. ARPS é emitido por fundos mútuos fechados para criar alavancagem e, assim, aumentar o rendimento. Um leilão holandês é o lugar onde um vendedor oferece um produto a um preço alto, que é reduzido pelas propostas de muitos compradores até que um preço atraente para compradores suficientes seja atingido. (O Departamento do Tesouro dos EUA usa esse sistema para vender suas obrigações de dívida.) Se nenhum proponente sair, o leilão será considerado como ldquofailrdquo. Essa falha não é, no entanto, um padrão na segurança que está sendo leiloada. A maioria dos ARPS de fundos fechados possui um rating de crédito AAA devido à cobertura de ativos e outras exigências de manutenção impostas pelas agências de classificação de risco, com as quais um fundo fechado deve cumprir para manter uma classificação de crédito favorável para seu ARPS. Sob a Lei de Sociedades de Investimento de 1940, os fundos fechados estão sujeitos a restrições adicionais, incluindo a exigência de que o valor de mercado dos ativos do fundo fechado subjacente exceda a quantidade de ARPS em circulação em pelo menos duas vezes. O volume médio diário de volume é exatamente o que o termo sugere: o número acumulado de ações negociadas em um determinado período de tempo, dividido pelo número de pregões naquele período. Um milhão de ações negociadas ao longo de um período de dez dias é um volume médio diário de cem mil ações. Os períodos de tempo usados ​​para calcular o volume diário médio variam, embora os números de volume diários médios e anuais sejam bastante comuns. Os analistas técnicos comparam o volume diário atual com o volume médio diário em um esforço para coletar padrões úteis. Os estoques tendem a negociar em volume diário maior do que a média em sessões anteriores a eventos futuros conhecidos, como anúncios de lucros e declarações de dividendos. Na ausência de ações corporativas futuras conhecidas, o volume médio diário forte pode ser interpretado como significando que um evento imprevisto é iminente. As grandes empresas tendem a negociar com maior volume médio diário do que as empresas menores. Se o volume for muito baixo, pode ser difícil (ou impossível) fechar uma posição longa. Ndash de prêmio Ao contrário do litígio de tribunal, que pode resultar em julgamento, as arbitragens do setor de valores mobiliários resultam em um ldquoAwardrdquo. O Prêmio, assinado por membros do Painel de Árbitros (ou o único Árbitro em uma pequena demanda de arbitragem) não tem força executiva estritamente legal. Se o Prêmio for contra uma empresa membro da indústria de corretagem (ou pessoa associada a um membro), a aplicabilidade é derivada da ameaça de revogação da licença por não cumprimento do Prêmio no prazo de 30 dias. Os estatutos de arbitragem da maioria dos estados, assim como a Lei Federal de Arbitragem, têm disposições que permitem certos esforços para obter a concessão. A capacidade de desocupar um Prêmio é limitada a circunstâncias muito restritas e, portanto, a maioria desses esforços falha. Uma vez que um tribunal confirme um prêmio, ele se torna um julgamento exequível. DIRETÓRIO DO SITE: Baby Bells ndash Em 1984, a American Telephone amp Telegraph Co. comumente conhecida como ATampT, foi dividida em sete companhias telefônicas regionais, que ficaram conhecidas como Baby Bells: NYNEX, Bell Atlantic, BellSouth, Southwestern Bell Corp. ), Ameritech, US West e Pacific Telesis. Preço base Preço de compra, incluindo comissões e outras despesas necessárias, usado para determinar ganhos de capital e perdas de capital para fins fiscais. Existem várias maneiras de determinar a base. Para um investimento comprado, a base é o custo. Se herdada, a base é o valor na data da morte dos proprietários originais (chamado valor de data de morte). Se recebida como um presente, a base é o valor que foi originalmente pago pelo investimento, a menos que o valor de mercado do investimento na data em que o presente foi dado seja menor. Também chamado de base de custo ou base tributária. Verifique as regulamentações do IRS em modificação de tempos em tempos. Em conexão com títulos, o termo ldquobasisrdquo refere-se ao rendimento até a maturidade. Em outras palavras, um bônus de 10, vendido a 100, tem uma base de 10. Em conexão com commodities, o termo refere-se à diferença entre o preço à vista e o preço futuro de uma determinada mercadoria. Veja Basesrdquo de ldquoAdjusted. Consulte seu contador. Ndash do ponto base Um ponto base é um centésimo de um por cento. Um por cento é igual a 100 pontos base. É a menor medida usada para cotar o rendimento de títulos, notas e notas. Se um rendimento subir de 5 para 5,25, aumentou 25 pontos base. Pode ser representado como 0,01 (1/100 de um por cento) ou 0,0001 em forma decimal. Dez mil pontos base equivalem a cem por cento. BATS Exchange ndash A partir do início de 2009, o BATS Exchange (BZX) tornou-se a terceira maior bolsa de valores do mundo (em volume) atrás da Bolsa de Valores de Nova York e da NASDAQ. ldquoBATSrdquo significa ldquoBetter Alternative Trading System e foi originalmente fundada em 2005 como ECN. Está sediada no Kansas e opera em Nova York e Londres. A BATS também opera o Índice BATS 1000, que foi lançado em 2009, medindo o desempenho de 1.000 títulos listados nos EUA em 10 setores igualmente ponderados. Em 2010, a BATS lançou uma segunda bolsa chamada BATS Y-Exchange (BYX) e também lançou uma plataforma para as opções de ações dos EUA. Bear ndash Um pessimista. Um urso do mercado de ações acredita que os preços dos títulos vão cair. Um Bear Market é aquele que reflete, por um período prolongado, tal pessimismo na forma de queda dos preços das ações e diminuição do volume de mercado. Uma das marcas é que os preços caem mais rápido do que as médias históricas. Um mercado de títulos em baixa é geralmente causado pelo aumento das taxas de juros. O oposto de um urso é um touro. Ndash de coeficiente beta Geralmente chamado simplesmente de ldquobetardquo, é uma medida do retorno esperado em um título particular relativo ao retorno esperado médio em todos os outros títulos no mercado. Ou seja, mede o risco de um estoque específico em relação ao mercado, excluindo riscos idiossincráticos. O coeficiente beta liga o retorno sobre a segurança e o retorno médio do mercado. O risco médio de mercado de todos os títulos é dito ter um beta de 1. Assim, uma ação com um beta de 1 faixas de risco global de mercado. Ou seja, se XYZ normalmente se move 10 quando a média do mercado se move 10, XYZ teria um beta de 1. Se movesse 20 contra o movimento de 10, teria um beta de 2, demonstrando maior risco / volatilidade que o de o mercado global. Se XYZ apenas movesse 5 contra um movimento de mercado de 10, teria um beta de 0,5, demonstrando menos risco / volatilidade do que o mercado total. Ofereça o preço mais alto de lote a que um negociante ou criador de mercado ou comprador em potencial comprará uma garantia. O preço de oferta será quase sempre inferior ao preço de venda. Se a oferta e o pedido forem idênticos, o mercado é considerado como tendo sido negociado durante esse breve momento. Tomados em conjunto, o lance e o pedido compreendem o ldquoquoterdquo ou ldquoquotationrdquo para a segurança. Os criadores de mercado ganham dinheiro com a diferença entre o preço de compra e o preço de venda. Essa diferença é chamada de spread. Se a XYZ Corp. estiver negociando atualmente, uma consulta a um corretor sobre uma cotação poderia gerar uma declaração como: ldquo49.78 por 49.84, último 49.79, rdquo significando que a oferta é 49.78, a solicitação é 49.84 e a última negociação foi 49.79 por ação . BlackndashScholes - termo aplicado a um modelo matemático de variação de preço ao longo do tempo (e fórmulas derivadas do modelo) usado para avaliar certos instrumentos de investimento, como derivativos e opções, mais comumente usado para determinar o preço das opções de compra de estilo europeu. O modelo foi descrito pela primeira vez por Fischer Black e Myron Scholes em seu artigo de 1973, The Pricing of Options and Corporate Liabilities. O modelo pressupõe que o preço das ações ou opções negociadas em grande escala segue um movimento Browniano geométrico com desvio e volatilidade constantes. Quando aplicado a uma opção de ações, o modelo incorpora a variação de preço constante da ação, o valor do dinheiro no tempo, o preço de exercício das opções e o tempo até a expiração das opções. As fórmulas derivadas do modelo usam equações diferenciais. Os tribunais descobriram que não existe uma regra da SEC que exija o uso do modelo de avaliação Black-Scholes em divulgações de procuração para programas de opções de ações corporativas. Seinfeld v. Bartz. 322 F. 3d 693 (9º Cir. 2003) Ndash das Leis do Céu Azul Uma frase colorida que se refere a estatutos de fraude contra valores mobiliários, geralmente dos estados. As leis da Blue Sky geralmente exigem que os ofertantes de títulos, bem como os corretores, cumpram certos requisitos de registro. Eles também estabelecem penalidades para o não cumprimento. O termo é às vezes usado como um verbo, como em ld blue skyrdquo, uma oferta, que significa determinar se uma proposta de oferta de títulos passa com cada estado particular em que os títulos devem ser vendidos. As origens do termo ldquoblue skyrdquo, como se aplica aos títulos, são bastante claras, não nebulosas ou encobertas. A mais antiga referência escrita pertinente, feita no contexto de vendas fraudulentas de metais de cunhagem, descobertas pelo Glossário GelberLaw, aparece em 5 de junho de 1895 na página 3 do Castle Rock Journal (Condado de Castle Rock, Douglas), um jornal do Colorado, em Um artigo: ldquoO ndash honesto do dólar Contém 412 1-2 Grãos do padrão Silverrdquo: ldquo Um dólar sadio deve representar uma determinada quantidade de trabalho e ser capaz de transformações prontas em qualquer produto do trabalho. A regra é o mundo sobre o que custa pouco trabalho para conseguir vale pouco. O céu azul pode ser bastante desejável, mas como um produto inteiramente de condições naturais e não de trabalho, não é contado como tendo valor material. Quando um promotor por engenhosa persuasão consegue obter dinheiro para algo que não tem valor algum na mente do comprador crédulo, diz-se que ele está vendendo o azul do céu. Este artigo foi reimpresso mais ou menos palavra por palavra nos próximos dois ou três dias em outros jornais do Colorado, tais como: The Akron Weekly Pioneer Press (Akron, Washington County), 7 de junho de 1895 (p.4) Pagosa Springs News ( Pagosa Springs, Condado de Archuleta, 7 de junho de 1895 (pág. 3) e New Castle News (Novo Castelo, Condado de Garfield) (pág. 3) 8 de junho de 1895./pgt A primeira referência literária especificamente conectada com as leis de valores descobertos pela Gelber Law O glossário aparece em um livro de 1906: The Grafters ofAmerican: Who They Are e How They Workrdquo (Monarch Book Company, Chicago), por Clifton Rodman Wooldridge. Na página 47, Wooldridge dirige um capítulo Stand on blues Skyrsquo and lsquoHot Airrsquordquo. Wooldridge relata o depoimento do julgamento de um certo executivo da empresa processada de Lowell e Cowell Referindo-se a falsas apólices de seguro, Cowell supostamente testemunhou: "Eles eram o que eu chamaria de" céu limpo "e títulos" quentes ". lhes algumas centenas de milhares de dólares em céu azul e papel de ar quente, e enquanto eles seguravam nas mãos eles assinavam declarações juradas de que valiam meio milhão ou um milhão de dólares. 48. Wooldridge era um ex-detetive da polícia de Chicago que, embora não sem seus próprios problemas, era conhecido como o ldquoamericano Sherlock Holmes. rdquo Entre 1911 e 1933, 47 estados adotaram estatutos blue-sky (Nevada era o único defensor). O Kansas foi o primeiro, em 1911, a promulgar uma lei abrangente de valores mobiliários que exigia o registro de ambos os títulos e de seus vendedores. ldquoBlue Skyrdquo foi usado pelo então Comissário do Kansas Bank, Joseph Norman Dolley, em conexão com o estatuto, e por aqueles que o reportaram. Ver ldquoJoe Dolley é depois do céu azul Merchantsrdquo, Topeka Capital-Journal, 22 de dezembro de 1910. J. N. Dolley reclamou da enorme quantidade de dinheiro do qual o povo do Kansas está sendo enganado por esses falsários e mercadores de céu azul. : Carta de J. N. Dolley 16 de dezembro de 1910 reimpresso em Brief for Appellees at 33, Merrick vs. N. W - Halsey amp Co. 242 EUA. 568 (1917) (No. 413), citado em J. R-Macey e G. P. Miller, origem da lei do céu azul, (1991) 70 Tex. L.Rev. 347 em 360 n. 59. A lei do Kansas foi uma resposta aos vendedores que enganavam investidores involuntários ao venderem interesses sem valor em empresas que voavam à noite e em minas de ouro ao longo das estradas secundárias do Kansas. Foi alegadamente dito que nenhum ativo apoiou esses títulos - nada além dos céus azuis do Kansas. Jornais de costa a costa relataram regularmente sobre as leis do céu azul. O New York Times informou sobre o estatuto, ver, por exemplo. ldquoKansasrsquos lsquoBlue Skyrsquo Lawrdquo Sexta-feira, 13 de outubro de 1911. Artigos subsequentes foram publicados no New York Times: ldquoBankers To Take Up The Blue Sky Law Investment Homens aqui para a Convenção Trabalhará para Uniformes Leis para Som Securitiesrdquo, (sexta-feira, 22 de novembro de 1912 ): seguido de ldquoExpect to Improve lsquoBlue Skyrsquo Lawrdquo (sábado, 23 de novembro de 1912). Como resultado de outros estados promulgando leis do céu azul, o termo entrou em uso comum e generalizado (ver New York Times, terça-feira, 18 de março de 1913, ldquoNew Yorkrsqus lsquoBlue Skyrsquo Law. rdquo) À medida que os estados começaram a passar o que cada um deles especificamente referidas como suas próprias leis blue-sky, objeções constitucionais e outras surgiram, estimulando o litígio. Entre as primeiras referências judiciais, William R. Compton Co. e outros vs. Allen et al. 216 Fed. 537 (S. D. Iowa, Divisão Central, 6 de julho de 1914). Em uma opinião per curiam, o tribunal reconheceu que o caso foi levado a restringir a execução de uma lei de Iowa denominada de "Lei do Céu Azul" daquela lei. Sem entrar na origem do termo, o tribunal observou que o propósito da Lei do Céu Azul de Iowa (que julgava ser inconstitucional) era: Proteger os humildes e honestos cidadãos do estado, desaprender na complexidade dos negócios como conduzido neste dia de ser saqueado e despojado de seus pequenos ganhos e propriedades, adquiridos através de anos de trabalho paciente, pelas maquinações sedutoras e os dispositivos enganosos, enganosos e fraudulentos que os inescrupulosos, astutos e enganosos lsquo Get-Rich-Quick - Wallingfordsrsquo do nosso dia practicehellip. rdquo A primeira referência da Suprema Corte dos Estados Unidos foi em Hall v. Geiger-Jones Co. 242 U. S. 539 (1917), relativa à constitucionalidade dos regulamentos de títulos do estado de Ohio. O juiz Joseph McKenna escreveu: O nome que é dado à lei indica o mal a que se destina, isto é, usar a linguagem de um caso citado, esquemas especulativos que não têm mais base do que tantos pés de céu azul ou, como afirmado pelo advogado em outro caso, para parar a venda de ações em questões de mosca, poços de petróleo visionários, minas de ouro distantes e outras como explorações fraudulentas. McKenna não identificou o caserdquo rdquocito. As explicações sobre o termo enfocam a idéia de que corporações fraudulentas não têm nada atrás de si, mas céu azul (como na situação do Kansas, acima) ou que corretores tentam vender pedaços do céu azul, ou promotores antiéticos podem vender lotes de prédios no azul sky. rdquo As leis do Céu Azul diferem de estado para estado. As leis do New Yorkrsquos Blue Sky são conhecidas como The Martin Act. Em um artigo sobre o Estatuto do Kansas, datado de 2 de dezembro de 1911, The Saturday Evening Post (Vol. 184 No. 23) escreveu: “A legislatura assumiu o assunto em sua última sessão e em março aprovou o ndash da Lei do Céu Azul apelidado porque é projetado para evitar a trapaça de pessoas através da venda de títulos que são baseados principalmente na atmosfera. Um memorando normalmente preparado pelo advogado underwriterrsquos descrevendo o tratamento de uma determinada nova emissão de títulos municipais sob as leis blue-sky de os vários estados. Os títulos municipais são geralmente isentos das exigências de registro de títulos estaduais, embora os corretores que os vendem estejam sujeitos a muitos requisitos de registro e regulamentação. Ndash Bond Um título é um título de dívida, semelhante a um IOU. As obrigações podem ser emitidas por um governo, município, corporação, agência federal ou outra entidade, todas essas entidades conhecidas como o emissor. Essencialmente, o emissor está tomando dinheiro emprestado do investidor. Por outro lado, o investidor está emprestando dinheiro ao emissor. Em troca do empréstimo, o emissor promete pagar ao investidor uma taxa de juros específica durante a vida do título e pagar o valor de face do título (o principal) quando for devido, ou vier a vencer. Diferentemente da propriedade em ações de uma empresa, um detentor de bônus não possui privilégios ou benefícios de propriedade corporativa. Dependendo do valor do crédito do emissor, o título pode ser classificado de acordo com o risco. O risco em qualquer investimento em títulos é o risco de o emissor deixar de pagar os juros ou o pagamento do principal. As obrigações estão disponíveis em uma variedade de estilos, tipos e sabores, cada uma com características específicas que atenderão às necessidades de adequação, bem como à tolerância de risco, de diferentes investidores. Bowie Bonds ndash Em 1997, sabendo que um título pode ser garantido por qualquer fluxo confiável de renda, o financista de Wall Street David Pullman desenvolveu um título securitizado pelo catálogo musical de David Bowiersquos, mais especificamente as receitas atuais e futuras de 25 álbuns (287 músicas). David Bowie registrou antes de 1990. Os títulos tinham vencimentos de dez anos e a emissão inteira foi comprada pela Prudential Insurance Company. Eles renderam 7,9. Bowie percebeu 55 milhões imediatamente da venda de tais títulos, sacrificando dez anos de royalties. Os títulos, vencidos em 2007, não estão disponíveis. No entanto, outros artistas seguiram o exemplo e esse tipo específico de segurança apoiada por ativos (apoiada por propriedade intelectual) também é conhecido como Pullman Bonds. A Bucket Shop é historicamente um tipo de corretora ilegal, onde, antigamente, era possível comprar e vender ações. Bucket shops were typically small store front operations that catered to the small investor prior to the stock market crash of 1929. Bucket shops generally no longer exist. When a customer placed an order it was written on a slip of paper and literally tossed into a bucket instead of being immediately transmitted to the floor of a stock exchange. The bucket shop would later match up buys and sells to increase its own profit. Since a customer had little way to know the actual price at any particular moment, the bucket shop could match a buy at 10 with a sell at 9 and pocket the 1 difference. As long as the bucket shop reported prices within the days high / low range, the customer had no way of detecting the fraud. The bucket shop could shift its recommendations to correct any imbalance in the buy-sell orders in its own bucket. Todays instant price quotes and executions have made bucket shops impossible. The term is still in use, however, to refer to what are more accurately (though metaphorically) called ldquobolier rooms. rdquo Bull ndash An optimist. A stock market bull believes that prices of securities will rise. A Bull Market is one that reflects, for a prolonged period, such optimism in the form of rising stock prices and increased market volume. One of the hallmarks is that the prices rise faster than historical averages. The opposite of a bull is a bear. Burn Rate ndashThe rate at which a company spends net cash over a certain period, usually a month. Often used by venture capitalists, underwriters and risk tolerant investors in new businesses to measure how much time a startup company has to reach positive cash flow before it runs out of money or requires additional funding. Butterfly spread ndashthis is a name of one of many ldquowinged spreadsrdquo, option strategies, which when graphed, resemble winged creatures (butterflies, condors). The ldquobasicrdquo butterfly spread is a neutral strategy that combines a bull spread with a bear spread, and provides both limited risk and limited profit. The butterfly spread can be built with either calls or puts. If calls and puts are mixed, the name changes. So, for example, using calls, a typical butterfly spread construction, called a ldquolong call butterfly spreadrdquo would involve the simultaneous (i) purchase of one in the money call (ii) sale of two at the money calls and (iii) purchase of one out of the money call. For example, XYZ is trading at 40 per share in June. Constructing a long call butterfly spread involves buying a July 30 call for 1100, writing two July 40 calls for 400 each and buying a July 50 call for 100. The net debit taken to enter the position is 400, which defines the maximum possible loss. On expiration in July, XYZ is still trading at 40 per share. The July 40 calls and the July 50 call expire worthless while the July 30 call still has an intrinsic value of 1000. Subtracting the initial debit of 400, the resulting profit is 600, which is the maximum profit attainable. (Maximum profit is equal to the strike price of the short call minus the strike price of the lower strike long call minus the net premium paid minus commissions, and is achieved when the price of the underlying security equals the strike price of the short calls.) Maximum loss results when the stock is trading below 30 or above 50 in our example. At 30, all the options expire worthless. Above 50, any profit from the two long calls will be neutralized by the loss from the two short calls. Em ambas as situações, o comerciante de borboletas sofre perda máxima que é o débito inicial levado para entrar no comércio. The maximum loss and the maximum profit are increased or decreased respectively by the commissions incurred. The strategy is useful if there is no volatility in the underlying security, which assures the profit. (The maximum loss equals the net premiums paid plus the commissions, and occurs when the price of the underlying security is less than or equal to the strike price of the lower strike long call or when the strike price of the underlying security is greater than or equal to the strike price of the higher strike long call.) Breakeven points exist as upper breakeven (equal to the strike price of the higher strike long call minus the net premium paid) or lower breakeven (equal to the strike price of the lower strike long call plus the net premium paid.) Doing the same thing with puts instead of calls results in a long put butterfly spread. Butterfly spreads can be placed in a variety of securities, including commodities. Brokers recommending such strategies need to be aware of regulatory exposure (commission motive). See In re Techno Trading, Inc. et al. CFTC Docket No. 95-8 (Jan. 8, 1998), and In re FSI Futures, Inc. et al. CFTC Docket No. 95-9, (Jan. 8, 1998). Traders should also be aware of tax issues relating to gains and losses, as well as margin and Regulation T issues. The term is defined at NYSE Rule 431(f)2) as follows: ldquoan aggregation of positions in three series of either puts or calls, structured as either: (A) a long butterfly spread in which two short options in the same series are offset by one long option with a higher exercise price and one long option with a lower exercise price or (B) a short butterfly spread in which two long options in the same series offset one short option with a higher exercise price and one short option with a lower exercise price, all of which have the same contract size, underlying component or index and time of expiration, are and based on the same aggregate current underlying value, where the interval between the exercise price of each series is equal, and the exercise prices are in ascending order. rdquo Daily Trading Limit - The highest and lowest prices that a commodity or option is permitted to reach in one day. Once reached, no trading occurs in that commodity or option until the following session. If a security reaches its limit early and stays there all day, it is said to be having an up-limit day or a down-limit day. Limits are posted by exchanges such as the Chicago Board of Trade. Dark Pool ndash (also dark liquidity pool), sometimes called the upstairs market, this term refers to off-exchange trading by big fish. It can be thought of as an external crossing network, which creates an opaque market, thereby allowing large players to trade without disclosing their hands. Dark pools range from completely opaque to semi-transparent, and their order flow can range from transient to stationary, although the majority of dark pools tend to be completely dark. They either match order flow periodically (these are call markets such as Posit, Instinet or the Nasdaq Cross) or continuously as orders flow to traditional exchanges. ITGs Posit Now, its continuous crossing network, and NYFIX Millennium leverage this transient matching model. Because the percentage of both buy-side and sell-side flow from these external networks has increased dramatically, the price discovery process of traditional markets is being affected. Also, because the profits from these dark pools are unavailable to traditional markets, Nasdaq has recently taken an interest in participating. Day Order - Unless a broker is given specific instructions to the contrary, orders to buy or sell a stock are day orders, meaning they are good only during that trading day. Orders that have been placed but not executed during regular trading hours will not automatically carry over into after-hours trading or the next regular trading day. Similarly, day orders placed during after-hours trading can only be executed during that after-hours session. If an order is not executed during a trading session, a new order needs to be placed in the next trading session. A day order to buy or sell securities that is not filled or cancelled automatically expires at the close of the session. Dead Cat Bounce ndash No animals were harmed in the development of this entry. The term comes from the belief (observation) that even a dead cat will bounce if it is dropped off the roof of a building. (Please do not try this). The term applies to a brief technical recovery, after a pronounced fall-off, in the price of a given stock or the market as a whole. Wikipedia attributes the earliest use of the phrase to 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year. Journalist Christopher Sherwell of the Financial Times reported a stock broker as saying the market rise was a dead cat bounce. The GelberLaw Glossary has no opinion as to whether a dead cat bounce is related to the dogs of the Dow. Delta ndash In derivatives options trading, Delta is one of a number of ratios expressed by letters known as ldquothe Greeksrdquo. Delta is used to describe the ratio between a change in the price of an option to a positive change in the price of the underlier. Expressed another way, it is a measure of option price sensitivity to changes in the price of the underlier. So, for example, a delta of .50 (usually expressed as ldquofiftyrdquo) means that for every increase of one dollar in the price of the underlier, the option price increases by fifty cents. Delta Hedge - Ordinarily, the basic ldquoroutinerdquo an options market maker would employ is a strategy called a Delta hedge. The market maker would express a willingness to buy an option for some bid price less than the price dictated by its pricing model (or buy at some ask price greater than its model price). The model price would simply be some theoretical value produced by applying some formula or method, such as Black-Scholes. This difference between the bid price and the model price (or ask price and the model price) is referred to as the ldquoedgerdquo. By way of example, a counterparty appears and takes the market maker up on its ask (offer) price and buys the option. The market maker now has a position in the option, having ldquowrittenrdquo the contract. In order to protect itself, the market maker would engage in Delta hedging, by attempting to establish and maintain a Delta neutral hedge position in the underlier (for example, natural gas). On a correctly placed Delta hedge, the market maker would profit from the edge when the positions are closed out. If there are too many open positions, Delta hedging becomes more difficult, and in all events does little to ameliorate the risks associated with volatility. See, Caiola v. Citibank . NA, New York, 295 F. 3d 312, 317 (2nd Cir. 2002)(ldquoeffective delta hedging is a sophisticated trading activity that involves the continuous realignment of the hedges portfolio. Because the delta changes with movements in the price of the underlying asset, the size of the delta core position also constantly changes. rdquo Delta measures sensitivity of the price of the derivative to the change in the price of the underlying asset. Id. Derivatives - are financial instruments that are dependent upon some other thing of value. In other words, the value of a derivative is derived from the value of an underlying asset (or index or something else). They can be simple, such as stock options, or more complex such as commodity futures contracts. Derivatives can be based on an underlying asset such as stocks, bonds, commodities, loans, or real estate. They can also be based upon an index, such as the Dow Jones or other stock or bond market indices, or interest rate indices or exchange rate indic es and so forth. The most common types of derivatives are options, swaps, forward contracts and future contracts. Derivatives are useful in hedging against loss or leveraging for greater profit. Because the value of a derivative is contingent on the value of the underlying asset, the notional value of derivatives is recorded off the balance sheet of an institution, while the actual market value of derivatives is recorded on the balance sheet. Dogs of the Dow - A pet name for a particular contrarian investment strategy. The Dow Jones Industrials represent thirty well-known, mature companies that have strong balance sheets with sufficient financial strength to ride out rough times, usually dividend paying companies. Periodically, some companies are dropped and new ones are added. By investing in these thirty companies, the theory is that the investor is making a quality investment. The idea behind the Dogs of the Dow strategy is to buy those DJI companies with the lowest P/E ratios and highest dividend yields. These Dow stocks are ldquocheapestrdquo relative to their peers. Essentially the strategy requires an investor, at the beginning of the year, to buy equal dollar amounts of the 10 DJI stocks with the highest dividend yields, for a one-year holding period. At the end of the year, adjust the portfolio to have just the current Dogs of the Dow. The idea is to buy good companies when they are out of favor and their stock prices are low. Different studies have suggested that this strategy produces comparatively better returns than most mutual funds, or the various averages. In defining or describing various investment strategies, the GelberLaw Glossary does not endorse any of them. Dollars ndash the units of currency of Australia, Bahamas, Barbados, Bermuda, Canada, Hong Kong, Jamaica, New Zealand, Singapore, Taiwan, Trinidad and Tobago, and the United States. Lapsed Option - Option that expires without being exercised and is therefore worthless. Lat ndash Unit of curency of Latvia. Layering A method of engaging in multiple levels layers - of securities transactions, or the placement and rapid cancellation of buy or sell orders, in order to create false volume indicators and thereby trick legitimate traders into buying or selling securities at an artificial price. Lei ndash Unit of currency of Moldava. Lempira ndash Unit of currency of Honduras. Leone ndash Unit of currency of Sierra Leone. Lettered Stock - Stock, usually issued in unregistered private placements that has limited transferability. Also called legend or restricted stock. Commonly, lettered stock restrictions arise under Rule 144 (adopted in 1972) of the Securities and Exchange Act of 1934. Rule 144 permits persons who hold such securities to publicly sell them without registration and without being deemed underwriters, if certain conditions are satisfied. The most common restriction is the prevention of sale for a period of time. The SEC amended rule 144 on February 18, 1997 to permit resale of limited amounts of restricted securities by any person after a one-year holding period, not the previous two-year holding period. U. S. Securities and Exchange Commission, Final and Prepared Amendments to Securities Act Rule 144, February 18, 1997 17 C. F.R. Parts 230 and 239 15 U. S.C. 77a et. seq. Leu ndash Unit of currency of Romania. Lev ndash Unit of currency of Bulgaria. Limit Order - A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. If a buyer places a limit order to buy 100 shares of XYZ Corp. at 49.00, the order will only be filled if (a) the stock drops to 49.00 and (b) enough shares are available at that price. If the stock goes no lower than 49.01, the buy limit order will not get filled. Conversely, if a seller places a limit order to sell 100 shares of XYZ Corp. at 49.00, the order will only be filled if (a) the stock rises to 49.00 and (b) enough shares are being sought at that price. If the stock goes no higher than 48.99, the sell limit order will not be filled. A limit order is a useful tool to avoid being caught by a runaway or volatile market, as can happen with a market order. A hot IPO is offered at 12.00 per share. A buyer wants in but does not want to risk a market order if the stock runs. A limit order to buy at 15.00 would assure that the purchase does not exceed that price. Some brokerage firms may charge higher commissions for executing a limit order than a market order. London Interbank Offered Rate (LIBOR ) ndash LIBOR is the interest rate a which London banks lend funds to other prime banks in London, using Eurodollars. This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years It is thus used as a basis for determining the rate of interest payable in Eurodollars and other Eurocurrency loans. Less credit worthy corporate borrowers will ordinarily be charged some rate based on LIBOR such as LIBOR plus 1. Some adjustable rate mortgages in the United States use LIBOR as a benchmark. Long ndash Outright ownership of a security. A person who is long a stock or bond, for example, owns it outright and has the right to sell it, transfer it as a gift, pledge it as collateral, and also has the right to receive income generated by the security, and also bears the rights and obligations attending price increases and decreases in the value of the security. If an investor is long 500 shares of XYZ, for example, that investor owns the shares and either possesses the certificate or has it on deposit in a brokerage account. Long is the opposite of short. SITE DIRECTORY: Madoff ndash Yiddish for Ponzi. Maloney Act of 1938 - 52 Stat. 1070, as amended, 15 U. S.C. 78o-3, amended the Securities Exchange Act of 1934 by adding Section 15A, and is thus also called the Maloney Amendment. It provides for the regulation of over-the-counter securities markets through national associations registered with the Securities and Exchange Commission. NASD is the only association ever to register under the Maloney Act. NASD (formerly known as National Association of Securities Dealers) thus has a quasi-governmental status, which renders it largely immune from suit while simultaneously allowing it to assert that it is not a ldquostate actorrdquo for Fifth Amendment purposes. What this means is that if the regulatory division of NASD seeks to question a broker, the broker will be barred from the securities industry if he or she asserts a Fifth Amendment right. Curiously, the broker can safely assert a Fifth Amendment right not to answer questions in a SEC inquiry. The Maloney Act subjects NASD to the supervision and oversight of SEC. Margin - Margin is borrowing money from a broker to buy stock, using the investment as collateral. The loan incurs margin interest, payable to the broker, at what is called the broker call rate or call money rate. The use of margin enables investors to increase their purchasing power, and creates leverage, which on the positive side increases the percentage rate of return on the investment. On the negative side. it increases the percentage rate of loss. For example, if an investor buys 100 shares of XYZ in a cash account at 50 per share, the purchase will cost 5,000 plus commissions. If XYZ rises to 75 per share and the investor sells, the investor receives 7,500, less commissions, yielding a 2500 profit, an approximate return of 50 on the original investment. But if the stock were purchased on margin ndash borrowing half the cost (2,500) from the broker ndash the same purchase would only require an outlay of 2,500 form the investorrsquos pocket. Thus the 2,500 profit would yield a 100 profit. Conversely, if the stock price decreases, the losses are similarly magnified. If the stock in the foregoing example falls to 25 per share, the loss would be 50 percent on an all cash investment. But on margin, the loss will be 100 percent, (plus the interest on the loan.) Thus, on margin, if a stock experiences an unexpected dip, there may be no opportunity to continue to hold it until it ldquocomes backrdquo. For this reason, in volatile markets, investors who put up an initial margin payment for a stock may, from time to time, be required through a mechanism called a ldquomargin callrdquo to provide additional cash if the price of the stock falls. Brokerage firms have the right to sell a customerrsquos securities that were bought on margin. They can do so without notification and at a substantial loss to the investor under specific circumstances that generally relate to the degree of insecurity the broker feels. Because of the risks associated with margin, brokers are required to determine the suitability of using margin for each particular customer, who is then asked to sign a ldquomargin agreement. rdquo The margin agreement states that a customer must abide by the rules of the Federal Reserve Board, the New York Stock Exchange, the National Association of Securities Dealers, Inc. and the brokerage firm providing the margin account. The Federal Reserve Board and many self-regulatory organizations such as the NYSE and NASD, have rules that govern margin trading. As corretoras podem estabelecer suas próprias exigências, desde que sejam pelo menos tão restritivas quanto as regras do Conselho Federal de Reserva e do SRO. Before trading on margin, the NYSE and NASD, for example, require a deposit with the brokerage firm of a minimum of 2,000 or 100 percent of the purchase price, whichever is less. Isso é conhecido como a margem mínima. Some firms may require a deposit more than 2,000. According to Regulation T of the Federal Reserve Board, a customer can borrow up to 50 percent of the purchase price of ldquomarginablerdquo securities. Not all securities can be purchased on margin. A common requirement for marginability is that the stock be trading above 5 per share. Isso é conhecido como a margem inicial. Some firms require a deposit of more than 50 percent of the purchase price. After a stock is purchased on margin, the NYSE and NASD require a minimum amount of equity in the margin account. The equity is the value of the securities less how much is owed to the brokerage firm. NASD margin rules can be found at Rule 2520 in the NASD Manual. Margin rules require at least 25 percent of the total market value of the securities in the margin account at all times. Os 25% são chamados de requisitos de manutenção. In practice, many brokerage firms have higher maintenance requirements, typically between 30 to 40 percent. Maintenance margin requirements can fluctuate depending on the type of stock and the market environment. Maintenance requirements work as follows: Investor buys 16,000 worth of XYZ by borrowing 8,000 from the firm and paying 8,000. If the market value of XYZ drops to 12,000, the account equity will fall to 4,000 (12,000 - 8,000 4,000). With a 25 percent maintenance requirement, the customer must have 3,000 equity in the account (25 percent of 12,000 3,000). In this example, there is enough equity because the 4,000 equity exceeds the 3,000 maintenance requirement. But if the firm requires 40 percent, there would not be enough equity. The firm would require 4,800 (40 percent of 12,000 4,800). The 4,000 equity is less than the firms 4,800 maintenance requirement. As a result, the firm may issue a maintenance margin call, since 4,000 equity in the account is 800 below the firms 4,800 maintenance requirement. If a customer fails to meet the margin call, the firm will sell the securities to increase the equity in the account up to or above the firms maintenance requirement. Technically, the margin call is a courtesy, and a brokerage firm can sell out the account without waiting for the additional value to be deposited. Market Order - A market order is an order to buy or sell a stock at the current market price. Unless specified otherwise, a broker will ordinarily enter an order as a market order. Hence the majority of orders placed on the various exchanges are market orders. The advantage of a market order is that it is almost always guaranteed to be executed (as long as there are willing buyers and sellers). Also, some brokerage firms charge lower commissions for market orders than for limit orders. The disadvantage is that the money paid (or received) when a market order is executed may not always be the price obtained from a real-time quote. This may be especially true in fast-moving markets where stock prices are more volatile. When an order at the market is placed, particularly for a large number of shares, there is a greater chance there will be different prices for various parts of the order. Markka ndash Unit of currency of Finland before the Euro. Mortgage-Backed Securities (MBS ) - are pools of mortgages used as collateral for the issuance of securities in the secondary market. They are issued by various entities, such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Association as well as by Ginnie Mae. MBS are commonly referred to as pass-through certificates because the principal and interest of the underlying loans is passed through to investors. The term Mortgage Backed Certificate thus refers to the security itself. The interest rate of the security is lower than the interest rate of the underlying loan to allow for payment of servicing and guaranty fees. Ginnie Mae MBS are fully modified pass-through securities guaranteed by the full faith and credit of the United States government. Thus, regardless of whether the underlying mortgage payment is made, investors in Ginnie Mae MBS receive full and timely payment of principal and interest. Mutual Fund - A mutual fund is a fund of pooled money operated by an investment company that invests the money in a variety of instruments (domestic and foreign) like stocks, bonds, options, futures, currencies, money market securities or government securities. A mutual fund offers the advantage of diversifications and professional management. Each mutual fund is different in its make-up and philosophy. Mutual funds are of many varieties, and range from very aggressive to very conservative with respect to risk. Some are designed for growth and others for income. They can be narrowly focused, such as single sector funds (like pharmaceuticals, or technology) or broad based funds that mirror the market as a whole. Funds sold through brokers carry sales charges (load funds) and funds sold directly often do not (no load funds.) All funds charge some type of management fees or administrative fees. SITE DIRECTORY: NASAA (North American Securities Administrators Association) ndash NASAA was organized in 1919 in Kansas (where the first blue-sky law was passed in 1911). It is the oldest international investor protection organization. NASAA membership currently consists of 67 state, provincial, and territorial securities administrators in the 50 states, the District of Columbia, the U. S. Virgin Islands, Puerto Rico, Canada, and Mexico. NASAA members, essentially the state and provincial securities regulators, license firms and their agents, investigate violations of state and provincial law, file enforcement actions when appropriate, and educate the public about investment fraud. NASAA makes it easy for regulators from multiple jurisdictions to share information in connection with enforcement actions against brokerage firms deemed to be in violation of blue-sky laws, and indeed enables the targeting of perceived ldquoviolatorsrdquo for enforcement proceedings. NASD ndash Formerly known as the National Association of Securities Dealers, NASD is a nonprofit organization formed under the joint sponsorship of the Investment Bankersrsquo Conference and the Securities and Exchange Commission to comply with the Maloney Act. NASD, as the main ostensibly non-governmental securities regulator in the United States, registers member brokerage firms, establishes rules to govern their behavior, examines them for compliance and disciplines those it deems to be non-compliant. Despite NASDrsquos position as a non-governmental agency, federal law requires brokerage firms to register with it. NASD previously owned NASDAQ, which it sold in 2000. NASD Dispute Resolution, Inc. a wholly owned subsidiary of NASD, became operational on July 9, 2000, replacing a former NASD entity, called NASD Regulation Office of Dispute Resolution. This subsidiary administers NASDrsquos vast securities arbitration program throughout the United States and England. NASD Regulation, Inc. another subsidiary, carries out NASDrsquos regulatory and oversight functions. Through its Department of Enforcement, it implements proceedings against member firms and individuals. Even though NASD is under the supervision and control of the Securities and Exchange Commission (a governmental agency), it is generally not subject to the restraints imposed on the SEC, and hence the subjects of NASD enforcement proceedings are not entitled to constitutional legal protections. This near absolute level of power can sometimes prove troubling. Natural Gas ndash Essentially methane, natural gas is a commodity for which futures contracts are traded on NYMEX. Each futures contract is for ten thousand million British Thermal Units, expressed as ldquo10,000 mmBTUrdquo or ten billion BTUs. A BTU is the amount of heat required to raise the temperature of one (1) avoirdupois pound of pure water from fifty-eight and five tenth degrees (58.5deg) Fahrenheit to fifty-nine and five tenths degrees (59.5deg) Fahrenheit at a constant pressure of 14.73 pounds per square inch absolute. A billion BTUrsquos is known as a gigajoule. Trading in natural gas futures is governed by NYMEX Rule 220 et seq. Negligence ndash failing to do something which a ldquoreasonable manrdquo, guided by those ordinary considerations which generally regulate human affairs, would do, or, conversely, doing something (without fraudulent intent) which a ldquoprudent manrdquo would not do. Negligence is often asserted as a ldquocause of actionrdquo in securities arbitration. It carries a ldquopreponderance of the evidencerdquo burden of proof and is subject to defenses such as ldquocontributory negligencerdquo or ldquocomparative negligencerdquo. No Load Fund - Mutual Fund offered by an open-end investment company that imposes no sales charge (load) on the purchase or sale of its shares. Investors buy shares in no-load funds directly from the fund companies, rather than through a broker as is done in load funds. Funds can be either front-loaded or back loaded, meaning the load can be paid up-front on purchase or later, upon sale. Many no-load fund families allow switching of assets between stock, bond, and money market funds. The listing of the price of a no-load fund in the newspaper is accompanied by the designation NL. The net asset value, market price and offer prices of this type of fund are exactly the same, since there is no sales charge. If an investor purchases 10,000 worth of a no-load mutual fund, all 10,000 will be invested into the fund. On the other hand, if a purchaser buys a load fund that charges a commission of 5 upon purchase, the amount actually invested in the fund is 9,500. If both funds return 10 in one year, the no-load fund would have grown to 11,000 while the load fund would grow to 10,450. Load versus no-load fund return calculators can be found on the Internet. Norwegian Krone ndash Unit of currency of Norway. NYMEX ndash New York Mercantile Exchange. NYMEX is the worldrsquos largest physical commodity futures exchange, and is the major trading forum for energy and precious metals. Transactions executed on NYMEX avoid the risk of counterparty default because the NYMEX clearinghouse acts as the counterparty to every cleared trade. Trading is conducted through two divisions, the NYMEX Division, for the energy, platinum, and palladium markets and the COMEX Division, for other metals, such as gold and silver. NYMEX is headquartered at the World Financial Center in lower Manhattan. SITE DIRECTORY: OATS - Order Audit Trail System. To eliminate horsing around with customer orders, NASD Rules 6950 ndash 6958 require FINRA member firms to develop a means for electronically capturing and reporting to OATS specific data elements related to the handling or execution of orders, including recording all times of these events in hours, minutes, and seconds, and to synchronize their business clocks. The SEC approved these Rules on March 6, 1998. On July 31, 1998, the SEC approved amendments to OATS Rules 6954 and 6957 and NASD Rule 3110. The amendments clarify the recording and recordkeeping requirements associated with the OATS Rules. NASD, now FINRA, established the Order Audit Trail SystemSM (OATS SM), as an integrated audit trail of order, quote, and trade information for Nasdaqreg securities, originally pursuant to a settlement agreement with the SEC. FINRA will use this audit trail system to recreate events in the life cycle of orders and more completely monitor the trading practices of member firms. Essentially, each order reported to OATS is assigned an identifier so the order may be uniquely identified. Odd Lot ndash most commonly used to refer to transactions of less than 100 shares of stock. Trading in multiples of 100 shares is called trading in round lots. So if a customer buys 100 shares of XYZ it is a round lot trade, but if a customer buys 56 shares of XYZ it is an odd lot trade. Odd-lot trades could result I higher commissions. Certain securities may trade in round lots of less than 100 shares, a round lot being technically defined as the normal trading unit of the security. Open Order ndash An order to purchase or sell securities that has not yet been filled or canceled, such as a Good-Till-Canceled order. OPRA - Option Price Reporting Authority. OPRA is the securities information processor for market information generated by trading of securities options in the United States. Last sale reports and quotations are the core of the information that OPRA disseminates. However, OPRA also disseminates certain other types of information with respect to the number of options contracts traded, open interest, end of day summaries, and certain kinds of administrative messages. OPRA option codes, the first one to three characters identifying the option root symbol, and the remaining two alpha characters identifying the expiration month, call/put indicator and strike price are being changed by the OSI. Evidently, the limitation of three characters representing the option root creates inconsistency for OTC securities, resulting in the use of illogical identifiers for both options and underlying securities, posing challenges for the marketplace. Option - The right, but not the obligation, to buy (for the purchaser of a call option) or sell (for the purchaser of a put option) a specific amount of a particular stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified, limited period of time. Stock option contracts are structured so that a single contract covers 100 shares of the underlying stock. So for example if a purchaser, in an opening transaction, buys 5 call contracts for XYZ corporation with a strike price of 50 expiring in two months, that purchaser is purchasing the right, but not the obligation, to buy 500 shares of XYZ stock at 50 per share (even if XYZ stock is higher than 50 per share), at any time up to the expiration date, which is usually the first Saturday after the third Friday of the month in which the option expires. The potential gain is the difference between the strike price and the actual price of the underlying stock, times 100. The maximum potential loss is the price paid for the option. The purchaser of a call option becomes a holder of that option. The holder can sell the option at any time up to expiration and profit or limit loss in accordance with the fluctuating price of the call option. When a holder sells an option, that holder is a seller, since the transaction is a closing transaction. However, if a person sells an option as an opening transaction, the seller is known as a writer. The writer of an option contract is much like the writer of an insurance contract. For example, the writer of 5 call contracts for XYZ corporation with a strike price of 50 expiring in two months, is guaranteeing that he will sell 500 shares XYZ to the holder of the option at 50 per share, no matter how high the actual price of XYZ is. Conversely, the writer of 5 put contracts at a 50 strike is guaranteeing that he will purchase 500 shares at 50, no matter how low the actual price is. The writer is responsible for fulfilling the terms of the contract by delivering the shares to the appropriate party. In the case of a security that cannot be delivered such as an index, the contract is settled in cash. For the holder, the potential loss is limited to the price paid to acquire the option. When an option is not exercised, it expires. No shares change hands and the money spent to purchase the option is lost. For the buyer, the upside is unlimited. In order to be able to trade options, an investor must demonstrate suitability for the different levels of option trading offered by most brokerage firms, and complete special account forms that must be approved by a type of supervisor known as a registered options principal. IN turn, the brokerage firm must provide the customer with an Options Clearing Corporation Prospectus, which explains the risks of various option strategies. There are multiple strategies using options as leverage or hedges against losses, and these strategies can involve different kinds of ldquospreadsrdquo, some of which have bizarre names such as four-legged butterfly and bull put spread, among others. Order ndash simply an instruction to a broker to buy or sell a security for a customer account. There are numerous types of orders, such as market orders, limit orders, day orders, good-till-cancelled orders, stop orders, fill or kill orders, all or none orders among others. Basically different types of orders attempt to tailor either the time, price or size of the transaction. Some securities disputes are premised on an allegation that the broker failed to follow or failed to execute and order. OSI ndash Options Symbology Initiative . The Options Symbology Initiative is an undertaking by an industry consortium headed by the Options Clearing Corporation (OCC) to eliminate the OPRA codes that have worked well for over 25 years. The consortium collaborated to address limitations in the traditional method of identifying U. S. listed options contracts during back-office processing. This is typically a three to five alpha-character representation the first three characters are used to identify the options listing symbol and the remaining two alpha-characters are used to identify the expiration month, call/put indicator and strike price. This method has been used for more than 25 years. The new plan will replace the current five-character symbols with a 17 ndash 25 character symbol (most commonly a 21 character symbol) that explains the underlying option. The new identification format comprises four key components: the underlying symbol, the expiration date, the strike price and the option type (call or put). This transition from the very complicted 5 symbol method to the streamlined simplified 21 symbol method is, as of 2010, pretty much in effect. SITE DIRECTORY: Painting the Tape - The illegal practice in which manipulators buy and sell a specific security among themselves, creating the illusion of high trading volume and significant investor interest. The increased volume attracts other unsuspecting investors who might then buy the stock and enable the traders to profit. For example, XYZ Corp. trades at 1 per share until somebody suddenly offers to buy 100 shares at 2 a share. The offer is accepted, the trade is reported, the news hits, it gets mentioned on CNBC and the manipulators then get out. Distantly related to ldquopump and dumprdquo. Pecora Investigation ndash into the causes of the 1929 stock market crash, began on March 4, 1932 by the Senate Committee on Banking and Currency. Ferdinand Pecora (1882 ndash1971), a 51 year old assistant district attorney for New York County, (a graduate of New York Law School), was the fourth and final chief counsel for the investigation, originally launched under the Committees chairman, Republican Senator Peter Norbeck. Hearings began on April 11, 1932, but were criticized by Democrats. Two chief counsels were fired and a third resigned after the Committee refused to give him broad subpoena power. In January 1933, Pecora was hired to write the final report, but found the investigation had essentially accomplished nothing. Pecora sought to hold another month of hearings. Democrats had won the majority in the Senate, and newly elected FDR urged the new Democratic chairman of the Banking Committee, Senator Duncan U. Fletcher, to let Pecora continue. Roosevelt often conferred with Pecora, encouraged him, and depended on Pecoras work to build public support for reform. So actively did Pecora pursue the investigation that his name became publicly identified with it, not the Committees chairman. The hearings ended May 4, 1934. The Pecora Investigation uncovered a wide range of abusive practices by banks and bank affiliates. These included underwriting unsound securities in order to pay off bad bank loans as well as pool operations to support the price of bank stocks. His exposeacute of National City Bank (now Citibank), including that the bank paid cash bonuses to traders who sold the most stocks and bonds, particularly the riskiest ones it wanted to dispose of fastest, made headlines and caused the banks president to resign within weeks. As a result, Congress passed the Glass-Steagall Banking Act of 1933, the Securities Act of 1933, and the Securities Exchange Act of 1934. Pecora was appointed as one of the first commissioners of the SEC. In 1939 Pecora published a memoir, Wall Street Under Oath:The Story of Our Modern Money Changers. Pecora wrote: Bitterly hostile was Wall Street to the enactment of the regulatory legislation. As to disclosure rules, he stated that Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the bankers stoutest allies. PIABA - Public Investors Arbitration Bar Association . In or around 1990, a group of lawyers who tended to represent public investors formed this group in order to share information and strategies helpful to the efforts of investors who were bringing securities arbitration claims against their brokers and brokerage firms. Since that time PIABA has grown to be the largest organization of its type. In general, PIABA engages in a broad range of efforts, funded by dues paying members, to improve the chances of an investor prevailing in a claim against a broker. PIPE (Private Investment in Public Equity) - A private investment firms, mutual funds or other qualified investorrsquos purchase of stock in a company at a discount to the current per share market price, offered by the company in order to raise capital. That is, a public company typically issues unregistered equity-linked securities to such investors at a discount to the price of the issuerrsquos common stock at the time the deal is closed. The issuer commits to registering the securities with the SEC so they can be resold to the public, typically within 90-120 days. There are two main types of PIPEs - traditional and structured. A traditional PIPE is one in which stock, either common or preferred, is issued and a structured PIPE issues convertible debt (convertible into common or preferred shares). Some structured PIPEs have what is known as a ldquodeath-spiralrdquo or ldquotoxicrdquo structure. In these, a company issues convertible preferred stock or convertible debentures that convert into common stock. However, the conversion price, rather than remaining fixed, changes relative to the performance of the issuerrsquos common stock after the deal is closed or over some predetermined period in the future (or some other trigger). If the price of the common stock falls within that period of time, the conversion price drops according to a set formula. This enables the investor to get more stock for the same amount of principal. The problem with such structure is that PIPE investors have incentive to short the common stock in an effort to lower the price down after the deal closed so they could convert to more stock. This incentive can be reduced by deals that include hard or soft floors that prevent ldquohigh-level dilution, rdquo thereby reducing the incentives of investors to short the stock. Despite litigation risks, PIPEs are popular for their relative efficiency in time and cost, compared to more traditional forms of financing such as secondary offerings. PIPEs are advantageous for small - to medium-sized public companies that may have have difficulty tapping into traditional forms of equity financing. Point ndash With respect to stocks and stock options, a point is one dollar. If the stock of XYZ Corp moves up 2 dollars per share, it has moved up two points. With respect to indexes, a point is simply a unit of its measurement. If the Dow Jones Industrial Average is 15,375 and it moves up 23 points, it will be 15,398. With respect to bonds, it refers to percent. Each point is one percent. For a bond with a 1,000 face value, a point is 10. Bond yields are quoted in basis points. A basis point is one one-hundredth of one percent (1 is divided into 100 parts, each part is basis point). Different types of investment vehicles have their own special usages. For example grain futures use ldquopointrdquo to refer to one-quarter of one cent. Ponzi Scheme ndash An investment scheme in which early investors are paid out of money provided by later investors, named for Carlo ldquoCharlesrdquo Ponzi, who came to the United States from Italy in 1903. The classical Ponzi scheme was most recently orchestrated to a breathtaking degree by Bernard Bernie Madoff, culminating in Madoffs guilty plea on March 12, 2009. In 1919 Ponzi discovered that postal coupons bought in Spain could be cashed in the US for six times the cost. Ponzi sought to capitalize on this. First he converted dollars into any foreign currency with a favorable exchange rate. Next, Ponzirsquos foreign agents would buy international postal coupons in countries with weak economies. Then, the coupons were exchanged into a favorable foreign currency and finally back into dollars. He claimed 400 net profits. In truth, the red tape, coupled with currency transfer delays, ate the profits. Nevertheless, friends and family grasped the idea and believed him. On December 26, 1919, Ponzi established The Security Exchange Company. He promised 50 interest in ninety days, but claimed to be able to deliver in forty-five days, thus doubling money in ninety days. Thousands of people bought Ponzi promissory notes ranging from 10 to 50,000, but averaging about 300. Ponzi used the money from later investors to pay off his earlier investors, creating the impression of success. Ponzi grossed around 1,000,000 per week at the height of his scheme. From the start, federal, state, and local authorities investigated him. But since Ponzi had managed to timely pay off all of his notes, no complaint was filed. On July 26, 1920, the Boston Post headlined a story questioning the schemersquos legitimacy. Later that day, authorities somehow convinced him to suspend taking in new investments until an auditor examined his books. Within hours, crowds lined up demanding their money. Ponzi obliged and issued assurances of stability. He returned money to those that requested it. By the end of the first day, he had settled nearly 1,000 claims. By continuing to meet his obligations, anger dwindled and public support swelled. Two weeks later, the auditors, banks, and newspapers declared that Ponzi was bankrupt. Within days, Ponzi acknowledged a 1908 forgery conviction in Canada and a 1910 conviction in Atlanta, Georgia for smuggling five Italians from Canada into the United States. On August 13, 1920, Ponzi was arrested by the feds and released on 25,000 bond. Moments later he was rearrested by Massachusetts and re-released on an additional 25,000 bond. There were federal and state civil and criminal trials, bankruptcy hearings, suits against Ponzi, suits filed by Ponzi, and the ultimate closing of five different banks. An estimated 40,000 people had entrusted some fifteen million 1920 dollars in Ponzirsquos scheme. A final audit concluded he had taken in enough to buy approximately 180,000,000 postal coupons, of which it could only confirm the purchase of two. It took about eight years, but note holders received an estimated thirty-seven percent of their investment returned in installments. Ponzi was sentenced to five years in federal prison for mail fraud. After three and one-half years, Ponzi was sentenced to an additional seven to nine years by Massachusetts. He was released on 14,000 bond pending appeal and fled to Florida. Under the alias of Charles Borelli, Ponzi got into a pyramid land scheme, buying land at 16 an acre, subdividing it into twenty-three lots, and selling each lot at 10 apiece. He promised all investors that their initial 10 investment would grow to 5,300,000 in just two years. Much of the ldquolandrdquo was underwater. Ponzi was indicted for fraud and sentenced to a year in a Florida prison. He jumped bail on June 3, 1926 and fled to Texas. He hopped a freighter for Italy, but was captured on June 28th in a New Orleans port. On June 30th he sent a telegram to President Calvin Coolidge asking to be deported. Ponzis request was denied and he returned to Boston to complete his sentence. After seven years, Ponzi was released on good behavior and deported on October 7, 1934. Back in Rome, Ponzi became an English translator. Mussolini offered him a position with Italyrsquos new airline and he served as the Rio de Janeiro branch manager from 1939-1942. Ponzi discovered that several airline officials were using the carrier to smuggle currency and Ponzi wanted a cut. When they refused, he tipped off the Brazilian government. World War II brought about the airlinersquos failure. Ponzi wandered from job to job. He tried running a Rio lodge, but that failed. He then alternated between earning a pittance for English lessons and drawing from Brazilian unemployment. Ponzi died in January of 1949 in the charity ward of a Rio de Janeiro hospital. Poison Pill A poison pill is not just a drug for spies to kill themselves if caught, but it is also a strategy to enable a corporation to deter or prevent a hostile takeover. The poison pill strategy was invented in 1982 by Martin Lipton, a mergers and acquisitions lawyer at the firm of Wachtell, Lipton, Rosen Katz. In using a poison pill strategy, the target company attempts to make its stock less attractive to the acquiring company or corporate raider. The strategy often involves either a flip-in, which permits existing shareholders other than the raider to buy more shares at a discount, or a flip-over where shareholders can buy the acquirers shares at a discount after the merger. Other methods to discourage the takeover involve the use of preferred rights plans, voting rights plans or back end rights plans. In 1985, the Delaware Supreme Court essentially upheld the legality of poison pills. Moran v. Household Intern. Inc., 500 A. 2d 1346 (Del. S. Ct. 1985). The Court described a Preferred Share Purchase Rights Plan as a defensive mechanism in the arsenal of corporate takeover weaponry. That same year, The Delaware Supreme Court established a test for the reasonableness of an antitakeover defense plan, in Unocal Corp. v. Mesa Petroleum Co., 493 A. 2d 946 (Del. S. Ct. 1985), now cleverly known as the Unocal test. Poison pill strategies usually get triggered when an acquirer obtains a certain percentage of shares. For a discussion of whether a mere 5 threshold is acceptable, please see Versata Enterprises v. Selectica, Inc., 5 A. 3d 586 (Del. S. Ct. t 2010). Foreign jurisdictions may or may not allow poison pills or have restraints on them. Prescriptions for poison pills are remarkably expensive and are not covered by Medicare. Prime Broker ndash Prime brokerage is an aspect of the investment banking business. In general, prime brokers are large banks or securities firms that provide specialized services to hedge funds, institutional investors and the like. Prime brokerage services simplify the record keeping obligations of hedge funds, enabling a money manager to trade with multiple brokerage houses while maintaining cash and securities in a single master account. Typically, a prime broker will offer a variety of services, including custody of securities, clearing, lending, financing and technology, among other things, all designed to simplify the tasks facing hedge fund and other large money managers. Pullman Bonds - a form of asset backed security, secured by the intellectual property rights most often of a musician. Commonly called Bowie Bonds. Pump and Dump ndash A fraudulent scheme, also known as hype and dump manipulation, involve the baseless touting of a companys stock (frequently, if not usually, microcap companies) through false and misleading statements to the marketplace. Often the pumping is done through coercive, high pressure, hard-sell tactics, relying on carefully crafted scripts, and is done by teams of brokers working in a ldquoboiler roomrdquo. With volume increases, the Street notices and the price rises. After pumping the stock, the manipulators who bought the stock cheaply (before the pump) make huge profits by selling (the dump) into the market. Because the fraud involves material misrepresentations, pump and dump schemes of course violate the anti-fraud provisions of the federal securities laws. They often rise to the level of criminal conduct. Fortunately, they are frequently detected, investigated and prosecuted, resulting in fines, license revocations, and sometimes imprisonment. The punishment while severe for the perpetrators is cold comfort to the customers who have lost all their money. Pyramid ndash This is the ancient Egyptian word for ldquoscamrdquo. In the classic pyramid scheme, participants attempt to make money solely by recruiting new participants into the program. It is similar to a classic Ponzi scheme, except in a pure Ponzi scheme, the promoter actually deals with the investors. In a pyramid scheme, the promoter recruits investors, who in turn recruit other investors, in what soon becomes an arithmetically impossible situation, guaranteeing the entire loss of the investment. For example, if a pyramid were started by one person at the top with just 10 people beneath him, and 100 beneath them, and 1000 beneath them, and so on, the pyramid structure would require the involvement of everyone on earth in just ten layers of people with one con man on top. This human pyramid of suckers being born every minute would be about 60 feet high and the bottom layer would have more than 10 billion people. Often there is no product or service at all, and the entire scheme is based solely on recruiting more people. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over money and getting others to do the same. An early version of a pyramid scheme involved a chain letter, in which the recipient would mail one dollar to the person at the top of a list, cross that personrsquos name off, add their own name to the bottom of a list of five or ten people. Then the person would mail the letter to five or ten more people. This created the theoretical requirement that the entire population of earth and the nearest 15 populated galaxies participate. The fraudsters behind a pyramid scheme often promote their schemes as legal, or tax advantaged, often by creating the false impression that it is a legitimate multi-level marketing program. New recruits pay off early stage investors. Rand ndash Unit of currency of South Africa. Real ndash Unit of currency of Brazil. RED HERRING ndash The term describes not merely a communist fish, but also a preliminary prospectus for a company seeking to raise money, usually by going public. So named because the preliminary prospectus, not yet approved by the SEC or state regulators, was traditionally printed with either a red border or red printing on the cover of the document. The red printed legend usually said something like: ldquoA Registration Statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. Information contained in this Preliminary Prospectus is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. rdquo The SEC eliminated the red ink requirement in 1996. (See SEC Release No. 33-7300. ldquoItem 501(c)(8) of Regulation S-K - The red ink requirement applicable to the prospectus caption Subject to Completion and related legend is being eliminated, thereby reducing issuer costs and conforming the requirements of Regulation S-K with the requirements of Regulation S-B. rdquo) The Red Herring is essentially a disclosure / offering document, setting forth the business plan, executive biographies, financial projections and risks inherent in connection with an investment in the company. REIT (Real Estate Investment Trust) ndash a liquid, dividend paying means of participating in the real estate market. REITs are generally publicly traded companies (and hence can be purchased on a stock exchange like a stock) that manage real estate portfolios and pass the profits on to their shareholders. Equity REITs purchase actual real estate and shareholders receive their share of the rents received and capital gains upon the sale of the property. Mortgage REITs lend money to developers, and shareholders receive their proportionate share of interest received on the loans. Hybrid REITS mix the two. REITs can themselves avoid taxation if 75 or more their income is from real property and if they distribute 95 of their net earnings to shareholders. This high distribution requirement is what tends to make REITs high yielding investments. REITS invest in a diverse array of properties, such as shopping malls, nursing homes, office buildings, hotels, warehouses and apartment complexes, among others. Some REITs specialize in one type of property. In addition to being available directly on the stock exchanges, one can invest in REITs by investing in REIT mutual funds. Respondent - In all legal disputes, the party making the complaint is distinguished from the party defending against the complaint. In the courtroom, the party complaining is called a ldquoplaintiffrdquo and the party defending is called a ldquodefendantrdquo. In securities arbitration, the nomenclature is different - the party complaining is called the ldquoclaimantrdquo and the party defending is called the ldquorespondent. rdquo The complaint is called a statement of claim. Repurchase Agreement ndash Generally and widely referred to a ldquoRepordquo, a repurchase agreement is, functionally, a short-term loan collateralized by a security, although legal title in the security actually passes to the buyer. As a practical matter repos are usually overnight transactions, although they can last up to two years. Basically, in a repo transaction a seller sells a security (often to an institutional buyer) in exchange for cash, while promising to buy it back at a predetermined date and fixed higher cash price. The difference between the sale price and the repurchase price is the investors (i. e. the repo buyerrsquos) return, and is referred to as the ldquorepo rate. rdquo For the most part, virtually any security can be sold in a repo transaction, and they frequently involve Treasury or Government bills, corporate and Treasury / Government bonds. Corporate stocks may be used. When a custodian functions as an administrative intermediary between the two parties to a repo transaction, it is called a ldquotri-party repo. rdquo And, from the perspective of the buyer, the transaction is commonly referred to as a ldquoreverse repordquo. Rial ndash Unit of currency of Iran, Yemen and of Oman. Riel ndash Unit of currency of Cambodia. Ringgit ndash Unit of currency of Malaysia. Risk ndash The likelihood of losing money (or value) in an investment or the degree of possibility of not gaining value. Also used to describe factors that can affect the likelihood of an investmentrsquos success. In general, the maximum financial risk of every investment is the loss of 100 of the amount invested. However, in certain types of leveraged investments, such as margin transactions and types of commodities transactions, the risk can exceed 100 of the investment. In general, risks that affect the likelihood of success are supposed to be disclosed by the person inviting the investment, and sometimes these risks are disclosed in a risk disclosure document, such as a private placement memorandum or a prospectus. Rubel ndash Unit of currency of the Republic of Belarus. Ruble ndash Unti of currency of Georgia, Kazakhstan, Republic of kyrgyz, Russia, Tajikstan, Turkmenistan, and Uzbekistan. Rufiyaa ndash Unit of currency of the Republic of Maldives. Rule of 72 ndash a convenient way to calculate the approximate time it takes money to double at a given interest rate. Simply divide the number 72 by the rate of interest to determine the number of years to double. For example, money earning 9 interest will double approximately every 8 years. (72 divided by 9 is 8). The Rule of 72 works best for annually compounding interest rates, and distortion significantly increases above 20. (Continuously compounding interest is better calculated by applying a Rule of 69.3). Sale ndash a securities transaction in which the seller trades away its right, title and interest in a security in exchange for consideration, usually money. A sale can be accomplished ldquolongrdquo (when the seller owns the security being sold), or ldquoshortrdquo when the seller borrows the security in order to sell it, subject to the sellerrsquos obligation to return the security to the party from whom the security was borrowed. In options transactions, when the seller of the option does not own the option, the seller is called a ldquowriterrdquo of the option. A sale can be effected by an issuer, as part of an IPO, for example, or by a holder or trader in the secondary market. Also, a securities sale can take place either on a public market, such as a stock exchange, or privately, as a matter of contract, such as in a private placement. Sales of securities are governed not only by the various federal and state securities laws, but also by the Article 8 of the Uniform Commercial Code. Also, the effectiveness or legality of a sale may be subject to a variety of factors, such as restrictions on the security, registration status, or clearing corporation (or transfer agent) rules. Securities Exchange Act of 1934 - (P. L. 73-291, 48 Stat. 881) 15 U. S.C. sect 78a et seq. was the first federal legislation specifically intended to regulate stock exchanges and companies that have distributed securities to the public. It passed both houses of Congress with overwhelming support and was enacted on June 6, 1934. Congress promulgated the Exchange Act under its authority to regulate interstate commerce, pursuant to Article II, section 8 of the U. S. Constitution. It therefore requires the use of an instrumentality of interstate commerce - communication or transportation - before it applies. The courts have held that the use of mails or a telephone meets this requirement, even if the use is only intrastate. The Exchange Act requires publicly held companies to make periodic public disclosures and disclosures in connection with proxy solicitations. It also requires certain disclosures in connection with tender offers for the shares of publicly held companies. Finally, the Exchange Act regulates trading by certain company insiders. The Exchange Act broadly prohibits all fraud, manipulation and other abusive practices in connection with the purchase or sale of securities. In the context of most litigated or arbitrated disputes, Section 10(b) is the most often relied upon section, along with Rule 10b-5 (promulgated under the Exchange Act). With respect to stock exchanges, including the National Association of Securities Dealers, which operates the NASDAQ market, or the New York Stock Exchange, the Exchange Act requires registration and adherence to certain principles of self-regulation to insure the transparent and fair operations of the securities exchanges. Every securities broker and every securities dealer must be a member of a so-called self-regulatory organization. If either a securities firm or a person associated with a securities firm violates the rules or regulations of the exchange, or the federal securities laws, or just and equitable principles of trade, the law permits the imposition of sanctions. These sanctions can range from fines to censures to permanent barring from the securities industry to criminal penalties. The Securities and Exchange Commission (SEC) is the primary regulatory agency charged with enforcing the federal securities laws, including the Securities Act of 1933, and the Securities Exchange Act of 1934. In the 1932 election, Franklin D. Roosevelt promised economic reform in the effort to emerge from the Great Depression, arguably triggered by the 1929 market crash. The Securities Act of 1933 was the first piece of Roosevelts New Deal, and Congress enacted it during the first one hundred days of his administration. Roosevelt sought to bring back public confidence in the securities markets and was convinced that truthful and full disclosure was essential to this goal. Congress joined in this conclusion, finding that full disclosure would give investors pause before falling prey to panic selling, and passed the Exchange Act for that purpose. Security ndash The term is misleading because it implies safety. A far more accurate term would be risk instrument. Security is broadly defined in the Securities Act of 1933 (15 U. S.C. sect77a et seq.), and also in the Securities Exchange Act of 1934 (15 U. S.C. sect78a et seq.) as well as a host of judicial decsions that have interpreted the definitions. It includes a broad range of investments such as stocks, bonds, futures, options, currency options, debentures, warrants, investment contracts among other things. Congress did not define the term ldquoinvestment contractrdquo. The test for whether a particular scheme is an investment contract was established by the Supreme Court in SEC v. W. J. Howey Co. . 328 U. S. 293 (1946): ldquowhether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. rdquo The courts have consistently viewed the definition broadly. ldquoCongressrsquo purpose in enacting the securities laws was to regulate investments, in whatever form they are made and by whatever name they are called. rdquo Reves v. Ernst amp Young . 494 U. S. 56, 61 (1990). Hence, pretty much anything a broker or an issuer sells a customer for investment or trading purposes is a security. For most people ldquosecurityrdquo simply refers to stocks, bonds, futures and options. Most securities disputes involve stock, bonds or options and the various strategies relating to the purchase and sale of such securities. Shelf Registration - An arrangement under the registration rules of the federal securities laws that permits an issuer of securities to file a registration statement for any securities that will be offered on a continuous or delayed basis under the Securities Act of 1933. Shelf registrations are governed by 17 C. F. R. sect 230.415 (2002) (Rule 415). The SECs Rule 415, adopted initially in 1982, allowed issuers to register securities they expected to sell within two years of the initial effective date, without having to file additional registration statements with each offering. In the case of primary offerings of debt securities by a company eligible to use Form S-3, the company had to register only the amount of securities it reasonably expected to offer and sell within two years of the initial effectiveness date of the registration statement. In December 2005, new shelf registration rules were effected which generally make the process easier in a number of respects, particularly for the largest and most active issuers with an established track record of filing reports with the SEC required by the Securities Exchange Act of 1934. These issuers are called well-known seasoned issuers, or WKSIs (pronounced ldquoWiksirdquo). One major change is that WKSIs are now permitted to file registration statements that will become automatically effective without SEC review. The rules also liberalize certain existing restrictions to the shelf registration process that are applicable to both WKSIs and ldquoseasoned issuersrdquo that fall outside the definition of WKSI. For example, both WKSIs and non-WKSIs are no longer required to limit the amount of securities they register to what they intend to offer during the two years from the effective date of the registration statement. Now, non-WKSI seasoned issuers must merely specify an amount of securities on the registration statement, which must be updated every three years, and WKSIs need not specify any amount of securities at all. Having a registration ldquoon the shelfrdquo essentially allows an issuer to act quickly when the market is right. Under SEC Rule 415, issuers are expected to file amendments disclosing any changes in financial condition. Delayed offerings originally were used by corporations, but the SEC also has approved their use by limited partnership tax shelters, employee benefit plans, and issuers of mortgage pass-through certificates. Sheqel ndash Unit of currency of Israel. Short ndash Used as a noun, a verb and an adjective, it is essentially the opposite of ldquolongrdquo. A short position in a security is created when a trader has sold something he or she does not own. For example, if a trader is short (goes ldquoshortrdquo or ldquoshortsrdquo)100 shares of XYZ at 50 per share, it means the trader sold, as an opening transaction, 100 shares of XYZ at 50 per share, in the hope it will drop in price. The trader accomplishes this by first borrowing the shares, at interest, from someone else. Regulations require the short seller to first determine the availability of the shares to borrow before placing the trade. If the price of XYZ goes down, for example to 40 per share, the trader will buy the 100 shares (called covering the short) at that price and pay back the borrowed shares, pocketing the difference (less interest and commissions.) If the stock goes up, the short trader loses money. A short position is established by selling short and remainig uncovered. It is a bet that the market will go down, and can be used as a hedging device. Short interest - Total volume of shares of a security that investors have sold short and have not yet been repurchased to close out the short positions. Usually, investors sell short to profit from price declines. The New York Stock Exchange reports short interest. Short interest is often an indicator of the amount of pessimism in the market about a particular security, although there are other reasons to short that are not related to pessimism. For example, hedging strategies for mergers and acquisition as well as derivative positions may involve short sales. Because of the requirement to cover all short positions, however, a high short interest figure reflects potential buying pressure to cover, and may be viewed as a bullish sign. Side pockets - Hedge funds may hide poor-performing or illiquid assets in a side pocket, a separate account on the hedge fundrsquos books. Hedge funds can use side pocket accounts in various ways, including (i) estimating the value of the side pocket positions and including a payment for them in the redemption price (ii) permitting investors to redeem the liquid portion of their interests but keeping the investor in the fund relative to the investorrsquos share of illiquid positions (iii) excluding side pocket value from the redemption proceeds for investors wishing to redeem before the illiquid positions are sold, so the redeeming investor simply relinquishes any interest in the side pocket and (iv) creating a separate class of fund interests with some investors only sharing in the liquid positions in the fundrsquos portfolio, while others, with a longerndashterm appetite for commitment, participate in the side pocket portion of the fund as well. Hedge funds have to isolate their positions in initial equity public offerings, so investors in the fund who are broker-dealers, or affiliated with them do not participate in the gain from that portion of the hedge fundrsquos portfolio. See FINRA Rule 2790 relating to hot issue IPO matters. Some hedge funds require leaving some of the investment in side pockets as a condition for redemption, even though the condition was not disclosed in the investment agreement. There is also the potential for excessive leverage, the over-concentration of positions, the dependence of valuations upon complex proprietary models, and operational risks for settlement and clearance systems. Hedge funds also use techniques known as ldquogatesrdquo and lock-upsrdquo to hold onto investor capital. In April 2010, the SEC launched in an investigation into whether hedge funds used side pockets to prevent investors from withdrawing money during the 2008 market turmoil. SIV - Structured Investment Vehicle. SIVs (most often run by banks, but not always) are investment companies that engage in market arbitrage. They purchase predominantly investment-grade debt securities (usually with a weighted average rating in the AA/Aa range) such as medium and long term fixed income bonds and fund themselves with cheaper senior debt instruments such as commercial paper and medium term notes. In other words, they buy highly rated debt securities and fund themselves by issuing senior debt and capital. The aim of the SIV is to earn the hoped-for net spread between the yield on its asset portfolio and its funding costs, to pay a return to capital holders and to generate fee income for the investment manager. The SIV runs both a liquidity risk and a solvency risk. Senior debt is usually (but not always) investment-grade commercial paper and medium-term notes issued both in the Euromarkets and in the US domestic market (and sometimes other local markets). Since SIVs rely on short-term commercial paper to fund longer maturing assets, there is an ongoing need to renew funding. SPAC ndash Stands for Special Purpose Acquisition Company. A SPAC is a pooled investment vehicle that allows public stock market investors to risk investment in private equity type transactions, particularly leveraged buyouts. SPACs are shell or blank-check companies that have no operations, income or any business. They are generally incorporated with the primary objective of raising funds through an initial public offering of its securities, the proceeds of which are used primarily for the purpose of acquiring or merging with one or more operating copmpanies. If the SPAC fails to make an acquistion within a fixed period of time, generally between 18 and 24 months, the money raised is returned to investors. A SPAC will typically begin as a corporation formed by a small group of industry executives or sophisticated investors (ldquoFounding Stockholdersrdquo). The Founding Stockholders buy the SPACrsquos common stock for nominal consideration and generally retain, after completion of the IPO, 20 of the SPACrsquos common equity, although this percentage is less if the underwritersrsquo over-allotment option is exercised. Some or all of the Founding Stockholders also serve as the SPAC management team that will search for prospective target operating companies. Once a target is found, 80 of the SPAC shares must approve the acquisition. (Some commentators argue that this is illusory because if management recommends the purchase, shareholders will approve it.) Because a SPAC is a very clean public shell, it provides the target private company with the option of accepting stock instead of cash in a transaction, thereby avoiding tax requirements. The target company is also able to immediately become a public company without the risk, expenses and time associated with the IPO process. SPACrsquos are typically listed in the United States on the OTC Bulletin Board and/or the American Stock Exchange. Specialist - A market professional that manages the two-way auction market trading in a handful of specific securities in which he or she specializes. A specialist ordinarily works for a specialist firm, an independent company in the business of trading listed securities. A specialist is a member of a stock exchange, such as the New York Stock Exchange, who performs several functions. Specialists must make a market in the stock they trade by displaying their best bid and asked prices to the market during trading hours. Specialists are required to maintain a fair and orderly market in the stocks they trade. They do this by committing their own capital to provide liquidity to help reduce market volatility when there are an insufficient number of buyers or sellers. Exchange rules prohibit specialists from trading ahead (a form of ldquofront-runningrdquo also cleverly known as ldquotrading aheadrdquo) of investors who have placed buy or sell orders for a security at the same price. The number of stocks a specialist trades depends on how active the stock trades, but most specialists specialize in around five to ten companies. On the New York Stock Exchange, the specialist obtains consideration for the supply of immediacy and the maintenance of an orderly market by having private access to order-flow information through the order book for the particular stock. On the Paris Bourse, on the other hand, specialists are compensated in cash. Steepener CD - Steepener CDs pay a guaranteed interest rate pegged to some derivative yield curve benchmark for a short period of time within the total maturity period for the CD. So, for example, the CD will have an 8 guaranteed interest rate for the first year of a ten-year CD. After the first year, the interest rate resets pursuant to some formula, for example: 4 times the difference of the 30-year and the 2-year CMS (Constant Maturity Swap) (positive yield curve) minus 1 as reported two business days before the start of the quarter (the observation date). But if the 2-year CMS rate on the observation date is greater than the 30-year CMS rate, reflecting a negative yield curve, no interest is paid for the entire quarter. While Steepener CDs are FDIC insured if the CD is held to maturity (10 years), the risks include loss of interest for a significant period of time, credit risks and market risks (i. e. if you need to sell before maturity, you could sustain a loss of principle and you need to locate a buyer.) Steepenerrsquos are available through brokerage firms and are subject to brokerage commissions. Stop-Limit Order - A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or to sell at a specified price. The benefit of a stop-limit order is that the investor can control the price at which the trade will get executed. But, as with all limit orders, a stop-limit order may never get filled if the stocks price never reaches the specified limit price. This may happen especially in fast-moving markets where prices fluctuate wildly. The use of stop limit orders is much more frequent for stocks that trade on an exchange than in the over-counter (OTC) market. In addition, a broker-dealer, or a particular exchange may not allow stop limit orders on some securities, or they may narrow the parameters. For example the American Stock Exchange prohibits stop limit orders unless the stop price and the limit price are equal. Check the rules, as they do change. Stop Order - A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the specified price is reached, the stop order becomes a market order. A stop order can be placed as a day order, good-till-canceled order, or any other type of time-limit order. Purchasers typically use a stop order when buying stock to limit a loss or protect a profit on short sales. A stop order to buy always places a stop price that is above the current market price. Sellers typically use a stop order to avoid further losses or to protect a profit that exists if a stock price continues to drop. A stop order to sell always places a stop price that is below the current market price. The advantage of a stop order is it that the investor does not have to monitor the stockrsquos performance on a daily basis. A desvantagem é que o preço de parada pode ser ativado por uma flutuação de curto prazo em um preço de ações. Once the stop price is reached, the stop order becomes a market order and the actual trade price can be much different from the stop price, especially in a fast-moving market where stock prices change rapidly. An investor can avoid the risk of a stop order not guaranteeing a specific price by placing a stop-limit order. The use of stop orders is much more frequent for stocks that trade on an exchange than in the over-counter (OTC) market. Some broker-dealer may not allow you to place a stop order on some securities or accept a stop order for OTC stocks. Stub quote ndash Also known as a placeholder quote, a stub quote is essentially a market makerrsquos tool to stay away from actually making a market. If XYZ Corporation normally trades for 25.25 per share, an active or liquid market could show a best bid of 25.15 and a best ask at 25.35. A second best bid might be at 25.10 and so forth. A stub quote on the other hand will likely be 0.01 on the bid and 2,000.00 on the ask ndash both so far away from any real market value that trades will not likely be executed. Stub quotes are usually posted when a stock does not have enough liquidity to trade in its recent price range. The market maker is technically meeting its requirements without exposing itself beyond available liquidity. Ironically, on May 6, 2010 a so-called ldquoflash crashrdquo occurred when real market quotes somehow disappeared for a few moments and market orders were executed at the stub quotes. Suitability - When a broker recommends that the purchase or sale of any particular security, that broker must have a reasonable basis for believing that the recommendation is suitable for the particular investor. The assessment is made in light of the investorrsquos level of sophistication, risk tolerance, financial status and investment objectives, among other criteria. FINRArsquos current Rule 2310 (scheduled to change in June, 2010) sets forth the criteria and steps that must be taken in making such determination. Suitability can be viewed both quantitatively and qualitatively. As an instructive example, the National Adjudicatory Council (NAC) of NASD Regulation (now FINRA), in DOE v. Chase . Complaint No. C8A990081 (Aug. 15, 2001) analyzed the following facts: Broker (B) had female client (W) with 800,000 in total assets, 500,000 of which was listed as Wrsquos liquid net worth. B disclosed the risks of a speculative security he recommended to W, an economics student in college. W had access to others who were giving her advice, including an accountant and an attorney. Wrsquos new account form sought speculation. B ultimately had Wrsquos ldquoentire liquid net worthrdquo in one speculative stock, on margin. The NAC noted that among the types of suitability problems that exist, there are ldquo lsquoreasonable basisrsquo suitabilityrdquo and ldquorsquoquantitativersquo suitabilityrdquo issues and confirmed severe sanctions, noting: A customers investment objectives, however, are but one factor to consider in determining whether the brokers recommendations were suitable for the customer. Furthermore, a broker cannot rely upon a customers investment objectives to justify a series of unsuitable recommendations that may comport with the customers stated investment objectives but are nonetheless not suitable for the customer, given the customers financial profile. Thus, even where a customer affirmatively seeks to engage in highly speculative or otherwise aggressive trading, a broker has a duty to refrain from making recommendations that are incompatible with the customers financial situation and needs. Veja, por exemplo John M. Reynolds, 50 S. E.C. 805, 809 (1992) (stating that regardless of whether the customer wanted to engage in aggressive and speculative trading, the broker was obligated to abstain from making recommendations that were inconsistent with the customers financial situation) Paul F. Wickswat, 50 S. E.C. 785, 786-87 (1991) (The proper inquiry is not whether the customer viewed the brokers recommendations as suitable, but whether the broker fulfilled his obligation to his client.). See also, Siegel v. SEC . 592 F. 3d 147 (D. C. Cir. 2010) for discussion of conduct that could lead to unsuitability claims being upheld under FINRA Rule 2310. Importantly, the knowing recommendation of unsuitable securities can form the basis of a claim of violation of Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder in other words, securities fraud. See Eickhorst, et al. v. E. F. Hutton Group, Inc . 1990 U. S. Dist. LEXIS 218 (S. D.N. Y. January 11, 1990) Leone v. Advest, Inc., 624 F. Supp. 297, 304 (S. D.N. Y. 1985)(In this circuit, unsuitability states a cause of action under sect10(b) and Rule 10b-5. ). See also, Treacy v. Simmons, Fed. Sec. L. Rep. para95,920 at 99,569 (CCH) (S. D.N. Y. April 22, 1991)(JFK) Clark v. John Lamula Investors Inc. . 583 F.2d 594 (2d Cir. 1978) Bischoff v. G. K. Scott amp Co. Inc . 687 F. Supp. 746,752 (E. D.N. Y. 1986) Mauriber v. Shearson/American Express, Inc. . 576 F. Supp. 1231, 1237 (S. D.N. Y. 1983). See also, Mihara v. Dean Witter amp Co . Inc. 619 F.2d 814 (9th Cir. 1980) (unsuitability arises under Section 10(b)) Zaretsky v. E. F. Hutton amp Co. Inc. 509 F. Supp. 68 (S. D.N. Y. 1981) (unsuitability arises under Rule 10b-5) Troyer v. Karcagi, 476 F. Supp. 1142, 1152 (S. D.N. Y. 1979) Cohen v. Prudential-Bache Securities, Inc. . 712 F. Supp. 653, 660 n.4. An allegation that defendants knew or reasonably believed that certain securities were unsuitable, but recommended them anyway, is more than an allegation of puffery and states a violation of Rule 10b-5. Cohen v. Prudential-Bache Securities, Inc., 712 F. Supp. 653, 660 n.4 (S. D.N. Y. 1989) citing to Mauriber, supra . Swap ndash Generally a swap is the exchange of one asset or liability for a similar asset or liability in order to lengthen or shorten maturities, or to raise or lower coupon rates, to maximize revenue or minimize financing costs. It can involve selling one securities issue and buying another in foreign currency or buying a particular currency on the spot market and simultaneously selling it forward. Os swaps também podem envolver a troca de fluxos de renda, por exemplo, a troca do fluxo de cupom de taxa fixa por um fluxo de pagamento de taxa variável, ou vice-versa, sem trocar o componente principal do título. Swaps are generally traded off-exchange (over-the-counter.) See the discussion of Credit Default Swaps above for an example. Swaption - An option (the right, but not the obligation) to enter into a specified type of swap at a specified future date certain. Symbol ndash A shorthand unique security identifier system employed in stock exchanges and stock markets to facilitate the trading of securities. On the New York Stock Exchange, symbols are from one to three letters. For example, Citigroup trades under the symbol ldquoCrdquo. A broker placing an order for that stock would simply write the letter C on the order ticket. IBM trades under the symbol ldquoIBMrdquo. Stock options trade pursuant to a more complex symbol designation, with certain letters indicating the month of expiration and certain letters indicating the strike price. For example, a call option expiring in January and striking at 60 would have the company stock symbol plus the letter A for January (B for February and so on, with January put option starting at M) plus the letter L indicating the 60 strike price (each letter reflecting 5 increments). This system can get complicated. NASDAQ traded securities usually have four letter symbols, such as MSFT for Microsoft. Sometimes a fifth letter is added to indicate a special or unusual situation, as follows: A - Class A B - Class B C - Issuer qualifications exceptions, such as a temporary listing continuance where listing standards are not met D - New E - Delinquent in required filings with the SEC F - Foreign G - First convertible bond H - Second convertible bond, same company I - Third convertible bond, same company J - Voting K - Nonvoting L - Miscellaneous situations, such as depositary receipts, stubs, additional warrants, and units M - Fourth preferred, same company N - Third preferred, same company O - Second preferred, same company P - First preferred, same company Q - Bankruptcy Proceedings R - Rights S - Shares of beneficial interest T - With warrants or with rights U - Units V - When-issued and when distributed W - Warrants Y - ADR (American Depositary Receipt) Z - Miscellaneous situations such as depositary receipts, stubs, additional warrants, and units. Tag-Along Rights ndash The term usually arises in venture capital contracts. Usually, the term applies to a minority investor, who, for a contractually determined tag-along period, has the right to join any deal entered into by majority shareholders to sell their shares. The concept is sometimes expressed as ldquoco-sale rightsrdquo or sometimes ldquopiggyback rightsrdquo. Tag-along rights essentially obligate the majority shareholders to include the minority shareholder position in any negotiations for the sale of majority interests. Tag-along rights are in fact common in various joint venture, private equity, or other venture capital contracts. Tag-along rights protect minority shareholders. Tax Refund ndash Government repayment of interest free loans made to it by taxpayers. Time ndash Naturersquos way of keeping everything from happening all at once. Time also adds value to money, in the form of interest. In a securities context, time is a factor in options trading, as well as with warrants, rights, tender offers and all investments or investment strategies with expiration or maturity dates. Finally, corporate executives, brokers and others, such as inside traders, who violate various provisions of the law are now given time, generally in prison, by judges, after a guilty plea or verdict is obtained by the prosecution. TIPS ndash In addition to money you leave your waiter, or a secret message about which horse to bet on, TIPS also refer to Treasury Inflation-Protected Securities. They come in five year, ten year and twenty year maturities. As the name suggests, these are Treasury instruments issued with the full faith and credit of the U. S. government that provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price All Urban Non-Seasonally Adjusted Index (CPI). When a TIPS matures, the investor is paid the adjusted principal or original principal, whichever is greater. Since a TIPS investor will never receive less than the original principal at maturity, the investors original principal amount is protected against deflation as well. TIPS pay interest every six months, at a fixed rate, and pay the principal when they mature. The rate is applied to the adjusted principal so, like the principal, interest payments rise with inflation and fall with deflation. Trading at Settlement (TAS) ndash TAS may be thought of as a limit order in the futures market, whereby an order placed during the trading day will be automatically priced at that dayrsquos closing settlement price of the particular futures contract being traded. TAS, sometimes referred to by traders as ldquobuying settlementrdquo, is particularly useful to commercial hedgers in the petroleum markets who often use average pricing in physical transactions as well as those in the natural gas markets who also use derivative products based on Exchange pricing. TAS was introduced in 2000 in the crude oil and natural gas rings. NYMEXrsquos TAS rules are set forth at Rule 6.40B of NYMEXrsquos ldquoExchange Rulebookrdquo. In addition, NYMEX issues, from time to time, ldquoNotices to Membersrdquo which may set forth specific TAS rules for particular products. So, for example, with respect to gasoline, TAS is available for the front two months except on the last trading day and is subject to the existing TAS rules. Trading in all TAS products, including by open outcry, ceases daily at 2:30 PM Eastern Time. TAS products trade off of a Base Price of 100 to create a differential (plus or minus) in points off settlement in the underlying cleared product on a 1 to 1 basis. Example: a crude oil contract trades on CME Globex at TAS 103, and the market for that product settles at 72.10. In that case, the TAS trade is executed at 72.13. Conversely, a trade at TAS 97 settles at 72.07. In the first instance the differential was plus three and in the second the differential was minus 3. A trade done at the Base Price of 100 will correspond to a traditional TAS trade, which will clear exactly at the final settlement price of the day. The TAS products and their commodity codes are: WTI crude oil financial TAS (WST) RBOB gasoline financial TAS (RTT) heating oil financial TAS (BHT) natural gas penultimate financial TAS (HPT) natural gas last day financial TAS (HHT) Brent crude oil financial TAS (BBT) NYMEX Europe Brent crude oil TAS (SCT) and NYMEX Europe gasoil TAS (GRT). Trading Halt - The temporary suspension of trading of a security by a securities exchange, such as the New York Stock Exchange (NYSE) or the NASDAQ Stock Market. A trading haltmdashwhich typically lasts less than an hour but can be longermdashcan be called for multiple reasons. They are commonly called during the trading day to allow a company to announce important news or if the market develops a significant order imbalance between buyers and sellers in a security. Um atraso de negociação (ou atraso na abertura) é chamado se qualquer uma dessas situações ocorrer no início do dia de negociação. There are two types of trading halts and delaysmdashregulatory and nonregulatory. The most common regulatory halt and delay happen when a company has pending news, such as a merger announcement or an earnings restatement, that may affect the securityrsquos price (a news pending halt or delay). The trading halt or delay gives market participants time and an equal opportunity to evaluate the impact of the news. Another type of regulatory halt happens when there is uncertainty over whether the security continues to meet the marketrsquos listing standards. When a regulatory halt or delay is imposed by a securityrsquos primary market, the other U. S. markets that also trade the security honor this halt. Nonregulatory halts or delays occur on exchanges, such as the NYSE and Amex (but not on NASDAQ), when there is a significant imbalance in the pending buy and sell orders in a security. When an imbalance occurs, trading is stopped to alert market participants to the situation and to allow the exchange specialists to disseminate information to investors concerning a price range where trading may begin again on this exchange. A nonregulatory trading halt or delay on one exchange does not preclude other markets from trading the security. The SEC does not halt or delay trading in a security for news pending or order imbalances, but it can suspend trading for other regulatory reasons for up to ten days and, if appropriate, take action to revoke a securityrsquos registration. Toumlgroumlg ndash Unit of currency of Mongolia. SITE DIRECTORY: Uncovered Interest Arbitrage - a form of arbitrage where short-term liquid funds are transferred abroad to take advantage of higher interest in foreign monetary centers. It involves the conversion of the domestic currency to the foreign currency to make investment and subsequent re-conversion of the fund from the foreign currency to the domestic currency at the time of maturity. A foreign exchange risk is involved due to the possible depreciation of the foreign currency during the period of the investment, and that risk is not covered by any type of hedging transaction, as would take place in covered interest arbitrage. Undigested Securities - Newly issued stocks and bonds that remain undistributed because there is insufficient public demand at the offering price. Unit Investment Trust (UIT) ndash Unit Investment Trusts, one of the three basic types of investment company (the other two being mutual funds and closed end funds), are defined at Section 4(2) of the Investment Company Act of 1940 (ldquoICArdquo) and discussed in greater detail at Section 26 of the ICA. The ICA states: Unit investment trust means an investment company which (A) is organized under a trust indenture, contract of custodianship or agency, or similar instrument, (B) does not have a board of directors, and (C) issues only redeemable securities, each of which represents an undivided interest in a unit of specified securities but does not include a voting trust. Essentially, a UIT is a registered investment company that buys and holds a generally fixed portfolio of stocks or bonds. Units in the trust are sold to investors who receive a share of the principal and dividends. UITrsquos come in two basic flavors - equity trusts and bond trusts. Equity trust expire on a fixed date and bond trusts expire on the maturity date of the security. Bond trusts are divided into taxable and tax-free trusts. UITs are sold to investors by brokers and can be resold in the secondary market. A UIT may be either a regulated investment corporation (RIC) or a grantor trust. The former is a corporation in which the investors are joint owners the latter grants investors proportional ownership in the UITs underlying securities. A UIT typically issues redeemable securities (or units), like a mutual fund, which means that the UIT will buy back an investorrsquos units, at the investorrsquos request, at their approximate net asset value. Some exchange-traded funds (ETFs) are structured as UITs. Under SEC exemptive orders, shares of ETFs are only redeemable in very large blocks (blocks of 50,000 shares, for example) and are traded on a secondary market. A UIT does not actively trade its investment portfolio. That is, a UIT buys a relatively fixed portfolio of securities (for example, five, ten, or twenty specific stocks or bonds), and holds them with little or no change for the life of the UIT. Because the investment portfolio of a UIT generally is fixed, investors know, from the prospectus, more or less what they are investing in for the duration of their investment. A UIT does not have a board of directors, corporate officers, or an investment adviser to render advice during the life of the trust. Uptick - A securities transaction executed at a higher price than the previous trade. Sometimes called a ldquoplus tickrdquo, it is indicated by a plus sign. Under SEC rules governing short trading, a short sale may only be done on an Uptick. This rule is ingeniously called the ldquoUptick rulerdquo and, since 1990, covers program trading. This rule, sometimes also known as the short tick rule is being eliminated by the SEC, and after July 6, 2007, will no longer be in effect. Variable Annuity - A life insurance annuity contract (either single or multiple premium), which provides future payments to the holder (called the annuitant). Payments can be taken at any time, but are usually taken at retirement. The size of payments varies with the performance of either the underlying securities in the portfolio, or some designated index. The advantage over its opposite, the fixed annuity, is that the variable payments can adjust for inflation. The investment options for a variable annuity are typically mutual funds that invest in stocks, bonds, money market instruments, or some combination of the three. Ordinarily the insurance company issuing the variable annuity will guarantee a certain minimum payment, but the ldquovariablerdquo component above the minimum is not guaranteed. Variable Rate Demand Obligation (VRDO) ndash This is a floating rate obligation that has a nominal long-term maturity but has a coupon rate that is periodically reset (e. g. daily or weekly). The investor has the option to put the issue back to the trustee or tender agent at any time upon specified (e. g. seven daysrsquo) notice. The put price is par plus accrued interest. Vatu ndash Unit of currency of Vanuatu. Velda Sue - Acronym for Venture Enhancement amp Loan Development Administration for Smaller Undercapitalized Enterprises, a federal agency that buys small business loans made by banks, pools them, then issues securities that are bought as investments by large institutions. Originally designed to contribute to the development of a secondary market for small business loans. Voting Right ndash Among the rights accompanying the ownership of publicly traded common stock is the right to vote in the election of corporate directors and on corporate resolutions. Voting may be either in person or by proxy. Usually the company mails out proxy forms. In smaller companies the importance of shareholder response to mailed solicitations for voter proxies is greater, since they run the risk of not achieving a quorum. W-9 ndash An official IRS form required under Section 3046 of the Internal Revenue Code for U. S citizens and resident aliens to certify a taxpayer identification number (for individuals, this is the social security number) as true and correct, in order to avoid federal tax withholding. This form is usually provided when opening an account at a brokerage firm. Wall Street ndash Dutch settlers in New York built a wall that ran across lower Manhattan from river to river to protect themselves from the native population. The term is used to describe the financial district in New York where the New York Stock Exchange is located (at the corner of Wall and Broad). It is also used to refer to the investment community as a whole and is most often shortened to ldquothe Streetrdquo, as ldquothe Street is bullish on XYZ Corp. rdquo Warrant - A warrant is a type of long-term purchase right, specifically the right to buy a stock at a particular price within a certain period of time, usually in excess of one year, often for many years, and sometimes with no expiration. Warrants are often issued as part of a ldquounitrdquo in an IPO, where, for example a unit might originally consist of two shares of common stock and one warrant, until after market trading begins and the warrants are traded independently of the stock. Warrants can also attach to bonds. Put warrants, which give the holder the right to sell a security at a certain price are relatively rare. WKSI (well known seasoned issuer) - A new category (pursuant to SEC rule changes in 2005) of issuer. The term WKSI (pronounced ldquoWiksirdquo) applies to a public company that is current and timely (with limited exceptions) in its Securities Exchange Act of 1934 filings for the previous 12 months and either has (1) a worldwide public common equity float of at least 700 million or (2) registered and issued for cash at least 1 billion in debt or non-convertible securities within the previous three years. WKSIs can take advantage of a streamlined shelf registration process that provides automatic effectiveness of registration statements upon filing (i. e. no SEC review), pay-as-you-go registration fees, and expanded use of prospectus supplements. Won ndash Unit of currency of North Korea and South Korea. Wooden Ticket ndash A confirmation, sent in violation of MSRB and SEC rules, ldquoconfirmingrdquo the terms of a transaction with a customer that, in fact, did not take place. The term is used largely in the bond context, and reflects a violation of MSRB Rule G-17. An unscrupulous broker-dealer might send such fraudulent confirmations to unsophisticated investors on the chance that some investors might mistakenly honor the transactions. The term can also be used to refer to ldquoan order to purchase securities for which the purchaser does not pay whether or not the intention not to pay existed at the time of the order. rdquo United States v. Corr, 543 F.2d 1042, 1045n.4 (2d Cir. 1976). Zero Coupon Security - Debt security that makes no periodic interest payments but is sold at a deep discount from face value. There are several kinds of zero coupon securities. The most popular is the zero coupon bond. This bond can either be issued by a corporation or by a brokerage firm when it strips the coupons off a bond and sells the principal and the coupons separately. This technique is used frequently with Treasury bonds. Zero coupon bonds are also issued by municipalities. The bondholder does not receive interest payments, only the full face value at redemption on the specified maturity date. The IRS claims that the owner of a zero-coupon bond owes income taxes on the interest that has accrued each year, even though the bondholder does not actually receive any payment until maturity. The IRS calls this ldquoimputed interestrdquo. Because zero coupon securities do not make interest payment, they are considered more volatile than bonds making periodic payments. When interest rates rise, zeros fall more sharply than interest paying bonds. However, zero coupon securities rise more rapidly in value when interest rates drop. Zero uptick - A price that is the same as the previous transaction price, but is greater than the most recent different transaction price. It is also known as zero-plus tick, and is the opposite of a zero-minus tick. Zoty ndash Unit of currency of Poland. Z-tranche ndash Tranche is French for ldquoslicerdquo. Certain investments are structured in pieces, classes, or slices, all of which can be referred to as tranches. A Z-tranche is a special type of bond class in a sequential pay collateralized mortgage obligation. It is the fourth tranche of bonds in a typically structured CMO. It combines features of Zero Coupon Securities and mortgage pass through securities. This class of bond does not receive any interest or principal payments until the three other tranches (A fast pay B medium-pay and C slow-pay) have been completely paid off. In a Z-tranche, the interest that is not paid is accrued and added to the principal for future interest calculation purposes. The main purpose of the Z-tranche is to speed up the maturity of the senior tranches by disbursing payment that the Z-tranche was supposed to receive to the higher priority tranches. Z-tranche is sometimes known as Z-bond. Mon Dieu. I am regularly updating The GelberLaw Glossary. An Encyclopedic Dictionary of the Securities Industry copy. and hope you also enjoy my Wikipedia article on Joseph Norman Dolley . Please feel free to telephone or e-mail me about your particular situation. There is no charge for an initial telephone consultation. Copyright Lawrence R. Gelber, 2004 - 2013. All rights reserved. quotGelberLawquot, quotLawrence R. Gelber, Attorney At Lawquot are Service Marks of Lawrence R. Gelber 1998 - 2004, 2009 - 2013. All rights reserved. Page design R. C.Candolin-Gelber 2004 - 2013. All rights reserved. PLEASE VISIT: MY BEST NEW YORK NY. MY BEST HELSINKI. I DECLARE WORLD PEACE. BACK TO TOPEdotek is a scientific consultancy which provides technical assistance to industry and other agencies helping them to solve problems in the areas of chemistry and materials technology. Isso pode estar relacionado às atividades de desenvolvimento de amplificadores de pesquisa, manufatura e produção, ou situações 8216in-service8217. A Edotek está engajada em tarefas que podem levar de meio dia a até 3 anos para serem concluídas Atividades típicas incluem Análises químicas Limpeza química / Identificação e controle de contaminação Teste de compatibilidade de corrosão e materiais Produtos químicos e materiais eletrônicos Materiais eletrônicos Química propelente Saúde e Segurança Relacionados a Produtos Químicos Perigosos Imagens Térmicas Podemos agir exclusivamente para você no papel de consultores que fornecem informações técnicas, ou envolvermo-nos em tarefas de teste8217 para resolver seu problema. Trabalhamos com uma ampla gama de produtos químicos, ligas de metais, bem como materiais poliméricos (borrachas e plásticos). Formada em 1998, a Edotek trabalha para clientes que vão desde pequenas empresas iniciantes até grandes organizações como o Ministério da Defesa do Reino Unido e a Agência Espacial Européia. Temos clientes estrangeiros em vários países europeus, bem como nos EUA. Portanto, não importa o quanto você saiba ou não saiba sobre química e materiais, se precisar de ajuda, ligue para nós. While every effort has been made to ensure information provided on this website is accurate, no responsibility is accepted for any errors which may be presentTHE GELBERLAW GLOSSARY The GelberLaw Glossary. An Encyclopedic Dictionary of the securities industry copy, strives to provide simple, clear, accurate, in depth definitions and explanations of words, expressions and terminology commonly used by lawyers and securities industry Some terms are subject to interpretation, so please consult your own lawyer (or accountant or securities industry professional) if a definition is important to your particular circumstance. Some terms may have multiple meanings, not all of which are examined. (Look up the word ldquosetrdquo in an unabridged dictionary.) Please check back frequently, since this page is updated, revised and expanded on a regular basis. Account ndash is basically a contractual relationship between a customer and a broker. The relationship enables the broker to buy and sell securities on the approval of and for the account of the customer and to tend to all the administrative functions involved in such transactions, such as maintaining balances, holding the securities, issuing confirmations of transactions, issuing account statements among other functions. Account Executive ndash another name for the broker who takes customer calls, offers advice to and follows customer instructions to buy or sell securities in your account. Some brokerage firms call their brokers registered representatives. This reflects the registration that all brokers are required to have after passing certain tests and obtaining the approval of NASD (and perhaps the New York Stock Exchange) and various state securities regulators. In other words, brokers must be licensed. Account Statement ndash a piece of paper that lists all the transactions that took place in an account as well as the holdings, interest and dividends paid and cash available or due. They usually issue once a month, but if an account is inactive, they may only issue once every three months. An account statement is an official record of the status and balance of an account on the date it is issued. It is important to review it and to challenge any error, preferably in writing and preferably immediately. Accredited Investor ndash this is a class of investor specifically defined in the federal securities laws. The official definition says that an accredited investor is one who either has a net worth of at least 1 million dollars (can be joint with a spouse) or must have earned at least 200,000 in each of the two most recent years or had joint income with a spouse of more than 300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. Some types of investments, such as certain private placements or certain limited partnerships, among others, require that investors meet this standard under certain circumstances. Accrual Bonds ndash these bonds do not provide periodic interest payments. They accrue the interest until the bonds mature. They provide a way to lock in interest rates. See Zero Coupon Bonds. Active Account ndash an account that engages in many transactions. Each brokerage firm may have its own benchmark. Active accounts are likely to receive monthly account statements, possible commission discounts, or other benefits such as access to free streaming quotes. Accounts that have no activity for years may face problems, such as the imposition of inactive fees, or even be viewed as abandoned and the proceeds sent to the state. Adjustable Rate Preferred Stock ndash less volatile prices than fixed rate preferred stock, ARPS is a type of preferred stock with an adjustable dividend. The dividend often adjusts quarterly based on changes in some money market rate, like a Treasury bill rate. These are also called floating rate or variable rate preferred. Adjusted Basis ndash Capital gains and losses are measured from the difference between the price paid on purchase and the price received on sale. The purchase price is called the basis. Basis gets adjusted to account for commissions and stock splits. See ldquoBasisrdquo. Consult your accountant. Advance ndash simply meaning a rise in price, as ldquothe market advanced 100 points today. rdquo Affidavit ndash a declared voluntary written (printed) statement of facts sworn to by the person making the declaration, under oath taken in front of a person authorized to administer oaths, such as a notary public. In some circumstances (but not in all circumstances) an affidavit may be admitted into evidence in a securities arbitration case. Affiliate ndash companies are deemed affiliated when (a) both are subsidiaries of a common parent company or (b) when one owns less than a majority of the voting stock of the other. Each state has its own laws relating to corporations and the definition of affiliate may be a matter of statute that differs from state to state. Various statutes, such as The Investment Company Act of 1940, the Federal Reserve Act and others, have specific definitions and usages of the term. Afghanis ndash the units of currency of Afghanistan. After-Hours Trading ndash securities can trade after (or before) the regular trading hours of organized exchanges. Dramatic news, positive or negative, often triggers a high volume of such trading. Aftermarke t ndash After a security is originally issued, such as a stock in an initial public offering (IPO), the securities trade on the various exchanges based on perceived pluses and minuses affecting the issuer of the securities. This trading is called aftermarket, or secondary market, trading. So, if XYZ Corporation raises money in the primary market by selling its stock to the public for the first time in an IPO, after the IPO, XYZ stock then trades in the secondary, or aftermarket based on principles of supply and demand, which are affected by good news and bad news about XYZ Corporation. In other words, most stock transactions are aftermarket transactions. Against the Box - The act of short selling securities you already own. This results in a neutral position where your gains in a stock are equal to the losses. For example, if you own 1000 shares of XYZ and you tell your broker to sell short 1000 shares of XYZ, you have shorted against the box. Alternatively, you can achieve the same effect by buying a put option on the stock, which may or may not be less expensive than shorting against the box. The primary rationale for shorting against the box is to delay a taxable event. Lets say that you have a big gain on your XYZ shares, and believe XYZ has peaked for the foreseeable future and you want to sell. However, the tax on the gain this year may leave you under-withheld for the year and perhaps subject to penalties. Or you are projecting lower personal income next year, putting you in a lower bracket and it would be beneficial to take the gain next year. The ldquoboxrdquo is where the securities are located physically for safekeeping. Always consult your accountant for changes in tax laws that relate to such strategies. Agency transaction ndash transactions at a brokerage firm are either agency transactions or principal transactions. In an agency transaction, the broker acts as a middleman between the buyer and seller, and takes a commission for the service. The broker takes no financial risk is such a transaction, all such risk being for the account of the client. Aggregate Exercise Price - The strike price of an option (either a put or a call) times the number of underlying securities in the option contract (usually 100 shares per contract). When calculating the aggregate exercise price, the price, called the ldquopremiumrdquo, paid or received on contracts (at 100 shares per option contract, equating to 1000 shares) of XYZ at 50 would have an aggregate exercise price of 50,000 if exercised before the option contract expires. In common parlance the phrase ldquooption contractrdquo is shortened to either option or contract. (ldquoI bought ten call contractsrdquo is the same as saying ldquoI bought ten call options. rdquo) Air Pocket Stock ndash a stock that has an abrupt drop in price following the announcement of bad news or poor earnings results. Shareholders rush to sell and few buyers can be found. Likened to an airplane dropping in an air pocket. Alligator Spread ndash When a broker arranges a position consisting of a combination of put options and call options that collectively create commissions so high that it is almost impossible to turn a profit for the client regardless of which direction the underlying security moves. The term originates from the idea of the spread eating the investor alive. This is related to the concept of ldquochurningrdquo. All or None ndash An instruction to a broker. For example, if you want to buy 1,000 shares of XYZ Corporation at a limit price of 50.00 per share, and you give an ldquoall or nonerdquo instruction, no part of the order will be filled unless it can all be filled. Without an all or none instruction, the order can be filled piecemeal - every time the price reaches 50 or below, shares will be purchased until the whole order is filled. American Arbitration Association (AAA) ndash Founded in 1926, the AAA is a private company offering a wide range of alternate dispute resolution services, including education and training, publications and mediation, arbitration, elections and other out-of-court settlement techniques. The AAA - with 34 offices in the United States and Europe and 59 cooperative agreements with arbitral institutions in 41 countries - provides a forum for the hearing of disputes, case administration, tested rules and procedures, and a roster of neutrals to hear and resolve cases. Securities arbitrations are conducted pursuant to the AAArsquos Commercial Arbitration Rules and Mediation Procedures (Including Procedures for Large, Complex Commercial Disputes) and its Supplementary Procedures for Securities Arbitration. Brokerage firms in the past used to include a AAA forum option in the arbitration agreement clauses of their customer agreements, but in recent years this option has largely been eliminated, and most securities arbitrations are held at NASD. While the fees charged by NASD for arbitration are high, with member firms being charged a surcharge, fees at AAA can be very high because, in addition to filing fees, it imposes a maintenance fee related to the length of time the case is pending. Arbitrage ndashalso know as riskless arbitrage, describes the simultaneous purchase and sale of a security trading on different markets or exchanges in order to take advantage of small price differentials / discrepancies that may exist as a result of certain market inefficiencies. Inefficiencies can result from untimely reporting of transactions or exchange rates, if the two markets are in different countries. For example, an investor buys a stock in the United States and sells (or shorts) it in Europe, when the price has not adjusted for foreign exchange. While distinct from ldquoRisk Arbitragerdquo and ldquoIndex Arbitragerdquo, all forms of arbitrage involve taking advantage of small, rather evanescent price discrepancies. Arbitration ndash is an alternative to suing in court when you have a dispute, usually over money. NASD administers most securities arbitration in the United States. Whether you are bringing a claim or defending a claim, NASD will charge fees for their services. You can be represented by a lawyer and each side gets to present its side of the story to an arbitration panel, which can award money or deny claims by issuing an arbitration award. Arbitration is available for disputes between customers and brokers, and also between or among brokers and brokerage firms. NASD Arbitration is governed by a set of rules called the Code of Arbitration Procedure. Ask ndash the lowest round lot price at which a dealer or market maker will sell a security. The ask price (also known as the offer or ldquoofferingrdquo price) will almost always be higher than the bid price. If the bid and the ask are identical, the market is said to ldquolockedrdquo for that brief moment. Market makers make money on the difference between the bid price and the ask price. That difference is called the spread. The term is flexible in that it can be expressed as the ldquoasked pricerdquo or the ldquoasking pricerdquo or the ldquoask pricerdquo or simply the ldquoask. rdquo If XYZ Corp. is currently trading, an inquiry to a broker about a quote could generate a statement like: ldquo49.78 by 49.84, last 49.79,rdquo meaning the bid is 49.78, the ask is 49.84 and the last trade was 49.79 per share. Ask yield - The return an investor would receive on a United States Treasury security if he or she paid the ask price. Auction Rate Preferred Stock ndash ARPS is a type of floating or adjustable-rate preferred security whose dividend yield is determined in a Dutch auction process, held in short term regular intervals, typically every seven or 28 days, by corporate or institutional bidders. The rate thus established is fixed until it is reset at the next auction. ARPS is issued by closed end mutual funds to create leverage and thereby boost yield. A Dutch auction is where one seller offers a product at a high price, which is reduced by the bids of many buyers until a price attractive to enough buyers is reached. (The U. S. Department of the Treasury uses this system to sell its debt obligations.) If no bidders emerge, the auction is said to ldquofailrdquo. This failure is not, however a default on the security being auctioned. The majority of closed-end fund ARPS carries a AAA credit rating due to asset coverage and other maintenance requirements imposed by credit rating agencies, with which a closed-end fund must comply in order to maintain a favorable credit rating for its ARPS. Under the Investment Company Act of 1940, closed-end funds are subject to additional restrictions, including a requirement that the market value of the assets of the underlying closed-end fund exceed the amount of ARPS outstanding by at least two times. Average Daily Volume ndash is exactly what the term suggests: the cumulative number of shares traded in a given time period, divided by the number of trading sessions in that period. One million shares traded over a ten-day period is an average daily volume of one hundred thousand shares. Time periods used for calculating average daily volume vary, although monthly and annual average daily volume figures are fairly common. Technical analysts compare current daily volume to average daily volume in an effort to glean useful patterns. Stocks tend to trade at greater than average daily volume in sessions preceding known future events, such as earnings announcements and dividend declarations. In the absence of known future corporate actions, strong average daily volume can be interpreted to mean that an unforeseen event is imminent. Large companies tend to trade at higher average daily volume than smaller companies. If volume is too low, it may be difficult (or impossible) to close out a long position. Award ndash Unlike courtroom litigation, which can result in a judgment, securities industry arbitrations result in an ldquoAwardrdquo. The Award, signed by members of the Panel of Arbitrators (or the sole Arbitrator in a ldquosmall claimrdquo arbitration) has no strictly legal enforceability. If the Award is against a brokerage industry member firm (or person associated with a member), the enforceability is derived from the threat of license revocation for failure to comply with the Award within 30 days. The arbitration statutes of most states, as well as the Federal Arbitration Act, have provisions to permit certain efforts to ldquovacaterdquo an Award. The ability to vacate an Award is limited to very narrow circumstances, and hence most such efforts fail. Once a court confirms an Award, it becomes an enforceable judgment. SITE DIRECTORY: Baby Bells ndash In 1984 the American Telephone amp Telegraph Co. commonly known as ATampT, was broken up into seven regional telephone companies, which became known as the Baby Bells: NYNEX, Bell Atlantic, BellSouth, Southwestern Bell Corp. (SBC), Ameritech, U. S. West and Pacific Telesis. Basis ndash Purchase price, including commissions and other necessary expenses, used to determine capital gains and capital losses for tax purposes. There are several ways to determine basis. For a purchased investment, the basis is cost. If inherited, the basis is the value on the date of the original ownerrsquos death (called date-of-death value). If received as a gift, the basis is the amount that was originally paid for the investment, unless the market value of the investment on the date the gift was given was lower. Also called cost basis or tax basis. Check changing IRS regulations from time to time. In connection with bonds, the term ldquobasisrdquo refers to the yield to maturity. In other words, a 10 bond selling at 100 has a 10 basis. In connection with commodities, ldquobasisrdquo refers to the difference between the cash price and the futures price of a given commodity. See ldquoAdjusted Basisrdquo. Consult with your accountant. Basis Point ndash A basis point is one one-hundredth of one percent. One percent equals 100 basis points. It is the smallest measure used in quoting the yield on bonds, bills and notes. If a yield rises from 5 to 5.25, is has risen 25 basis points. It can be represented as 0.01 (1/100th of a percent) or 0.0001 in decimal form. Ten thousand basis points equal one hundred percent. BATS Exchange ndash As of early 2009, the BATS Exchange (BZX) grew to be the third largest stock exchange in the world (by volume) behind the New York Stock Exchange and NASDAQ. ldquoBATSrdquo stands for ldquoBetter Alternative Trading Systemrdquo and was originally founded in 2005 as an ECN. It is headquartered in Kansas, and has operations in New York and London. BATS also operates the BATS 1000 Index, which it launched in 2009, measuring the performance of 1,000 U. S. listed securities in 10 equally weighted sectors. In 2010 BATS launched a second exchange called the BATS Y-Exchange (BYX), and also launched a platform for U. S. equity options. Bear ndash A pessimist. A stock market bear believes that prices of securities will fall. A Bear Market is one that reflects, for a prolonged period, such pessimism in the form of falling stock prices and decreased market volume. One of the hallmarks is that the prices fall faster than historical averages. A bear market in bonds is usually caused by rising interest rates. The opposite of a bear is a bull. Beta coefficient ndash Generally called simply ldquobetardquo, it is a measure of the expected return on a particular security relative to the average expected return on all other securities in the market. That is, it measures the risk of a particular stock relative to the market, exclusive of idiosyncratic risks. The beta coefficient links the return on the security and the average market return. The average market risk of all securities is said to have a beta of 1. Thus a stock with a beta of 1 tracks overall market risk. That is, if XYZ typically moves 10 when the market average moves 10, XYZ would have a beta of 1. If it moved 20 against the marketrsquos movement of 10, it would have a beta of 2, demonstrating greater risk/volatility than that of the overall market. If XYZ only moved 5 against a market move of 10 it would have a beta of 0.5, demonstrative of less risk / volatility then the overall market. Bid ndash the highest round lot price at which a dealer or market maker or prospective purchaser will purchase a security. The bid price will almost always be lower than the ask price. If the bid and the ask are identical, the market is said to ldquolockedrdquo for that brief moment. Taken together, the bid and the ask comprise the ldquoquoterdquo or ldquoquotationrdquo for the security. Market makers make money on the difference between the bid price and the ask price. That difference is called the spread. If XYZ Corp. is currently trading, an inquiry to a broker about a quote could generate a statement like: ldquo49.78 by 49.84, last 49.79,rdquo meaning the bid is 49.78, the ask is 49.84 and the last trade was 49.79 per share. BlackndashScholes - a term applied to a mathematical model of price variation over time (and to formulas derived from the model) used to value certain investment instruments, such as derivatives and options, most commonly used to determine the price of European style call options. The model was first described by Fischer Black and Myron Scholes in their 1973 paper, The Pricing of Options and Corporate Liabilities. The model assumes that the price of heavily traded stocks or options follows a geometric Brownian motion with constant drift and volatility. When applied to a stock option, the model incorporates the constant price variation of the stock, the time value of money, the options strike price and the time to the options expiry. The formulas derived from the model use differential equations. Courts have found that there is no SEC rule requiring the use of the Black-Scholes valuation model in proxy disclosures for corporate stock option programs. Seinfeld v. Bartz . 322 F. 3d 693 (9th Cir. 2003) Blue Sky Laws ndash A colorful phrase referring to anti-securities fraud statutes, usually of the states. Blue Sky laws generally require offerors of securities, as well as brokers, to meet certain registration requirements. They also establish penalties for non-compliance. The term is sometimes used as a verb, as in ldquoto blue skyrdquo an offering, which means to determine if a proposed securities offering passes muster with each particular state in which the securities are to be sold. The origins of the term ldquoblue skyrdquo as it applies to securities are fairly clear, not cloudy or overcast. The earliest relevant written reference, made in the context of fraudulent sales of coinage metals, uncovered by the GelberLaw Glossary, appears on June 5, 1895 at page 3 of the Castle Rock Journal (Castle Rock, Douglas County), a Colorado newspaper, in an article: ldquoThe Honest Dollar ndash It Contains 412 1-2 Grains of Standard Silverrdquo: ldquoA sound dollar should represent a certain amount of labor and be capable of ready transformations into any product of labor. The rule is the world over that what costs little labor to get is worth little. Blue sky may be quite desirable, but as a product entirely of natural conditions and not of labor, it is not counted as having material value. Wh5en a promoter by artful persuasions succeeds in getting money for something which has no valueexcept in the mind of the credulous purchaser he is said to have been selling lsquo blue sky rsquo. This article was reprinted more or less word for word over the next two or three days in other Colorado newspapers, such as: The Akron Weekly Pioneer Press (Akron, Washington County), June 7, 1895 (p.4) Pagosa Springs News (Pagosa Springs, Archuleta County, June 7, 1895 (p. 3) and New Castle News (New Castle, Garfield County)(p.3) June 8, 1895./pgt The first literary reference specifically connected to ldquosecuritiesrdquo uncovered by the GelberLaw Glossary appears in a 1906 book: ldquoThe Grafters of America: Who They Are and How They Workrdquo (Monarch Book Company, Chicago), by Clifton Rodman Wooldridge. At page 47, Wooldridge heads a chapter Stand on lsquoBlue Skyrsquo and lsquoHot Airrsquordquo. In that chapter, Wooldridge recounts the trial testimony of one ldquoCowellrdquo of the prosecuted firm of Lowell amp Cowell. Referring to bogus insurance policies, Cowell purportedly testified: ldquoThey were what I would term lsquoblue sky and hot airrsquo securities. hellipI would hand them a few hundred thousand dollarsrsquo worth of blue sky and hot air paper, and while they held it in their hands they would sign affidavits to the effect that they were worth half a million or a million dollars. rdquo Id . at 48. Wooldridge was a former Chicago police detective who, though not without his own problems, was known as the ldquoAmerican Sherlock Holmes. rdquo Between 1911 and 1933, 47 states adopted blue-sky statutes (Nevada was the lone holdout). Kansas was the first, in 1911, to enact a comprehensive securities law requiring registration of both securities and their salesmen. ldquoBlue Skyrdquo was used by then Kansas Bank Commissioner Joseph Norman Dolley in connection with the statute, and by those reporting on it. See ldquoJoe Dolley Is After the Blue Sky Merchantsrdquo, Topeka Capital-Journal, December 22, 1910. J. N. Dolley complained about the rdquoenormous amount of money the Kansas people are being swindled out of by these fakers and blue-sky merchants. : Letter from J. N. Dolley Dec. 16, 1910 reprinted in Brief for Appellees at 33, Merrick v. N. W - Halsey amp Co . 242 US. 568 (1917) (No. 413), cited in J. R - Macey and G. P. Miller, Origin of the Blue Sky Law, (1991) 70 Tex. L.Rev. 347 at 360 n. 59. The Kansas law was a response to salesmen duping unwitting investors by selling worthless interests in fly-by-night companies and gold mines along the back roads of Kansas. It was reportedly said that no assets backed up those securities--nothing but the blue skies of Kansas. Newspapers from coast to coast reported regularly on the blue-sky laws. The New York Times reported on the statute, see, e. g . ldquoKansasrsquos lsquoBlue Skyrsquo Lawrdquo Friday, October 13, 1911. Subsequent articles were published in the New York Times: ldquoBankers To Take Up The Blue Sky Law Investment Men Here for Convention Will Work for Uniform Laws for Sound Securitiesrdquo, (Friday, November 22, 1912): followed by ldquoExpect to Improve lsquoBlue Skyrsquo Lawrdquo (Saturday, November 23, 1912). As a result of other states enacting blue-sky laws, the term came into widespread and common usage (see New York Times, Tuesday, March 18, 1913, ldquoNew Yorkrsquos lsquoBlue Skyrsquo Law. rdquo) As the states started to pass what they each specifically referred to as their own blue-sky laws, constitutional and other objections arose, spurring litigation. Among the first judicial refererences was William R. Compton Co. et al v. Allen et al . 216 Fed. 537 (S. D. Iowa, Central Division July 6, 1914.) In a per curiam opinion, the court acknowledged that the case was brought to restrain enforcement of an Iowa law ldquocommonly termed the lsquoBlue Sky Lawrsquo of that staterdquo. Without going into the origin of the term, the court noted that the purpose of the Iowa Blue Sky Law (which it found to be unconstitutional) was to: Protect the humble, honest citizens of the state, unlearned in the intricacy of business affairs as conducted at this day from being plundered and despoiled of their small earnings and property, acquired through years of patient toil, by the alluring machinations and the deceptive, misleading, and fraudulent devices which the unscrupulous, cunning and deceitful lsquo Get-Rich-Quick-Wallingfordsrsquo of our day practicehellip. rdquo The first United States Supreme Court reference was in Hall v. Geiger-Jones Co . 242 U. S. 539 (1917), relating to the constitutionality of Ohio state securities regulations. Justice Joseph McKenna wrote: The name that is given to the law indicates the evil at which it is aimed, that is, to use the language of a cited case, speculative schemes which have no more basis than so many feet of blue sky or, as stated by counsel in another case, to stop the sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines and other like fraudulent exploitations. McKenna did not identify the rdquocited caserdquo. Explanations about the term focus on the idea that fraudulent corporations have nothing behind them but blue sky (as in the Kansas situation, above) or that brokers were attempting to sell pieces of the blue sky, or unethical promoters ldquowould sell building lots in the blue sky. rdquo Blue Sky laws differ from state to state. New Yorkrsquos Blue Sky laws are known as The Martin Act. In an article about the Kansas statute dated December 2, 1911, The Saturday Evening Post (Vol. 184 No. 23) wrote: ldquoThe legislature took up the subject at its last session and in March passed the Blue Sky Law ndash so nicknamed because it is designed to prevent the swindling of people through sales of securities that are based mostly upon atmosphere. rdquo Blue-Sky Memorandum ndash A memorandum typically prepared by underwriterrsquos counsel describing the treatment of a particular new issue of municipal securities under the blue-sky laws of the various states. Municipal securities are generally exempt from state securities registration requirements, although broker-dealers selling them are subject to many statesrsquo registration and regulatory requirements. Bond ndash A bond is a debt security, similar to an IOU. Bonds can be issued by a government, municipality, corporation, federal agency or other entity, all such entities known as the issuer. Essentially the issuer is borrowing money from the investor. Conversely, the investor is lending money to the issuer. In return for the loan, the issuer promises to pay the investor a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it ldquomatures, rdquo or comes due. Unlike ownership in shares of a company, a bondholder has no corporate ownership privileges or benefits. Depending on the credit-worthiness of the issuer, the bond can be rated according to risk. The risk in any bond investment is the risk that the issuer will default on either the interest or principal payments. Bonds are available in a range of styles, types and flavors, each carrying particular features that will address the suitability needs, as well as risk tolerance, of different investors. Bowie Bonds ndash In 1997, knowing that a bond can be secured by any dependable stream of income, Wall Street financier David Pullman developed a bond securitized by David Bowiersquos music catalogue, more specifically the current and future revenues of 25 albums (287 songs) that David Bowie recorded before 1990. The bonds had ten year maturities and the entire issue was purchased by Prudential Insurance Company. They yielded 7.9. Bowie realized 55 million immediately from the sale of such bonds, sacrificing ten years of royalties. The bonds, which matured in 2007, are not available. However, other artists followed suit and this particular type of asset backed security (backed by intellectual property) are also sometimes known as Pullman Bonds. Bucket Shop ndash historically a type of illegal brokerage firm, where, in the old days, one could buy and sell stock. Bucket shops were typically small store front operations that catered to the small investor prior to the stock market crash of 1929. Bucket shops generally no longer exist. When a customer placed an order it was written on a slip of paper and literally tossed into a bucket instead of being immediately transmitted to the floor of a stock exchange. The bucket shop would later match up buys and sells to increase its own profit. Since a customer had little way to know the actual price at any particular moment, the bucket shop could match a buy at 10 with a sell at 9 and pocket the 1 difference. As long as the bucket shop reported prices within the days high / low range, the customer had no way of detecting the fraud. The bucket shop could shift its recommendations to correct any imbalance in the buy-sell orders in its own bucket. Todays instant price quotes and executions have made bucket shops impossible. The term is still in use, however, to refer to what are more accurately (though metaphorically) called ldquobolier rooms. rdquo Bull ndash An optimist. A stock market bull believes that prices of securities will rise. A Bull Market is one that reflects, for a prolonged period, such optimism in the form of rising stock prices and increased market volume. One of the hallmarks is that the prices rise faster than historical averages. The opposite of a bull is a bear. Burn Rate ndashThe rate at which a company spends net cash over a certain period, usually a month. Often used by venture capitalists, underwriters and risk tolerant investors in new businesses to measure how much time a startup company has to reach positive cash flow before it runs out of money or requires additional funding. Butterfly spread ndashthis is a name of one of many ldquowinged spreadsrdquo, option strategies, which when graphed, resemble winged creatures (butterflies, condors). The ldquobasicrdquo butterfly spread is a neutral strategy that combines a bull spread with a bear spread, and provides both limited risk and limited profit. The butterfly spread can be built with either calls or puts. If calls and puts are mixed, the name changes. So, for example, using calls, a typical butterfly spread construction, called a ldquolong call butterfly spreadrdquo would involve the simultaneous (i) purchase of one in the money call (ii) sale of two at the money calls and (iii) purchase of one out of the money call. For example, XYZ is trading at 40 per share in June. Constructing a long call butterfly spread involves buying a July 30 call for 1100, writing two July 40 calls for 400 each and buying a July 50 call for 100. The net debit taken to enter the position is 400, which defines the maximum possible loss. On expiration in July, XYZ is still trading at 40 per share. The July 40 calls and the July 50 call expire worthless while the July 30 call still has an intrinsic value of 1000. Subtracting the initial debit of 400, the resulting profit is 600, which is the maximum profit attainable. (Maximum profit is equal to the strike price of the short call minus the strike price of the lower strike long call minus the net premium paid minus commissions, and is achieved when the price of the underlying security equals the strike price of the short calls.) Maximum loss results when the stock is trading below 30 or above 50 in our example. At 30, all the options expire worthless. Above 50, any profit from the two long calls will be neutralized by the loss from the two short calls. Em ambas as situações, o comerciante de borboletas sofre perda máxima que é o débito inicial levado para entrar no comércio. The maximum loss and the maximum profit are increased or decreased respectively by the commissions incurred. The strategy is useful if there is no volatility in the underlying security, which assures the profit. (The maximum loss equals the net premiums paid plus the commissions, and occurs when the price of the underlying security is less than or equal to the strike price of the lower strike long call or when the strike price of the underlying security is greater than or equal to the strike price of the higher strike long call.) Breakeven points exist as upper breakeven (equal to the strike price of the higher strike long call minus the net premium paid) or lower breakeven (equal to the strike price of the lower strike long call plus the net premium paid.) Doing the same thing with puts instead of calls results in a long put butterfly spread. Butterfly spreads can be placed in a variety of securities, including commodities. Brokers recommending such strategies need to be aware of regulatory exposure (commission motive). See In re Techno Trading, Inc. et al. CFTC Docket No. 95-8 (Jan. 8, 1998), and In re FSI Futures, Inc. et al. CFTC Docket No. 95-9, (Jan. 8, 1998). Traders should also be aware of tax issues relating to gains and losses, as well as margin and Regulation T issues. The term is defined at NYSE Rule 431(f)2) as follows: ldquoan aggregation of positions in three series of either puts or calls, structured as either: (A) a long butterfly spread in which two short options in the same series are offset by one long option with a higher exercise price and one long option with a lower exercise price or (B) a short butterfly spread in which two long options in the same series offset one short option with a higher exercise price and one short option with a lower exercise price, all of which have the same contract size, underlying component or index and time of expiration, are and based on the same aggregate current underlying value, where the interval between the exercise price of each series is equal, and the exercise prices are in ascending order. rdquo Daily Trading Limit - The highest and lowest prices that a commodity or option is permitted to reach in one day. Once reached, no trading occurs in that commodity or option until the following session. If a security reaches its limit early and stays there all day, it is said to be having an up-limit day or a down-limit day. Limits are posted by exchanges such as the Chicago Board of Trade. Dark Pool ndash (also dark liquidity pool), sometimes called the upstairs market, this term refers to off-exchange trading by big fish. It can be thought of as an external crossing network, which creates an opaque market, thereby allowing large players to trade without disclosing their hands. Dark pools range from completely opaque to semi-transparent, and their order flow can range from transient to stationary, although the majority of dark pools tend to be completely dark. They either match order flow periodically (these are call markets such as Posit, Instinet or the Nasdaq Cross) or continuously as orders flow to traditional exchanges. ITGs Posit Now, its continuous crossing network, and NYFIX Millennium leverage this transient matching model. Because the percentage of both buy-side and sell-side flow from these external networks has increased dramatically, the price discovery process of traditional markets is being affected. Also, because the profits from these dark pools are unavailable to traditional markets, Nasdaq has recently taken an interest in participating. Day Order - Unless a broker is given specific instructions to the contrary, orders to buy or sell a stock are day orders, meaning they are good only during that trading day. Orders that have been placed but not executed during regular trading hours will not automatically carry over into after-hours trading or the next regular trading day. Similarly, day orders placed during after-hours trading can only be executed during that after-hours session. If an order is not executed during a trading session, a new order needs to be placed in the next trading session. A day order to buy or sell securities that is not filled or cancelled automatically expires at the close of the session. Dead Cat Bounce ndash No animals were harmed in the development of this entry. The term comes from the belief (observation) that even a dead cat will bounce if it is dropped off the roof of a building. (Please do not try this). The term applies to a brief technical recovery, after a pronounced fall-off, in the price of a given stock or the market as a whole. Wikipedia attributes the earliest use of the phrase to 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year. Journalist Christopher Sherwell of the Financial Times reported a stock broker as saying the market rise was a dead cat bounce. The GelberLaw Glossary has no opinion as to whether a dead cat bounce is related to the dogs of the Dow. Delta ndash In derivatives options trading, Delta is one of a number of ratios expressed by letters known as ldquothe Greeksrdquo. Delta is used to describe the ratio between a change in the price of an option to a positive change in the price of the underlier. Expressed another way, it is a measure of option price sensitivity to changes in the price of the underlier. So, for example, a delta of .50 (usually expressed as ldquofiftyrdquo) means that for every increase of one dollar in the price of the underlier, the option price increases by fifty cents. Delta Hedge - Ordinarily, the basic ldquoroutinerdquo an options market maker would employ is a strategy called a Delta hedge. The market maker would express a willingness to buy an option for some bid price less than the price dictated by its pricing model (or buy at some ask price greater than its model price). The model price would simply be some theoretical value produced by applying some formula or method, such as Black-Scholes. This difference between the bid price and the model price (or ask price and the model price) is referred to as the ldquoedgerdquo. By way of example, a counterparty appears and takes the market maker up on its ask (offer) price and buys the option. The market maker now has a position in the option, having ldquowrittenrdquo the contract. In order to protect itself, the market maker would engage in Delta hedging, by attempting to establish and maintain a Delta neutral hedge position in the underlier (for example, natural gas). On a correctly placed Delta hedge, the market maker would profit from the edge when the positions are closed out. If there are too many open positions, Delta hedging becomes more difficult, and in all events does little to ameliorate the risks associated with volatility. See, Caiola v. Citibank . NA, New York, 295 F. 3d 312, 317 (2nd Cir. 2002)(ldquoeffective delta hedging is a sophisticated trading activity that involves the continuous realignment of the hedges portfolio. Because the delta changes with movements in the price of the underlying asset, the size of the delta core position also constantly changes. rdquo Delta measures sensitivity of the price of the derivative to the change in the price of the underlying asset. Id. Derivatives - are financial instruments that are dependent upon some other thing of value. In other words, the value of a derivative is derived from the value of an underlying asset (or index or something else). They can be simple, such as stock options, or more complex such as commodity futures contracts. Derivatives can be based on an underlying asset such as stocks, bonds, commodities, loans, or real estate. They can also be based upon an index, such as the Dow Jones or other stock or bond market indices, or interest rate indices or exchange rate indic es and so forth. The most common types of derivatives are options, swaps, forward contracts and future contracts. Derivatives are useful in hedging against loss or leveraging for greater profit. Because the value of a derivative is contingent on the value of the underlying asset, the notional value of derivatives is recorded off the balance sheet of an institution, while the actual market value of derivatives is recorded on the balance sheet. Dogs of the Dow - A pet name for a particular contrarian investment strategy. The Dow Jones Industrials represent thirty well-known, mature companies that have strong balance sheets with sufficient financial strength to ride out rough times, usually dividend paying companies. Periodically, some companies are dropped and new ones are added. By investing in these thirty companies, the theory is that the investor is making a quality investment. The idea behind the Dogs of the Dow strategy is to buy those DJI companies with the lowest P/E ratios and highest dividend yields. These Dow stocks are ldquocheapestrdquo relative to their peers. Essentially the strategy requires an investor, at the beginning of the year, to buy equal dollar amounts of the 10 DJI stocks with the highest dividend yields, for a one-year holding period. At the end of the year, adjust the portfolio to have just the current Dogs of the Dow. The idea is to buy good companies when they are out of favor and their stock prices are low. Different studies have suggested that this strategy produces comparatively better returns than most mutual funds, or the various averages. In defining or describing various investment strategies, the GelberLaw Glossary does not endorse any of them. Dollars ndash the units of currency of Australia, Bahamas, Barbados, Bermuda, Canada, Hong Kong, Jamaica, New Zealand, Singapore, Taiwan, Trinidad and Tobago, and the United States. Lapsed Option - Option that expires without being exercised and is therefore worthless. Lat ndash Unit of curency of Latvia. Layering A method of engaging in multiple levels layers - of securities transactions, or the placement and rapid cancellation of buy or sell orders, in order to create false volume indicators and thereby trick legitimate traders into buying or selling securities at an artificial price. Lei ndash Unit of currency of Moldava. Lempira ndash Unit of currency of Honduras. Leone ndash Unit of currency of Sierra Leone. Lettered Stock - Stock, usually issued in unregistered private placements that has limited transferability. Also called legend or restricted stock. Commonly, lettered stock restrictions arise under Rule 144 (adopted in 1972) of the Securities and Exchange Act of 1934. Rule 144 permits persons who hold such securities to publicly sell them without registration and without being deemed underwriters, if certain conditions are satisfied. The most common restriction is the prevention of sale for a period of time. The SEC amended rule 144 on February 18, 1997 to permit resale of limited amounts of restricted securities by any person after a one-year holding period, not the previous two-year holding period. U. S. Securities and Exchange Commission, Final and Prepared Amendments to Securities Act Rule 144, February 18, 1997 17 C. F.R. Parts 230 and 239 15 U. S.C. 77a et. seq. Leu ndash Unit of currency of Romania. Lev ndash Unit of currency of Bulgaria. Limit Order - A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. If a buyer places a limit order to buy 100 shares of XYZ Corp. at 49.00, the order will only be filled if (a) the stock drops to 49.00 and (b) enough shares are available at that price. If the stock goes no lower than 49.01, the buy limit order will not get filled. Conversely, if a seller places a limit order to sell 100 shares of XYZ Corp. at 49.00, the order will only be filled if (a) the stock rises to 49.00 and (b) enough shares are being sought at that price. If the stock goes no higher than 48.99, the sell limit order will not be filled. A limit order is a useful tool to avoid being caught by a runaway or volatile market, as can happen with a market order. A hot IPO is offered at 12.00 per share. A buyer wants in but does not want to risk a market order if the stock runs. A limit order to buy at 15.00 would assure that the purchase does not exceed that price. Some brokerage firms may charge higher commissions for executing a limit order than a market order. London Interbank Offered Rate (LIBOR ) ndash LIBOR is the interest rate a which London banks lend funds to other prime banks in London, using Eurodollars. This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years It is thus used as a basis for determining the rate of interest payable in Eurodollars and other Eurocurrency loans. Less credit worthy corporate borrowers will ordinarily be charged some rate based on LIBOR such as LIBOR plus 1. Some adjustable rate mortgages in the United States use LIBOR as a benchmark. Long ndash Outright ownership of a security. A person who is long a stock or bond, for example, owns it outright and has the right to sell it, transfer it as a gift, pledge it as collateral, and also has the right to receive income generated by the security, and also bears the rights and obligations attending price increases and decreases in the value of the security. If an investor is long 500 shares of XYZ, for example, that investor owns the shares and either possesses the certificate or has it on deposit in a brokerage account. Long is the opposite of short. SITE DIRECTORY: Madoff ndash Yiddish for Ponzi. Maloney Act of 1938 - 52 Stat. 1070, as amended, 15 U. S.C. 78o-3, amended the Securities Exchange Act of 1934 by adding Section 15A, and is thus also called the Maloney Amendment. It provides for the regulation of over-the-counter securities markets through national associations registered with the Securities and Exchange Commission. NASD is the only association ever to register under the Maloney Act. NASD (formerly known as National Association of Securities Dealers) thus has a quasi-governmental status, which renders it largely immune from suit while simultaneously allowing it to assert that it is not a ldquostate actorrdquo for Fifth Amendment purposes. What this means is that if the regulatory division of NASD seeks to question a broker, the broker will be barred from the securities industry if he or she asserts a Fifth Amendment right. Curiously, the broker can safely assert a Fifth Amendment right not to answer questions in a SEC inquiry. The Maloney Act subjects NASD to the supervision and oversight of SEC. Margin - Margin is borrowing money from a broker to buy stock, using the investment as collateral. The loan incurs margin interest, payable to the broker, at what is called the broker call rate or call money rate. The use of margin enables investors to increase their purchasing power, and creates leverage, which on the positive side increases the percentage rate of return on the investment. On the negative side. it increases the percentage rate of loss. For example, if an investor buys 100 shares of XYZ in a cash account at 50 per share, the purchase will cost 5,000 plus commissions. If XYZ rises to 75 per share and the investor sells, the investor receives 7,500, less commissions, yielding a 2500 profit, an approximate return of 50 on the original investment. But if the stock were purchased on margin ndash borrowing half the cost (2,500) from the broker ndash the same purchase would only require an outlay of 2,500 form the investorrsquos pocket. Thus the 2,500 profit would yield a 100 profit. Conversely, if the stock price decreases, the losses are similarly magnified. If the stock in the foregoing example falls to 25 per share, the loss would be 50 percent on an all cash investment. But on margin, the loss will be 100 percent, (plus the interest on the loan.) Thus, on margin, if a stock experiences an unexpected dip, there may be no opportunity to continue to hold it until it ldquocomes backrdquo. For this reason, in volatile markets, investors who put up an initial margin payment for a stock may, from time to time, be required through a mechanism called a ldquomargin callrdquo to provide additional cash if the price of the stock falls. Brokerage firms have the right to sell a customerrsquos securities that were bought on margin. They can do so without notification and at a substantial loss to the investor under specific circumstances that generally relate to the degree of insecurity the broker feels. Because of the risks associated with margin, brokers are required to determine the suitability of using margin for each particular customer, who is then asked to sign a ldquomargin agreement. rdquo The margin agreement states that a customer must abide by the rules of the Federal Reserve Board, the New York Stock Exchange, the National Association of Securities Dealers, Inc. and the brokerage firm providing the margin account. The Federal Reserve Board and many self-regulatory organizations such as the NYSE and NASD, have rules that govern margin trading. As corretoras podem estabelecer suas próprias exigências, desde que sejam pelo menos tão restritivas quanto as regras do Conselho Federal de Reserva e do SRO. Before trading on margin, the NYSE and NASD, for example, require a deposit with the brokerage firm of a minimum of 2,000 or 100 percent of the purchase price, whichever is less. Isso é conhecido como a margem mínima. Some firms may require a deposit more than 2,000. According to Regulation T of the Federal Reserve Board, a customer can borrow up to 50 percent of the purchase price of ldquomarginablerdquo securities. Not all securities can be purchased on margin. A common requirement for marginability is that the stock be trading above 5 per share. Isso é conhecido como a margem inicial. Some firms require a deposit of more than 50 percent of the purchase price. After a stock is purchased on margin, the NYSE and NASD require a minimum amount of equity in the margin account. The equity is the value of the securities less how much is owed to the brokerage firm. NASD margin rules can be found at Rule 2520 in the NASD Manual. Margin rules require at least 25 percent of the total market value of the securities in the margin account at all times. Os 25% são chamados de requisitos de manutenção. In practice, many brokerage firms have higher maintenance requirements, typically between 30 to 40 percent. Maintenance margin requirements can fluctuate depending on the type of stock and the market environment. Maintenance requirements work as follows: Investor buys 16,000 worth of XYZ by borrowing 8,000 from the firm and paying 8,000. If the market value of XYZ drops to 12,000, the account equity will fall to 4,000 (12,000 - 8,000 4,000). With a 25 percent maintenance requirement, the customer must have 3,000 equity in the account (25 percent of 12,000 3,000). In this example, there is enough equity because the 4,000 equity exceeds the 3,000 maintenance requirement. But if the firm requires 40 percent, there would not be enough equity. The firm would require 4,800 (40 percent of 12,000 4,800). The 4,000 equity is less than the firms 4,800 maintenance requirement. As a result, the firm may issue a maintenance margin call, since 4,000 equity in the account is 800 below the firms 4,800 maintenance requirement. If a customer fails to meet the margin call, the firm will sell the securities to increase the equity in the account up to or above the firms maintenance requirement. Technically, the margin call is a courtesy, and a brokerage firm can sell out the account without waiting for the additional value to be deposited. Market Order - A market order is an order to buy or sell a stock at the current market price. Unless specified otherwise, a broker will ordinarily enter an order as a market order. Hence the majority of orders placed on the various exchanges are market orders. The advantage of a market order is that it is almost always guaranteed to be executed (as long as there are willing buyers and sellers). Also, some brokerage firms charge lower commissions for market orders than for limit orders. The disadvantage is that the money paid (or received) when a market order is executed may not always be the price obtained from a real-time quote. This may be especially true in fast-moving markets where stock prices are more volatile. When an order at the market is placed, particularly for a large number of shares, there is a greater chance there will be different prices for various parts of the order. Markka ndash Unit of currency of Finland before the Euro. Mortgage-Backed Securities (MBS ) - are pools of mortgages used as collateral for the issuance of securities in the secondary market. They are issued by various entities, such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Association as well as by Ginnie Mae. MBS are commonly referred to as pass-through certificates because the principal and interest of the underlying loans is passed through to investors. The term Mortgage Backed Certificate thus refers to the security itself. The interest rate of the security is lower than the interest rate of the underlying loan to allow for payment of servicing and guaranty fees. Ginnie Mae MBS are fully modified pass-through securities guaranteed by the full faith and credit of the United States government. Thus, regardless of whether the underlying mortgage payment is made, investors in Ginnie Mae MBS receive full and timely payment of principal and interest. Mutual Fund - A mutual fund is a fund of pooled money operated by an investment company that invests the money in a variety of instruments (domestic and foreign) like stocks, bonds, options, futures, currencies, money market securities or government securities. A mutual fund offers the advantage of diversifications and professional management. Each mutual fund is different in its make-up and philosophy. Mutual funds are of many varieties, and range from very aggressive to very conservative with respect to risk. Some are designed for growth and others for income. They can be narrowly focused, such as single sector funds (like pharmaceuticals, or technology) or broad based funds that mirror the market as a whole. Funds sold through brokers carry sales charges (load funds) and funds sold directly often do not (no load funds.) All funds charge some type of management fees or administrative fees. SITE DIRECTORY: NASAA (North American Securities Administrators Association) ndash NASAA was organized in 1919 in Kansas (where the first blue-sky law was passed in 1911). It is the oldest international investor protection organization. NASAA membership currently consists of 67 state, provincial, and territorial securities administrators in the 50 states, the District of Columbia, the U. S. Virgin Islands, Puerto Rico, Canada, and Mexico. NASAA members, essentially the state and provincial securities regulators, license firms and their agents, investigate violations of state and provincial law, file enforcement actions when appropriate, and educate the public about investment fraud. NASAA makes it easy for regulators from multiple jurisdictions to share information in connection with enforcement actions against brokerage firms deemed to be in violation of blue-sky laws, and indeed enables the targeting of perceived ldquoviolatorsrdquo for enforcement proceedings. NASD ndash Formerly known as the National Association of Securities Dealers, NASD is a nonprofit organization formed under the joint sponsorship of the Investment Bankersrsquo Conference and the Securities and Exchange Commission to comply with the Maloney Act. NASD, as the main ostensibly non-governmental securities regulator in the United States, registers member brokerage firms, establishes rules to govern their behavior, examines them for compliance and disciplines those it deems to be non-compliant. Despite NASDrsquos position as a non-governmental agency, federal law requires brokerage firms to register with it. NASD previously owned NASDAQ, which it sold in 2000. NASD Dispute Resolution, Inc. a wholly owned subsidiary of NASD, became operational on July 9, 2000, replacing a former NASD entity, called NASD Regulation Office of Dispute Resolution. This subsidiary administers NASDrsquos vast securities arbitration program throughout the United States and England. NASD Regulation, Inc. another subsidiary, carries out NASDrsquos regulatory and oversight functions. Through its Department of Enforcement, it implements proceedings against member firms and individuals. Even though NASD is under the supervision and control of the Securities and Exchange Commission (a governmental agency), it is generally not subject to the restraints imposed on the SEC, and hence the subjects of NASD enforcement proceedings are not entitled to constitutional legal protections. This near absolute level of power can sometimes prove troubling. Natural Gas ndash Essentially methane, natural gas is a commodity for which futures contracts are traded on NYMEX. Each futures contract is for ten thousand million British Thermal Units, expressed as ldquo10,000 mmBTUrdquo or ten billion BTUs. A BTU is the amount of heat required to raise the temperature of one (1) avoirdupois pound of pure water from fifty-eight and five tenth degrees (58.5deg) Fahrenheit to fifty-nine and five tenths degrees (59.5deg) Fahrenheit at a constant pressure of 14.73 pounds per square inch absolute. A billion BTUrsquos is known as a gigajoule. Trading in natural gas futures is governed by NYMEX Rule 220 et seq. Negligence ndash failing to do something which a ldquoreasonable manrdquo, guided by those ordinary considerations which generally regulate human affairs, would do, or, conversely, doing something (without fraudulent intent) which a ldquoprudent manrdquo would not do. Negligence is often asserted as a ldquocause of actionrdquo in securities arbitration. It carries a ldquopreponderance of the evidencerdquo burden of proof and is subject to defenses such as ldquocontributory negligencerdquo or ldquocomparative negligencerdquo. No Load Fund - Mutual Fund offered by an open-end investment company that imposes no sales charge (load) on the purchase or sale of its shares. Investors buy shares in no-load funds directly from the fund companies, rather than through a broker as is done in load funds. Funds can be either front-loaded or back loaded, meaning the load can be paid up-front on purchase or later, upon sale. Many no-load fund families allow switching of assets between stock, bond, and money market funds. The listing of the price of a no-load fund in the newspaper is accompanied by the designation NL. The net asset value, market price and offer prices of this type of fund are exactly the same, since there is no sales charge. If an investor purchases 10,000 worth of a no-load mutual fund, all 10,000 will be invested into the fund. On the other hand, if a purchaser buys a load fund that charges a commission of 5 upon purchase, the amount actually invested in the fund is 9,500. If both funds return 10 in one year, the no-load fund would have grown to 11,000 while the load fund would grow to 10,450. Load versus no-load fund return calculators can be found on the Internet. Norwegian Krone ndash Unit of currency of Norway. NYMEX ndash New York Mercantile Exchange. NYMEX is the worldrsquos largest physical commodity futures exchange, and is the major trading forum for energy and precious metals. Transactions executed on NYMEX avoid the risk of counterparty default because the NYMEX clearinghouse acts as the counterparty to every cleared trade. Trading is conducted through two divisions, the NYMEX Division, for the energy, platinum, and palladium markets and the COMEX Division, for other metals, such as gold and silver. NYMEX is headquartered at the World Financial Center in lower Manhattan. SITE DIRECTORY: OATS - Order Audit Trail System. To eliminate horsing around with customer orders, NASD Rules 6950 ndash 6958 require FINRA member firms to develop a means for electronically capturing and reporting to OATS specific data elements related to the handling or execution of orders, including recording all times of these events in hours, minutes, and seconds, and to synchronize their business clocks. The SEC approved these Rules on March 6, 1998. On July 31, 1998, the SEC approved amendments to OATS Rules 6954 and 6957 and NASD Rule 3110. The amendments clarify the recording and recordkeeping requirements associated with the OATS Rules. NASD, now FINRA, established the Order Audit Trail SystemSM (OATS SM), as an integrated audit trail of order, quote, and trade information for Nasdaqreg securities, originally pursuant to a settlement agreement with the SEC. FINRA will use this audit trail system to recreate events in the life cycle of orders and more completely monitor the trading practices of member firms. Essentially, each order reported to OATS is assigned an identifier so the order may be uniquely identified. Odd Lot ndash most commonly used to refer to transactions of less than 100 shares of stock. Trading in multiples of 100 shares is called trading in round lots. So if a customer buys 100 shares of XYZ it is a round lot trade, but if a customer buys 56 shares of XYZ it is an odd lot trade. Odd-lot trades could result I higher commissions. Certain securities may trade in round lots of less than 100 shares, a round lot being technically defined as the normal trading unit of the security. Open Order ndash An order to purchase or sell securities that has not yet been filled or canceled, such as a Good-Till-Canceled order. OPRA - Option Price Reporting Authority. OPRA is the securities information processor for market information generated by trading of securities options in the United States. Last sale reports and quotations are the core of the information that OPRA disseminates. However, OPRA also disseminates certain other types of information with respect to the number of options contracts traded, open interest, end of day summaries, and certain kinds of administrative messages. OPRA option codes, the first one to three characters identifying the option root symbol, and the remaining two alpha characters identifying the expiration month, call/put indicator and strike price are being changed by the OSI. Evidently, the limitation of three characters representing the option root creates inconsistency for OTC securities, resulting in the use of illogical identifiers for both options and underlying securities, posing challenges for the marketplace. Option - The right, but not the obligation, to buy (for the purchaser of a call option) or sell (for the purchaser of a put option) a specific amount of a particular stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified, limited period of time. Stock option contracts are structured so that a single contract covers 100 shares of the underlying stock. So for example if a purchaser, in an opening transaction, buys 5 call contracts for XYZ corporation with a strike price of 50 expiring in two months, that purchaser is purchasing the right, but not the obligation, to buy 500 shares of XYZ stock at 50 per share (even if XYZ stock is higher than 50 per share), at any time up to the expiration date, which is usually the first Saturday after the third Friday of the month in which the option expires. The potential gain is the difference between the strike price and the actual price of the underlying stock, times 100. The maximum potential loss is the price paid for the option. The purchaser of a call option becomes a holder of that option. The holder can sell the option at any time up to expiration and profit or limit loss in accordance with the fluctuating price of the call option. When a holder sells an option, that holder is a seller, since the transaction is a closing transaction. However, if a person sells an option as an opening transaction, the seller is known as a writer. The writer of an option contract is much like the writer of an insurance contract. For example, the writer of 5 call contracts for XYZ corporation with a strike price of 50 expiring in two months, is guaranteeing that he will sell 500 shares XYZ to the holder of the option at 50 per share, no matter how high the actual price of XYZ is. Conversely, the writer of 5 put contracts at a 50 strike is guaranteeing that he will purchase 500 shares at 50, no matter how low the actual price is. The writer is responsible for fulfilling the terms of the contract by delivering the shares to the appropriate party. In the case of a security that cannot be delivered such as an index, the contract is settled in cash. For the holder, the potential loss is limited to the price paid to acquire the option. When an option is not exercised, it expires. No shares change hands and the money spent to purchase the option is lost. For the buyer, the upside is unlimited. In order to be able to trade options, an investor must demonstrate suitability for the different levels of option trading offered by most brokerage firms, and complete special account forms that must be approved by a type of supervisor known as a registered options principal. IN turn, the brokerage firm must provide the customer with an Options Clearing Corporation Prospectus, which explains the risks of various option strategies. There are multiple strategies using options as leverage or hedges against losses, and these strategies can involve different kinds of ldquospreadsrdquo, some of which have bizarre names such as four-legged butterfly and bull put spread, among others. Order ndash simply an instruction to a broker to buy or sell a security for a customer account. There are numerous types of orders, such as market orders, limit orders, day orders, good-till-cancelled orders, stop orders, fill or kill orders, all or none orders among others. Basically different types of orders attempt to tailor either the time, price or size of the transaction. Some securities disputes are premised on an allegation that the broker failed to follow or failed to execute and order. OSI ndash Options Symbology Initiative . The Options Symbology Initiative is an undertaking by an industry consortium headed by the Options Clearing Corporation (OCC) to eliminate the OPRA codes that have worked well for over 25 years. The consortium collaborated to address limitations in the traditional method of identifying U. S. listed options contracts during back-office processing. This is typically a three to five alpha-character representation the first three characters are used to identify the options listing symbol and the remaining two alpha-characters are used to identify the expiration month, call/put indicator and strike price. This method has been used for more than 25 years. The new plan will replace the current five-character symbols with a 17 ndash 25 character symbol (most commonly a 21 character symbol) that explains the underlying option. The new identification format comprises four key components: the underlying symbol, the expiration date, the strike price and the option type (call or put). This transition from the very complicted 5 symbol method to the streamlined simplified 21 symbol method is, as of 2010, pretty much in effect. SITE DIRECTORY: Painting the Tape - The illegal practice in which manipulators buy and sell a specific security among themselves, creating the illusion of high trading volume and significant investor interest. The increased volume attracts other unsuspecting investors who might then buy the stock and enable the traders to profit. For example, XYZ Corp. trades at 1 per share until somebody suddenly offers to buy 100 shares at 2 a share. The offer is accepted, the trade is reported, the news hits, it gets mentioned on CNBC and the manipulators then get out. Distantly related to ldquopump and dumprdquo. Pecora Investigation ndash into the causes of the 1929 stock market crash, began on March 4, 1932 by the Senate Committee on Banking and Currency. Ferdinand Pecora (1882 ndash1971), a 51 year old assistant district attorney for New York County, (a graduate of New York Law School), was the fourth and final chief counsel for the investigation, originally launched under the Committees chairman, Republican Senator Peter Norbeck. Hearings began on April 11, 1932, but were criticized by Democrats. Two chief counsels were fired and a third resigned after the Committee refused to give him broad subpoena power. In January 1933, Pecora was hired to write the final report, but found the investigation had essentially accomplished nothing. Pecora sought to hold another month of hearings. Democrats had won the majority in the Senate, and newly elected FDR urged the new Democratic chairman of the Banking Committee, Senator Duncan U. Fletcher, to let Pecora continue. Roosevelt often conferred with Pecora, encouraged him, and depended on Pecoras work to build public support for reform. So actively did Pecora pursue the investigation that his name became publicly identified with it, not the Committees chairman. The hearings ended May 4, 1934. The Pecora Investigation uncovered a wide range of abusive practices by banks and bank affiliates. These included underwriting unsound securities in order to pay off bad bank loans as well as pool operations to support the price of bank stocks. His exposeacute of National City Bank (now Citibank), including that the bank paid cash bonuses to traders who sold the most stocks and bonds, particularly the riskiest ones it wanted to dispose of fastest, made headlines and caused the banks president to resign within weeks. As a result, Congress passed the Glass-Steagall Banking Act of 1933, the Securities Act of 1933, and the Securities Exchange Act of 1934. Pecora was appointed as one of the first commissioners of the SEC. In 1939 Pecora published a memoir, Wall Street Under Oath:The Story of Our Modern Money Changers. Pecora wrote: Bitterly hostile was Wall Street to the enactment of the regulatory legislation. As to disclosure rules, he stated that Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the bankers stoutest allies. PIABA - Public Investors Arbitration Bar Association . In or around 1990, a group of lawyers who tended to represent public investors formed this group in order to share information and strategies helpful to the efforts of investors who were bringing securities arbitration claims against their brokers and brokerage firms. Since that time PIABA has grown to be the largest organization of its type. In general, PIABA engages in a broad range of efforts, funded by dues paying members, to improve the chances of an investor prevailing in a claim against a broker. PIPE (Private Investment in Public Equity) - A private investment firms, mutual funds or other qualified investorrsquos purchase of stock in a company at a discount to the current per share market price, offered by the company in order to raise capital. That is, a public company typically issues unregistered equity-linked securities to such investors at a discount to the price of the issuerrsquos common stock at the time the deal is closed. The issuer commits to registering the securities with the SEC so they can be resold to the public, typically within 90-120 days. There are two main types of PIPEs - traditional and structured. A traditional PIPE is one in which stock, either common or preferred, is issued and a structured PIPE issues convertible debt (convertible into common or preferred shares). Some structured PIPEs have what is known as a ldquodeath-spiralrdquo or ldquotoxicrdquo structure. In these, a company issues convertible preferred stock or convertible debentures that convert into common stock. However, the conversion price, rather than remaining fixed, changes relative to the performance of the issuerrsquos common stock after the deal is closed or over some predetermined period in the future (or some other trigger). If the price of the common stock falls within that period of time, the conversion price drops according to a set formula. This enables the investor to get more stock for the same amount of principal. The problem with such structure is that PIPE investors have incentive to short the common stock in an effort to lower the price down after the deal closed so they could convert to more stock. This incentive can be reduced by deals that include hard or soft floors that prevent ldquohigh-level dilution, rdquo thereby reducing the incentives of investors to short the stock. Despite litigation risks, PIPEs are popular for their relative efficiency in time and cost, compared to more traditional forms of financing such as secondary offerings. PIPEs are advantageous for small - to medium-sized public companies that may have have difficulty tapping into traditional forms of equity financing. Point ndash With respect to stocks and stock options, a point is one dollar. If the stock of XYZ Corp moves up 2 dollars per share, it has moved up two points. With respect to indexes, a point is simply a unit of its measurement. If the Dow Jones Industrial Average is 15,375 and it moves up 23 points, it will be 15,398. With respect to bonds, it refers to percent. Each point is one percent. For a bond with a 1,000 face value, a point is 10. Bond yields are quoted in basis points. A basis point is one one-hundredth of one percent (1 is divided into 100 parts, each part is basis point). Different types of investment vehicles have their own special usages. For example grain futures use ldquopointrdquo to refer to one-quarter of one cent. Ponzi Scheme ndash An investment scheme in which early investors are paid out of money provided by later investors, named for Carlo ldquoCharlesrdquo Ponzi, who came to the United States from Italy in 1903. The classical Ponzi scheme was most recently orchestrated to a breathtaking degree by Bernard Bernie Madoff, culminating in Madoffs guilty plea on March 12, 2009. In 1919 Ponzi discovered that postal coupons bought in Spain could be cashed in the US for six times the cost. Ponzi sought to capitalize on this. First he converted dollars into any foreign currency with a favorable exchange rate. Next, Ponzirsquos foreign agents would buy international postal coupons in countries with weak economies. Then, the coupons were exchanged into a favorable foreign currency and finally back into dollars. He claimed 400 net profits. In truth, the red tape, coupled with currency transfer delays, ate the profits. Nevertheless, friends and family grasped the idea and believed him. On December 26, 1919, Ponzi established The Security Exchange Company. He promised 50 interest in ninety days, but claimed to be able to deliver in forty-five days, thus doubling money in ninety days. Thousands of people bought Ponzi promissory notes ranging from 10 to 50,000, but averaging about 300. Ponzi used the money from later investors to pay off his earlier investors, creating the impression of success. Ponzi grossed around 1,000,000 per week at the height of his scheme. From the start, federal, state, and local authorities investigated him. But since Ponzi had managed to timely pay off all of his notes, no complaint was filed. On July 26, 1920, the Boston Post headlined a story questioning the schemersquos legitimacy. Later that day, authorities somehow convinced him to suspend taking in new investments until an auditor examined his books. Within hours, crowds lined up demanding their money. Ponzi obliged and issued assurances of stability. He returned money to those that requested it. By the end of the first day, he had settled nearly 1,000 claims. By continuing to meet his obligations, anger dwindled and public support swelled. Two weeks later, the auditors, banks, and newspapers declared that Ponzi was bankrupt. Within days, Ponzi acknowledged a 1908 forgery conviction in Canada and a 1910 conviction in Atlanta, Georgia for smuggling five Italians from Canada into the United States. On August 13, 1920, Ponzi was arrested by the feds and released on 25,000 bond. Moments later he was rearrested by Massachusetts and re-released on an additional 25,000 bond. There were federal and state civil and criminal trials, bankruptcy hearings, suits against Ponzi, suits filed by Ponzi, and the ultimate closing of five different banks. An estimated 40,000 people had entrusted some fifteen million 1920 dollars in Ponzirsquos scheme. A final audit concluded he had taken in enough to buy approximately 180,000,000 postal coupons, of which it could only confirm the purchase of two. It took about eight years, but note holders received an estimated thirty-seven percent of their investment returned in installments. Ponzi was sentenced to five years in federal prison for mail fraud. After three and one-half years, Ponzi was sentenced to an additional seven to nine years by Massachusetts. He was released on 14,000 bond pending appeal and fled to Florida. Under the alias of Charles Borelli, Ponzi got into a pyramid land scheme, buying land at 16 an acre, subdividing it into twenty-three lots, and selling each lot at 10 apiece. He promised all investors that their initial 10 investment would grow to 5,300,000 in just two years. Much of the ldquolandrdquo was underwater. Ponzi was indicted for fraud and sentenced to a year in a Florida prison. He jumped bail on June 3, 1926 and fled to Texas. He hopped a freighter for Italy, but was captured on June 28th in a New Orleans port. On June 30th he sent a telegram to President Calvin Coolidge asking to be deported. Ponzis request was denied and he returned to Boston to complete his sentence. After seven years, Ponzi was released on good behavior and deported on October 7, 1934. Back in Rome, Ponzi became an English translator. Mussolini offered him a position with Italyrsquos new airline and he served as the Rio de Janeiro branch manager from 1939-1942. Ponzi discovered that several airline officials were using the carrier to smuggle currency and Ponzi wanted a cut. When they refused, he tipped off the Brazilian government. World War II brought about the airlinersquos failure. Ponzi wandered from job to job. He tried running a Rio lodge, but that failed. He then alternated between earning a pittance for English lessons and drawing from Brazilian unemployment. Ponzi died in January of 1949 in the charity ward of a Rio de Janeiro hospital. Poison Pill A poison pill is not just a drug for spies to kill themselves if caught, but it is also a strategy to enable a corporation to deter or prevent a hostile takeover. The poison pill strategy was invented in 1982 by Martin Lipton, a mergers and acquisitions lawyer at the firm of Wachtell, Lipton, Rosen Katz. In using a poison pill strategy, the target company attempts to make its stock less attractive to the acquiring company or corporate raider. The strategy often involves either a flip-in, which permits existing shareholders other than the raider to buy more shares at a discount, or a flip-over where shareholders can buy the acquirers shares at a discount after the merger. Other methods to discourage the takeover involve the use of preferred rights plans, voting rights plans or back end rights plans. In 1985, the Delaware Supreme Court essentially upheld the legality of poison pills. Moran v. Household Intern. Inc., 500 A. 2d 1346 (Del. S. Ct. 1985). The Court described a Preferred Share Purchase Rights Plan as a defensive mechanism in the arsenal of corporate takeover weaponry. That same year, The Delaware Supreme Court established a test for the reasonableness of an antitakeover defense plan, in Unocal Corp. v. Mesa Petroleum Co., 493 A. 2d 946 (Del. S. Ct. 1985), now cleverly known as the Unocal test. Poison pill strategies usually get triggered when an acquirer obtains a certain percentage of shares. For a discussion of whether a mere 5 threshold is acceptable, please see Versata Enterprises v. Selectica, Inc., 5 A. 3d 586 (Del. S. Ct. t 2010). Foreign jurisdictions may or may not allow poison pills or have restraints on them. Prescriptions for poison pills are remarkably expensive and are not covered by Medicare. Prime Broker ndash Prime brokerage is an aspect of the investment banking business. In general, prime brokers are large banks or securities firms that provide specialized services to hedge funds, institutional investors and the like. Prime brokerage services simplify the record keeping obligations of hedge funds, enabling a money manager to trade with multiple brokerage houses while maintaining cash and securities in a single master account. Typically, a prime broker will offer a variety of services, including custody of securities, clearing, lending, financing and technology, among other things, all designed to simplify the tasks facing hedge fund and other large money managers. Pullman Bonds - a form of asset backed security, secured by the intellectual property rights most often of a musician. Commonly called Bowie Bonds. Pump and Dump ndash A fraudulent scheme, also known as hype and dump manipulation, involve the baseless touting of a companys stock (frequently, if not usually, microcap companies) through false and misleading statements to the marketplace. Often the pumping is done through coercive, high pressure, hard-sell tactics, relying on carefully crafted scripts, and is done by teams of brokers working in a ldquoboiler roomrdquo. With volume increases, the Street notices and the price rises. After pumping the stock, the manipulators who bought the stock cheaply (before the pump) make huge profits by selling (the dump) into the market. Because the fraud involves material misrepresentations, pump and dump schemes of course violate the anti-fraud provisions of the federal securities laws. They often rise to the level of criminal conduct. Fortunately, they are frequently detected, investigated and prosecuted, resulting in fines, license revocations, and sometimes imprisonment. The punishment while severe for the perpetrators is cold comfort to the customers who have lost all their money. Pyramid ndash This is the ancient Egyptian word for ldquoscamrdquo. In the classic pyramid scheme, participants attempt to make money solely by recruiting new participants into the program. It is similar to a classic Ponzi scheme, except in a pure Ponzi scheme, the promoter actually deals with the investors. In a pyramid scheme, the promoter recruits investors, who in turn recruit other investors, in what soon becomes an arithmetically impossible situation, guaranteeing the entire loss of the investment. For example, if a pyramid were started by one person at the top with just 10 people beneath him, and 100 beneath them, and 1000 beneath them, and so on, the pyramid structure would require the involvement of everyone on earth in just ten layers of people with one con man on top. This human pyramid of suckers being born every minute would be about 60 feet high and the bottom layer would have more than 10 billion people. Often there is no product or service at all, and the entire scheme is based solely on recruiting more people. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over money and getting others to do the same. An early version of a pyramid scheme involved a chain letter, in which the recipient would mail one dollar to the person at the top of a list, cross that personrsquos name off, add their own name to the bottom of a list of five or ten people. Then the person would mail the letter to five or ten more people. This created the theoretical requirement that the entire population of earth and the nearest 15 populated galaxies participate. The fraudsters behind a pyramid scheme often promote their schemes as legal, or tax advantaged, often by creating the false impression that it is a legitimate multi-level marketing program. New recruits pay off early stage investors. Rand ndash Unit of currency of South Africa. Real ndash Unit of currency of Brazil. RED HERRING ndash The term describes not merely a communist fish, but also a preliminary prospectus for a company seeking to raise money, usually by going public. So named because the preliminary prospectus, not yet approved by the SEC or state regulators, was traditionally printed with either a red border or red printing on the cover of the document. The red printed legend usually said something like: ldquoA Registration Statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. Information contained in this Preliminary Prospectus is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. rdquo The SEC eliminated the red ink requirement in 1996. (See SEC Release No. 33-7300. ldquoItem 501(c)(8) of Regulation S-K - The red ink requirement applicable to the prospectus caption Subject to Completion and related legend is being eliminated, thereby reducing issuer costs and conforming the requirements of Regulation S-K with the requirements of Regulation S-B. rdquo) The Red Herring is essentially a disclosure / offering document, setting forth the business plan, executive biographies, financial projections and risks inherent in connection with an investment in the company. REIT (Real Estate Investment Trust) ndash a liquid, dividend paying means of participating in the real estate market. REITs are generally publicly traded companies (and hence can be purchased on a stock exchange like a stock) that manage real estate portfolios and pass the profits on to their shareholders. Equity REITs purchase actual real estate and shareholders receive their share of the rents received and capital gains upon the sale of the property. Mortgage REITs lend money to developers, and shareholders receive their proportionate share of interest received on the loans. Hybrid REITS mix the two. REITs can themselves avoid taxation if 75 or more their income is from real property and if they distribute 95 of their net earnings to shareholders. This high distribution requirement is what tends to make REITs high yielding investments. REITS invest in a diverse array of properties, such as shopping malls, nursing homes, office buildings, hotels, warehouses and apartment complexes, among others. Some REITs specialize in one type of property. In addition to being available directly on the stock exchanges, one can invest in REITs by investing in REIT mutual funds. Respondent - In all legal disputes, the party making the complaint is distinguished from the party defending against the complaint. In the courtroom, the party complaining is called a ldquoplaintiffrdquo and the party defending is called a ldquodefendantrdquo. In securities arbitration, the nomenclature is different - the party complaining is called the ldquoclaimantrdquo and the party defending is called the ldquorespondent. rdquo The complaint is called a statement of claim. Repurchase Agreement ndash Generally and widely referred to a ldquoRepordquo, a repurchase agreement is, functionally, a short-term loan collateralized by a security, although legal title in the security actually passes to the buyer. As a practical matter repos are usually overnight transactions, although they can last up to two years. Basically, in a repo transaction a seller sells a security (often to an institutional buyer) in exchange for cash, while promising to buy it back at a predetermined date and fixed higher cash price. The difference between the sale price and the repurchase price is the investors (i. e. the repo buyerrsquos) return, and is referred to as the ldquorepo rate. rdquo For the most part, virtually any security can be sold in a repo transaction, and they frequently involve Treasury or Government bills, corporate and Treasury / Government bonds. Corporate stocks may be used. When a custodian functions as an administrative intermediary between the two parties to a repo transaction, it is called a ldquotri-party repo. rdquo And, from the perspective of the buyer, the transaction is commonly referred to as a ldquoreverse repordquo. Rial ndash Unit of currency of Iran, Yemen and of Oman. Riel ndash Unit of currency of Cambodia. Ringgit ndash Unit of currency of Malaysia. Risk ndash The likelihood of losing money (or value) in an investment or the degree of possibility of not gaining value. Also used to describe factors that can affect the likelihood of an investmentrsquos success. In general, the maximum financial risk of every investment is the loss of 100 of the amount invested. However, in certain types of leveraged investments, such as margin transactions and types of commodities transactions, the risk can exceed 100 of the investment. In general, risks that affect the likelihood of success are supposed to be disclosed by the person inviting the investment, and sometimes these risks are disclosed in a risk disclosure document, such as a private placement memorandum or a prospectus. Rubel ndash Unit of currency of the Republic of Belarus. Ruble ndash Unti of currency of Georgia, Kazakhstan, Republic of kyrgyz, Russia, Tajikstan, Turkmenistan, and Uzbekistan. Rufiyaa ndash Unit of currency of the Republic of Maldives. Rule of 72 ndash a convenient way to calculate the approximate time it takes money to double at a given interest rate. Simply divide the number 72 by the rate of interest to determine the number of years to double. For example, money earning 9 interest will double approximately every 8 years. (72 divided by 9 is 8). The Rule of 72 works best for annually compounding interest rates, and distortion significantly increases above 20. (Continuously compounding interest is better calculated by applying a Rule of 69.3). Sale ndash a securities transaction in which the seller trades away its right, title and interest in a security in exchange for consideration, usually money. A sale can be accomplished ldquolongrdquo (when the seller owns the security being sold), or ldquoshortrdquo when the seller borrows the security in order to sell it, subject to the sellerrsquos obligation to return the security to the party from whom the security was borrowed. In options transactions, when the seller of the option does not own the option, the seller is called a ldquowriterrdquo of the option. A sale can be effected by an issuer, as part of an IPO, for example, or by a holder or trader in the secondary market. Also, a securities sale can take place either on a public market, such as a stock exchange, or privately, as a matter of contract, such as in a private placement. Sales of securities are governed not only by the various federal and state securities laws, but also by the Article 8 of the Uniform Commercial Code. Also, the effectiveness or legality of a sale may be subject to a variety of factors, such as restrictions on the security, registration status, or clearing corporation (or transfer agent) rules. Securities Exchange Act of 1934 - (P. L. 73-291, 48 Stat. 881) 15 U. S.C. sect 78a et seq. was the first federal legislation specifically intended to regulate stock exchanges and companies that have distributed securities to the public. It passed both houses of Congress with overwhelming support and was enacted on June 6, 1934. Congress promulgated the Exchange Act under its authority to regulate interstate commerce, pursuant to Article II, section 8 of the U. S. Constitution. It therefore requires the use of an instrumentality of interstate commerce - communication or transportation - before it applies. The courts have held that the use of mails or a telephone meets this requirement, even if the use is only intrastate. The Exchange Act requires publicly held companies to make periodic public disclosures and disclosures in connection with proxy solicitations. It also requires certain disclosures in connection with tender offers for the shares of publicly held companies. Finally, the Exchange Act regulates trading by certain company insiders. The Exchange Act broadly prohibits all fraud, manipulation and other abusive practices in connection with the purchase or sale of securities. In the context of most litigated or arbitrated disputes, Section 10(b) is the most often relied upon section, along with Rule 10b-5 (promulgated under the Exchange Act). With respect to stock exchanges, including the National Association of Securities Dealers, which operates the NASDAQ market, or the New York Stock Exchange, the Exchange Act requires registration and adherence to certain principles of self-regulation to insure the transparent and fair operations of the securities exchanges. Every securities broker and every securities dealer must be a member of a so-called self-regulatory organization. If either a securities firm or a person associated with a securities firm violates the rules or regulations of the exchange, or the federal securities laws, or just and equitable principles of trade, the law permits the imposition of sanctions. These sanctions can range from fines to censures to permanent barring from the securities industry to criminal penalties. The Securities and Exchange Commission (SEC) is the primary regulatory agency charged with enforcing the federal securities laws, including the Securities Act of 1933, and the Securities Exchange Act of 1934. In the 1932 election, Franklin D. Roosevelt promised economic reform in the effort to emerge from the Great Depression, arguably triggered by the 1929 market crash. The Securities Act of 1933 was the first piece of Roosevelts New Deal, and Congress enacted it during the first one hundred days of his administration. Roosevelt sought to bring back public confidence in the securities markets and was convinced that truthful and full disclosure was essential to this goal. Congress joined in this conclusion, finding that full disclosure would give investors pause before falling prey to panic selling, and passed the Exchange Act for that purpose. Security ndash The term is misleading because it implies safety. A far more accurate term would be risk instrument. Security is broadly defined in the Securities Act of 1933 (15 U. S.C. sect77a et seq.), and also in the Securities Exchange Act of 1934 (15 U. S.C. sect78a et seq.) as well as a host of judicial decsions that have interpreted the definitions. It includes a broad range of investments such as stocks, bonds, futures, options, currency options, debentures, warrants, investment contracts among other things. Congress did not define the term ldquoinvestment contractrdquo. The test for whether a particular scheme is an investment contract was established by the Supreme Court in SEC v. W. J. Howey Co. . 328 U. S. 293 (1946): ldquowhether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. rdquo The courts have consistently viewed the definition broadly. ldquoCongressrsquo purpose in enacting the securities laws was to regulate investments, in whatever form they are made and by whatever name they are called. rdquo Reves v. Ernst amp Young . 494 U. S. 56, 61 (1990). Hence, pretty much anything a broker or an issuer sells a customer for investment or trading purposes is a security. For most people ldquosecurityrdquo simply refers to stocks, bonds, futures and options. Most securities disputes involve stock, bonds or options and the various strategies relating to the purchase and sale of such securities. Shelf Registration - An arrangement under the registration rules of the federal securities laws that permits an issuer of securities to file a registration statement for any securities that will be offered on a continuous or delayed basis under the Securities Act of 1933. Shelf registrations are governed by 17 C. F. R. sect 230.415 (2002) (Rule 415). The SECs Rule 415, adopted initially in 1982, allowed issuers to register securities they expected to sell within two years of the initial effective date, without having to file additional registration statements with each offering. In the case of primary offerings of debt securities by a company eligible to use Form S-3, the company had to register only the amount of securities it reasonably expected to offer and sell within two years of the initial effectiveness date of the registration statement. In December 2005, new shelf registration rules were effected which generally make the process easier in a number of respects, particularly for the largest and most active issuers with an established track record of filing reports with the SEC required by the Securities Exchange Act of 1934. These issuers are called well-known seasoned issuers, or WKSIs (pronounced ldquoWiksirdquo). One major change is that WKSIs are now permitted to file registration statements that will become automatically effective without SEC review. The rules also liberalize certain existing restrictions to the shelf registration process that are applicable to both WKSIs and ldquoseasoned issuersrdquo that fall outside the definition of WKSI. For example, both WKSIs and non-WKSIs are no longer required to limit the amount of securities they register to what they intend to offer during the two years from the effective date of the registration statement. Now, non-WKSI seasoned issuers must merely specify an amount of securities on the registration statement, which must be updated every three years, and WKSIs need not specify any amount of securities at all. Having a registration ldquoon the shelfrdquo essentially allows an issuer to act quickly when the market is right. Under SEC Rule 415, issuers are expected to file amendments disclosing any changes in financial condition. Delayed offerings originally were used by corporations, but the SEC also has approved their use by limited partnership tax shelters, employee benefit plans, and issuers of mortgage pass-through certificates. Sheqel ndash Unit of currency of Israel. Short ndash Used as a noun, a verb and an adjective, it is essentially the opposite of ldquolongrdquo. A short position in a security is created when a trader has sold something he or she does not own. For example, if a trader is short (goes ldquoshortrdquo or ldquoshortsrdquo)100 shares of XYZ at 50 per share, it means the trader sold, as an opening transaction, 100 shares of XYZ at 50 per share, in the hope it will drop in price. The trader accomplishes this by first borrowing the shares, at interest, from someone else. Regulations require the short seller to first determine the availability of the shares to borrow before placing the trade. If the price of XYZ goes down, for example to 40 per share, the trader will buy the 100 shares (called covering the short) at that price and pay back the borrowed shares, pocketing the difference (less interest and commissions.) If the stock goes up, the short trader loses money. A short position is established by selling short and remainig uncovered. It is a bet that the market will go down, and can be used as a hedging device. Short interest - Total volume of shares of a security that investors have sold short and have not yet been repurchased to close out the short positions. Usually, investors sell short to profit from price declines. The New York Stock Exchange reports short interest. Short interest is often an indicator of the amount of pessimism in the market about a particular security, although there are other reasons to short that are not related to pessimism. For example, hedging strategies for mergers and acquisition as well as derivative positions may involve short sales. Because of the requirement to cover all short positions, however, a high short interest figure reflects potential buying pressure to cover, and may be viewed as a bullish sign. Side pockets - Hedge funds may hide poor-performing or illiquid assets in a side pocket, a separate account on the hedge fundrsquos books. Hedge funds can use side pocket accounts in various ways, including (i) estimating the value of the side pocket positions and including a payment for them in the redemption price (ii) permitting investors to redeem the liquid portion of their interests but keeping the investor in the fund relative to the investorrsquos share of illiquid positions (iii) excluding side pocket value from the redemption proceeds for investors wishing to redeem before the illiquid positions are sold, so the redeeming investor simply relinquishes any interest in the side pocket and (iv) creating a separate class of fund interests with some investors only sharing in the liquid positions in the fundrsquos portfolio, while others, with a longerndashterm appetite for commitment, participate in the side pocket portion of the fund as well. Hedge funds have to isolate their positions in initial equity public offerings, so investors in the fund who are broker-dealers, or affiliated with them do not participate in the gain from that portion of the hedge fundrsquos portfolio. See FINRA Rule 2790 relating to hot issue IPO matters. Some hedge funds require leaving some of the investment in side pockets as a condition for redemption, even though the condition was not disclosed in the investment agreement. There is also the potential for excessive leverage, the over-concentration of positions, the dependence of valuations upon complex proprietary models, and operational risks for settlement and clearance systems. Hedge funds also use techniques known as ldquogatesrdquo and lock-upsrdquo to hold onto investor capital. In April 2010, the SEC launched in an investigation into whether hedge funds used side pockets to prevent investors from withdrawing money during the 2008 market turmoil. SIV - Structured Investment Vehicle. SIVs (most often run by banks, but not always) are investment companies that engage in market arbitrage. They purchase predominantly investment-grade debt securities (usually with a weighted average rating in the AA/Aa range) such as medium and long term fixed income bonds and fund themselves with cheaper senior debt instruments such as commercial paper and medium term notes. In other words, they buy highly rated debt securities and fund themselves by issuing senior debt and capital. The aim of the SIV is to earn the hoped-for net spread between the yield on its asset portfolio and its funding costs, to pay a return to capital holders and to generate fee income for the investment manager. The SIV runs both a liquidity risk and a solvency risk. Senior debt is usually (but not always) investment-grade commercial paper and medium-term notes issued both in the Euromarkets and in the US domestic market (and sometimes other local markets). Since SIVs rely on short-term commercial paper to fund longer maturing assets, there is an ongoing need to renew funding. SPAC ndash Stands for Special Purpose Acquisition Company. A SPAC is a pooled investment vehicle that allows public stock market investors to risk investment in private equity type transactions, particularly leveraged buyouts. SPACs are shell or blank-check companies that have no operations, income or any business. They are generally incorporated with the primary objective of raising funds through an initial public offering of its securities, the proceeds of which are used primarily for the purpose of acquiring or merging with one or more operating copmpanies. If the SPAC fails to make an acquistion within a fixed period of time, generally between 18 and 24 months, the money raised is returned to investors. A SPAC will typically begin as a corporation formed by a small group of industry executives or sophisticated investors (ldquoFounding Stockholdersrdquo). The Founding Stockholders buy the SPACrsquos common stock for nominal consideration and generally retain, after completion of the IPO, 20 of the SPACrsquos common equity, although this percentage is less if the underwritersrsquo over-allotment option is exercised. Some or all of the Founding Stockholders also serve as the SPAC management team that will search for prospective target operating companies. Once a target is found, 80 of the SPAC shares must approve the acquisition. (Some commentators argue that this is illusory because if management recommends the purchase, shareholders will approve it.) Because a SPAC is a very clean public shell, it provides the target private company with the option of accepting stock instead of cash in a transaction, thereby avoiding tax requirements. The target company is also able to immediately become a public company without the risk, expenses and time associated with the IPO process. SPACrsquos are typically listed in the United States on the OTC Bulletin Board and/or the American Stock Exchange. Specialist - A market professional that manages the two-way auction market trading in a handful of specific securities in which he or she specializes. A specialist ordinarily works for a specialist firm, an independent company in the business of trading listed securities. A specialist is a member of a stock exchange, such as the New York Stock Exchange, who performs several functions. Specialists must make a market in the stock they trade by displaying their best bid and asked prices to the market during trading hours. Specialists are required to maintain a fair and orderly market in the stocks they trade. They do this by committing their own capital to provide liquidity to help reduce market volatility when there are an insufficient number of buyers or sellers. Exchange rules prohibit specialists from trading ahead (a form of ldquofront-runningrdquo also cleverly known as ldquotrading aheadrdquo) of investors who have placed buy or sell orders for a security at the same price. The number of stocks a specialist trades depends on how active the stock trades, but most specialists specialize in around five to ten companies. On the New York Stock Exchange, the specialist obtains consideration for the supply of immediacy and the maintenance of an orderly market by having private access to order-flow information through the order book for the particular stock. On the Paris Bourse, on the other hand, specialists are compensated in cash. Steepener CD - Steepener CDs pay a guaranteed interest rate pegged to some derivative yield curve benchmark for a short period of time within the total maturity period for the CD. So, for example, the CD will have an 8 guaranteed interest rate for the first year of a ten-year CD. After the first year, the interest rate resets pursuant to some formula, for example: 4 times the difference of the 30-year and the 2-year CMS (Constant Maturity Swap) (positive yield curve) minus 1 as reported two business days before the start of the quarter (the observation date). But if the 2-year CMS rate on the observation date is greater than the 30-year CMS rate, reflecting a negative yield curve, no interest is paid for the entire quarter. While Steepener CDs are FDIC insured if the CD is held to maturity (10 years), the risks include loss of interest for a significant period of time, credit risks and market risks (i. e. if you need to sell before maturity, you could sustain a loss of principle and you need to locate a buyer.) Steepenerrsquos are available through brokerage firms and are subject to brokerage commissions. Stop-Limit Order - A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or to sell at a specified price. The benefit of a stop-limit order is that the investor can control the price at which the trade will get executed. But, as with all limit orders, a stop-limit order may never get filled if the stocks price never reaches the specified limit price. This may happen especially in fast-moving markets where prices fluctuate wildly. The use of stop limit orders is much more frequent for stocks that trade on an exchange than in the over-counter (OTC) market. In addition, a broker-dealer, or a particular exchange may not allow stop limit orders on some securities, or they may narrow the parameters. For example the American Stock Exchange prohibits stop limit orders unless the stop price and the limit price are equal. Check the rules, as they do change. Stop Order - A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the specified price is reached, the stop order becomes a market order. A stop order can be placed as a day order, good-till-canceled order, or any other type of time-limit order. Purchasers typically use a stop order when buying stock to limit a loss or protect a profit on short sales. A stop order to buy always places a stop price that is above the current market price. Sellers typically use a stop order to avoid further losses or to protect a profit that exists if a stock price continues to drop. A stop order to sell always places a stop price that is below the current market price. The advantage of a stop order is it that the investor does not have to monitor the stockrsquos performance on a daily basis. A desvantagem é que o preço de parada pode ser ativado por uma flutuação de curto prazo em um preço de ações. Once the stop price is reached, the stop order becomes a market order and the actual trade price can be much different from the stop price, especially in a fast-moving market where stock prices change rapidly. An investor can avoid the risk of a stop order not guaranteeing a specific price by placing a stop-limit order. The use of stop orders is much more frequent for stocks that trade on an exchange than in the over-counter (OTC) market. Some broker-dealer may not allow you to place a stop order on some securities or accept a stop order for OTC stocks. Stub quote ndash Also known as a placeholder quote, a stub quote is essentially a market makerrsquos tool to stay away from actually making a market. If XYZ Corporation normally trades for 25.25 per share, an active or liquid market could show a best bid of 25.15 and a best ask at 25.35. A second best bid might be at 25.10 and so forth. A stub quote on the other hand will likely be 0.01 on the bid and 2,000.00 on the ask ndash both so far away from any real market value that trades will not likely be executed. Stub quotes are usually posted when a stock does not have enough liquidity to trade in its recent price range. The market maker is technically meeting its requirements without exposing itself beyond available liquidity. Ironically, on May 6, 2010 a so-called ldquoflash crashrdquo occurred when real market quotes somehow disappeared for a few moments and market orders were executed at the stub quotes. Suitability - When a broker recommends that the purchase or sale of any particular security, that broker must have a reasonable basis for believing that the recommendation is suitable for the particular investor. The assessment is made in light of the investorrsquos level of sophistication, risk tolerance, financial status and investment objectives, among other criteria. FINRArsquos current Rule 2310 (scheduled to change in June, 2010) sets forth the criteria and steps that must be taken in making such determination. Suitability can be viewed both quantitatively and qualitatively. As an instructive example, the National Adjudicatory Council (NAC) of NASD Regulation (now FINRA), in DOE v. Chase . Complaint No. C8A990081 (Aug. 15, 2001) analyzed the following facts: Broker (B) had female client (W) with 800,000 in total assets, 500,000 of which was listed as Wrsquos liquid net worth. B disclosed the risks of a speculative security he recommended to W, an economics student in college. W had access to others who were giving her advice, including an accountant and an attorney. Wrsquos new account form sought speculation. B ultimately had Wrsquos ldquoentire liquid net worthrdquo in one speculative stock, on margin. The NAC noted that among the types of suitability problems that exist, there are ldquo lsquoreasonable basisrsquo suitabilityrdquo and ldquorsquoquantitativersquo suitabilityrdquo issues and confirmed severe sanctions, noting: A customers investment objectives, however, are but one factor to consider in determining whether the brokers recommendations were suitable for the customer. Furthermore, a broker cannot rely upon a customers investment objectives to justify a series of unsuitable recommendations that may comport with the customers stated investment objectives but are nonetheless not suitable for the customer, given the customers financial profile. Thus, even where a customer affirmatively seeks to engage in highly speculative or otherwise aggressive trading, a broker has a duty to refrain from making recommendations that are incompatible with the customers financial situation and needs. Veja, por exemplo John M. Reynolds, 50 S. E.C. 805, 809 (1992) (stating that regardless of whether the customer wanted to engage in aggressive and speculative trading, the broker was obligated to abstain from making recommendations that were inconsistent with the customers financial situation) Paul F. Wickswat, 50 S. E.C. 785, 786-87 (1991) (The proper inquiry is not whether the customer viewed the brokers recommendations as suitable, but whether the broker fulfilled his obligation to his client.). See also, Siegel v. SEC . 592 F. 3d 147 (D. C. Cir. 2010) for discussion of conduct that could lead to unsuitability claims being upheld under FINRA Rule 2310. Importantly, the knowing recommendation of unsuitable securities can form the basis of a claim of violation of Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder in other words, securities fraud. See Eickhorst, et al. v. E. F. Hutton Group, Inc . 1990 U. S. Dist. LEXIS 218 (S. D.N. Y. January 11, 1990) Leone v. Advest, Inc., 624 F. Supp. 297, 304 (S. D.N. Y. 1985)(In this circuit, unsuitability states a cause of action under sect10(b) and Rule 10b-5. ). See also, Treacy v. Simmons, Fed. Sec. L. Rep. para95,920 at 99,569 (CCH) (S. D.N. Y. April 22, 1991)(JFK) Clark v. John Lamula Investors Inc. . 583 F.2d 594 (2d Cir. 1978) Bischoff v. G. K. Scott amp Co. Inc . 687 F. Supp. 746,752 (E. D.N. Y. 1986) Mauriber v. Shearson/American Express, Inc. . 576 F. Supp. 1231, 1237 (S. D.N. Y. 1983). See also, Mihara v. Dean Witter amp Co . Inc. 619 F.2d 814 (9th Cir. 1980) (unsuitability arises under Section 10(b)) Zaretsky v. E. F. Hutton amp Co. Inc. 509 F. Supp. 68 (S. D.N. Y. 1981) (unsuitability arises under Rule 10b-5) Troyer v. Karcagi, 476 F. Supp. 1142, 1152 (S. D.N. Y. 1979) Cohen v. Prudential-Bache Securities, Inc. . 712 F. Supp. 653, 660 n.4. An allegation that defendants knew or reasonably believed that certain securities were unsuitable, but recommended them anyway, is more than an allegation of puffery and states a violation of Rule 10b-5. Cohen v. Prudential-Bache Securities, Inc., 712 F. Supp. 653, 660 n.4 (S. D.N. Y. 1989) citing to Mauriber, supra . Swap ndash Generally a swap is the exchange of one asset or liability for a similar asset or liability in order to lengthen or shorten maturities, or to raise or lower coupon rates, to maximize revenue or minimize financing costs. It can involve selling one securities issue and buying another in foreign currency or buying a particular currency on the spot market and simultaneously selling it forward. Os swaps também podem envolver a troca de fluxos de renda, por exemplo, a troca do fluxo de cupom de taxa fixa por um fluxo de pagamento de taxa variável, ou vice-versa, sem trocar o componente principal do título. Swaps are generally traded off-exchange (over-the-counter.) See the discussion of Credit Default Swaps above for an example. Swaption - An option (the right, but not the obligation) to enter into a specified type of swap at a specified future date certain. Symbol ndash A shorthand unique security identifier system employed in stock exchanges and stock markets to facilitate the trading of securities. On the New York Stock Exchange, symbols are from one to three letters. For example, Citigroup trades under the symbol ldquoCrdquo. A broker placing an order for that stock would simply write the letter C on the order ticket. IBM trades under the symbol ldquoIBMrdquo. Stock options trade pursuant to a more complex symbol designation, with certain letters indicating the month of expiration and certain letters indicating the strike price. For example, a call option expiring in January and striking at 60 would have the company stock symbol plus the letter A for January (B for February and so on, with January put option starting at M) plus the letter L indicating the 60 strike price (each letter reflecting 5 increments). This system can get complicated. NASDAQ traded securities usually have four letter symbols, such as MSFT for Microsoft. Sometimes a fifth letter is added to indicate a special or unusual situation, as follows: A - Class A B - Class B C - Issuer qualifications exceptions, such as a temporary listing continuance where listing standards are not met D - New E - Delinquent in required filings with the SEC F - Foreign G - First convertible bond H - Second convertible bond, same company I - Third convertible bond, same company J - Voting K - Nonvoting L - Miscellaneous situations, such as depositary receipts, stubs, additional warrants, and units M - Fourth preferred, same company N - Third preferred, same company O - Second preferred, same company P - First preferred, same company Q - Bankruptcy Proceedings R - Rights S - Shares of beneficial interest T - With warrants or with rights U - Units V - When-issued and when distributed W - Warrants Y - ADR (American Depositary Receipt) Z - Miscellaneous situations such as depositary receipts, stubs, additional warrants, and units. Tag-Along Rights ndash The term usually arises in venture capital contracts. Usually, the term applies to a minority investor, who, for a contractually determined tag-along period, has the right to join any deal entered into by majority shareholders to sell their shares. The concept is sometimes expressed as ldquoco-sale rightsrdquo or sometimes ldquopiggyback rightsrdquo. Tag-along rights essentially obligate the majority shareholders to include the minority shareholder position in any negotiations for the sale of majority interests. Tag-along rights are in fact common in various joint venture, private equity, or other venture capital contracts. Tag-along rights protect minority shareholders. Tax Refund ndash Government repayment of interest free loans made to it by taxpayers. Time ndash Naturersquos way of keeping everything from happening all at once. Time also adds value to money, in the form of interest. In a securities context, time is a factor in options trading, as well as with warrants, rights, tender offers and all investments or investment strategies with expiration or maturity dates. Finally, corporate executives, brokers and others, such as inside traders, who violate various provisions of the law are now given time, generally in prison, by judges, after a guilty plea or verdict is obtained by the prosecution. TIPS ndash In addition to money you leave your waiter, or a secret message about which horse to bet on, TIPS also refer to Treasury Inflation-Protected Securities. They come in five year, ten year and twenty year maturities. As the name suggests, these are Treasury instruments issued with the full faith and credit of the U. S. government that provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price All Urban Non-Seasonally Adjusted Index (CPI). When a TIPS matures, the investor is paid the adjusted principal or original principal, whichever is greater. Since a TIPS investor will never receive less than the original principal at maturity, the investors original principal amount is protected against deflation as well. TIPS pay interest every six months, at a fixed rate, and pay the principal when they mature. The rate is applied to the adjusted principal so, like the principal, interest payments rise with inflation and fall with deflation. Trading at Settlement (TAS) ndash TAS may be thought of as a limit order in the futures market, whereby an order placed during the trading day will be automatically priced at that dayrsquos closing settlement price of the particular futures contract being traded. TAS, sometimes referred to by traders as ldquobuying settlementrdquo, is particularly useful to commercial hedgers in the petroleum markets who often use average pricing in physical transactions as well as those in the natural gas markets who also use derivative products based on Exchange pricing. TAS was introduced in 2000 in the crude oil and natural gas rings. NYMEXrsquos TAS rules are set forth at Rule 6.40B of NYMEXrsquos ldquoExchange Rulebookrdquo. In addition, NYMEX issues, from time to time, ldquoNotices to Membersrdquo which may set forth specific TAS rules for particular products. So, for example, with respect to gasoline, TAS is available for the front two months except on the last trading day and is subject to the existing TAS rules. Trading in all TAS products, including by open outcry, ceases daily at 2:30 PM Eastern Time. TAS products trade off of a Base Price of 100 to create a differential (plus or minus) in points off settlement in the underlying cleared product on a 1 to 1 basis. Example: a crude oil contract trades on CME Globex at TAS 103, and the market for that product settles at 72.10. In that case, the TAS trade is executed at 72.13. Conversely, a trade at TAS 97 settles at 72.07. In the first instance the differential was plus three and in the second the differential was minus 3. A trade done at the Base Price of 100 will correspond to a traditional TAS trade, which will clear exactly at the final settlement price of the day. The TAS products and their commodity codes are: WTI crude oil financial TAS (WST) RBOB gasoline financial TAS (RTT) heating oil financial TAS (BHT) natural gas penultimate financial TAS (HPT) natural gas last day financial TAS (HHT) Brent crude oil financial TAS (BBT) NYMEX Europe Brent crude oil TAS (SCT) and NYMEX Europe gasoil TAS (GRT). Trading Halt - The temporary suspension of trading of a security by a securities exchange, such as the New York Stock Exchange (NYSE) or the NASDAQ Stock Market. A trading haltmdashwhich typically lasts less than an hour but can be longermdashcan be called for multiple reasons. They are commonly called during the trading day to allow a company to announce important news or if the market develops a significant order imbalance between buyers and sellers in a security. Um atraso de negociação (ou atraso na abertura) é chamado se qualquer uma dessas situações ocorrer no início do dia de negociação. There are two types of trading halts and delaysmdashregulatory and nonregulatory. The most common regulatory halt and delay happen when a company has pending news, such as a merger announcement or an earnings restatement, that may affect the securityrsquos price (a news pending halt or delay). The trading halt or delay gives market participants time and an equal opportunity to evaluate the impact of the news. Another type of regulatory halt happens when there is uncertainty over whether the security continues to meet the marketrsquos listing standards. When a regulatory halt or delay is imposed by a securityrsquos primary market, the other U. S. markets that also trade the security honor this halt. Nonregulatory halts or delays occur on exchanges, such as the NYSE and Amex (but not on NASDAQ), when there is a significant imbalance in the pending buy and sell orders in a security. When an imbalance occurs, trading is stopped to alert market participants to the situation and to allow the exchange specialists to disseminate information to investors concerning a price range where trading may begin again on this exchange. A nonregulatory trading halt or delay on one exchange does not preclude other markets from trading the security. The SEC does not halt or delay trading in a security for news pending or order imbalances, but it can suspend trading for other regulatory reasons for up to ten days and, if appropriate, take action to revoke a securityrsquos registration. Toumlgroumlg ndash Unit of currency of Mongolia. SITE DIRECTORY: Uncovered Interest Arbitrage - a form of arbitrage where short-term liquid funds are transferred abroad to take advantage of higher interest in foreign monetary centers. It involves the conversion of the domestic currency to the foreign currency to make investment and subsequent re-conversion of the fund from the foreign currency to the domestic currency at the time of maturity. A foreign exchange risk is involved due to the possible depreciation of the foreign currency during the period of the investment, and that risk is not covered by any type of hedging transaction, as would take place in covered interest arbitrage. Undigested Securities - Newly issued stocks and bonds that remain undistributed because there is insufficient public demand at the offering price. Unit Investment Trust (UIT) ndash Unit Investment Trusts, one of the three basic types of investment company (the other two being mutual funds and closed end funds), are defined at Section 4(2) of the Investment Company Act of 1940 (ldquoICArdquo) and discussed in greater detail at Section 26 of the ICA. The ICA states: Unit investment trust means an investment company which (A) is organized under a trust indenture, contract of custodianship or agency, or similar instrument, (B) does not have a board of directors, and (C) issues only redeemable securities, each of which represents an undivided interest in a unit of specified securities but does not include a voting trust. Essentially, a UIT is a registered investment company that buys and holds a generally fixed portfolio of stocks or bonds. Units in the trust are sold to investors who receive a share of the principal and dividends. UITrsquos come in two basic flavors - equity trusts and bond trusts. Equity trust expire on a fixed date and bond trusts expire on the maturity date of the security. Bond trusts are divided into taxable and tax-free trusts. UITs are sold to investors by brokers and can be resold in the secondary market. A UIT may be either a regulated investment corporation (RIC) or a grantor trust. The former is a corporation in which the investors are joint owners the latter grants investors proportional ownership in the UITs underlying securities. A UIT typically issues redeemable securities (or units), like a mutual fund, which means that the UIT will buy back an investorrsquos units, at the investorrsquos request, at their approximate net asset value. Some exchange-traded funds (ETFs) are structured as UITs. Under SEC exemptive orders, shares of ETFs are only redeemable in very large blocks (blocks of 50,000 shares, for example) and are traded on a secondary market. A UIT does not actively trade its investment portfolio. That is, a UIT buys a relatively fixed portfolio of securities (for example, five, ten, or twenty specific stocks or bonds), and holds them with little or no change for the life of the UIT. Because the investment portfolio of a UIT generally is fixed, investors know, from the prospectus, more or less what they are investing in for the duration of their investment. A UIT does not have a board of directors, corporate officers, or an investment adviser to render advice during the life of the trust. Uptick - A securities transaction executed at a higher price than the previous trade. Sometimes called a ldquoplus tickrdquo, it is indicated by a plus sign. Under SEC rules governing short trading, a short sale may only be done on an Uptick. This rule is ingeniously called the ldquoUptick rulerdquo and, since 1990, covers program trading. This rule, sometimes also known as the short tick rule is being eliminated by the SEC, and after July 6, 2007, will no longer be in effect. Variable Annuity - A life insurance annuity contract (either single or multiple premium), which provides future payments to the holder (called the annuitant). Payments can be taken at any time, but are usually taken at retirement. The size of payments varies with the performance of either the underlying securities in the portfolio, or some designated index. The advantage over its opposite, the fixed annuity, is that the variable payments can adjust for inflation. The investment options for a variable annuity are typically mutual funds that invest in stocks, bonds, money market instruments, or some combination of the three. Ordinarily the insurance company issuing the variable annuity will guarantee a certain minimum payment, but the ldquovariablerdquo component above the minimum is not guaranteed. Variable Rate Demand Obligation (VRDO) ndash This is a floating rate obligation that has a nominal long-term maturity but has a coupon rate that is periodically reset (e. g. daily or weekly). The investor has the option to put the issue back to the trustee or tender agent at any time upon specified (e. g. seven daysrsquo) notice. The put price is par plus accrued interest. Vatu ndash Unit of currency of Vanuatu. Velda Sue - Acronym for Venture Enhancement amp Loan Development Administration for Smaller Undercapitalized Enterprises, a federal agency that buys small business loans made by banks, pools them, then issues securities that are bought as investments by large institutions. Originally designed to contribute to the development of a secondary market for small business loans. Voting Right ndash Among the rights accompanying the ownership of publicly traded common stock is the right to vote in the election of corporate directors and on corporate resolutions. Voting may be either in person or by proxy. Usually the company mails out proxy forms. In smaller companies the importance of shareholder response to mailed solicitations for voter proxies is greater, since they run the risk of not achieving a quorum. W-9 ndash An official IRS form required under Section 3046 of the Internal Revenue Code for U. S citizens and resident aliens to certify a taxpayer identification number (for individuals, this is the social security number) as true and correct, in order to avoid federal tax withholding. This form is usually provided when opening an account at a brokerage firm. Wall Street ndash Dutch settlers in New York built a wall that ran across lower Manhattan from river to river to protect themselves from the native population. The term is used to describe the financial district in New York where the New York Stock Exchange is located (at the corner of Wall and Broad). It is also used to refer to the investment community as a whole and is most often shortened to ldquothe Streetrdquo, as ldquothe Street is bullish on XYZ Corp. rdquo Warrant - A warrant is a type of long-term purchase right, specifically the right to buy a stock at a particular price within a certain period of time, usually in excess of one year, often for many years, and sometimes with no expiration. Warrants are often issued as part of a ldquounitrdquo in an IPO, where, for example a unit might originally consist of two shares of common stock and one warrant, until after market trading begins and the warrants are traded independently of the stock. Warrants can also attach to bonds. Put warrants, which give the holder the right to sell a security at a certain price are relatively rare. WKSI (well known seasoned issuer) - A new category (pursuant to SEC rule changes in 2005) of issuer. The term WKSI (pronounced ldquoWiksirdquo) applies to a public company that is current and timely (with limited exceptions) in its Securities Exchange Act of 1934 filings for the previous 12 months and either has (1) a worldwide public common equity float of at least 700 million or (2) registered and issued for cash at least 1 billion in debt or non-convertible securities within the previous three years. WKSIs can take advantage of a streamlined shelf registration process that provides automatic effectiveness of registration statements upon filing (i. e. no SEC review), pay-as-you-go registration fees, and expanded use of prospectus supplements. Won ndash Unit of currency of North Korea and South Korea. Wooden Ticket ndash A confirmation, sent in violation of MSRB and SEC rules, ldquoconfirmingrdquo the terms of a transaction with a customer that, in fact, did not take place. The term is used largely in the bond context, and reflects a violation of MSRB Rule G-17. An unscrupulous broker-dealer might send such fraudulent confirmations to unsophisticated investors on the chance that some investors might mistakenly honor the transactions. The term can also be used to refer to ldquoan order to purchase securities for which the purchaser does not pay whether or not the intention not to pay existed at the time of the order. rdquo United States v. Corr, 543 F.2d 1042, 1045n.4 (2d Cir. 1976). Zero Coupon Security - Debt security that makes no periodic interest payments but is sold at a deep discount from face value. There are several kinds of zero coupon securities. The most popular is the zero coupon bond. This bond can either be issued by a corporation or by a brokerage firm when it strips the coupons off a bond and sells the principal and the coupons separately. This technique is used frequently with Treasury bonds. Zero coupon bonds are also issued by municipalities. The bondholder does not receive interest payments, only the full face value at redemption on the specified maturity date. The IRS claims that the owner of a zero-coupon bond owes income taxes on the interest that has accrued each year, even though the bondholder does not actually receive any payment until maturity. The IRS calls this ldquoimputed interestrdquo. Because zero coupon securities do not make interest payment, they are considered more volatile than bonds making periodic payments. When interest rates rise, zeros fall more sharply than interest paying bonds. However, zero coupon securities rise more rapidly in value when interest rates drop. Zero uptick - A price that is the same as the previous transaction price, but is greater than the most recent different transaction price. It is also known as zero-plus tick, and is the opposite of a zero-minus tick. Zoty ndash Unit of currency of Poland. Z-tranche ndash Tranche is French for ldquoslicerdquo. Certain investments are structured in pieces, classes, or slices, all of which can be referred to as tranches. A Z-tranche is a special type of bond class in a sequential pay collateralized mortgage obligation. It is the fourth tranche of bonds in a typically structured CMO. It combines features of Zero Coupon Securities and mortgage pass through securities. This class of bond does not receive any interest or principal payments until the three other tranches (A fast pay B medium-pay and C slow-pay) have been completely paid off. In a Z-tranche, the interest that is not paid is accrued and added to the principal for future interest calculation purposes. The main purpose of the Z-tranche is to speed up the maturity of the senior tranches by disbursing payment that the Z-tranche was supposed to receive to the higher priority tranches. Z-tranche is sometimes known as Z-bond. Mon Dieu. I am regularly updating The GelberLaw Glossary. An Encyclopedic Dictionary of the Securities Industry copy. and hope you also enjoy my Wikipedia article on Joseph Norman Dolley . Please feel free to telephone or e-mail me about your particular situation. There is no charge for an initial telephone consultation. Copyright Lawrence R. Gelber, 2004 - 2013. All rights reserved. quotGelberLawquot, quotLawrence R. Gelber, Attorney At Lawquot are Service Marks of Lawrence R. Gelber 1998 - 2004, 2009 - 2013. All rights reserved. Page design R. C.Candolin-Gelber 2004 - 2013. All rights reserved. PLEASE VISIT: MY BEST NEW YORK NY. MY BEST HELSINKI. I DECLARE WORLD PEACE. BACK TO TOP