S
Fifth letter of a Nasdaq stock symbol specifying a beneficial interest.
SA
The two-character ISO 3166 country code for SAUDI ARABIA.
SAIF
See: Savings Association Insurance Fund
SAR
The ISO 4217 currency code for the Saudi Arabian Riyal.
SATURNS
See Structured Asset Trust Unit Repackagings.
SB
The two-character ISO 3166 country code for SOLOMON ISLANDS.
SBD
The ISO 4217 currency code for the Solomon Islands Dollar.
SC
The two-character ISO 3166 country code for SEYCHELLES.
SCR
The ISO 4217 currency code for the Seychelles Rupee.
SD
The two-character ISO 3166 country code for SUDAN.
SDD
The ISO 4217 currency code for the Sudanese Dinar.
SDR
See: Special drawing rights
SE
The two-character ISO 3166 country code for SWEDEN.
SEAQ
See: Stock Exchange Automated Quotation System
SEC
See: Securities & Exchange Commission
SED
See: Shipper's Export Declaration
SEHK
See: Stock Exchange of Hong Kong
SEK
The ISO 4217 currency code for the Swedish Krona.
SHP
The ISO 4217 currency code for the Saint Helena Pound.
SIAC
See: Security Industry Automated Corporation
SIC
See: Standard Industrial Classification
SIMEX
See: Singapore International Monetary Exchange
SG
The two-character ISO 3166 country code for SINGAPORE.
SGD
The ISO 4217 currency code for the Singapore Dollar.
SH
The two-character ISO 3166 country code for SAINT HELENA.
SI
The two-character ISO 3166 country code for SLOVENIA.
SIT
The ISO 4217 currency code for the Slovenian Tolar.
SJ
The two-character ISO 3166 country code for SVALBARD AND JAN MAYEN.
SK
The two-character ISO 3166 country code for SLOVAKIA.
SKK
The ISO 4217 currency code for the Slovak Republic Koruna.
SL
The two-character ISO 3166 country code for SIERRA LEONE.
SLL
The ISO 4217 currency code for the Sierra Leone Leone.
SM
The two-character ISO 3166 country code for SAN MARINO.
SMBS
See: Stripped mortgage backed securities
SN
The two-character ISO 3166 country code for SENEGAL.
SO
The two-character ISO 3166 country code for SOMALIA.
SOES
See: Small Order Execution System
SOS
The ISO 4217 currency code for the Somalian Shilling.
SOXS
See: Sarbanes Oxley Act of 2002
SPDR
The Standard and Poor's depositary receipt. This is a tracking stock which trades like an index mutual fund which follows the S&P 500. It trades continuously.
SR
The two-character ISO 3166 country code for SURINAME.
SRG
The ISO 4217 currency code for the Surinam Guilder.
ST
The two-character ISO 3166 country code for SAO TOME AND PRINCIPE.
STD
The ISO 4217 currency code for the Sao Tome & Principe Dobra.
SV
The two-character ISO 3166 country code for EL SALVADOR.
SVC
The ISO 4217 currency code for the El Salvador Colon.
SWIFT
See: Society for Worldwide Interbank Financial Telecommunications
SY
The two-character ISO 3166 country code for SYRIAN ARAB REPUBLIC.
SYP
The ISO 4217 currency code for the Syrian Pound.
SZ
The two-character ISO 3166 country code for SWAZILAND.
SZL
The ISO 4217 currency code for the Swaziland Lilangeni.
SACE
The Italian export credit agency.
Safe harbor
Often used in risk arbitrage as a form of shark repellent. A target company acquires a business so onerously regulated that it makes the target less attractive, giving it, in effect, a safe harbor.
Safe harbor lease
A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the lessee, if the lessee could not use them, to a lessor that could use them.
Safekeep
Holding by a bank of bonds and money market instruments. For a fee, the bank clips coupons and presents for payment at maturity.
Safety cushion
In a contingent immunization strategy, the difference between the initially available immunization level and the safety-net return.
Safety-net return
The minimum available return that will trigger an immunization strategy in a contingent immunization strategy.
Salary
Regular wages and benefits an employee receives from an employer.
Salary freeze
A temporary halt to increases in salary due to financial difficulties experienced by a company.
Salary reduction plan
A plan allowing employees to contribute pre-tax income to a tax-deferred retirement plan.
Salary Reduction Simplified Employee Pension Plan (SARSEP)
A low-cost, no-frills version of a 401(k) employee savings plan available to companies with 25 or fewer employees. It allows employees to make pretax contributions to their IRAs through salary reduction each year. The Small Business Job Protection Act of 1996 replaced SARSEPs with SIMPLE (Savings Incentive Match Plan for Employees) plans. Existing SARSEPs were allowed to add new participants, but new plans could not be formed after December 31, 1996.
Sale
An agreement between a buyer and a seller on the price to be paid for a security, followed by delivery.
Sale and lease-back
Sale of an existing asset to a financial institution that then leases it back to the user. Related: Lease.
Sales charge
The fee charged by a mutual fund at purchase of shares, usually payable as a commission to a marketing agent, such as a financial adviser, who is thus compensated for assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.
Sales completion
In the context of project financing, the state in which the project has reached physical completion and has delivered product or generated revenues in satisfaction of a sales completion test.
Sales Contract
Contract between a seller and buyer for the sale of goods, services, or both.
Sales forecast
A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors.
Sales literature
Material written by an institution selling a product, which informs potential buyers of the product and its benefits.
Sales load
See: Sales charge
Sales tax
A percentage tax on the selling price of goods and services.
Sales-type lease
The leasing out of a firm's own equipment, such as a printing company leasing its own presses, thereby competing with an independent leasing company.
Sallie Mae
See: Student Loan Marketing Association
Salomon Brothers World Equity Index (SBWEI)
A top-down, float capitalization-weighted index used to measure the performance of fixed-income and equity markets. It includes approximately 6000 companies in 22 countries.
Salomon Brothers Non-U.S. Dollar World Government Bond Index
A benchmark index that includes institutionally traded bonds other than U.S. issues that have a fixed rate and a remaining maturity of one year or longer.
Salvage value
Scrap value of plant and equipment.
Same-Day Funds Settlement (SDFS)
A method of settlement used in trading between well-collateralized parties in good-the-same-day federal funds used by the Depository Trust Company for transactions in US government securities, short-term municipal notes, medium-term commercial paper notes, CMOs, and other instruments.
Same-day substitution
Offsetting changes in a margin account during the day that result in no overall change in the balance of the account.
Samurai bond
A yen-denominated bond issued in Tokyo by a non-Japanese borrower. Related: Bulldog bond and Yankee bond.
Samurai market
The foreign market in Japan.
Santa Claus Rally
Seasonal rise in stock prices in the last week of the calendar year, between Christmas and New Year's Day.
Sao Paulo Stock Exchange
See: Bolsa de Valores de Sao Paulo
S&P
Standard & Poor's Corporation.
S&P 500 Composite Index
Index of 500 widely held common stocks that measures the general performance of the market.
S&P phenomenon
Tendency of stocks newly added to the S&P composite index to rise in price due to a large number of buy orders as S&P-related index funds add the stock to their portfolios.
S&P Rating
Rating service provided by S&P that indicates the amount of risk involved with different securities.
Sarbanes Oxley Act of 2002
Legislation passed largely as a result of a number of accounting scandals. Among the many features is the creation of the Public Company Accounting Oversight Board. This board is charged to: The Board shall: 1) register public accounting firms; 2) establish, or adopt, by rule, auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers; (3) conduct inspections of accounting firms; (4) conduct investigations and disciplinary proceedings, and impose appropriate sanctions; (5) perform such other duties or functions as necessary or appropriate; (6) enforce compliance with the Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect thereto; (7) set the budget and manage the operations of the Board and the staff of the Board.
Saturday night special
Often used in risk arbitrage. Sudden attempt by one company to take over another by making a public tender offer.
Saucer
Technical chart pattern depicting a security whose price has reached bottom and is moving up.
Savings Association Insurance Fund (SAIF)
A government organization that replaced the Federal Savings and Loan Insurance Corporation as the provider of deposit insurance for thrift institutions.
Savings bank
An institution that primarily accepts consumer savings deposits and to make home mortgage loans.
Savings bond
A government bond issued in face value denominations from $50 to $10,000, with local and state tax-free interest and semiannually adjusted interest rates.
Savings deposits
Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand.
Savings element
Used in the context of life insurance, the cash value built up in a policy, which equals the amount of premium paid minus the cost of protection. This excess is invested by the insurance company, and the returns are tax-deferred inside the policy.
Savings Incentive Match Plan for Employees (SIMPLE) 401(k) plan
A tax-deferred retirement savings plan similar to a conventional 401(k) plan, redesigned with specific rules to meet the needs of small employers. The Small Business Job Protection Act of 1996 created these plans for companies with fewer than 100 employees. An employee's contributions are indexed for inflation, and employers must make annual annual matching contributions.
Savings and loan association
National- or state-chartered institution that accepts savings deposits and invests the bulk of the funds thus received in mortgages.
Savings rate
Personal savings as a percentage of disposable personal income.
Scale
Payment of different rates of interest on CDs of varying maturities. A bank is said to "post a scale." Commercial paper dealers also post scales.
Scale-enhancing
Describes a project that is in the same risk class as the whole firm. That is, the project allows the firm to grow larger in the context of their current business rather than diversify into new businesses.
Scale in
Gradually taking a position in a security or market over time.
Scale order
Order to buy (sell) a security that specifies the total amount to be bought (sold) and the amount to be bought (sold) at successively decreasing (increasing) price intervals; often placed in order to average the price.
Scaling
How the characteristics of an object change as you change the size of your measuring device. For a three dimensional object, it could be the volume of an object covered as you increase the radius of a covering sphere. In a times series, it could be the change in the amplitude of the time series as you increase the increment of time.
Scalp
To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day.
Scalping
Buying up the good IPOs.
Scattered
Used for listed equity securities. Unconcentrated buy or sell interest.
Scenario analysis
The use of horizon analysis to project total returns under different reinvestment rates and future market yields.
Schedule C
Describes membership requirements and procedures of NASD, in its bylaws.Schedule 13d
Disclosure form required when more than 5% of any class of equity securities in a publicly held corporation is purchased.
Scheduled cash flows
The mortgage principal and interest payments due to be paid under the terms of the mortgage, not including possible prepayments.
Scorched-earth policy
Often used in risk arbitrage. Any technique a company that has become the target of a takeover attempt uses to make itself unattractive to the acquirer. For example, it may agree to sell off its crown jewels, or schedule all debt to become due immediately after a merger.
S Corporation
A corporation that elects not to be taxed as a corporation. That is, the corporation does not directly pay federal income tax on its earnings. Similar to a partnership, it passes its income or losses and other tax items on to its shareholders.
Screen stocks
To analyze various stocks in search of stocks that meet predetermined criteria. For example, a simple value screen would sort all stocks by their price-to-book ratio and pick the stocks with the lowest ratios as candidates for the value portfolio.
Scrip
A temporary document that represents a portion of a share of stock, often issued after a stock split or spin-off.
Scripophily
Collecting stock and bond certificates for their scarcity, rather than for their value as securities.
Search costs
Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time). Related: Information costs.
Seasonally adjusted
Mathematically adjusted by moderating a macroeconomic indicator (e.g., oil prices/imports) so that relative comparisons can be drawn from month to month all year.
Seasoned
In the case of equity, having gained a reputation for quality with the investing public and enjoying liquidity in the secondary market; in the case of convertibles, having traded for at least 90 days after issue in Europe, and thus available for sale legally to U.S. investors.
Seasoned datings
Extended credit for customers who order goods in periods other than peak seasons.
Seasoned issue
Issue of a security for which there is an existing market. Related: Unseasoned issue.
Seasoned new issue
A new issue of stock after the company's securities have previously been issued. A seasoned new issue of common stock can be made using a cash offer or a rights offer.
Seat
Position of membership on a securities or commodity exchange, bought and sold at market prices.
SEC fee
Small fee the SEC charges to sellers of equity securities on an exchange.
Second market
The OTC market.
Second pass regression
A cross-sectional regression of portfolio returns on betas. The estimated slope is the measurement of the reward for bearing systematic risk during the period analyzed.
Second-preferred stock
Preferred stock issue that has less priority in claiming dividends and assets in liquidation than another issue of preferred stock.
Second round
Stage of venture capital financing following the start-up and first round stages and before the mezzanine level stage.
Second-to-die insurance
Insurance policy that, on the death of the spouse dying last, pays a death benefit to the heirs that is designed to cover estate taxes.
Secondary distribution/offering
Public sale of previously issued securities held by large investors, usually corporations or institutions, as distinguished from a primary distribution, where the seller is the issuing corporation. The sale is handled off the NYSE, by a securities firm or a group of firms, and the shares are usually offered at a fixed price related to the current market price of the stock.
Secondary issue
(1) Procedure for selling blocks of seasoned issues of stocks. (2) More generally, sale of already issued stock.
Secondary Offering
An IPO in which privately held shares in a corporation are sold to the public.
Secondary market
The market in which securities are traded after they are initially offered in the primary market. Most trading occurs in the secondary market. The New York Stock Exchange, as well as all other stock exchanges and the bond markets, are secondary markets. Seasoned securities are traded in the secondary market.
Secondary mortgage market
Buying and selling existing mortgage loans, which are often pooled and traded as mortgage-backed securities.
Secondary stocks
Stocks with smaller market capitalization, less quality and more risk than blue chip issues that behave differently than larger corporations' stocks.
Second mortgage lending
Loans secured by real estate previously pledged in a first mortgage.
Secert Ballot
In the context of corporate governance, this is also known as confidential voting. An independent third party or employees sworn to secrecy are used to count proxy votes, and the management usually agrees not to look at individual proxy cards. This can help eliminate potential conflicts of interest for fiduciaries voting shares on behalf of others, or can reduce pressure by management on shareholder-employees or shareholder-partners.
Section 16(a)
Provision of the Securities Exchange Act of 1934 that requires company insiders to file periodic reports disclosing their holdings and changes in beneficial ownership of the company's equity securities.
Section 16(b)
Provision of the Securities Exchange Act of 1934 that requires that any profit realized by a company insider from the purchase and sale, or sale and purchase, of the company's equity securities within a period of less than six months must be returned to the company. It is also known as the "short-swing profit" rule.
Section 83(b) Election
A tax filing within 30 days of grant that allows employees granted stock to pay taxes on the grant date instead of on the date restrictions lapse. If an employee files the election, taxes are based on the fair market value on the grant date, with any future appreciation taxed as a capital gain. If the employee does not file an election, taxes are based on the fair market value on the date the restrictions lapse, which will be higher assuming the stock has appreciated in value.
Section 423
The government agency responsible for the supervision and regulation of the securities industry and markets, as well as public securities offerings and the ongoing disclosure obligations of public companies.
Section 482
US Department of Treasury regulations governing transfer prices.
Sector
Used to characterize a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.
Sector allocation
Investment of certain proportions of a portfolio in certain sectors. See: Industry allocation.
Sector diversification
Constituting of a portfolio of stocks of companies in each major industry group.
Sector fund
A mutual fund that concentrates on a relatively narrow market sector. These funds can experience higher share price volatility than some diversified funds because sector funds are subject to common market forces specific to a given sector.
Sector rotation
An active asset management strategy certain sectors, that tactically overweights and underweights depending on expected performance. Sometimes called rotation.
Secular
Long-term time frame (10-50 years or more).
Secured bond
A bond backed by the pledge of collateral, a mortgage, or other lien, as opposed to an unsecured bond, called a debenture .
Secured debt
Debt that has first claim on specified assets in the event of default.
securities
Paper certificates (definitive securities) or electronic records (book-entry securities) evidencing ownership of equity (stocks) or debt obligations (bonds).
Securities Act of 1933
First law designed to regulate securities markets, requiring registration of securities and disclosure.
Securities Acts Amendments of 1975
Legislation to encourage the establishment of a national market system together with a system for nationwide clearing and settlement of securities transactions.
Securities analysts
Related: Financial analysts
Securities and commodities exchanges
Exchanges on which securities, options, and futures contracts are traded by members for their own accounts and for the accounts of customers.
Securities & Exchange Commission (SEC)
A federal agency that regulates the US financial markets. The SEC also oversees the securities industry and promotes full disclosure in order to protect the investing public against malpractice in the securities markets.
Securities and Exchange Commission Rules
Rules enacted by the SEC to assist in the regulation of US financial markets.
Securities Exchange Act of 1934
Legislation that created the SEC, outlawing dishonest practices in the trading of securities.
Securities Exchange of Thailand (SET)
The only stock market in Thailand, based in Bangkok.
Securities Industry Association (SIA)
An association of broker-dealers who sell taxable securities, which lobbies the government, records industry trends, and keeps records of broker profits.
Securities Industry Committee on Arbitration (SICA)
A private group that provides mediation services in case of customer complaints against securities firms.
Securities Investor Protection Corporation (SIPC)
A nonprofit corporation that insures customers' securities and cash held by member brokerage firms against the failure of those firms.
Securities loan
The loan of securities between brokers, often to cover a client's short sale; or a loan secured by marketable securities.
Securities markets
Organized exchanges plus over-the-counter markets in which securities are traded.
Securitization
Creating a more or less standard investment instrument such as the mortgage pass-through security, by pooling assets to back the instrument. Also refers to the replacement of nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.
Security
Piece of paper that proves ownership of stocks, bonds, and other investments.
Security characteristic line
A plot on a graph of the excess return on a security over the risk-free rate as a function of the excess return on the market. The slope of this line is the security's beta.
Security deposit (initial)
Synonymous with the term margin. A cash amount that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase. Related: Margin.
Security deposit (maintenance)
Related: Maintenance margin
Security Industry Automated Corporation (SIAC)
Entity that executes automated DOT orders.
Security interest
The creditor's right to take property or a portion of property offered as security.
Security market line
Line representing the relationship between expected return and market risk or beta. The slope of this line is the risk premium for beta.
Security Market Line
The linear relationship between expected asset returns and betas posited by the Capital Asset Pricing Model.
Security market plane
A plane that shows the relationship between expected return and the beta coefficient of more than one factor.
Security ratings
Commercial rating agencies' assessment of the credit and investment risk of securities.
Security selection
See: Security selection decision
Security selection decision
Choosing the particular stocks or bonds or other investment instruments to include in a portfolio.
Seed money
The first contribution by a venture capitalist toward the financing of a new business, often using a loan or purchase of convertible bonds or preferred stock. See: Mezzanine level and second round.
Seek a market
Search for a securities buyer or seller.
Segmented Market
A market in which there are impediments to the free flow of labor, capital, and information.
Segregation of securities
SEC rules to dictate how customers' securities may be used by broker-dealers in broker loans.
Seigniorage
The amount of goods and services that the government obtains by printing new money in a given period. Often we consider this in real terms, by dividing the new money by the price level.
Select ten portfolio
A unit investment trust that buys and holds for one year the ten stocks in the Dow Jones Industrial Average with the highest dividend yields.
Selective hedging
Protecting investments during some time periods and not during others.
Selected dealer agreement
The set of rules governing the selling group in an underwriting.
Self-amortizing mortgage
Mortgage whose entire principal is paid off in a specified period of time with regular interest and principal payments.
Self-directed IRA
An IRA that the account holder can after appointing a custodian manager to carry out investment instructions.
Self-employed income
Taxable income of a person involved in a sole proprietorship or other sort of free-lance work.
Self-employment tax
A tax self-employed people must pay to qualify them to receive Social Security benefits at retirement.
Self-liquidating loan
Loan to finance current assets. The sale of the current assets provides the cash to repay the loan.
Self-regulatory organization (SRO)
Organizations that enforce fair, ethical, and efficient practices in the securities and commodity futures industries, including all national securities and commodities exchanges and the NASD.
Self-selection
Consequence of a contract that induces only one group to participate.
Self-Similar
When small parts of an object are qualitatively the same, or similar to the whole object. In certain deterministic fractals, like the Sierpinski Triangle, small pieces look the same as the entire object. In random fractals, small increments of time will be statistically similar to larger increments of time. See: Fractal.
Self-supporting debt
Bonds sold to finance a project that will produce enough revenue through tolls or other charges to retire the debt . See: revenue bond.
Self Tender
A company buys back a certain percentage of its own shares through a tender offer.
Self-tender offer
A company that tenders for its own shares.
Sell the book
Used for listed equity securities. Order to a broker by the holder of a large quantity of shares of a security to sell all that can be absorbed at the current bid price. The term derives from the specialist's book - the record of all the buy and sell orders members have placed in the stock one handles. In this scenario, the buyers potentially include those in the specialist's book, the specialist for its own account, and broker-dealers.
Sell hedge
Related: short hedge.
Sell limit order
Conditional trading order that indicates that a security may be sold at the designated price or higher. Related: Buy limit order.
Sell off
Sale of securities under pressure. See: Dumping.
Sell order
An order that may take many different forms by an investor to a broker to sell a particular stock, bond, option, future, mutual fund, or other holding.
Sell out
Liquidation of a margin account after a customer has failed to bring an account to a required level by producing additional equity after a margin call.
The selling of securities by a broker when a customer fails to pay for them.
The complete sale of all securities in a new issue.
Sell plus order
Market or limit order to sell a stated amount of stock provided that the price to be obtained is not lower than the last sale if the last sale was a plus, or zero plus tick, and is not lower than the last sale plus the minimum fractional change in the stock if the last sale was a minimum or zero minimum tick. (In a limit order, sale cannot be lower than the limit, regardless of tick.)Sell price
See: Redemption price
Sell-side analyst
A financial analyst who works for a brokerage firm and whose recommendations are passed on to the brokerage firm's customers. Also called Wall Street analyst.
Seller financing
Funding a purchase by a seller's loan to the buyer, the buyer takes full title to the property when the loan is fully repaid.
Seller's market
Market in which demand exceeds supply. As a result, the seller can dictate the price and the terms of sale.
Seller's option
Delayed settlement/delivery in a transaction.
Seller's points
In reference to a loan, seller's points consist of a lump sum paid by the seller to the buyer's creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount.
Selling climax
A sudden drop in security prices as sellers dump their holdings.
Selling concession
The discount underwriters offer the selling group on securities in a new issue.
Selling dividends
Inducing a prospective customer tobuy shares in order to profit from a dividend scheduled in the near future.
Selling, general, and administrative (SG&A) expenses
Expenses such as salespersons' salaries and commissions, advertising and promotion, travel and entertainment, office payroll and expenses, and executives' salaries.
Selling on the good news
A strategy of selling stock shortly after a company announces good news and the stock price rises. Investors believe that the price is as high as it can go and is on the brink of going down.
Selling group
All banks involved in selling or marketing a new issue of stock or bonds.
Selling short
Selling a stock not actually owned. If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug. 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.
Selling short against the box
Selling short stock that is actually owned by the seller but held in the box, meaning it is held in safekeeping. The seller borrows securities needed to cover as the stock in the box may be inaccessible, or the seller may not wish to disclose ownership. The traditional motive for this transaction was to defer capital gains taxes. However, this method became infeasible under the Taxpayer Relief Act of 1997.
Selling the spread
A spread whose option to be sold is trading at a higher premium than the option to be bought.
Selling Syndicate
A group of underwriters that issues a firm's securities by buying them from the issuing firm and reselling them to a group of smaller brokerage firms for eventual sale to individual investors.
Semistrong-form efficiency
A form of pricing efficiency that profits the price of a security fully reflects all public information (including, but not limited to, historical price and trading patterns). Compare weak-form efficiency and strong-form efficiency.
"Send it in"
Market language: "I bought your stock - 'send it in' (and possibly more)."
Senior debt
Debt whose terms in the event of bankruptcy, require it to be repaid before subordinated debt receives any payment.
Senior mortgage bond
A bond that, in the event of bankruptcy, will be redeemed before any other bonds are repaid.
Senior refunding
Replacement by the issuer of securities with 5-to 12-year maturities with securities of 15-year or longer maturities, in order to delay, reduce, or consolidate payment.
Senior security
A security that, in the event of bankruptcy, will be redeemed before any other securities.
Seniority
The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated debt is repaid.
Sensitive market
A market that reacts to a great extent to good or bad news.
Sensitivity analysis
Analysis of the effect on a project'sprofitability of changes in sales, cost, and so on.
Sentiment indicators
The general feeling of investors about the state of the market, such as whether they are bullish or bearish.
Separate customer
Method of allocating insurance by the Securities Investor Protection Corporation. Each account that is under the name of a different person or group of people is entitled to maximum protection.
Separate tax returns
Tax returns of married persons who choose to file their returns individually, usually because this approach produces lower overall tax payments.
Separate Trading of Registered Interest and Principal Securities (STRIPS)
Long-term notes and bonds divided into principal and interest-paying components, which may be transferred and sold in amounts as small as $1000. STRIPS are sold at auction at a minimum par amount, varying for each issue. The amount is an arithmetic function of the issue's interest rate.
Separation property
The property that portfolio choice can be divided into two independent tasks: (1) Determination of the optimal risky portfolio, which is a purely mathematical problem, and (2) the personal choice of the best mix of the optimal risky portfolio and the risk-free asset, which depends on a person's degree of risk aversion.
Separation theorem
Theory that the value of an investment to an individual is not dependent on consumption preferences. That is, investors will want to accept or reject the same investment projects by using the NPV rule, regardless of personal preference.
Serial bonds
Corporate bonds arranged so that specified principal amounts become due on specified dates. Related: Term bonds.
Serial covariance
The covariance between a variable and the lagged value of the variable; the same as autocorrelation.
Serial entrepreneur
Business person that successfully starts (does not kill) a number of different businesses.
Serial redemption
The redemption of a serial bond.
Series
Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Stocks: shares that have common characteristics, such as rights to ownership and voting, dividends, or par value. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered.
Series bond
Bond that may be issued in several series under the same indenture document.
Series E bond
A local and state tax-free bond issued by the U.S. government from 1941 to 1979, which was then replaced by Series HH bonds.
Series EE bond
See: Savings bond
Series HH bond
See: Savings bond
Service charge
A component of some finance charges, such as the fee for triggering an overdraft checking account into use.
Set-aside
A percentage of a municipal or corporate bond underwriting that is allocated for handling by a minority-owned broker/dealer firm.
Set of contracts perspective
View of corporation as a set of contracting relationships among individuals who have conflicting objectives, such as shareholders or managers. The corporation is a legal construct that serves as the nexus for the contracting relationships.
Set up
Applies mainly to convertible securities. Arbitrage involving going long the convertible and short a certain percentage of the underlying common. Antithesis of Chinese hedge.
Setoff
Money held on behalf of a borrower that may be applied to repay the loan, but usually without the permission of the borrower.
Settle price
An average of the trading prices in the futures market during the last few minutes of trading.
Settlement
When payment is made for a trade.
Settlement date
The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently three business days after the trade. For mutual funds, settlement usually occurs in the US the day following the trade. In some regional markets, foreign shares may require months to settle.
Settlement options
The various possibilities open to a beneficiary under a life insurance policy as to how the benefit will be paid out.
Settlement price
A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. Related: Closing range.
Settlement rate
The rate suggested in Financial Accounting Standards Board (FASB) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled if the company sponsoring the pension plan wishes to terminate its pension obligation.
Settlement risk
The risk that one party will deliver and the counterparty will not be able to pay and vice versa.
Severally but not jointly
An agreement between members of an underwriting group buy a new issue (severally), but not to assume joint liability for shares left unsold by other members.
Severance
A settlement received after being released from a corporation. In the context of corporate governance, an agreement that assures high-level executives of their postions or some compensation and are not contingent upon a change in control.
Segmented market
A market that is partially or wholly isolated from other markets by one or more market imperfections.
Shadow calendar
A backlog of securities issues registered with the SEC, awaiting the determination of an offer date.
Shadow stock
First, a public company may create a stock that strips out the market wide movements for the purpose of rewarding managers. That is, the management might have done a great job - but the traded stock plummets because the market as a whole plummets. A second interpretation of shadow stock is a phantom stock that is created by a private company (i.e. that does not have stock traded either on exchange or over the counter) again for the purpose of performance evaluation and rewards.
Shadows
The thin lines above and below the real body on a candlestick line.
Shakeout
A dramatic change in market conditions that forces speculators to sell their positions, often at a loss.
Sham
A business transaction, such as a limited partnership, that is entered into for the sake of avoiding tax.
Shanghai Stock Exchange
One of two major securities markets in China.
Share broker
A discount broker who charges per share traded, and reduces the per unit charge as the number of shares traded increases, as opposed to a dealer who charges a percentage of the dollar amount of the trade.
Share repurchase
Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since repurchase reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.
Shared Appreciation Mortgage (SAM)
A mortgage with a low rate of interest, offset by giving the lender some portion of the appreciation in the value of the underlying property.
Shareholder
Person or entity that owns shares or equity in a corporation.
Shareholders' equity
This is a company's total assets minus total liabilities. A company's net worth is the same thing.
Shareholders' letter
A section of an annual report where one can find general overall discussion by management of successful and failed strategies. Provides guidance for looking at specific parts of the report.
Shares
Certificates or book entries representing ownership in a corporation or similar entity.
Shares authorized
The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding.
Shark repellant
Often used in risk arbitrage. Examples are golden parachutes, poison pills, safe harbor, and scorched-earth policy. Porcupine provision. Amendment to company charter intended to protect it against takeover.
Shark watcher
Often used in risk arbitrage. Firm specializing in the early detection of takeover activity. Such a firm, whose primary business is usually the solicitation of proxies for client corporations, monitors trading patterns in a client's stock and attempts to determine the identity of parties accumulating shares.
Sharpe benchmark
A statistically created benchmark that adjusts for a manager's index-like tendencies. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.
Sharpe ratio
A measure of a portfolio's excess return relative to the total variability of the portfolio. Related: Treynor index. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.
Shelf offering
Offering of registered securities covered by a prospectus whose distribution is not underwritten on a firm commitment basis. The shares may be sold in one block or in small amounts from time to time in agency or principal transactions. See: Rule 415.
Shelf registration
A procedure that allows firms to file one registration statement covering several issues of the same security. SEC Rule 415, adopted in the 1980s, allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. With the registration "on the shelf," the corporation, by simply updating regularly filed annual, quarterly, and related reports to the SEC, can go to the market as conditions become favorable with a minimum of administrative preparation and expense.
Shell corporation
An incorporated company with no significant assets or operations, often formed to obtain financing before beginning actual business, or as a front tax evasion.
Shenzhen Stock Exchange
One of two major securities markets in China.
Shipper's Export Declaration (SED)
Document required by the U.S. Department of Commerce for exports of certain controlled items, and/or shipments to certain countries, and/or shipments anywhere that exceed certain dollar amounts. This document is used to monitor shipments of controlled goods.
Shipping Documents
A generic term for the various typesof forms required for overseas shipments, such as commercial invoices, transport documents, packing lists, origin certificates, etc.
Shirking
The tendency to do less work when the return is smaller. Owners may have more incentive to shirk if they issue equity as opposed to debt, because they retain less ownership interest in the company and therefore may receive a smaller return. Thus, shirking is considered an agency cost of equity.
Shock absorbers
See: Circuit breakers
Shogun bond
Dollar bond issued in Japan by a nonresident.
Shootout
Venture capital jargon. Refers to two or more venture capital firms fighting for the startup.
Shop
Wall Street slang for a firm.
Shopped stock
Sell inquiry that has been seen by or shown to other dealers before coming to an investment bank.
Shopping
Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers.
Short
One who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of a long position. Related: Long.
Short against the box
A short sale of a stock is where the seller actually owns the stock, but does not want to close out the position.
Short Bias
In the context of hedge funds, a style of management where part or all of the fund consists of short sales.
Short bonds
Bonds with short (not much time to maturity) current maturities.
Short book
See: Unmatched book.
Short coupon
A bond payment covering less than six-months' interest, because the original issue date is less than six months from the first scheduled interest payment. A bond with a short time to maturity, usually two years or less.
Short covering
Used in the context of general equities. Actual purchase of securities by a short seller to replace those borrowed at the time of a short sale.
Short exempt
Used for listed equity securities. A special trading situation where a short sale is allowed on a minustick. The owners of a convertible trading at parity can sell the equivalent amount of common short on a minus tick, assuming they have the firm intention to convert.
Short hedge
The sale of futures contracts to eliminate or lessen the possible decline in value of an approximately equal amount of the actual financial instrument or physical commodity. Related: Long hedge.
Short interest
Total number of shares of a security that investors have sold short and that have not been repurchased to close out the short position. Usually, investors sell short to profit from price declines. As a result, the 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.
Short interest theory
The theory that a large interest in short positions in stocks will precede a rise in the market prices, because the short positions must eventually be covered by purchases of the stock.
Short-Form Registration
A procedure that allows a firm to condense its registration statement and prospectus by referencing financial data already on file with the SEC.
Short position
Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will drop.
Short ratio(or short interest ratio)
Number of shares of a security that investors have sold short divided by average daily volume of the security (measured over 30 days or 90 days). There are various interpretations of this ratio. When people short, it is usually (but not always) because they are pessimistic about the security's future performance. Shorting involves buying at at some point however. Hence, some would interpret a high short ratio as an indicator that there will be some buying pressure on the security that would increase its price.
Short-run operating activities
Events and decisions concerning the short-term finance of a firm, such as how much inventory to order and whether to offer cash terms or credit terms to customers.
Short sale
Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.
Short-sale rule
An SEC rule requiring that short sales be made only in a market that is moving upward; this means either on an uptick from the last sale, or showing no downward movement.
Short selling
Establishing a market position by selling a security one does not own in anticipation of the price of that security falling.
Short settlement
Trade settlement made prior to the standard five-day period due to customer request.
Short-short test
A repealed IRS restriction, that used to limit profits from short-term trading, which three months, to 30% of gross income. The penalty for exceeding this limit would be the loss of certain tax-free benefits.
Short squeeze
When a lack of supply tends to force prices upward. In particular, when prices of a stock or commodity futures contracts start to move up sharply and many traders with short positions are forced to buy stocks or commodities in order to cover their positions and prevent (limit) losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.
Short straddle
A straddle involves both purchase and sale. In short straddle one put and one call are sold.
Short-term capital gain
A profit on the sale of a security or mutual fund share that has been held for one year or less. A short-term capital gain is taxed as ordinary income.
Short-term interest rates
Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates.
Short-term reserves
Investments in interest-bearing bank deposits, money market instruments, U.S. Treasury bills, and short-term bonds.
Short tender
Practice prohibited by SEC that involves the use of borrowed stock to respond to a tender offer.
Short-term
Any investments with a maturity of one year or less.
Short-term bond fund
A bond mutual fund holding short to intermediate-term bonds that have maturities of three to five years.
Short-term debt
Debt obligations, recorded as current liabilities, requiring payment within the year.
Short-term financial plan
A financial plan that covers the coming fiscal year.
Short-term gain (or loss)
A profit or loss realized from the sale of securities held for less than a year that is taxed at normal income tax rates if the net total is positive.
Short-term investment services
Services that assist firms in making short-term investments.
Short-term solvency ratios
Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (1) the current ratio, (2) the acid test ratio, (3) the inventory turnover ratio, and (4) the accounts receivable turnover ratio.
Short-term tax exempts
Short-term securities issued by states, municipalities, and quesi-government entities such as local housing and urban renewal agencies.
Short-term trend
Erratic price movements that last less than three weeks.
Shortage cost
Costs that fall with increases in the level of investment in current assets.
Shortfall risk
The risk of falling short of any investment target.
Show me buyer/seller
Used in the context of general equities. Customer who has not placed a firm order to buy stock but has requested that the salesperson propose available stock for sale or purchase, along with the asking/bid price. See: Bidding buyer.
Show stopper
A legal barrier, such as a scorched-earth policy or shark repellant system, that firms use to prevent a takeover.
Show and tell list
Used in the context of general equities. Block list which is full of real customer indications (rather than profile).
Shrinkage
Discrepancy between a firm's actual inventory and its recorded inventory due to theft, deterioration, loss, or clerical problems.
Shut out the book
Used for listed equity securities. Exclude a public bid or offer from participation in a print.
Side effects
Effects of a proposed project on other parts of the firm.
Side-by-side trading
Trading a security and an option on the same security on the same exchange.
Sidelines
Hypothetical position referring to noninvolvement in a stock; merely watching.
Sideways market
See: Horizontal price movement
Sight draft
Demand for immediate payment.
Sight Letter of Credit
A letter of credit made payable to a beneficiary upon presentation to the opener of conforming documents.
Signal
To convey information through a firm's actions. The more costly it is to provide a signal, the more credibility it has. For example, to call a press conference and tell everyone that the firm's prospects have improved is less effective than saying the same thing and raising the dividend.
Signaling approach
Notion that insiders in a firm have information that the market does not have, and that the choice of capital structure by insiders can signal information to outsiders and change the value of the firm. This theory is also called the asymmetric information approach.
Signaling approach (on dividend policy)
The argument that dividend changes are important signals to investors about changes in management's expectation about future earnings.
Signature guarantee
The authentication of a signature in the form of a stamp, seal, or written confirmation by a bank or member of a domestic stock exchange (or other acceptable guarantor). A notary public cannot provide a signature guarantee. A signature guarantee is a common requirement when transferring or redeeming shares or changing the ownership of an account.
Signature loan
A good faith loan that is unsecured and requires only the borrower's signature on the loan application.
Signatures on Proxies
The basic rule of acceptability is that if the signature reads as the proxy is printed, it is acceptable. If an individual signs on behalf of another individual and states a legal representation, it is acceptable. Examples: executor, guardian, power of attorney; but not husband, wife, next of kin, etc. On corporate registrations, a manual signature in the name of the corporation is acceptable. A facsimile signature is also acceptable, but a rubber-stamp signature with a signature line is acceptable only if signed on that line. With joint tenancy, one signature is sufficient, as in the case of one trustee signing for two or more.
Significant influence
The holding of a large portion of the equity of a corporation, usually at least 20%, which gives the holder a significant amount of control over the corporation. This degree of holding must be recorded in a firm's financial statements.
Significant order
An order to buy or sell a large enough quantity of securities that the price of the security may be affected. Institutional investors usually spread out such an order over a few days or weeks to avoid adverse pressures on the buy or sell price.
Significant order imbalance
A large number of buy or sell orders for a stock that cause an abnormally wide spread between bid and offer prices, and often causes the exchange to halt the sale of the stock until significant balance has been reestablished.
Silent partner
A partner in a business who has no role in management but shares in the liability, tax responsibility, and cash flow.
Silver Parachutes
These provisions are similar to Golden Parachutes in that they provide severance payments upon a change in corporate control, but unlike Golden Parachutes, a large number of a firm's employees are eligible for these benefits.
Single-buyer policy
Ex-Im Bank practice allows the exporter to insure certain transactions selectively.
Single European Act
Act intended to eliminate barriers on trade and capital flows between and among European countries.
Simple compound growth method
Calculating a growth rate by relating terminal value to initial value and assuming a constant percentage annual rate of growth between the two values.
Simple interest
Interest calculated as a simple percentage of the original principal amount. Compare to compound interest.
Simple IRA
A salary deduction plan for retirement benefits provided by some small companies with no more than 100 employees.
Simple linear regression
A regression analysis between only two variables, one dependent and the other explanatory.Simple linear trend model
An extrapolative statistical model that asserts that earnings have a base level and grow at a constant amount each period.
Simple moving average
The mean, calculated at any time over a past period of fixed length.
Simple prospect
An investment opportunity in which only two outcomes are possible.
Simple rate of return
The return from investments figured by dividing income plus capital gains by the amount of capital invested. The effect of compounding is not taken into account.
Simplified Employee Pension (SEP) plan
A pension plan in which both the employee and the employer contribute to an individual retirement account. Also available to the self-employed.
Simulation
The use of a mathematical model to imitate a situation many times in order to estimate the likelihood of various possible outcomes. See: Monte Carlo simulation.
Singapore International Monetary Exchange (SIMEX)
A leading futures and options exchange in Singapore.
Single-country fund
A mutual fund that invests in individual countries outside the United States.
Single-factor model
A model of security returns that acknowledges only one common factor. The single factor is usually the market return. See: Factor model.
Single-index model
A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on the broad market index, and firm specific factors. Related: Market Model
Single life annuity
An annuity covering one person. A straight life annuity provides payments until death, while a life annuity with a guaranteed period provides payments until death or continues payments to a beneficiary for a guaranteed term, such as ten years.
Single option
A single put option or call option, as opposed to a spread or straddle, which involves multiple puts and calls.
Single-payment bond
A bond that makes only one payment of principal and interest.
Single-Premium Deferred Annuity (SPDA)
An IRA-like annuity into which an investor makes a lump-sum payment that is invested in either a fixed-return instrument or a variable-return portfolio, which is taxed only when distributions are taken.
Single-premium life insurance
A whole life insurance policy requiring one premium payment, which accrues cash value much more quickly than a policy paid in installments.
Single-state municipal bond fund
A mutual fund investing only in government obligations within a single state, with state tax-free dividends, but taxed capital gains.
Sinker
A bond with interest and principal payments coming from the proceeds of a sinking fund.
Sinking fund
A fund to which money is added on a regular basis that is used to ensure investor confidence that promised payments will be made and that is used to redeem debt securities or preferred stock issues.
Sinking fund requirement
A condition included in some corporate bond indentures that requires the issuer to retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.
Sit tight
Directive from the trader to the customer to be patient, emphasizing that one's piece of business will be executed.
Size
Refers to the magnitude of an offering, an order, or a trade. Large as in the size of an offering, the size of an order, or the size of a trade. Size is relative from market to market and security to security. "I can buy size at 102-22," means that a trader can buy a significant amount at 102-22. Small is <10,000 shares. Medium is 15,000-25,000 shares. Good is 50,000 shares. Size is 100,000 shares. Good six-figure size is 200,000-300,000 shares. Multiple six-figure size is >300,000 shares. Size of the market is actual number of shares represented in one's market, or bid and offering; unless specified, assumed to be at least 500 to 1000 shares, depending on the stock.
Size out the book
Overt action to exclude a public bid or offer from participation in a print through trading a larger size in the book. Can never size out a market order. See: Priority, shut out the book.
Skewed distribution
Probability distribution in which an unequal number of observations lie below (negative skew) or above (positive skew) the mean.
Skewness
Negative skewness means there is a substantial probability of a big negative return. Positive skewness means that there is a greater-than-normal probability of a big positive return.
Skill
The ability to accurately forecast returns. We measure skill using the information coefficient.
Skip-day settlement
Settling a trade one business day beyond what is normal.
Skip-payment privilege
A mortgage contract clause giving borrowers the right to skip payments if they are ahead of schedule.
Skort-Swing Transaction
Any purchase and sale, or sale and purchase, of the issuer's equity securities by an insider within a period of less than six months, See: Section 16(b) above.
SLD last sale
Shortened version of "sold last sale," which shows up on the consolidated tape when a large change (one point for lower priced securities and two points for higher-priced securities) occurs between transactions.
Sleeper
Stock in which there is little investor interest but that has significant potential to gain in price once its attractions are recognized. Antithesis of high flyer.
Sleeping beauty
Often used in risk arbitrage. Potential takeover target that has not yet been approached by an acquirer. Such a company usually has particularly attractive features, such as a large amount of cash, or undervalued real estate or other assets.
Slippage
The difference between estimated transactions costs and actual transactions costs. The difference usually represents revisions to price difference or spread and commission costs.
Slump
A temporary fall in performance, often describing consistently falling security prices for several weeks or months.
Small business policy
Insurance coverage available to new exporters and small businesses.
Small-cap
A stock with a small capitalization, meaning a total equity value of less than $500 million.
Small-capitalization (small-cap) fund
A mutual fund that invests primarily in stocks of companies whose market value is less than $1 billion. Small-cap stocks historically have been more volatile than large-cap stocks, and often perform differently from the overall market.
Small-capitalization (small cap) stocks
The stocks of companies whose market value is less than $1 billion. Small-cap companies tend to grow faster than large-cap companies and typically use any profits for expansion rather to pay dividends. They also are more volatile than large-cap companies, and have a higher failure rate.
Small-firm effect
The tendency of small firms (in terms of total market capitalization) to outperform the stock market (consisting of both large and small firms).
Small investor
An individual person investing in small quantities of stock or bonds. This group of investors makes up a minimal fraction of total stock ownership.
Small issues exemption
Securities issues that involve less than $1.5 million are not required to file a registration statement with the SEC. Instead, they are governed by Regulation A, for which only a brief offering statement is needed.
Small Order Execution System (SOES)
Three-tiered system of automatic execution of an order at the best price. Size is either 200, 500, or, most often, 1000 shares.
Smart money
Investors who make consistent profits in the market, regardless of the investing environment, by making wise, educated moves.
Smidge
Small amount of price, usually +/- 1/8 or 1/4.
Smithsonian Agreement
A revision to the Bretton Woods international monetary system that was signed at the Smithsonian Institution in Washington, D.C., in December 1971. Included were a new set of par values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.
Snake
Arrangement established in 1972, that ties European currencies to each other within specified limits.
Snowballing
Used in the context of general equities. Process by which the exercise of stop orders in a declining or advancing market causes further downward or upward pressure on prices, thus triggering more stop orders and more price pressure, and so on.
Social Security benefits
Monthly government payments to retired workers or their families who have paid Social Security taxes for a total of 40 quarters or 10 years.
Social Security Disability Income Insurance
Program financed by the Social Security tax to provide assistance to disabled individuals with disabilities expected to last at least one year, to compensate for lost income.
Socially conscious mutual fund
A mutual fund that does not invest in companies that have interests in socially unacceptable markets or produce harmful products or by-products, such as high levels of environmental pollution.
Society for Worldwide Interbank Financial Telecommunications (SWIFT)
A dedicated computer network to support funds transfer messages internationally between over 900 member banks world-wide.
"Soft" capital rationing
Constraints on spending that under certain circumstances can be violated or even viewed as constituting targets rather than absolute limits.
Soft currency
The money of a country that is expected to drop in value relative to other currencies.
Soft dollars
The value of research services that brokerage houses supply to investment managers "free of charge" in exchange for the investment manager's business commissions.
Soft landing
A term describing a growth rate high enough to keep the economy out of recession, but also slow enough to prevent high inflation and interest rates.
Soft market
A buyer's market in which supply exceeds demand, causing little trading activity and wide bid-ask spreads.
Soft spot
Stocks or groups of stocks that remain weak in a strong market.
Softs
Tropical commodities such as coffee, sugar, and cocoa.
Sold away
Refers to over-the-counter trading. Having sold stock to another dealer before making the present offering.
Sold-out market
Unavailability of a futures contract in a particular commodity or maturity date because of contract executions and limited offerings.
Sole proprietorship
A business owned by a single individual. A sole proprietor pays no corporate income tax but has unlimited liability for business debts and obligations.
Solvency
Ability to meet obligations.
Sour bond
A bond issue that has defaulted on interest or principal payments, and will thus trade at a large discount and a poor credit rating.
Source of funds seller
Customer seller of stock for the purpose of raising cash for other purchases. Such a seller will sell only at advantageous prices, and not aggressively.
Sources and applications of funds statement
See: Statement of cash flows
South African Futures Exchange (SAFEX)
Electronic futures and options exchange based in South Africa.
Sovereign risk
The risk that a central bank will impose foreign exchange regulations that will reduce or negate the value of foreign exchange contracts. Also refers to the risk of government default on a loan made to a country or guaranteed by it. The government's part of political risk.
Span
To cover all contingencies within a specified range.
SPDRs
SPDRs (Spiders) are designed to track the value of the Standard & Poor's 500 Composite Price Index. Stands for Standard & Poor's Depositary Receipt. They trade on the American Stock Exchange under the symbol SPY. SPDRs are similar to closed-end funds but are formally known as, a unit investment trust. One SPDR unit is valued at approximately one-tenth (1/10) of the value of the S&P 500. Dividends are disbursed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust. See: Mid-cap SPDR.
Special arbitrage account
A margin account with lower cash requirements, reserved for transactions that are hedged by an offsetting position in futures or options.
Special assessment bond
A municipal bond with interest paid by the taxes of the community benefiting from the bond-funded project.
Special bid
A method of purchasing a large block of stock on the NYSE by advertising a client's large buy order, and matching it up with a number of other traders' smaller sell orders.
Special bond account
A special broker margin account used only for transactions in US government bonds, municipals, and eligible listed and unlisted non-convertible corporate bonds.
Special Claim on Residual Equity (SCORE)
A certificate that entitles the owner to the capital appreciation of an underlying security, but not to the dividend income from the security.
Special dividend
Also referred to as an extra dividend. Dividend that is unlikely to be repeated.
Special Drawing Rights (SDR)
A form of international reserve assets, created by the IMF in 1967, whose value is based on a portfolio of widely used currencies.
Special Meeting
Refers to a meeting of shareholders outside the usual annual general meeting. In the context of corporate governance, some limitations either increase the level of shareholder support required to call a special meeting beyond that specified by state law or eliminate the ability to call one entirely. Such provisions add an extra time delay to many proxy fights, since bidders must wait until the regularly scheduled annual meeting to replace board members or dismantle takeover defenses.
Special-Purpose Entity
A financing technique in which a company decreases its risk by creating separate partnerships, rather than subsidiaries, for certain holdings and solicits outside investors to take on the risk. In order to qualify as a special-purpose entity, whose financial results are not carried on the company's books, the unit must meet strict accounting guidelines. Compare to subsidary.
Specialist
On an exchange, the member firm that is designated as the market maker (or dealer for a listed common stock). Member of a stock exchange who maintains a "fair and orderly market" in one or more securities. Only one specialist can be designated for a given stock, but dealers may be specialists for several stocks. In contrast, there can be multiple market makers in the OTC market. Major functions include executing limit orders on behalf of other exchange members for a portion of the floor broker's commission, and buying or selling for the specialist's own account to counteract temporary imbalances in supply and demand and thus prevent wide swings in stock prices.
Specialist block purchase and sale
Purchase of a large number of securities by a specialist for himself or to pass on to another floor trader or block buyer.
Specialist market
Market in a stock made solely by the specialist, as no public orders, and henceforth no depth, exist in the market.
Specialist unit
A specialist who maintains a stable market by acting as a principal and agent for other brokers in one or many stocks.
Specialist's book
Chronological record maintained by a specialist that includes the specialist's own inventory of securities, market orders to sell short, and limit orders and stop orders that other stock exchange members have placed with the specialist.
Specialist's short-sale ratio
The percentage of the total short sales of stock sold short by specialists.
Specific issues market
The market in which dealers reverse in securities they wish to short.
Specific Return
The part of the excess return not explained by common factors. The specific return is independent of (uncorrelated with) the common factors and the specific returns to other assets. It is also called the idiosyncratic return.
Specific risk
See: Unique risk
Spectail
A dealer doing business with retail but concentrating more on acquiring and financing its own speculative positions.
Speculation
Purchasing risky investments that present the possibility of large profits, but also pose a higher-than-average possibility of loss. A profitable strategy over the long term if undertaken by professionals who hedge their portfolios to control the amount of risk.
Speculative
Securities that involve a high level of risk.
Speculative demand (for money)
The need for cash to take advantage of investment opportunities that may arise.
Speculative-grade bond
Bond rated Ba or lower by Moody's, or BB or lower by S&P, or an unrated bond.
Speculative motive
A desire to hold cash in order to be poised to exploit any attractive investment opportunity requiring a cash expenditure that might arise.
Speculative stock
Very risky stock.
Speculator
One who attempts to anticipate price changes and, through buying and selling contracts, aims to make profits. A speculator does not use the market in connection with the production, processing, marketing, or handling of a product. See: Trader.
Speed
Related: Prepayment speed
Spider
See: SPDRs
Spike
Order ticket that shows the stock, price, number of shares, type, and account of the order. Origin: Practice of placing the ticket on a metal spike upon execution or cancellation. Spike is also a sudden, drastic increase in a company's share price.
Spin-off
A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spin-off.
Spinning
In investment banking, the practice of an investment bank setting aside portions of a corporation's Initial Public Offering for senior management of that corporation. Ethically questionable practice which appears to be a form of bribery.
SPINs
Stands for Standard & Poor's 500 Index Subordinated Notes.
Split
Sometimes companies split their outstanding shares into more shares. If a company with 1 million shares executes a two-for-one split, the company would have 2 million shares. An investor with 100 shares before the split would hold 200 shares after the split. The investor's percentage of equity in the company remains the same, and the share price of the stock owned is one-half the price of the stock on the day prior to the split.
Split commission
A commission shared between a broker and a financial adviser or other professional who brought the customer to the broker.
Split-coupon bond
A bond that begins as a zero-coupon bond paying no interest and converts to an interest paying bond on a future date.
Split-fee option
An option on an option. The buyer generally executes the split fee with first an initial fee, with a window period at the end of which (upon payment of a second fee) the original terms of the option may be extended to a later predetermined final notification date.
Split offering
A municipal bond issue that is made up of serial bonds and term maturity bonds.
Split order
A large securities transaction that is divided into smaller orders that are spread out over some period of time to avoid large fluctuations in the market price.
Split print
Block trade printed at two different prices. Often used in dividend rolls to get an average price equal to the dividend.
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are distributed as dividends.
Split rating
Two different ratings given to the same security by two important rating agencies.
Split stock
(1) Purchases or sales shared with others. (2) Division of the outstanding shares of a corporation into a large number of shares. Ordinarily, splits must be proposed by directors and approved by shareholders.
Spoken for
Amount of opposite demand (placement) or supply (availability) the trader has in efforts to cross the stock. Not open.
Sponsor
An underwriting investment company that offers shares in its mutual funds, or an influential institution that highly values a particular security and thus creates additional demand for the security. In the context of project financing, a developer of the project or a party poviding financial support.
Spontaneous Current Liabilities
Short-term obligations that automatically increase and decrease in response to financing needs, such as accounts payable.
Spontaneous Liabilities
Obligations that arise automatically in the course of operating a business when a firm buys goods and services on credit.
Spot commodity
A commodity that is traded with the expectation of actual delivery, as opposed to a commodity future that is usually not delivered.
Spot exchange rates
Exchange rate on currency for immediate delivery. Related: Forward exchange rate.
Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.
Spot interest rate
Interest rate fixed today on a loan that is made today. Related: Forward interest rates.
Spot lending
Originating mortgages by processing applications taken directly from prospective borrowers.
Spot markets
Related: Cash markets
Spot month
The nearest delivery month on a futures contract.
Spot price
The current market price of the actual physical commodity. Also called cash price. Current delivery price of a commodity traded in the spot market, in which goods are sold for cash and delivered immediately. Antithesis of futures price.
Spot rate
The theoretical yield on a zero-coupon Treasury security.
Spot rate curve
The graphical depiction of the relationship between the spot rates and maturity.
Spot secondary
Secondary distribution that may not require an SEC registration statement and may be attempted without delay. An underwriting discount is normally included in these offerings.
Spot trade
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.
Spot transaction
A foregin exchange transaction in which each party promises to pay a certain amount of currency to the other on the same day or within one or two days.
Spousal IRA
An individual retirement account in the name of an unemployed spouse.
Spousal remainder trust
A fixed-term trust from which income is distributed to the beneficiary (such as a child of the grantor) to take advantage of a lower tax bracket, and that at the end of the term passes to the grantor's spouse.
Spread
(1) The gap between bid and ask prices of a stock or other security. (2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months. Also known as a straddle. (3) Difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public. (4) The price an issuer pays above a benchmark fixed-income yield to borrow money.
Spread income
Also called margin income, the difference between income and cost. For a depository institution, the difference between the assets it invests in (loans and securities) and the cost of its funds (deposits and other sources).
Spread option
A position consisting of the purchase of one option and the sale of another option on the same underlying security with a different exercise price and/or expiration date.
Spread order
An order listing the series of options that the customer wants to buy and sell and the desired spread between the premiums paid and received for the options.
Spread position
The status of an account after a spread order has been carried out.
Spread strategy
A strategy that involves a position in one or more options so that the cost of buying an option is funded entirely or in part by selling another option in the same underlying. Also called spreading.
Spreadsheet
A computer program that organizes numerical data into rows and columns in order to calculate and make adjustments based on new data.
Sprinkling trust
A trust in which the trustee decides how to distribute trust income among a group of designated people.
SPX
Applies to derivative products. Symbol for the S&P 500 index.
Squeeze
Period when stocks or commodities futures increase in price and investors who have sold short must cover their short positions to prevent loss of large amounts of money.
SS1
Securities sales speaker box that transmits to all investment banks' regional trading and sales desks.
Stabilization
The action undertakes a country when it buys and sells its own currency to protect its exchange value.
Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders follow a plus tick and buy orders a tick.
Actions a managing underwriter undertake so that the market price does not fall below the public offering price during the offering period.
Stable Paretian, or Fractal Hypothesis
In the characteristic function of the fractal family of distributions, the characteristic exponent alpha can range between one and two. See: Alpha, Fractal Distributions, Gaussian.
Stability
The relative steadiness or safety of a security or fund compared to the market as a whole. For example, money market funds and other short-term investments offer more stability than funds that invest in growth stocks.
Stag
Speculator who buys and sells stocks to hold for short intervals to make quick profits.
Stagflation
A period of slow economic growth and high unemployment with rising prices (inflation).
Staggered board of directors
Occurs when a portion of directors are elected periodically, instead of all at once. Board terms are often staggered in order to thwart unfriendly takeover attempts, since potential acquirers would have to wait longer before they could take control of a company's board through the normal voting procedure.
Staggering maturities
Hedging against interest rate movements by investment in short-, medium-, and long-term bonds.
Stagnation
A period of slow economic growth, or, in securities trading, a period of inactive trading.
Stakeholders
All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government.
Stale price
An old price of the asset that does not reflect the most recent information.
Stale price arbitrage
For a number of assets, the most recent transaction price at 4PM ET does not fully reflect all available market information. One example is international equities that trade on exchanges that are located in different time zones and close 2-15 hours before U.S. markets. In addition, domestic small-capitization equities and high-yield and convertible bonds often trade infrequently and have wide bid-ask spreads. This can cause the most recent transaction price to be much different from the price that one would see in a liquid market at 4 PM, even for assets that trade on exchanges that are open at that time. Investors can take advantage of mutual funds that calculate their NAVs using stale closing prices by trading based on recent market movements. For example, if the U.S. market has risen since the close of overseas equity markets, investors can expect that overseas markets will open higher the following morning. Investors can buy a fund with a stale-price NAV for less than its current value, and they can likewise sell a fund for more than its current value on a day that the U.S. market has fallen. Similar opportunities exist when the values of infrequently or illiquidly-traded domestic assets have recently changed. Also referred to as Net Asset Value Arbitrage or NAV Arbitrage.
Stalking horse
In bankruptcy proceedings, this refers to the company that first bids for the companies assets.
Stalking horse bid
In bankruptcy proceedings, this refers to first bid for the companies assets. This is the bid to beat. If there are multiple bids, often there is a bankruptcy auction.
Stamp duty
Applies mainly to international equities. Taxes on foreign transactions, usually a percentage of total transaction amount, that can be unilateral or bilateral in nature.
Stamp tax
Tax on a financial transaction.
Stand-alone principle
Investment approach that advocates a firm should accept or reject a project by comparing it with securities in the same risk class.
Standby Letter of Credit
Documents evidencing failure of the bank's customer (the applicant) to pay an obligation when due.
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