Introduction of stock online exchange: A stock market or equity market is a public entity (a loose network of economic transactions, not

a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion at the start of October 2008.[1] The total world derivatives market has been estimated at about $791 trillion face or nominal value,[2] 11 times the size of the entire world economy.[3] The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The largest stock market in the United States, by market capitalization, is the New York Stock Exchange (NYSE). In Canada, the largest stock market is the Toronto Stock Exchange. Major European examples of stock exchanges include the Amsterdam Stock Exchange, London Stock Exchange, Paris Bourse, and the Deutsche Börse (Frankfurt Stock Exchange). In Africa, examples include Nigerian Stock Exchange, JSE Limited, etc. Asian examples include the Singapore Exchange, the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as the BM&F Bovespa and the BMV. Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations trading in their own shares. Some studies have suggested that institutional investors and corporations trading in their own shares generally receive higher riskadjusted returns than retail investors.[4] Trading: Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order of buying or selling. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.

Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-firstserved basis if there are multiple bidders or askers at a given price. The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide realtime trading information on the listed securities, facilitating price discovery.

The New York Stock Exchange The New York Stock Exchange is a physical exchange, also referred to as a listed exchange – only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a floor broker, who goes to the floor trading post specialist for that stock to trade the order. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place—in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading". The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock.

The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated. From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant.[6]

Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where clients can move big blocks of stock anonymously, brokers pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions as well as the surplus of the century had taken place.[citation needed].

Market participants
Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations trading in their own shares. Some studies have suggested that institutional investors and corporations trading in their own shares generally receive higher riskadjusted returns than retail investors.[7] A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but only for large institutions.[citation needed]) However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'.[citation needed]

Established in 1875, the Bombay Stock Exchange is Asia's first stock exchange In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred;[8] the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam.

tend to be associated with increased business investment and vice versa. China. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Genoa and Florence also began trading in government securities during the 14th century. An economy where the stock market is on the rise is considered to be an up-and-coming economy. Soon thereafter. India. Bankers in Pisa. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities.[citation needed] Rising share prices. among which options and repos.a practice which was banned by the Dutch authorities as early as 1610.where trading is currently completed through computers. The stock market is one of the most important sources for companies to raise money. continuous trade in company stock emerged on the Amsterdam Exchange. central banks tend to keep an eye on the control and behavior of the stock market and. the stock market is often considered the primary indicator of a country's economic strength and development. South Korea and the Netherlands. compared to other less liquid investments such as real estate. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch East India Company (founded in 1602) was the first joint-stock company to get a fixed capital stock and as a result. Share prices also affect the wealth of households and their consumption. Canada. Japan. for instance.[citation needed] Some companies actively increase liquidity by trading in their own shares. with the world's largest markets being in the United States. or raise additional financial capital for expansion by selling shares of ownership of the company in a public market. on the smooth operation of financial system functions. Venetian bankers began to trade in government securities. Italian companies were also the first to issue shares. Companies in England and the Low Countries followed in the 16th century.[11][12] History has shown that the price of shares and other assets is an important part of the dynamics of economic activity.In the middle of the 13th century. Verona. United Kingdom. a lively trade in various derivatives.[9] There are now stock markets in virtually every developed and most developing economies.[citation needed] . Therefore. in general. and can influence or be an indicator of social mood. This allows businesses to be publicly traded. Dutch traders also pioneered short selling . Germany (Frankfurt Stock Exchange). France.[10] Importance of stock market Function and purpose The main trading room of the Tokyo Stock Exchange. This is an attractive feature of investing in stocks. In fact. Financial stability is the raison d'être of central banks. emerged on the Amsterdam market.

and guarantee payment to the seller of a security. Similar tendencies are to be found in other industrialized countries. such as the European Union. etc. Economists continue to debate whether financial markets are 'generally' efficient. One feature of this development is disintermediation. (Positive or up trends are referred to as bull markets. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. mutual funds. Japan and other developed nations. According to one interpretation of the efficient-market hypothesis (EMH). flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. A portion of the funds involved in saving and financing. pension funds. hedge funds.[citation needed] Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. The major part of this adjustment is that financial portfolios have gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals. only changes in fundamental factors. such as the outlook for margins. negative or down trends are referred to as bear markets. In this way the financial system is assumed to contribute to increased prosperity. meaning that they collect and deliver the shares. either directly or through mutual funds. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth. permitting a higher proportion of shares to bonds.Exchanges also act as the clearinghouse for each transaction. insurance investment of premiums. The general public's heightened interest in investing in the stock market. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance. In all developed economic systems. has been an important component of this process.. ought to .) Over-reactions may occur—so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. profits or dividends. the United States. In the 1970s. the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another The behavior of the stock market From experience we know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'.g.[citation needed] The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as possibly employment. compared to less than 20 percent in the 2000s. in Sweden. e.

) The 'hard' efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987. in any of its current forms. nontrending). and often will perceive a pattern in what is.e. theoretically could cause financial markets to overreact. it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash.affect share prices beyond the short term. (Something like seeing familiar shapes in clouds or ink blots. As social animals. a 'soft' EMH has emerged which does not require that prices remain at or near equilibrium. some research has shown that changes in estimated risk. (But this largely theoretic academic viewpoint—known as 'hard' EMH—also predicts that little or no trading should take place. to this day. but only that market participants not be able to systematically profit from any momentary market 'inefficiencies'.. just noise. a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this. while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i. although very rarely. For instance. reducing his (psychological) risk threshold. in fact.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information. contrary to fact. .[14] However.6 percent—the largest-ever one-day fall in the United States.[14] This event demonstrated that share prices can fall dramatically even though. A period of good returns also boosts the investor's self-confidence. having priced in all public knowledge. But the best explanation seems to be that the distribution of stock market prices is non-Gaussian (in which case EMH.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price up). when the Dow Jones index plummeted 22. Psychological research has demonstrated that people are predisposed to 'seeing' patterns. such as stop-loss limits and Value at Risk limits. Various explanations for such large and apparently nonrandom price movements have been promulgated.[17] Another phenomenon—also from psychology—that works against an objective assessment is group thinking. (But note that such events are predicted to occur strictly by chance. and the use of certain strategies. An example with which one may be familiar is the reluctance to enter a restaurant that is empty. Moreover. many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer.[15][16] Other research has shown that psychological factors may result in exaggerated (statistically anomalous) stock price movements (contrary to EMH which assumes such behaviors 'cancel out'). it is not easy to stick to an opinion that differs markedly from that of a majority of the group. would not be strictly applicable). people generally prefer to have their opinion validated by those of others in the group. where random 'noise' in the system may prevail. since prices are already at or near equilibrium.

in turn. the stock market may be swayed in either direction by press releases.[20] Crashes Robert Shiller's plot of the S&P Composite Real Price Index. making the stock market behavior difficult to predict. In times of market stress. The stock market. the media amplified the general euphoria. In the run up to 2000. people are generally not as rational as they think. since often such news has been anticipated. Inexperienced investors rarely get the assistance and support they need. even if that news is likely to have no real effect on the fundamental value of securities itself. (And later amplified the gloom which descended during the 2000–2002 bear market. Over the short-term. stocks and other securities can be battered or buoyed by any number of fast market-changing events.[19] However. Emotions can drive prices up and down. momentary hysteria. the game becomes more like poker (herding behavior takes over). from Irrational Exuberance. 2008. are opportunities to make money. and Interest Rates. so that by summer of 2002. 2d ed. but generally only briefly. Dividends. far higher than the .[21] In the preface to this edition.In one paper the authors draw an analogy with gambling. this occurred on October 13. "The stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still. however. euphoria and mass panic. predictions of a DOW average below 5000 were quite common. the whole notion of EMH is that these nonrational reactions to information cancel out. Shiller warns.42 points or 11 percent. Therefore. as more experienced investors (especially the hedge funds) quickly rally to take advantage of even the slightest. The Dow Jones Industrial Average biggest gain in one day was 936. is quite unforgiving of amateurs.[18] In normal times the market behaves like a game of roulette. Behaviorists argue that investors often behave 'irrationally' when making investment decisions thereby incorrectly pricing securities.) Irrational behavior Sometimes the market seems to react irrationally to economic or financial news. the probabilities are known and largely independent of the investment decisions of the different players. rumors. at this writing [2005]. as with any other business. and the reasons for buying and selling are generally obscure. leaving the prices of stocks rationally determined. In the period running up to the 1987 crash. But this may be more apparent than real. Earnings. in the mid-20s. which. and a counterreaction may occur if the news is better (or worse) than expected. with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. which causes market inefficiencies. less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000–2002 bear market. the average did not rise above 5 %). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.

and get into the market when it is low. There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale.8 %%.6 %% in a day. Spain 31 %%.5 %%.[21] source). See also ten-year returns. the Dotcom bubble of 2000. especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market.68 %%. The Dow Jones Industrial lost 50 % during this stock market crash. The crash in 1987 raised some puzzles-–main news and events did not predict the catastrophe and visible reasons for the collapse were not identified. This event raised . stock markets in Hong Kong had fallen 45. stock market crashes end speculative economic bubbles. Another famous crash took place on October 19. to lower their exposure to the stock market when it is high. reinvesting dividends. 1987 – Black Monday..5 %%. a reason for stock market crashes is also due to panic and investing public's loss of confidence. which followed Terrible Thursday—the starting day of the stock market crash in 1929. Australia 41. Long-term investors would be well advised. as it has been recently. There have been a number of famous stock market crashes like the Wall Street Crash of 1929.. the United Kingdom 26. Black Monday itself was the largest one-day percentage decline in stock market history – the Dow Jones fell by 22. People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich. and Canada 22. The vertical axis shows the geometric average real annual return on investing in the S&P Composite Stock Price Index. the United States 22. It was the beginning of the Great Depression. and the Stock Market Crash of 2008. The crash began in Hong Kong and quickly spread around the world. Shiller states that this plot "confirms that long-term investors—investors who commit their money to an investment for ten full years—did do well when prices were low relative to earnings at the beginning of the ten years. 1929 on Black Thursday. An increasing number of people are involved in the stock market. 1929. the stock market crash of 1973–4. The names “Black Monday” and “Black Tuesday” are also used for October 28–29.1.4 %%. One of the most famous stock market crashes started October 24. Often. Data from different twenty year periods is color-coded as shown in the key. and so they do not make conservative preparations for possible bad outcomes. The horizontal axis shows the real price-earnings ratio of the S&P Composite Stock Price Index as computed in Irrational Exuberance (inflation adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). individually. the Black Monday of 1987. and selling twenty years later. In parallel with various economic factors. By the end of October." Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert Shiller (Figure 10."[21] A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges.historical average.

Short selling .questions about many important assumptions of modern economics. the theory of rational human conduct. with the weights reflecting the contribution of the stock to the index. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. equity swaps. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment. Stock market index The movements of the prices in a market or section of a market are captured in price indices called stock market indices. stock index and stock options. or.. Derivative instruments Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. stock options and the futures market. of which there are many. For some time after the crash. The SEC modified the margin requirements in an attempt to lower the volatility of common stocks. Leveraged strategies Stock that a trader does not actually own may be traded using short selling. the S&P. As all of these products are only derived from stocks. This halt in trading allowed the Federal Reserve system and central banks of other countries to take measures to control the spreading of worldwide financial crisis. In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. the theory of market equilibrium and the hypothesis of market efficiency. derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sales.g. margin buying may be used to purchase stock with borrowed funds. or traded overthe-counter. the FTSE and the Euronext indices. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time. rather than the (hypothetical) stock market. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. they are sometimes considered to be traded in a (hypothetical) derivatives market. since the exchange computers did not perform well owing to enormous quantity of trades being received at one time. These last two may be traded on futures exchanges (which are distinct from stock exchanges—their history traces back to commodities futures exchanges). single-stock futures. Such indices are usually market capitalization weighted. namely. e. Some examples are exchange-traded funds (ETFs). trading in stock exchanges worldwide was halted. and stock index futures.

Investment strategies . the trader borrows stock (usually from his brokerage which holds its clients' shares or its own shares on account to lend to short sellers) then sells it on the market. Margin buying In margin buying. from $ 9 billion to $39 billion. New issuance Global issuance of equity and equity-related instruments totaled $505 billion in 2004. Exiting a short position by buying back the stock is called "covering a short position. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock). In the United States. and there is often a maintenance margin below the $500). speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. making money if the price fell in the meantime and losing money if it rose. Initial public offerings (IPOs) by US issuers increased 221 % with 233 offerings that raised $45 billion. and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity. Middle East and Africa (EMEA) increased by 333 %. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright. you need to put up $500. Before that. it can be a maximum of a certain percentage of those other stocks' value. A margin call is made if the total value of the investor's account cannot support the loss of the trade.8 % increase over the $389 billion raised in 2003. but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim). the trader borrows money (at interest) to buy a stock and hopes for it to rise. the margin requirements have been 50 % for many years (that is. and IPOs in Europe. The investor is responsible for any shortfall following such forced sales. if you want to make a $1000 investment. hoping for the price to fall.In short selling.) Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. The practice of naked shorting is illegal in most (but not all) stock markets. a 29. The trader eventually buys back the stock." This strategy may also be used by unscrupulous traders in illiquid or thinly traded markets to artificially lower the price of a stock.

which uses price patterns. its price will fall down. utilizes strict money management and is also rooted in risk control and diversification. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. Additionally..e. it could be assumed that taxation is already incorporated into the stock price through the different taxes companies pay to the state. since World War II). one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). and ride the general trend of the stock market (which. a large array of fiscal obligations are taxed for capital gains. two basic methods are classified by either fundamental analysis or technical analysis. "How do I make money investing?" There are many different approaches. in particular in the stock exchanges. However.e. high supply and low demand) for the stock of ABC Co.S.e. demand and supply for a particular stock). Taxation According to much national or state legislation. business trends. More and more people would want to buy this stock (i. or that tax free stock market operations are useful to boost economic growth.One of the many things people always want to know about the stock market is. One example of a technical strategy is the Trend following method. ABC Co. these fiscal obligations may vary from jurisdictions to jurisdictions because. Ltd. etc. buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. most of the operations are done electronically .e. general economic conditions. buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT. has averaged nearly 10 % per year. less supply). Henry and Ed Seykota. high demand) and very few people will want to sell this stock at current market price (i. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings. in the market. in the U. Let us take an example for a better understanding of how market forces determine stock prices. Ltd. among other reasons. On the contrary. In this method. many choose to invest via the index method. Stock Market of India Introduction Stock markets refer to a market place where investors can buy and sell stocks. Therefore. minimize taxes from too frequent trading. if there are more sellers than buyers (i. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. The price at which each buying and selling transaction takes is determined by the market forces (i. Ltd. dividends and capital gains on the stock market. The principal aim of this strategy is to maximize diversification. compounded annually. Taxes are charged by the state over the transactions. used by John W. In earlier times.

2850 could only be sold at Rs. the Indian Stock Markets have a 200 years old history. busuness in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. 18th Century 1830's 1840's 1850's 1860's 1860-61 East India Company was the dominant institution and by end of the century. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business attracting more people into the business The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America.and the stock markets have become almost paperless. and can trade freely from their home or office over the phone or through Internet. marking the beginning of the "Share Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example.The Origin One of the oldest stock markets in Asia.90's Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal 1908 "The Calcutta Stock Exchange Association" was formed .Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business. 87) 1862-63 1865 Pre-Independance Scenario . Now investors dont have to gather at the Exchanges. Bank of Bombay Share which had touched Rs. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" 1875 1880's 1894 1880 . History of the Indian Stock Market .

number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt. 1982) 3. Indore Many more stock exchanges were established during 1980's. The Exchanges that were recognized under the Act were: 1. Madras 4. Ahmedabad 5. Uttar Pradesh Stock Exchange Association Limited (at Kanpur. Cochin Stock Exchange (1980) 2. Lahore Estock Exchange was closed down after the partition of India. 1956. Calcutta 3. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Bangalore 8. Ludhiana Stock Exchange Association Limited (1983) 5. When recession followed. Pune Stock Exchange Limited (1982) 4.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited" 1940 1944 1947 Post Independance Scenario The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Hyderabad 7. Delhi 6. Bombay 2. namely: 1. Gauhati Stock Exchange Limited (1984) . and later on merged with the Delhi Stock Exchange. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act.1920 1923 1934 1936 1937 Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers.

1 2 3 4 5 6 7 8 As on 31st December No. of Stock Issues of Listed Cos.) Market Value of Capital per Listed Cos.) 194 196 197 197 198 1985 6 1 1 5 0 7 7 8 8 9 14 1991 20 6229 8967 1995 22 8593 11784 59583 112 120 159 155 226 4344 5 3 9 2 5 150 211 283 323 369 6174 6 1 8 0 7 270 753 971 24 181 261 397 9723 32041 2 4 3 129 267 327 675 2530 11027 478121 2 5 3 0 2 9 63 113 168 175 224 582 260 514 1770 344 693 5564 803 86 107 167 211 298 358 170 148 126 170 Trading Pattern of the Indian Stock Market . There was a sharp increase in number of Exchanges. there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).) Market value of Capital of Listed Cos.) Capital per Listed Cos. 1985) 7. Coimbatore Stock Exchange 13. (Lakh Rs. 1989) 11. of Stock Exchanges No.6. No. Capital of Listed Cos. 1986) 8. Rs. No. Rs. which is visible from the following table: S. Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. Kanara Stock Exchange Limited (at Mangalore. Vadodara Stock Exchange Limited (at Baroda. of Listed Cos. listed companies as well as their capital. (Cr.) (5/2) Appreciated value of Capital per Listed Cos. Bhubaneswar Stock Exchange Association Limited (1989) 10. Saurashtra Kutch Stock Exchange Limited (at Rajkot. 1990) 12. (Cr. (4/2) (Lakh Rs. Meerut Stock Exchange At present. Magadh Stock Exchange Association (at Patna. (Lak Rs. Jaipur Stock Exchange Limited (1989) 9.

They are divided into two categories: Types of Transactions The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges: .Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s).

Industrial Finance Corporation of India. Greater liquidity and lesser risk of intermediary charges due to widely spread trading mechanism across India 2.Indian stock exchange allows a member broker to perform following activities: 1. Lack of liquidity and transparency. Buy and sell securities on his own account and risk. 4. SBI Capital Markets. 3. General Insurance Corporation and its subsidiaries and CanBank Financial Services. Act as an agent. The screen-based scripless trading ensures transparency and accuracy of prices . This age-old trading mechanism in the Indian stock markets used to create many functional inefficiencies. Buy and sell securities for his clients and charge commission for the same. long settlement periods and benami transactions are a few examples that adversely affected investors. OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India. Industrial Credit and Investment Corporation of India. 2. OTCEI was incorporated in 1990 under the Companies Act 1956. Act as a trader or dealer as a principal. Industrial Development Bank of India. Advantages of OTCEI 1. trading in Stock Exchanges in India followed a conventional style where people used to gather at the Exchange and bids and offers were made by open outcry. In order to overcome these inefficiencies. Over The Counter Exchange of India (OTCEI) Traditionally.

Integrated network for trading in stock market of India 2. Industrial Finance Corporation of India. When the prices match the transaction will be completed 7. Capital market Wholesale Debt Market . government securities. On the basis of the recommendations of high powered Pherwani Committee. . This network allows them to execute trade from their offices 5. all Insurance Corporations. Fully automated screen-based trading mechanism 2.Similar to money market operations. selected commercial banks and others. Industrial Credit and Investment Corporation of India. selling and holding of a company's share. A confirmation slip will be printed at the office of the trading member Advantages of trading at NSE 1. Greater functional efficiency supported by totally computerized network Ever come across words like Sensex.3. commercial papers etc. Fully automated screen based system that provides higher degree of transparency 3. You must have also come across research reports from brokerage houses that talk of buying. Wholesale debt market 2. rally et al? Well. the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India. Nifty. Shorter allotment procedure (in case of a new issue) than other exchanges National Stock Exchange In order to lift the Indian stock market trading system on par with the international standards. Faster settlement and transfer process as compared to other exchanges 4. Trading at NSE 1. a regular reader of business newspapers must have come across these and a host of other terms that describe the stock market activities. The prices at which the buyer and seller are willing to transact will appear on the screen 6. NSE provides exposure to investors in two types of markets. correction. Trading members are linked through a communication network 4. namely: 1. Investors can transact from any part of the country at uniform prices 4. Strictly follows the principle of an order-driven market 3. debt market operations involve institutional investors and corporate bodies entering into transactions of high value in financial instrumets like treasury bills.

Bajaj Auto [ Get Quote ]. The only difference between the two indices (the Sensex and Nifty) is that the Nifty comprises of 50 companies and hence is more broad-based than the Sensex. The Nifty 50 or the S&P CNX Nifty as the index is officially called has all the 30 Sensex stocks. Sensex It is an index that represents the direction of the companies that are traded on the Bombay Stock Exchange [ Images ]. These companies represent the myriad sectors of the Indian economy. . the Sensex. HLL [ Get Quote ] (fast moving consumer goods) etc. Wipro. A number represents this movement.Let us go through a few of these terms used in routine stock market parlance. all the 30 stocks that make up the Sensex have reached a value of 14. The word Sensex comes from sensitive index. Infosys [ Get Quote ]. Currently. Tata Motors [ Get Quote ]. • List of Nifty 50 stocks The NSE Nifty functions exactly like (explained above) the BSE Sensex. Wipro [ Get Quote ]. TCS [ Get Quote ] (information technology). Nifty It is the Sensex's counterpart on the National Stock Exchnage. ONGC [ Get Quote ]. • Weights assigned to Sensex stocks The increase or decrease in this index. or a BHEL. and HLL have higher weightages compared to others like HDFC [ Get Quote ].355 points. Companies like Reliance. Reliance [ Get Quote ] (oil & gas). The Sensex captures the increase or decrease in prices of stocks of companies that it comprises. A few of these companies and the sector they represent are: ACC (cement). is the effect of a corresponding increase or decrease in the stock market price of these 30 companies. Maruti [ Get Quote ] (automobile). NSE. Having said that one must remember that the Sensex is the benchmark that represents Indian equity markets globally. BSE. • List of 30 Sensex stocks Each company has a weight assigned to it. Infosys. ITC.

mutual funds and foreign institutional investors are not allowed this luxury in India [ Images ] yet. a bull buys first at a lower price and sells later at a price higher than her/his cost of purchase. The shares can later be returned to the bear's friend if s/he had borrowed the same from a friend. A falling market takes bulls into hibernation. This way s/he has got back the 100 shares of Ranbaxy and simultaneously made a profit of Rs 2500. • The best way to invest in the stock market If a bear sells first. if a bull buys a company's share at Rs 100. the bulls buy at a lower price and sell at a higher price. Bears are happy in a falling market. Simply put. Such selling is called naked short selling or going short on a stock. and then purchases the same quantity of shares at a lower price. A bear sells stocks first that s/he owns or borrows from. s/he would prefer selling the same stock at Rs 120 or any price higher than Rs 100 to make a profit.Bull A particular kind of investor who purchases shares in the expectation that the market price of that company's share will increase. Usually. There are bears in the market that sell shares first without actually owning them unlike in the above example. Squaring off . say a friend. For instance. Bear Bull's counterpart is the bear. then her/his profit is Rs 25 (400-375) per share. While individual investors can engage in selling first and buying later (also referred to as short selling). say 100 shares of Ranbaxy [ Get Quote ] at Rs 400. Bulls are happy when the markets (the Sensex and Nifty) move upwards. and later purchases the same number of shares at Rs 375. S/he sells her/his stock at a higher price and pockets the profit.

Rally The word suggests the gain made by the Sensex or Nifty during the course of the day. However. Day trading is a mechanism whereby investors/traders can buy.000 points in a span of say 14 or for that matter 20 trading sessions (the stock markets remain closed on Saturdays. Crash As the word suggests. Indian equity markets remain open between 9:55 am and 3:30 pm normally (At times there are sun outages when satellites fail to link with ground infrastructure of the two exchanges (the servers where buy and sell orders are matched). brokers etc call it as a market rally. If such gains are made on a regular basis then market participants like investors. • Do and don'ts for stock market investments Similarly. Bulls are always said to be active during a market rally. NSE opens (the working hours are 9:55 am to 3:30 pm in normal times) and sell the same amount of shares later (bulls) before the two stock exchanges close. if you sell 100 shares of Maruti and purchase them later then you have squared off your sell position. Equity market rules in Indian allow investors/traders to engage in day trading. say 100 shares of a company as soon as the BSE. crash refers to a fall in the value of Sensex and Nifty. If you purchase 50 shares of say Infosys and sell them later before the market closes then you have squared off your buy position. In the first three trading days of this week(February 12-14) alone the Sensex had crashed by more than 700 points. . a stock bought on the BSE cannot be sold on the NSE and vice-versa.000 points to 15.A process whereby investors/traders buy or sell shares and later reverse their trade to complete a transaction is called squaring off of a trade. During these times the trading period is extended till 4:15 pm to compensate for the time lost in between). Sundays and other bank holidays) then the phenomenon is referred to as a rally. If the Sensex moves from 14. Similarly investors/traders can also sell first and buy later (bears) during the course of the day to square off their sell positions.

It is like a woman/man resting for some time after running a long distance race. 2007). Corrections are generally considered as signs of strength after which the markets (the Sensex and Nifty) gets once again poised for a further rally. • How to make a crore in the stock market Bears are said to be active and happy during the market crash as their style of trading (sell first and buy later) helps them make good money during a crash.000 points. It can then issue bonus shares out of these Rs 50 crore. . This sudden and violent 700-point fall is referred to as th crash or market crash. Market experts consider such corrections healthy because during this period the ownership of shares moves from weak hands (short-term investors) to strong hands (longterm investors). Say if the markets rally from 13. let us take a company A that has made a profit of Rs 100 crore in the financial year 2007 (April 1. 2006 to March 31. And the remaining Rs 50 crore the company puts into its reserve pool or idle cash that the company has no plans to spend. When a company declares a bonus issue it converts this idle cash into shares that are then distributed amongst its shareholders. This process is called capitalising of reserves. A bonus is declared after a discussion amongst the board members that make up the management of a company. Bonus shares These are the free shares that a listed company gives its shareholders. For instance.The Sensex then had plummeted from around 14.700 points in the next five-six days then this action is termed as a market correction. Out of this amount the company may need Rs 50 crore for say buying machinery or constructing a new warehouse.000 points in 10 days and the again fall to 13. Like human beings the market too needs to take rest after a smart rally. A bonus issue is looked upon as a way of rewarding shareholders.700 levels to around 14. Correction A correction (or a measured fall) in the Sensex and Nifty takes place when these indices rise for a few days and then retrace or shave off some of these gains.000 to 14.

dividend amount also comes from a company's free cash reserves. We shall see some more next week. The company's registrar keeps a track of who owns how many shares of that particular company. A dividend is generally issued as a percentage of the face value of a share.6) will always be less than a dividend of 20% declared on share of face value Rs 10 (Rs 4). Say a company A announces a 1:1 bonus issue and the book closure date is February 28.consult our Stock Market Terms for a glossary of terms and vocabulary that may help you better understand the capital markets. Face value is the nominal price of a company's share. The same is also true for dividend announcements. A share can have different face values like Re 1. This just sums up a few terms used by stock market participants. A 2:1 bonus issue (or two for every one held) means you will get two free shares of a company for every one that you own.A bonus is usually declared as a ratio. a 5:1 bonus issue will give you five free shares for every one share that you own. Rs 5. 2007. Rs 2. Book closure date This is the date on which a company closes its books for business after it announces a bonus or dividend. Similarly. Dividend It is again a way of rewarding a company's shareholders. Any investor having shares in his/her demat account before this date becomes eligible for the bonus issue or the dividend declared. If the ownership of shares is reflected in your account after February 28 then you will not get any bonus shares. NOTE: . Stock Market Terms Speak the language of the stock market . A bonus issue in the ratio of 1:1 means you will get one free share for every one share of the company you own. If you don't own this company's share and want to avail of the bonus offer then you must not only buy this share before February 28 but also make sure that the number of shares purchased by you are transferred to your account from the seller before this date. Like bonus shares. An 80% dividend on a share of face value Rs 2 (Rs 1. Rs 10 or Rs 100.

may differ from standard general definitions. These are also known as open options. All-or-None Order An order that must be filled completely or the trade will not take place. This classification is related to TSX Venture Exchange Tier 1 status. including financial statements and a report on operations.consult our Stock Market Terms for a glossary of terms and vocabulary that may help you better understand the capital markets. The agent does not own the security at any time during the transaction.Some of the definitions are TSX-specific and. Anonymous Trading Permits Participating Organizations to voluntarily withhold their true broker identities when entering orders and trades on TSX trading systems. Agent A securities firm is classified as an agent when it acts on behalf of its clients as buyer or seller of a security. as a result. may differ from standard general definitions. issued by a company to its shareholders at the company's fiscal year-end. NOTE: Some of the definitions are TSX-specific and. Alberta Securities Commission (ASC) The provincial regulatory agency responsible for overseeing the capital market in Alberta. Stock Market Terms Speak the language of the stock market . Annual Report A publication. American-Style Options Options that can be exercised any time during their lifetime. as a result. Arbitrage The simultaneous purchase of a security on one stock market and the sale of the same security on another stock market at prices which yield a profit. Aa Advanced Companies Companies listed on TSX Venture Exchange that meet higher asset. market value and shareholder distribution requirements than those classified as venture companies. .

Assignment The notification to the seller of an option by the clearing corporation that the buyer of the option is enforcing the terms of the option's contract. Averaging Down Buying more of a security at a price that is lower than the price paid for the initial investment. index or commodity equals the strike price of the option.50% is 25 basis points. bonds or other components. Best-Efforts Underwriting A type of underwriting where the investment firm acts as an agent. but does not guarantee the issuing company that the securities to be issued will be sold. Averages and Indices Statistical tools that measure the state of the stock market or the economy. The aim of averaging down is to reduce the average cost per unit of the investment. securities. . Assets are listed on a company's balance sheet or an individual's net worth statement. the Dow Jones Industrial Average and the Consumer Price Index. Bb Basis Point One-hundredth of a percentage point.25% and 5. For example. including money. The firm agrees to use its best efforts to sell the new issue of securities. Examples are the S&P/TSX Venture Composite Index. the S&P/TSX Composite Index. Bear Market A market in which stock prices are falling. equipment and real estate. Assets Everything a company or person owns. it forms the basis of a stock quote. the difference between 5. Assets include everything that is owed to the company or person. based on the performance of stocks.Ask or Offer The lowest price at which someone is willing to sell the security. When combined with the bid price information. At-the-Money When the price of the underlying equity. Ask Size The aggregate size in board lots of the most recent ask to sell a particular security.

10 .99 .Beta A measurement of the relationship between the price of a stock and the movement of the whole market. Booked Orders Orders that do not trade immediately upon entry. These are available only at the opening. as follows: • • • Trading price per unit is less than $0. Book An electronic record of all pending buy and sell orders for a particular stock. A better-priced sell order has a limit price lower than the best bid. Blue Chip Stocks Stocks of leading and nationally known companies that offer a record of continuous dividend payments and other strong investment qualities.10 to $0. When combined with the ask price information. it forms the basis of a stock quote. These orders are also known as outstanding orders.000 units Trading price per unit is $0.000 in value.000 shares in size and greater than or equal to $100. Block Trades Trades greater than or equal to 10. Bid Size The aggregate size in board lots of the most recent bid to buy a particular security. The board lot size of a security on Toronto Stock Exchange or TSX Venture Exchange depends on the trading price of the security.board lot size is 1. Black-Scholes Model A mathematical model used to calculate the theoretical price of an option.board lot size is 500 units Trading price per unit is $1. Bid The highest price a buyer is willing to pay for a stock.00 or more . .board lot size is 100 units Bonds Promissory notes issued by a corporation or government to its lenders. usually with a specified amount of interest for a specified length of time. A better-priced buy order has a limit price higher than the best offering. Board Lot A standard trading unit as defined in UMIR (Universal Market Integrity Rules). Better-Price-Limit Orders An order with a limit price better than the best price on the opposite side of the market.

unlike an investment fund. Cc Call Option An option which gives the holder the right. to buy a fixed amount of a certain stock at a specified price within a specified time. the investment advisor does not own the securities but acts as an agent for the buyer and seller and charges a commission for these services. Broker or Brokerage Firm A securities firm or a registered investment advisor affiliated with a firm. the centre will accept claims up to $50. Business Trust A trust that usually generates cash flows from one business or operating company. Bull Market A market in which stock prices are rising. If the price of the securities decreases before the brokerage firm has had a chance to resell the securities to its clients. British Columbia International Commercial Arbitration Centre (BCICAC) An arbitration centre established to resolve business disputes that have not been resolved through normal channels. When acting as a broker for the purchase or sale of listed stock.000 from clients of participating members of the Investment Dealers Association of Canada (Pacific Division) and TSX Venture Exchange. Buy-In If a broker fails to deliver securities sold to another broker on the settlement date. excluding statutory holidays. . Calls are purchased by investors who expect a price increase. the receiving broker may buy the securities at the current market price of the stock and charge the delivering broker the cost difference of such a purchase. Brokers are the link between investors and the stock market. which generates income from a diversified pool or portfolio. The trust holds debt and equity interests of an operating business.Bought-Deal Underwriting A type of underwriting where the brokerage firm acts as principal. Businesses that exhibit these characteristics may opt for a trust structure over a corporate structure to take advantage of tax efficiency. Business Day Any day from Monday to Friday. The brokerage firm risks its own capital to purchase all of the securities to be issued. but not the obligation. the firm absorbs the loss. British Columbia Securities Commission (BCSC) The provincial government agency responsible for administering and enforcing the Securities Act and the Commodity Contract Act of British Columbia. As part of its services.

Toronto Stock Exchange. payable date. CDS is regulated by the Ontario Securities Commission. Unlike traditional public companies. Canadian Investor Protection Fund (CIPF) A fund established to protect customers in the event of insolvency of a member of any of the following sponsoring self-regulatory organizations: the Bourse de Montréal. and the Bank of Canada. Canadian Securities Institute (CSI) The national educational organization of the securities industry sponsored by the Investment Dealers Association of Canada. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement. and funds. This includes stocks and other investments such as investment property. To investors. it may be paid in securities or cash. Capital To an economist. (TCO). Canadian Depository for Securities Limited (CDS). It is generally paid to security holders of trusts. the Bourse de Montréal and TSX Venture Exchange. The amount. Capital Gains Distribution A taxable distribution out of taxable gains realized by the issuer. and record date are established by the issuer. L'Autorité des marchés financiers (the securities commission of Quebec). The nature of their business is to find and acquire a . Toronto Stock Exchange. capital means machinery. capital means their cash plus the financial assets they have invested in securities. TSX Venture Exchange and the Investment Dealers Association of Canada. partnerships. Canadian Derivatives Clearing Corporation (CDCC) The designated central clearing corporation for options and futures trading on the Bourse de Montréal. Capital Pool Companies The TSX Venture Exchange Capital Pool Company (CPC) program offers a unique listing opportunity that brings experienced management teams with proven public financing ability together with development-stage companies in need of capital and management expertise. their home and other fixed assets. and TSX Inc. Like all distributions. CDS is owned by major Canadian chartered banks. provides clearing and settlement services in support of trading in equity. and money markets. Capital Gain or Loss Profit or loss resulting from the sale of certain assets classified under the federal income tax legislation as capital assets. fixed income.Canadian Depository for Securities Limited (CDS) Canada's national securities depository. capital pools list and begin trading without an operating business. members of the Investment Dealers Association of Canada (IDA). factories and inventory required to produce other products. Previously known as Trans Canada Options Inc.

Cash Dividend / Distribution A dividend/distribution that is paid in cash. Any individual constituent of the index can represent no more than a specified percent of the index. other eligible investments. and other qualified debt obligations. such as debt. or cancellation of listed securities or listed securities that are issuable upon conversion or exchange of other securities of an issuer. The business objective of capital trusts is to acquire and hold assets that will generate net income for distribution to unit holders. contributed surplus and retained earnings of a company.000 face value and trade with accrued interest. Capped Indices Indices for which there is a maximum relative weight by market capitalization for any one constituent. Capitalization or Capital Structure Total dollar amount of all money invested in a company. Cash A special term attached to an equity order that requires the trade to be settled either the same day or the following business day for cash. The trust's assets may consist of residential mortgages. mortgage co-ownership interests.promising early-stage venture. . Capital trusts are generally issued by banks or other financial intermediaries. preferred and common stock. including preferred and common shares. Capital Stock All shares representing ownership of a company. repurchase. These investment vehicles trade like a debt instrument with $1. This change may involve the issuance. mortgage-backed securities. Capital trust assets are usually acquired from and serviced by the issuing institution and/or its affiliates. regardless of when it is reported to the Exchange. Capital Trust A form of financial trust that differs from other trusts in that it looks more like a fixed income instrument than an equity issue. The individual constituents of the S&P/TSX Capped Composite and S&P/TSX Capped 60 indices are capped at 10%. Capitalization Effective Date The date that the capitalization change is reflected in the issuer's share register. and their treasuries are funded expressly for the search and due diligence process. Capitalization Change Any change in the issued and outstanding listed securities of an issuer. while the individual constituents of the S&P/TSX Capped sector indices are capped at 25%.

substitutional listings. Changes in Stock List Any modification to the list of tradable issues of an exchange.Cash Settlement Settlement of an option contract not by delivery of the underlying shares. Closed-End Investment Fund An investment trust that issues a fixed number of securities that trade on a stock exchange or in the over-the-counter market. and stock symbol changes. name changes. . Like other publicly traded securities. quotes. Clearing Number The trading number of the clearing Participating Organization or Member. supplemental security listings. CL1 TSX Venture Level 1 (CL1) is a real-time service for listed junior equities that provides trades. deletions. CL2 TSX Venture Level 2 (CL2) is a real-time service for junior equities that shows all of the committed orders and trades for each TSX Venture Exchange listed security in real time. Certificate The physical document that shows ownership of a bond. but by a cash payment of the difference between the strike or exercise price and the underlying settlement price. stock or other security. the market price of closed-end fund securities fluctuates and is determined by supply and demand in the marketplace. Client Order An order from a retail customer of a Participating Organization. corporate actions and index information from TSX Venture Exchange. These modifications include: new listings. Closing Transaction An order to close out an existing open futures or options contract. Clearing Day Any business day on which the clearing corporation is open to effect trade clearing and settlement. Commission The fee charged by an investment advisor or broker for buying or selling securities as an agent on behalf of a client. Assets of a closed-end fund are professionally managed in accordance with the fund's investment objective and policies and may be invested in a wide range of financial instruments/assets.

oil and metals. Continuous Disclosure A company's ongoing obligation to inform the public of significant corporate events. both favourable and unfavourable. Under UMIR rule 10. Common shareholders may be paid dividends. Common Shares or Common Stock Securities that represent part ownership in a company and generally carry voting privileges. all TSX and TSX Venture Exchange Participating Organizations and Members must report the firm's short position on a semi-monthly basis to TSX Datalinx. This is known as limited liability. but only after preferred shareholders are paid. in accordance with the terms of the conversion feature. The shareholders are the corporation's owners and are liable for the debts of the corporation only up to the amount of their investment. debentures. or preferred shares) that may be converted into other securities of that issuer. Cross A trade that occurs when two accounts within the same Participating Organization/Member wish to buy and sell the same security at an agreed price and . Corporation or Company A form of business organization created under provincial or federal laws that has a legal identity separate from its owners. Convertible Security A security of an issuer (for example . Common shareholders are last in line after creditors. but it may occur at the option of the issuer. debt holders and preferred shareholders to claim any of a company's assets in the event of liquidation. for both TSX and TSX Venture Exchange listed issues.10.Commodities Products used for commerce that are traded on a separate. Complete Fill When an order trades all of its specified volume. Consolidated Short Position Report A consolidated report that includes the total shares short (as of the trade date) and the net change from the previous report.bonds. authorized commodities exchange. Commodities are the basis for futures contracts traded on these exchanges. Non-clearing firms may report through the firm that is responsible for their clearing. Commodities include agricultural products and natural resources such as timber. a CLA consists of the Toronto Stock Exchange listing agreement and the company's prospectus. Conditional Listing Application (CLA) When a company applies to list on Toronto Stock Exchange. The conversion usually occurs at the option of the holder of the securities.

and 5:00 p. The owner of shares purchased cum dividend is entitled to an upcoming already-declared dividend. CDS INC. Day Order An order that is valid only for the day it is entered. a subsidiary of CDS. The opposite of this is ex rights. CUSIP CUSIP © (Committee on Uniform Security Identification Procedures) is a standard system of securities identification and securities description. Cyclical Stock A stock of a company in an industry sector that is particularly sensitive to swings in economic conditions. Cum Dividend With dividend. it will be purged overnight. A debenture is unsecured and . With some approved exceptions. Cum-Dividend/Distribution Date The trading day before the ex-dividend/distribution (ex-d) date. Dd Daily Price Limit The maximum price advance or decline permitted for a futures contract in one trading session compared to the previous day's settlement price. The owner of shares purchased cum rights is entitled to forthcoming. already-declared rights. Crossing Session After the close of the regular trading day. ET at the last sale price of the stock. crosses can only occur within the current bid and ask for the stock. acts as liaison between Standard & Poor's (S&P) and the issuing companies for the assignment of CUSIP numbers and descriptions. If the order is still outstanding when the market closes. Debenture A long-term debt instrument issued by corporations or governments that is backed only by the integrity of the borrower.. A CUSIP number uniquely identifies a Canadian or American security issue and its issuer. crosses can be executed between 4:10 p. not by collateral.m. As a service bureau to the Canadian financial industry. The opposite of this is ex dividend.volume. which is used in electronic processing and recording of securities transactions in North America. It is the last day on which the securities can be traded and on which the buyer is entitled to the dividend/distribution.m. Cum Rights With rights.

the company is bankrupt. Delivery The tender and receipt of the underlying commodity or the payment or receipt of cash in the settlement of an open futures contract. or the company has failed to comply with the terms of its listing agreement. $101. It equals price multiplied by volume divided by 100. $99. Delisted Issue The status of a security that is no longer listed on the Exchange. Delist The removal of a security's listing on a stock exchange.1) indicates that the debt instrument has traded at a premium. Debt Value The total dollar value of volume traded on one side of the transaction for a specified period. A debt instrument trading at par would have a price of $100.1) indicates that the debt instrument has traded at a discount. . Delayed Delivery Order A special term order in which there is a clear understanding between the buying and selling parties that the delivery of the securities will be delayed beyond the usual threeday settlement period to the date specified in the order. Delisted Issuer An issuer whose securities are no longer listed on Toronto Stock Exchange or TSX Venture Exchange. A debenture is unsecured in that there are no liens or pledges on specific assets. This is done when the security no longer exists.subordinate to secured debt. A price below face value (for example. A price above face value (for example. Debt Volume The number of debt instruments traded on one side of the transaction for a specified period multiplied by the face value of the debt instrument. The security could trade on another market. A listed issuer is delisted when the last listed security of the issuer is delisted. Debt Price The price paid per $100 of a debt instrument's face value traded. the public distribution of the security has dropped to an unacceptably low level. Defensive Stock A stock purchased from a company that has maintained a record of stable earnings and continuous dividend payments through periods of economic downturn.

payable date. and funds.00 equals 2%. It is generally paid to security holders of trusts. The exchange that the issue is listed on sets the exdividend/distribution (ex-d) date for entitlement. quarterly. . semi-annually. Diversification Limiting investment risk by purchasing different types of securities from different companies representing different sectors of the economy. Distribution The portion of the issuer's equity paid directly to the security holders. Discretionary Account A securities account created when a client gives a partner. or annually). Demand is determined by income and by price. Dividend The portion of the issuer's equity paid directly to shareholders. Delta values have a range of 0 to 1. which are. An issuer is under no legal obligation to pay either preferred or common dividends. Deep in-the-money options have deltas that approach 1. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement.Delivery Month The calendar month in which a futures contract may be satisfied by making or taking delivery. It is generally paid on common or preferred shares. frequency (monthly. or annually). director or qualified portfolio manager of a Participating Organization specific written authorization to select securities and execute trades on the client's behalf. semi-annually.00. frequency (monthly. Dividend Reinvestment Plan A means of reinvesting dividends. and record date. determined by supply. quarterly. The issuer or its representative provides the amount. $1 divided by $50. Delta A ratio that measures an option's price movement compared to the underlying interest's price movement. in additional stock of the company. and record date. which would otherwise be paid to the shareholder in cash. Demand The combined desire. Dividend Yield Equal to the indicated annual dividend rate per share divided by the security's price. payable date. For example. if the indicated dividend rate is $1. The issuer or its representative provides the amount. partnerships.00 and the closing price is $50. in part. ability and willingness on the part of consumers to buy goods or services.

Ee Energy or Royalty Trust Investment vehicles that may engage in the development. Equity Financing The dollar value of securities issued in accordance with a TSX or TSX Venture Exchange approved transaction. The investor buys more shares when the price is low and buys fewer shares when the price is high. Conventional oil and gas royalty trusts are actively managed portfolios holding assets of mature producing properties. Downtick A trade is on a downtick when the last trade occurred at a price lower than the previous one. compared with purchasing a constant number of shares at set intervals. is passed on to the unit holders as royalty income. The distributions are highly dependent upon the cash flow generated by the trust. net cash flow) and then sells interests in the trust (called trust units) to investors. but are usually subject to restrictions on the amount. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. Dow Jones Industrial Average (DJIA) An average made up of 30 actively traded stocks. Dividend/Distribution Record Date The date on which a security holder must be registered as a holder of an issue to receive the dividend/distribution. net of certain deductions. In general. The DJIA is one of the most widely quoted stock market averages in the media. The value equals the number of securities multiplied by the . which represent a share in the ownership of a company. Dollar Cost Averaging Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time. the largest variable in determining the level of cash flow is the price of crude oil and natural gas.Dividend/Distribution Payable Date The date set by the issuer on which the dividend/distribution will be paid. Dollar cost averaging results in a lower average cost per share. Equities Common and preferred stocks. The trust receives royalty income from producing properties (essentially. acquisition. and/or production of oil and gas reserves. Royalty trusts provide an alternative (from owning the shares of individual companies) for investors to participate in the oil and gas sector. such as administrative expenses and management fees. Capital expenses may also be deducted. Substantially all of the cash flow generated by the oil and gas assets.

Ex Dividend The holder of shares purchased ex dividend is not entitled to an upcoming alreadydeclared dividend. The various forms of financial instruments may have an effect on determining the price or the number of securities. Ex Right The holder of shares purchased ex rights is not entitled to already-declared rights.offering price. Equity Volume The total number of shares traded on one side of the transaction. Exchange Offering Prospectus (EOP) A form of prospectus that allows a company to conduct a prospectus offering through the facilities of a stock exchange. Exchangeable Security A security of an issuer that is exchangeable for securities of another issuer (usually a subsidiary) in accordance with the terms of the exchange feature. because they are subject to an escrow agreement that restricts the ability of certain security holders of that issuer from trading or otherwise dealing in those securities until certain conditions are satisfied. but is entitled to future rights issues. The company then applies to list the securities on the exchange. The exchange may be at the option of the holder or at the option of the issuer of the securities. rather than issuing them directly to the public. Equity Price The price per share traded. Equity Value The total dollar value of volume traded on one side of the transaction for a specified period. but is entitled to future dividends. It equals price multiplied by volume. Escrowed Securities The outstanding securities of an issuer that are not freely tradable. European-Style Option Options that can be exercised only on their expiration date. Equity Option An option contract that grants the holder the right to buy or sell a specific number of shares of stock at a specified price during a specific period of time. Exchange-Traded Fund (ETF) A special type of financial trust that allows an investor to buy an entire basket of stocks .

Extra dividends/distributions are sometimes referred to as special dividends/distributions. Expiration Date The date at which an option contract expires. It is the amount of money that the holder of a debt instrument receives back from the issuer on the debt instrument's maturity date. Filing statements are not used for the purposes of a financing. Also known as an index participation unit (IPU). This means that the option can't be exercised after that date. Ex-D Date Ex-dividend/distribution date. which tracks and matches the returns of a stock market index. it may be paid in securities or cash and the amount. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement. Extra Dividend / Distribution A dividend/distribution paid in addition to the regularly established dividend/distribution of the issuer. The date that the buyer of a stock is not entitled to the upcoming declared dividend/distribution. Face value is also referred to as par value or principal. Fill or Kill (FOK) Order A tradable limit order marked "FOK" will trade as much stock as possible upon entry. because the buyer will not be a holder of record. . Exercise The act of an option holder who chooses to take delivery (calls) or make delivery (puts) of the underlying interest against payment of the exercise price. and record date are established by the issuer. payable date. ETFs are considered to be a special type of index mutual fund. but they are listed on an exchange and trade like a stock. Like all dividends/distributions. The exchange that the issue is listed on sets the ex-d date. but will immediately cancel or kill any unfilled volume. Filing Statement A disclosure document submitted by a listed company to outline material changes in its affairs. Ff Face Value The cash denomination of the individual debt instrument. This status is generally reserved for senior listed issuers. The ex-d date is two clearing days before the record date.through a single security. Exempt Issuer A listed issuer that has satisfied listing requirements as outlined in Section 502 of the Listing Requirements Manual. An exempt issuer is not subject to special reporting rules.

industry. The four levels are: sector. The price is determined by the policies of the TSX Company Manual or TSX Venture Corporate Finance Manual. such as a prime rate. jointly launched GICS in 1999. choosing a weekly or monthly perspective when looking at several years of data makes it easier to identify long-term trends. Frequency Frequency refers to the given time period on an intraday. two providers of global indices. daily. This term refers to a TSX Group Historical Performance charting feature. monthly. the QMV is based on float shares. "5-Minute". industry group. Gg GICS The Global Industry Classification Standard (GICS®) is a consistent set of global economic sector and industry definitions. "15-Minute" and "Hourly" frequency are used for intraday charts and the remaining choices are applicable to end-of-day charts. Daily charts are useful for active traders and short-term time period charts. . Floating Rate Security A security whose interest rate or dividend changes with specified market indicators. as defined by the Standard & Poor's index methodology. not on total outstanding shares. Futures Contracts to buy or sell securities at a future date. quarterly or yearly perspective. Standard & Poor's and Morgan Stanley Capital International (MSCI). The "Daily".Float Quoted Market Value (QMV) The last price multiplied by the number of outstanding shares. triggered when an order violates parameters set by TSX. It can be an initial public offering (IPO). Float shares are total outstanding shares less any control block position. For the S&P/TSX index. Front Month The closest month to expiration for a futures or option contract. "1-Minute". the price is not adjusted for the value of the flow-through tax benefit available to the security holder. Flow-Through Shares Financing The dollar value of flow-through shares issued in accordance with a TSX or TSX Venture Exchange approved transaction. and sub-industry. GICS is a four-level classification system. weekly. secondary offering. Freeze An interruption in trading on a stock. A floating rate is one that is based on an administered rate. or private placement. GICS are used to classify the constituents of many indices worldwide. Typically.

which means that the registered owner has endorsed it. the certificate must be surrendered on good delivery by the seller. This type of order is also referred to as an open order. To settle a sale. Guaranteed Investment Certificate (GIC) A deposit instrument most commonly available from trust companies or banks requiring a minimum investment at a predetermined rate of interest for a stated term. HSDF High Speed Data Feed is a real-time broadcast of market data related to Toronto Stock Exchange and TSX Venture Exchange markets. whichever happens first. which may be imposed by the Exchange. Growth Stock The shares of companies that have enjoyed better-than-average growth over recent years and are expected to continue their climb. Good-Till-Date (GTD) Order A GTD order will remain in the system until it is either filled or until the date specified. its agent (Market Regulation Services Inc. Hedge A strategy used to limit investment loss by making a transaction that offsets an existing position. Good-Till-Cancelled (GTC) Order A GTC order will remain in the system until the date that it is filled or until a maximum of 90 calendar days from date of entry. Hh Halted Issue A temporary stoppage of trading of the listed securities of an issuer. or voluntarily requested by the issuer. A Participating Organization can cancel a GTC order at any time. such as one or five years. at which time it is automatically cancelled by the system. Usually an issuer's listed securities are halted pending a public announcement of material information about the issuer.Good Delivery The term used to describe a security that is in proper form to transfer title. A certificate that bears a share transfer restriction will not constitute good delivery. . A Participating Organization can cancel a GTD order at any time. (RS)). GICs are generally non-redeemable and non-transferable before maturity. This is another kind of open order. but the Exchange or RS may also impose a halt if the issuer is not in compliance with Exchange requirements or if the Exchange determines that it is in the public interest to do so.

fixed income-like instrument consisting of a subordinated debt security and a share of common stock packaged together to form a tax-efficient delivery mechanism to distribute an issuer's free cash flow to its investors. pipeline. The time from posting for trading to closing is generally within a week. an income trust is structured to distribute cash flows. companies. There are four categories of income trusts: business trusts. and power. high-yield returns to U.S. Income Stock A security with a solid record of dividend payments and which offers a dividend yield higher than the average common stock. Income Participating Security (IPS) See Income Deposit Security (IDS). Also known as income participating securities (IPS). and Canadian investors in U.S. which carries on an active business. sustainable. The trust structure is typically utilized by mature. IDSs do not use the trust structure. The term is used only for listing of new securities. energy trusts.providing steady. or an additional listing of existing listed securities. typically on a monthly basis. Settlement occurs on the closing of the prospectus. Income trusts are trusts structured to own debt and equity of an underlying entity. or has royalty revenues generated by the assets of an active business. cash-generating businesses that require a limited amount of maintenance capital expenditures. and utility trusts. Improving the Market An order that either raises the bid price or lowers the offering price is said to be improving the market. and trading takes place before the closing (formal original issuance) of the prospectus. Also known as the "grey market". real estate investment trusts (REITs). either on a listing of a new issuer. The structure was created for U.-based companies to replicate the economic attributes of the Canadian income trust structure . Income Deposit Security (IDS) An exchange-traded. from those businesses to unit holders in a tax-efficient manner. Income Trust Also called income funds.S. The market improves because the spread between the bid and offer decreases. As & When Issued Trading Occurs when new securities are posted for trading. a supplemental listing. By owning securities or assets of an underlying business. Investors are paid dividends from the common share component and interest from the subordinated debt.Ii If. . An income trust is an exchangetraded equity investment that is similar to a common share. stable.

Examples are the S&P/TSX Composite Index and the S&P/TSX Venture Composite Index. Initial Public Offering (IPO) A company's first issue of shares to the general public. the IAD is obtained by adding the dividend/distribution amounts paid in the last 12-month period. The ICCP is calculated without reference to volatility parameters. then the indicated rate is $0.04 X 4 or $0.04 quarterly. usually measured by the percentage change in the Consumer Price Index. and those who are presumed to have access to inside information concerning the company.16. if an issuer pays $0. Indicated annual dividend/distribution is also referred to as indicated rate. a TSX electronic call market facility. Indicated Annual Dividend/Distribution For an issue with a committed dividend/distribution policy. Index Participation Unit (IPU) See Exchange-Traded Fund (ETF). Inside Information Non-public information pertaining to the business affairs of a corporation that could affect the company's share price should the information be made public. the indicated annual dividend/distribution (IAD) equals the most recent dividend/distribution multiplied by the payment frequency. An insider is also anyone owning more than 10% of the voting shares of a company. based on the performance of stocks. The ICCP for each MOC security will be broadcast to the trading community at 3:50 PM ET on each trading Insider All directors and senior officers of a company.Index A statistical measure of the state of the stock market. In the case of issuers with no committed policy. The ICCP for all MOC securities will be included in the MOC Imbalance Report that is made available on tmxmoney. The first type occurs when insiders trade in the . Indicative Calculated Closing Price (ICCP) A feature of Market On Close (MOC). Insider Trading There are two types of insider trading. the Indicative Calculated Closing Price (ICCP) provides a preliminary indication of what the calculated closing price for a MOC security would be assuming the regular trading session had ended at the time of calculation. For example. A key objective of broadcasting the ICCP is to provide market participants with an early indication of potentially large price movements at the close. Inflation An overall increase in prices for goods and services. 10 minutes prior to the actual Market On Close execution.

Investment The purchase or ownership of a security in order to earn income. In-the-money is a term used when the intrinsic value is positive. antiques and real estate. The ISG promotes effective market surveillance among international exchanges and RS involvement helps ensure they are continually in touch with other regulators and part of the development of international best practices. The other type of insider trading is when anyone trades securities based on material information that is not public knowledge. Intermarket Surveillance Group (ISG) An international committee comprised of members from 31 exchanges around the world.S. Investment Counsellor A specialist in the investment industry paid by fee to provide advice and research to investors with large accounts. interlisted is defined as any issue listed on TSX or TSX Venture Exchange and also listed on a U. Membership in the ISG allows all members to share surveillance and investigative information to ensure that each regulator has access to the necessary information to effectively regulate its marketplace. Investments may also include artwork. including every major stock exchange. Interlisted For TSX reporting purposes.stock of their company. exchange or NASDAQ. followed by a nine-character alphanumeric security identifier (assigned by a national security numbering agency). Intrinsic Value The difference between the current market value of the underlying interest and the strike price of an option. pre-opening expenses and leaseholds. Investment capital usually consists of inventory. Insiders must report these transactions to the appropriate securities commissions. It consists of a twocharacter alphabetic country code specified in ISO 6166. Investment Capital Initial investment capital necessary for starting a business. Investment Advisor A person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products. . equipment. This type of insider trading is illegal. International Securities Identification Number (ISIN) The international standard that is used to uniquely identify securities. capital or both. and then an ISIN check-digit.

income from derivative investment strategies. Investment Fund A closed-end fund that offers investors the ability to buy a security that represents a portfolio of investments with a specific investment strategy. Some examples are: funds of income funds. combining finance. trading and research departments. In that case. These funds are not directly related to an operating business. to provide investors with accurate information about a company's performance and prospects. Issued shares refer to the portion of a company's shares that have been issued for sale. These products use funds raised through a public offering to invest in a portfolio of securities. interest payments. marketing and communications. suspended. or delisted from trading.Investment Dealer Securities firms that employ investment advisors to work with retail and institutional clients. Investor Relations A corporate function. IPO Financing The dollar value of initial public offering (IPO) securities issued in accordance with a TSX or TSX Venture Exchange approved transaction. and commodity funds. Investment Dealers Association of Canada (IDA) The national self-regulatory organization of the securities industry. under certain corporate statutes in Canada. A company does not have to issue the total number of its authorized shares. Issue Any of a company's securities or the act of distributing the securities. However. . the securities are issued but are not outstanding. It is the stated prospectus price multiplied by "the number of securities issued under the IPO plus the over allotment". Issued and Outstanding Securities Commonly refers to the situation where the number of issued securities equals the number of outstanding securities. Issue Status The trading status of a class or series of an issuer's listed securities. typically through a combination of dividends. which are actively managed to create income streams for investors. such that a class or series of listed securities of an issuer may be halted. the number of issued securities does not equal the number of outstanding securities. an issuer may have issued securities and then repurchased those securities without cancelling them. senior loan funds. mortgage-backed security funds. capital gains. Investment dealers have underwriting. and in some cases. The Association's role is to foster efficient capital markets by encouraging participation in the savings and investment process and by ensuring the integrity of the marketplace. As a result.

and the minimum price they are willing to accept as a seller. If the MOC closing price acceptance parameters are exceeded. for execution. it equals the last board lot sale price of the security on the exchange in the regular trading session. Long-term liabilities are those payable after one year. Liquidating Order An order to close out an existing open futures or options contract. . a larger organization which is a member of the exchange. Limit Order An order to buy or sell stock at a specified price. and trading. Instead. investment dealer A gives its orders to investment dealer B. Liabilities are found on a company's balance sheet or an individual's net worth statement. Investment dealer A pays a reduced percentage of the normal commission. A limit order sets the maximum price the client is willing to pay as a buyer. For any other listed security. Junior Corporation A young company in the early stages of operations and growth. Liabilities The debts and obligations of a company or an individual.Issuer Status The trading status of a listed or formerly listed issuer. suspended. Last Trading Day The last day on which a futures or option contract may be traded. Issuer status types include: delisted. Current liabilities are debts due and payable within one year. the last sale price equals the calculated closing price. For example. The order can be executed only at the specified price or better. listed. A liquidating order involves the sale of a contract that has been purchased or purchase of a contract that has been sold. investment dealer A is a small firm whose volume of business is not sufficient to maintain a trader on the exchange. in the regular trading session. the last sale price equals the last board lot sale price of the security on the exchange. Jj Jitney Order The execution and clearing of orders by one member of a stock exchange for the account of another member. Ll Last Sale Price For a Market On Close (MOC)-eligible security.

Market The place where buyers and sellers meet to exchange goods and services. Listing Application The document that an issuer completes and submits to an exchange when it applies to list its shares on the exchange. Liquidity also refers to how easily investors can convert their securities into cash and to a corporation's cash position. A client needs to deposit a margin amount with the balance advanced by the investment dealer against collateral such as investments. For example. Market Capitalization The number of issued and outstanding securities listed for trading for an individual issue multiplied by the board lot trading price. Listed Stock Shares of an issuer that are traded on a stock exchange. a bid price. which means the client must deposit more money or securities if the value of the account falls below a certain level. or if applicable.Liquidity This refers to how easily securities can be bought or sold in the market. The investment dealer also charges the client interest on the money borrowed to buy the securities. Long A term that refers to ownership of securities. Liquidity is one of the most important characteristics of a good market. Should a trading price not be available. if you are long 100 shares of XYZ. The investment dealer can make a margin call. this means that you own 100 shares of XYZ company. which is how much the value of the corporation's current assets exceeds current liabilities. If the client does not meet the margin call. It also represents the actual or potential demand for a product or service. Mm Margin Account A client account that uses credit from the investment dealer to buy a security. Issuers pay fees to the exchange to be listed and must abide by the rules and regulations set out by the exchange to maintain listing privileges. A security is liquid when there are enough units outstanding for large transactions to occur without a substantial change in price. the price for an issue of the same issuer . The issuer must disclose its activities. management and finances in the application. the dealer can sell the securities in the margin account at a possible loss to cover the balance owed. Listed Issuer An issuer that has at least one class of securities listed on Toronto Stock Exchange or TSX Venture Exchange. a price on another market. plans.

Market On Close (MOC) A TSX electronic call market facility. At the close.000 shares . MOC accepts confidential market orders from before the open and throughout the trading session. at a calculated closing price (which assures the most matches closest to the last sale price). Market-by-Price® A real-time data feed that puts the order book directly on the customer's screen. This information product shows the committed. Ten minutes before the close of the trading session. MOC publicly broadcasts an imbalance of buy and sell MOC market orders and asks for limit MOC orders to offset the imbalance. Escrowed shares are excluded from TSX Venture market capitalization. Market Maker A trader employed by a securities firm who is required to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities up to a specified minimum guaranteed fill.which the first issue is convertible into. Member See Participating Organizations (POs) and Members Minimum Fill Order A special term order with a minimum fill condition will only begin to trade if its first fill has the required minimum number of shares. Market Order An order to buy or sell stock immediately at the best current price. tradable volume of the top 5 bids and asks for each Toronto Stock Exchange or TSX Venture Exchange-listed stock. which establishes the closing price for certain TSX-listed securities. a listed issuer must issue a news release and report to the applicable self-regulatory organization as soon as a material change occurs. MOC matches orders. Twenty minutes before the close of the trading session. Total market capitalization for a market is obtained by adding together all individual issue market capitalizations (warrants and rights excluded). from the MOC and continuous market books. such as a change in the nature of the business or control of the issuer. For example. Under the principle of continuous disclosure. may be used. maintaining them in time priority. and allocates the fills according to price and time priority. Material Change A change in an issuer's affairs that could have a significant effect on the market value of its securities. MOC publicly broadcasts an Indicative Calculated Closing Price (ICCP) that provides market participants with an indication of what the calculated closing price would be assuming the regular trading session had ended at that time (see Indicative Calculated Closing Price for more details). Market makers for the stock of issuers listed on Toronto Stock Exchange are referred to as Registered Traders. an order to buy 5.

with a minimum volume of 2,000 shares can only trade if 2,000 or more shares become available. Minimum Guaranteed Fill (MGF) Orders These orders are guaranteed a complete fill upon entry. A Registered Trader will provide the stock should the book be below the required limit. To be eligible for MGF, an order has to be a tradable client order with a volume less than or equal to the MGF size, which varies from stock to stock. Minimum Price Fluctuation The minimum price change or tick on a futures contract. Mixed Lot or Broken Lot An order with a volume that combines any number of board lots and an odd lot. Money Market Part of the capital market established to buy and sell short-term financial obligations. These include federal government treasury bills, short-term Government of Canada bonds, commercial paper, bankers' acceptances and guaranteed investment certificates. Longer-term securities are also traded in the money market when their term shortens to three years. Multijurisdictional Disclosure System (MJDS) A disclosure system that facilitates certain Canadian-U.S. cross-border securities offerings, issuer bids and takeover bids. It is intended to reduce costly duplication of disclosure requirements and other filings when issuers from one country register securities offerings in the other. Under the rules, eligible cross-border offerings are governed by the disclosure requirements of the issuer's home country. Must-Be-Filled (MBF) Order Orders placed before the market opens to buy or sell shares of stocks when their options expire. These orders are guaranteed a complete fill at the opening price to offset expiring options. They must be ordered between 4:15 p.m. and 5:00 p.m. on the Thursday before the third Friday of each month. Mutual Fund A fund managed by an expert who invests in stocks, bonds, options, money market instruments or other securities. Mutual fund units can be purchased through brokers or, in some cases, directly from the mutual fund company.

Naked Writer A seller of an option contract who does not own a position in the underlying security.

Net Change The difference between the previous day's closing price and the last traded price. Net Worth The difference between a company's or individual's total assets and its total liabilities. Also known as shareholders' equity for a company. New Issue A stock or bond issue sold by a company for the first time. Proceeds may be used to retire the company's outstanding securities, or be used for a new plant, equipment or additional working capital. New debt issues are also offered by governments. New Issuer Listing Occurs concurrently with the posting of the new issuer's securities for trading. The preconditions for listing include the acceptance by the Exchange that all listing requirements and conditions have been satisfied. The effective listing date is the date when the listed securities open for trading. New Issuer Listing - Application An issuer whose application for listing was based on the TSX listing application or the TSX Venture Exchange listing application form. These applications in themselves provide prospectus-level disclosure; however, often the listing application is accompanied by an offering document or a prospectus. New Issuer Listing - Graduate An issuer, previously listed on TSX Venture Exchange (including NEX), that applied for and was approved for listing on TSX. The issuer's security would be delisted from TSX Venture Exchange and listed on TSX at the same time, permitting continuous listing of the securities on contiguous exchanges. New Issuer Listing - IPO (Initial Public Offering) An IPO (initial public offering) is an issuer's first offering of its securities made to the public in accordance with a prospectus. The offering is often made in conjunction with an issuer's initial application for listing on an exchange. New Issuer Listing - Plan of Arrangement An issuer listing as a result of a plan of arrangement. A plan of arrangement is a form of corporate reorganization that must be approved by a court and by the corporation's shareholders or others affected by the proposed arrangement, all as prescribed by corporate legislation. A plan of arrangement can take various forms, including:
• • •

An amalgamation of two or more corporations A division of the business of the corporation A transfer of all or substantially all of the property of the corporation to another corporation

• • • •

An exchange of securities of the corporation held by security holders of the corporation for other securities, money, or other property that is not a takeover bid A liquidation or dissolution of the corporation A compromise between the corporation and its creditors or holders of its debt Any combination of the foregoing.

New Issuer Listing - Spin-Off A reorganization that usually results in a newly listed issuer acquiring a business division or assets as its principal operating asset from another issuer (the reorganized issuer), with security holders of the reorganized issuer holding securities in both issuers, following completion of the reorganization. New Issuer Listing - Transfer An issuer previously listed on TSX that applied for and was approved for listing on TSX Venture Exchange. The issuer's security would be delisted from TSX and listed on TSX Venture Exchange at the same time, permitting continuous listing of the securities on contiguous exchanges. New Listing A security issue that is newly added to the list of tradable security issues of an exchange. It is accompanied with a new listing date. NEX A separate board of TSX Venture Exchange. NEX was launched by TSX Group, effective August 18, 2003, to trade as an open, continuous auction market, on the same TSX Venture trading engine, and to be governed by identical trading rules. NEX provides a trading forum for issuers that have fallen below TSX Venture's continuing listing requirements. They are identified with an extension of "H" added to their stock symbol. Non-Certificated Issues An issue that is recorded on the transfer agent's electronic book rather than being held as a physical note. Non-Client Order An order from a Participating Organization or an order a firm is executing on behalf of an institution, such as a mutual fund. An "N" denotes a non-client order in the book. Non-Exempt Issuer A listed issuer that is subject to special reporting rules. Non-Net Order A special-term order when there is a clear understanding between the buying and selling parties that they will settle the trade directly with each other.

One-Sided Market A market that has only buy orders or only sell orders booked for a particular security. it is the replacement for the 1987 Standard Industrial Classification (SIC) codes. an odd lot would be 99 or fewer shares. An on-stop order becomes a limit order once a trade at the trigger price has occurred. . It was developed by the Economic Classification Policy Committee (ECPC) on behalf of the U. which is the regular trading unit decided upon by the particular stock exchange. Office of Management and Budget (OMB). Launched in 1997. North American Industry Classification System (NAICS) A system for classifying business establishments. An odd lot is also an amount that is less than the par value of one trading unit on the over-the-counter market. For example. Offset To liquidate or close out an open futures or option contract. Oo Odd Lot A number of shares that are less than a board lot.Non-Resident Order A special term order when one or more participants in the trade is not a Canadian resident. Open Order An order that remains in the system for more than a day. Open Interest The net open positions of a futures or option contract. Ontario Securities Commission The government agency that administers the Securities Act (Ontario) and the Commodity Futures Act (Ontario) and regulates securities and listed futures contract transactions in Ontario. Offer See Ask. if a board lot is 100 shares. See Good-Till-Cancelled or Good-Till-Date. in cooperation with Statistics Canada and Mexico's Instituto Nacional de Estadistica. On-Stop (O/S) Order A special-term order placed with the intention of trading at a later date when the price of the stock reaches the specified stop price. Geografia e Informatica (INEGI) to provide comparable statistics across the three countries.S.

and a call option gives the holder the right to buy the security. Order Number An eight or nine-digit number assigned to every order entered into the system. Option Class All options of the same type. Option Type A call or put contract. Original Listing/Initial Listing A listing is designated as an original listing on TSX or initial listing on TSX Venture Exchange. determined at the close of each business day. It pays applicable listing fees. that have the same underlying security. to buy or sell certain securities at a specified price within a specified time. Opening The market opens at 9:30 a. either calls or puts. before the contract expires. A put option gives the holder the right to sell the security. Option Writer The seller of an option contract who may be required to deliver (call option) or to purchase (put option) the underlying interest covered by the option. Option Series An individual option contract for a given security. if it satisfies the following three conditions: • • • It meets listing requirements. Option Holder The buyer of an option contract who has the right to exercise the option during its lifetime. Option The right. but not the obligation. Option Cycle A set pattern of months when a class of options expires. .Open-End Investment Fund An investment fund that continuously offers its securities to investors and stands ready to redeem its securities at all times. ET each business day.m. It is described in the exchange bulletin as an original listing by TSX or a new listing by TSX Venture Exchange. Examples of an open-end fund are traditional mutual funds and exchange-traded funds (ETFs). Transactions in shares/units of mutual funds are based on their net asset value (NAV).

and assisting companies in the initial public offering (IPO) process.00 a share. Partial Fill An order receives a partial fill when it trades only part of its total committed volume. provided such trades are reported within a specific time frame to the Exchange for public dissemination of the transaction. An OTC market is also known as an unlisted market. which permits a trade to be executed off the Exchange.4 (e). However. A portfolio may include various types of securities representing different companies and industry sectors. are traded over-the-counter in Canada. if one or both Participating Organization/Member client accounts are outside of Canada. Portfolio Holdings of securities by an individual or institution. Position Limit The maximum number of futures or options contracts any individual or group of people acting together may hold at one time. Almost all bonds and debentures. Participating Organizations (POs) and Members of TSX Firms that are entitled to trade through the facilities of TSX. becoming its own publicly traded entity) OTC Foreign Trading OTC (over-the-counter) foreign trading refers to UMIR Rule 6. from an existing issuer. However. Participating Organizations (POs) and Members of TSX Venture Exchange Firms entitled to trade through the facilities of TSX Venture Exchange. as well as some stocks. only POs of TSX and Members of TSX Venture Exchange are permitted to act as sponsors for listed issuers or issuers proposing to be listed on TSX Venture Exchange.Typical examples of original/initial listings include: • • • An initial public offering (IPO) Transfer from another exchange A new entity created by a spin-off (such as a division. Pp Par Value A security's nominal face value. Penny Stock Low-priced speculative issues of stock selling at less than $1. only POs are also involved in all aspects of the securities business. . including underwriting new issues and other financings. Over-The-Counter (OTC) Market The market maintained by securities dealers for issues not listed on a stock exchange.

The composition of the financing could take the form of units comprised of multiple securities. a priority determines when one of these orders will be filled before any other at this price. Price-Earnings (P/E) Ratio A common stock's last closing market price per share divided by the latest reported 12month earnings per share. This ratio shows you how many times the actual or anticipated annual earnings a stock is trading at. Preferred Share A class of share capital that entitles the owner to a fixed dividend ahead of the issuer's common shares and to a stated dollar value per share in the event of liquidation. Pre-Opening Session A session from 7:00 a. They are investment vehicles that have underlying businesses that are utilities. power generation companies. or pipeline companies.m. unless a stated number of dividends have been omitted.m. Premium An option contract's price. Professional and Equivalent Real-Time Data Subscriptions The total number of professional accesses to real-time products of TSX and TSX Venture Exchange. The price is determined in accordance with the policies of the TSX Company Manual or TSX Venture Corporate Finance Manual. Private Placement Financing The dollar value of privately placed securities issued in accordance with a TSX or TSX Venture Exchange approved transaction. Principal Trade A trade when a Participating Organization is either buying from. . Tradable orders will be queued until after 9:30 a. (ET) when orders can be entered into the Toronto Stock Exchange's systems. or selling to its client. See Best Efforts and Bought Deal Underwriting. Resale of the security is limited. when the market opens. Private Placement The private offering of a security to a small group of buyers. It usually does not have voting rights. Priority is based on the time at which the order is received into the system. to 9:30 a. Pipeline & Utility Trusts A type of income trust. Priority If there are several orders competing for a stock at the same price.m. as well as non-professional accesses that are priced the same or at a minimal discount to the professional access rate for the same product. The number of securities is the actual number issued.Power.

Profit What is left over for the owners of a business after all expenses have been deducted from revenues. Record Date Redeemable Security . Qq Quoted Market Value (QMV) Rr Rally A brisk rise in the general price level of the market or price of a stock. It must be prepared in accordance with provincial securities commission regulations. which otherwise is an illiquid market. apartments. such as shopping centres. Prospectus documents usually disclose pertinent information concerning the company's operations. without the holders having to surrender the old shares. a closed-end investment fund that trades on an exchange and uses the pooled capital of many investors to purchase and manage income properties. and industrial buildings. By taking advantage of the trust structure. Gross profit is the profit before corporate income taxes. Put Option A put option is a contract that gives the holder the right to sell a specified number of shares at a stated price within a fixed time period. Put options are purchased by those who think a stock may decline in price. individually or in conjunction with other persons. Real Estate Investment Trust (REIT) Typically. securities. Both the old and new shares have equal value. excluding shares held by persons who. REITs offer tax advantages (beyond traditional common equity investments) to investors and provide a liquid way to invest in real estate. Net profit is the final profit of the business after taxes have been paid. Equity REITs primarily own commercial real estate. management and purpose of the offering. Prospectus A legal document describing securities being offered for sale to the public. Public Float The number of issued and outstanding shares of a company. Push-Out A push-out occurs during a stock split when new shares are forwarded to the registered holders of old share certificates. hold 20% or more of the issuer's voting securities.

. or other form of reorganization. such that after completion of the transaction(s). with an accompanying change of control of the listed issuer. It is produced monthly for each TSX Group PO/Member. an amalgamation. Risk The future chance or probability of loss. Responsible Registered Trader The Registered Trader assigned by the Selection Committee to act as market maker in a security.A security that carries a condition giving the issuer a right to call in and retire that security at a certain price and for a certain period of time. maintaining minimum spread and ensuring orderly trading. The listing of securities of an issuer formed in accordance with an RTO/backdoor listing is treated as a new listing. The rights are only valid within a given time period. a plan of arrangement. subject to specified terms and conditions. Registered Traders A trader employed by a securities firm who is required to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities up to a specified minimum guaranteed fill. Retractable Security A security that features an option for the holder to require the issuer to redeem it. Revenue The total amount of funds generated by a business. Their duties include providing a minimum guaranteed fill. including a business or asset acquisition. the new security's holders will own more than 50% of the outstanding voting securities of the listed issuer. Reverse Takeover (RTO)/Backdoor Listing A transaction or series of transactions that includes a securities issuance made by a listed issuer to parties vending securities or other assets into the listed issuer (the new security's holders). Relative Position Report A TSX report that ranks each Participating Organization's/Member's trading activity relative to the total market and the other POs/Members. The price is usually less than the market price of the common shares on the day the rights are issued. A reverse takeover (RTO)/backdoor listing can be completed through various transactions. Rights A temporary privilege that lets shareholders purchase additional shares directly from the issuer at a stated price.

2001. but have not been added to the S&P/TSX 60 Index or the S&P/TSX MidCap Index. An investment dealer or brokerage buys a seat on the exchange and one employee is designated as the seat holder. and includes securities of 60 issuers balanced across ten economic sectors.Ss S&P/TSX 60 Capped Index Includes all of the constituents of the S&P/TSX 60 Index. S&P/TSX Venture Composite Index Launched December 10. . Inclusion in the S&P/TSX Composite is a prerequisite to inclusion in the S&P/TSX 60 Index. As Toronto Stock Exchange is now demutualized. The relative weight by market capitalization of any single index constituent is capped at 10%. S&P/TSX Capped Composite Index Includes all of the constituents of the S&P/TSX Composite Index. S&P/TSX SmallCap Index An index of smaller Canadian issuers that are included in the S&P/TSX Composite Index. and includes securities of 60 issuers balanced across ten economic sectors. It was formerly known as the TSE 300 Composite Index. S&P/TSX MidCap Index An index of mid-sized Canadian issuers that have been included in the S&P/TSX Composite Index but are not members of the S&P/TSX 60 Index. with weights adjusted for available share float. it is automatically added to the S&P/TSX SmallCap Index. it is the leading benchmark used to measure the price performance of the Canadian public venture capital equity market. with weights adjusted for available share float. senior equity market. S&P/TSX 60 Index An index of large. liquid. S&P/TSX Composite Index Comprises the majority of market capitalization for Canadian-based. Canadian issuers listed on Toronto Stock Exchange. Toronto Stock Exchange listed companies. Canadian. The relative weight by market capitalization of any single index constituent is capped at 10%. there are no longer seats on the exchange. This index does not have a fixed number of constituents. It is the leading benchmark used to measure the price performance of the broad. It is market capitalization weighted. When a new issuer qualifies to be included in the S&P/TSX Composite. Seat The traditional term for membership on a stock exchange. It is market capitalization weighted.

bonds. with co-operation from legal firms and stock exchanges. equitable and ethical practices in the securities industry. SEDAR* The System for Electronic Document Analysis and Retrieval. Self-Regulatory Organization An organization recognized by securities administrators as having powers to establish and enforce industry regulations to protect investors and to maintain fair. It is the stated prospectus price multiplied by the "number of securities issued under the offering plus the over allotment". This act is a set of laws and regulations that set down the rules under which securities may be issued or traded in that province. Settlement The process that follows a transaction when the seller delivers the security to the buyer and the buyer pays the seller for the security. Securities Commission Each province has a securities commission or administrator that oversees the provincial securities act. Seed Stock The shares or stock sold by a company to provide start-up capital before carrying out an initial public offering (IPO). SEDAR is an electronic filing system that allows listed companies to file prospectuses and continuous disclosure documents. Members include banks. Securities Transferable certificates of ownership of investment products such as notes. *SEDAR is a trademark of the Canadian Securities Administrators. Settlement Date The date when a securities buyer must pay for a purchase or a seller must deliver the . dealers and mutual fund companies. stocks. futures contracts and options. Securities Industry Association (SIA) The trade association representing more than 600 securities firms throughout Canada and the United States. The Canadian Securities Administrators. Canadian Depository for Securities Limited and the filing community developed it. brokers.Secondary Offering Financing The dollar value of secondary offering securities issued in accordance with a TSX or TSX Venture Exchange approved transaction. Examples include Toronto Stock Exchange and the Investment Dealers Association. Securities and Exchange Commission (SEC) The federal regulatory body for interstate securities transactions in the United States.

Split Shares Capital and preferred shares issued by a split-share shares and preferred shares. a cash order will be settled sooner than the usual three-day settlement period. Special Terms Orders which must trade under special conditions. A split-share corporation holds common shares of one or more companies. For example. The objective is to generate fixed. cumulative. Speculator Someone prepared to accept calculated risks in the marketplace for attractive potential returns. cover the outstanding short. Sponsor. which provides an opinion on the suitability of that issuer for listing or continued listing on TSX Venture Exchange. Spread The difference between the bid and the ask prices of a stock. Settlement Price The price used to determine the daily net gains or losses in the value of an open futures or options contract. TSX Venture Issuers A Participating Organization of TSX or a Member of TSX Venture Exchange that is qualified to carry out a due-diligence review of an issuer and prepare a sponsor report. and realize a profit from the difference. . preferential dividends for the holders of preferred shares and to enable the holders of the capital shares to participate in any capital appreciation (or depreciation) in the underlying common shares. Short selling is a trading strategy. Short sellers assume the risk that they will be able to buy the stock at a lower price. Share Certificate A paper certificate that represents the number of shares an investor owns.securities sold. Settlement must be made on or before the third business day following the transaction date in most cases. The corporation then issues two classes of shares . Short Selling The selling of a security that the seller does not own (naked or uncovered short) or has borrowed (covered short). Special Trading Session A session during which trading in a listed security is limited to the execution of transactions at a single price.

Stock Symbol Extension The character or characters that may follow the stock symbol to uniquely identify a listed security. float quoted market value of the index constituents and is calculated for all S&P/TSX indices. It is usually accompanied with a reason for deletion and the deletion date. they include: . Examples include the S&P/TSX Composite Index and the S&P/TSX Venture Composite Index. Stock Dividend/Distribution A dividend/distribution paid in securities of the same issue or a different issue of the same issuer or another issuer. extension and separator dots in between. Stock Symbol A one-character to three-character. Stock List Deletion A security issue that is removed or delisted from the list of tradable security issues of an exchange. which represents an issuer listed on Toronto Stock Exchange or TSX Venture Exchange. without the issuer receiving any consideration for the issue. in direct proportion to the amount of securities they own on the record date. It can be a single alphabetic character. their percentage ownership of the issuer does not change. BMO. Stock Price Index A statistical measure of the state of the stock market. For example. thus. The issuer or its representative provides the amount. SPIV is calculated at the end of the trading session for all S&P/TSX indices and throughout the trading session for certain S&P/TSX indices. alphabetic root symbol. payable date. The exchange that the issue is listed on sets the ex-dividend/distribution (exd) date for entitlement. Stock Split A corporate action that increases the number of securities issued and outstanding. based on the performance of certain stocks. Each security holder gets more securities. two alphabetic characters. SPIV is based on the aggregate. For example.Standing Committees Committees formed for the purpose of assisting in decision-making on an ongoing basis. Currently. and record date. Stock Index Futures Futures contracts which have a stock index as the underlying interest. A stock dividend/distribution can be used as a means to list a new issuer. a two-for-one stock split involves the issuance of two new securities for every old security.PR.U. Approval by security holders is required in many jurisdictions. Stock Price Index Value (SPIV) The number that is usually quoted as the value of an index. or a combination of two plus one characters with a maximum of eight characters for the stock symbol.

Supplemental also covers the additional listing of when-issued shares through a secondary offering of an issue that is already listed. rights. warrants. which provide innovative and flexible investment products designed to respond to modern investor needs. funds UN .class of shares DB .when issued WT .preferred R .special U. track an index.NEX market IR . V . and mutual fund partnerships. terms U.S. This makes the certificate easily transferable to a new owner.subscription receipts RT . ETFs. The subcategories under the structured products include: investment funds. Supplemental Listing A type of listing transaction. the portfolio can purchase a basket of securities.warrants Street Certificate These are certificates registered in the name of a securities firm rather than the owner of the security.units W . capital trusts.equity dividend H . Strike Price The price the owner of an option can purchase or sell the underlying security. or asset diversification. made after an issuer's original listing. Structured Products Closed-end or open-end investment funds.rights S .notes P . risk reduction.Capital Pool Company PR . NS. The purchases and sales are also known as calls and puts.installment receipts NO.• • • • • • • • • • • • • • • A-B . split share corporations. this involves the listing of preferred shares. Structured products allow investors to buy a single unit/share of a fund that represents an interest in the investment portfolio.debenture E . NT . or debentures. such as yield enhancement. Typically. Substitutional Listing A broad category of transactions that involves one security on the stock list being replaced by another security or securities.S. that involves the listing and posting for trading of a new issue of securities. or hold a specific type of security or portion of a security.U. . Based on the investment strategy.

A requested symbol is available for use if it is appropriate for the type of security and the issuer's voting structure. Tt Thin Market A market that occurs when there are comparatively few bids to buy or offers to sell. or the listed issuer is delisted. Tier Structure The TSX Venture Exchange market has two tiers where securities are listed and traded. it is displayed on an electronic ticker tape. Symbol Change A change in a listed issuer's stock symbol. The listed issuer remains suspended until trading privileges have been reinstated. The phrase may apply to a single security or to the entire stock market. Suspended Issuer An issuer whose trading privileges for a listed security or securities have been revoked by Toronto Stock Exchange or TSX Venture Exchange. A thin market in a particular stock may reflect lack of interest in that issue. or the issuer is delisted. price fluctuations between transactions are usually larger than when the market is liquid. It is a record of current trading activity on an exchange. one cent or five cents. Ticket Fee The administrative fee charged for each trade. . Suspended Issue The status of a listed security of an issuer whose trading privileges have been revoked by the Exchange. Depending on the stock price it could be a half-cent. or a limited supply of the stock. which may be required by the Exchange in the context of an issuer's reorganization or may be made at the request of the issuer. In a thin market. It is the stated prospectus price multiplied by the "number of securities issued under the supplemental listing plus the over allotment".Supplemental Listing Financing The dollar value of supplemental securities issued in accordance with a TSX or TSX Venture Exchange approved transaction. Tick Slang used for minimum spread. or both. All securities of the issuer remain suspended until trading privileges have been reinstated. Ticker Tape Each time a stock is bought and sold.

Tier 1 is for advanced companies with a certain level of net tangible assets and earnings. except that the TRIV is based on the aggregate. corporate actions and index information from TSX. Trading Issue The status of a listed security of an issuer whose trading privileges are active on the Exchange. Total Number of Shares The total number of issued and outstanding shares for the security. The additional options refer to end-of-day pricing data. TRIV is calculated only at the end of the trading session for all S&P/TSX indices. Time Value The difference between an option's premium and its intrinsic value. . This term refers to a TSX Group Historical Performance charting feature. "5-Minute". Timely Disclosure Policy This policy requires all listed companies to publicly disclose material information in a timely manner. "1-Minute". quotes. TL2 Toronto Level 2 (TL2) is a real-time service for senior equities that shows all of the committed orders and trades for each TSX listed security in real time. These options give you a choice of intraday pricing data ("Daily". usually due to the dissemination of news that might impact a stock's price. Total Return Index Value (TRIV) Similar to the stock price index value (SPIV). Toronto Stock Exchange Canada's national stock exchange. which serves the senior equity market. Trading Halt A trading halt is imposed by the exchange. Tier 2 is for more junior venture companies. "15-Minute" and "Hourly") options. float quoted market value of the index constituents (SPIV) plus their paid dividends/distributions. TL1 Toronto Level 1 (TL1) is a real-time service for listed senior equities that provides trades. Time Time refers to the time period you would like to see charted from the drop-down menu box labelled "Time".

Trading Number The unique. mining. Trading Session The period during which the Exchange is open for trading. The classification is done at the review of the original listing application or at a later review of . It includes special items. twelve-months earnings per share (TTM EPS). reported by TSX for listed issuers. addresses and number of shares held by its shareholders. is an annualized EPS Trailing Twelve Months Earnings Per Share (TTM EPS) Trailing. Trading Symbol See Stock Symbol. if any. from their latest annual financial statements and the latest subsequent interim financial statements. provided that all proper documentation is included. Mines and Oil & Gas Categories (IMO) The broad classification of issuers into an industrial. Transferable Security A security that can be transferred from one party holder to another without restrictions. Transfer Agent A trust company appointed by a listed company to keep a record of the names. Transactions As reported in exchange trading statistics. such as extraordinary items or discontinued operations. TSX Industrial Category Includes all issuers that are not classified as mining or oil and gas. 3-digit number assigned to each Participating Organization and Member to identify it for market transparency. It indicates the issuer's annualized earnings for the latest financial reporting period. Transaction Date The date when the purchase or sale of a security takes place.Trading Issuer An issuer that has at least one class of securities whose trading privileges are active on Toronto Stock Exchange or TSX Venture Exchange. TSX Industrial. based on EPS as presented by the issuer. the transfer agent also distributes dividend cheques to the company's shareholders. represents the total number of trades for a specified period. It is also used to calculate the issuer's price/earnings (P/E) ratio that is reported on tmxmoney. or oil and gas category. Frequently.

.S. Uptick A stock is said to be on an uptick when the last trade occurred at a higher price than the one before it. foreign issuers. index or financial instrument that an option or futures contract is traded. TSX Oil & Gas Category Includes oil and gas companies that have proven and developed reserves and ongoing operations. TSX Marker for U. Non-U.S..the listed issuer. or Non-U.S. Mineral exploration and development issuers that have a planned work program of exploration or development. The classification determines which listing standard is to be applied to the issuer. TSX Mines Category Includes: • • Mining issuers that have proven or probable reserves and are either in production or have made a production decision. Uu Underlying Interest The specific security. The formal agreements for these transactions are called underwriting agreements. which serves the public. foreign issuer data is not broken down by country of incorporation. and non-U. but traded on the over-the-counter market. Underwriting The purchase for resale of a new issue of securities by an investment dealer or group of dealers who are also known as underwriters. . commodity. The data source is the original listing bulletin. TSX Venture Exchange Canada's national stock exchange. Unlisted A security not listed on a stock exchange. venture equity market. U.S.S. which includes a notation on the laws or jurisdiction the issuer was incorporated under. Foreign Incorporated Issuer A marker used by TSX to classify trading (including interlisted shares) and market capitalization by domestic.

calculated by dividing the total value by the total volume of securities traded for the relevant period. a VWAP cross may be executed outside the quote. on or during a trading day on the Exchange. When-Issued Trading Occurs when the security has been listed and posted for trading. This definition is generally used by listed issuers to price their shares. but the certificate representing the security itself is not yet issued and available for settlement. VWAP Volume-weighted. Where appropriate. VWAP Cross A transaction for the purpose of executing a trade at a volume-weighted average price of a security traded for a continuous period. VWAP crosses may be executed in the post open and special trading sessions. A warrant may be traded as a listed security or it may be held privately.Vv Venture Capital Money raised by companies to finance new ventures. The exchange bulletin issued on listing of the security indicates if the trading will be done on a when-issued basis. Volatility A statistical measure of changes in price over a period of time. Volume See Debt Volume and Equity Volume. A warrant is often issued in conjunction with another security as part of a financing. Warrants are not exercisable after the expiry date. Marked as a specialty-priced cross. In this case. will not set the last sale price. market value and shareholder distribution requirements for Tier 2 listing. and is not subject to interference by other orders on the book. the issuance of the security is guaranteed and the delay . Ww Warrant A security giving the holder the right to purchase securities at a stipulated price within a specified time limit. average trading price of the listed securities. Exercise of the warrant is solely at the discretion of the holder. TSX may exclude internal crosses and certain other special terms trades from the calculation. Venture Company A classification of TSX Venture Exchange-listed companies that are in the early stages of development and meet the minimum asset.

Writer The seller of an option. plus amortizing the difference between its current market price and par value over the life of the bond. Yy Yield This is the measure of the return on an investment and is shown as a percentage. lenders. listed investment funds. For example. these exchanges account for over 95% of world stock market capitalization. A PRIMER TO THE PRIMARY MARKETS BASIC CAPITALMARKET INSTRUMENTS 1 Stock or share An ordinary share represents the form of fractional ownership of a company in which a shareholder. etc. Together. A bond yield is a more complicated calculation. and is on the Federation's Board of Directors. the claim of the ordinary shareholder on the residual amount left comes last after all other stakeholders. World Federation of Exchanges (WFE) The World Federation of Exchanges (WFE) is a global trade association for the exchange industry. such as employees. Current day constituent data is broadcast before market open. a stock selling at $50 and with an annual dividend of $5 per share yields 10%. government.. If the business fails to succeed. 2 Preference share .in issuance is often due to factors relating to the printing and distribution of the security. and most of its exchange-traded futures. involving annual interest payments. creditors. The period for when-issued trading is usually less than one week. options. undertakes maximum entrepreneurial risk associated with the business venture. Xx XL1 Index Level 1 is a feed service that provides index and constituent data for the equity S&P/TSX indices. as a fractional owner. The writer has an obligation associated with the contract to either purchase or sell a specified number of shares at the strike price on or before expiry. Complete index and constituent data is delivered at end of day. preference shareholders.. A stock yield is calculated by dividing the annual dividend by the stock's current market price. and bonds. The membership is comprised of more than 50 regulated exchanges from all regions of the world. TSX is a member of WFE.

1956. A stock exchange in India operates with due recognition from the government under the Securities and Contracts (Regulations) Act. 5 Stock Exchange Stock Exchange is the place where buyers and sellers of stocks meet. Statutes & Regulatory Authorities 1 Security Contract Regulation Act (SCRA) It is a Law passed by Indian Government with a view to prevent undesirable transactions in securities by regulating the business of dealing therein. the stock exchange is an association of individual members called member brokers (or simply members or brokers). Usually dividend payable on preference shares if not paid. 3 Cumulative Convertible Preference Share (CCP) A Cumulative Convertible Preference share has two distinct features mainly the dividend is accumulated if not paid in a year and the Preference share is convertible into equity shares as per the terms of the issue of Preference shares. 3 Registrar of companies The Registrar of Companies is an authority under the Companies Act where all the companies have to register their Memorandum of association. The price (face value plus premium if any) is determined as per the conditions mentioned in the debentures. Hence. 4 Company Law Board (CLB) CLB is a statutory body appointed under the Companies Act. Also. but the company is required to pay interest to its other creditors. 2 Securities and Exchange Board of India (SEBI) SEBI was constituted in the year 1992 under the overall administrative control of Government of India (Ministry of Finance) for the regulation and orderly functioning of the stock exchanges and the securities industry to fully protect the rights of the investors. before dividend is distributed to equity shareholders. The member brokers are essentially the middlemen. 1956. This is because if a company is not making profit it is not liable to pay dividend to preference shareholders. by providing for certain other matters connected therewith. Some exchanges which are formed by limited companies may have brokers who are not . It administers various powers granted to it under the Companies Act for smooth functioning of the companies in the country. in the event of winding up of a company to the extent of principle value and unpaid dividend before making any payments to equity shareholders. The prices of the shares are decided by demand and supply of the shares. is accumulated and paid in subsequent years. Some exchanges are formed and managed by limited companies whose shareholders may be members of the exchange and thereby have license to offer brokerage services to members of public. this right is not like any other debt obligation. usually a debenture is required to be secured against the assets of a company. to prevent trading malpractice's and promote healthy growth of capital markets. 5 Convertible debenture A debenture which is convertible either optionally or compulsorily into equity shares at a later date (at the time of redemption or the period as specified in the conditions of the debentures) is called convertible debenture. or an amount calculated at a fixed rate. A debenture holder receives a fixed stream of interest. Preference shares are also redeemed.A preference share means a share. which carries a right for a dividend of a fixed amount. unlike the uncertain stream of dividends that a shareholder receives. etc. Payment of interest is a legal obligation on the part of the company. This act is called the Securities Contracts Regulation Act. who carry out the desired transactions in securities on behalf of the public (for a commission) or on their own behalf. However. formed for the express purpose of regulating and facilitating the buying and selling of securities by the public and institutions at large. The buyers and sellers are represented by the brokers. It extends to the whole of India. It was given a statutory status in 1992 under the SEBI Act. any mergers. 4 Debenture A debenture represents the smallest unit of public lending to a company. Articles of Association and all reports such as annual repots.

etc. A debenture holder receives a fixed stream of interest. then the scheme is called Income scheme.e. which conducts the business of lending and borrowing of money. Taxation 1 Capital Gain When an asset is bought. the claim of the ordinary shareholder on the residual amount left comes last after all other stakeholders. If the business fails to succeed. then the gains made are called short-term capital gains. an individual is a non resident Indian if he satisfies one of the following conditions. ICICI. HDFC. creditors. as per current Indian laws) are called long term capital gains.. An Asset Management Company (AMC) manages the pool of money. such as employees. These gains are clubbed with investor's ordinary income for tax purposes and charged normal tax rate as applicable. usually less than one year. As per that. or .He is in India in the previous year for a period of 182 days or more. 3 Mutual Fund A Mutual Fund is a collective savings scheme.. Currently the brokers have to be registered with Securities and Exchange Board of India in order to carry out his activities. real estate. usually a debenture is required to be secured against the assets of a company. Also. gold. For example if most of the money is likely to be invested in interest bearing securities. 2 Short -Term Capital gain When an equity investor buys a security and sells within a short period. Broker charges fees for his services. 5 Foreign Institutional Investor (FII) . lenders. A debenture represents the smallest unit of public lending to a company.He is in India for a period of 60 days or more during the previous year and 365 days or more during 4 year preceding the previous year. When an investor buys a capital asset i. The exact period for reckoning short term or long term gains depends on the accounting and taxation practices of respective countries. if the asset is held for more than the short-term period. E. preference shareholders.g. undertakes maximum entrepreneurial risk associated with the business venture. Payment of interest is a legal obligation on the part of the company. 4 Financial institution (FI) Financial institution is a financial intermediary. (one year in case of equity/debentures and if real estate then more than 3 years. Types of Investors 1 Indian Corporates & Non Corporate Entities An ordinary share represents the form of fractional ownership of a company in which a shareholder. 2 Non Resident Indian (NRI) The definition of Non Resident Indian is given in the Indian Income Tax Act. and it is likely to generate benefit for period longer than 1 year. as a fractional owner. securities.necessarily shareholders of the exchange company also 6 Broker A company or an individual who is a member of the stock exchange and acts as a middleman between the buyer and seller of securities in that market. etc the gains realized on selling are called capital gains. it is usually capitalized in books of accounts. The AMC usually come out with various schemes declaring the type of investment that will be undertaken on those funds. FIs are governed by the RBI and Ministry of Finance regulations. unlike the uncertain stream of dividends that a shareholder receives. . For Real estate consideration trade done within 3 years time is treated as short-term capital gain. stocks. government. IFCI. etc. This is called a Capital asset. 3 Long-Term Capital gains The gains realized in the buy-sell of an asset.

Asset Management Company.Foreign Institutional Investor means an institution or Pension Fund. After the share prices rise. where an NRI holds 60% or more of its share capital or beneficial interest. Types of Traders 1 Bull In market there are traders/investors who take position i. it also includes domestic asset management company or domestic portfolio manager who manages funds raised or collected or brought from outside India for investment in India on behalf of a sub-account. These traders/investors are known as bulls. Offshore funds are usually promoted for investing in one or few specific countries. 3 Stag Stag is an investor who buys the shares in the primary market from public issue in anticipation of rise in prices on the listing of the shares on stock exchange. All redemptions and fresh investments in this scheme is done directly with the Mutual Fund at net asset value ("NAV") related prices. 1995 have been notified based on the earlier guidelines There are around 500 FIIs registered in India at present. the SEBI (Foreign Institutional Investors) Regulations. Nominee Company and Incorporated / Institutional Portfolio Manager or their Power of Attorney holder established or incorporated outside India which proposes to make investment in India in securities. 6 Overseas Corporate Body (OCB) Overseas corporate body is a legal entity incorporated outside India.e. . 7 Offshore Fund A fund promoted by a domestic asset management company abroad is called offshore fund. 2 Bears In market there are traders/investors who take position i. Foreign Institutional Investors have been permitted to invest in Indian securities markets since September 1992 when the Government of India issued the Guidelines for Foreign Institutional Investment. These traders/investors are known as bears. They try to encash the profit between the issue price and the listing price of the share. Buy position by buying the shares in anticipation that price of the particular share will rise in the future. Investment Trust. These traders will buy back the shares when the prices actually do fall to make a profit. shall be deemed to be a Foreign Institutional Investor. These are called country funds. Mutual Fund. they would sell them off for a profit. TERMINOLOGY / JARGONS Mutual Fund Terms 1 Open Ended Scheme Open-Ended Schemes do not have a fixed maturity and are highly liquid schemes. Bank. In November 1995.e. Sell position by selling the shares in anticipation that price of the particular share will fall in the future.

SEBI has prescribed that total of Front end and Back end loads should not exceed 6% of the NAV of the corpus. Mutual Funds incur various expenses during an issue. which are charged to the scheme. At the time of IPO the companies' shares are not listed on any stock exchange. Funds may charge these expenses either fully or partly to the schemes. the value of deductions effected from NAV is called Back end load or Exit load. Back End loads are imposed since premature withdrawals carry a transaction cost to the AMC. 2 Public Issue When an existing company offers its shares in the primary market it is called public issue. 4 Underwriter .2 Close Ended Schemes Close-Ended Schemes have fixed maturity period and investment in these schemes is done at the time of the initial issue and thereafter you can buy or sell the units of the scheme on the stock exchanges where they are listed. 3 Net Asset Value (NAV) Net Asset Value is the common expression among Mutual Funds and denotes Net Asset Value (N A V). 5 Front end/entry load and Back end / exit load These terms are common in Open ended mutual fund schemes. Shares with attached options like warrants by new as well as existing companies. Often IPO and Public issue are used interchangeably. The maximum sales load that can be charged to a scheme at the time of an initial public offer is 6 % of the unit capital raised. Some close-ended schemes give you an additional option of selling your units directly to the Mutual Fund through periodic repurchase at NAV related prices. which owns the mutual fund. Similarly when an investor choose to withdraw from a fund. These shares will be listed on specified stock exchanges after the completion of allotment and compliance with other prescribed formalities. SEBI specifies that an AMC must be a separate entity from the trust. which markets and manages a mutual fund scheme and in return receives a management fee paid from the fund corpus. NAV per Unit is equal to NAV = Market value of the assets of the scheme . Such a charge is called a Sales load. Primary Market Terms 1Primary Market Primary market refers to issue of new shares. Debentures. 3 New issue or IPO (Initial Public Offering ) When the company offers its shares to the investors for the first time its called initial public offering.Liabilities/ Units Outstanding 4 Asset Management Company (AMC) The AMC is the corporate entity. Entry load or Front end load.

4). The underwriter is like an insurance company to the issuer company. The certificate number is different from distinctive numbers of shares. companies are coming out with issues with different face values e. 5 Share Certificate Nos The companies issue physical stock to the shareholder. the risk inherent in the project for which the capital is being raised and so on. This is called certificate number. a prospectus contains the terms and conditions of the issue. Typically. One share certificate would carry distinctive number of one or more number of shares. 6 Distinctive Numbers) Distinctive numbers are the numbers given by the company to the shareholder for the shares held by them. Currently dividend income is tax free in the hands of investors. HCL Technologies (Rs.Underwriter to issue of capital is the one that agrees to take up securities. 8 Face value Face Value (Par Value) implies the value at which a share is originally recorded in the balance sheet as capital. But now as per relaxation by SEBI. 7 Prospectus A prospectus is a document that must accompany the application forms of all public issues of securities. The certificate carries a number. which are not fully subscribed by shareholders in case of a Rights issue or by members of public in case of a public issue. the company's track record. This income for the shareholders is called dividend. 100. which remains in the records of the companies. The underwriter charges underwriting fees to the issuer company for his services. 9 Partly Paid Share When a company gives the option to investor to apply for the shares on part payment of the face value then till the remaining amount is paid the share is called partly paid share 10 Dividend A company from its post tax profit distribute some proportion to shareholders. 10 to Rs 1. Zee has split the face value of shares from Rs. He makes a commitment to get the issue subscribed either by others or by him. the purpose for which the issue is made. but the company is required to pay dividend tax directly to the Government Corporate Terms 1 Company . In India face value is normally Rs 10 or Rs. or debentures. along with the specific feature of the security. whether ordinary shares.g. The companies use this for their records. He is paid underwriting charges even if the issue is fully subscribed.

holds more than half in nominal value of its equity share capital or . . It can have minimum 2 and maximum 50 members. reorganization or winding up of companies. The directors have the direction. etc.where the first mentioned company is any other company. Thus on incorporation. forming. The directors of the company are collectively referred to as the Board of Directors. It is possible to form a Company whose liability is limited by guarantee or even a company with unlimited liability of the shareholders. register such transfers in its book of members.that other controls the composition of its board of directors or . 7 Subsidiary companys A Company is a subsidiary of the other if.where the first mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this act have the same voting rights in all respects as the holders of equity shares. having a common seal and a perpetual succession. The shares of private limited company are not listed. The company can invite public subscription for its shares or debentures. 5Common seal The company on the share certificate for authentication puts a stamp on the share certificate known as company seal.Company is an incorporated association of many persons. This is called a limited liability company. but only if. The day-to-day management of the affairs of the company is delegated to the managerial personnel by the board. 2 Distinction between Private limited company and Public limited company A private limited company is closely held company. An individual director or any group of directors can exercise their power only after the delegation by the board. amalgamation. 3 Board of Directors A director includes any person occupying the position of a director by whatever name (Section 13 of the Companies Act' 88 ). The company must have minimum 7 members and 3 directors. a company becomes a separate legal entity different from the persons forming it. 4 Registrar and Share Transfer Agent (R & T Agent) An R & T agent is an agency appointed by a Public Limited company to carry out the service of transfer of shares from one member to another. distribute dividend warrants to shareholders. Only an individual can be a director (Section 253). The liabilities of the members of a company extend only to the unpaid value of the shares held by them. incorporation. A public limited company can have more than 50 members. superintendence and control of the affairs of the company. exercises or controls more than half of the total voting power of such company. which is an artificial person in law. There is a restriction on transfer of shares without consent of others.the first mentioned . There are restrictions on inviting Capital from Members of public for a private limited company. . reconstruction. The Company seal is also affixed on important agreements and contracts by the Company 6 Company Secretary Company Secretary is the member of association of Institute of Company Secretaries of India who engages himself in the practice of the profession of the Company Secretaries or offers to perform or perform services in relation to the promotion.

If the stock exchange approves the company's application then company's shares get listed on the exchange for trading. shall. Every company limited by shares. hold a general meeting of the members of the company which is General Body meeting. This is called multiple listing. which is called "The Listing Agreement". 12 Resolution Any decision of the company has to be taken by consent of members or board of directors.e. 11 Multiple listing A Company gets its shares listed on more than one exchange for better access of the investors. 8 Managing agent When a company appoints some other company to manage and run the operations on commission basis the company is called managing agent. an exit route where they can sell their shares. 13 General Body meeting A General Body Meeting is a meeting of the members. and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of next. Every company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meetings as such in the notice calling it. For this. 14 Annual General Meeting (AGM) The AGM is a meeting called annually of the members to transact routine business such as approving of accounts. has to offer investors the option to trade their shares i. sale/purchase of undertaking of the Company. company has to apply to the stock exchange to get approval for their shares to be traded on the same. within a period of not less than one month nor more than six months from the date at which the company is entitled to commence business. It also transacts special business such as enhancing borrowing limits. which are that others subsidiary. This is called resolution. electing directors etc. and every company limited by guarantee and having a share capital. as on a record date of the Company. The listing agreement stipulates obligations of the listed company to the Members of public as well as shareholders on dissemination of information regarding the working of the company. which comes out with a public issue. 10 Meaning of a Company listed on the Stock Exchange A Company. Usually the Stock Exchanges and the company enter into an is a subsidiary of any company. etc. . but it's not necessary that all Public companies are listed. 9 Are all public limited companies necessarily listed? Most Public limited companies can get themselves listed.

'B1' Group is a subset of the other listed shares that enjoy higher market capitalization and liquidity than the rest. which cannot wait till the AGM. but a proxy so appointed does not have any right to speak at the meeting. The scrips in this group are classified on the basis of equity capital . 'B2' Group of shares comprises the shares not covered in the above two categories. 4 Specified or 'A' group. . as stipulated by SEBI. number of years of listing on the exchange. floating stock. • Insurance Fund • Excise Duty payable to Revenue authorities in the form of Service Tax. 3 Additional charges other than brokerage that can be levied on the investors Apart from the brokerage the trading member can charge : • Transaction charges payable to Stock exchange for facilitating smooth trading. • Investor Protection Fund. • Penalties arising on behalf of clients (investors) for non compliance of the relevant requirements. • Contingency Fund. 2 Brokerage and the maximum Brokerage charged by a Broker Brokerage is the commision charged by the broker for purchase/sale transaction through him. which are listed on Stock exchanges. It contains the shares of the companies which have fairly good growth record in terms of dividend and capital appreciation. Basic Secondary Market Terms 1 Secondary Market Secondary market is the market where you can buy or sell shares. Usually the Corporate members send in their representatives as proxies. 'F' Group represents the debt market ( fixed income securities ) segment. 5 Security code For the trading purpose on BOLT (BSE online terminal) all the scrips have been assigned numeric codes which have to be keyed in at the time of transaction. 'B2'. trading volume etc.15 Extraordinary general body meeting All general body meetings other than annual general body meeting are called Extraordinary General Body Meeting (EGM). market capitalisation. 'A' Group is a category where there is a facility for carry forward (Badla) for a period not exceeding 90 days. 'Z' Group category comprises of shares of the companies which does not comply with the rules and regulations of the Stock Exchange. The EGM is called usually to transact urgent business. There are provisions in the Company's Act whereby the members can also requisition such meetings 16 Proxy Any member of a company entitled to attend and vote at meeting of the company is entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself. The maximum brokerage chargeable. is at present 2. ' F ' and 'Z' Group shares At (BSE) Bombay Stock Exchange the shares are classified in different categories. • Stamp duty payable to various State governments.5% of the trade value. This is called security code. public share holding. 'B1' .

rate. Contract notes are made in duplicate. brokerage. signature of authorized signatory and the arbitration clause stating that the trade is subject to the jurisdiction of Mumbai must be present on the face of the contract note. 7 Market lots When the company issues shares to the public. trade time. quantity. • The confirmation given will be followed by Contract Note evidencing the transactions executed within 24 hours of the trade being executed. 11 Book-Closure and Record dates An important aspect of investing in securities is to understand the purpose and implications of book closure or record date. bonus shares or rights issues. After dematerialization. The benefits are then distributed to those security holders whose names appear on the register of the company on that date. These are known as scrip symbols. Hence for all physical shares traded on the stock exchange. and the member and client both keep one copy each. details of other levies. 8 Contract Note Contract note is a confirmation of trade(s) done on a particular day for and on behalf of a client. the deliveries are to be made in market lots only by the seller unless specifically agreed to otherwise. the company has to ascertain as to who should receive the benefits. establishing a legally enforceable relationship between the member and client in respect to the trades stated in that contract note. 10 Documents an Investor should receive from the broker and when The Transactions executed by the broker for the clients can be confirmed by the following methods.6 Scrip symbol For NSE trading scrips are represented by their symbols depending upon their names. This minimum number of shares per lot is known as market lot. for each benefit to be distributed to the shareholders. This is done to facilitate easy trading of shares on the stock exchange.if the trading is via internet. For this purpose. security name. SEBI registration number. 9 Points to be checked by an investor to check the validity of a contract note Name and address of the Trading member. 100 face value.. • On line . a company announces in advance. trade no. To receive this benefit from the company. A contract note is issued by the broker in the prescribed format and manner. an investor who has bought the security on a cum-benefit basis must make sure that the security is sent for . • Orally by the word of mouth on telephone or personal meeting. Since the security holders of a company keep changing practically every day... • By faxing the details or the Contract Note. details of trade like order no. 10 and 5 or 10 shares for Rs. the face value is decided and the minimum number of shares to be transacted per single transaction is decided. minimum lot has become one for all shares which are traded in dematerialized form. settlement no. dividends. a record/book closure date. when a company has to distribute benefits in the form of interest. Before dematerialization minimum lot used to be 50 or 100 shares for Rs.

There are SEBI guidelines.registration of his name before the book closure date. the existing shareholders or convertible debenture holders have the first right to subscribe to the issue in proportion to their existing holdings. When company's reserves are satisfactory. then it is called a private placement of shares. issues shares from reserves to shareholders and credits the equity capital by the same amount. it will contain several securities. 15 Rights Issue Whenever an existing company makes a fresh issue of equity capital or convertible debentures. which regulate such issues by a listed company. This increases the liquidity of the company's shares as number of shares increase. 17 Rights Issue When investor applies for the registration of shares in his/her name. then the issue is called a preferential issue. to selected group of investors. associates. the management by book entry. which regulate such issues by a listed company. However. The market price of the company's shares usually comes down as per the ratio in which the shares are issued. Shareholders are benefited as they get more shares but the returns in real terms accrue only if the company is able to maintain the same growth. as opposed to an issue open to the public at large. in which case we call it a public issue. The reserves plus equity capital is called Networth. First holder is entitled to all rights. he/she can apply jointly. The company after distributing the dividends keeps remaining earnings as reserves. since in general no one puts all the eggs in one basket. 18 Calls Calls are the sums payable on a partly paid share. That means there will be two/three applicants for the same shares. 12 Portfolio The set of all securities held by an investor is called his portfolio. The portfolio may contain just one security. But at the time of selling. 16 Bonus Issue When we invest in shares we expect more than just the dividends from the earnings of the company after paying off the dues of all other stakeholders. Thus. The Company after having issued partly paid . There are SEBI guidelines. Such a portfolio is known as a diversified portfolio. Only what is not subscribed to by the existing shareholders can be issued to the public. etc. 13 Private Placement When a company offers its shares to group of investors by passing the right/public issue. shareholders of the Group Company. 14 Preferential Issue When a company offers its shares to selected investors who may be promoters of the company. the approval of all the joint holders is necessary. an issue offered to the existing shareholders as their right is known as Rights Issue. This are called bonus shares.

To secure the trade. The time gap between delivery and payment increases the market risk. In the absence of DVD. Often there is a time lag between pay in and pay out. To guard against the possibility of the loss not being paid by the investor. This is known as margin. These orders for buy-sell trades for any share giving the prices and quantities of shares are arranged in descending orders. the stock exchange or the clearing house guarantees honoring of the trade between members/brokers. • Different types of margins are • Gross Exposure Margin • Daily margin • Carry Forward Margin • Special Margin • Mark to Market Margin • Volatility Margin • Concentration Margin • Adhoc Margin a) Daily margin A client and a broker is required to deposit/make available margin for open positions either on the . the margins are collected by the brokers from the investors. 21 Delivery V/s Payment (DVP) Delivery v/s payment means exchanging simultaneously for money.shares would call upon the shareholders to pay the balance calls as and when they require. the buyers have to pay in money and the sellers have to deliver shares ahead of time and wait for the payout to take place. These numbers are unique and facilitate international trade. When a trade takes place. This listing of all the orders is called order book. the prices of the stock may move up or down. This movement in price may result in profit/loss to the investor. Hence the best buy and sell price for a scrip form the touchline. Touchline is the prices at which buy and sell order can be executed. in case the broker/member defaults in honoring the commitment to the exchange. Margin 1 Definition After a buy/sell trade takes place. The time lag may be of a couple of hours or even. the margin is refunded. 22 ISIN Number ISIN (International Securities Identification Number) is an identification number given to the security of an issuer company by the International securities organisation in consultation with SEBI. The stock exchange levies different margins as per the situation requirements. On successful completion of the transaction. 20 Touchlines This term is often used when trading on the BOLT( BSE On Line Trading)system. on the stock exchange. 19 Order books There may be several buy orders and several sell orders at various prices with different quantities. the stock exchange asks from the members/brokers some proportion of total transaction value as a safety deposit.

g. The exchange insists on the broker making certain security available to it in the form of cash/bank guarantee/shares. the trader has to pay the difference between the trade price and the closing price as a margin. small cap stocks) Exchange specifies special margin to be paid for both the buy side and the sell side of the transaction. g) Gross Exposure Margin The end of the day net outstanding scripwise position results in open exposure between client/broker and broker/exchange.e. This margin is known as mark to market margin. Generally the method adopted to calculate the volatility is by working out the difference between the highest price and the lowest price over a 45 day transaction cycle and comparing it with the lowest price. 245 he has to pay the difference of Rs. The margin is accepted in cash or in form of demat shares. The objective of this margin is to ensure that in case there is a very wide fluctuation in the price of the scrip. It is intended to take care of eventualities that might occur between 2 trading days. etc. 5 per share totaling RS.per share. (250-245) i. This is known as Gross exposure margin. Generally.e. to take care of gross exposure.then the difference of Rs 10 per share on 100 share totaling Rs 1000 will be mark to market margin. d) Mark to Market margin When a trader takes a buy/sell position and the market price moves against the trade i. This is known as daily margin. b) Carry forward margin On exchanges which provides for trading on carry forward basis from one settlement to another as per the SEBI guidelines an additional margin needs to be paid on positions which are carried over. A trader sells 100 shares of Gujarat Ambuja at Rs. E.g. 250/. This is specified in absolute amount to be paid generally in cash form. A trader buys 100 shares of Reliance at Rs. and the price of Gujarat Ambuja closes at Rs 260/. c) Special Margin In order to curtail heavy. At the broker level the mark to market profits are not adjusted against mark to market losses. both the buyers and seller honour their commitments to each other and the integrity of the market is not endangered. e) Volatility Margin In order to control the volatility or very wide fluctuations in the scrip price. This is usually done at the close of the business day E. for a buy trade price declines and for sell trades price moves up. RS. f) Ad-hoc Margin As prescribed by SEBI Ad-hoc margins are imposed on brokers carrying very large position over all or in certain illiquid small value stocks. 250 and the price closes at Rs. The daily margin is refunded at the end of the settlement while the carry forward margin is collected. SEBI imposes from time to time a margin. it needs to be paid in advance of the side or on the sell side at the end of the day. 500 as mark to market margin. unhealthy transaction positions in particular scrip (normally illiquid. . which is called as Volatility Margin. The total of net open positions is know as gross exposure.

4 Definition It is a trading mechanism. As per the current SEBI regulation one can take either buy or sell position in specified shares in the Bombay Stock Exchange and carry it forward till 90 days or else the person has to settle the trade by taking delivery by paying cash or giving delivery if he has sold the shares. Every day's trades are netted on a daily basis. Some indices may track a large number of shares average whereas some may track particular industries. the stock exchange can use the margin taken from the trader to settle his trade so that the settlement procedure for whole market does not get disrupted. or sell shares if you don't have the deliveries. The base year keeps on changing with time. which allows us to buy shares. Again. 2 T+1 or T+2n T+1 is the settlement of trade after 1 day of the date of trading. simple or weighted average. This is different from weekly settlement wherein the trades are netted off on a weekly basis and settled subsequently. It is also known as carry forward trading. it is a cushion available for meeting likely losses in case the seller does not honor his commitment to the market. It is statistical average. of a few leading shares in the market. In any of trades the investor/trader has to pay margins as per the stock exchange specification. with the average share price in 1984-85 taken as 100. This is called a sector specific index. Ups and downs of an . when this happens the indices before and after the introduction of the new base year can not be compared directly. The year for which the average price is assumed to be 100 (in this means that on an average. 1984-85) is known as the base year. share prices in the market have gone up by about 50 times since 198485. BSE 30 or SENSEX is such an average of thirty leading shares traded in the BSE. even if we do not have the requisite amount of money. T+2 is the settlement of trade after 2 days of the date of trading. Badla charges are known as contango charges. 3 Rolling Settlement In a rolling settlement the trade has to be settled on the T+ Nth day. The number so arrived at is called an index. Squaring off can be done on the same day otherwise the trades have to be settled by paying cash or giving security. the stock exchange can use the margin taken from the trader to settle his trade so that the settlement procedure for the whole market does not get disrupted. 2 Significance of Index movements If the share price index today is 5000. Indices 1 Index An index is a simple barometer of the underlying scrips in the market. 2 Sellers If the seller fails to honor his commitment of giving delivery or by settling the trade at a loss and paying cash due to loss in a trade.Why are Margins levied on 1 Buyers If the buyer fails to honor his commitment of taking delivery by paying cash or by squaring off the trade. In India currently T+5 is operational. It is a cushion available for meeting likely losses in case the buyer does not honor his commitment to the market.

trading interest and financial performance.g. This is called security code. The MidCap Universe for this index has been defined as companies having an average market capitalisation (over the preceding 12 months) between Rs. and give each stock a weight proportional to its market about the industry .1. Bombay. On any one day. Natex reflects the price movements of 100 actively traded shares of five major exchanges viz. there would be good stock-specific news for a few companies and bad stock-specific news for others. the index drops. it is because the stock market thinks that the prospective earnings will be better than previously thought. The Index based on above stocks is called ICE Index. When the index goes up. The index represents 71% of the total midcap market capitalisation and 72% of its trading value making it an optimal index for stock market performance of the MidCap segment. and the only thing left will be news that is common to all stocks. The ideal index gives us instant-to-instant readings about how the stock market perceives the future of India's corporate sector. That is what the index will capture.stock. the overriding need has been to ensure that the industry weightings in the index dynamically reflect the industry weightings in the market. 6 S&P CNX Nifty and CNX Nifty Junior The CNX MidCap 200 Index comprises 200 companies. 15 billion (US$ 353 million).5 billion (US$ 35 million) and Rs. The distribution of industries in the index represents the industry distribution in the MidCap Universe. The current method of averaging is to take a weighted average. Every stock price moves for three possible reasons: . Delhi. about the company (e. a product launch. these will cancel out. which is more broad based index than the sensex. Stocks are selected based on their market capitalisation. Each stock contains a mixture of these three elements . The S&P CNX~500 Equity Index currently contains 79 industry groups representing over 73% of total market capitalisation and over 98% of total turnover making it an optimal market benchmark. When prospects of earnings in the future become pessimistic. When we take an average of returns on several about the economy as a whole including political and sentimental factors. However. Telecommunication and Entertainment industries are referred to as ICE Stocks. 4 S&P CNX 500 Equity Index The S&P CNX 500 Equity Index comprises 500 stocks and is market capitalisation weighted. Demat . industry representation. 7 NATEX or National Index Natex is developed by BSE.Their base year is 1983.index reflect the changing expectations of the stock market about future earnings of India's corporate sector. Ahmedabad and Madras. It represents the indices of Technology stocks listed on New York Stock Exchange. Whether the stock market is depressed or buoyant is reflected by either the downward or upward movement respectively of this indices. In a good index. industry and economy news. 3 ICE Stocks or ICE Index The stocks falling in Information Technology. or the closure of a factory) . the individual stock news tends to cancel out. 8 NASDAQ 'Nasdaq' is an acronym of the National Association of Securities Dealers. 5 CNX MidCap 200 Index For the trading purpose on BOLT (BSE online terminal) all the scrips have been assigned numeric codes which have to be keyed in at the time of transaction.

5010. 3 Depository A depository is the place where shares are "deposited" or withdrawn from. custodians. UTI and National Stock Exchange. 5000 and Sell 100 shares at Rs. 2 Meaning of Physical stock The company issues a share certificate to the shareholder as a proof of his holding in the company. To cover for the risk involved. Consequently. According to SEBI guidelines. the liquidity risk and the time risk. A market maker would offer to do transaction on either side as chosen by the counter party at the prices indicated by the market maker for the quantities offered. HDFC Bank. banks. It is promoted by Bombay Stock Exchange (BSE). the cost of transacting in a depository environment is considerably lower as compared to transacting in physical form. 2 Tarvaniwala . This is known as physical stock since the certificate exists physically. It is promoted by IDBI. Since the shares now appear only as an electronic record in the books of the depository. The depository may hold the share on behalf of the clients in physical form or dematerialized form. The market maker assumes the price risk. financial institutions. CDSL stands for Central Depository Services Limited. Time risk means that the market maker may have to hold the inventory for an unknown period of time and lose the interest on his investments.g. He can do this if he has financial strength and the shares to deliver. 6 Rematerialisation of Shares It is the process through which shares held in electronic form in a depository are converted into physical form. E. Liquidity risk means that he may not be able to liquidate his purchase position and may have to take deliveries and vice versa. he keeps difference between buy and sell quote. He is the liquidity provider in the scrip. Price risk means that he may not be able to cover his position at the same or better price than the price at which he did the original transaction. it is called dematerialized stock. State Bank of India and Bank of India. All deposits and withdrawals of shares are accounted by the depository similar to a bank account operation. 5 NSDL and CDSL NSDL stands for National Securities Depository Limited. 4 Depository Participant A depository participant (DP) is an agent of the depository and is authorized to offer depository services to investors. stockbrokers.1 Meaning of Dematerialized stocks The dematerialization of physical stock is done on the request of the investor and the depositories hold it. This method does away with all the risks and hassles normally associated with paperwork. Types of Traders 1 Market Maker /Jobber Market maker is the one who gives two way quotes for a security at any point of time. can become depository participants in a depository. Market maker will give quotes for Satyam as Buy 100 shares at Rs. Bank of Baroda.

• Shares are readily available for delivery (pay-in day of securities for auction is held within 1 or 2 days of auction) and • Shares delivered are good delivery (no opportunity provided for rectification of bad delivery) • Securities not delivered on auction pay-in day or bad delivery of securities delivered in auction are directly squared off at a price specified by the Exchange/Clearing Corporation.250 and on NSE is Rs.g. Auction 1 Auction of Stocks Auction is a mechanism which is used when a member broker selling shares defaults on the delivery ie. The exchange resorts to Auction to fulfil its obligation towards the broker buying the shares.3 per share. between spot and futures market etc. the difference he gets between these two way spread is called Tarvani and the trader is called Ttarvanivala. if shares are not offered for sale in the auction. the transactions are squared up as per SEBI guidelines. 4 Arbitrageur The persons who do arbitrage as a business are called arbitrageurs.253 one can buy the shares on BSE if he has the money and sell simultaneously on NSE if he has the shares with him for delivery and make risk free profit of Rs. Nature of Shares 1 Blue Chip Shares Shares of large. 3 Arbitrage A simultaneous buy and sale of an asset to get the benefit of price difference is called arbitrage. As per the guidelines in force. financially strong and well established companies which have stood up against all . If on the BSE price of SBI is Rs. However they should ensure that. if he has delivered short ( shares fewer than what they have sold) or their deliveries are bad or if they have not rectified the company's objections reported against them. E. 3 Close out If the shares could not be bought in the auction i.e. Arbitrage is of different types: price differences between two exchanges. 2 Modus Operandi of Auction Investors can ask their broker member to sell their securities in the Auction.When a jobber gives two way qoutes and does the transaction. the transaction is squared up at the highest price from the relevant trading period till the close-out day or at 20% above the last available trading price whichever is higher.

STOCK MARKET MANUPILATIONS Price Manipulative Terms 1 Inside information Nonpublic knowledge about a corporation possessed by corporate officers. Shares of such companies grow at a rate faster than others in terms of sales and profitability. These shares have low fluctuations in their prices and are fairly stable. major stockholders. have large accumulated losses but which show signs of recovery or making profits. which belong to the companies that. 5 Cyclical Shares These shares are in commodity companies and their prices depend on cyclical fluctuations of the economy. that process is called price rigging. 3 Price rigging When a person or person acting in concert with each other collude to artificially increase or decrease the prices of a security. their prices would fall. Mutual Funds) in near future they buy the shares to sell them on later date. Wipro. 4 Front running When a person buys ahead of certain information becoming public knowledge on his own behalf or someone else it is called front running. This is .g. E. which have out-performed others in the Industry. it is known as insider trading. 2 Insider trading When persons aware of private price sensitive information about a company take trading decisions based on that information. 6 Turn Around Shares The shares. Infosys. Satyam and NIIT are current examples of growth stocks in the Indian IT industry. they appreciate otherwise. In most countries including India trading on publicly unknown price sensitive information is illegal and punishable under the law.kinds of market conditions and which have good profitability and dividend track records are referred to as blue chip Shares. If the economy is doing well. FII. 4 Defensive Shares These Shares are generally neutral to business cycles. directors. 3 Value Stocks Value stocks are those stocks that currently have a low market sentiment and are underpriced relative to their intrinsic worth. or others who hold private inside information allowing them to benefit from buying or selling the stock. So when a trader anticipates buying from institutions (domestic. 2 Growth Shares These are shares of companies.

E. etc). 12 Price Earning (P/E) ratio Price earning ratio is the ratio of market price of the security to the earning per share (EPS) of the company. In this trading. A buys 100 shares of SBI from B. its market share. 11 What is Cash Earning per share (CEPS) Cash earning per share ratio is the ratio of sum of profit after tax and depreciation to number of outstanding equity shares. the market perception of the potential of the scrip. 6 Valuation Valuation is an exercise to find the intrinsic value of an asset. 8 Book value Book value of a share is networth divided by number of shares outstanding 9 Profit before tax (PBT) The residual amount left with the company from the earnings after paying all the dues of stakeholders i. Eg.g. This indicates usually. in some level of depth. Such a detailed study of corporate performance is called 'Fundamental Analysis'. This is circular trading. C sells them once again to A at some higher/lower price. 5 Dead-Cat Bounce A deceptive. 2 Technical Analysis Some experts believe that tracking past prices of equity shares will provide adequate guidance as to its future path. These experts configure complex charts and mathematical averages of the price movements to accurately predict its future. government agencies (excise. 7 Networth Networth is the sum of paid up equity capital and reserves (the amount of retained earnings for the past years after paying all stakeholders and distribution of dividend). employees. This analysis is called 'Technical Analysis'. Research Terms 1 Fundamental Analysis Investing in Equity shares requires you to know about the company you are investing into.called front running operation done by trader. 4 Relative Strength Price wise performance of a share as compared with other shares or the share price index.You need to examine the company's line of business. its financial performance. temporary recovery in share prices. 5 Circular Trading When some informed investors indulge in trading between themselves in order to manipulate price and/or volume traded in the scrip is called circular trading. debt obligation. 13 Payout Ratio . 10 Earning per share (EPS) Earning per share is the ratio of net profit to the number of paid up equity shares. after a period of stagnancy or a declining trend. 3 Rally Material rise in the price of a share. actual funds and shares have not changed owners. technological prowess and various factors.e. B sells this shares at higher/lower (negotiated between them) to C. operating expenditure. but in the process price and volumes get manipulated. or a material rise in the share market index. sales tax. its management capability. etc is called profit before tax. This helps the investor in making decisions about when to buy the asset or to sell.

Payout Ratio is how much percentage of Earnings is distributed as dividend. he is not entitled to these benefits but the previous owner would be entitled to them. The lender of the scrip earns additional returns by lending his stocks for a specified period to those who need them to discharge their delivery obligations. Cum-dividend and Ex-Dividend When an Investor buys a shares with cum-dividend (or cum Bonus or cum rights or other benefits). the trap closes on it.g. and may have to accept humiliating conditions proposed by lender countries for further Miscellaneous 1 Dividend. When an investor buys the share ex-dividend (ex bonus or ex rights or other benefits). shares are fake. it means that 40% of the company's profits after tax have been distributed as dividend and 60% transferred to reserves. etc. Bonds where an investment of Rs. Depositories are normally big international banks. forged or stolen . the share capital of the company goes up. which receive dividends. the registration is some time rejected if the signature differs. For E. bonus shares or rights for which the books are to be closed. When this is done it is called fully diluted earnings. often fall into the trap. forcing liquidation. 16 Debt Trap When highly leveraged company does not perform satisfactorily it falls into debt trap. 2 Stock Lending It is a mechanism through which seller going short can borrow stocks to meet his obligations. Luxembourg. A very high dividend payout may not be healthy. Unless there is a dramatic turnaround in the company's profits. 5 Global Depository Receipt (GDR) Global Depository Receipt (GDR) are receipts denominated in US Dollar giving the owner the right to convert the underlying shares by surrendering them to the depository holding the underlying shares. It is defined as Payout Ratio = Dividend per share (DPS) / (EPS) x 100 Earnings Per If the payout ratio Share is 40%. Servicing of large debt may not leave the company with any profit or operating cash. 4 Deep Discount Bond A Deep Discount Bond is long term bond where the initial amount invested keeps growing based on the interest accumulated on the principal amount.which if studied carefully . The underlying shares are called depository shares. which in turn will lead to further borrowing.000 after 30 years. reports. Bottoms up approach on the other hand assumes that the impact of economy and the industry is reflected in the fundamentals of the company . the earnings of the companies are to be considered on the enhanced equity capital. the industry in which the company is operating and then move on to analyze the company's performance. It provides for the lending of securities for a price to short sellers. Top down refers to first find about the economy. etc. Countries which borrow heavily. 15 Top Down or Bottoms Up Approach These terms are used while doing fundamental analysis of Stocks. he is entitled for the dividend . or if there is a court injunction preventing the transfer of the shares etc. 3 Company Objection When Investors send share certificates along with the transfer deeds to the company for registration. In such case. if the IRR (Internal Rate Of Return) is higher than the return an investor will get if he invests the amount of dividend distributed outside 14 Fully Diluted earnings When a company issues bonus shares or rights shares or comes out with an IPO. will reveal the potential for appreciation in the scrip.100. GDRs are listed on stock exchanges such as London. 2800 today could yield Rs. . In GDRs only qualified institutional investors can participate which restricts retail entry decreasing the depth of the market.

1986 to meet the claims of investors against defaulter members. 6 American Depository Receipt (ADR) American Depository Receipts (ADR) are depository receipts issued in US. this means that the circuit limit for a shares on BSE and NSE can be different. 12 Investors Protection Fund (IPF) Investor's Protection Fund was set up by The Stock Exchange in July . the company is referred to the BIFR.who are familiar with the areas of controversy. 8 Transmission of Shares Transmission refers to transfer of ownership of shares by operation of law in case of death or insolvency from the owner to his legal heirs or creditors. ADRs are listed in stock exchanges in the US. strategizing etc.have a daily price band of ± 8%. usually NASDAQ or New York Stock Exchange. 20/.have a daily price band of ± 50%. Some of . 10 Arbitrator When there is a dispute between two or more parties. all securities traded at or above Rs. For this. After the 8% price band is hit and it doesn't recover from that level for next 30 minutes.Pricewise performance of a share as compared with other shares or the share price index. 10/. However.E. This also cuts down on time to resolve the disputes.and below Rs. The previous day's closing price is taken as the base price for calculating the price. ADRs increase retail participation. traded at or above Rs. 7 Transfer of Shares Transfer refers to transfer of ownership of shares from one person to another through a sale or gift when accompanied by a transfer deed. 15 Venture Capital Venture capital is basically equity finance in relatively new companies when it is too early to go to the capital market to raise funds. the circuit is further released for 4% more. As per SEBI directive.have a daily price band of ±25%. When the networth of a company is eroded. SEBI has come with a set of rules to determine the fixed price bands for different securities within which they can move within a day. The government had set up this board to rehabilitate the sick companies if possible or to liquidate them. It can also be made in the term of loan finance/convertible debt to ensure a running yield on the portfolio of venture capitalist. As the closing price on BSE and NSE can be significantly different. Venture capital financing involves high risk-return spectrum. 13 Trade Guarantee Fund ( T G F ) The Stock Exchange has constituted a Trade Guarantee Fund to guarantee settlement of bonafide transactions of members of the exchange inter-se which form part of the Stock Exchange settlement system.10/. 11 Circuit Filter To check the excessive volatility of shares. the companies issuing receipts has to file the prospectus with US regulator Securities and Exchange Commission for their approval and follow their strict accounting and disclosure procedures. such investment is not exclusively equity investment. 9 An Angel investor Companies or persons providing venture capital for the new start ups. 14 BIFR BIFR is Board of Industrial Finance and Reconstruction.20/. All stock market contracts are subject to arbitration. so as to ensure timely completion of settlement of contracts and thereby protect the interest of investors and the members of the exchange. Often angel investors also help the Promoters by way of sourcing/assisting in finding managerial personnel. GDRs of Reliance. However recently the price band is extended to 12% for 200 active scrips. as they are not able to access the capital markets at that point of time. ITC etc are listed on London exchange. traded below Rs. it is resolved by unbiased persons arbitrators .g.

SEBI has specified a takeover code.g.g. Recently Sterlite Industries has decided to split into 3 units viz. Times Bank has merged into HDFC Bank. • 2.g. Example of absorption : Hindustan Lever and Ponds merged but the resultant entity remained Hindustan Lever. ie. • 4. Company A merges into B and shares of B are given to shareholders of A on a fixed ratio. subsume both absorption and consolidation. held as investments by B in a fixed ratio. which the acquiring company has to follow so that investor interests are protected. The ratio in which the shares of Novartis were issued to Hindustan Ciba and Sandoz is called SWAP RATIO. The Swap Ratio decided was 5. This is known as Employee Stock Option Plan (ESOP). For example. as used in financial literature. for every 5. Copper .75 : 1. This ratio is called swap ratio. Consider following examples: • 1. A consolidation involves a combination of two or more firms as a result of which a new firm comes into being and the existing firms are dissolved.75 shares held in Times Bank by it's shareholder 1 Equity share of HDFC Bank was alloted. 5 Dawn Raid In takeover attempt an individual or a company instructs brokers to buy all available shares of the target company at current market prices as soon as stock exchanges open for business on a particular date. 3 SWAP RATIO When two or more companies merge or demerge. a consideration is payable to shareholders of merged entity. then company B has to pay consideration to shareholders of company A. • E. Mergers. This may be in cash or by shares of the company B. In brief. Company A divests its one division into separate company and existing shareholders are given shares in the new company. When the shares are being issued to shareholders of company A. • 3. Venture capitalists acts as a financial intermediary between investors looking for high returns and entrepreneurs who need institutional capital as they are not yet ready /able to go to the public. Hindustan Ciba Geigy and Sandoz merged to form Novartis 2 Takeover A takeover involves the acquisition of a certain or entire block of equity capital of a company. With that as a base the bidder makes an attractive offer to the other shareholders in order to make a full takeover bid.g. a reasonable ratio is worked out by valuation experts. company A is merging into Company B. A and B company merge to make company C and shares of company C are given to shareholders of A and B based on individual ratio worked out for each company. Usually the options are exercisable at a price lower then the market price.the ventures yield very high return compensating the loss from unsuccessful investments. Mergers & Acquisitions 1 Merger Merger involves dissolving of two firms and creating one new entity or continuing of one of the old entity names. 4 Employee Stock Option Plan (ESOP) The companies in order to reward and retain its employees offer them option to buy the shares of the company. which enables the acquirer to exercise control over the affairs of the company. • E. Options & Futures 1 Derivatives . Hindustan Ciba and Sandoz merged to form the new entity Novartis. E. Derivatives. They are regulated by SEBI and have Tax Implications as prescribed by the act from time to time. aluminium and telecom cables. Mergers represent a very important form of corporate restructuring. • E. A merges into B and shareholders of A are given shares of C.

Instead of buying shares that constitute the Index one can buy the market by taking a position on the Index future. but not the obligation. This happens due the systematic risk in the market. Forces that contribute to variations in returns-price or dividend (interest) . if the economy is moving towards recession and corporate profits shift downward. Risk & Return 1 Systematic risk Risk in holding securities is generally associated with the possibility that realized returns will be less than the returns that were expected. The underlying instrument in any derivative instrument is the physical asset or a security. or market index values.constitute the elements of risk. Factors such as management capability. For instance. For example. This is of great help when one wants to take a position on market movements. Securities providing payoffs that depend on or are contingent on the values of other assets such as a commodity price. In a stock market context. and sociol ogical changes are sources of systematic risk. consumer preferences. to buy or sell an asset at a particular price on or before a particular date. 7 Call and Put Options A call option gives the holder the right to buy while a put gives him the right to sell the underlying security / asset. The buyer agrees to take delivery of something and pay the agreed price and the seller agrees to make delivery for the agreed consideration. Market capitalization is the product of stock price and number of shares issued by the company.000 points. Economic. 2 Futures Futures contract is a firm legal commitment between a buyer and a seller in which they agree to exchange something at a specified price at the end of a designated period. For E.g. and is generally the indicator of status of the set. This is different from futures wherein there is an obligation on both the buyer and seller to perform the contract. 4 Index futures Index futures are future contracts where the underlying asset is the Index. NSE Nifty one can effectively gauge market moods in India. political. Systematic risk refers to that portion of total variability in return caused by factors affecting the price of all securities. 5 Difference between the Forward and Future Contracts Forward contracts are Over the counter (OTC) contracts whose terms are agreed upon by the counter parties. The source of such disappointment is the failure of dividends (interest) and/or the appreciation in security price to materialize as expected. external. and broad in their effect are called as sources of systematic risk.Derivatives are hedging instruments to be used against price risk. 3 Index An Index is a representative of a set. bond and stock price. in the hands of the holder. stock prices may decline across the board and nearly all the stocks listed on the BSE move in the same direction as the BSE Index. by tracking the changes of the BSE Sensex. Any Index is an average of its constituents. Their effect is to cause prices of nearly all-individual common stocks and/or all individual bonds to move together in the same manner. the BSE Sensex is a weighted average of prices of 30 select stocks. Whereas Futures are traded on exchanges where the terms are standardized by the exchange. those forces that are uncontrollable. 6 Options An option is the right. In Investments. Some influences are external to the firm and cannot be controlled. and labor strikes cause systematic variability of . Other influences are internal to the firm and are controllable to the large degree. and affect large number of securities. 2 Unsystematic risk Unsystematic risk is the portion of total risk that is unique to a firm or industry. Suppose one feels that the market is bullish and the Sensex would cross 5. Index is an indicator of the broad market. where the weight is the market capitalization of individual stocks.

With an Online Stock Trading Service You Can Buy and Sell Stocks . Technical Definition. or futures contracts. the higher will be its beta. etc. In effect. defined as the covariance divided by the standard deviations of two variables. short selling.4 and 1. and buy and sell stocks online. Positive co-relation implies if one of the two moves up. nearly all betas are positive and most betas lie somewhere between . some comparison must be there to find out whether our choice of stocks are giving optimum returns or not. The correlation can be positive or negative.. if the market is expected to provide a 10 percent rate of return over the next year. charts and graphs. The relation is called correlation. a stock having a beta of having a beta of 1. Suppose you have a portfolio and there is a likelihood of a war.A standardized statistical measure of the dependence of two random variables. Beta is calculated by relating the returns on a security with the returns for the market. Its purpose is to reduce the volatility of a portfolio. 6 Hedging Hedging is a mechanism to reduce investment risk using call options. However. Beta shows how the price of a security responds to market forces.9. the other will also move up and vice versa. The loss on your portfolio would be covered by the gains on sell position in Index futures. Market return is measured by the average return of a large sample of stocks. 3 Bench marking of returns For the returns on the stocks we have in our portfolio. A hedge can help lock in existing profits. in such an event the value of your portfolio would diminish.returns in a firm. 4 BETA Beta measures non-divesifiable risk. The beta for the overall market is equal to 1 and other betas are viewed in relation to this value. forecast tools and analyst reports that professional stock brokers have? Nobody has as much stake in the future of your investment portfolio as you. For e. so it's important to become a confident and informed investor. 5 Stock Co-relations When the security price moves in some trend which some short of relationship can be established to the trend of some other security or index then the two are said to co-relate. Unsystematic factors are largely independent of factors affecting securities markets in general. With a good online stock trading service. Investors will find beta helpful in assessing systematic risk and understanding the impact market movements can have on the returns expected from a share or stock. put options.g. This particular stock is much more volatile than the market as a whole. For this purpose we compare them against some benchmark such as BSE Sensex or CNX Nifty. such as the BSE SENSEX or S&P CNX Nifty. Betas can be positive or negative. the more responsive the price of a security is to changes in the market. they must be examined for each firm. by reducing the risk of loss.8*10%) over the same period. You would not like to sell off your entire portfolio because of tax issues or liquidity problems. you can learn everything you need to know to become a smart investor. Why Online Stockbrokers? Do you want access to the same market news.80 would be expected to experience an increase in return of approximately 18 percent (1. The best hedge would be to sell Index futures. This is called benchmarking of returns. Negative co-relation implies if one of the two moves up the other will move down and vice versa. Because these factors affect one firm.

including from your cell phone. newsletters. Learn About Trading Trading can be intimidating and there really is no sure thing. glossaries and definitions. The best services offer free webinars. responsive customer support.™ What to Look for in an Online Stockbroker The top online stock trading services should provide you with all the resources you need to make well-informed financial choices and the ability to buy and sell stocks from anywhere. watch lists. mutual funds. broker assisted trades. Fees/Commissions Fees and commissions can quickly escalate. however many stock trading services provide educational tools so you can learn the basics or advance your skills. streaming news. For the purpose of this review. option chains. . most services charge fees for trades. option trades and so on. we looked for services that provide good tools for choosing stocks or investments. thirdparty analyst reports. Some support resources include educational materials such as articles. investment calculators and a user-friendly trading platform. We also looked for trading services that can offer excellent. At TopTenREVIEWS We Do the Research So You Don’t Have To. Though many experienced traders may not need all of the tools offered by the services. Invest Many stock trading services offer investment options such as IRAs and investment funds for education or retirement. no matter how much you know or how much you can afford to invest. blogs. exchange–traded funds and various fixed-income securities including bonds and CDs. real–time charts. seminars. forums. and more. investment calculators and virtual trading. options. and also offer a competitive trade and margin rate. Monitor and Watch Stocks Most online stock trading services also offer useful tools such as alerts. Some services will even provide free broker assisted trades.Utilizing a stock trading service you can buy and sell stocks. In this site. we looked for services that can provide tools and investment options for everyone. you’ll find articles on investing and comprehensive reviews on online stockbrokers that will help you make an informed decision on which broker is right for you. We compared fees and margin rates as well as requirements like minimum account balances and account maintenance fees. Below are the criteria TopTenREVIEWS used to evaluate online stock trading.

a virtual market game established in 1996 and now a division of Cantor Fitzgerald. options. directors. mutual funds and exchange-traded funds. However. correctly predicted 32 of 2006's 39 big-category Oscar nominees and 7 out of 8 top category winners. chains or graphs. the best services provide excellent support by telephone. or virtual markets) are speculative markets created for the purpose of making predictions. The best online brokers also offer free assistance such as tutorials. some also offer one-on-one training. while those who buy high and sell low are punished for degrading the market prediction. FAQs. LP. Trading/Investment Tools Buy and selling stocks without the assistance of a broker can be intimidating. instant messaging and chat. email. The Hollywood Stock Exchange. cell phone alerts and useful charts. Evidence so far suggests that prediction markets are at least as accurate as other institutions predicting the same events with a similar pool of participants. idea futures. in which players buy and sell prediction shares of movies.Investments Offered Generally. analyst reports. Prediction market From Wikipedia.. decision markets. HedgeStreet. We looked for online stock trading services that provide educational resources as well as monitoring tools. People who buy low and sell high are rewarded for improving the market prediction. regardless of experience. the free encyclopedia Jump to: navigation. articles. Additionally. comprehensive services also provide access to a selection of international markets as well as investment services or options for retirement and education saving. Support/Customer Service Because buying and selling stocks online can be a bit nerve racking. History One of the oldest and most famous is the University of Iowa's Iowa Electronic Market. Ease of Use Not all investors are pros. many are just starting out or only have a small amount to invest. blogs and so on. . so we looked for services that are easy-to-use for everyone. all online stock trading services offer the ability to buy and sell stocks. The best online brokers offer tools such as investment calculators. search Prediction markets (also known as predictive markets. event derivatives. information markets. actors. and film-related options. The current market prices can then be interpreted as predictions of the probability of the event or the expected value of the parameter.

until at least the 1940s. Dr. Austria. and validation for prediction markets. Prediction markets are championed in James Surowiecki's 2004 book The Wisdom of Crowds. and Denmark formed the Prediction Market Industry Association. Manski suggests that directly asking a group of participants to estimate probabilities may lead to better results. Cass Sunstein's 2006 Infotopia.[3] In John Brunner's 1975 science fiction story The Shockwave Rider there is a description of a prediction market that he called the Delphi Pool. the U. Prediction markets have a long and colorful lineage. Steven Gjerstad (Purdue) in his paper "Risk Aversion. Newspapers reported market conditions to give a sense of the closeness of the contest in this period prior to widespread polling. and had remarkable predictive accuracy. enables Internet traders to speculate on economic events. Charles F. education. and Prediction Market Equilibrium. with formal markets existing on Wall Street in the months leading up to the race. In October 2007 companies from the United States. Betting on elections was common in the U. and is available online and in print. the cold fusion controversy. and How to Measure Anything: Finding the Value of Intangibles in Business by Douglas Hubbard. Robin Hanson used the first known corporate prediction market. Employees used it in order to bet on.S. Germany. Beliefs. had millions of dollars in volume in current terms. In July 2003. The journal was first published in 2007. for example.S.[1] Around 1990 at Project Xanadu. A critical backlash quickly denounced the program as a "terrorism futures market" and the Pentagon hastily canceled the program. However. edited by Leighton Vaughan Williams and published by the University of Buckingham Press. Department of Defense publicized a Policy Analysis Market and on their website speculated that additional topics for markets might include terrorist attacks. The markets involved thousands of participants. Manski of Northwestern University published “Interpreting the Predictions of Prediction Markets”. Ireland. In particular.[2] The research literature is collected together in the peer reviewed The Journal of Prediction Markets.designated in 1991 as a market and regulated by the Commodity Futures Trading Commission.[4] tasked with promoting awareness. [edit] Accuracy Some academic research has focused on potential flaws with the prediction market concept." [6] has shown that prediction market prices are very close to the .[5] which attempts to show mathematically that under a wide range of assumptions the "predictions" of such markets do not closely correspond to the actual probability beliefs of the market participants unless the market probability is near either 0 or 1.

both exchanges performed equally well. in the year 2000 IEM presidential futures markets. liquidity or other factors not intended to be measured are taken into account as risk factors by the market participants.[9] Hollywood Stock Exchange creator Max Keiser suggests that not only are these markets no more predictive than their established counterparts such as the New York Stock Exchange and the London Stock Exchange. significantly closer than the average single subjective estimate. the prices of binary prediction markets have proven to be closely related to actual frequencies of events in the real world. If this was a deliberate manipulation effort it failed. However. As more press attention is paid to . the data collected so far disagrees. and also include some analysis of prediction market data. implying a zero percent chance that Bush would win. In the Tradesports 2004 presidential markets there was an apparent manipulation effort.[8] Analyzed data from the Hollywood Stock Exchange and the Foresight Exchange concluded that market prices predicted actual outcomes and/or outcome frequencies in the real world. however. incentivizes market participants to seek further information.[8][9] Douglas Hubbard has also conducted a sample of over 400 retired claims which showed that the probability of an event is close to its market price but. he also shows that this benefit is partly offset if individuals first undergo calibrated probability assessment training so that they are good at assessing odds subjectively. a flood of new traders in the final week of the election caused the market to gyrate wildly. For example. making its "predictions" useless. using real money did not lead to better predictions."[7] In practice. therefore. Comparing an entire season's worth of NFL predictions from NewsFutures' play-money exchange to those of Tradesports. at the same time. in their paper "Interpreting Prediction Market Prices as Probabilities. distorting the market probabilities. but that reducing the unpredictability of markets would mean reducing risk and. In this case. more importantly. i.e. Hubbard claims. an equivalent real-money exchange based in Ireland. [edit] Sources of inaccuracy Prediction markets suffer from the same types of inaccuracy as other kinds of market. for example).[10] However. reducing the amount of speculative capital needed to keep markets open and liquid. A common belief among economists and the financial community in general is that prediction markets based on play money cannot possibly generate credible predictions.mean belief of market participants if the agents are risk averse and the distribution of beliefs is spread out (as with a normal distribution.[citation needed] There can also be direct attempts to manipulate such markets. The only rational purpose of such a trade would be an attempt to manipulate the market in a strategy called a "bear raid". Justin Wolfers (Wharton) and Eric Zitzewitz (Dartmouth) have obtained similar results. The key benefit of the market. An anonymous trader sold short so many Bush 2004 presidential futures contracts that the price was driven to zero. Prediction markets may also be subject to speculative bubbles. as the price of the contract rebounded rapidly to its previous level. is that it mostly adjusts for uncalibrated estimates and.

which operates from the University of Iowa under the cover of a no-action letter from the Commodity Futures Trading Commission and allows bets up to $500. but it also might turn into an assassination market. it is likely that more groups will be motivated to manipulate them.[12] [edit] Other issues [edit] Legality Because online gambling is outlawed in the United States through federal laws and many state laws as well.S. show how attempts at market manipulation can in fact end up increasing the accuracy of the market because they provide that much more profit incentive to bet against the manipulator. iPredict and TradeSports a prediction markets for sporting events. and the . Hubdub. most prediction markets that target U. as a form of insurance. For example. where gambling is legal and regulated[citation needed].[11] Hanson. Oprea and Porter (George Mason U). which escapes U. In addition there are a number of virtual prediction markets where purchases are made with virtual money.5 billion GBP in 2010.S. [edit] Public prediction markets There are a number of commercial prediction markets. such attempts at manipulation have always proven to be very short lived. the Popular Science Predictions Exchange. The Industry Standard's technology industry prediction market. For example. and the Iowa Electronic Markets.prediction markets. The Iowa Electronic Markets an academic market examining elections where positions are limited to $500. in practice. a market predicting the death of a world leader might be quite useful for those whose activities are strongly related to this leader's policies. [edit] Controversial incentives Some kinds of prediction markets may create controversial incentives. In their paper entitled "Information Aggregation and Manipulation in an Experimental Market" (2005).[13] Others include. Knew The News. Intrade a forprofit company with a large variety of contracts not including sports. traders may buy shares of that leader being elected. Using real-money prediction market contracts as a form of insurance can also affect the price of the contract. Notable exceptions are Intrade/TradeSports. Tahministan. users operate with "play money" rather than "real money": they are free to play (no purchase necessary) and usually offer prizes to the best traders as incentives to participate. legal restrictions by operating from Dublin. NewsFutures. one of the largest is Betfair which had a valuation in the region of £1. Hollywood Stock Exchange. if the election of a leader is perceived as negatively impacting the economy. these include The simExchange. Ireland. However.

Foresight Exchange Prediction Market. Bet2Give is a charity prediction market where real money is traded but ultimately all winnings are donated to the charity of the winner's choice.

[edit] Use by corporations
The embedded lists in this section may contain items that are not encyclopedic. Please help out by removing such elements and incorporating appropriate items into the main body of the article. (November 2007)

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The simExchange introduced a perpetual contract that it calls "stocks" to predict the global, lifetime sales of video game consoles and software titles. These stocks do not expire like most contracts on prediction markets because the founder, Brian Shiau, argued that video game sales can continue for years.[14] The premise for these stocks is that Shiau believes the video game industry suffers from a "lack of comprehensive sales data" and he compares the information problem of a game's sales to the information problem of evaluating a company's market value. Hanson warns that such a system may not work if a connection is not enforced.[15] Keith Gamble has described the simExchange as a Keynesian beauty contest[16] and that financial markets have certain remedies such as company buy-outs that cannot happen on the simExchange. Gamble concludes that such a prediction market can work but will be confined to play money.[17] Best Buy, Motorola, Qualcomm,, and Misys Banking Systems are listed as Consensus Point clients.[18] Hewlett-Packard pioneered applications in sales forecasting and now uses prediction markets in several business units. Mentioned in academic publications from HP Labs. Also mentioned in Newsweek.[19] It is working towards a commercial launch of the implementation as a product, BRAIN (Behaviorally Robust Aggregation of Information Networks).[20] Corning, Renault, Eli Lilly, Pfizer, Siemens, Masterfoods, Arcelor Mittal and other global companies are listed as NewsFutures customers. Intel is mentioned in Harvard Business Review (April 2004) in relation to managing manufacturing capacity. Microsoft is piloting prediction markets internally. France Telecom's Project Destiny has been in use since mid-2004 with demonstrated success.[21] Google has confirmed that it uses a predictive market internally in its official blog.[22][23] The Wall Street Journal reported that General Electric uses prediction market software from Consensus Point[24] to generate new business ideas.[25] BusinessWeek lists MGM and Lionsgate Studios as two HSX clients.[26] HSX built and operated a televised virtual stock market, the Interactive Music Exchange for Fuse Networks Fuse TV to be used as the basis of their daily live television broadcast, IMX, which ran from January, 2003 through July, 2004. The television audience traded virtual stocks of artists/videos/songs, and predicted which would make it to the top of the Billboard music charts. The first of its kind,

Fuse Network and HSX won an AFI Enhanced TV (American Film Institute) Award for innoviation in television interactivity.[27] Starwood embraced the use of prediction markets for developing and selecting marketing campaigns. Marketing department started out with some initial ideas and allowed employees to add new ideas or make changes to existing ones. Then subsequently incentives based prediction markets were leveraged to select the best of the lot.

Advantages of Online Stock Trading (E- Trading):
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You can get real time stock trading without calling or visiting broker’s office. You will get real time market watch, historical datas. Investment in IPOs, Mutual Funds , Stocks and Bonds. Place offline orders for buying or selling stocks. Customer service through Email or Chat. Trading is Secure.

Disadvantages of Online Stock Trading (E- Trading):
• • •

Website performance – sometime the website is too slow or not enough user friendly. Little long learning curve especially for people who doesn’t know much about computer and internet. Brokerages are little high compared to stock brokers.

Direct access trading is a technology which allows stock traders to trade directly with market makers or specialists, rather than trading through stock brokers.[1] Direct access trading systems use front-end trading software and high-speed computer links to stock exchanges such as NASDAQ, NYSE and the various electronic communication networks. Direct access trading system transactions are executed in a fraction of a second and their confirmations are instantly displayed on the trader's computer screen. This is in contrast to a typical conventional online trader who requires seconds or minutes to execute a trade.

Commissions and fees
[edit] Commission
Most direct-access firms charge commissions based on your trading volume, usually in terms of calendar months. Increased trading activity reduces commission for each trade. It can be as cheap as you can trade by 1 point or pip difference, in that it is a must for scalpers. Unlike traditional online brokerages, direct-access brokerages usually pass through the exchange fees involved in trading to customers. Examples are specialist fees, Electronic

Communications Networks fees, exchange modify and cancel fees, clearing fees, regulatory fees etc. Commissions are generally on a per share basis and typically around 0.005 USD per share. For example, the commission would be $8 for a 1000 share transaction at $0.008 per share. Some firms set fee schedules instead of passing exchange fees on directly. This improves the transparency of fee administration. For example, you do not need to change the charge any time there is a change in the exchange fees. Some fees may be complex to calculate or variable. It is not easy to write them on the fee schedules.

[edit] Platform or Software fee
Some firms do not charge their clients a platform fee. Instead, they provide a lower-end, less-featured electronic trading platform to minimize their costs. More complex systems are offered as an upgrade option, but come with monthly fees. Costs can be recovered elsewhere, including hidden fees, or giving a client significantly less interest for cash balances. Some firms have platform or software fees which cover firms' costs of developing, using and maintaining their proprietary trading software or platforms. The charge can be somewhere between $50 to $300 per calendar month. However, most firms will waive the fee if you trade up to a specific volume per calendar month.

[edit] Account minimums
There are usually 2 types of minimums to open a direct-access account. The first one is balance minimums. This could be several thousands in USD. Different types of accounts may have different requirements. More deposits are required if one engages in pattern day trading according to US regulations. The second one is activity minimums. Some firms charge inactivity fees if a minimum monthly trading volume has not been met. Many firms will deduct transaction fees and commission paid each month from that month's inactivity fee. Hence an activity fee often serves as a minimum monthly commission which is paid to the brokerage. However, not all direct access trading brokerages charge an inactivity fee.

[edit] Who uses direct access trading?
Direct access trading is primarily for self-helped and active traders who value speed of execution and try hard to minimize costs and slippage. Also they get to take care of themselves and make trade decisions on their own (without the help of brokers or advisors). These people typically include:

2. Slippage: Slippage is controlled at a minimal. momentum (event-based) traders . inactive traders [edit] Direct access brokerages VS online retail brokerages [edit] Advantages 1. 3. Direct-access brokerages . Each trade may earn them substantial profits to cover those small slippage losses. Liquidity rebates: Traditional online brokerages usually have a simple and flat commission fee per trade because they sell order flows.Direct-access trading typically requires experience and knowledge. They hold a position for a long time. day traders . Transaction costs are generally per share (ex. Direct access brokers can give them front-end trading software and platforms and offer deep discounts on commissions and brokerage fees.they trade a lot per trading day. scalpers . They need lightning fast execution to enable them to grasp these opportunities.slippage is important to frequent traders. 3. Also it has a higher chance to execute at a better price when the market suddenly moves rapidly 4. 5$ per trade). the market will usually become very volatile. and even incur losses. Cost reduction: Transaction costs are lower for trade executed with a direct access brokerage.they trade in a large volume for small gains. but it amounts to only a dollar or so for each trade. 2. as is common in traditional online trading. 0. Control over order routing: With most direct access firms.1. measured in terms of milliseconds 2. momentum (technical-based) day or swing traders . Speedy execution: It allows very fast execution. and may need to get out quickly if the market goes against them. When the news breaks out. or electronic communication network 5.they trade on high momentum stocks. Direct access trading is not typically for: 1. would therefore not be acceptable to such traders. Slow execution may kill profits. (long-term) investors . They need their orders executed lightning fast.their trading decisions based on news or incidents happened in normal trading days. 4. novice traders . These costs may not justify direct access trading for long-term investors. in which it has high volatility. specialist. Some direct-access brokers charge inactivity and platform fees.004$ per share) where as retail brokerage firms charge on a per transaction basis (ex. 3. A delay of seconds to minutes. the difference between success or failure may be determined in just a second. a trader may choose to send his orders to any specific market maker.

2. not all direct access brokerages have minimum monthly trading volume requirements. Knowledge: New and inexperienced traders may find it difficult to become familiar with direct access trading. Volume Requirement: Some firms charge inactivity fees if a minimum monthly trading volume has not been met. Knowledge is required when dealing with something like making trade decisions & order routing . An active trader can gain what traditional online brokerages gain [edit] Disadvantages not sell order flows and get rebates They earn money from serving their customers. Hence an activity fee often serves as a minimum monthly commission which is paid to the brokerage. For example Interactive Brokers charges a 10 USD per month inactivity fee on accounts generating less than 10 USD a month in commissions. Many firms will deduct transaction fees and commission paid each month from that month's inactivity fee. However.

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