A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Affirmative Obligation
The requirement that a specialist commit his own capital to add liquidity to a market when public supply and demand are temporarily out of balance (see 'auction market'). A specialist will fulfill this obligation by "leaning against the wind," buying and selling stock to cushion temporary imbalances and to avoid unreasonable price variations.

Agency Cross
A trade in which a single broker acts as the agent for both the buyer and seller. This can occur when a member firm simultaneously receives a buy and a sell order from two different customers but for the same number of shares in the same stock. When these orders reach the floor broker, he can easily cross them and complete the transaction, but only after going to the designated trading post for that stock and announcing the bid in case another broker is prepared to offer a better price.

Agent
A person who buys or sells for the account and risk of another. Generally, an agent takes no financial risk and charges a commission for his services.

American Depositary Receipt (ADR)
A receipt that is issued by a U.S. Depositary Bank which represents shares of a foreign corporation held by the bank. Because ADRs are quoted in U.S. dollars and trade just like any other stock, they make it simple for investors to diversify their holdings internationally.

Arbitrage
A technique used by alert traders, now aided by sophisticated computer programs, to profit from minute price differences for the same security on different markets. For example, if a computer monitoring markets notices that ABC stock can be bought on the New York exchange for $10 a share and sold on the London exchange at $10.12, the arbitrageur or a special program can simultaneously purchase ABC stock in New York while selling the same amount it in London, thus pocketing the difference.

Ask Price
The price a seller is willing to accept for a security, also known as the “ offer” price.

Auction Market
A form of trading that takes place by verbal outcry of bids and offers by Exchange members acting as agents for institutions or individual investors. Buy and sell orders meet directly on the trading floor, and prices are determined by the interplay of supply and demand. In contrast, in the over-the-counter market the price is determined by a dealer who buys and sells out of inventory.

Bear (Bull)
For generations, bulls and bears on Wall Street have referred to two decidedly different types of investors - the bulls being those who expect stock prices to rise, the bears being those who believe prices are about to decline.

Bear Market
A term to describe a market of declining prices.

Beta
Coefficient measuring a stock's relative VOLATILITY. The beta is a covariance of the stock in relation to the rest of the stock market. The Standard & Poor's 500 Stock Index has a beta coefficient of 1. Any stock with a higher beta is more volatile than the market, and any with a lower beta can be expected to rise and fall more slowly than the market.

Bid and Ask
Collectively called the "quote", the bid refers to the highest price a buyer is willing to pay for a stock, while the asked is the lowest price a seller will accept.

Bid-Ask Spread
The amount that the ask price exceeds the bid. For example if the bid price is $20 and the ask price is $21 then the "bid-ask spread" is $1.

Bid Price
The price a buyer is willing to pay for a security.

Block Trade
The sale or purchase of a large quantity of securities. In general, 10,000 shares of stock (not including penny stocks) or $200,000 worth of bonds would be considered a block trade.

Blue Chip
A company known nationally for the quality of its products or services, its reliability, and its ability to operate profitably in good and bad economic times.

Broker
An agent who acts as an intermediary between buyer and seller in trading securities, commodities, or other property. He charges a commission for this service.

Cash Sale
A transaction on the floor of the Stock Exchange that calls for delivery of the securities the same day. In regular stock trades, the seller is to deliver on the third business day. Bonds must be delivered on the next day after a trade.

Circuit Breakers
In response to the market breaks in October 1987 and October 1989, the New York Stock Exchange instituted several circuit breakers to reduce market volatility and promote investor confidence. The following is a list and brief description of these circuit breakers.

Circuit-Breaker Levels for Q1 2004
In the event of an 800 point decline in the DJIA (10%):

• Before 2 PM >> 1 Hour Halt
• 2-2:30 PM >> 30 Minute Halt
• After 2:30 PM >> No Halt

In the event of a 1,600 point decline in the DJIA (20%):

• Before 1 PM >> 2 Hour Halt
• 1-2 PM >> 1 Hour Halt
• After 2 PM >> Market Closes

Trading-Collar Levels for Q1 2004
In the event of 150 point advance in the DJIA, all index-arbitrage buy orders of the S&P 500 stocks must be stabilizing for the remainder of the day. Collar will be removed if the DJIA moves back to within 70 points of the previous day’s close.

In the event of a 150 point decline in the DJIA, all index arbitrage sell orders of the S&P 500 stocks must be stabilizing for the remainder of the day. Collar will be removed if the DJIA moves back to within 70 points of the previous day’s close.

Commission Broker
An agent who executes the public's orders for the purchase or sale of securities or commodities.

Consolidated Quote System (CQS)
Collects and disseminates, electronically, current bid and asked quotations along with volume, from and to all market.

Consolidated Tape
A high-speed system that continuously provides the last sale price and volume of any securities transaction in listed stocks to the public. All trades in NYSE-listed securities, regardless of the market center on which such trades occur, are reported to and disseminated on the ticker system. The following market centers are Consolidated Tape participants:

• American Stock Exchange (AMEX)
• Boston Stock Exchange (BSE)
• Chicago Board Options Exchange (CBOE)
• Cincinnati Stock Exchange (CSE)
• Chicago Stock Exchange (CHX)
• National Association of Securities Dealers (NASD)
• New York Stock Exchange (NYSE)
• Pacific Stock Exchange (PSE)
• Philadelphia Stock Exchange (PHLX)

Consolidated Trade System (CTS)
Receives and disseminates, electronically, listed stock last-sale prices in all markets in which they trade. CTS is under the operational guidance of the Consolidated Tape Association (CTA).

CQS
Consolidated Quotation System - Collects and disseminates, electronically, current bid and asked quotations, with volume, from and to all market centers trading listed stocks.

Cross
Another name for a trade or a transaction. The matching of a buy order with an identical order to sell.

Crowd
Brokers that come to the post to seek an execution.

Day Order
An order to buy or sell which, if not executed, expires at the end of the trading day on which it was entered.

Dealer
An individual or firm in the securities industry who buys and sells stocks and bonds as a principal rather than as an agent. The dealer's profit or loss is the difference between the price paid and the price received for the same security. The dealer's confirmation must disclose to the customer that the principal has been acted upon. The same individual or firm may function, at different times, either as broker or dealer.

Dealer Participation Rate (%TTV)
The total shares bought and sold by the specialist as a dealer as a percentage of all shares bought and sold (i.e., twice total volume).

Dealer Stabilization Rate (%Stab)
The specialists’ total shares bought on “minus” and “zero minus” ticks and sold on “plus” and “zero plus” ticks as a percentage of the specialists’ total purchases and sales.

Delayed Opening
The postponement of the trading of an issue on a stock exchange because of unusual market conditions. Reasons for the delay might be an influx of either buy or sell orders, an imbalance of buyers and sellers, or pending corporate news that requires time for dissemination.

Depth Guidelines
A computerized market depth surveillance system that compares the depth value of each 3,000 share sequence to a predetermined depth guideline and generates exceptions for further review if the depth value exceeds the guideline. [A stock’s depth guideline is based on its current price and previous month’s average daily non-block (trades under 25,000 shares) volume.

Derivative Security
A financial security whose value is determined in part from the value and characteristics of another security, known as the underlying security.

Display Book (Electronic Book)
At the trading post, SuperDot orders that come in from member firm systems appear on the specialist's Display Book screen. The Display Book is an electronic workstation that keeps track of all limit orders and incoming market orders.

Various window-like screen applications allow the specialist to view one or more issues at a time at various levels of detail. Incoming SuperDot limit orders automatically enter the Display Book. The Display Book sorts the limit orders and displays them in price/time priority.

When a floor broker gives the specialist a limit order, the specialist's clerk can enter the order into the Display Book using the keyboard. SuperDot market orders are displayed at the terminal and await further action. The order execution may be a market against another order on the book, against the specialist's inventory, or against an order represented by a floor broker in the crowd.

The message that an order has been executed (in part or whole) is called a report. The report goes from the specialist, SuperDot and CMS to the members who entered the orders involved in the trade. Trades involving more than one SuperDot order will generate more than one report. The ultimate destination of the execution report is the investor who placed the order.

Dollar Cost Average
A system of buying securities at regular intervals with a fixed dollar amount. Under this system investors buy by the dollars worth rather than by the number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Temporary downswings in price benefit investors if they continue periodic purchases in both good times and bad and the price at which the shares are sold is more than their average cost.

Dow Theory
A theory of market analysis based upon the performance of the Dow Jones stock price averages. The theory holds that there is no primary market trend (i.e., a trend that will last -- either upward or downward -- for a year or more) unless there is substantial correlation between the movements of the industrial, transportation, and utility averages.

ECN
Electronic Communication Network. An electronic system that attempts to match buy & sell orders within the same ECN. Orders placed through ECNs are not guaranteed execution, and there is no possibility for price improvement or best price. ECN environments have less liquidity for investors than the primary marketplace for a stock.

Ex-Dividend
A synonym for "without dividend." The buyer of an ex-dividend stock is not entitled to the next dividend payment. Dividends are paid on a set date to all those shareholders recorded on the books of the company as of a previous date of record.

For example, a dividend may be declared as payable to stockholders of record on a given Friday. Since three business days are allowed for delivery of stock in a regular transaction on the New York Stock Exchange, the Exchange would declare the stock "ex-dividend" as of the opening of the market on the preceding Wednesday. That means anyone who bought it on or after that Wednesday would not be entitled to that dividend. When stocks go "ex-dividend", the stock tables include the symbol "x" following the name.

Exchange-Trade Fund (ETF)
This fund owns a basket of stocks that mirrors the composition of a market index. An investor buys ETF shares the same way shares of stock are bought, not from a fund company, but on a stock exchange, with the help of a broker who charges a commission.

Fair Market Price
A reasonable price for securities based on supply and demand.

Fill or Kill
The fill or kill order is used by customers wishing an immediate fill, but at a specified price. The floor broker will bid or offer the order three times and return to you with either a fill or an unable, but it will not continue to work throughout the session.

Financial Futures
Futures contracts based on financial instruments such as U.S. Treasury bonds, CDs and other interest-sensitive issues, currencies and stock market indicators.

Floor Brokers
The largest single membership group of the NYSE. There are two main types: Commission brokers, employed by brokerage houses, buy and sell securities on the NYSE floor for the general public. Independent floor brokers work for themselves. They execute orders for brokerages without full-time commission brokers or for overly busy brokers.

Floor Official
A member or employee of the Exchange responsible for supervising and regulating trading floor activities.

Free and Open Market
A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated.

Fundamental Research
Analysis of industries and companies based on such factors as sales, assets, earnings, products or services, markets and management. As applied to the economy, fundamental research includes consideration of gross national product, interest rates, unemployment, inventories, savings, etc.

Futures
A contract specifying a future date of delivery or receipt of a certain amount of a specific tangible or intangible product. The commodities traded in futures markets include stock index futures; agricultural products like wheat, soybeans and pork bellies; metals; and financial instruments. Futures are used by business as a hedge against unfavorable price changes and by speculators who hope to profit from such changes.

Good 'til Cancelled (GTC) Order
An order to buy or sell that remains in effect until it is either executed or canceled. Also called an Open Order.

Hedging
The purchase or sale of a derivative security (such as options or futures)
in order to reduce or neutralize all or some portion of the risk of holding another security.

House Broker
An agent, employed by a brokerage house, who executes the public's order for the purchase or sale of securities or commodities.

Imbalance
Heavily weighted order to one side or the other i.e. a large amount to buy or sell without a commensurate amount on the other side.

Independent Broker
Member on the floor of the NYSE who executes orders for other brokers who are too busy to handle all of their orders, or for firms who do not have their Exchange member on the floor. Independents are still sometimes referred to as "two dollar brokers" because they originally received $2 for every hundred shares they traded. Now their fees are paid by the commission brokers.

Index
Any comprehensive measure of market trends, intended for investors who are concerned with general stock market price movements.

Indication
Electronic posting of bids and offers to attract orders. This is the NYSE’s method of advertising to find the other side of the imbalance.

Intermarket Trading System (ITS)
An electronic communications network that links nine markets -- the New York (NYSE), American (AMEX), Boston (BSE), Chicago (MSE), Cincinnati (CSE), Pacific (PSE) and Philadelphia (PHLX) stock exchanges, the Chicago Board Options Exchange (CBOE), and the NASD. The system enables market professionals to interact with their counterparts in other markets whenever the nationwide Consolidated Quote System (CQS) shows a better price.

ITS was inaugurated on a pilot basis on April 17, 1978 with the New York and Philadelphia exchanges trading 11 stocks. During mid-1978, four other exchanges joined the system. Gradually, more issues were added. The Cincinnati Stock Exchange joined in February 1981. The NASD became a participant on May 17, 1982 when an experimental linkage between ITS and CAES, an automated system operated by the NASD, was ordered by the SEC. This pilot was originally limited to 30 listed stocks (23 on the NYSE and 7 on the AMEX) in which SEC Rule 19c-3 permits exchange member firms to make dealer markets in away from any exchange trading floor. The Chicago Board Options Exchange joined on February 20, 1991.

The 3,293 issues eligible for trading on ITS at the end of 1994 represented most of the stocks traded on more than one exchange. Of these stocks, 2,817 are listed on the New York Stock Exchange and 476 on the American Stock Exchange.

Leverage
Any means of increasing value and return by borrowing funds or committing less of one's own. For corporations, it refers to the ratio of debt (in the form of bonds and preferred stock outstanding) to equity (in the form of common stock outstanding) in the company's capital structure. The more long-term debt there is, the greater the financial leverage. Shareholders benefit from this financial leverage to the extent that the return on the borrowed money exceeds the interest costs of borrowing it. The market value of the company rises and so do its shares. Because of this effect, financial leverage is popularly called "trading on the equity." For individuals, leverage can involve debt, as when an investor borrows money from his broker "on margin" and so is able to buy more stock than he otherwise could. If the stock goes up, he repays the broker the loan amount and keeps the profit himself. By borrowing money he has achieved a higher return on his investment than if he had paid for all the stock himself. Rights, warrants, and option contracts also provide leverage, not through debt but by offering the prospect of a high return for little or no investment.

LEAPS
Long-term Equity AnticiPation Securities are long-term stock or index options. LEAPS, like all options, are available in two types, calls and puts, with expiration dates up to three years in the future.

Limit Order
An order to buy or sell a predetermined amount of shares at a specified price or better than the specified price. Limit orders also allow an investor to limit the length of time an order can be outstanding before cancelled. Limit orders are especially useful on a low volume or highly volatile stock.

Limit Order Processing
The limit order system electronically files orders which are to be executed when and if the specific limit price is reached. The system accepts limit orders up to 99,999 shares and electronically updates the Specialist's Electronic Book. Good ‘til Cancelled orders not executed on the day of submission are automatically stored until executed or cancelled.

Liquidity
The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.

Long
Signifies ownership of securities. "I am long 100 U.S. Steel" means the speaker owns 100 shares.

Margin
The use of borrowed money to purchase securities, referred to as "buying on margin." Margin subjects the user to a number of unique risks as well as interest payments for use of the borrowed money.

Margin Call
A demand upon a customer to put up money or securities with the broker. The call is made when a purchase is made; also if a customer's equity in a margin account declines below a minimum standard set by the Exchange or by the firm.

Market Depth
The difference between highest price and the lowest price in a sequence of transactions totaling 3,000 shares.

Market Maker
A broker/dealer who is registered to trade in a given security on the NASDAQ.

Market-On-Close (MOC) Order
A market order, which is to be executed in its entirety at the closing price, on the Exchange, of the stock named in the order, and if not so executed, is to be treated as cancelled. The term "at the close order'' shall also include a limit order that is entered for execution at the closing price, on the Exchange, of the stock named in the order pursuant to such procedures as the Exchange may from time to time establish.

Market Order
An order to buy or sell a stock immediately at the best available current price. A market order guarantees execution. Sometimes referred to as an unrestricted order.

Market Price
The last reported price at which the stock or bond sold, or the current quote.

Market Value
The current resale value of a security. The market value of an issue is easily computed as the closing price multiplied by the shares outstanding.

Member Corporation
A securities brokerage firm organized as a corporation, with at least one member of the New York Stock Exchange who is an officer or employee of the corporation.

Member Firm
A securities brokerage firm organized as a corporation, partnership or sole proprietorship with at least one member of the NYSE who is an officer or employee of the corporation.

Member Organization
This term includes New York Stock Exchange Member Firms and Member Corporations.

National Market System
A national market system was mandated by the Securities Act Amendments of 1975, the most important federal securities legislation since the 1930s. At the heart of the national market is the ITS, which began operation in 1978. Nine markets -- the American, Boston, Cincinnati, Chicago, New York, Pacific, and Philadelphia and NASD over-the-counter market -- are linked electronically by ITS computers. This allows traders at any exchange to seek the best available price on all other exchanges that a particular security is eligible to trade on. The national market system also includes a consolidated electronic tape, which combines last-sale prices from all markets into a single stream of information.

New York Stock Exchange (NYSE)
The NYSE marketplace blends public pricing with assigned dealer responsibilities. Aided by advanced technology, public orders meet and interact on the trading floor with a minimum of dealer interference. The result is competitive price discovery at the point of sale. Liquidity in the NYSE auction market system is provided by individual and institutional investors, member firms trading for their own accounts, and assigned specialists. The NYSE is linked with other markets trading listed securities through the Intermarket Trading System (ITS).

NYSE-assigned dealers, known as specialists, are responsible for maintaining a fair and orderly market in the securities assigned to them. Most trading, however, is conducted by brokers acting on behalf of customers, rather than by dealers trading for their own account. For this reason, the NYSE is often described as an agency auction market. The interaction of natural buyers and sellers determines the price of a NYSE-listed stock.

NYSE Composite Index
In 1966, the NYSE established the NYSE Composite Index to provide a comprehensive measure of the market trend for the benefit of many investors who are concerned with general stock market price movements. The indexes consist of a Composite Index of all common stocks listed on the NYSE and four subgroup indexes -- Industrial, Transportation, Utility, and Finance.

The indexes are basically a measure of the changes in aggregate market value of NYSE common stocks, adjusted to eliminate the effects of capitalization changes, new listings and delistings. The market value of each stock is obtained by multiplying its price per share by the number of shares listed. The aggregate market value, which is the sum of the individual market values, is then expressed relative to a base point market value. The base value was set at 50.00 on December 31, 1965 because this figure was reasonably close to the actual average price of all common stocks at that time.

The arithmetic procedure in calculating the index is shown in the following simplified example: Year-end total market value of common stocks, $5,943.5 billion, divided by adjusted base market value, $901.9 billion, multiplied by 50.00 equals the index, 329.51 at year-end.

Every measure of changes in stock prices - index or average - must frequently be adjusted to reflect only movements resulting from auction market activity and eliminate the influence of corporate actions. Any change in the capitalization of an individual issue or of all issues in aggregate is dealt with in this index by making a proportionate change in the market value of the base figure.

NYSE-Listed
Companies that have applied and been approved to have their shares traded on the New York Stock Exchange.

OARS
Opening Automated Report Service Provides improved accuracy and efficiency for handling certain orders sent before trading opens. OARS receives, stores, and continuously tabulates market orders up to a specified size routed through the common message switch. It matches buy and sell interest in each stock, calculates imbalances, and reports them to specialists. Seconds after the specialist notifies OARS of an opening price, the system automatically generates and returns execution reports to originating firms, and submits the trade for automatic clearance and settlement.

Odd Lots
Stock transactions that involve less than 100 shares.

Off-Board
This term may refer to transactions over-the-counter in unlisted securities or to a transaction of listed shares that is not executed on a national securities exchange.

Off-Hours Trading
Trading that takes place after the close of the regular session. On June 13, 1991, the NYSE introduced off-hours trading in the form of two post 4:00 p.m. crosses. Crossing Session I introduced a 5:00 p.m. cross in individual stocks at the NYSE regular day closing price; Crossing Session II facilitates the crossing of portfolios until 5:15 p.m.

Crossing Session I
Crossing Session I operates between 4:15 and 5:00 p.m. (EST). It enables members to enter one-sided, two-sided, or good-til-executed (GTX) orders for a particular stock into the SuperDot system for execution at 5:00 p.m. Matched orders are executed at the NYSE closing price determined during the Exchange's 9:30 a.m. to 4:00 p.m. trading session and are printed on the consolidated tape.

In August 2003, Crossing Session I totaled 45 million shares.

Crossing Session II
Crossing Session II operates between 4:00 p.m. and 5:15 p.m. (EST). This session is designed to facilitate trading of baskets of at least 15 NYSE securities valued at $1 million or more. Members that have either facilitated a basket trade, or have paired two customers' baskets, submit aggregate information to the Exchange for execution. At 5:15 p.m., the NYSE prints the aggregate information of all baskets executed in this session to the consolidated tape. On the third day after trade date (T+3), the individual component stocks executed as part of a basket trade are printed in aggregate form in the NYSE Daily Sales Report.

In August 2003, Crossing Session II totaled 377 million shares.

Offer
The price at which a person is willing to sell a security.

Overbought
Refers to a stock that has risen sharply in price or to the market as a whole after a period of vigorous buying which, it is sometimes said, has left prices "too high".

Oversold
The reverse of over-brought. A single security or a market which, it is believed, has declined to an unreasonable level.

Over-the-Counter (OTC)
A security which is not traded on an exchange, usually due to an inability to meet listing requirements. For such securities, brokers/dealers negotiate directly with one another over computer networks and by phone. Also referred to as unlisted.

Panel
The stocks assigned to a specialist to trade are displayed above his/her head at the trading post.

Participation
Measures the frequency that the specialist is either the buyer or the seller.

Pre-Market Trading
Trading done before the regular market opens. Participation by market makers and ECNs is voluntary, and, consequently, there may be less liquidity than during normal trading hours.

Price Continuity
The absolute value of a price change, if any, from one trade to the next in the same stock.

Price-Earnings Ratio
A popular measure for comparing stocks selling at different prices in order to single out over or undervalued issues. The P/E ratio is simply the price per share divided by the company's earnings per share. However, P/E is not always an accurate guide to a stock's quality. Some people tend to think that a stock is inflated and drastically overvalued if its price is many times its earnings. Yet that same stock may be quite accurately valued to reflect the company's rapid growth and potential for high future earnings. When comparing P/Es it is therefore important to choose stocks in the same industry that are likely to face the same earnings prospects.

Price Improvement
When a buy order is executed at a price lower than the current quoted offer, or when a sell order is executed at a price higher than the current quoted bid. In addition to quoting the best prices more than 90 percent of the time, the NYSE continuous auction market typically improves upon these quoted prices, allowing investors to get a better price for their shares.

Primary Distribution
The sale of a new issue of securities by a company. Initial public offerings (IPOs) are primary distributions by companies that were not publicly traded prior to the offering.

Primary Market
The process by which a corporation's stock is issued for the first time. It is then sold to the public on the secondary market.

Principal
Any person who buys or sells a security for his or her own account. Also refers to an executive of a firm that actively engages in that firm's trading business.

Profit-Taking
Selling stock that has appreciated in value since purchase, in order to realize the profit. The term is often used to explain a downturn in the market following a period of rising prices.

Program Trading
Computerized trading used primarily by institutional investors, typically for large volume trades. Orders from the trader's computer are entered directly into the market's computer system and executed automatically. Program trades are usually executed if index prices sink or rise to a certain level. This tends to create very volatile situations, and as a result there are restrictions on when program trading can be used.

Quote
The highest bid to buy and the lowest offer to sell any stock at a given time.

Quotation Spread
The difference between the best bid price and the best offer price of the reported quotation.

Rally
A brisk rise following a decline in the general price level of the market, or in an individual stock.

Registered Competitive Market Maker (RCMM)
A member of the Exchange who trades in stocks on the Floor for an account in which there is an interest. Also known as a Registered Trader.

Report
A message that an order has been executed (in part or in whole). Even though the report is the formal notice that has occurred, it is not publicly available and is not the same as the “print” of the transaction that appears on the tape.

Round Lot
A transaction that usually involves at least 100 shares of stock or 5 bonds. A deal involving less than 100 shares is considered an odd lot transaction.

Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002, which President Bush signed into law on July 30, 2002, addresses a wide range of corporate-accountability issues. Key provisions of the legislation, which apply to both U.S. and foreign private issuers, will:
Create a Public Company Accounting Oversight Board to establish auditing standards and regulate accountants who audit public companies;

• Prohibit auditors from providing non-audit services to audit clients, except with oversight board pre-approval;
• Require CEOs and CFOs to certify their companies’ annual and quarterly financial reports, subject to civil and criminal penalties;
• Require CEOs and CFOs to forfeit bonuses, incentive compensation or gains from the sale of company securities during the 12-month period after the initial publication of financial statements that have to be reinstated as a result of misconduct;
• Demand real-time disclosure, in plain English, of material changes to an issuer’s financial condition or operations;
• Require public companies to have an audit committee composed entirely of independent directors;
• Require public companies to disclose the adoption of, and any changes to, corporate codes of ethics;
• Prohibit issuers from extending new personal loans to directors and executive officers;
• Accelerate the reporting of insider transactions to within two business days;
• Prohibit directors and executive officers from trading company stock during company benefit plan blackout periods;
• Provide criminal penalties for destroying audit records or falsifying documents;
• Enhance criminal penalties for violations of antifraud rules, federal securities laws and other “white-collar” crimes;
• Protect employees of public companies against retaliation for whistle-blowing;
• Increase the frequency of SEC reviews of public-company filings to at least once every three years.

Source: An analysis prepared by Sullivan & Cromwell for the BNA Daily Report

Scale Order
An order to buy (or sell) a security, that specifies the total amount to be bought (or sold) at specified price variations.

Secondary Market
When stocks or bonds are traded or resold, they are said to be sold on a secondary market. The majority of all securities transactions take place on a secondary market.

Sell Side
A broker/dealer who sells expertise in research, order execution or any other service to an individual or institution.

Seller's Option
A special transaction that gives the seller the right to deliver the stock or bond at any time within a specified period, ranging from not less than 2 business days to not more than 60 business days.

Short Sell Against The Box
The act of short selling securities that you already own. This results in a neutral position where your gains in a stock are equal to the losses.

For example, if you own 200 shares of XYZ and you tell your broker to sell short 200 shares of XYZ, you have shorted against the box. The sole rationale for shorting-against-the-box is to delay a taxable event, such as delaying capital gains until the next year. Unfortunately, tax agencies have discovered this tactic and have tried to prevent it.

This strategy is also known as "shorting against the box."

Short Covering
Buying stock to return stock previously borrowed to make delivery on a short sale.

Short Selling
The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short. Selling short is the opposite of going long. That is, short sellers make money if the stock goes down in price.

Short Interest
The total number of shares of a security that have been sold short by customers and securities firms. Short interest is typically expressed as a percentage. For example, 3% short interest means that 3% of the outstanding shares are held short.

Specialist
Central to the New York Stock Exchange customer-driven system is the specialist. Specialists manage the auction market in the specific securities allocated to them. Specialist units are independent companies in corporate or partnership structures.

Specialists conduct trading in equities across a range of industries. The number of stocks traded by an individual specialist varies according to the total activity of the stocks. Specialist firms distribute the activity to balance the workload for each specialist.

Specialist's Responsibility
Specialists must maintain a fair, competitive, orderly and efficient market. This means that all customer orders have an equal opportunity to interact and receive the best price. It also means that once auction trading begins, a customer should be able to buy or sell a reasonable amount of stock close to the last sale. Therefore, a specialist works to avoid large or unreasonable price variations between consecutive sales. The results: almost 98% of all trades take place at 1/8th point or less from the last sale.

The auction takes place at the specialist's post where the stocks are traded. This single location -- or point of sale -- combined with rules of trading, guarantees maximum order exposure, interaction and market liquidity.

On the trading floor, specialists perform four critical roles:

• Specialist as Auctioneer
  The specialist continually shows the best bids and offers throughout the trading day. These quotes are disseminated electronically through the NYSE quote and other market data systems that transmit the information instantly worldwide. The specialist maintains order in the crowd and interacts with agents representing customers.
  
• Specialist as Agent
  A specialist is the agent for all SuperDot (electronically routed) orders. A floor broker may also choose to leave an order with a specialist to represent it until it can be executed at a specified price. This frees brokers up to concentrate on other orders that require their immediate attention. As agent, a specialist assumes the same fiduciary responsibility as a broker.
  
• Specialist as Catalyst
  Unique to the agency-auction is the specialist as a conduit of order flow. The specialist knows who has been interested in a stock, and keeps track of all known interest. As all buyers and sellers aren't always represented in the crowd at the same time, the specialist can call in all interested parties to let them know what has become available in the market. By giving updates to a previously interested party, a specialist helps trades occur where they otherwise might not happen.
  
• Specialist as Principal
  Specialists, in order to fulfill their role, agree to several obligations. The first is to place and execute all customer orders ahead of their own. At the NYSE, three out of four transactions take place between customers, without the capital participation of the specialist.

In the balance of transactions, a specialist participates as principal by providing capital and, thereby, adding liquidity to the market. While they do not supply all the liquidity for the market, or determine the ultimate price of a stock, they use their capital to bridge temporary gaps in supply and demand and help reduce price volatility by cushioning price movement.

The Influence of Supply and Demand on Stock Prices Supply and demand ultimately determines the trading price of a stock. As a stock rises and falls to meet supply and demand, the specialist constantly adjusts the market reflecting the public order flow. Intraday price swings are caused by shifts in supply or demand.

The specialist is required to buffer temporary shifts in supply or demand. For instance, news is a market mover. Between the close of trading one day and opening the next morning, company or industry news, economic or political developments or shifts in foreign exchange rates can all affect an investor's actions and influence stock prices.

For example, a company may report much higher than expected earnings. Customer response might result in a flurry of buy orders. When demand for a stock overwhelms the supply, the price of the stock may rise sharply. The specialist steps in against the market trend and becomes a seller of stock to make the advance more orderly.

The same is true if the supply outweighs the demand. The specialist will not be able to prevent a fall in the price but he or she will buy stock at various price points to fill in gaps and make the transition from price A to B more orderly. This cushioning process gives buyers and sellers a better opportunity to enter the market and eventually restore equilibrium. This is how an orderly and more liquid market is sustained.

As principal, Specialists supply the short-term liquidity for the market. Buying or selling against the trend, specialists help to reduce volatility and stabilize the market. Specialist performance in meeting their obligations is closely monitored by the Market Surveillance Division of the Exchange using sophisticated technology and analysis.

As auctioneer, agent, catalyst and principal, specialists make a continuous market in a stock from the opening to the closing bell, insuring that shareholders have the opportunity to buy and sell stock as close to the last sale as possible.

SPEQ Ratings
Specialist Performance Evaluation Questionnaire - Surveys floor brokers quarterly to assess how well the specialists maintain the auction market; and how effectively they fulfill their dealer, agency, communication, and administrative functions.

Spread
The difference between the bid and the offer.

Statistical Arbitrage
A profit situation arising from pricing inefficiencies between securities. Investors identify the arbitrage situation through mathematical modeling techniques.

Statistical arbitrage is not without risk; it depends heavily on the ability of market prices to return to a historical or predicted normal.

Stop Limit Order
An order to buy or sell at a specified price or better (called a stop-limit price), but only after a given stop price has been reached or passed. It is a combination of a stop order and a limit order.

Stop Order
An order to sell a stock when its price falls to a particular point, thus limiting an investor's loss (or locking in a profit). Also referred to as a "stop-loss order."

Street Name
Securities held in the name of a broker instead of a customer's name are said to be carried in "street name." This occurs when the securities have been bought on margin or when the customer wishes the security to be held by the broker.

SuperDot
Super Designated Order Turnaround System - Transmits member firms' market and day limit orders, up to specified sizes in virtually all listed stocks, through the common message switch to the proper trading floor workstation. Specialists receiving orders through SuperDot execute them in the trading crowd at their posts, as quickly as market interest and activity permit, and return reports to the originating firm's offices via the same electronic circuit that brought them to the floor. Super Dot can handle daily volume exceeding 2 billion shares.

Syndicate
A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue.

Technical Research
Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effects of current market action or future supply and demand for securities and individual issues.

Third Market
Securities listed on a stock exchange that are also traded in the over-the-counter market by broker/dealers.

Tick
The tick is the direction in which the price of a stock moved on its last sale. An up-tick means the last trade was at a higher price than the one before it and a down-tick means the last sale price was lower than the one before it. A zero-plus tick means the transaction was at the same price as the one before, but still higher than the nearest preceding different price. The tick becomes especially important when large market movements trigger the implementation of certain circuit breakers meant to stabilize the market.

Ticker
A telegraphic system that continuously provides the last sale prices and volume of securities transactions on exchanges. Information is either printed or displayed on a moving tape after each trade.

Trader
An employee of a broker/dealer or other financial institution who specializes in handling purchases and sales of securities for the firm or its clients.

Trading Posts
Manned by clerks and specialists on the Trading Floor of the NYSE, Trading Posts are like stores where individual stocks are bought and sold. Each trading post is responsible for over 100 stocks. The actual buying and selling takes place at each post.

Triple Witching Hour
The last trading hour on the third Friday of March, June, September and December when options and futures on stock indexes expire concurrently.

Up Tick
A term used to designate a transaction made at a price higher than the preceding transaction. Also called a plus tick". A zero plus tick is a term used for a transaction at the same price as the preceding trade but higher than the preceding different price. Conversely, a down tick, or minus tick is a term used to designate a transaction made at a price lower than the preceding trade. A plus sign or minus sign is displayed throughout the day. They are attached to the last price of each stock, and can be seen on the trading post at the floor of the New York Stock Exchange.

UTP
An Unlisted Trading Privilege (UTP) is a right, provided by the Securities Exchange Act of 1934, that permits securities listed on any national securities exchange to be traded by other such exchanges.

Volatility
A measure of the fluctuation in market price of a security. A volatile issue has frequent and large swings in price.

Volume
The number of shares or contracts traded in a security or an entire market during a given period. Volume is normally considered on a daily basis, with a daily average being computed for longer periods.

Volume Weighted Average Price (VWAP)
A trading benchmark particularly used in pension plans. It is calculated by adding up the dollars traded for every transaction (price times shares traded) and then dividing by the total shares traded for the day.

The theory is that if the price of a buy trade is lower than the VWAP, it is a good trade. The opposite is true if the price is higher than the VWAP.

When Issued
A short form of when, as and if issued. The term indicates a conditional transaction in a security authorized for issuance but not as yet actually issued. All "when issued" transactions are on an "if" bases, to be settled if and when the actual security is issued and the exchange or National Association of Securities Dealers rules the transactions are to be settled.