Glossary

Account closure (depositor account)

The closure of beneficiary and pool accounts by the investor and the clearing member or at the discretion of the participant, if the client has defaulted in its obligations towards the participant.

Accreting

A description applicable to a range of instruments, e.g. caps, swaps, collars and swaptions, where the notional amount on which the instrument is based increases successively during its life.

Acid Test Ratio

The value of cash equivalents and accounts receivable (the quick assets) divided by current liabilities. Also known as quick asset ratio or liquidity ratio, it is a measurement of corporate liquidity..

Acquirer

Any individual/company/any other legal entity, which intends to acquire or acquires substantial quantity of shares or voting rights of target company or acquires or agrees to acquire control over the target company along with the persons acting in concert.

Adhoc Margin

Margin collected by the Stock Exchange from the members having unduly large outstanding position or the margin levied on volatile scrips based on adhoc basis keeping in view the risk perspective.

Adjustable Peg

Term for an exchange rate regime where a country’s exchange rate is pegged (i.e. fixed) in relation to another currency (normally the dollar), but where the rate may be changed from time to time.

Admission to Dealing

The process of granting permission to the securities of a company to be listed in a Stock Exchange and to provide trading facilities for the securities in the market.

Agency Orders

Orders that a broker dealer executes for the account of a customer with another professional or retail investor.

Allotment Advice

A letter sent to the successful applicant by the company stating allotment of shares or debentures or other securities against his application. The advice is not negotiable in the market.

AMBI

Association of Merchant Bankers in India

American Depository Receipts (ADR) (U.S.)

A certificate issued in the United States in lieu of a foreign security. The original securities are lodged in Bank/Custodian abroad, and the American Depository Receipts (ADRs) are traded in the US for all intents and purposes as if they were a domestic stock. An ADR dividend is paid in US dollars, so it provides a way for American investors to buy foreign securities without having to go abroad, and without having to switch in and out of foreign currencies.

American Option

A put or call that can be exercised at any time prior to expiration. Most listed stock options, including those on European exchanges are US style options. Important exceptions are certain low strike price 3 options and options on shares with restricted transferability. Most listed options on other instruments are also US-style options, but a number of European style options have been introduced in recent years, particularly on stock indices and currencies.

AMFI

Association of Mutual Funds in India

Approved intermediary

A person duly registered by the SEBI Board under the Securities Lending Scheme , 1997 through whom the lender of securities will deposit the securities and the borrower will borrow the securities.

Arbitration

An alternative dispute resolution mechanism provided by a stock exchange for resolving disputes between the trading members and their clients in respect of trades done on the exchange.

Arbitration

An option whose pay-off depends on the average value of an underlier over a specified period.

Asset allocation fund

A mutual fund that splits its investment assets among stocks, bonds, and other vehicles in an attempt to provide a consistent return for the investor.

Asset-backed securities

Securities backed by assets that are not mortgage loans. Examples include assets backed by automobile loans, credit card receivables and others.

Asset based securitization

A process that creates a series of securities which is collaterised by assets mortgaged against loans, assets leased out, trade receivables, or assets sold on hire purchase basis or installment contracts on personal property.

Asset Stripper

A person who buys a company in order to make profit by peeling off its assets bit by bit, and then selling them. These assets may be separate subsidiaries or plant and equipment or property. This process invariably involves the stripping of another sort of asset (the employees) of a number of jobs. This has been largely responsible for giving asset strippers a bad name. The asset stripper relies on there being a difference in the price of the business as a whole (as valued by a stock market, for example) and the sum of the amounts that can be raised from its parts sold separately. Such a possibility arises most commonly when a company is making losses or a much smaller profit than seems to be justified by its size.

Asymmetric information

A situation where access to information by one party (or parties) to a transaction is better than access by another party (or parties). Asymmetric information can be used as a source of power in determining the outcome of the transaction.

At Best

An instruction from the client to the broker authorizing him to use his discretion so as to execute an order at the best possible market price.

Aunt Jane/Aunt Agatha

A passive long term investor.

Authorized Assistants

Assistants or clerks of members who are authorized by them to do business on their behalf in the market. The member has to take responsibility of fulfilling all the transactions and business commitments of the authorized assistants entered into on behalf of the members.

Authorized Assistants

Assistants or clerks of members who are authorized by them to do business on their behalf in the market. The member has to take responsibility of fulfilling all the transactions and business commitments of the authorized assistants entered into on behalf of the members.

Baby Bond (U.S)

A bond with a face value of less than $1000 usually in $100 denominations

Backwardation/Ulta Badla/Undha Badla

The payment of money charges made by a seller of shares which he borrows to deliver against his sale. These charges become payable only when there are more sellers who are not in a position to deliver against their sale. These charges become payable to the buyer, when the seller is not in a position to deliver the documents to the buyers who demand delivery.

Badla

Carrying forward of transactions from one settlement period to another without effective delivery. This is permitted only in specified securities and is done at the making up price which is usually the closing price of the last day of settlement.

Badla Charge/ Contango

Consideration or interest paid to the seller by the buyer for carrying over a transaction from one settlement period to another.

Badliwalas

A financier who lends money to both buyers and sellers of shares when they are not able to pay or deliver.

Bail out of issue

When the public issue do not get good response from the public or fails to garner minimum subscription ,the issuer or promoters approaches the financiers or some persons to arrange subscription to bail out the issue for consideration of buy-back shares subsequent from the financiers at higher price or compensating the financier by payment of interest on the amount of the subscription money paid in the public issue.

Bancassurance

The phenomenon whereby a financial institution combines the selling of banking products and insurance products through the same distribution channel. Popular in the early 1990s bancassurance rested on the premise that it is easy to cross-sell banking and insurance services because customers feel confident buying insurance from the same institution where they keep their savings

Band Ke Bhao

Unauthorized trading in securities done outside official hours.

Banker to an issue

A scheduled bank carrying on all or any of the issue related activities namely acceptance of application and application monies; acceptance of allotment or call monies; refund of application monies; and payment of dividend or interest warrants.

Bear Hug

A variety of takeover strategy that seeks to hurry target company managements to recommend acceptance of a tender offer in a short period of time.

Bearer Securities/Bearer Bonds

Securities which do not require registration of the name of the owner in the books of the company. Both the interest and the principal whenever they become due are paid to anyone who has possession of the securities. No endorsement is required for changing the ownership of such securities.

Bellweather

A security that is seen as a significant indicator of the direction in which a market’s price is moving.

Bilateral netting

An arrangement between two parties in which they exchange only the net difference in their obligations to each other. The primary purpose of netting is to reduce exposure to credit/settlement risk.

Blow Out

A security offering that sells out almost immediately.

Blue Sky Laws (U.S)

Laws passed by the states in the U.S. to protect investors. The term traces its origin to a remark made by a Kansas legislator that unless a state passed effective legislation promoters would try to sell shares in the blue sky to unsuspecting investors.

Boiler Room (U.S)

It is a practice of using high pressure sales tactics.This practice is sometimes used by stock brokers who try to sell investors the firm’s house stock. A broker using boiler room tactics only gives customers promising information about the company and discourages them from doing any outside research.

Bond Trust

Public unit trust which invests in government fixed interest or corporate fixed interest securities and investments

Breadth of the Market

The number of securities listed on the market in which there is regular trading.

Break

A rapid and sharp decline in a security or index

Broad based Fund (sub account)

A fund which has at least 20 shareholders and no single investor holds more than 10% of shares and units of the Fund. In case, if any investor holds more than 10% of shares or units of the fund, then it should be broad based.

Bucket Shop (U.S)

A fraudulent brokerage firm that uses aggressive telephone sales tactics to sell securities that the brokerage owns and wants to get rid of. The securities that they sell are typically poor investment opportunities, almost always penny stocks. A brokerage that makes trades on a client’s behalf and promises a certain price. The brokerage, however, waits until a different price arises and then makes the trade, keeping the difference as profit. A stock brokerage operation in which the broker accepts the client’s money without ever buying the stock ordered. Instead the money is used for another purpose, the broker gambling that the customer is wrong and that the market price will decline and the stock can be bought at a lower price.

Bucketing

A situation where, in an attempt to make a short-term profit, a broker confirms an order to a client without actually executing it. If the eventual price that the order is executed at is higher than the price available when the order was submitted, the customer simply pays the higher price. On the other hand, if the execution price is lower than the price available when the order was submitted, the customer pays the higher price and the brokerage firm pockets the difference. It also means directly or indirectly taking the opposite side of client’s order into the brokers own account or into an account in which the broker has interest, without open and competitive execution of the order on an exchange.

Bulldog Bond

A bond denominated in sterling but issued by a non British borrower.

Buyer’s Comparison Memo/Objection Statement

Since normally comparison memos are only issued to the seller, the buyer figuring in the memo may not have any idea about the rejection by the computer of that transaction till the seller contacts him. Therefore, he is issued a Buyers Comparison Memo.

CEDEL

One of the two major organizations in the Eurobond market which clears or handles the physical exchange of, securities and stores securities. Based in Luxembourg, the company is owned by several shareholding banks and operates through a network of agents.

Cats and Dogs (U.S)

Stocks in companies that are small, new, poorly financed or in trouble.

CDSC (Contingent deferred sales charge)

A type of back end load sales charge, a contingent deferred sales charge is a fee charged when shares are redeemed within a specific period following their purchase. These charges are usually assessed on a sliding scale, with the fee reduced each year during which the shares are held.

Central Listing Authority

The authority set up to address the issue of multiple listing of the same security and to bring about uniformity in the due diligence exercise in scrutinising all listing applications on any stock exchanges. The functions include processing the application made by any body corporate, Mutual Fund or collective investment scheme for the letter of recommendation to get listed at the stock exchange, making recommendations as to listing conditions and any other functions as may be specified by SEBI Board from time to time.

Chalu Upla

Adjustment of position between two brokers either to avoid margin or to cross the trading or exposure limit.

Cheapest to Deliver Issue

The acceptable Treasury security with the highest implied repo rate. It is the rate that a seller of a futures contract can earn by buying an issue and then delivering it at the settlement date.

Close-out-netting

An arrangement to settle all contracted but not yet due obligations to and claims on a counterparty by one single payment, immediately upon the occurrence of one of the defined events of default.

Coercive Tender Offer

A tender offer that exerts pressure on target shareholders to tender early. This pressure may come in 16 the form of preferential compensation for early tendering shareholders. Changes in securities laws have limited the effectiveness of such tender offers.

Collateralised Mortgage Obligation (CMO)

A generic term for a security backed by real estate mortgages. CMO payment obligations are covered by interest and /or principal payments from a pool of mortgages. In addition to its generic meaning, CMO usually suggest a non governmental issue.

Composite issues

An issue of securities by a listed company on a public-cum rights basis offered through a single offer document wherein the allotment for both public and rights component of the issue is proposed to be made simultaneously.

Confirmation process

The procedure for verifying trade details with a counterparty. This is generally done by exchanging via fax or mail a document (i.e. a confirmation) identifying the trade details and any governing legal documentation and verifying the accuracy of the information provided by the counterparty (i.e. matching).

Constituent Subsidiary General Ledger (SGL) account

A constituent SGL account is an account held by an intermediary at Reserve Bank of India (RBI) on behalf of its constituents who have empowered the said intermediary to carry out various transactions on their behalf. In this account only constituent transactions can take place and under no circumstances the intermediary will use this account for proprietary transactions.

Control of management

The right to appoint directly or indirectly or by virtue of agreements or in any other manner majority of directors on the Board of the target company or to control management or policy decisions affecting the target company

Controlling interest

Holding a sufficiently large number of shares in a company so as to be able to control its prices.

Corners

A corner occurs when a person buys up a substantial volume of a security knowing that other market participants will be forced to buy from him at a higher price. An example of this would be when the other market participants hold short positions in the security which must be settled. A similar practice is the “abusive squeeze” where a person takes advantage of a shortage in an asset by controlling the demand side and creating artificial prices.

Corporate raiders

A cash rich person who may either by himself or through the company he controls buys in very large numbers of equity shares of a target company with a view to taking over that company.

Cross collateralization

Practice of using assets as back up or secondary collateral for debt other than the debt they are primarily pledged for. A network of cross collateralization may facilitate an increase in borrowing or a reduction in borrowing cost.

Cum

Means ‘with’ A cum price includes the right to any declared dividend (cd) or bonus (cb).

Cumulative Convertible Preference Shares

A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.

Cumulative Convertible Preference Shares

A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.

Daisy chain

A kind of fictitious trading, or wash selling, whereby a group of unscrupulous investors artificially inflate the price of a security so that they sell it at a profit. As a stock price rises due to increased volume, investors who didn’t do all their homework may be attracted to the stock in order to participate in the rising price. These investors are typically caught owning a stock that continues to depreciate long after the daisy chain sells out their positions for a profit.

Dawn Raid (U.S.)

A situation in which a predator broker sweeps into the market the instant it opens and buys up a large block of shares before the others have chance to react.

Debenture Trustee

A trustee of a trust deed for securing any issue of debentures of a body corporate.

Defined Benefit Plan

A pension plan in which the sponsor agrees to make specified payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor.

Defined Contribution Plan

A pension plan in which the sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants.

Delivery Notice (U.S.)

The written notice given by the seller of his intention to make delivery against an open short futures position on a particular date.

Demutualization

Process of transition from “mutually-owned” association to a company “owned by shareholders”. In other words, transformation of the legal structure from a mutual form to a business corporation form and privatisation of the corporations so constituted, is referred to as demutualization.

Direct Quotation

The quotation of variable units of domestic currency in terms of fixed units of foreign currency.

Dirty Float

A floating security whose value is not solely determined by free market supply and demand pressures but also by interventions of the concerned authorities.

Dirty Price

A price for a bond which includes the amount of interest that has accrued on the bond since the date of the last interest payment.

Disintermediation

A situation where some intervention usually by government agencies for the purpose of controlling or regulating the growth of financial intermediaries lessens their advantage in the provision of financial services and drives financial transfers and businesses into other channels.

Distribution Dates

The dates on which income is paid to unit holders as in a trust, or mutual fund

Dividend Cover

Denotes the number of times equity earnings per share covers the equity dividend per share.

Don’t Fight The Tape (U.S)

Colloquial expression meaning, “Don’t trade against the Market trend”

Dotcom Stocks

Companies whose products or services are in some way dependent on the Internet and which have the suffix “.com” (dot.com) as part of their registered name.

Dutch Auction

An auction in which the auctioneer’s prices fall rather than rise. In such an auction, the first person to bid wins whatever it is that the auctioneer is selling. The system is used in the Dutch flower markets and also, occasionally, as a method of selling securities.

Effective Sale (U.S)

A round lot transaction consummated on the floor of the New York Stock Exchange after entry of an odd-lot order by a customer. Its price is used to determine the execution price for odd-lot order after consideration of the dealers’ fee.

Eurobond

Eurobonds are issued in a specific currency outside the currency’s domicile. They are not subject to withholding tax and fall outside the jurisdiction of any one country. The Eurobond market is based in London. Not to be confused with euro-denominated bonds

Euroequities

Equities underwritten and distributed to investors outside the country of origin of the issuer.

Excess Spread Policy (U.S.)

A NASD requirement that prohibits market makers from entering quotations in the NASDAQ system that exceed prescribed parameters for maximum allowable spreads.

External Commercial Borrowings

In India External Commercial Borrowings are defined to include commercial bank loans, buyers’ credit, suppliers’ credit, securitised instruments such as Floating Rate Notes and Fixed Rate Bonds, etc., credit from official export credit agencies and commercial borrowings from the private sector window of Multilateral Financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC etc. ECBs are being permitted by the Government as a source of Finance for Indian corporates for expansion of existing capacity as well as for fresh investment.

Family of Funds

A group of mutual funds, each typically with its own investment objective, managed and distributed by the same company

Feeder Fund

Unit Trusts or Mutual Funds which invest in other trusts promoted by the same manager

Fill or Kill (Fok) Order

An order that requires the immediate purchase or sale of a specified amount of stock, though not necessarily at one price. If the order cannot be filled immediately, it is automatically cancelled (killed).

Firewall

A barrier designed to prevent losses or risks taken in one part of a financial institution from weakening other parts of institution.

Five against bond spreadh

A spread in the futures markets created by taking offsetting positions in futures contracts for five-year treasury bonds and long-term (15-30 year) treasury bonds.

Flip-Over

A provision in a poison pill that gives shareholders the right to buy the company’s shares (or the shares of the surviving company after a merger) at half price. Unlike a Flip-in, a flip-over right does not become effective simply because an interested shareholder buys some stock. Usually it becomes effective when (i) there is an interested shareholder and (ii) the company engages in certain transactions with the interested shareholder or an affiliate, such as a merger or a sale of all or a large part of its assets. Historically, the flip-over poison pill was devised several years before the more powerful flip-in. At that time the essential discrimination against the interested shareholder that the flip-in entails was widely considered illegal. Now the two are generally combined, although under most circumstances the flip-in provision of the pill dominates any potential bidder’s attention.

Flip-in poison pill plan

Shareholders are issued rights to acquire stock in the target at a significant discount which is usually 50%.

Flip-in

The most important characteristic of the most effective rights plan (position pill) in use today. It gives shareholders the right to buy the company’s shares at half price when someone becomes an ‘interested shareholder’, that is, crosses some stock ownership threshold such as 15% or 20%. The interested shareholder’s rights are void. Other shareholders can (typically) use each of their rights to buy a number of shares equal to two times the exercise price (set in advance), divided by the current market price of the target company’s stock. Usually, from the standpoint of a bidder, the flip-in right is a complete show stopper unless the bidder can convince a court that it should intervene. In the text we have tried to describe when courts intervene against poison pills under Delaware law.

Flip-over Poison Pill Plan

The most popular type of poison pill anti-takeover defense. Shareholders of the target firm are issued rights to purchase common stock at an exercise price high above the current market price. If a merger occurs, the rights flip over and allow shareholders to purchase the acquiring firm’s common stock at a substantial discount.

Flow back

Securities recently placed in the markets that are resold on the issuers’ national market. It is one of the major risks in an equity placement because it may frustrate the objective of internationalization of the equity market and cause downward pressure on its market price.

Free-rider Paradox

Sometimes benefits and costs cannot be allocated accurately or at all to users by the markets or otherwise. A free rider tries to take advantage of this situation. The paradox is that if everyone tries to free ride no one can and everyone is worse off. An important example is the natural environment. Most industrial users of the natural environment are free riders. Everyone collectively is worse off but no one individually finds it worthwhile to stop. In takeovers, an important recent example is the basic research part of corporate research and development. It is impossible to limit the benefits from basic research to the corporation who pays the bill. Therefore, there will be a strong temptation for companies to free ride. Competition in the product and takeover market should increase this temptation.

Fungible securities

Securities which are easily interchangeable with another in the same class.

Galla

Cutting in rates. It is the practice of depriving a client a higher rate while selling or lowest rate while buying over and above the brokerage.

Garage (U.S)

One of the small trading areas just off the main trading floor of the New York Stock Exchange.

Gilt Edged

A term used to describe a bond, generally issued by the Government or issued with a Government Guarantee so much so that there are no doubts about the ability of the issuer to pay regular interest and the principal amount to the bond holders.

Golden Handcuffs (U.S)

A contract between a broker and brokerage house, offering lucrative commissions, bonuses and other benefits as long as the broker stays with the firm. Upon leaving, the broker must return much of the compensation.

Good Delivery

Proper delivery by a seller to the buyer of the securities without any defect so that they can be transferred without any additional documentation.

Grave dancer

An acquirer who searches for bargains often among companies in dire financial straits or in bankruptcy

Greenmail

Common practice in the United States in the merger-mad 1980s. Somebody buys a larger chunk of share in a company and threatens to make hostile bid for the company. To buy him off the company buys back the shares at a much higher price than the greenmailer paid for them. So disgusted were ordinary Americans with this practice that they passed legislation which imposed an onerous tax on any profit made from greenmail.

Greenmail

Common practice in the United States in the merger-mad 1980s. Somebody buys a larger chunk of share in a company and threatens to make hostile bid for the company. To buy him off the company buys back the shares at a much higher price than the greenmailer paid for them. So disgusted were ordinary Americans with this practice that they passed legislation which imposed an onerous tax on any profit made from greenmail.

Grey Knight

One who offers to buy shares of the bidding company as an aid to the defence.

Guaranteed Coupon (GTD)

Bonds issued by a subsidiary corporation and guaranteed as to principal and /or interest by the parentcorporation.

Gun Jumping (U.S.)

Illegally soliciting orders before SEC registration is effective. Buying a security based on information that is not yet public (inside information).

Herfindahl-Hirschman (HH) Index

The sum of the squares of the market shares of companies in any given industry. It is a measure of industry concentration and is more sensitive to the effects of mergers than simple market shares.

Hot Issue

A security that is expected to trade in the after market at a premium over the public offering price.

Hot Money

Short term international capital movements, motivated by interest rate differential or revaluation hopes/ devaluation fears.

Hypothecation

Pledging assets against a loan. The ownership of the asset or the income from the asset is not transferred, except that in default of repayment of loan the asset may be sold to realize its value. Brokers will accept shares as collateral for loans to finance purchase of shares or to cover short sales.

Inside Quote (U.S.)

The highest bid and lowest ask prices among all the competing market makers in a security i.e. the best bid and offer prices.

Interdelivery spread

The purchase of one delivery month of a given futures contract and simultaneous sale of another delivery month of the same contract on the same exchange. Also called intramarket spread.

Interest rate differential

The difference between the existing rate of interest and the rate for the term remaining, multiplied by the principal outstanding and the balance of the term.

Jitney

Describes a situation where one broker who has direct access to a stock exchange performs trades for a broker who does not have access. A fraudulent activity in the penny stock market. It occurs when two brokers work together by trading a stock back and forth to rack up commissions and give the impression of trading volume.For example, in the first definition, a small firm whose volume of business is not sufficient to maintain a trader on the exchange would give its orders to a large dealer for execution.In the second definition, jitney or “the jitney game” is basically the same thing as circular trading.

Jumbo Bonds (U.S)

A certificate of deposit issued by a bank or savings and loan association for a huge amount usually for a period of a year or less.

Kerb Dealings/Khangi Bhao

See Band Ke Bhao

Kapli

A standard form used by the broker to inform the Stock Exchange of his transactions for the purpose of matching a settlement.

Killer Bees (U.S.)

Law firms, proxy solicitors and public relations firm employed to help a company management fight off an unfriendly takeover.

Kiss Principle (U.S)

Advice given by old pros to neophyte brokers on how they should explain to investors such sophisticated investment concepts as options and arbitrage. Keep it simple, stupid.

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Lame Duck

A defaulter on a Stock Exchange who is not able to meet his market commitment and financial obligations of his business.

Last In First Out - LIFO

An inventory cost accounting procedure in which the last item manufactured is assumed to be the first one sold by the company.

Law of one price

An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal.

Load

A sales charge assessed by certain mutual funds (load funds) to cover selling costs. A front end load is charged at the time of purchase. A back-end load is charged at the time of sale

Locked or Crossed Quotations (U.S)

A temporary condition, normally associated with fast-moving, active markets, where the asking price of one market maker in a given security is the same or lower than the bid price of another market maker, thereby producing locked or crossed markets respectively

MIT

Market if touched (MIT). A limit order that automatically becomes a market order if the price is reached.

Maple Leaf

Debt warrants entitling the holder to purchase a Government of Canada Bond.

Marketable Lot

A fixed minimum number, in which or in multiples of which, shares are bought and sold on the stock exchange. For shares whose face value is Rs. 10, the marketable or trading lot may be 50 or 100. For Rs. 100 shares the market lot is usually 5 or 10. Companies may, however, decide on other lots, such as 1 share for Rs. 500, although it is now rare. Any number of share less than the marketable lot makes an odd lot, difficult to buy and disadvantageous to sell. When companies issue bonus or rights shares in less than 1:1 ratio, odd lots are often the result.

National best bid and offer

A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.

Negotiated Dealing System (NDS)

Electronic platform for facilitating dealing in Government Securities and Money Market Instruments, introduced by RBI.

No-action Letter

A form of written advice given by the staff of the SEC to lawyers. It is given in response to a request letter and is limited to the facts of a particular proposed undertaking. Generally, the advice concerns an ambiguity or apparently illogical result under the SEC laws or rules. If the request is granted, the staff says that, based upon the facts described, it (the staff) would not recommend that the Commission take any action against the conduct described. In theory, grant of a no-action letter does not foreclose private lawsuits or even prevent some action by the Commission itself. However, in practice the letter generally would be given great weight by a court.

Non Discriminatory Poison Pill

Anti-takeover defense plans which do not penalize acquirers exceeding a given shareholding limit. Include flip-over plans, preferred stock plans and ownership flip-in plans which permit cash offers for all shares.

No load fund

A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/ scheme at net asset value (NAV) and no additional charges are payable on purchase or sale of units.

Odd Lot

Anything less than the standard unit of trading.

Original Plan Poison Pill

Also called preferred stock plan. An early poison pill antitakeover defense in which the firm issues a dividend of convertible preferred stock to its common stockholders. If an acquiring firm passes a trigger point of share ownership, preferred stockholders (other than the large block holder) can put the preferred stock to the target firm (force the firm to redeem it) at the highest price paid by the acquiring firm for the target’s common or preferred stock during the past year. If the acquirer merges with the target, the preferred can be converted into acquirer voting stock with a market value no less than the redemption value at the trigger point.

Ownership Flip-in Plan

A poison pill anti-takeover defense often included as part of a flip-over plan. Target stockholders are issued rights to purchase target shares at a discount if an acquirer passes a specified level of share ownership. The acquirer’s rights are void and his or her ownership interest becomes diluted.

Pari Passu

A term used to describe new issue of securities which have same rights as similar issues already in existence.

Payment netting

Settling payments due on the same date and in the same currency on a net basis.

Persons acting in concert (PAC)

Individual(s) /company(ies)/ any other legal entity(ies) who are acting together for a common objective or for a purpose of substantial acquisition of shares or voting rights or gaining control over the target company pursuant to an agreement or understanding whether formal or informal

Placing Power

The ability of the financial institutions to place securities with the investor.

Poison Put

A provision in some new bond issues designed to protect bondholders against takeover-related credit deterioration of the issuer. Following a triggering event, bond holders may put their bonds to the corporation at an exercise price of 100-101 percent of the bond’s face amount.

Prime Rate

The interest rate on loans, which a bank is charging its best, most credit-worthy business customers. This interest rate affects all borrowers - not merely those who actually pay the prime rate because the level of the prime rate and the direction in which it is moving tend to determine other interest rates.

Programme Trading

A technique, which uses decision rules, usually programmed on a computer, to generate trading decisions automatically.

Proxy Battle

A battle between a company and some of its own shareholders. It starts with a group of dissident shareholders soliciting proxies in order to force through a shareholder resolution.

Puffing advertisement

Advertising or planting some news in the newspaper or in any media in respect of a proposed corporate action and later taking the stand that the Board of directors did not approve the proposed corporate action or news about financial results, given in misleading or distorted manner intended to generate or induce trading in the scrip.

Pari Passu

Close watch by a company’s top executive on trading their company’s stock. The objective is to detect any unusual amount of buying which might indicate that some one is attempting to acquire a chunk of the stock in anticipation of a takeover attempt.

Run

A run involves a person creating activity in a security by successively buying or selling that security. The intention is that the increased activity would, in case where the person is buying, attract others to buy and push up the price. At that point, those organizing the run would then attempt to sell out at a financial gain. This is sometimes known as “pumping and dumping.”

SIPC (Pronounced ‘Si-Pick’) (U.S.)

Close watch by a company’s top executive on trading their company’s stock. The objective is to detect any unusual amount of buying which might indicate that some one is attempting to acquire a chunk of the stock in anticipation of a takeover attempt.

Saturday Night Special (U.S.)

A surprise tender offer with a 7-10 day expiration period. So called because the strategy often involves announcing it over the weekend, thus denying the rival management time to respond.

Scorched Earth Policy (U.S.)

Extreme defence tactics by a defending company taking on heavy debt or selling off the key assets to save itself, to ward off a takeover.

SEDAR

An electronic filing system (the System for Electronic Document Analysis Retrieval) in Canada that enables companies to file prospectuses and continuous disclosure documents.

Shark Repellent (U.S.)

Special provisions in a company’s charter or bylaws designed to deter bidders.

Shelf Registration (U.S.)

Here a company wishing to sell new stocks or bonds to the public can file a single plan with the Securities and Exchange Commission, outlining its intentions to sell such securities over the next two years. Once the plan – called a registration statement – has been filed and is sitting on the shelf at the SEC, the company may then sell all or part of the securities, without any further procedures, at any time it feels market conditions are right.

Sleeping Beauty (U.S.)

A desirable company, often with considerable cash on its balance sheet, that is vulnerable to a takeover attempt by another company.

Small firm effect

The tendency of small firms (in terms of total market capitalization) to outperform the stock market (consisting of both large and small firms).

Specified Shares

A group of equity shares in which carry forward of transactions from one settlement period to the next is permitted.

Spot Delivery Contract

A contract which provides for (a) actual delivery of securities and the payment of a price therefore either on the same day as the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefore through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality; (b) transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository.

Stag

i. An applicant, for a new issue of shares, who hopes to sell the shares on allotment at a profit once trading commences in the secondary market. ii. A speculator who buys and sells stocks rapidly for fast profits.

Stagnation

Period of low volume and inactive trading on the securities market.

Staggered Board (U.S.)

A board of directors in which only a certain number of the directors say, a third, are elected each year. This is considered one effective method through which a company might protect itself against an unwelcome takeover attempt. With a staggered board, an outside group could only obtain control of a minority of the board of directors in any given year, since holdover directors elected in earlier years would continue to serve.

Stock Index Future

A futures contract whose price varies in line with the movements of a stock market index.

Society for Worldwide Interbank Financial Telecommunications (SWIFT)

A dedicated computer network to support funds Transfers messages internationally between over 900 member banks world-wide.

Synchronized or Pre-arranged trading

Trading on the electronic screen in such a way that trades are put simultaneously in the system of the stock exchange with prior understanding with counterparty by synchronizing the logging in or of trades so that desired quantity matches at desired price.

Thin markets

Characterized by relatively few transactions per unit of time and where price fluctuations are high relative to the volume of trade.

Tombstone

An advertisement placed in financial newspaper or magazine to announce the completion of a syndicated loan or a new issue of securities. It is called a tombstone because it consists of little more than a list of names and dates. The names are those of borrower (who pays for tombstone) and of the financial institutions which participated in the deal. They are ordered in strict seniority , the size of the typeface indicating their importance in the deal. Within the same rank, participants are listed strictly alphabetically. The more the tombstones there are, the less dead is the market.

Trade netting

A legally enforceable consolidation and offsetting of individual trades into net amounts of securities and money due between trading partners or among members of a clearing system. A netting of trades which is not legally enforceable is position netting.

Trust Promoter

Person or company responsible for attracting investors into a unit trust or mutual fund.

Upstairs market

A network of trading desks for the major brokerage firms and institutional investors that communicate with each other by means of electronic display systems and telephones to facilitate block trades and program traders.

Upstairs market

A network of trading desks for the major brokerage firms and institutional investors that communicate with each other by means of electronic display systems and telephones to facilitate block trades and program traders.

Wash sales

A wash sale involves a person, either directly or indirectly, being both the buyer and seller of securities in the same transaction, so that there is no actual change in ownership of the securities. The manipulator will undertake frequent trades hoping to attract other investors who note the increased turn over in the security. The manipulator aims to gain financially through creating a small price differential between the buy and sell rates of the security in question.

White Knight (U.S.)

A friendly bidder, willing to offer more for a target share than an existing hostile bidder to rescue a company that is about to fall into the hands of an unwe0lcome suitor. They are usually persuaded by the company that is subject to a hostile bid to come to its rescue.

Window Dressing

A manoeuvre often engaged in by companies, banks, mutual funds etc., at the end of the accounting period in order to impress stock holders who will be receiving the report showing that funds are better managed and invested than what might have been drawn up.

Yuppie Scam (U.S.)

The name given to Wall Street insider trading scandal after a host of smart young lawyers, bankers and arbitrageurs were found to be in the dealing ring.

Handle, Tim, “Pocket Finance”, Economist Books, First South Asian Edition, 2001.

Ryland, Philip, “Pocket Investor”, Economist Books, First South Asian Edition, 2001.

Mutual Funds Fact Book, Investment Company Institute, 38th edition.

Shroff, Praveen, “The Stock Market Dictionary – Guide to Dalal Street Money-Talk”, Vision Books, Third Edition, 1997

Fabozzi, Frank J., “Investment Management”, Prentice Hall Ltd., 1995

Mutual Funds in India – Fact Book, UTI Institute of Capital Market, New Bombay, First edition, 1995.

Kuruvilla, Thomas, “Glossary of the Capital Market”, Securities and Exchange Board of India, 1989

A. Chairman’s Speech

1. The Valedictory address at Nirma Institute of Management, Ahemedabad “ Building Enlightened Corporate Citizens of India” by Shri.G.N. Bajpai, Chairman, SEBI on April 5, 2002.
2. The Valedictory address at Amrita Institute of Management, “Fostering Knowledge Management (Acquiring, Assimilating, Accessing, Apportioning)”by Shri. G.N. Bajpai, Chairman, SEBI on April 20, 2002.
3. The Convocation Address at K.J. Somaiya Institute of Management Studies and Research, Mumbai, “The Challenge of Leadership”by Shri. G.N. Bajpai, Chairman, SEBI on May 11, 2002.
4. The Inaugural Address at Institute of Company Secretaries of India, New Delhi “Need for Centralised Listing and Simplification of Delisting Norms” by Shri.G.N .Bajpai, Chairman, SEBI on June 14, 2002.
5. Speech at S.D. Gupte Memorial Lecture, Mumbai, “Significance of Securities Market in the Growth of an Economy: An Indian Context” on March 13, 2003.
6. Speech for the Convocation Ceremony of Dr.Gauri Hari Singhania Institute of Management & Research, Kanpur “Cultivating Winning Habit” by Shri. G.N. Bajpai, Chairman, SEBI on May 26, 2003.

SEBI Research Working Paper Series

1. Price discovery and volatility on NSE Futures Market, March 2003, SEBI, By Dr. M.T. Raju and Kiran Karande (out of print)
2. Trade Execution Cost For Equity Shares in India, January 2002, SEBI By Dr. M.T. Raju, Kiran Karande and Shikha Taneja
3. Impact of Takeover Regulations on Corporate Sector in India – A Critical Appraisal, June 2001, SEBI By Dr. M.T. Raju, Neelam Bharadwaj, Kiran Karande and Shikha Taneja
4. Dematerialisation : A Silent Revolution in the Indian Capital Market, March 2001, SEBI By Dr. M.T. Raju and Dr. Prabhakar. R. Patil (out of print)
5. Transaction Cost for Equity Shares in India (Revised), November 2000, SEBI By Dr. M.T. Raju
6. Stock Market Volatility – A Comparative Study of Selected Markets, January 2000, SEBI By Pratip Kar, Dr. M.T. Raju, Dr. Prabhakar. R. Patil, Kiran Karande
7. Transaction Cost for Equity Shares in India, August 1999, SEBI By Dr. M.T. Raju and Ms. Varsha Marathe.

Surveys

1. Survey of Indian Investors, 1998-99, published by SEBI-NCAER, Price Rs.1500 2. Survey of Indian Investors, 2000-01, published by SEBI-NCAER, Price Rs.750

Other Publications

Annual Reports: 2002-03, 2001-02, 2000-01, 1999-00, 1998-99.