All or None (AON) Order
An order with this condition instruct the broker to fill the order completely or not at all.

For example, if you instruct your broker to buy 200 shares at Rs 100, the broker will not fill the order unless he can get you the 200 shares at Rs 100.

This is to ensure that there are no half filled orders before expiry.

American Depository Receipt (ADR) -
A certificate issued by a US depository bank representing a specified number of shares held in a foreign corporation. ADRs can be bought and sold in US markets just like regular stocks.

The foreign entity must provide financial information to the sponsor bank. ADRs are listed on either the NYSE, AMEX, or NASDAQ. issued by a US depository bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue.

One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation.

American Depository Share (ADS) -
A share issued under deposit agreement that represents an underlying security in the issuer's home country. The term ADR and ADS are thought to be the same, they sort of are. ADS is the actual share trading while ADR represents a bundle of ADSs.At best - An instruction from the client to the broker authorising him to use his discretion and try to execute an order at the best possible price. An 'at best' order is valid only for the day it is placed.

Arbitrage
The business of taking advantage of difference in price of a security traded on two or more stock exchanges, by buying in one and selling in the other (or vice versa).

In simple terms it means to buy something cheap in one place and make a profit selling it someplace else. In effect, the simultaneous purchase of foreign exchange, securities, commodities or any other financial instrument in one market and the sale in another at a higher price.

Arbitration -
Settlement of claims differences or disputes between one member and another and between a member and his clients, authorised clerks, sub-brokers etc., through appointed arbitrators.

Averaging -
The process of gradually buying more and more securities in a declining market (or selling in a rising market) in order to level out the purchase (or sale) price.

Badla -
Carrying forward of transaction form one settlement period to the next without effecting delivery or payment. Badla involves carrying forward of a transaction from one settlement period to the next. The carry-forward is done at the making up price, which is usually the closing price of the last day of settlement. A badla transaction attracts the following payments/charges:

(a) 'margin money' specified by the stock exchange board; and
(b) contango or badla charges (interest charges) determined on the basis of demand and supply forces.

Bargain
Transaction between two members of the exchange. The terms 'dealings' and 'contracts' also have identical meanings

Basis Point (BP) -
The smallest measure used in quoting yields on fixed income securities. One basis point is one percent of one percent, or 0.01%.

Bear Market -
A prolonged period of falling securities prices in a stock market.

Bearer Security -
This is a bond or a share for which there is no other proof of ownership than the physical possession of the security. No official record or register of ownership is kept, the owner is the "bearer" of the share or bond certificate. This means that these certificates are easily traded without formality. If you own bearer securities, look after them! No dividend is paid to such shares and no interest paid to such bonds. Instead the certificate will have several coupons attached. These must be physically removed from the certificate and presented to the originating company for payment of any dividend or interest to be made.

Bears -
These stockmarket animals are pessimists, they expect share prices or any other type of investment to fall. In a 'bear market' the general sentiment is that prices are going to go lower and majority of dealers will sell as quickly as possible for fear of holding shares which diminish in value.Bears, like 'bulls' drive the market.

Bond -
A debt security, or an IOU, issued by a company or government agency is called a bond. A bond investor lends money to the issuer and, in exchange, the issuer promises to repay the loan amount on a specified maturity date; the issuer usually pays the bondholder periodic interest payments over the period of the loan.

Bourse -
The floor of a Stock Exchange.

Capital loss
The negative difference between the selling price of the stock and purchase price of the stock.

Capital Market
A market where debt or equity securities are traded.

Cash Markets
The markets where securities (assets) have to be delivered immediately.

Clearing House
Each Exchange maintains a clearing house to act as the central agency for effecting delivery and settlement of contracts between all members. The days on which members pay or receive the amounts due to them are called pay-in or pay-out days respectively.

Closing Price
Closing price is the trade price of a security at the end of a trading day. Based on the closing price of the security, the base price at the beginning of the next trading day is calculated.

Demat trading
Demat trading is trading of shares that are in the electronic form or dematerialised shares.

Dematerialisation is the process by which shares in the physical form are cancelled and credit in the form of electronic balances are maintained on highly secure systems at the depository.

Diversification
Investing in a basket of shares with different risk-reward profile and correlation so as to minimise unsystematic risk.

Dividend
This is the income you receive as a shareholder from a company. When you buy an ordinary share in a company, you become a shareholder (an owner of the business) and to that extent you will have certain entitlements including the right to receive dividend payments as set by the board of directors and approved by the shareholders (sometimes called members.)

In other words, dividend is a cut of the profits earned by the business for the year. This pay-out is not guaranteed and where it exists at all, the amount you receive will vary from company to company and year to year.

Earnings Per Share (EPS)
This measure expresses how much the company is earning for every share held. The calculation is 'pre-tax profit dividend by the number of shares in issue'. Earnings per share is more important than the overall reported profit figure. The reason being that EPS provides a more pure measure of profitability.

ESOP
ESOP stands for Employee Stock Option Plan. This is a trust established by a company to allot some of its paid-up equity capital to its employees over a period of time.

Eurobond
A Eurobond is a medium or long-term interest-bearing bond created in the international capital markets. A Eurobond is denominated in a currency other than that of the place where it is being issued. Eurobonds are only issued by major borrowers, such as governments, other public bodies or large multinational companies.

Ex-bonus
The share is described as ex-bonus when a potential purchaser is not entitled to receive the current bonus, the right to which remains with the seller.

Exercise price
The pre-determined price at which the underlying future or options contract may be bought or sold.

Final Dividend
This is the dividend paid by a company to its shareholders out of profits at the end of the financial year.

A motion to pay a final dividend must be approved at the shareholder's Annual General Meeting (AGM) - where they have the option of accepting the dividend recommended by the directors or of reducing it - they cannot vote to increase it.

Firm Price
It is the price quoted by a market-maker at which he is committed to deal with a broker or other market-maker. The only occasion in which a market-maker may vary from offering a firm price is when the Stock Exchange has declared a fast market.

Flotation
The first occasion on which a public company's shares are offered widely to investors on the market. Flotations are often referred to as new issues although it is possible for companies already in the stock market to issue new shares.

Futures
A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price at a fixed date in the future. Futures contracts were originally invented to allow those who regularly buy and sell goods to protect themselves against future changes in the price of those goods.

In other words, the futures markets evolved to allow producers or consumers to hedge their risk.

Gap
When the market opens above or below the previous day's close the price on a bar chart will show a 'gap'. This may then be 'closed' if the market trades at prices between the opening level and the previous day's close.

Gilts
Gilts, sometimes referred to as Government bonds are those used by the Government to raise money from large financial institutions like pension funds and from private investors. Money is needed by the Government because the Treasury so often finds that its expenses exceed its income.

Gilts are sometimes referred to as 'gilt edged securities' or 'bonds' or 'fixed interest securities'. In any event, gilts are issued by the Treasury and, in nearly all cases, the investor hands over his cash and then receives a fixed rate of interest for the life of the gilt.

When the gilt matures, its capital value is repaid at par value. Gilts are bought at their par value or at face value.

Global Depositary Receipt (GDR)
These are negotiable certificates which prove ownership of a company's shares.They are marketed internationally, mainly to financial institutions. GDRs allow purchasers to gain exposure to companies which are listed on foreign markets without having to purchase the shares directly in the market in which they are listed.

Hedging
Offsetting or guarding against investment risk. A perfect hedge is a no-risk-no gain precaution. Hedging is a conservative strategy for reduction of risk through futures, options or some other derivative and by opening an opposite position to that already held in the underlying market.

Holder
Holder is the buyer of an option.

Holding Period Return (HPR)
The rate of return for the period of holding of an investment.

Illiquid
An investment is said to be illiquid if it cannot easily be turned back into cash quickly and at a low cost. Shares in smaller companies are more likely to be illiquid than those in larger companies; they will be less easy to sell and you are likely to find that the spread or difference between the buying and selling price is much wider.So, in other words blue chip shares are more liquid than unquoted companies.

Immediate or Cancel (IOC)
An Immediate or Cancel (IOC) order allows a user to buy or sell a security as soon as the order is released into the market, failing which the order is removed from the market. There could be a partial match for such an order resulting in one or more trades, in which case the balance order will be removed from the market.

Initiator
The Initiator is the trading member who starts the auction. The Initiator can be a buyer or a seller.

Issuing house
This is a member of the Issuing Houses Association, responsible for sponsoring the issue of a new security on the Stock Exchange or an over the counter market.The definition has also spread to include any merchant bank or dealer in securities which is involved in such an issue.The issuing house will have been closely involved in the process leading up to the flotation and will have advised the company on its timing, pricing, etc.

LIBID
Banks offer to borrow money in the wholesale money markets. The rate is called the London Inter Bank Bid Rate (LIBID).

LIBOR
LIBOR stands for London Inter Bank Offer Rate. It is the rate of interest at which banks offer to lend money to one another in the so-called wholesale money markets in the city of London. Money can be borrowed overnight or for a period in excess of five years.

Listed Company
A public limited company which satisfies certain listings conditions and signs a listing agreement wit the stock exchange for trading in it securities. One important listing condition is that 25% of its issued capital should be offered to the public.

Margin
It refers to the difference between the cost price and the selling price of a share, it can also mean the difference between the buying and selling prices (also referred to as the spread). It may also refer to a type of loan arrangement between client and broker, for e.g. the amount a buyer/seller of a futures contractor an uncovered (naked) option seller (writer) is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intra day price changes.

Market lot
Market lot is the minimum number of shares of a particular security that must be transacted on the Exchange. Multiples of the market lot may also be transacted.

Market maker
Market makers are players in the stock market who trade as principals and may actively try to encourage/discourage trading by changing the prices they quote to tempt buyers and sellers into the market.

Market order
Market order is an order for which no price has been specified at order entry.

Member Firm
A member firm is a trading firm which has membership of the stock exchange.The firm is permitted to deal in shares on behalf of its clients or on behalf of the firm itself.

Nasdaq
National Association of Securities Dealers Automatic Quotation System. An American stock exchange. It is also known as the technology heaven for companies in that category.

Negotiated Trade
Two Trading members can negotiate a trade outside the system. However this trade is accepted by the system only if Control approves. Both the parties enter each side of their trade in the system specifying each other's identity.

Nominal Value
The nominal value is the face value of share. If the face value of a share is Rs. 10 then it may also be stated that its nominal value is Rs. 10.

Non-Cleared Securities
Shares traded directly between brokers, and not cleared through the stock exchange clearing house. Also called non-specified Securities, B-group Securities, or Cash Shares.

Odd Lot market
The market in which odd lot orders are recorded. Odd Lot orders have a quantity less than one regular lot. These shares are illiquid in nature, as they cannot be transacted on the Exchange.

One For One
This is meant to denote that in a bonus issue declared a bonus share has been given for every share held. In effect the share capital of the company doubles. Other terms commonly used to denote the proportion of bonus shares issued are two for three, three for five and the like.

Open
A time period in the trading day for the different markets that the exchange deals in. Order entry, matching, inquiries and other functions at the workstation will be allowed during this period.

Order
A buy or a sell offer/bid for any of the Capital Market securities entered by the dealer in the system. The system generates a unique order number for each order entry.

Over The Counter (OTC) Trading
A secondary market in which shares are bought and sold to the general public by jobbers and brokers outside an organised market place. Generally, the OTC market consists of geographically diffused dealers.

Oversubscribed
A company may offer for sale a certain number of shares. If applications are received for shares in excess of the number offered, the issue is termed as oversubscribed.

Panic Selling
A condition of the stock market in which not only inexperienced investors, but also sturdy bulls, take fright and start selling. It may be caused by sudden unfavourable news or rumour, or a Random Walk by shares downwards, or simply, in bear market conditions, the absence of financial institutions from the market.

Pari Passu
This is a Latin term and it means, 'having equal rights'. When shares (bonus or otherwise) are issued pari passu with existing shares it means that the new shares would be equal to and have identical rights with the existing shares.

Participant
An entity responsible for the settlement of a trade is deemed to be a participant. Every order in the trading system has a participant associated with it.

Passed Dividend
A company is termed to have 'passed dividend' if it has not declared its usual annual dividend.

Portfolio
The group name for the entire collection of investments belonging to an investor or held by a financial organization such as a bank, pension fund or investment trust.The idea of a portfolio is that you should invest in a diversifed selection of investments.

Pre-Open
A time period in the trading day for the Normal market. Trading members are allowed to enter orders during this period. These orders in the system take part in the algorithm for the calculation of the opening price during this period.

Premium
The price of an option (call or put) contract, determined in the competitive market place, which the buyer (holder) of the option pays to its seller (writer) for the rights granted to the former by the option contract.

Real Return
The rate return earned on an investment after adjusting for the rate of inflation.

Record date
Record date is the date on which the beneficial ownership of an investor is entered into the register of members. Such a member is entitled to get all the corporate benefits.

Regular Lot Order
The minimum quantity of an order entered into the Normal, Spot and Auction markets. The order that does not carry any special conditions (Minimum Fill, All or None) is treated as a regular lot order.

Rights Issues
The issues of new shares to existing shareholders in a fixed ratio to those already held at a price which is generally below the market price of the old shares.These are the relatively rare occasions in a company's life when it will create new shares, the proceeds of which will go directly into its bank account, instead of giving a profit (or a loss) to an existing shareholder. Typically, the subscription price of a rights issue is significantly below the market price of the old shares

Rolling Settlement
This is the system by which shares are bought, sold and paid for. Rolling Settlements is a mechanism of settling trades. in Rolling Settlements, trades done on a single day are settled separately from the trades of other day on Trade day + 5 days. As such netting of trades is done only for the day and not for multiple days. In Rolling Settlement, the settlement is carried out on a daily basis.

Share certificate
This is a legal document which can be used as proof of ownership of a shareholding. But with 30,000 plus share transactions a day going through the London stock market in the early 1990's, a lot of paper was being generated. A more efficient way of handling share settlements is to do it electronically as is happening in many other countries.

Share swap
An arrangement by which shares of one company are swapped for another in a specified ratio.

Spot
Spot purchase or sale implies that the deal is for immediate cash and the shares are to be delivered immediately.

Spot trading
A market in which securities are traded for immediate delivery, as distinct from a forward market. Spot in this context means 'immediately effective', so that spot price is the price for immediate delivery. The actual delivery of securities takes place either on the same day of the contract or on the next day. Trading by delivery of shares and payment for the same on the date of purchase or on the next day.

Spreads
Options and futures transactions involving two or more series of the underlying asset.

Stag
A stag is an investor or speculator who subscribes to a new issue with the intention of selling them soon after allotment to realise a quick profit.

Stock Option
An option given to a person to buy stock at a predetermined price at a future date.

Trade
When a buy order matches with a sell order following the price-time priority logic, a trade takes place. The system generates a unique trade number for each trade.

Trade guarantee
Trade guarantee is the guarantee provided by the clearing corporation for all trades that are executed on the Exchange. In contrast the settlement guarantee guarantees the settlement of trade after multilateral netting.

Trading Member
It refers to a member of the BSE/NSE who is authorised to place orders in the Capital Market System. The term Broker or Brokerage house is also used to convey the same meaning.

Transfer deed
A transfer deed is a form that is prescribed by the Registrar of Companies for effecting share transfer and is valid for a specified period. This transfer deed is the instrument that accompanies the share certificate while registering a transfer with a company. The transfer deed must be duly stamped and signed by or on behalf of the transferor and be complete in all respects.

Transmission
Transmission is the lawful process by which the ownership of securities is transferred to the legal heir/s of the deceased.

Underwrite
Under writing is effectively a guarantee wherein the underwriter (usually a bank, broker or financial institution) agrees to purchase a certain number of shares in the event the issue is under-subscribed for a certain fee.

Unit of Trading
The minimum number of shares of a company which are accepted for normal trading on the stock exchange. All transactions are generally done in multiple of trading units. Odd lots are generally traded at a small discount.

Unquoted Shares
Shares in some companies, often smaller ones, are not traded on any stock exchange. Companies are not quoted (or listed) because either: they do not wish to be and prefer to run their businesses in relative privacy, or they do not meet the listing requirements, such as minimum market capitalisation. In other words they are too small to join a stock market. For people interested in investing in unquoted shares, there are investment trusts which specialise in this area.

User
A person is recognised as a user of the Capital Market system, when he or she possess a valid user identifier and password, both of which are essential requirements for accessing the system.

Variation Margin
Payment made in order to restore or maintain initial margin on adverse positions resulting from price movements in futures/options transactions undertaken.

Volatility
The rate by which the price of a security fluctuates in changing market conditions.

Volume of Trading
The total number of shares which change hands in a particular company's securities. It is the sum of either purchases or sales which necessarily equal. This information is useful in explaining and interpreting fluctuations in share prices.

Warning Quantity Percentage
It refers to a percentage which reflects the quantity outstanding on a certain security. An order with quantity exceeding this percentage causes the system to force the dealer to confirm the entered order.

Wash Sale
In a wash sale, the seller repurchases the security immediately. The purpose of a wash sale, which is not a genuine sale, is merely to establish a record of sale for tax purposes or for misleading others by creating a false impression of rise or fall in prices.

Watered
A company that has issued shares in excess of the real value of the business is said to have watered its capital. It is in effect similar to the deficit financing done by some governments.

Yield
Yield is the annual return you receive from holding a stock, share or unit trust - it is expressed as a percentage of its price.In the case of shares, the yield is calculated by expressing the dividend as a percentage of the cost of the investment. To calculate a yield on a share, take the dividend paid (this will be net of the basic rate of tax), add back the tax to get the gross yield and then divide by the share price and multiply by 100.

Yield Curve
A graph depicting yield vis-a-vis maturity. If short-term rates are lower than long-term rates, it is a positive yield curve, if short-term rates are higher, it is a negative or inverted yield curve. If there is isn't much difference, it is a flat yield curve.

Yield To Maturity (YTM)
The yield earned by a bond if held to maturity.