Glossary

Glossary of terms frequently used in share dealing.

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

A

Administration Charge : A management charge made by your Stockbroker for managing your 'Portfolio'.

Advisory : Service to investors from a Stockbroker who gives advice on what shares to buy and sell.

AGM : Annual General Meeting, attended by the company's shareholders. Votes are held to re-appoint the directors and company matters are discussed. Normally held 21 days after the annual report is published.

AIM : Alternative Investment Market, a UK trading market for smaller companies looking to raise finance. 'AIM' listed companies do not supply as much information as 'London Stock Exchange' fully listed companies when listing onto the market and are therefore considered riskier investments, but also offer investors opportunities for rapid capital growth of their investment.

Allotment Letters : These letters are sent out in a rights issue and inform the shareholder that they have the right to buy new shares at a stated price, known as the 'call'. We will advise you on any action required by you on shares you hold with us for these actions.

Annual Reports and Accounts : Public Limited Companies are obliged to make these available to shareholders. They set out the company's yearly financial performance. They can also usually be found on the company's website.

Analysts : People employed by financial organisations who look at companies and markets making recommendations to buy/sell or hold a company and market trend predictions.

Ask Price : More usually referred to as the 'Offer Price', is the price at which an investor may buy shares from the market. The 'Bid Price' is the opposite.

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B

BACS : A computerised payment system for Direct Debit payments from and credits to bank accounts.

Bank of England : The UK's central bank that recommends monetary policies, interest rates and regulates retail banking.

Bargain : The term used when a purchase or sale of shares is agreed

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C

Capital Gain : Profits you make when you sell a stock are called 'Capital Gains'. If you make a loss, it is called a 'Capital Loss'.

Capital Gains Tax : Tax due on any capital gains made.

Capitalisation : Refers to the 'Market Capitalisation' of the company - the number of shares in issue multiplied by the current share price, used to describe how big the company is.

Cash Dividend : Cash payment per share held, usually twice per year as an 'Interim' and 'Final'.

Certificate : Paper issued to share holder confirm how many shares in the company they hold, now usually held in a 'Nominee Account'.

Commission : The amount a Stockbroker charges a client for executing an order.

Composite Tax Vouchers (CTVs) : These are paper vouchers you receive to advise how much dividend you have received each six months and are used to calculate any tax return.

Consideration : The cost of the shares purchased or sold before charges are added.

Consolidated Tax Certificate (CTC) : Sent out annually detailing what payments a client has received from. Again you should keep your CTC for your tax submission.

Contract Note : These confirm your purchases and sales.

Corporate Actions : The term for company activities which may affect their share price, such as mergers, takeovers and rights issues. Should an action effect you we will advise you of any action you need to take.

CREST : Electronic settlement system for shares for UK companies. Holds 'Dematerialised Shares'.

Cum : the opposite of 'ex', it is used to denote rights and entitlements that come with a share when it is purchased or sold, for example 'Cum-div' means bought with any dividend due.

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D

Dematerialised Stock : These are shares held in electronic accounts within CREST, instead of in a paper 'Certificate' format and make selling easier and quicker to carry out.

Discretionary Management : You authorise your Stockbroker to make all decisions on buying and selling shares for you in your 'Portfolio'. Also called 'Portfolio Management' and is the most expensive way of dealing in shares.

Dividend : The distribution of profits to shareholders. Usually paid in pence per share twice per year into your 'Nominee Account' with 'CREST' or by cheque if you hold your shares as a 'Certificate'. Dividends are not guaranteed.

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E

Emerging Markets : The analyst's favourite jargon used to describe less well established stock markets, for example Mexico or Africa.

Encryption : Is used to protect sensitive data transmitted via computers, such as transactions and e-mail messages and stops people reading the message other than the sender and the recipient.

Equities : The 'Ordinary Share' capital of a company and the most frequently traded.

Ex-dividend : The period usually about six weeks before a company pays out it's a 'Dividend' If you buy the share during this period you are not entitled to that 'Dividend'.

Execution Only : This type of dealing without advice is the cheapest level of dealing for investors and can be via a Stockbroker or through on-line trading.

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F

Financial Services Act 1986 : The Act which established the system of self-regulation for financial services and a series of regulatory bodies.

Financial Services Authority (FSA) : Chief regulator for financial service industry in the UK.

Flotation : When a company's shares are offered for investors to buy and listed for the first time.

FTSE 100 : The index of the UK's top 100 companies, by 'Market Capitalisation' usually consisting of 'Blue Chips'. Other indexes include the top 350 companies 'FTSE 350' and 'FTSE 250'

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G

Gross : A sum of money before the deduction of taxes or commissions.

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H

Holding : The number of shares you own in a company.

Hostile Takeover : Where one company tries to buy another company against the latter's wishes.

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I

Individual Savings Account (ISA) : Tax efficient investment wrapper, which allows investors to shelter investments including shares away from 'Capital Gains Tax'.

Insider Dealing : The purchase or sale of 'Securities' based on information before its public release, which affects the share price. It is a criminal offence.

Interim Dividend : The company's distribution of profits to shareholders halfway through the year. Dividends are not guaranteed.

Interim Report : A report released after the first 6 months of the financial year by all companies on the stock exchange. It reveals how well the company is trading and can move prices up and down.

Investment Club : A group of investors, usually friends or work colleagues, who contribute monthly to a central fund to invest in shares.

Investment Trust : A UK company (listed on the London Stock Exchange), which invests in other companies.

Investors Compensation Scheme : If a broker firm ceases to trade and takes some of its investors' money with it, this scheme will compensate them fully for the first £30,000 invested, and 90% of the next £20,000 to a maximum of £48,000. Hoodless Brennan are members of the scheme.

Initial Public Offering (IPO) : Initial Public Offering - the offering of shares to investors to buy prior to a market listing of a company.

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L

Lapse : In a 'Rights Issue', when you decide to do nothing, the company may sell the rights and give you the value received less commissions. This is called lapsing.

Liquidity : This term refers to how easy it is to buy and sell a share. If there is a shortage of buyers or sellers, if the price is too high or if there are few market makers prepared to buy or sell the share, the share can be illiquid and therefore not easy to sell or buy. A stock easily sold or bought is therefore liquid.

Limit Order : A purchase or sell order to be executed at a price specified by the client. A 'Limit Order System' is an automated system that allows input of orders 24 hours a day 7 days a week to be executed by the system if the price specified is reached during the opening hours of the Relevant Market.

LSE : Common abbreviation of the 'London Stock Exchange'. 
 

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M

Main Market : 'LSE' main market for UK and international 'Securities'.

Market Capitalisation : The number of shares in issue of a company multiplied by the share price. Used to calculate the size of a company and which index it belongs to, for example 'FTSE 100'.

Market Index : An index, such as the 'FTSE 100'. Usually expressed as a rise or fall in value of the market daily.

Market Maker : Market Makers are the firms or 'Securities Houses' who make a market in a share. They quote their prices for Stockbrokers to buy or sell to.

Market Size : The number of shares a 'Securities House' is willing to deal in at the quoted price.

Mergers : When two or more companies join together to form one company.

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N 

Net : Is the money you receive after deductions have been made for tax and charges.

New Issues : Companies that are listing on a market for the first time, or the issue of extra shares to raise money.

Nominal Value : This is the face value of the share, but not the value at which people are buying and selling the share in the market. Also known as 'Par Value', usually a few pence.

Nominated Advisor : An 'LSE' approved adviser for 'AIM' listed companies. Companies listed on 'AIM' must at all times have an adviser to comply with the listing regulations.

Nominee Account : Are accounts which hold securities on behalf of a client or grouped together for a firm, registering them electronically. We use a company called Raven Nominees to hold together clients holdings. We recommend holding shares in nominee form as you remain the owner and they can then be sold easily through CREST as they are electronically logged onto the account. You can also check your holding through your account on-line.

Normal Market Size : Simply put this is the normal maximum size 'Market Makers' will quote a price. Deals above that size are quoted separately to the Stockbroker.

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O

Offer Price : The price at which you buy. You sell back at the 'Bid Price'.

Open Offer : Existing shareholders here are offered an entitlement to purchase extra shares up to the same size as their current holding in the company.

Ordinary Shares : The most common shares in issue and the most frequently bought and sold by ordinary investors. 
 

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P

Placing : A new issue of shares sold privately through a group of financial institutions.

PLUS Markets : An unregulated market for small UK companies to raise finance, and stands for 'Off Exchange'. Often the first market a small company will list on to develop its business.

Portfolio : Your selection of shares in different companies that you have bought.

Portfolio Valuation : Usually an annual statement of your holdings and their value, which is e-mailed to you if you deal on-line.

Price Earnings Ratio (P/E Ratio) : Investors use this measure to define the future growth prospects of a company. The higher the figure the higher they anticipate company earnings to be in the future. Many new hi-tech companies have a high P/E ratio reflecting investors hope of good earnings in the future but with very low earnings at present. Conversely investors seeking income look for a low P/E ratio as this indicates stability and the prospect of a company being able to easily grow earnings thus increasing profitability and therefore 'Dividends'.

Price Enhancer : This term refers to our market-scanning system. When you buy or sell online with us the Price Enhancer automatically scans the market to get the best price available for you to buy or sell.

Privatization : A common term in the UK since the 1980's as nationally owned companies were listed onto the market by government to raise finance for investment and to allow people to buy shares and own a part of the businesses.

Prospectus : A document issued by, or on behalf of, a company when looking to invite potential investors into buying shares. Prospectuses are most commonly used during a flotation.

Proxy : This allows you, the shareholder to vote even though you can't attend the meeting.

PTM Levy : A nominal charge of £1 on deals over £10,000, paid to the Panel for Takeovers and Mergers which regulates company take overs and mergers. It is automatically added to any deal you complete over £10,000. 
 

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Q

Quote : An 'RSP Market Maker' provides a quote when an enquiry is received. A two-way quote is a 'Bid' and 'Offer' price. A quoted company is one in which you can buy shares

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R

Real-Time Prices : Most on-line trading Stockbrokers provide delayed prices, usually 15-20 minutes. However, with our system we provide real time pricing dealing, which means you see the actual price you buy and sell at the time of dealing - not afterwards.

Record Date : The date when a company 'Registrar' reviews which shareholders are due dividends.

Registrars : Companies whose job it is to maintain and update the company register, which is the list of shareholders in a company.

Relevant Market Hours : The hours which the market You are attempting to deal on is open for business and accepting trades.
Rights Issue : When a company is looking to raise finance current shareholders are offered the opportunity to buy more shares in proportion to their current holding, at a cheaper price than the market price. Companies do this to raise money to expand or pay off debts.

Retail Price Index (RPI) : Retail Price Index, representing movements of prices within the UK for household goods, i.e. cookers, TVs. The index shows the rate of inflation in the economy.

Retail Service Provider (RSP) : Retail Service Provider. The term used for a 'Market Maker' that provides quotes to Stockbrokers for their retail customers.

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S

Save As You Earn (SAYE) : Employer run scheme for employees to buy shares in the company they work for - usually at discount prices.

Scrip Dividend : When a dividend is paid, shareholders can have the option to receive it as additional shares, instead of cash.
Scrip Issues : These occur when the price of a share becomes very high. A high price makes the share difficult to buy and sell, i.e. 'illiquid'. To resolve this, the shareholders receive free shares to increase the number of shares in the market and lower the price to affordable levels thus helping 'liquidity' making it easier to buy and sell.

Securities : The term given to stocks and shares issued by companies.

Securities House : The term for a bank/financial institution that conducts business in 'Securities'.

Self-Regulatory Organisation : A body that authorises and regulates firms conducting financial services business, for example Stockbrokers are authorised and regulated by the 'Securities and Futures Authority'.

Stock Exchange Electronic Trading System (SETS) : Stock Exchange Electronic Trading System. The order driven electronic trading system for dealing in 'FTSE 100' and ex 'FTSE 100' equities.

Settlement : The term used to describe the transfer of shares for payment between a buyer and seller.

Securities and Futures Authority (SFA) : The regulatory body for Stockbroking firms trading in 'Securities'. Now superseded by the Financial Services Authority.

Spread : The difference between prices to buy and sell a share, usually expressed as a percentage.

Stag : The term used to refer to an investor who applies for a 'New Issue' in the hope of selling the stock quickly in order to make a quick profit when the company lists.

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T

T+ : The number of days before 'Settlement' of a trade will take place. 'T+5' indicates 'Settlement' will occur five business days after the transaction day. T+3 is the standard LSE settlement period for Equities.

Tender Offer : An offer where potential investors are invited to apply for shares indicating how much they are willing to pay for the shares on offer.

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V

Volatility : Describes the swing of a share's price, a high volatility factor means large swings up and down in the price.

Volume : Refers to the number of shares traded, usually per day.

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W

Windfall Shares : Free shares given to members of a building society or a mutual insurance company when it becomes a 'Public Limited Company'.

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Y

Yield : The annual dividend received from a share as a percentage of the price of the share. For example share price £1.00, dividend 10p, yield therefore 10%.

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