Definition of Broker
An agent who handles public orders to buy or sell financial assets.
An individual who is paid a commission for executing customer orders. Either a floor broker who
executes orders on the floor of the exchange, or an upstairs broker who handles retail customers and their
Related: Call money rate.
A market where an intermediary offers search services to buyers and sellers.
A broker on the floor of an exchange acts as agent for a particular brokerage house and
who buys and sells stocks for the brokerage house on a commission basis.
A member who is paid a fee for executing orders for clearing members or their customers. A
floor broker executing customer orders must be licensed by the CFTC.
This is a provincial government licensed independent businessperson who usually represents five or more life insurance companies in a sales and service capacity and who is paid a commission by those life insurance companies for sales and service of life insurance products. We for example, have been in business for 12 years and regularly place new business with over twenty different life insurance companies.
A means of compensating the broker of a program trade solely on the basis of commission
established through bids submitted by various brokerage firms. agency incentive arrangement. A means of
compensating the broker of a program trade using benchmark prices for issues to be traded in determining
commissions or fees.
Employee of a brokerage or fund management house who studies companies and makes buy-and-sell
recommendations on their stocks. Most specialize in a specific industry.
brokerage house clerical operations that support, but do not include, the trading of stocks and
other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory
Back-end loan fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from
4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a
designated time, such as one year. The commission decreases the longer the investor holds the shares. The
formal name for the back-end load is the contingent deferred sales charge, or CDSC.
brokerage firms that help to find potential buyers or sellers of large block trades.
A financial analyst employed by a non-brokerage firm, typically one of the larger money
management firms that purchase securities on their own accounts.
Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call money rate plus a service charge.
Excessive trading of a client's account in order to increase the broker's commissions.
The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or
their dollar value. In 1975, deregulation led to the creation of discount brokers, who charge lower
commissions than full service brokers. Full service brokers offer advice and usually have a full staff of
analysts who follow specific industries. Discount brokers simply execute a client's order -- and usually do not
offer an opinion on a stock. Also known as a round-turn.
The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating Expense Ratio (OER).
The last day (in the case of American-style) or the only day (in the case of European-style)
on which an option may be exercised. For stock options, this date is the Saturday immediately following the
3rd Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of
an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding
Direct trading in exchange-listed securities between investors without the use of a broker.
Good 'til canceled
Sometimes simply called "GTC", it means an order to buy or sell stock that is good until
you cancel it. brokerages usually set a limit of 30-60 days, at which the GTC expires if not restated.
Initial margin requirement
When buying securities on margin, the proportion of the total market value of
the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the board of
governors of the Federal Reserve the responsibility to set initial margin requirements, but individual
brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by
For companies: Raw materials, items available for sale or in the process of being made ready for
sale. They can be individually valued by several different means, including cost or current market value, and
collectively by FIFO, LIFO or other techniques. The lower value of alternatives is usually used to preclude
overstating earnings and assets.
For security firms: securities bought and held by a broker or dealer for resale.
Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.
An order to buy a stock at or below a specified price or to sell a stock at or above a specified
price. For instance, you could tell a broker "Buy me 100 shares of XYZ Corp at $8 or less" or to "sell 100
shares of XYZ at $10 or better." The customer specifies a price and the order can be executed only if the
market reaches or betters that price. A conditional trading order designed to avoid the danger of adverse
unexpected price changes.
A market is locked if the bid = ask price. This can occur, for example, if the market is
brokered and brokerage is paid by one side only, the initiator of the transaction.
Maintenance margin requirement
A sum, usually smaller than -but part of the original margin, which must
be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the
maintenance margin level, the broker must issue a margin call for the amount at money required to restore the
customer's equity in the account to the original margin level. Related: margin, margin call.
This allows investors to buy securities by borrowing money from a broker. The margin is the
difference between the market value of a stock and the loan a broker makes. Related: security deposit (initial).
Margin account (Stocks)
A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.
Odd lot dealer
A broker who combines odd lots of securities from multiple buy or sell orders into round lots
and executes transactions in those round lots.
An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in the name of the
originating broker, rather than designated separately. Related: commission house.
One man picture
The picture quoted by a broker is said to be a one-man picture if both the bid and offered
prices come from the same source.
P&S (P and S)
Purchase and sale statement. A statement provided by the broker showing change in the customer's net
ledger balance after the offset of a previously established position(s).
In mutual funds, the ability to transfer shares between funds in the same family by
telephone request. There may be a charge associated with these transfers. Phone switching is also possible
among different fund families if the funds are held in street name by a participating broker/dealer.
The bid and asked prices quoted by a broker for a given security.
The bid and offer prices at which a dealer could do "size." Quotes in the brokers market may
reflect not the real market, but pictures painted by dealers playing trading games.
Individual and institutional customers as opposed to dealers and brokers.
Security deposit (initial)
Synonymous with the term margin. A cash amount of funds that must be deposited
with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as
part payment or purchase. Related: margin
If an investor thinks the price of a stock is going down, the investor could borrow the stock from
a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you
borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares
of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.
Also called a Wall Street analyst, a financial analyst who works for a brokerage firm and
whose recommendations are passed on to the brokerage firm's customers.
Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers.
The value of research services that brokerage houses supply to investment managers "free of
charge" in exchange for the investment manager's business/commissions.
brokers, dealers, underwriters, and other knowledgeable members of the financial community; from
Wall Street financial community.
Describes securities held by a broker on behalf of a client but registered in the name of the Wall Street firm.
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 trades.
A list of securities selected for special surveillance by a brokerage, exchange or regulatory
organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks
showing unusual activity.
A firm operating a private wire to its own branch offices or to other firms, commission houses or
A person or firm in the financial asset business who buys for his or her own account and then resells to customers, in contrast to a broker, who buys only on behalf of a customer.
The automatic quotation system of the National Association of Securities Dealers, providing brokers and dealers with price quotations for over-the-counter stocks.
Errors and Omissions Insurance
Insurance coverage purchased by the agent/broker which provides protection against loss incurred by a client because of some negligent act, error, oversight, or omission by the agent/broker.
In October 1996 it was announced in the international news that scientists had finally located the link between cigarette smoking and lung cancer. In the early 1980's, some Canadian Life Insurance Companies had already started recognizing that non-smokers had a better life expectancy than smokers so commenced offering premium discounts for life insurance to new applicants who have been non-smokers for at least 12 months before applying for coverage. Today, most life insurance companies offer these discounts.
Savings to non-smokers can be up to 50% of regular premium depending on age and insurance company. Most life insurance companies offering non-smoker rates insist that the person applying for coverage have abstained from any form of tobacco or marijuana for at least twelve months, some companies insist on longer periods, up to 15 years.
Tobacco use is generally considered to be cigarettes, cigarillos, cigars, pipes, chewing tobacco, nicorette gum, snuff, marijuana and nicotine patches. In addition to these, if anyone tests positive to cotinine, a by-product of nicotine, they are also considered a smoker. There are some insurance companies which allow moderate or occasional use of cigars, cigarillos or pipes as acceptable for non-smoker status. Experienced brokers are aware of how to locate these insurance companies and save you money.
Special care should be taken by applicants for coverage who qualify for non-smoker rates by virtue of having ceased a smoking habit for the required period before application, but for some reason, fall back into the smoking habit some time after obtaining coverage. While contractually, the insurance company is still bound to a non-smoking rate, the facts of the applicant's smoking hiatus may become vague over the subsequent years of the resumed habit and at time of death claim, the insurance company may decide to contest the original non-smoking declaration. The consequence is not simply a need to back pay the difference between non-smoker and smoker rates but in reality the possibility of denial of death claim. It is therefore, important to advise the servicing broker as well as the insurance company of the change in smoking habits to make certain that sufficient evidence is documented to track the non-smoking period.
This could be the person (broker or agent) who helps you choose the proper type of life insurance or disability insurance and the insurance company for your particular needs. This could also be the person at the insurance company's head office who reviews your application for coverage to determine whether or not the insurance company will issue a policy to you.
management expense ratio (MER)
The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund.
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