Definition of Round lot

Round lot

A trading order typically of 100 shares of a stock or some multiple of 100. Related: odd lot.

Odd lot

A trading order for less than 100 shares of stock. Compare round lot.

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.

Go-around

When the Fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits
competitive bids or offers from all primary dealers.

Round-trip transactions costs

Costs of completing a transaction, including commissions, market impact
costs, and taxes.

Round-turn

Procedure by which the Long or short position of an individual is offset by an opposite
transaction or by accepting or making delivery of the actual financial instrument or physical commodity.

Turnaround

Securities bought and sold for settlement on the same day. Also, when a firm that has been
performing poorly changes its financial course and improves its performance.

Turnaround time

Time available or needed to effect a turnaround.

Underground Economy

Economic activity not observed by tax collectors and government statisticians.

Dealer

An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell
from its own account (at its ask price).

Dealer loan

Overnight, collateralized loan made to a dealer financing his position by borrowing from a
money market bank.

Dealer market

A market where traders specializing in particular commodities buy and sell assets for their
own accounts.

Dealer options

Over-the-counter options, such as those offered by government and mortgage-backed
securities dealers.

Foreign exchange dealer

A firm or individual that buys foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling prices, or spread.

Odd first or last period

Fixed-income securities may be purchased on dates
that do not coincide with coupon or payment dates. The length of the first and
last periods may differ from the regular period between coupons, and thus the
bond owner is not entitled to the full value of the coupon for that period.
Instead, the coupon is pro-rated according to how long the bond is held during
that period.

Dealer

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.

Acquisition of stock

A merger or consolidation in which an acquirer purchases the acquiree's stock.

Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.

American shares

securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
issuer. The certificates represent claims to foreign equities.

American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.

Auction rate preferred stock (ARPS)

Floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.

Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.

Beta equation (Stocks)

The beta of a stock is determined as follows:
[(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[(sum of x) (sum of x)]
where: n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the stock

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Broker

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
orders.

Broker loan rate

Related: Call money rate.

Brokered market

A market where an intermediary offers search services to buyers and sellers.

Builder buydown loan

A mortgage loan on newly developed property that the builder subsidizes during the
early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the
prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount
for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).

Buy

To purchase an asset; taking a long position.

Buy in

To cover, offset or close out a short position. Related: evening up, liquidation.

Buy limit order

A conditional trading order that indicates a security may be purchased only at the designated
price or lower.
Related: sell limit order.

Buy on close

To buy at the end of the trading session at a price within the closing range.

Buy on margin

A transaction in which an investor borrows to buy additional shares, using the shares
themselves as collateral.

Buy on opening

To buy at the beginning of a trading session at a price within the opening range.

Buy-and-hold strategy

A passive investment strategy with no active buying and selling of stocks from the
time the portfolio is created until the end of the investment horizon.

Buydowns

Mortgages in which monthly payments consist of principal and interest, with portions of these
payments during the early period of the loan being provided by a third party to reduce the borrower's monthly
payments.

Buying the index

Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the
same return.

Buyout

Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is
done with borrowed money.

Buy-back

Another term for a repo.

Buy-side analyst

A financial analyst employed by a non-brokerage firm, typically one of the larger money
management firms that purchase securities on their own accounts.

Commission broker

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.

Common stock

These are securities that represent equity ownership in a company. Common shares let an
investor vote on such matters as the election of directors. They also give the holder a share in a company's
profits via dividend payments or the capital appreciation of the security.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Common stock equivalent

A convertible security that is traded like an equity issue because the optioned
common stock is trading high.

Common stock market

The market for trading equities, not including preferred stock.

Common stock ratios

Ratios that are designed to measure the relative claims of stockholders to earnings
(cash flow per share), and equity (book value per share) of a firm.

Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.

Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
stock.

Convertible preferred stock

Preferred stock that can be converted into common stock at the option of the holder.

Cross-border risk

Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.

Cumulative preferred stock

Preferred stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred stock.

Day order

An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.

Day trading

Refers to establishing and liquidating the same position or positions within one day's trading.

Debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
other instruments.

Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.

Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Dividend yield (Stocks)

Indicated yield represents annual dividends divided by current stock price.

Economic order quantity (EOQ)

The order quantity that minimizes total inventory costs.

Employee stock fund

A firm-sponsored program that enables employees to purchase shares of the firm's
common stock on a preferential basis.

Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of
employees.

Exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares.

Exempt securities

Instruments exempt from the registration requirements of the securities Act of 1933 or the
margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis,
commercial paper, and private placements.

Federal agency securities

securities issued by corporations and agencies created by the U.S. government,
such as the Federal Home Loan Bank Board and Ginnie Mae.

Fill or kill order

A trading order that is canceled unless executed within a designated time period.
Related: open order.

Floor broker

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.

Forward looking multiple

A truncated expression for a P/E ratio that is based on forward (expected)
earnings rather than on trailing earnings.

Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.

Futures contract multiple

A constant, set by an exchange, which when multiplied by the futures price gives
the dollar value of a stock index futures contract.

Go-around

When the Fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits
competitive bids or offers from all primary dealers.

Going-private transactions

Publicly owned stock in a firm is replaced with complete equity ownership by a
private group. The shares are delisted from stock exchanges and can no longer be purchased in the open
markets.

Government securities

Negotiable U.S. Treasury securities.

Growth stock

Common stock of a company that has an opportunity to invest money and earn more than the
opportunity cost of capital.

Harmless warrant

Warrant that allows the user to purchase a bond only by surrendering an existing bond
with similar terms.

Income stock

Common stock with a high dividend yield and few profitable investment opportunities.

Informationless trades

Trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

Insider trading

trading by officers, directors, major stockholders, or others who hold private inside
information allowing them to benefit from buying or selling stock.

Last trading day

The final day under an exchange's rules during which trading may take place in a particular
futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery
of underlying physical commodities or financial instruments, or by agreement for monetary settlement
depending upon futures contract specifications.

Lessee

An entity that leases an asset from another entity.

Lessor

An entity that leases an asset to another entity.
Letter of comment A communication to the firm from the SEC that suggests changes to its registration
statement.

Letter stock

Privately placed common stock, so-called because the SEC requires a letter from the purchaser
stating that the stock is not intended for resale.

Leveraged buyout (LBO)

A transaction used for taking a public corporation private financed through the use
of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new
corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or
junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the
bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in
such investments.

Limit order

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.

Limit order book

A record of unexecuted limit orders that is maintained by the specialist. These orders are
treated equally with other orders in terms of priority of execution.

Listed stocks

stocks that are traded on an exchange.

Lessor

An entity that leases an asset to another entity.

Listed stocks

stocks that are traded on an exchange.

Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.

Management buyout (MBO)

Leveraged buyout whereby the acquiring group is led by the firm's management.

Manufactured housing securities (MHSs)

Loans on manufactured homes - that is, factory-built or
prefabricated housing, including mobile homes.

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.

Market order

This is an order to immediately buy or sell a security at the current trading price.

Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.

Mortgage-backed securities

securities backed by a pool of mortgage loans.

Multiple rates of return

More than one rate of return from the same project that make the net present value
of the project equal to zero. This situation arises when the IRR method is used for a project in which negative
cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.

Multiple regression

The estimated relationship between a dependent variable and more than one explanatory variable.

Multiples

Another name for price/earnings ratios.

Multiple-discriminant analysis (MDA)

Statistical technique for distinguishing between two groups on the
basis of their observed characteristics.

Multiple-issuer pools

Under the GNMA-II program, pools formed through the aggregation of individual
issuers' loan packages.

Negotiable order of withdrawal (NOW)

Demand deposits that pay interest.

New York Stock Exchange (NYSE)

Also known as the Big Board or The Exhange. More than 2,00 common
and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the
largest. It is lcoated on Wall Street in New York City

Non-cumulative preferred stock

Preferred stock whose holders must forgo dividend payments when the
company misses a dividend payment.
Related: Cumulative preferred stock

Open (good-til-cancelled) order

An individual investor can place an order to buy or sell a security. That
open order stays active until it is completed or the investor cancels it.

Option seller

Also called the option writer , the party who grants a right to trade a security at a given price in
the future.

Options contract multiple

A constant, set at $100, which when multiplied by the cash index value gives the
dollar value of the stock index underlying an option. That is, dollar value of the underlying stock index = cash
index value x $100 (the options contract multiple).

Outstanding shares

shares that are currently owned by investors.

P/E ratio (PE ratio / multiple)

Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25. 50 = 10
times $2. 55
XYZ stock sells for 10 times earnings. P/E = Current stock price divided by trailing annual earnings per
share or expected annual earnings per share.

Pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
where the holder receives the principal and interest payments. Related: mortgage pass-through security

Pecking-order view (of capital structure)

The argument that external financing transaction costs, especially
those associated with the problem of adverse selection, create a dynamic environment in which firms have a
preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated
funds are the most preferred, new debt is next, debt-equity hybrids are next, and new equity is the least
preferred source.

Performance shares

shares of stock given to managers on the basis of performance as measured by earnings
per share and similar criteria. A control device used by shareholders to tie management to the self-interest of
shareholders.

Philadelphia Stock Exchange (PHLX)

A securities exchange where American and European foreign
currency options on spot exchange rates are traded.

Preferred equity redemption stock (PERC)

Preferred stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.

Preference stock

A security that ranks junior to preferred stock but senior to common stock in the right to
receive payments from the firm; essentially junior preferred stock.

Preferred shares

Preferred shares give investors a fixed dividend from the company's earnings. And more
importantly: preferred shareholders get paid before common shareholders. See: preferred stock.

Preferred stock

A security that shows ownership in a corporation and gives the holder a claim, prior to the
claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most
preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar
amount or as a percentage of par value. This stock does not usually carry voting rights. The stock shares
characteristics of both common stock and debt.

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