Finance knowledge

Trading---At the core of our business model is Trading, which involves the buying and selling of financial tools to generate profit. Trading takes place in our Global Markets division, which spans collateralised financing, commodities, emerging markets, equity-linked products, fixed income, foreign exchange and portfolio and liquidity management.

A share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT‘s.
It is commonly used to refer to equity shares.

Dividends are payments made by a corporation to its shareholder members. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

Clearing denotes all activities from the time a commitment is made for a transaction until it is settled.Processes included in clearing are reporting/monitoring, risk margining, netting of trades to single positions, tax handling, and failure handling.

A limit order is an order to buy a security at no more (or sell at no less) than a specific price. This gives the customer some control over the price at which the trade is executed, but may prevent the order from being executed.

A market order is a buy or sell order to be executed by the broker immediately at current market prices.

The Financial Information eXchange (FIX) protocol is an electronic communications protocol for international real-time exchange of information related to the securities transactions and markets.

ECN is an Electronic Communication Network. An electronic system that attempts to eliminate the role of a third party inthe execution of orders entered by an exchange market maker or anover-the-counter market maker, and permits such orders to be entirely or partlyexecuted.An ECN connects major brokerages and individual traders so that theycan trade directly between themselves without having to go through a middleman.NASDAQ, NYSE Arca and Globex are examples of electronic market places.

Exchange - An exchangeis a highly organized market where (especially) tradable securities,commodities, foreign exchange, futures, and options contracts are sold andbought. Exchanges bring together brokers and dealers who buy and sell theseobjects.

VWAP is a trading acronym for Volume-Weighted Average Price, the ratio of the value traded to total volume traded over a particular time horizon (usually one day). It is a measure of the average price a stock traded at over the trading horizon.

Trading or booking involves entering into contracts of sale and purchase.
Settlement of securities is the process whereby securities or interests insecurities are delivered, usually against payment, to fulfill contractualobligations, such as those arising under securities trades.

Some mandatory regulatory reports:

Auditor‘s report on the financial statements, Balance Sheet, Income statement, Statement of retained earnings, Statement of cash flows, Management discussion and analysis (MD&A), Quarterly and Annual Reports.

The buyer of a call option has the right but not the obligation to buy the agreed quantity of the underlying from the seller of the option at a certain time for a certain price(strike price).The seller however has the obligation to sell the underlying based on the buyer‘s decision.

The buyer of the put option has the right but not the obligation to sell the agreed quantity of the underlying to the seller of the option at a certain time for a certain price(strike price).The seller however has the obligation to buy the underlying based on the buyer‘s decision.

A futures contract gives the holder the obligation to make or take delivery under the terms of the contract, whereas an option grants the buyer the right, but not the obligation for the same.The owner of an options contract may exercise the contract, but both parties of a futures contract must fulfill the contract on the settlement date.

A bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity.Thus a bond is a loan: the issuer is the borrower, the bond holder is the lender, and the coupon is the interest.

Preference shareholders are often entitled to a fixed dividend (issued with the rate of dividend fixed at the time of issue) while ordinary shareholders may receive a dividend after the payment of the fixed dividend to the preference shareholders.
Preference shareholders cannot normally vote at general meetings while ordinaryshareholders do.

Headging positions: There are two kind of positions(long or short) that one can hold. A hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment. Thus if we own a security(have a long position) then we profit if the security rises in value , however we would want to hedge (protect) ourselves from the loss if the value of the security falls by making another financial investment.

Over-the-counter options are traded between private parties, often well-capitalized institutions, that have negotiated separate trading and clearing arrangements with each other. These options are not Exchange traded.

An interest rate swap is a derivative in which one party exchanges a stream of interest payments for another party‘s stream of cash flows.In an interest rate swap, each counterparty agrees to pay either a fixed or floating rate denominated in a particular currency to the other counterparty.

An equity swap is a swap where a set of future cash flows are exchanged between two counterparties.One of these cash flow streams can be pegged to floating rate of interest or pay a fixed rate . The other will be based on the performance of a share of stock or stock market index.

A convertible bond (or convertible debenture) is a type of bond that can be converted into shares of stock in the issuing company, usually at some pre-announced ratio. It is a hybrid security with debt- and equity-like features. A convertible bond has a lower coupon rate as compared to a normal bond but he is compensated with the ability to convert the bond to common stock, usually at a substantial discount to the stock‘s market value.

business knowledge