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Scaling Down
When a new issue is over subscribed, the procedure whereby applicants receive a proportion of the number of shares for which they applied.
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Scrip Issue
See Bonus Issue.
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SEATS Plus
A trading system which combines quote and order driven systems. It is used for most AIM shares and some smaller fully listed shares.
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Secondary Market
Market place for trading in existing securities. The price at which they are trading has no direct effect on the company's fortunes but is a reflection of investors' perceptions of the company.
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Secured Loan
A loan with collateral pledged in exchange for the funds. (See Debenture)
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Securities
Bonds and equities.
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Securities and Investments Board (SIB)
Former name of the Financial Services Authority.
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Securities House
General term covering any type of organisation involved in securities although usually reserved for the larger firms.
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Self Invested Personal Pension (SIPP)
A personal pension under which the member can control the investments and invest in, e.g. unit trusts, stocks and shares.
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Self-Select ISA
The investor makes all the decisions as to what is bought and sold within the ISA, particularly the stocks and shares component. An account manager is still required and would typically be a stockbroker.
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Semi-Annual Yield
The yield calculation for a bond which pays interest twice a year. The semi-annual equivalent is a calculation to semi-annualize the yield on an annual bond so that its yield may be compared with that of a semi-annual bond. (See Annual Equivalent Yield)
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Senior Debt
Debt which takes priority over junior or subordinated debt from the same issuer.
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Separate Traded Registered Interest and Principal Securities (STRIP)
The result of stripping a coupon-¬bearing bond. A coupon strip entitles the holder to the benefits of one or more future coupons, whereas a principal strip entitles the holder to the benefits of the redemption value of the original bond.
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Serialised Repayments
The process of redeeming bonds in instalments at pre-determined intervals.
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Series
All option contracts on the same instruments with the same exercise price and the same expiry date. Put options and call options with the same strike price and same expiry date form two different series.
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SETSMM
A trading service for FTSE 250 securities trading on SEAQ. The system uses an electronic order book supported by market makers.
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Settlement
The fulfilment of the contractual commitments of transacted business.
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Settlement Date
The day on which securities must be delivered and paid for to settle a transaction. The standard period for equities is the 3rd business day after the date of the transaction, known as T +3 in the market. Longer settlement periods can be negotiated.
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Settlement price
The price used for daily revaluation of open positions.
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Share Buybacks
When a listed company purchases its own shares in the market for cancellation.
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Share Certificate
A certificate issued by a company to a shareholder stating either that a named person is the registered owner or that the bearer is the owner.
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Short Bond
A bond with less than 5 years to maturity.
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Short Coupon
The first coupon on a newly issued bond which is payable at the end of a period shorter than the interval between the remaining coupons.
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Short Selling
Selling shares that you do not own with the aim of buying them back at a lower price.
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Short-dated Gilt
Gilts with seven years or less to run.
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Sinking Fund
An obligation of the issuer to redeem annually a given amount of stock, by drawings, unless previously purchased in the market and cancelled.
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Small Self Administered Scheme (SSAS)
An occupational pension scheme which can have no more than 12 members and 2 directors.
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Société d'Investissement À Capital Variable (SICAV)
A type of open-ended investment fund in which the amount of capital in the fund varies according to the number of investors. Shares in the fund are bought and sold based on the fund's current net asset value. SICAV funds are some of the most common investment vehicles in Europe.
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Sovereign
A government issuer of bonds.
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Special Ex Dividend
For a period before certain bonds are quoted ex dividend, it is possible to deal either cum dividend or ex dividend and in the latter case, trades are described as special ex.
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Spinoff
The creation of an independent company through the sale or distribution of new shares of an existing business/division of a parent company. A spinoff is a type of divestiture.
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Spread
1. The difference between the bid and offer price made by Market Makers on the Stock Exchange. (Bid and Offer spread)
2. The difference in yields on different securities. (Yield Spread)
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Spread (options)
A market position involving a degree of risk offset in two or more positions. With options such strategies as ratio, horizontal and vertical spreads are used across strike prices and expiry months.
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Stag
A person who applies for shares in a new issue with the aim of selling at a higher price at the commencement of trading.
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Stamp duty
A UK tax on the physical transfer of certain certificated securities.
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State-controlled Economy
Country where all aspects of activity are controlled by the government.
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Stepped Coupon
A coupon which increases periodically to pre-determined levels.
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Stock Exchange (Stockmarket)
An organisation that provides facilities for companies and governments to issue securities to raise money and for those securities to be traded among investors.
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Stock Exchange Automated Quotation System (SEAQ)
A competing market maker quote driven trading systems for certain listed securities and the more liquid AIM shares.
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Stock Exchange Electronic Trading System (SETS)
Computerised matching system through which traders in equities display prices and quantities of stock they wish to buy or sell.
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Stock Split
A proportionate change in the number of shares in a company, without changing the total shareholders’ equity. This increases the number of shares outstanding. Essentially, a firm splits its shares to reduce the market price and makes the shares more attractive to a larger pool of investors. The reverse action is referred to as a stock consolidation or reverse split. Note the difference between stock split and certificate split: the latter, a shareholder–initiated action, does not alter the value of each share.
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Straddle
The purchase or sale of a call combined with the purchase or sale of a put at the same strike (generally purchased with both at-the-money).
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Straight
A fixed income security that cannot be converted into other securities. Its only reward is an annual or biannual interest coupon together with a promise to repay the capital at par on the redemption date.
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Strike Price/Rate (Or exercise price)
The price or rate at which the holder of an option can insist on the underlying transaction being fulfilled.
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Subordinated
A security with lower priority than other securities in the event of a winding-up and subsequent distribution of assets.
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Subsidiary
A company, at least 50% of which is owned by another company. See Holding Company.
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Supranational
An entity which does not have one particular national identity - e.g. The European Investment Bank.
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Swap
The means by which two borrowers, one of whom has fixed interest and one of whom has floating rate borrowings, swap their commitments with each other. A bank would arrange the swap and charge a fee. Swaps are most common in euro currency markets.
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Syndicate
A group of securities houses who are placing a new issue of eurobonds under the authority of a lead manager.