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Glossary

The number of shares allotted to a subscriber of a new issue of shares.

An individual employed by a securities firm to perform investment research.

A financial report or statement issued by a publicly listed company at the end of a financial year to its shareholders, and is usually audited.

An asset is a resource controlled by a person or company, as a result of a past transaction, through which it offers products or services to its customers and in return earn income.

An individual whose net personal assets exceed $2 million or its equivalent in value in any foreign currency, whose income in the preceding 12 months is not less than $300,000 (or its equivalent in a foreign currency)

A condition that is met when an option’s strike price is the same as the prevailing price for the underlying stock. For example, if stock ABC is trading at $125 and the option’s strike price is also $125, then the option is at the money.

A financial statement that shows the value of a company’s assets, liabilities, and owner’s equity on a given date. Total assets minus total liabilities equals owner’s equity.

A portfolio consisting of more than one security that may or may not replicate an index. For example, a share or equity basket is one that contains shares in more than one company.

A market that is characterised by prolonged decline in stock prices. Typically a decline of more than 20% in the major indices will be considered a bear market.

The price that the buyer is willing to pay for the stocks.

An expression widely used to describe ordinary shares of the highest investment calibre. These are listed companies with a good track record of steady profit growth and dividend payments, good management and sound reputation.

A standardized number of shares defined by a stock exchange as a trading unit. In SGX, this typically means 100 shares. The purpose of a board lot is to avoid "odd lots" and to facilitate easier trading.

A form of debt or fixed income security which pays a fixed interest for each specified period and has a maturity date. It is generally a promise to repay the principal and the interest on specific dates.

An offer of free additional shares to existing shareholders. This will result in dilution of the share prices as well.

The day when the shareholder records of a company are closed for registration in order to determine the entitlement of dividends, rights and bonus issues. Only shareholders marked in the company's register at the Book Closure Date would be entitled to receive these benefits.

This represents the total amount of a company’s assets minus liabilities and if issued, preferred stock.

A broker is a licensed capital markets services’ representative of a brokerage firm, and acts as an agent or intermediary for investors to buy and sell shares on their behalf. He is paid a commission or a brokerage fee for his service.

The fee a broker charges when he buys and sells securities on behalf of his clients. Also known as commission.

A market that is characterised by prolonged advance in stock prices. Typically an advance of more than 20% in the major indices will be considered a bull market.

The repurchase of securities at the seller’s risk when he fails to deliver securities to the buyer by due date.

A recommendation to purchase a specific security. A buy rating from an analyst or research firm is a recommendation to purchase the security, with the implied insistence that the security is undervalued in some fashion.

A situation that occurs when the seller sold stocks that you do not own. If the seller did not borrow shares to deliver to the buyer by due date, the seller will be subjected to Buy-in.

A measure of a stock’s relative volatility. A stock with a higher beta can be expected to rise or fall more than the overall market, whereas a stock with a lower beta is less volatile than the overall market.

A theoretical model used to calculate the fair market value of an option based on time to expiration, price of the underlying stock, historical volatility, strike price, and carrying costs.

A contract that gives the buyer the right to buy a given quantity of the underlying asset at a predetermined price on or before a specified date. If the option or right is not exercised the option expires and the buyer forfeits the money. A contract that gives the holder the right to buy a particular asset at a specified price at any time prior to the expiration of the option.

The profit made from selling a stock at a price higher than the price it was bought at. The profit from the sale of an investment at a price that’s higher than the purchase price.

Catalist is a market operated by Singapore Exchange Securities Trading Ltd, with a Sponsor- supervised model.

Also known as The Central Depository (Pte) Ltd, it provides depository, clearing and settlement as well as computerised book-entry services for securities traded on Singapore Exchange.

A person who uses past price movements to determine future price movements of shares.

This is the last done price at which the stock was traded at before the close of trading day.

Securities or other assets pledged by a borrower to guarantee a loan.

A form of trading where the investor does not collect the securities he purchases nor delivers the securities he sells, but arranged to settle outstanding differences which may be profits or losses.

An agreement between 2 parties to make and take delivery of securities.

Document sent to a buyer or seller confirming the transaction and showing details as to price, stamp duties, brokerage and total value due.

A bond that may be exchanged for a specified number of shares of the issuing company.

These are actions by the company which can have a significant impact on the value of that security, as a result, on the value of the shareholder’s portfolio.

A covered warrant which entitles the warrant holder a right but not the obligation to buy or sell the underlying stocks at a pre-determined price (strike price) on or before a pre-determined date (Expiry Date). 
 All Singapore listed covered warrants are cash settled on expiry i.e. there is no delivery of shares.

Includes all declared entitlements.

A bank, financial institution or organization which keeps the shares or other assets on behalf of an individual or corporate clients. Also performs other financial duties such as settlement of transactions and handling corporate actions in relation to the custody of those shares.

A bond that the issuer can redeem before its maturity date. The bondholder is often paid a premium when the bond is called.

A chart that shows the daily high, low, opening, and closing prices for a security over a specified time period.

A call option sold by an investor who already owns the underlying shares. If you write a covered call and the option is exercised by the holder, then you would just deliver the stock to the holder.

Date when declared dividends are payable.

An investor’s trading account that has been frozen as a result of failure to settle an overdue payment.

Removal of a company’s listed status, after which the shares of this company will not be allowed to be traded on SGX.

An institution which provides central depository of certificates and where ownership of shares is transferred and recorded.

CDP, which also provides clearing and settlement services, is the only depository in Singapore.

A financial instrument that derives its value from the price of another more basic instrument.

For instance, stock options are derivatives with the price derived from the price behaviour of the underlying stock.

SGX imposes certain requirements on listed companies in relation to disclosure where they are called to disclose material information that may affect share price movement, shareholders’ interests or investment decisions.

A share of the company’s profits distributed to shareholders of the company’s ordinary and preferred stocks. The dividend payout is determined by the company’s board of directors and may be paid out in cash or stock dividend. Money paid out by a company to the owner of its stock. An income stock is a stock that has a regularly paid, higher-than-average dividend

Rate of dividend return, shown in percentage form. The formula for calculating the dividend yield:
Dividend Yield = Dividend / Price per share

A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique is that a portfolio of different kinds of investments will hold lesser company-specific risks.

Shares having a claim to participate in the whole range of annual profits remaining to a company after it has satisfied all charges and met any fixed preferential dividends, and having a right to participate in surplus assets in a winding-up.

Excludes declared entitlements.

The price at which the stock or commodity underlying an option can be purchased (call option) or sold (put option) pursuant to the terms of the contract.

A market in which stock shares are issued and traded. Trading takes place through both exchanges and over-the-counter markets

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.

The sale of securities at a buyer’s risk when he fails to pay for the securities purchased earlier.

The evaluation of economic and financial analysis in investment decision-making A method of evaluating securities by attempting to measure the intrinsic value of a stock by examining related economic, financial and other qualitative and quantitative factors.

Currency that a government declares to be legal tender, even though it is not backed by reserves of physical assets (such as gold). The value of fiat money derives solely from the public’s confidence and faith in its ability to serve as a storage medium for purchasing power. Most of the world’s money is fiat money.

Speculation on the value of one currency versus another, in which you buy one country’s currency—in the hope that it will appreciate relative to the value of another currency.

Contracts where you agree to buy or sell a specific amount of a commodity, currency, or other asset at a specified price on a specified future date. Unlike an option, a futures contract creates an obligation, rather than just a right, to buy and sell the underlying security.

When a company issues its shares to the public for the first time.

When you own a security or other asset, you are said to be long that security. When you go long (that is, buy) a security, you’re bullish, or positive on the market, and you expect the price of that security to go up.

An investment strategy that allows you to reduce the risk of an unfavorable price change in a security. For example, a stockholder of ABC Company who is worried about declining stock prices can offset that risk by buying a put option on ABC, allowing him to sell his shares in the future at today’s price.

A chart formation in a graph of an asset price that resembles three mountaintops in a row, with the middle mountaintop being taller than the other two. The pattern indicates a trend reversal, meaning that prices are expected to fall.

An analyst's recommendation to neither buy nor sell a security. A company with a hold recommendation generally is expected to perform with the market or at the same pace as comparable companies.

Measures the stock market movement based on a group of selected counters or sectors. For the Singapore market, the most common index is The Straits Times Index.

A dividend paid during a company’s financial year.

To acquire an asset with the expectation of growing value in the future. Linked to the concept of ownership.

Also known as a new share issue. A company’s first offering of stock to the public for subscription.

The capital for which shares have been issued; often in distinction to the nominal or authorised capital. The latter term means capital for which the issue of shares has been authorized and on which capital stamp duty has been paid. The amount of nominal value of share held by the shareholders. It is the face value of the shares that have been issued to the shareholders. Issued share capital and share premium represent the amount invested by the shareholders in the company. It is also known as the subscribed capital or subscribed share capital.

Investments that don’t trade very actively and are difficult to sell on short notice.

A theoretical value representing the volatility of the security underlying an option. Implied volatility is used by the Black-Scholes model, among others, to calculate the price of an option. Implied volatility usually rises when the markets are in downtrends, and falls when the markets are in uptrends.

A condition that is met when a call option’s strike price is below the prevailing price for the underlying stock. For example, if stock ABC is trading at $125 and the option’s strike price is $120, then the option is in the money. 
For a put option, the strike price must be above the current market price of the stock for the option to be in the money.

The ability to convert assets to cash readily.

A company that has met the requirements set by SGX to qualify for a listing and its shares are traded on the stock market.

The first day of trading for an IPO.

The degree to which an investor or business is utilizing borrowed money. For investors, leverage is a means of multiplying the return on an investment by borrowing money to purchase additional securities or other assets. Buying securities on margin is an example. If you have $1,000 of cash and borrow another $1,000 from your brokerage, you could then purchase $2,000 of stock. If the value of the purchased stock increases by 10 percent ($200), then you have realized a 20 percent gain ($200/$1,000) on your actual cash investment.

A trading board where companies have met SGX’s stringent financial requirements to qualify for a listing.

A securities account opened in the name of the investor with a broking company for the sole purpose of margin trading.

Call for additional funds or shares so that the minimum acceptable level is restored.

Refers to the status of an investor’s margin account at the end of each trading day. For example, if the margin deposit falls below the maintenance level, the investor will be required to put in more money to restore the level to its initial margin level. An arrangement whereby changes in the value of an asset or fund are recorded each day to reflect its current fair market value. Marking to market occurs on a daily basis and is used for a number of purposes. Notably, investors mark to market a portfolio or security to ensure that a margin account is meeting its minimum maintenance.

Market capitalization is the total value of the issued shares of a publicly traded company, and is equal to the share price times the number of shares outstanding. The value of a company as measured by the total number of stock shares outstanding times the market price of each share. For example, if company ABC has 20 million shares outstanding, and each share is currently worth $100, then the market cap for ABC is $2 billion. In general, stocks are classified as large cap (over $5 billion), small cap (under $1 billion), or mid cap (anything in between).

Market-making is a critical component in the development of liquid markets. Market makers do not attempt to profit from predicting the future trends in prices. Rather, their focus is to identify the equilibirum price at which demand and supply are balanced at a given moment.

After correctly identifying the equilibrium price, the market maker offers a two-way price (ie. bid and offer) and thus providing liquidity to the market and supplies prices for buyers and sellers. These market makers are required to maintain two-sided markets during exchange hours and are obligated to buy and sell at their displayed bids and offers.The reward is the benefit of spread between bid and offer prices. By selling to and buying from different people, the market makers get the benefit of spread between his buying (ie. bid) and his selling (ie. offer) price.

The price of shares traded.

A stock index where the effect of each stock on the index is in proportion to its market capitalisation.

The amount a fund pays to its investment manager for the investment management associated with the overseeing the fund's portfolio.

The perceived strength behind a price or volume movement in a security based on the rate of acceleration of that movement.

In technical analysis, a chart line that shows the average of a security’s price over a specified period of time, recalculated for each new data point. For example, a 30-day moving average will include yesterday’s price and those for the previous 29 days. Tomorrow’s moving average will include today’s price but will drop the price for the earliest date in yesterday’s average. The moving average is used to spot pricing trends by flattening out large fluctuations.

A fund operated by an investment company that raises money from shareholders and invests that money in a group of assets in accordance with one or more stated objectives, such as income, growth, aggressive growth, and so on. A mutual fund may generally invest in stocks, bonds, options, futures, currencies, and money market securities in accordance with its stated parameters. All shareholders share equally in the income, gains, and losses generated by the fund.

A call option sold by an investor who does not already own the underlying shares. If you write a naked call and the option is exercised by the holder, then you would have to buy the stock at the market price to meet your obligation. Naked calls are very risky, though potentially very rewarding.

The number of shares that is less than the normal unit of trading, known as a board lot. For SGX, this would be any quantity less than 100 shares for most counters.

The price at which shares in an initial or secondary offering are offered to the public. Also known as the subscription price.

A derivatives instrument where the buyer has the right to take up certain shares on specified terms within or at a specified time. A derivative security that gives the holder a contractual right to buy or sell a set amount of a stock, commodity, or other asset at a specified price on or before the option’s expiration date. An option is purchased for a fee, called a premium.

This occurs when the number of shares applied for exceeds the number of shares offered for subscription in an IPO. Oversubscription rate is the number of times the number of shares applied for exceed the number of shares offered for subscription.

Trading in securities that are not listed on a stock exchange.

A person who is buying options. Call option holders have the right to buy a stipulated quantity of the underlying asset specified in the contract at a specified strike price. Put option holders have the right to sell the specified amount at the strike price.

A condition that is met when a call option’s strike price is above the prevailing price for the underlying stock. For example, if stock ABC is trading at $120 and the option’s strike price is $125, then the option is out of the money.
 For a put option, if the strike price is below the current market price of the stock, then the option is out of the money.

Investor’s holding of securities of various types. The wise investment policy is to build up a balanced portfolio according to personal requirements.

Shares taking precedence over other shares of the same corporation with regard to dividend and liquidation distributions.

Premium is the price that the option buyer will pay for the purchasing the option.

Ratio of the current market price over earnings per share.

Securities are first offered for sale in this market. For example, an IPO, the sale of a new bond, etc.

A direct sale of securities between an issuer and an investor.

The practice of selling a security which has risen in price. This allows investors to convert the increase of an asset's market value into cash. As sellers realise their profits, the price is depressed in the process.

Written authorisation given by a shareholder to another person to vote on his behalf at a shareholders’ meeting.

A contract that gives the holder the right to sell a particular asset at a specified price at any time prior to the expiration of the option.

A rise in stock price(s) for an extended period of time.

A company, usually traded publicly, that raises money from shareholders and invests that money in a portfolio of real estate properties. REITs are modeled after mutual funds, although the tax treatment of REIT income is different.

A licensed Trading Representative who is an agent of an SGX member broking firm and who shares commission with the member broking firm. For more information on remisiers, please visit www.remisiers.org

An issue of rights to a company's existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings, within a fixed time period. The subscription price at which each share may be purchased in generally at a discount to the current market price. Rights are often transferable, allowing the holder to sell them on the open market.

A price movement in the opposite direction of the previous trend. When a price has gone too far and traders deem the security overbought or oversold, the price may stop rising or falling and move in the opposite direction for a period of time.

Trading without the physical transfer of share scrips. Scrips are immobilised at CDP and beneficiary ownership is processed on a computerised book-entry basis.

Trading in existing securities which takes place in the secondary market. The financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.

A term used to refer to all shares, debentures, notes and bonds.

The final point in the trade process after which the trades are executed, securities and monies are delivered and exchanged by settlement date.

Settlement generally occurs three business days following the trade date (T), which is T+3 days. This is known as the settlement date.

One who owns part of a listed company, and who has the right to vote for the Board of Directors and on corporate matters.

A situation that occurs when the seller sold stocks that you do not own. If the seller did not borrow shares to deliver to the buyer by due date, the seller will be subjected to Buy-in.

A structured warrant which entitles the warrant holder a right but not the obligation to buy or sell the underlying stocks at a pre-determined price (strike price) on or before a pre-determined date (Expiry Date). 
 All Singapore listed covered warrants are cash settled on expiry i.e. there is no delivery of shares.

An instruction to a broker to sell a stock at the market price after the security has touched the specified stop price. A sell stop is always placed below the present market price and is usually designed to protect a profit or limit a loss.

The general feeling among investors as to which direction the stock market is heading. If the sentiment is that prices are going up, it is said to be bullish; if the sentiment is toward a downward movement, it is bearish. Investors base sentiment on market activity and movements in the prices of securities.

A situation that occurs when the seller sold stocks that you do not own. If the seller did not borrow shares to deliver to the buyer by due date, the seller will be subjected to Buy-in.

The price at which the stock or commodity underlying an option can be purchased (call option) or sold (put option) pursuant to the terms of the contract.

The FTSE Straits Times Index (STI) is a capitalisation-weighted stock market index that is regarded as the benchmark index for the Singapore stock market. It tracks the performance of the top 30 companies listed on the Singapore Exchange.

Systematic risk, also known as “undiversifiable risk” or “market risk”, affects the overall market, not just a particular stock or industry. This type of risk is both unpredictable and impossible to completely avoid. It cannot be mitigated through diversification, only through hedging or by using the right asset allocation strategy.

A takeover occurs when the Offerer, either a person/company or a group of persons/companies acting in concert, seeks to gain voting control in another company (the Offeree).

A method of forecasting price movements through trading volume and price studies. Technical analysts use charts and technical indicators to identify and project price trends.

See Broker.

The volume of trading measured by the number of shares traded and the value of share transactions.

A price change in a security’s trades. If the next trade takes a security up in price, it’s an uptick; if it takes the security down, it’s a downtick.

The spread between the high and low prices of a security or commodity within a particular period.

The party which arranges for the issue of new securities. Underwriters guarantee full subscription by taking up all unsubscribed shares.

An investment where investors pool their funds together and invest in securities through a professional fund manager. Investors can participate in the trust fund by buying units from the fund manager. Each unit represents a fraction of the portfolio held.

A measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices.

Provide shareholders with the right, but not the obligation to subscribe for a given number of ordinary shares in the company.

A person who is selling options. Call option writers have the obligation to sell a stipulated quantity of the underlying asset specified in the contract at the specified strike price if the option is exercised by the holder. Put option writers have the obligation to buy the specified amount at the strike price if the option is exercised.

Effective return to an investor from a particular security, expressed The amount of cash (in percent terms) that returns to the owners of a security