Glossary
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
ASX TradeMatch
Is the ASX’s primary trading venue for trading in Australian equities. Prior to the introduction of multi markets and alternative trading venues, ASX TradeMatch was the primary trading venue for all equity trading in Australia.
ASX Centre Point
ASX Centre Point orders offer anonymous execution at the prevailing midpoint of the best bid and offer of the ASX order book (ASX TradeMatch). ASX Centre Point orders can only transact with another ASX Centre Point Order.
For further information please refer to the ASX Trade brochure New Order Types available from the ASX website www.asx.com.au
Announcement
Information provided by a listed company to the stock exchange. Examples include profit announcements, significant changes in trading conditions, etc.
Annual Report
An annual report is a financial report or statement issued by a company to its shareholders. The annual report contains a profit and loss statement, a balance sheet and a statement of cash flow, as well as notice of the Annual General Meeting (AGM) and business resolutions to be discussed for listed companies on the ASX.
Active Management
Investment approach that seeks to outperform the market, through making informed, independent, investments and selective asset management.
Arbitrage
Buying and selling of an asset or security, often on two separate exchanges, taking advantage of any price differential that may exist.
Ask
The price at which someone is prepared to sell shares. Also referred to as "Offer".
ASX
Australian Stock Exchange.
At Market
An instruction with a buying or selling Order indicating that the order should be carried out immediately at the best possible price.
B
Best Execution Policy
Under ASIC Market Integrity Rule 3.1.1 (Competition in Exchange markets) 2011, State One is required to take reasonable steps to obtain the best outcome for its clients when handling and executing orders in a multi market environment. This policy sets outs State Ones approach to providing the best outcome for its clients and is available on our website at www.amscot.com.au
Bear Market
A falling market – usually when multiple index’s lose more than 20% over more than a two month duration.
Bid
The price at which someone is prepared to buy a security.
Bid-Ask Spread
The difference between the buying and selling price. (The bid is the price offered; the ask price is the price requested).
Blue Chip Shares
Shares, in high quality companies with a track record of steady or growing profits and dividend payments.
Bonus Shares/Bonus Issue
Additional shares issued by the company to existing shareholders for free, usually in a pre-determined ratio to the number of shares already held.
Brokerage
Relates to the fee paid to a stockbroking firm for buying or selling shares.
Bull Market
A strong, rising market.
Buy on Margin
An investor may use money borrowed from a broker or bank to purchase securities.
C
CHI-X Australia Pty Ltd
Chi-X Australia is a new trading venue which commenced operations on the 31st October 2011. Chi-X Australia is an alternative to ASX TradeMatch and provides trading in a subset of ASX listed securities. Chi-X Australia does not support ETOs, or CFD trading at this stage
Crossing
A 'crossing' or 'crossed trade' is when a trade has resulted from matching a buyer and a seller of a particular stock, where both the buyer and seller are clients of the same broker.
Capital Growth
An increase in the value of your investment.
Capital Markets
The total universe of publicly-traded securities, this includes shares, fixed-income securities and money-market instruments.
Closing Market Price
Is the last traded price of a security at the close of the trading day.
Company Analysis
Research of a specific company using the calculation of financial ratios and/or forecasting of profits, cash flows and dividends. Company analysis provides a basis for the valuation of shares and recommendations on when to buy, sell and hold.
Contract Note
A written document confirming a transaction between two brokers or a broker and a client which details the costs, type and quantity of shares traded.
Contributing Shares (or partly paid shares)
Shares that are not fully paid. The outstanding amount is payable at a time chosen by the company.
Correlation
The degree to which two assets behave in a similar manner under differing market conditions. The more similarly they behave, the greater their positive correlation; the more they behave in opposite ways, the greater their negative correlation. Two assets that have a high negative correlation, the more one will diversify the other- lowering an investors overall risk.
Current Market Price
The latest traded price on a security at any given time.
D
Default
When an issuer cannot or fails to meet their payment obligations.
Diversification
The practice of investing in a range of investments, principally to reduce risk..
Dividend or Dividend Per Share (DPS)
Money paid out to shareholders from a company’s profit (after tax and all other expenses). Dividends are often a certain number of cents per share, paid regularly according to the company’s dividend policy.
Dividend Yield
Rate of investment return received by way of dividends. The yield is calculated by dividing the annual dividend (cents per share) by the market price of the share (cents).
E
Earnings Per Share (EPS)
The amount of annual profit (after tax and all other expenses) that is attributable to each share in the company. EPS is calculated by dividing profit by the average number of shares on issue.
EBIT
A commonly used abbreviation for ‘earnings before interest and taxation’. A measure of a company’s earnings before considering the financing of that company (the share of equity and debt employed).
EBITDA
A commonly used abbreviation for ‘earnings before interest and taxation, depreciation and amortisation’. A measure of the company’s earnings before considering the financing of that company (the share of equity capital and debt employed), and disregarding potentially very different depreciation and amortisation policies
EPS Growth
A company’s profit divided by its number of common outstanding shares. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term. The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year’s earnings and the consensus forecast earnings for next year.
Equities
In relation to the stock market, equities are a synonym for shares and represent part-ownership of a company.
Exchange-Traded Fund
An exchange traded fund (ETF) is an investment vehicle or fund that is traded on the stock exchange in a similar fashion to a single security. It is a basket of securities that reflect the composition of a stock market index or a specific sector. An ETF’s value is based on the net asset value of the underlying stocks that it represents.
Ex Date
First business day after the record date for an entitlement or right. From this date, any shares purchased do not carry that entitlement or right.
F
Financial Statements
The set of financial records all companies must produce to certain accounting standards: profit and loss statements (or income statements), balance sheets and cash flow statements. Listed companies must publicly issue these twice a year within strict deadlines. The statements – and accompanying notes – are the starting point for all company analysis and share valuation.
Float/ Initial Public Offer /IPO
Offering of shares to the general public, investors and listing on the stock market. A float may involve the issue of new shares to raise more capital for the company or the sale of shares previously owned by other shareholders. Float and “IPO” are terms also commonly used.
Fundamentals
Anything that is “fundamental” to the working of a company’s business and its profitability: operating costs, product prices, technical innovations etc.
Futures
An agreement/contract that obligates a buyer to purchase and a seller to sell a specified quantity of an underlying asset at a future date and at a price agreed when the contract was executed.
G
Growth Share
Growth shares have the potential to achieve above-average growth in profits over time. Growth companies often pay low or no dividends and re-invest their profits into growing their business.
H
Hybrid
A term or classification covering securities that have both debt and equity characteristics.
I
Income Shares
Income Shares provide income in the form of dividends. Companies that choose to pay out a higher proportion of earnings as dividends and offer a relatively high dividend yield are termed income shares.
Index/Index Fund
A collection of companies trading on a particular stock market. The value of the index is used as a benchmark to gauge market performance.
Initial Public Offering (IPO)
An Initial Public Offering is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
Issuer
A company that has raised capital through selling securities on the capital markets.
J
K
L
Liquidity
Liquidity relates to the ease with which an investment can be turned back into cash.
Listed Company
A company, whose shares can be bought and sold on the stock market.
LPT/REITs - Listed Property Trust
A unitised portfolio of property assets that is listed on a stock exchange. This allows investors to purchase an interest in a professionally managed portfolio of real estate.
M
Multi Market
With the introduction of alternative trading venues, equity trading in Australian listed shares may now be conducted on multiple trading venues.
Managed Funds
Companies or trusts that offer a means of investing indirectly in shares (and other securities and assets). They combine money from many investors who seek a higher return by having professional managers buy, sell and hold shares within a portfolio of investments.
Market Capitalisation
The total market value of a company, or the total value of a stock market. It is calculated by multiplying the total number of shares on issue by their market price. This can be applied to work out the market value of one company, an index or the value of all companies listed on an exchange.
Market Price
The current price of shares traded on a stock market. This may be the last price at which the shares traded, or the most recent price offered or bid for the shares.
Market Timing
Buying or selling shares according to one’s forecast of how the markets will do in the short term.
Minimum Holding
The minimum amount of shares an individual must hold.
N
NBBO
NBBO is an acronym for National Best Bid and Offer. The national best bid price is the highest price that all buyers are willing to pay for a particular stock, regardless of the trading venue it is being published on. Similarly, the national best offer price is the lowest price that all sellers are willing to accept for a particular stock.
As bids and offers may differ between trading venues, the NBBO will be used to describe the Best Bid Price and Best Offer Price across all trading venues.
NXXT Crossing
An NXXT crossing is a crossing that has occurred at the current NBBO price. This type of trade typically occurs when a broker has automatically matched one of their orders with the order of another client from the same broker through the broker’s internal Crossing System. Using the ASX or Chi-X trade reporting facilities the broker is able to notify the market that a crossed trade is being executed at the current NBBO price.
Net Asset Value (NAV)
The value of a company’s assets less the value of its liabilities.
Net Present Value (NPV)
The value (in today’s money) of a series of future net cash flows that will result from an investment, minus the amount of the original investment.
Net Tangible Asset Backing (NTA)
A ratio showing the value of company assets attributable to each share on issue – the total assets of a company less its total liabilities and not including intangible items such as goodwill, trademarks etc. NTA is a measure of what shareholders would receive if their company was liquidated in theory.
Non-Renounceable Issue
An issue where the right to subscribe to new securities cannot be sold on market or transferred to another shareholder.
O
Offer
The price of securities to be sold.
Option
The right to buy or sell a commodity or security at an agreed price during a specific period of time.
P
Payout Ratio
The percentage of after tax profits paid out to shareholders as dividends.
P/E (Price Earning) Ratio
An abbreviation for Price to Earnings Ratio. This ratio, which divides the share price by earnings per share, provides a valuation tool for investors. Generally, the higher the P/E ratio, the more expensive the company.
Portfolio
A collection of securities and/or other financial instruments (investments) held by an institution or private individual.
Preference Shares
Shares that entitle the shareholder to first claim on the profits of a company when it comes to dividend payments and which hold priority over ordinary shares for repayment of capital in the event that the company is liquidated. Preference shares rank below creditors and debenture holders and often carry no entitlement to vote at general meetings except under special circumstances.
Prospectus
A document issued by a company or fund prior to the issue of shares to the public, when raising capital. The prospectus outlines terms of the offer, provides background, financial and management status of the company or fund.
Q
Quotes
Prices at which investors offer to buy and sell shares to each other which create a market for each security.
R
Record Date
The date chosen by a company for the determination of the shareholders to whom an entitlement or right relating to its shares may apply.
Renounceable Issue
An issue where the shareholder has the option of either subscribing for new securities or selling that right on market.
Reweighting/Rebalancing
This means changing the proportion of individual holdings or weightings to asset classes within a portfolio.
Rights Issue
An offer of additional shares to existing shareholders in proportion to their shareholding, usually at a discount to the prevailing market price.
S
Securities
A general term applied to all shares, debentures, notes and bonds that are traded on a stock market.
Short Sell
Selling a security which you do not own yet, in the belief that the price will fall, so that it can be bought back later at a lower price.
Share Buyback
A share buyback is when a company buys back its own shares from shareholders, reducing the number of outstanding shares.
T
Technical Analysis
Research on patterns in past share trading as a basis for predicting future trends in prices. Technical analysis - in contrast to company or fundamental analysis - assumes that prices rise and fall at different rates in patterns that can be exposed. Analysis of past changes enables prediction of future movements.
Total Return
All the return an investment receives on a specific investment over a stated period, including realised or unrealised capital gain or loss, and dividends or interest; expressed as a percentage of the investment’s value at the beginning of the period. Total return is the true measure of investment results, as distinct from either income, yield or price appreciation alone, since total return measures the total change in value of an investment over a given period (aside from the investor’s own withdrawals or additions).
Traded Volume
Relates to the number of shares bought and sold on the stock market.
U
Underwriter
An underwriter guarantees to the company engaged that the funds sought through a capital raising (IPO) will be raised and any shortfall will be covered by the underwriter.
V
Volatility
Volatility is the movement or fluctuation in value that most investments experience. Higher risk investments often have the potential for a greater return, however usually at a much higher level of risk and volatility.
W
Warrants
Warrants provide investors with the ability to leverage their exposure to the underlying assets, potentially generating greater returns.
X
Y
Yield
Return on an investment compared to either the original investment or the market value of the investment.
Yield Curve
The graphic depiction of the relationship between the yield on bonds of the same credit quality but different maturities. A normal yield curve is upward sloping, with short-term rates lower than long-term rates.
Z