| P/E
Ratio |
See
Price to Earnings
Ratio. |
| PAL |
Provisional
allotment letter. See Rights Issues. |
| PAYE |
See
Pay As You
Earn. |
| PEP |
See
Personal Equity
Plan. |
| PHLX |
Philadelphia
Stock Exchange. |
| PIBS |
See
Permanent Interest
Bearing Shares. |
| PPS |
See
Protected Payment
System. |
| PSBR |
See
Public Sector
Borrowing Requirement. |
| PSDR |
See
Public Sector Debt
Repayment |
| Packaged
Products |
Investments
which are formed from a collection of other investments. For example, a
unit trust is
created by combining a range of shares and other assets. Aside from unit trusts
it also includes life policies and
investment
trust savings schemes. |
| Panel |
The Panel on
Takeovers and Mergers. A non-statutory body with responsibility for the rules
governing takeovers/mergers. Its Chairman is appointed by the Governor of the
Bank of
England and the Chancellor of the Exchequer. |
| Par
Value |
See
Nominal
Value. |
| Partly Paid
Shares |
Shares where
the shareholder is still liable to pay an additional sum of money to the issuer
when the outstanding amount is called by the directors. If the shareholder does
not pay the outstanding amount, his share will be cancelled with no
compensation. If the company is insolvent, the
liquidator has the
ability to sue shareholders for any unpaid amounts on partly paid
shares. |
| Pay As You
Earn |
Known as the
PAYE scheme. A system whereby employees suffer income tax deduction at source
from their salaries. Instead of paying the gross salary to the employee, the
employer is obliged under law to deduct an appropriate amount of tax and remit
this amount to the Inland Revenue. |
Payment
Banks
 back to top |
These are
CREST
participants who guarantee payment for securities delivered to their
client via CREST. Payment banks respond to
instructions from members’ CMAs (see
Cash Memorandum
Account). All cash movements are effected outside CREST by
debits/credits to their accounts at the
Bank of
England. |
| Periodic
Information |
Valuations of a
customer’s investments which, under
SFA rules, must be
sent by the customer’s
investment
manager. The maximum time between valuations is six months for
securities and
one month for derivatives. |
| Permanent
Interest Bearing Shares (PIBS) |
Permanent
interest bearing shares - irredeemable debt
instruments
issued by building
societies, usually paying a fixed rate of interest. |
| Permitted
Person |
An organisation
dealing for its own account, but granted a permit by the
Financial Services
Authority, thereby excepting it from the need for
authorisation.
Such permits may be granted to corporate treasury departments, but would not be
given to market
makers. |
| Personal
Account Notice |
A written
undertaking signed by the employees of
authorised firms
detailing the rules to be obeyed when dealing for themselves. |
| Personal
Allowance |
In the fiscal
year 1998/99, this comes to #4,195. The first #4,195 of an individual’s
income is covered by the personal allowance and is not liable to income
tax. |
| Personal
Equity Plan (PEP) |
A tax subsidy
to encourage investment in European Union company shares and UK company
bonds. An
investor may set up a mainstream PEP and invest #6,000 in the PEP each year.
Any income or capital gains generated within the PEP is tax free. If the PEP
invests directly into shares and bonds, it must invest in shares listed on a
European Stock Exchange or in a UK company’s listed bonds. If the PEP
invests in unit
trusts or investment trusts, those funds must
invest at least 50% of their funds in such qualifying securities.In addition to the mainstream PEP, an individual may set
up a single company PEP in which he may invest up to #3,000 a year. A single
company PEP is only permitted to invest in the shares of one
company. |
Personal
Investment Authority
back to top |
The
self-regulating
organisation with responsibility for those marketing
packaged investment
products. |
| Physical
Delivery |
Settlement of a
contract by
the delivery or receipt of a financial
instrument or
commodity. Contrast with cash settlement, where no delivery of an
underlying physical asset takes place. |
| Pit |
Arena in which
open outcry
trading in a particular product takes place. Each product or range of products
will have its own designated pit. See also
Ring. |
| Pit
Observer |
An employee of
an open outcry
exchange, who is responsible for ensuring the orderly conduct of the market.
Such an official will ensure compliance with the relevant regulations/trading
rules, arbitrate in disputes, report trades and prices, and where applicable,
trade public limit
orders. |
| Placing |
An issue of
shares where the issuing house places the shares directly with its own client
base rather than inviting applications for the shares from outside third
parties. A method of issuing shares where a company is obtaining a listing for
the first time. See also Offer for Subscription,
Offer for Sale,
Intermediaries
Offer and Introduction. This method of issuing
securities is
also common in bond markets. |
| Polarisation |
The requirement
that financial advisers selling
packaged products
in the United Kingdom should either be independent financial advisers, offering
advice on all the products available in the market, or
tied agents,
offering advice on the products of only one company. |
| Pool |
A small
collective investment
scheme operated in the USA which is limited to 35 members, and can only
be marketed subject to a very restrictive regime. |
Position
back to top |
A
long or
short market
commitment, an obligation, or right, to make or take
delivery. |
| Position
Limit |
A
limit set by
an exchange which restricts the number of contracts a person or group of
connected persons may hold in a particular product. Position limits are put in
place to ensure that entities cannot establish a dominant and potentially
destabilising position in a product (sometimes known as ‘cornering the
market’). Position limits are common on many US exchanges. Currently,
there are no position limits in existence on UK exchanges. |
| Position
Risk Requirement (PRR) |
A component of
the financial resources requirement for both
ISD and
non-ISD firms. The PRR represents the likely risk of the firms’ principal
positions. |
| Potentially
Exempt Transfers |
When an
individual makes a gift to another person, the gift will usually be liable to
inheritance tax only if the donor dies within seven years of making the gift.
If the donor survives for seven years, the gift will be exempt from inheritance
tax. At the date the gift is made, its final status is therefore uncertain and
it is referred to as a potentially exempt transfer. |
| Pre-Emption
Rights |
When a UK
company issues new shares, it is obliged by law to give existing shareholders
the opportunity to purchase the new shares on a basis pro rata to their
existing shareholding in the company. This right is usually implemented by
means of a Rights
Issue. Pre-emption rights may be disapplied where a shareholders’
resolution to that effect has been passed. |
| Preference
Shares |
Shares in a
company which usually receive a fixed dividend each year and which, if
redeemed, are redeemed at par value. Although the
dividend is
fixed, it is not guaranteed. However, if the company fails to pay
(‘passes’) the preference dividend it will not be allowed to pay an
ordinary dividend for the year to ordinary shareholders. Where the preference
shares are cumulative, any arrears of preference dividend will also have to be
paid prior to the ordinary dividend being paid in any year. Preference shares
may be redeemable, when they will be redeemed at a set date. They may also be
convertible. Finally, they may be
participating, which means that in
addition to the fixed dividend, they will receive a variable dividend dependent
on the performance of the company. |
| Preferred
Stock |
See
Preference
Share. |
Premium
back to top |
1. When a
bond is redeemed
at a premium to
par, this means
that the redemption value exceeds the
nominal value
of the bond. 2. When a currency is trading at a premium in the foreign currency
forward market, this indicates that it is strengthening in the
forward market
relative to the spot market. This means that a forward
premium is deducted from the spot quote to give the forward quote. 3. The price
paid to acquire an option. 4. The amount by which the
futures price
exceeds its fair value. |
| Premium
Bonds |
A form of
government borrowing organised by the
National
Savings department. Investors buy serially numbered premium bonds at a
cost of #1 each. Each month a random draw is made of numbers with a range of
prizes from #50 to #1 million. The total value of the prize fund is calculated
by reference to a percentage of the total value of premium bonds outstanding.
An investor may redeem bonds at
par value at
any time. Any winnings are tax free. Premium bonds are not
investments. |
| Premium
Put |
The right of an
investor to redeem a bond for cash at a
premium to
nominal
value. |
| Prepayments |
Cash paid by a
company for a service not yet received. Since the provider of the service
effectively owes the cash back to the company until the service is performed,
the cash paid is shown as a prepayment in the company’s
balance sheet
and is included in debtors. |
| Price Driven
System |
See
Quote Driven
System. |
| Price
Factor |
The figure used
to convert the price of a bond
future into the
price of a deliverable bond. This is done to bring all deliverable bonds onto a
common basis. Sellers will receive more for a higher
coupon (more
expensive) bond than for a lower coupon (cheaper) bond. |
Price
Limit
back to top |
A
limit set by
an exchange which restricts the amount by which a product’s price may vary
in a trading day, in order to prevent prices moving too far or too fast within
a trading session. If the limit is breached during the session, trading is
suspended for a set period of time, the theory being that this reduces any
panic amongst traders and calms the market. At the end of the period, trading
resumes. Few UK exchanges impose price limits, as they prevent investors from
trading when they wish, and can therefore have potentially serious
consequences. |
| Price to
Earnings Ratio (P/E Ratio) |
An accounting
ratio defined as the share price divided by the
earnings per
share. Broadly speaking, the higher a company’s
P/E ratio, the
more expensive the company and the more highly rated it is. |
| Primary
Dealers |
The US name for
gilt edged market
makers. |
| Primary
Market |
The term used
to describe the initial issue of
securities by an
issuer to investors, to be distinguished from the
secondary
market, where investors trade the security among
themselves. |
| Primary
Requirement |
A component of
the financial resources requirement for both
ISD and
non-ISD firms. It is broadly related to the running exposures of the
firm. |
| Principal |
A participant
in the market who is acting for their own account when buying and selling, as
opposed to acting as ‘agent’ for another person. See also
Agent. |
| Principal
Private Residence |
An
individual’s main home, which is exempt from capital gains tax on
disposal. |
| Principal
Trade |
Where the
participant is acting for their own account when buying or selling stock, as
opposed to acting as Agent for another person. |
Priority
back to top |
This determines
the order in which a member’s transactions will be settled within
CREST once the
intended settlement
date has been reached. Priorities are either automatically assigned or
selected by the member. Priorities range from 0 - 99 with higher priority
transactions, e.g. 90 settling before lower priorities, e.g. 50. |
| Private
Customer |
A type of
investor who is neither a non-customer nor a non-private customer. Typically,
private customers will be non-expert individuals and small companies/trusts. As
the most vulnerable investor category they are given significant protection
under the conduct of business rules. |
| Private
Investor |
Means any
individual. It is these people who are protected by the unsolicited call rules
and who may sue under Section 62 of the
Financial Services
Act 1986. |
| Private
Limited Company |
A company with
Limited
Liability, but which is not permitted to issue shares to the public.
Contrast with a Public Limited Company. |
| Probate
Value |
The value of an
individual’s estate at death. |
| Producer’s
Hedge |
See
Short
Hedge. |
| Profit and
Loss Account |
1. A statement
showing a company’s income and expenditure over a period of time, usually
one year. Part of the financial statements of the
company.2. A
reserve in a
company’s balance
sheet, representing the accumulated profits which a company has
generated since its incorporation. |
| Prompt
Date |
The term used
on the LME to
describe a future’s delivery day. LME
contracts
have daily prompt dates for all business days out to three months, then at less
frequent intervals out to 27 months. |
| Prospectus |
A document
prepared by a company which is issuing
securities to
the public. |
| Protected
Payment System |
The automated
payments system operated by
LCH for the
collection and payment of margin. LCH has a mandate over its
clearing
members’ bank accounts, and can therefore pass instructions for
margin monies (variation
margin debits and initial margin) to be electronically
transferred from the clearing members’ accounts to its own account to
cover margin calls. In addition it can electronically credit the clearing
members’ bank accounts with variation margin credits and the return of
initial margin. |
| Provisional
Allotment Letter |
See
Rights
Issues. |
| Provisions |
These are
liabilities where
the company is uncertain as to the amount or timing of the expected future
costs. For example, if a company is subject to a law suit, it may provide now
for the expected liability on loss of the law suit. This is an example of the
prudence
concept. |
Prudence
back to top |
One of the
fundamental accounting concepts. Accounts must be prepared on a prudent basis.
Revenue must never be shown in the accounts until the cash realisation of the
revenue is reasonably certain. On the other hand, costs arising as a result of
past actions should be provided for immediately, even if the cash will not be
paid over until the future. |
| Public Limit
Order |
A special type
of limit
order which is executed by exchange staff. Public limit orders take
precedence over other business at the same price. Normally a service only
available for private customer orders and on certain exchanges. |
| Public
Limited Company |
Also known as
plc. A company which, by registering as a plc and adhering to strict legal
requirements as a result, has the ability to issue shares to the public.
Contrast this with a Private Limited Company, which is not
permitted to issue shares to the public. Public Limited Company should not be
confused with a Listed
Company. A listed company is a public limited company which has
obtained a listing from the Stock Exchange and not all public limited companies
do this. |
| Public
Sector Borrowing Requirement |
The amount by
which government expenditure in a year exceeds government income. The budget
deficit this involves has to be financed by government borrowings in the year
and is referred to as the public sector borrowing requirement (PSBR). When
government income exceeds expenditure (unusual in the United Kingdom), the
government can repay debt and we have a public sector debt repayment
(PSDR). |
| Public
Sector Debt Repayment |
See
Public Sector
Borrowing Requirement. |
| Purchase
Fund |
Where a
bond is redeemed
in instalments over its life. The bonds which are redeemed early (at par) are
determined by drawing of lots. See also
Sinking Fund and
Bullet
Form. |
| Put
Option |
A
contract
which confers upon the holder the right, but not the obligation, to sell an
asset at a given
price on or before a given date. |
| Put
Premium |
See
Premium
Put. |
| Put/Call
Parity |
The term used
to describe the relationship between
option and
futures prices. By
definition the prices of options and futures on the same underlying product
must be linked due to the ability to
synthetically
create futures positions with the use of options. The relationship can be
defined mathematically. For options on futures, the sum of the call and put
option prices must be equal to the futures price less the exercise price of the
option. For options on physicals, this formula is amended slightly so that the
sum of the call and put option prices is equal to the physical price of the
options discounted back to today’s values. |
