| S&P
100,500 |
Standard and
Poors US equity market indices. |
| SARs |
See
Rules Governing the
Substantial Acquisitions of Shares (The). |
| SDRT |
See
Stamp Duty Reserve
Tax. |
| SEAQ |
Stock Exchange
Automated Quotation system of the
London Stock
Exchange. The system used by
market makers
to disseminate the prices at which they are prepared to trade in
equities and
bonds quoted on
the exchange. It also acts as a means of disseminating other market and general
information.For SEAQ to be used for a listed
company’s shares, there must be two market makers registered in the stock
to offer competing prices at which investors can deal. Otherwise, the stock
will be traded on SEATS PLUS, the
Stock Exchange
Alternative Trading Service. |
| SEATS
PLUS |
See
Stock Exchange
Alternative Trading Service. |
| SEC |
The Securities
and Exchange Commission. This is the US government agency which has
responsibility for regulating the securities industry. The SEC also has
responsibility for regulating certain areas concerning
derivatives,
namely stock options, stock index derivatives, currency transactions undertaken
on exchanges and the Chicago Board Options Exchange
(CBOE). |
| SFA |
See
Securities and Futures
Authority. |
| SIMEX |
The Singapore
International Monetary Exchange. |
| SPAN |
Standard
Portfolio Analysis of Risk, a margining system used by the
LCH to
calculate initial margins due from and to its
clearing
members. SPAN is a computerised system which calculates the effect of a
range of possible changes in price and
volatility on
portfolios of derivatives. The worst probable loss
calculated by the system is then used as the
initial margin
requirement. See also Scanning Loss. |
| SSAP |
Statement of
Standard Accounting Practice.
See Accounting
Standards. |
| Samurai
bond |
A Yen
bond issued in
Japan by a foreign issuer. |
Scale
Order
 back to top |
An order type
which allows a gradual entry to or exit from the market. Such an order allows a
trader to scale into or out of the market as he sees a trend confirmed in the
market. For example, an order which stipulates ‘buy 5
FTSE future at
6000 with a further 5 contracts for each 20 point rise in the market’
ensures that as an upward trend occurs, the trader continues to build his
position in accordance with his bullish sentiment. |
| Scaling
Factor |
Used in the
calculation of the invoice amount for the
settlement of
futures, the
scaling factor converts the quotation into the price of one
contract.
In most instances, the scaling factor will be the contract size. For example,
assume the exchange delivery settlement price (EDSP) for a lead futures contract is set by
the exchange at $800. This is a price per tonne, and so to calculate the
invoice amount for one contract, one would take the EDSP of $800 and multiply
it by the scaling factor, which in this case is 25, the number of tonnes of
lead in one futures contract. This gives an invoice amount of $20,000 which is
the amount payable by the buyer to the seller. |
| Scanning
Loss |
A term used to
describe the initial margin calculated by
SPAN. The
scanning loss will be the worst-case potential risk in a portfolio of
derivatives
across a range of changes in price and
volatility as
calculated by the SPAN system. |
| Schatz |
Medium term
German government debt. |
| Scrip
Dividend |
An issue of
shares to an investor in lieu of a cash
dividend. The
value of the shares will be designed to equal the value of the cash dividend
foregone. This may be useful for investors who wish to increase their
investment in the company without incurring the costs of buying shares in the
market. It also benefits the company, which is not required to pay
Advance Corporation
Tax on a scrip dividend. Many
listed
companies offer scrip dividend alternatives to the cash
dividend. |
| Scrip
Issue |
See
Bonus
Issue. |
| Second
Banking Co-ordination Directive (2BCD) |
A European
Union Directive, similar in objective to the
Investment Services
Directive, and aimed at the creation of a single market in banking and
related activities. |
| Secondary
Market |
The term used
to describe the market where investors trade
securities among
themselves, to be distinguished from the
primary
market, where an issuer originally issues securities to
investors. |
| Secondary
Requirement |
An additional
component of the financial resources requirement for
ISD firms
that may be levied at the discretion of
SFA. |
| Section 212
Notices |
Under section
212 of the Companies Act 1985, a public company may send a notice to any person
it has reasonable cause to believe is (or has been in the last three years)
interested in its shares, requiring that person to give details to the company
of any interest or holding in the company’s shares within that three year
period. This section 212 notice enables listed companies to identify when a
potential predator is building up a holding in the company through nominee
company names. |
| Section
47 |
Part of the
Financial Services
Act 1986 that makes it a criminal offence to mislead a
market. |
Section
62
back to top |
Part of the
Financial Services
Act 1986, which as amended allows private investors (individuals) to
sue for damages if their advisers/brokers have breached a core or detailed
rule. S.62 actions may not be brought for breaches of the ten
FSA principles or
the guidance notes. |
| Securities
& Futures Authority (SFA) |
The
self-regulatory
organisation empowered to authorise firms engaged in dealing and
advising on certain investments e.g. exchange
members. |
| Securities
& Investments Board (SIB) |
The old name of
the Financial Services
Authority until November 1997. |
| Security |
See
Charges. |
| Segregation |
The separation
of client assets and money from those of the firm This policy is enforced by
the UK regulators to ensure that client money is not misappropriated.
Private
customers always get client money segregation; non-private customers
have the right to opt out of such segregation if they wish. |
| Self
Trading |
See
Crossing. |
| Self-Regulating
Organisations (SROs) |
Bodies
empowered by the Financial
Services Authority to authorise certain investment businesses. There
are three SROs: the Securities and Futures Authority, the
Investment Management
Regulatory Organisation and the
Personal Investment
Authority. |
| Self-Regulation
Within a Statutory Framework |
A phrase used
to describe the part legal and part consensual method of regulation created by
the Financial
Services Act 1986. |
| Sequence |
The Sequence
programme has been developed over recent years by the Stock Exchange to provide
a fully electronic trading and information service to its market participants.
Sequence 6, the final phase, took effect on 27 August 1996, establishing a
technical platform to link all markets together; it is the trade reporting
vehicle for gilts, corporate
bonds, domestic
and international equities. |
| Settlement |
See
Physical Delivery and
Cash Settlement. |
| Settlement
Due Date |
This is the
earliest a transaction can settle and can otherwise be referred to as the
intended settlement
date. |
| Settlement
Queue |
On
CREST, each
matched market
transaction enters each member’s settlement queue at the start of
the intended settlement
day, i.e. settlement queues are transactions awaiting settlement. There
are two types of queue: cash queues (i.e. credit) and stock queues. |
Share
Capital
back to top |
Part of
shareholders’
funds in a company’s
balance sheet.
The share capital is given by the number of shares in issue multiplied by the
nominal value
per share. |
| Share
Identification Rules |
The process by
which the Inland Revenue identify which shares have been sold out of a
shareholding in a company when only part of the shareholding has been sold. It
is based on the dates of purchase of the shares relative to the date of
sale. |
| Share
Premium Account |
Part of
shareholders’
funds in a company’s
balance sheet.
Arises when shares are issued at a
premium to their
nominal
value. For example, if shares with a nominal value of 100p are issued
at a price of 150p, the share capital of the company will increase by the
nominal value of 100p per share and the share premium account will increase by
50p per share. The total of share capital plus share premium account therefore
represents the total cash raised from shareholders by the company in the
past. |
| Shareholders’
Funds |
Also referred
to as a company’s net worth or equity. See also
Balance
Sheet. |
| Short |
A term used to
describe an open
sold futures or
options
position. Also used to describe someone who sells a cash asset not previously
owned. Contrast with Long (Position). |
| Short Form
Advertisement |
A type of
advertisement that, because of its brevity and lack of inducement to purchase,
does not need to comply with the detailed rules laid down by
SFA. |
| Short
Hedge |
A transaction
which involves the sale of a futures contract which is used to
hedge a
long cash market
position. Such a transaction seeks to ensure that any decrease in the
cash price on the subsequent cash market sale is offset by a profit on the
futures position. Sometimes described as a Producer’s Hedge. |
| Sicovam |
A domestic
settlement agency
for French government debt. |
| Sinking
Fund |
Where a
bond is redeemed
in instalments over its life, by means of bonds being repurchased prior to
final maturity
in the market at the current market price. See also
Purchase Fund
and Bullet
Form. |
Small
Company
back to top |
A company which
fulfils two of the following three criteria. 1. Its turnover is not more than
#2.8 million in the year. 2. Its total assets are not more than #1.4 million.
3. It has not more than 50 employees. Note that this definition is only
relevant for accounting purposes,not tax purposes. See
Corporation Tax
Rates for more detail on tax rules. |
| Small
Company Tax Rate |
See
Corporation Tax
Rates. |
| Soft
Commission |
An allowable
type of inducement under which a guaranteed level of business is given in
return for benefits such as research. There are strict rules with respect to
the disclosure of such arrangements as well as to the type of benefits that may
be supplied. |
| Special
Cum/Ex |
The purchase of
securities
trading ex
dividend/coupon such that the next income stream is received by the
buyer (special cum); the purchase of securities trading cum dividend/coupon
such that the next income stream remains the entitlement of the seller (special
ex). |
| Special
Resolution |
A
shareholders’ resolution at an
Annual General
Meeting or Extraordinary General Meeting which
requires a 75% majority of votes cast in order to be approved. Special
resolutions are usually matters of importance for the company and include, for
example, a resolution to wind up the company. Where a special
resolution is to be discussed, 21 days notice will usually need to be given of
the meeting. See alsoOrdinary Resolution. |
| Speculator |
An investor or
trader hoping for large profits from risky positions, i.e. a risk taker.
Contrast with a hedger, who wishes to reduce risk from an
existing position.
It is the speculator who takes on the risk which has been transferred from the
hedger. |
Sponsor
back to top |
An
authorised person
(usually a member firm of the Stock Exchange, a firm of accountants or a firm
of solicitors) who is on the register of sponsors held by the Stock Exchange.
The role of the sponsor is to prepare companies for listing of their shares and
to ensure that the company is suitable for
listing and
that directors are aware of their responsibilities as directors of a listed
company. Where a company is planning is to obtain a listing for its debt
securities, it needs a Listing Agent instead of a sponsor. The
role of the listing agent is less onerous than that of a sponsor due to the
nature of the securities involved. |
| Sponsored
Member |
Certain
investors such as private investors and institutions who
are active traders, wanting to hold stock in
CREST
accounts, but lacking the direct technical access to CREST, can rely on
another member or user of CREST. A sponsored member will appear in
the register as the legal owner. |
| Spot |
Price of an
asset for
immediate delivery. |
| Spot
Currency Transaction |
A transaction
completed in the foreign currency market for which delivery and settlement take
place two business days after the day of the trade (T+2). |
| Spot Month
Margin |
One of the
adjustments made by the SPAN margining system to the
initial margin
requirement. This increases the margin requirement for products on certain
exchanges as delivery for that product draws near. This
occurs in order to ensure that customers contemplating taking the contract to
delivery have allocated adequate funds to effect
settlement, and
also to force any less well capitalised
speculators
out of the market, and thereby reduce short term speculative
pressures. |
| Spread |
Refers to
normally simultaneous purchase and sale of related
derivative
contracts. Generally, such trades are of limited risk due to the offsetting
nature of the two contracts in the spread. See also
Intramarket
Spread and Intermarket Spread, which are spread
trades involving futures contracts, and
Diagonal Spread,
Horizontal
Spread and Vertical Spread, which relate to option
spread trades. |
| Spread
Margin |
An adjustment
made to the calculation of
initial margin
which takes account of offsetting risks in futures contracts. Within the
SPAN system two
types of spread margins are calculated.1. An
initial margin which is levied to account for the possibility of an adverse
move in the relationship between two
delivery dates.
This is necessary as in the determination of the
scanning loss this
risk is ignored. 2. The inter-commodity spread credit takes account of the
reduced risk of position which consists of long and short
futures in
different, but related contracts, e.g. Brent Crude/Gas Oil. The credit is
deducted from the scanning risk. |
| Spread
Order |
An order in
which a spread transaction is described.
See
Spread. |
| Stabilisation |
The process of
supporting the price of a new issue of
securities by
means of the management group of the issue buying the relevant
bonds or
shares in the
market place for a limited period of time in the after market. This practice is
only permitted if SFA rules and other regulatory requirements
are followed. |
| Stags |
Investors who
apply for shares
on a new issue, hoping to sell them at a profit immediately
afterwards. |
Stamp
Duty
back to top |
A tax levied on
the purchaser of securities bought in paper form. The UK
rate is 0.5% (1.5% on the creation of depository receipts) of the consideration
value rounded up to the next 50p. The liability arises on the settlement
date. |
| Stamp Duty
Reserve Tax |
A tax levied on
the purchaser of securities bought in paperless form, i.e.
via CREST. The UK rate is 0.5% (1.5% on the creation of depository receipts) of
the consideration value rounded to the nearest penny. The liability arises on
the trade date. |
| Statement of
Standard Accounting Practice |
See
Accounting
Standards. |
| Statement of
Total Recognised Gains and Losses |
Part of a
company’s financial statements. A statement which
summarises all the gains and losses made by a company during the year, such as
the retained profit or loss for the year and revaluations of
fixed
assets. |
| Stock
Borrowing and Lending Intermediaries |
Stock Exchange
member firms who act as brokers identifying pools of stock which
are available for lending to other market participants by their beneficial
owners. They also act as money brokers. |
| Stock
Deposit |
This is a
transaction to deposit stock currently in paper form (i.e. held outside
CREST) into
dematerialised form within a
CREST member
account. See Dematerialised Holdings. |
| Stock
Exchange Alternative Trading Service |
Also known as
SEATS PLUS. Where a stock only has one
market maker
registered or no market makers at all, it cannot be traded on the
SEAQ system.
Instead, such stocks are traded on SEATS PLUS. This is a system which allows
for one market maker to quote prices but also for investors to present orders
to the market, rather than dealing with a market maker. It is therefore a
combination of a Quote
Driven System and an
Order Driven
System. AIM securities also trade on SEATS PLUS.
When more than one market maker registers in a security on SEATS PLUS, the
security is transferred to SEAQ, unless it is an AIM security. |
| Stock
Exchange Yearbook |
Stock Exchange
publication giving details of the history and recent accounting information for
listed
companies. |
| Stock
Transfer Form |
A legal
document which is required to transfer ownership of
securities
bought and sold off-exchange. |
| Stock
Withdrawal |
This is a
transaction to withdraw stock held within
CREST in
dematerialised
form for holding outside CREST in paper form. |
Stocks
back to top |
Goods purchased
by a company to resell on to its customers. Included as part of
current assets
in the company’s balance sheet. Also known as inventories
in the USA. |
| Stop Limit
Order |
An order type
which essentially combines a
stop order and
a limit
order. As with a stop order, a level is specified at which the order is
activated. However, unlike a simple stop order where once the order is
activated it is merely traded at the prevailing market price, this order type
also has a limit attached. The limit prevents the trader from paying more or
receiving less than a particular specified price. For example, a buy stop on a
FTSE future
with a stop of 6000 and limit of 6010 means that if the market reaches 6000 the
buy order is activated, but that the dealer should pay no more than 6010 for
the future. |
| Stop
Order |
An order which
is activated when a stipulated market level is reached. Once the stop level has
been reached by the market, the order becomes a
market order
and trades at the prevailing market price, not necessarily the specified stop
level. Stops to sell are entered below the market, stops to buy above the
market. They are generally used to exit positions, unlike
MIT orders which
are normally used to enter the marketplace. |
| Straddle |
A type of
option
combination, where a call option and a
put option on
the same underlying
asset with the same strike price and expiry date are either purchased
(long straddle) or sold (short straddle). Straddles are generally entered into
when a trader has a view on volatility, either that it will increase (long
straddle) or decrease (short straddle). Long straddles have limited risk and
unlimited rewards, whereas short straddles have limited reward and unlimited
risks. |
| Strangle |
A type of
option
combination, similar to a straddle, where a
call option
and a put
option on the same
underlying
asset with the same expiry date but different
strike prices
are either purchased (long strangle) or sold (short strangle). Strangles are
generally entered into when a trader has a view on
volatility, either
that it will increase (long strangle) or decrease (short strangle). Long
strangles have limited risk and unlimited rewards, whereas short strangles have
limited reward and unlimited risks. When compared to straddles, strangles
premiums are generally lower and have their breakevens further apart, i.e. a
greater market movement will be required to make a long strangle
profitable/short straddle unprofitable. |
| Strike |
See
Exercise
Price. |
| Strike
Price |
See
Exercise
Price. |
| Strips |
Separately
Traded Registered Interest and Principal Security. The
zero coupon
bonds that are traded are a result of the
coupon
stripping of a bond. |
| Subsidiary
Company |
A subsidiary
company is a company which is controlled by another company, referred to as its
holding
company. Control is usually achieved either by owning shares with more
than 50% of the voting rights in the subsidiary, or by having the right to
appoint directors to the Board who have a majority of voting rights on the
Board. |
| Suitability |
A duty owed by
a firm to all private advisory and all
discretionary
customers to provide advice/or undertake trades appropriate to the needs of the
customer. |
Swaps
back to top |
Complex
derivative
products which are contracts for differences and thus
investments. |
| Switching |
The act of
engaging in excessive trading within a
packaged product
to generate commission whilst disregarding the best interests of customers.
Prohibited for all private customers, whether
discretionary or advisory. |
| Synthetic |
A
derivative
position which is created synthetically by using other derivative contracts.
For example, the creation of a
synthetic
long future by the purchase of a
call option
and the sale of a put
option with the same
exercise price
and expiry date.
The ability to synthetically create any derivative position by the combination
of other derivative positions leads to the concept of
put/call
parity, which states that there is a relationship between option and
futures prices. |
| Synthetic
Fund |
A type of
futures and options
fund where the fund is designed to perform in accordance with an index,
often a stock index such as the
FTSE 100. It
does not invest in the underlying securities themselves, but instead uses
derivatives to
gain the same exposure. For example, by purchasing a FTSE 100 future as opposed
to the underlying top 100 shares in the UK. Such a fund is not
geared and
therefore losses are limited to the amount originally invested. |
| Synthetic
Long |
A
long futures
position synthetically created by the purchase of a
call option
and the sale of a put
option with the same
strike price
and expiry date,
and on the same underlying asset. |
| Synthetic
Long Call |
A
long call
option position created synthetically by the purchase of the future or
underlying and the purchase of a
put
option. |
| Synthetic
Long Put |
A
long put
position created synthetically by the sale of the future or underlying and the
purchase of a call
option. |
| Synthetic
Short |
A
short futures
position synthetically created by the purchase of a
put option and
the sale of a call
option with the same
strike price
and expiry date,
and on the same underlying asset. |
| Synthetic
Short Call |
A
short call
option position created synthetically by the sale of the future or underlying
and the sale of a put
option. |
| Synthetic
Short Put |
A
short put
position created synthetically by the purchase of the future or underlying and
the sale of a call
option. |
