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Glossary : S

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Safe harbor: Often used in risk arbitrage. Form of shark repellent whereby a target company acquires a business so onerously regulated it makes the target less attractive, giving it, in effect, a safe harbor.
Safe harbor lease: A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the lessee, if the lessee could not use them, to a lessor that could use them.
Safekeep: For a fee, bankers will hold in their vault, clip coupons on, and present for payment at maturity bonds and money market instruments.
Safety cushion: In a contingent immunization strategy, the difference between the initially available immunization level and the safety-net return.
Safety-net return: The minimum available return that will trigger an immunization strategy in a contingent immunization strategy.
Sale and lease-back: Sale of an existing asset to a financial institution that then leases it back to the user. Related: lease.
Sales charge: The fee charged by a mutual fund when purchasing shares, usually payable as a commission to a marketing agent, such as a financial advisor, who is
thus compensated for his assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.
Sales forecast: A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors.
Sales-type lease: An arrangement whereby a firm leases out its own equipment, such as a printing company leases its own presses, thereby competing with an independent leasing company.
Salvage value: Scrap value of plant and equipment.
Samurai bond: A yen-denominated bond issued in Tokyo by a non-Japanese borrower. Related: bulldog bond and Yankee bond.

Samurai market: The foreign market in Japan.
Saturday night special: Often used in risk arbitrage. Sudden attempt by one company to takeover another by making a public tender offer.
Savings and Loan association: National- or state-chartered institution that accepts savings deposits and invests the bulk of the funds thus received in mortgages.
Savings deposits: Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand.
Scale: A bank that offers to pay different rates of interest on CDs of varying maturities is said to "post a scale." Commercial paper dealers also post scales.

Scale enhancing: Describes a project that is in the same risk class as the whole firm.
Scale in: When a trader or investor gradually takes a position in a security or market over time.

Scale order: Used in the context of general equities. Order to buy (sell) a security which specifies the total amount to be bought (sold) and the amount to be bought (sold) at successively decreasing (increasing) price intervals; often done in order to average the price.
Scalp: To trade for small gains. It normally involves establishing and liquidating a position quickly, usually within the same day.
Scattered: Used for listed equity securities. Unconcentrated buy or sell interest.
Scenario analysis: The use of horizon analysis to project bond total returns under different reinvestment rates and future market yields.
Scheduled cash flows: The mortgage principal and interest payments due to be paid under the terms of the mortgage not including possible prepayments.
Scorched-earth policy: Often used in risk arbitrage. Technique used by a company that has become the target of a takeover attempt to make itself unattractive to the acquirer. For example, it may agree to sell off its crown jewels or schedule all debt to become due immediately after a merger.
Search costs: Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time). Related: information costs.
Seasonally adjusted: Mathematically adjusted by moderating a macroeconomic indicator (i.e., Oil prices/imports) so that relative comparisons can be drawn from month to month all year.
Seasoned: For seasoned equity, having gained a reputation for quality with the investing public and enjoying liquidity in the secondary market; when applied to convertibles, having traded for at least 90 days after issued in Europe, and is thus available for sale legally to U.S. investors.
Seasoned datings: Extended credit for customers who order goods in periods other than peak seasons.
Seasoned issue: Issue of a security for which there is an existing market. Related: Unseasoned issue.
Seasoned new issue: A new issue of stock after the company's securities have previously been issued. A seasoned new issue of common stock can be made by using a cash offer or a rights offer.
Second pass regression: A cross-sectional regression of portfolio returns on betas. The estimated slope is the measurement of the reward for bearing systematic risk during the period analyzed.
Secondary distribution/offering: Used in the context of general equities. Public sale of previously issued securities held by large investors, usually corporations, or institutions as distinguished from a primary distribution, where the seller is the issuing corporation. The sale is handled off the N.Y.S.E., by a securities firm or a group of firms and the shares are usually offered at a fixed price related to the current market price of the stock.
Secondary issue: (1) Procedure for selling blocks of seasoned issues of stocks. (2) More generally, sale of already issued stock.
Secondary market: The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market. The New York Stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets. Seasoned securities are traded in the secondary market.
Section 482: United States Department of Treasury regulations governing transfer prices.
Sector: Refers to a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.
Secured debt: Debt that, in the event of default, has first claim on specified assets.
Securities & Exchange Commission (S.E.C.): The S.E.C. is a federal agency that regulates the U.S. financial markets. This federal agency also oversees the securities industry and promotes full disclosure and protection of the investing public against malpractice in the securities markets.
Securities analysts: Related: financial analysts
Securitization: The process of creating a pass-through, such as the mortgage pass-through security, by which the pooled assets become standard securities backed by those assets. Also, refers to the replacement of nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.
Security: Piece of paper that proves ownership of stocks, bonds and other investments.
Security characteristic line: A plot of the excess return on a security over the risk-free rate as a function of the excess return on the market. The slope of this line is the security's beta.
Security deposit (initial): Synonymous with the term margin
. A cash amount of funds that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase. Related: margin
Security deposit (maintenance): Related: Maintenance margin
Security Industry Automated Corporation (S.I.A.C.): Executes automated, D.O.T. orders.
Security market line: Line representing the relationship between expected return and market risk or beta. The slope of this line is the risk premium for beta.
Security market plane: A plane that shows the relationship between expected return and the beta coefficient of more than one factor.
Security selection: See: security selection decision.
Security selection decision: Choosing the particular securities to include in a portfolio.
Self-liquidating loan: Loan to finance current assets, the sale of the current assets provides the cash to repay the loan.
Self-selection: Consequence of a contract that induces only one group (e.g. low risk individuals) to participate.

Seller's option: Used in the context of general equities. Delayed settlement/delivery.
Sell hedge: Related: short hedge.

Selling group: All banks involved in selling or marketing a new issue of stock or bonds.

Selling short: If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy
the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.
Sell limit order: Conditional trading order that indicates that a security may be sold at the designated price or higher. Related: buy limit order.

Sell off: Used in the context of general equities. Selling of securities under pressure. See: dumping.
Sell plus order: Used in the context of general equities. Market or limit order to sell a stated amount of stock provided that the price to be obtained is not lower than the last sale if the last sale was a plus, or zero plus tick, and is not lower than the last sale plus the minimum fractional change in the stock if the last sale was a minimum or zero minimum tick. (if a limit order, sale cannot be lower than the limit regardless of tick).
Sell-side analyst: Also called a Wall Street analyst, a financial analyst who works for a brokerage firm and whose recommendations are passed on to the brokerage firm's customers.
Sell the book: Used for listed equity securities. Order to a broker by the holder of a large quantity of shares of a security to sell all that can be absorbed at the current bid price. The term derives from the specialist's book -- the record of all the buy and sell orders members have placed in the stock one handles. In this scenario, the buyers potentially include those in the specialists book, the specialist for his own account, and the broker-dealer crowd.
Semi-strong form efficiency: A form of pricing efficiency where the price of the security fully reflects all public information (including, but not limited to, historical price and trading patterns). Compare weak form efficiency and strong form efficiency.
"Send it in": Used in the context of general equities. "I bought your stock -- 'send it in' (and possibly more)."
Senior debt: Debt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment.

Seniority: The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated debt is repaid.
Sensitivity analysis: Analysis of the effect on a project's profitability due to changes in sales, cost, and so on.
Separation property: The property that portfolio choice can be separated into two independent tasks: 1) determination of the optimal risky portfolio, which is a purely mathematical problem, and 2) the personal choice of the best mix of the optimal risky portfolio and the risk-free asset which depends on a person's risk aversion.
Separation theorem: The value of an investment to an individual is not dependent on consumption preferences. All investors will want to accept or reject the same investment projects by using the N.P.V. rule, regardless of personal preference.
Serial bonds: Corporate bonds arranged so that specified principal amounts become due
on specified dates. Related: term bonds.
Serial covariance: The covariance between a variable and the lagged value of the variable; the same as auto covariance.

Series: Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Stocks: shares which have common characteristics, such as rights to ownership and voting, dividends, par value, etc. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered.
Series bond: Bond that may be issued in several series under the same indenture.
Set of contracts perspective: View of corporation as a set of contracting relationships, among individuals who have conflicting objectives, such as shareholders or managers. The corporation is a legal contrivance that serves as the nexus for the contracting relationships.
Settlement: When payment is made for a trade.

Settlement date: The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently 3 business days after the trade. For mutual funds, settlement usually occurs in the U.S.the day following the trade. In some regional markets, foreign shares may require months to settle.
Settlement price: A figure determined by the closing range which is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. Related: closing range.
Settlement rate: The rate suggested in Financial Accounting Standard Board (F.A.S.B.) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled if the company sponsoring pension plan wished to terminate its pension obligation.
Settlement risk: The risk that one party will deliver and the counterparty will not be able to pay and vice versa.
Set up: Mainly applies to convertible securities. Arbitrage involving going long the convertible and short a certain percentage of the underlying common. Antithesis of Chinese hedge.
Shadow Stock: First, a public company may create a stock that strips out the market wide movements for the purpose of rewarding managers. That is, the management might have done a great job - but the traded stock plummets because the market as a whole plummets. A second interpretation of shadow stock is a phantom stock that is created by a private company (i.e. that does not have stock traded either on exchange or over the counter) again for the purpose of performance evaluation and rewards.
Shareholders: Person or entity that owns share in a corporation.
Shareholders' equity: This is a company's total assets minus total liabilities. A company's net worth is the same thing.

Shareholders' letter: A section of an annual report where one can find jargon-free discussions by management of successful and failed strategies. Provides guidance for the probing of the rest of the report.
Share repurchase: Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.

Shares: Certificates or book entries representing ownership in a corporation or similar entity.
Shark repellant: Often used in risk arbitrage. Examples include golden parachutes, poison pills, safe harbor, and scorched-earth policy. Porcupine provision. Amendment to company charter intended to protect it against takeover.
Shark watcher: Often used in risk arbitrage. Firm specializing in the early detection of takeover activity. Such a firm, whose primary business is usually the solicitation of proxies for client corporation, monitors trading patterns in a client's stock and attempts to determine the identity of parties accumulating shares.
Sharpe benchmark: A statistically created benchmark that adjusts for a managers' index-like tendencies. Named after William Sharpe, Nobel Laureate, and inventor of the capital asset pricing model.
Sharpe ratio: A measure of a portfolio's excess return relative to the total variability of the portfolio. Related: Treynor index. Named after William Sharpe, Nobel Laureate, and inventor of the capital asset pricing model.
Shelf offering: Used in the context of general equities. Offering of registered securities covered by a prospectus where the distribution is not underwritten on a firm commitment basis. The shares may be sold in one block or in small amounts from time to time in agency or principal transactions. See: Rule 415.
Shelf registration: A procedure that allows firms to file one registration statement covering several issues of the same security. It is the term used for S.E.C. Rule 415 adopted in the 1980's, which allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. With the registration "on the shelf," the corporation, by simply updating regularly filed annual, quarterly, and related reports to the S.E.C., can go to the market as conditions become favorable with a minimum of administrative preparation and expense.
Shirking: The tendency to do less work when the return is smaller. Owners may have more incentive to shirk if they issue equity as opposed to debt, because they retain less ownership interest in the company and therefore may receive a smaller return. Thus, shirking is considered an agency cost of equity.
Shogun bond: Dollar bond issued in Japan by a nonresident.
Shop: Wall Street jargon for a firm.
Shopped stock: Used in the context of general equities. Sell inquiry that has been seen/shown to other dealers before coming to an investment bank.
Shopping: Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers.
Short: One who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of a long position. Related: Long.
Shortage cost: Costs that fall with increases in the level of investment in current assets.
Short bonds: Bonds with short (not much time to maturity) current maturities.
Short book: See: unmatched book.
Short covering: Used in the context of general equities. Actual purchase of securities by a short seller to replace those borrowed at the time of a short sale.
Short exempt: Used for listed equity securities. Trading status whereby the owner of a convertible trading at parity can sell the equivalent amount of common short on a minus tick, assuming he has the firm intention to convert.
Shortfall risk: The risk of falling short of any investment target.
Short hedge: The sale of a futures contract(s) to eliminate or lessen the possible decline in value of an approximately equal amount of the actual financial instrument or physical commodity. Related: Long hedge.
Short interest: This is the total number of shares of a security that investors have sold short and that have not been repurchased to close out the short position. Usually, investors sell short to profit from price declines. As a result, the short-interest is often an indicator of the amount of pessimism in the market about a particular security. It should be noted that there are other reasons to short that are not related to pessimism. For example, hedging strategies for mergers and acquisition as well as derivative positions may involve short sales.
Short position: Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will go down.
Short-run operating activities: Events and decisions concerning the short-term finance of a firm, such as how much inventory to order and whether to offer cash terms or credit terms to customers.
Short sale: Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.
Short selling: Establishing a market position by selling a security one does not own in anticipation of the price of that security falling.
Short settlement: Used in the context of general equities. Trade settlements done prior to the standard five-day period due to customer request.
Short squeeze: A situation in which a lack of supply tends to force prices upward. In particular, a situation when prices of a stock or commodity futures contracts start to move up sharply and many traders with short positions are forced to buy stocks or commodities in order to cover their positions and prevent (limit) losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.
Short straddle: A straddle in which one put and one call are sold.
Short-term financial plan: A financial plan that covers the coming fiscal year.
Short-term investment services: Services that assist firms in making short-term investments.
Short-term solvency ratios: Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (1) the current ratio, (2) the acid-test ratio, (3) the inventory turnover ratio, and (4) the accounts receivable turnover ratio.
Short-term tax exempts: Short-term securities issued by states, municipalities, local housing agencies, and urban renewal agencies.
Show & tell list: Used in the context of general equities. Block list which is full of real customer indications (rather than profile).
Show me buyer/seller: Used in the context of general equities. Customer who has not placed a firm order to buy stock but has requested that the salesman show him/her available stock for sale or purchase, along with the asking/bid price, due to his/her interest in buying/selling the stock. See: bidding buyer.
Shut out the book: Used for listed equity securities. Exclude a public bid or offer from participation in a print.
Standard Industrial Classification (S.I.C.): Each code represents a unique business activity classified by industry.
Side effects: Effects of a proposed project on other parts of the firm.
Sidelines: Used in the context of general equities. Hypothetical area referring to non-involvement, merely watching, in a stock.
Sight draft: Demand for immediate payment.
Singapore International Monetary Exchange (S.I.M.E.X.): A leading futures and options exchange in Singapore.
Simple prospect: An investment opportunity where a certain initial wealth is placed at risk
and only two outcomes are possible.
Single country fund: A mutual fund that invests in individual countries outside the United States.
Single factor model: A model of security returns that acknowledges only one common factor. The single factor is usually the market return. See: factor model.
Single index model: A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on the broad market index, and firm specific factors.
Signal: The process of conveying information through a firm's actions. The more costly it is to provide a signal, the more credibility it has. For example, to call a press conference and tell everyone that the firm's prospects have improved is less effective than saying the same thing and raising the dividend.
Signaling approach: Approach to the determination of the optimal capital structure asserting that insiders in a firm have information that the market does not have; therefore, the choice of capital structure by insiders can signal information to outsiders and change the value of the firm. This theory is also called the asymmetric information approach.
Signaling view (on dividend policy): The argument that dividend changes are important signals to investors about changes in management's expectation about future earnings.
Simple compound growth method: A method of calculating the growth rate by relating the terminal value to the initial value and assuming a constant percentage annual rate of growth between these two values.
Simple interest: Interest calculated only on the initial investment. Related: compound interest.
Simple linear regression: A regression analysis between only two variables, one dependent and the other explanatory.
Simple linear trend model: An extrapolative statistical model that asserts that earnings have a base level and grow at a constant amount each period.
Simple moving average: The mean, calculated at any time over a past period of fixed length.
Simulation: The use of a mathematical model
to imitate a situation many times in order to estimate the likelihood of various possible outcomes. See: Monte Carlo simulation.
Single-index model: Related: market model
Single-payment bond: A bond that will make only one payment of principal and interest.
Single-premium deferred annuity: An insurance policy bought by the sponsor of a pension plan for a single premium. In return, the insurance company agrees to make lifelong payments to the employee (the policyholder) when that employee retires.
Sinker: Sinking fund.
Sinking fund requirement: A condition included in some corporate bond indentures that requires the issuer to retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.
Sit tight: Used in the context of general equities. Directive from the trader to the customer to be patient, emphasizing that one's piece of business will be executed.
Size: Large in size, as in the size of an offering, the size of an order, or the size of a trade. Size is relative from market to market and security to security. Context: "I can buy size at 102-22," means that a trader can buy a significant amount at 102-22. Small is >10,000 shares. Medium is 15,000 - 25,000 shares. Good is 50,000 shares. Size is 100,000 shares. Good six figure size is 200,000 - 300,000 shares. Multiple six figure size is >300,000 shares of the market is actual number of shares represented in one's market, or bid and offering; unless specified, assumed to be at least 500 to 1000 shares, depending on the stock.
Size out the book: Overt action to exclude a public bid or offer from participation in a print through trading a larger size that exists in the book. Can never size out a market order. See: priority, shut out the book.
Skewed distribution: Probability distribution
in which an unequal number of observations lie below (negative skew) or above (positive skew) the mean.
Skewness: Negative skewness means there is a substantial probability of a big negative return. Positive skewness means that there is a greater than normal probability of a big positive return.
Skip-day settlement: The trade is settled one business day beyond what is normal.

Sleeper: Used in the context of general equities. Stock in which there is little investor interest but which has significant potential to gain in price once its attractions are recognized. Antithesis of high flyer.
Sleeping beauty: Often used in risk arbitrage. Potential takeover target that has not yet been approached by an acquirer. Such a company usually has particularly attractive features, such as a large amount of cash, or undervalued real estate or other assets.
Slippage: The difference between estimated transaction costs and actual transaction costs. The difference is usually composed of revisions to price difference or spread and commission costs.
Small-firm effect: The tendency of small firms (in terms of total market capitalization) to outperform the stock market (consisting of both large and small firms).
Small issues exemption: Securities issues that involve less than $1.5 million are not required to file a registration statement with the S.E.C.. Instead, they are governed by Regulation A, for which only a brief offering statement is needed.
Small Order Execution System (S.O.E.S.): Three-tiered system of automatic execution of an order at the best price. Size is either 200, 500, or, most often, 1000 shares.
Smidge: Used in the context of general equities. Small amount of price, usually +/- 1/8 or 1/4.
Smithsonian agreement: A revision to the Bretton Woods international monetary system which was signed at the Smithsonian Institution in Washington, D.C., U.S.A., in December 1971. Included were a new set of par values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.
Snowballing: Used in the context of general equities. Process by which the activities of stop orders in a declining or advancing market causes further downward or upward pressure on prices, thus triggering more stop orders and more price pressure, and so on.
Society for Worldwide Interbank Financial Telecommunications (S.W.I.F.T.): A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.
"Soft" Capital Rationing: Capital rationing that under certain circumstances can be violated or even viewed as made up of targets rather than absolute constraints.
Soft currency: A currency that is expected to drop in value relative to other currencies.
Soft dollars: The value of research services that brokerage houses supply to investment managers "free of charge" in exchange for the investment manager's business commissions.
Sold away: Refers to over-the-counter trading. Having sold stock to another dealer before making the present offering.
Sole proprietorship: A business owned by a single individual. The sole proprietorship pays no corporate income tax but has unlimited liability for business debts and obligations.
Source of funds seller: Used in the context of general equities. Customer seller of stock for the purpose of raising cash for other purchases. Hence, he will only sell at advantageous prices, and not aggressively.
Sovereign risk: The risk that a central bank will impose foreign exchange regulations that will reduce or negate the value of FX contracts. Also refers to the risk of government default on a loan made to it or guaranteed by it.
Span: To cover all contingencies within a specified range.
SPRDs: SPRDS (Spiders) are designed to track the value of the Standard & Poors 500 Composite Price Index. They are known as Spiders which is short for Standard&Poor's Depositary Receipt. They trade on the American Stock Exchange under the symbol SPY. They are similar to closed-end funds but are formally known as, UIT, a unit investment trust. One SPDR unit is valued at approximately one tenth (1/10) of the value of the S&P 500. Dividends are disbursed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust. See: Mid-cap SPRD
Special dividend: Also referred to as an extra dividend. Dividend that is unlikely to be repeated.
Special drawing rights (S.D.R.): A form of international reserve assets, created by the IMF in 1967, whose value is based on a portfolio of widely used currencies.
Specialist: On an exchange, the member firm that is designated as the market maker (or dealer for a listed common stock). Only one specialist can be designated for a given stock, but dealers may be specialists for several stocks. In contrast, there can be multiple market makers in the O.T.C. market. This member of a stock exchange who maintains a "fair and orderly market" in one or more securities. Major functions include executing limit orders on behalf of other exchange members for a portion of the floor broker's commission, and buying or selling for his own account to counteract temporary imbalances in supply and demand and thus prevent wide swings in stock prices.
Specialist's book: Used for listed equity securities. Chronological record maintained by a specialist that includes the specialist's own inventory of securities, market orders to sell short, and limit orders and stop orders that other stock exchange members have placed with the specialist.
Specialist market: Used for listed equity securities. Market in a stock made solely by the specialist, as no public orders, and henceforth depth, exist in the market.
Specific issues market: The market in which dealers reverse in securities they wish to short.
Specific risk: See:unique risk.
Spectail: A dealer that does business with retail but that concentrates more on acquiring and financing its own speculative positions.
Speculative demand (for money): The need for cash to take advantage of investment opportunities that may arise.
Speculative grade bond: Bond rated Ba or lower by Moody's, or BB or lower by S&P, or an unrated bond.
Speculative motive: A desire to hold cash for the purpose of being in a position to exploit any attractive investment opportunity requiring a cash expenditure that might arise.
Speculator: One, who attempts to anticipate price changes and, through buying and selling contracts, aims to make profits. A speculator does not use the market in connection with the production, processing, marketing or handling of a product. See: trader.
Speed: Related: prepayment speed
Spider: See: SPDRs
Spike: Used in the context of general equities. Order ticket that shows the stock, price, number of shares, type, and account of the order. (Note: name refers to the ticket being spiked onto a metal spike upon execution or cancellation). Spike is also a sudden, drastic increase in a company's share price.
Spin-off: A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spinoff.
Split: Sometimes, companies split their outstanding shares into a larger number of shares. If a company with 1 million shares did a two-for-one split, the company would have 2 million shares. An investor with 100 shares before the split would hold 200 shares after the split. The investor's percentage of equity in the company remains the same, and the price of the stock he owns is one-half the price of the stock on the day prior to the split.
Split-fee option: An option on an option. The buyer generally executes the split fee with first an initial fee, with a window period at the end of which (upon payment of a second fee) the original terms of the option may be extended to a later predetermined final notification date.
Split print: Used in the context of general equities. Block trade printed at two different prices. Often used in dividend rolls to get an average price equal to the dividend.
Split-rate tax system: A tax system that taxes retained earnings at a higher rate than earnings that are distributed as dividends.
Split stock: Used in the context of general equities. (1) Purchases or sales shared with others. (2) Division of the outstanding shares of a corporation into a large number of shares. Ordinarily, splits must be noted by directors and approved by shareholders.
Spoken for: Used in the context of general equities. Amount of opposing demand (placement) or supply (availability) the trader has in his efforts to cross the stock. Not open.
Spot exchange rates: Exchange rate on currency for immediate delivery. Related: forward exchange rate.
Spot futures parity theorem: Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.
Spot interest rate: Interest rate fixed today on a loan that is made today. Related: forward interest rates.
Spot lending: The origination of mortgages by processing applications taken directly from prospective borrowers.
Spot markets: Related: cash markets
Spot month: The nearest delivery month on a futures contract.
Spot price: The current market price of the actual physical commodity. Also called cash price. Current delivery price of a commodity traded in the spot market, in which goods are sold for cash and delivered immediately. Cash price. Antithesis of futures price.
Spot rate: The theoretical yield on a zero-coupon treasury security.
Spot rate curve: The graphical depiction of the relationship between the spot rates and maturity.
Spot secondary: Used in the context of general equities. Secondary distribution which may not require an S.E.C. registration statement and may be attempted without delay, an underwriting discount is normally contained in these offerings.
Spot trade: The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.
Spread: (1) The gap between bid and ask prices of a stock or other security. (2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months. Also known as a straddle. (3) Difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public. (4) The price an issuer pays above a benchmark fixed-income yield to borrow money.
Spread income: Also called margin income, the difference between income and cost. For a depository institution, the difference between the assets it invests in (loans
and securities) and the cost of its funds (deposits and other sources).
Spreadsheet: A computer program that organizes numerical data into rows and columns on
a terminal screen, for calculating and making adjustments based on new data.
Spread strategy: A strategy that involves a position in one or more options so that the cost of buying an option is funded entirely or in part by selling another option in the same underlying. Also called spreading.
SPX: Applies to derivative products. Symbol for the S&P 500 index.
SS1: Used in the context of general equities. Securities sales speaker box that transmits to all investment bank's regional trading and sales desks.
Staggered Board of Directors: Often used in risk arbitrage. Board of Directors of a company in which a portion of the directors are elected periodically, instead of all at once. A board is often staggered in order to thwart unfriendly takeover attempts, since potential acquirers would have to wait a longer time before they could take control of a company's board through the normal voting procedure.
Stakeholders: All parties that have an interest, financial or otherwise, in a firm - stockholders, creditors, bondholders, employees, customers, management, the community, and the government.
Stamp duty: Mainly applies to international equities. Taxes on foreign transactions, usually a percentage of total transaction amount, that can be unilateral or bilateral in nature.
Stand-alone principle: Investment principle that states a firm should accept or reject a project by comparing it with securities in the same risk class.
S&P: Used in the context of general equities. Standard & Poors Corporation.
Standard deviation: The square root of the variance. A measure of dispersion of a set of data from their mean.
Standard error: In statistics, a measure of the possible error in an estimate. Plus or minus 2 standard errors usually provides a 95% confidence interval.
Standardized normal distribution: A normal distribution with a mean of 0 and a standard deviation of 1.
Standardized value: Also called the normal deviate, the distance of one data point from the mean, divided by the standard deviation of the distribution.
Standby agreement: In a rights issue, agreement that the underwriter will purchase any stock not purchased by investors.
Standby fee: Amount paid to an underwriter who agrees to purchase any stock that is not subscribed to the public investor in a rights offering.
Standing: Used in the context of general equities. Level of priority in the trading crowd.
Standstill agreements: Contracts where the bidding firm in a takeover attempt agrees to limit its holdings of another firm.
Stand up to: Used in the context of general equities. Make a good-sized market in the trader's own bid and offering prices. Hence, standing up to the bid signifies the trader's willingness to buy size (i.e., 50m) volume at his advertised bid, even if the customer buyer/seller falls down.
Stated annual interest rate: The interest rate expressed as a per annum percentage, by which interest payment is determined. See: Annual percentage rate.
Stated conversion price: At the time of issuance of a convertible security, the price the issuer effectively grants the security holder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio.
Stated maturity: For the C.M.O. tranche, the date the last payment would occur at zero CPR.
Statement billing: Billing method in which the sales for a period such as a month (for which a customer also receives invoices) are collected into a single statement and the customer must pay all of the invoices represented on the statement.
Statement of Cash Flows: A financial statement showing a firm's cash receipts and cash payments during a specified period.
Statement-of-Cash-Flows method: A method of cash budgeting that is organized along the lines of the statement of cash flows.
Statement of Financial Accounting Standards No. 8: This is a currency translation standard previously in use by U.S. accounting firms. See: Statement of Accounting Standards No. 52.
Statement of Financial Accounting Standards No. 52: This is the currency translation standard currently used by U.S. firms. It mandates the use of the current rate method. See: Statement of Financial Accounting Standards No. 8.
Static theory of capital structure: Theory that the firm's capital structure is determined by a trade-off of the value of tax shields against the costs of bankruptcy.
Statistical tracking error: Used in the context of general equities. Standard deviation of the difference between the portfolio return and the desired investment benchmark return.
Statutory surplus: The surplus of an insurance company determined by the accounting treatment of both assets and liabilities as established by state statutes.
Steady state: As the M.B.S. pool ages, or four to six months after it was passed at least once through the threshold for refinancing, the prepayment speed tends to stabilize within a fairly steady range.
Steenth: 1/16 (.0625) of one full point in price. Often used in negotiations to compromise an Eighth difference and in options trading. Teenyo.
Steepening of the yield curve: A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has increased. Compare flattening of the yield curve and butterfly shift.
Step aside: Used in the context of general equities. Allow a block to trade at a price at which you do not care to participate in the trade.
Step-up: To increase, as in step up the tax basis of an asset.
Step-up bond: A bond that pays a lower coupon rate for an initial period which then increases to a higher coupon rate. Related: Deferred-interest bond, Payment-in-kind bond.
Sterilized intervention: Foreign exchange market intervention in which the monetary authorities have insulated their domestic money supplies from the foreign exchange transactions with offsetting sales or purchases of domestic assets.
Stochastic models: Liability-matching models that assume that the liability payments and the asset cash flows are uncertain. Related: Deterministic models.
Stock: Ownership of a corporation which is represented by shares which represent a piece of the corporation's assets and earnings.
Stock ahead: Situation in which two or more orders for a stock at a certain price arrive about the same time, and the exchange's priority rules take effect. N.Y.S.E. Rules stipulate that the bid made first should be executed first or, if two bids came in at once, the bid for the larger number of shares receives priority. The bid that was not executed is then reported back to the broker, who informs the customer that the trade was not completed because there was "stock ahead." See: ahead.
Stock dividend: Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
Stock exchanges: Formal organizations, approved and regulated by the Securities and Exchange Commission (S.E.C.), that are made up of members that use the facilities to exchange certain common stocks. The two major national stock exchanges are the New York Stock Exchange (N.Y.S.E.) and the American Stock Exchange (A.S.E. or A.M.E.X.). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati. The Arizona Stock Exchange is an after hours electronic marketplace where anonymous participants trade stocks via personal computers.
Stock Exchange Automated Quotation System (S.E.A.Q.): London's N.A.S.D.A.Q. system.
Stock Exchange of Hong Kong (S.E.H.K.): The Stock Exchange of Hong Kong (S.E.H.K.) is the only stock exchange in Hong Kong.
Stockholder's books: Set of books kept by firm management for its annual report that follows Financial Accounting Standards Board rules. The tax books follow IRS tax rules.
Stockholder's equity: The residual claims that stockholders have against a firm's assets, calculated by subtracting total liabilities from total assets.
Stockholder equity: Balance sheet item that includes the book value of ownership in the corporation. It includes capital stock, paid in surplus, and retained earnings.
Stock index option: An option in which the underlying is a common stock index.
Stock index: Index like the Dow Jones Industrial Average that tracks a portfolio of stocks.
Stock market: Also called the equity market, the market for trading equities.
Stock option: An option in which the underlying asset is the common stock of a corporation.
Stockout: Running out of inventory.
Stock replacement strategy: A strategy for enhancing a portfolio's return, employed when the futures contract is expensive based on its theoretical price, involving a swap between the futures, Treasury bills portfolio and a stock portfolio.
Stock repurchase: A firm's repurchase of outstanding shares of its common stock.
Stock right: Another terminology for a stock option.
Stock selection: An active portfolio management technique that focuses on advantageous selection of particular stock rather than on broad asset allocation choices.
Stock split: Occurs when a firm issues new shares of stock but in turn lowers the current market price of its stock to a level that is proportionate to pre-split prices. For example, if IBM trades at $100 before a 2-for-1 split, after the split it will trade at $50 and holders of the stock will have twice as many shares as they had before the split. See: split.
Stock ticker: This is a lettered symbol assigned to securities and mutual funds that trade on U.S. financial exchanges.
Stop basis: Refers to over-the-counter trading. Method of entering an O.T.C. trade into the trader's position without reporting the trade on the O.T.C. Tape.
Stop-limit order: A stop order that designates a price limit. In contrast to the stop order, which becomes a market order once the stop is reached, the stop-limit order becomes a limit order.
Stop-loss order: An order to sell a stock when the price falls to a specified level.
Stop order (or stop): An order to buy or sell at the market when a definite price is reached, either above (on a buy) or below (on a sell) the price that prevailed when the order was given.
Stopped: Used in the context of general equities. Guaranteed a specific price on the customer's working order while the dealer tries to obtain a better one. Stopped against one's self involves a customer order and a firm's own account, not two customers. One can still cancel his order even after being stopped by another party.
Stopping curve: A curve showing the refunding rates for different points in time at which the expected value of refunding immediately equals the expected value of waiting to refund.
Stopping curve refunding rate: A refunding rate that falls on the stopping curve.
Straddle: Purchase or sale of an equal number of puts and calls with the same terms at the same time. Related: spread
Straight: Used in the context of general equities. Direct phone line, versus an outside line which requires a phone number to be dialed.
Straight line depreciation: An equal dollar amount of depreciation in each accounting period.
Straight value: Also called investment value, the value of a convertible security without the conversion option.
Straight voting: A shareholder may cast all of his votes for each candidate for the board of directors.
Stratified equity indexing: A method of constructing a replicating portfolio in which the stocks in the index are classified into stratum, and each stratum is represented in the portfolio.
Stratified sampling approach to indexing: An approach in which the index is divided into cells, each representing a different characteristic of the index, such as duration or maturity.
Stratified sampling bond indexing: A method of bond indexing that divides the index into cells, each cell representing a different characteristic, and that buys bonds to match those characteristics.
Stray: Used in the context of general equities. 1) not a member of the participating party in the trade at hand; 2) not a meaningful indication of a customer's desire to take a sizable position or be involved in a stock.
Street: Brokers, dealers, underwriters, and other knowledgeable members of the financial community; from Wall Street financial community.
Street name: Describes securities assets held by a broker on behalf of a client but registered in the name of the Wall Street firm.
Strike index: For a stock index option, the index value at which the buyer of the option can buy or sell the underlying stock index. The strike index is converted to a dollar value by multiplying by the option's contract multiple. Related: strike price
Strike price: The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
Strip mortgage participation certificate (strip PC): Ownership interests in specified mortgages purchased by Freddie Mac from a single seller in exchange for strip PCs representing interests in the same mortgages.
Stripped bond: Bond that can be subdivided into a series of zero-coupon bonds.
Stripped mortgage-backed securities (S.M.B.S.s): Securities that redistribute the cash flows from the underlying generic M.B.S. collateral into the principal and interest components of the M.B.S. to enhance their use in meeting special needs of investors.
Stripped yield: Mainly applies to convertible securities. Return on the debt portion of a bond/warrant unit after subtracting the value of the issued warrant segment.
Strip, strap: Variants of a straddle. A strip is two puts and one call on a stock, a strap is two calls and one put on a stock. In both cases, the puts and calls have the same strike price and expiration date.
Strong-form efficiency: Pricing efficiency, where the price of a security reflects all information, whether or not it is publicly available. Related:Weak form efficiency, semi strong form efficiency
Structured arbitrage transaction: A self-funding, self-hedged series of transactions that usually utilize mortgage backed securities (M.B.S.) as the primary assets.
Structured debt: Debt that has been customized for the buyer, often by incorporating unusual options.
Structured portfolio strategy: A strategy in which a portfolio
is designed to achieve the performance of some predetermined liabilities that must be paid out in the future.
Structured settlement: An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.
Stub: Often used in risk arbitrage. Piece of equity security left over from a major cash or security distribution from a recapitalization.
Subject: Refers to a bid or offer that cannot be executed without confirmation from the customer. In other words, not firm, but a bid/offer that needs additional information/confirmation before becoming firm and is therefore still negotiable.
Subject market: Used in the context of general equities. Quote in which prices are subject to confirmation. See: fast market.
Subject to a (N.Y.) can: Used for listed equity securities. Contingent upon trader's ability to cancel an order on the indicated exchange.
Subject to a print/execution/trading: Used in the context of general equities. Contingent on a trade being executed because the picture in the stock has not been materially altered.
Subjective probabilities: Probabilities that are determined subjectively (for example, on the basis of judgement rather than using statistical sampling).
Subject to opinion: An auditor's opinion reflecting acceptance of a company's financial statements subject to pervasive uncertainty that cannot be adequately measured, such as information relating to the value of inventories, reserves for losses, or other matters subject to judgment.

Subordinated debenture bond: An unsecured bond that ranks after secured debt, after debenture bonds, and often after some general creditors in its claim on assets and earnings. Related: Debenture bond, mortgage bond, collateral trust bonds.
Subordinated debt: Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debtholders receive payment only after senior debt claims are paid in full.
Subordination clause: A provision in a bond indenture that restricts the issuer's future borrowing by subordinating future lender's claims on the firm to those of the existing bondholders.
Subpart F: Special category of foreign-source "unearned" income that is currently taxed by the IRS whether or not it is remitted to the U.S.
Subperiod return: The return of a portfolio over a shorter period of time than the evaluation period.
Subscription price: Price that the existing shareholders are allowed to pay for a share of stock in a rights offering.
Subscription warrant: Applies to derivative products. Type of security, usually issued with another security, such as a bond or stock, that entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance. Warrant.
Subsidiary: A wholly or partially owned company which is part of a large corporation. A foreign subsidiary is a separately incorporated entity under the host country's law.
Substitute sale: A method for hedging price risk that utilizes debt-market instruments, such as interest rate futures, or that involves selling borrowed securities as the primary assets.
Substitution swap: A swap in which a money manager exchanges one bond for another bond that is similar in terms of coupon, maturity, and credit quality, but offers a higher yield.
Sum-of-the-years'-digits depreciation: Method of accelerated depreciation.
Sunk costs: Costs that have been incurred and cannot be reversed.
Super D.O.T.: Super D.O.T. provides faster execution than regular D.O.T. and focuses on large-size trades and baskets. See: program trading.

Supermajority: Provision in a company's charter requiring a majority of, say, 80% of shareholders to approve certain changes, such as a merger.
Supermajority amendment: Often used in risk arbitrage. Corporate amendment requiring that a substantial majority (usually 67% to 90%) of stockholders approve important transactions, such as mergers.
Super message: Used in the context of general equities. See: Autex.
Supply shock: An event that influences production capacity and costs in an economy.
Support level: A price level below which it is supposedly difficult for a security or market to fall. That is, the price level at which a security tends to stop falling because there is more demand than supply; can be identified on a technical basis by seeing where the stock has bottomed in the past.
Surplus funds: Cash flow available after payment of taxes in the project.
Surplus management: Related: asset management
Sushi bond: A Eurobond issued by a Japanese corporation.
Suspended trading: Used in the context of general equities. Temporary halt in trading in a particular security, in advance of a major news announcement or to correct an imbalance of orders to buy and sell.
Sustainable growth rate: Maximum rate of growth a firm can sustain without increasing financial leverage.
Swap: An arrangement whereby two companies lend to each other on different terms, e.g. in different currencies, and/or at different interest rates, fixed or floating.
Swap assignment: Related: swap sale.
Swap buy-back: The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.
Swap option: See: Swaption. Related: Quality option.
Swap rate: The difference between spot and forward rates expressed in points, e.g., $0.0001 per pound sterling.
Swap reversal: An interest rate swap designed to end a counterparty's role in another interest rate swap, accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.

Swap sale: Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.
Swaption: Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises.
Sweep account: Account in which the bank takes all of the excess available funds at the close of each business day and invests them for the firm.
Swingline facility: Bank borrowing facility to provide finance while the firm replaces U.S. commercial paper with eurocommercial paper.
Swissy: Jargon for the Swiss Franc.
Switching: Liquidating an existing position and simultaneously reinstating a position in another futures contract of the same type. Symmetric cash matching, an extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.
Switch order: Used in the context of general equities. Order for the purchase (sale) of one stock and the sale (purchase) of another stock at a stipulated price difference. Contingent order, swap. For equities, selling one security to purchase another, usually to enhance yield while
Symbol: Used in the context of general equities. Letters used to identify companies used on the consolidated tape and other locations.
Symbol book special: Used in the context of general equities. Illiquid, inactively traded stock that lacks market familiarity.
Symmetric cash matching: An extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.
Synchronous data: Data available at the same time. In testing option-pricing models, the price of the option and of the underlying should be synchronous, representing the same moment in the market.
Syndicate: A group of banks that acts jointly, on a temporary basis, to loan money in a bank credit (syndicated credit) or to underwrite a new issue of bonds.
Synergistic effect: A violation of value-additivity whereby the value of the combination is greater than the sum of the individual values.
Synthetics: Customized hybrid instruments created by blending an underlying price on a cash instrument with the price of a derivative instrument. It is a combination of security holdings which mimics the price movement of another, single security (i.e., synthetic call: long position in a stock combined with a put on that position; a protected long sale; synthetic put: short position in a stock combined with a call on that position; a protected short sale).
Synthetic convertible: Mainly applies to convertible securities. Combination of usable bonds and warrants (that expire on or after bonds' maturity) that resemble the characteristics of a convertible bond.
Systematic: Common to all businesses.
Systematic risk: Also called undiversifiable risk or market risk.
Systematic risk principle: Only the systematic portion of risk matters in large, well-diversified portfolios. The, expected returns must be related only to systematic risks.

Glossary created by Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University.