The Center Online (securities glossary)

12b-1 fees: Advertising and promotional costs incurred by a mutual fund and charged against the assets in the fund under a Rule 12b-1 plan filed with the SEC. Funds filing a 12b-1 plan may distribute the shares themselves or distribute them through an underweriter and charge an additional sales load. The maximum 12b-1 fee charge is .75% of net assets.

401(k) Plan: A qualified corporate retirement plan in which the employee can take part of his or her compensation in the form of contributions to the plan.

401(b) Plan: A qualified retirement plan, similar to a 401(k) but restricted for use by teachers and employees of certain nonprofit organizations.

Accelerated Cost Recovery System (ACRS): A statutory schedule of depreciation deductions for assets put into service after 1980 and before 1987. Salvage value is disregarded in computing ACRS allowances. Replaced by Modified Cost Recovery System (MACRS).

Acceptance, Waiver, and Consent Procedure: A disciplinary procedure used when the Department of Enforcement of the NASD believes a violation has occurred and the member or associate does not dispute the violation With this procedure, the Department of Enforcement prepares and asks the respondent to sign a letter that accepts the charges, waives rights to have a hearing and appeal the decision, and consents to imposition of sanctions.

Account Guarantee Acknowledgment: A written acknowledgment to the firm that it may use the money and securities in the guaranteeing account without restriction to carry the guaranteed account and pay any deficit in the guaranteed account. The margin to be maintained is then calculated by combining the two accounts.

Accredited investor: An investor in an offering who meets certain criteria under Regulation D, who does not have to be counted for purposes of limitations on the number of purchasers in an offering. At least one of the following criteria must be met to be an accredited investor: (i) a buyer with a net worth individually or with a spouse of $1,000,000 or more; (ii) institutional investors including banks, insurance companies, registered broker/dealers, and large pensions plans; (iii) tax-exempt organizations with total assets in excess of $5,000,000; (iv); private business development companies; (vii) directors, officers, or general partners of the issuer; and (viii) entities owned entirely by accredited investors.

Accretion: The process of adjusting the cost of a bond purchased at a discount. Only original-issue discount municipal bonds are accreted.

Accumulation period: For a variable annuity, the time from when the first payment into the annuity is made to when the first annuity payment is made.

Accumulation units: An accounting measurement used to measure an annuitant's ownership of the separate account during the deposit period of a variable annuity contract.

Acid test ratio: See Quick Ratio.

ACRS: See Accelerated Cost Recovery System.

Actively traded securities: Securities that have a current worldwide average daily trading volume over 60 consecutive calendar days (ADTV) of at least $1 million and an issuer with common equity securities having a public float value of at least $150 million. This condition is used for an exemption from Regulation M, which restricts the trading of an existing security by participants in a public offering of that security.

Additional bond test: An income test, which ascertains that revenues must meet certain levels to allow the sale of additional bonds against the financed facility. A provision in the trust indenture of an open end revenue bond.

Additional takedown: The profit to a syndicate member selling municipal bonds to broker/dealers who are not members of the syndicate.

Adjustment bonds: See income bonds.

ADR: See American Depository Receipt.

Ad valorem taxes: A tax levied "by value," usually used to describe property taxes.

Advance/decline ratio: The ratio of the number of stocks increasing in price to the number of stocks decreasing in price. Also called the "breadth of the market."

Advertising: Under NASD rules, means promotional items that have uncontrolled distribution. In other words, the firm has no way to know who will see the item. The material is published or designed for use in newspapers, magazines or other periodicals, radio, television, telephone or tape recording, video tape display, signs or billboards, motion pictures, telephone listings (other than white-page listings), or other public media. Does not include communications that are neither advertising nor sales literature.

Adviser's client account: An account with a brokerage firm in which an investment adviser pools the funds of all his customers, keeping a record of each customer's percentage of the account. The brokerage firm does not know the identity of the individual customers. The investment adviser pays for securities and meets margin calls. The customers make their checks out to the investment adviser. Also called an omnibus account.

Affiliated Persons: Persons (individuals, corporations, trusts, etc.) in a position to influence a corporation's decisions. Includes officers, directors, and principal stockholders (those with 10% ownership or more) of the corporation, and their immediate families. Also called insiders or control persons.

Affirmative defense: A defense in a legal proceeding that attacks the legal grounds for an accusation rather than the truth of the facts.

Affirmative determination: The inquiry a registered representative makes to ensure that a customer who has custody of the securities certificates in a trade can deliver the certificates in good delivery form within three days of the trade date. The registered representative must talk with the customer and make a notation on the order ticket about his conversation with the customer.

Agency sales ticket: A memorandum of each brokerage order received or given, whether executed or not.

Agency transactions: Transactions in which a broker acts only as an agent for the customer, putting together a buyer and a seller, and makes a commission on the sale.

Agent: One who acts for another. When a firm acts as agent, it is acting as a broker, bringing together a buyer and a seller. As agent it does not buy or sell for its own account.

Aggregate indebtedness: A firm's unsecured liabilities, including any customer-related liabilities. Aggregate indebtedness does not include subordinated agreements or loans fully collateralized either by fixed assets such as real estate or by the firm's securities.

Agreement among underwriters: The contract that governs the syndicate members in a negotiated offering.

Agreement of limited partnership: The contract between the general partners and the limited partners that governs the limited partnership.

Aggregate exercise price: In an options position, the total amount of money involved in the resulting stock trade if the position is exercised. If a customer is long 1 XYZ July 50 Put, the aggregate exercise price is $5,000.

Alpha: A statistical measurement used to determine the percentage of the change in a stock's price due to factors internal to the company, rather than to the stock market's fluctuations.

All-or-none: A limit order for multiple round lots that bars partial execution of the order. The customer waits until the entire order can be filled in a single trade. Often abbreviated "AON."

All-or none underwriting: A type of best-efforts underwriting that withdraws the offering if it cannot be sold completely.

Alternative minimum tax: A tax on certain "preference items," most of which are tax deductions allowed under the normal income tax calculation. Taxpayers pay either the regular tax or the alternative minimum tax, whichever is greater.

Alternative orders: An order with two parts. When one part is filled, the other part is automatically canceled. For example, a customer may enter an order to buy at 32 or 38 stop. He is trying to buy the stock for $32 or less, but if the price increases to or above $38, it becomes a market order.

Alternative trading system: An electronic system that brings together buyers and sellers of securities and completes trades by matching orders according to a predefined logic. Electronic Communications Networks (ECNs) are alternative trading systems that have sufficient volume in non-government securities and commercial paper that they must be registered with the SEC. Unregistered ATSs include the Arizona Stock Exchange, BRASS, and Optimark. The Arizona Stock Exchange is an electronic call market where buy and sell orders are combined into one large daily trade that takes place at a single price. BRASS is a system management network to rout orders, and Optimark is an electronic trading system that can be purchased by an exchange or broker, but is not an exchange or broker in itself.

American Depository Receipt: A receipt for shares of a foreign corporation on deposit with a foreign branch of an American bank.

American Stock Exchange (AMEX): The second largest traditional stock exchange, based in New York City.

American-style options: Options that may be exercised at any time before expiration. (See European-style options.)

AMTI: The Alternative Minimum Taxable Income; the amount on which the alternative minimum tax liability is calculated.

Amortization: A reduction in a debt or fund by periodic payments covering interest and part of the principal. In municipal bonds, amortization refers to adjusting the cost of a bond for any premium paid.

Annual report: The yearly report of a corporation's financial condition. It includes a balance sheet, income statement, and other descriptive information of interest to investors.

Annuity: Money is paid (usually to an insurance company) to someone who invests the money for a set period of time and then pays money to the annuitant (the one receiving the annuity) when he/she reaches a certain age. Fixed annuities guarantee a fixed payment amount, while variable annuities pay a varying amount depending on the fixed amount of initial investment.

Annuity units: An accounting measurement used to determine the annuitant's ownership in the separate account during the annuity period when payments are being made to the investor on a variable annuity contract.

Anti-dilution clause: A clause in the trust indenture of a bond offering which provides that the conversion price (or conversion ratio) of a convertible bond be adjusted in the case of stock splits or stock dividends paid to common stockholders.

AON: See all-or-none

Arbitrage: Taking advantage of minor aberrations in the market to try to profit as the market returns to normal. Arbitrage might take advantage of imbalances in prices between two markets for the same security (such as a domestic and a foreign market) or between two types of securities whose value depends on the same underlying security (such a stock and a bond convertible into the stock).

Arbitration: A method of settling disputes. The parties present their arguments to a panel of one or more arbitrators who will render a decision. There are no appeals from arbitration.

Asked price: The lowest price a seller of a security is willing to take for a unit of a security at a particular time. (Note that the OTC market uses the term "asked," while the exchanges use the term "offered" or "offering.")

Asset: Anything of value owned by a company or individual. Assets include cash, investments, and physical property.

Asset allocation: A fundamental concept in portfolio management in which an investment adviser determines the investment profile for a client, including their risk tolerance and time horizon, then uses this information to split the client's funds between appropriate classes of investments. As relative movements in the market for the various asset classes change the mix of assets in the portfolio over time, the adviser must rebalance the portfolio.

Asset class: A group of investments with similar risk and return characteristics, such as cash equivalents, government bonds, municipal bonds, corporate bonds, common stock (or industry groupings within the broad category of common stocks), real estate, precious metals, and collectibles.

Assignment: For options, the notice from the OCC telling the broker/dealer that an option written by one of its clients has been exercised.

Assistant Representative-Order Processing: A Series 11 representative who only accepts unsolicited customer orders for execution. Cannot solicit customers, give investment advise, make recommendations to customers, or effect transactions for the NASD-member's account. Must not be registered in any other capacity for the firm. Compensation cannot be based on the number or size of transactions they handle.

Associated persons: Employees of a brokerage firm who are required to be licensed.

ATS: see Alternative Trading System

At-the-close order: An order to be executed at or near the close of trading. Round-lot orders entered at-the-close are executed in the last thirty seconds of trading.

At-the-money: An option contract with a strike price that equals the market price of the underlying stock.

At-the-opening order: An order to be filled on the first trade of the day in that stock. If the order cannot be filled on the first trade of the day, it is canceled.

At-risk rule: A provision in the tax code stating that a limited partner may only include debt as part of his or her basis in the partnership if he or she is personally liable for the debt (i.e., if it is a recourse loan).

Auction market: A market in which the price of a security is determined by supply and demand, through a continuous auction. Exchanges are auction markets.

Auditor's report: The public accountant's statement as to the scope of the review of the books and records of the corporation and the accountant's opinion as to the accuracy of the financial statements (i.e., unqualified or to some degree qualified approval).

Automated Confirmation Transaction (ACT): A computer system that matches trade information, determines locked-in trades, and submits them to clearing through the National Securities Clearing Corporation (NSCC). The primary way that OTC transactions in equity securities are reported. Participation is mandatory for all brokers that are members of a registered clearing agency and for all brokers who have a clearing arrangement with such brokers.

Backing away: The illegal practice of publishing a quote that a firm has no intention of honoring.

Balance of payments: A summary statement comparing the money coming into a country with the amount of money leaving the country for one period of time. Usually divided into the current account (showing imports and exports of goods and services), the capital account (showing movement of investments), and gold (showing movement of gold). The statement uses double-entry bookkeeping, which ensures that though individual categories may have a deficit or surplus, the overall statement must not.

Balance of trade: The net difference in imports and exports of goods by a country for a period of time. (Note: This is not the same as the change in the current account portion of the balance of payments, since the current account also includes imports and exports of services.) More exports than imports produce what is generally considered a favorable balance of trade, while the reverse is generally considered unfavorable.

Balance sheet: A financial report of a corporation, showing the corporation's assets, liabilities, and stockholders' equity at a point in time (usually month-end, quarter-end, or year-end).

BAN: See Bond Anticipation Note.

Bankers' acceptances: A short-term instrument used to finance import/export activities. Usually sold at a discount.

Basis: The cost or book value of an investment. The gain or loss on an investment is the sale price less the basis. Basis is often called "cost basis."

Basis book: A series of tables used to determine the dollar price of a serial municipal bond issue (quoted on a yield to maturity basis), or to determine the yield to maturity on a term bond (quoted in the same manner as corporate bonds).

Basis points: 0.01% in yield. Increasing from 5.00% to 5.05%, the yield increases by five basis points.

Bearer: Certificates (usually bonds) that are not registered in the holder's name, but are payable to the presenting party when due.

Bear market: A situation in a market for investments in which price trends are generally downward.

Bear Spreads: An options spread position that is profitable when the stock price decreases. The position is characteristically entered by purchasing a high strike price option and selling a low strike price option.

Best-efforts underwriting: Underwriting without a guarantee to the issuer to sell the securities. The underwriters act as brokers.

Beta: A statistical measurement correlating a stock's price change with the movement of the stock market.

Bid price: The highest price a buyer of a security is willing to pay for a unit of the security at a particular time.

Blanket fidelity bond: Insurance brokerage firms are required to carry to protect customers from the dishonesty or carelessness of brokerage employees and officers. Covers loss of money or securities, forgery, and fraudulent trading. The amount of coverage required is linked to the firm's required net capital under SEC Rule 15c3-1. The minimum bond allowed for all categories is $25,000.

Block trade: A trade of a large number of shares, usually 10,000 shares or more.

Blue Chip Stocks: Stocks of strong, well established corporations with a history of paying dividends in good and bad times.

Blue List: A listing of municipal bonds offered for sale in the secondary market.

Blue List Total: The total par value of the bonds offered for sale on the Blue List. This is a measure of the secondary market for municipal bonds.

Blue Skying: The process of registering a new issue with the states.

Blue Sky Laws: State securities laws. The name is derived from a court decision in which a state judge held that a particular offering had "no more substance than the blue sky above."

Board Broker: The employee of the CBOE who maintains the public limit order file, which is similar to a specialist's book, and executes limit orders for customers. Also known as an Order Book Official, or OBO.

Bond: A long-term debt instrument issued by a corporation or government entity. The bondholder loans the issuer money and the issuer promises to pay the bondholder interest at a specified rate on the loan for a specified period of time and then to repay the loan at expiration. The bondholder is a creditor of the issuer rather than a partial owner.

Bond Anticipation Note: A short-term municipal note issued in advance of long-term bond financing, commonly referred to as a BAN. The BAN is repaid from the proceeds of the bond issue. BANs are normally general obligations of the issuer.

Bond Buyer: A publication which contains news of interest to the municipal bond market; also contains worksheets designed to assist syndicates in preparing their bids for an offering.

Bond Index: An index of 20 high quality, general obligation municipal bonds, also known as the 20 Bond Index.

Bond Swap: Selling municipal bonds (usually at a loss) and using the proceeds to buy other municipal bonds, to establish a loss for tax purposes, to diversify a portfolio, to increase cash flow, or increase yield. Also known as tax swaps.

Book entry: A bond registration procedure in which the bondholder does not receive the physical certificates held by a depository. The depository maintains ownership records and forwards interest payments.

Book value: The value of a corporation's assets or liabilities on its balance sheet. Assets are valued at their original purchase price less any depreciation taken for accounting purposes. The book value of common stock is the corporation's assets less its liabilities and the liquidation value of its preferred stock. Book value may have little relationship to market value.

BP Option: "BP" is the abbreviation for the British Pound. An option to buy or sell British Pounds.

Branch office: Any location identified to the public as a location where an NASD member conducts investment banking or securities business. However, telephone directories, business cards, etc. may refer to a non-branch, as long as they also give the address and telephone number of the branch office or office of supervisory jurisdiction that supervises the non-branch.

Breadth of the Market: See Advance/Decline Ratio.

Breakeven Point: The point beyond which a trade begins to be profitable. Up to this point, it is a losing trade.

Breakpoint: A purchase amount that qualifies for a reduced sales charge for mutual funds.

Breakpoint sale: The prohibited practice of selling mutual fund shares in an amount just under a breakpoint (usually within $1,000 of a breakpoint) to earn more commissions.

Broker: See Agent.

Broker/Dealer: A brokerage firm.

Broker's broker: A municipal securities firm that acts as broker for other firms. Broker's brokers do not deal with customers and do not trade their own accounts.

Bull market: A situation in a market for investments in which price trends are generally upward.

Bull spread: An options spread position that is profitable if the stock price rises. The position is characterized by a low strike price for the long position and a high strike price for the short position.

Bunching: Combining two or more odd lot orders into one order for a round lot.

Business cycle: A recurring cycle of economic conditions starting with credit expansion, economic activity becoming feverish, then depressed. Recovery occurs when the malinvestments and maladjustments have been corrected.

Buyer's option: A contract giving the buyer the right to specify a later date on which to settle the trade. The specified date must be from six business days to sixty calendar days after the trade date.

Buying power: In a margin account, the dollar amount of securities the customer may purchase without making a cash deposit. The buying power in an account is a function of the SMA (which see).

Buy stop: An order to buy a security if it trades at or above a trigger price. Often used to limit a loss or protect a profit in a short stock position.

Calendar spread: An options spread position with the same strike prices, but different expiration months. Calendar spreads are entered to take advantage of the decay of time premium.

Callable securities: Securities that may be bought back by the issuer before they are due, usually at a premium over the par value. Many bonds and preferred stocks are callable.

Call option: An option contract that gives the holder the choice to buy the stock and the writer the obligation to sell the stock at a specified price.

Call rate: The rate of interest banks charge broker/dealers on loans collateralized by securities, often called the broker loan rate.

Call spread: An options spread position in which the customer is long a call and short a different call on the same underlying security.

Canadian interest cost: See True Interest Cost.

Cap Interval: The point at which these special index options are automatically exercised if the underlying index touches or exceeds the cap price on the close.

Capital Asset Pricing Theory (CAPT): A theory of portfolio analysis stating that diversified investments in a portfolio are less risky than the sum of the risks of the individual stocks.

Capital gain: A gain recognized when a security is purchased at one price and sold at a higher price. It does not include dividend or interest income.

Capitalization: The long-term financing of a corporation, including the shareholder's equity section of the balance sheet plus long-term bonds outstanding.

Cash flow: The net profits or losses of a business plus noncash expenses such as depreciation, amortization, and depletion.

Cash settlement: A trade that is settled on the same day as the trade date.

Catastrophe call: A provision in the trust indenture of a bond issue that allows the issuer to call the bonds if the facility is destroyed by a natural disaster. It is usually called at par.

CBOE: See Chicago Board Options Exchange.

CD: See Certificate of deposit.

Certificate: The physical paper that evidences ownership of stock in a corporation.

Certificate of Deposit: A document certifying an unsecured time deposit with a bank, usually known as a CD. To be negotiable, it must be for $100,000 or more.

Certificate of Limited Partnership: A document summarizing the provisions of a limited partnership. It must be filed with the secretary of state in the state in which the partnership is formed. Filing the certificate creates the limited partnership.

Chicago Board Options Exchange (CBOEJ): The largest options exchange. Located in Chicago.

CFTC: The Commodity Futures Trading Commission.

Chinese Wall doctrine: Doctrine by which firms must establish barriers restricting information flow between departments to ensure that insider information acquired by one department (legal or investment banking, for example) will not be used in trades of another department or in recommendations to customers.

Churning: Excessive trading in a customer's account to give profit to the broker/dealer in disregard of the customer's best interests. Prosecutable under the 1934 Securities Exchange Act.

Circuit breakers: Trading halts, curtailment of automated trading systems and/or price movement limits used by the exchanges to attempt to prevent the free-fall of stock or stock index futures markets. Established after Black Monday in 1987 by major stock and commodities exchanges. The breakers are triggered when the market has fallen by a specified amount in a specified period. Amounts that trigger the breakers are changed from time to time.

Class of Options: Options of the same type (put or call) on the same underlying security.

Closed-end investment company: An investment company with a fixed number of shares that trade in the secondary market.

Closing purchase: A purchase of an option to eliminate or reduce a short options position.

COD: Cash on Delivery. Payment for goods is made upon delivery. See Delivery versus Payment.

Code of Arbitration: Procedure of the NASD for settling disputes among participants in the securities markets by arbitration. Applies to disputes between and among members, members and their associates, members and public customers, associates of members and public customers, and members and clearing agencies or persons using the facilities of a clearing agency (however, only when the clearing agency has an arbitration agreement with the NASD).

Code of Procedure: Procedures of the NASD that detail the form for disciplinary actions against members and their associates for violations of the rules over which the NASD has jurisdiction.

Coincident indicator: An economic indicator that reflects changes in the economy. The index of industrial production and retail sales are both coincident indicators.

Collateral: Securities or other assets that a borrower pledges to a lender to secure repayment of a loan. If the borrower does not make payments as promised, the lender may legally seize the collateral and use the proceeds from its sale to pay off the loan.

Collateralized Mortgage Obligations (CMOs): Bonds secured with GNMA, FNMA, and FHLMC mortgage-backed securities. Also known as REMICs.

Collateral trust bonds: Bonds secured by securities of another corporation.

Combination: An options position in which an investor is long both a put and a call option on the same stock or short both a put and a call option on the same stock. The options usually have different strike prices.

Commercial paper: Short-term business notes, drafts, and acceptances maturing in 270 days or less.

Commission: The fee charged by a broker/dealer for acting for others in executing buying or selling orders.

Commodity Futures Trading Commission: U.S. Government Agency that regulates U.S. exchange trading in futures.

Common stock: The most basic type of equity security, representing ownership of the corporation.

Communications that are neither advertising nor sales literature: Items exempt from the NASD's advertising and sales literature rules, including: 1. tombstone advertisements or similar communications; 2. documents intended for the internal use of the firm and not given to the public; 3. communications which only identify the member and/or offer a specific security at a stated price; 4. prospectuses, offering circulars, etc. used in connection with a public offering of a security that has been registered or filed with the SEC or a state (except for the prospectus for investment company shares); and 5. communications merely stating facts, such as the member's new name or address, facts concerning a merger or acquisition, the firm's NASDAQ® symbol, or the NASDAQ® symbol of a security in which the member is a registered market maker.

Competitive bid underwriting: An offering in which syndicates enter bids for the opportunity to underwrite the issue.

Competitive trader: A person who owns a seat on an exchange and uses it to trade for his own account.

Complaint: Defined by the NASD as a written statement of a grievance by a customer or his agent, involving persons associated with the member concerning the solicitation, execution, or disposition of funds or securities.

Compliance Registered Options Principal: A registered options principal who has been designated by the broker/dealer to maintain compliance with industry rules and federal law, usually referred to as a CROP. He must approve all items of advertising, sales literature, and educational material.

Concession: In a municipal underwriting, the compensation given up to broker/dealers who are not members of the syndicate.

Conduct Rules (formerly known as the Rules of Fair Practice): Rules maintained and enforced by the NASD that apply to general business activities of members.

Conduit Theory: Theory governing an exemption on paying taxes for Regulated Investment Companies. The theory governing this exemption is that an RIC that distributes most of its income is acting only as a conduit for income on investments.

Confirmation: A written report giving details of the trade to the customer or the other broker/dealer involved in the trade. Confirmations must be sent the next business day after the trade.

Consent to service of process: Legal document used by the state administrator to simplify filing of complaints under state securities laws. The person or entity signing it (such as the issuer of a security, or a securities registrant with the state) agrees that, for noncriminal complaints, any legal papers regarding the signee that are served on the state administrator in lieu of the signee have the same force and validity as if they were served directly on the signee.

Consolidated Tape: System for providing the last sale price and volume of trades in exchange-listed securities. The system has two tapes: Network A and Network B. All trades in NYSE securities, regardless of where they occur, are listed on Network A with an identifier as to where they originated. Transactions in securities listed on AMEX and other regional exchanges are reported on Network B. Participants in addition to the NYSE and AMEX include BSE, CBOE, CSE, CHX, NASD, PSE, and PHLX.

Contemporaneous traders: Traders who buy or sell a security at the time of insider trading. Such traders may sue in court for damages.

Continuous issue of redeemable securities: Manner in which shares of a mutual fund are issued. The shares purchased are new shares, and when a shareholder wishes to sell shares, he sells them back to the fund itself (redeems them) rather than selling them on the open market. The shares repurchased by the mutual fund are retired: they do not become treasury stock, nor may they be reissued; the shares simply cease to exist.

Continuous net settlement: The offsetting of payments and certificates when multiple trades involving a particular security have the same two parties on opposing sides. Used by registered clearing agencies.

Contractual plans: A contract committing an investor to invest money over a period of time. The sales charges are deducted over the life of the contract, being higher in the early part of the contract.

Control persons: See Affiliated persons. Control persons are also called "Insiders."

Control stock: Stock owned by control persons.

Conversion price: The price of a bond or stock at which it can be converted to common stock.

Conversion ratio: The ratio specifying how many shares of a common stock will be received upon converting one bond or share of preferred stock.

Convertible: Designation for a bond, debenture, or preferred stock which signifies that it may be exchanged by the owner for common stock or another security, usually one issued by the same corporation. Conversions are subject to terms established in the issue of the original security.

Cooling-off period: The time between the filing of the offering with the SEC and the effective date when it is released by the SEC.

Cost basis: See Basis.

Coterminous: Overlapping debt, such as the bonds of a city and a school district where both debts are being paid by the same tax base (taxpayers).

Coupon bond: A bond in which coupons for interest payment are physically attached to the bond paper. The bondholder must clip the coupons as they come due and present them for payment of interest.

Coupon rate: The nominal yield on a bond or share of preferred stock. For example, a bond with a face value of $1,000 that pays $100 per year has a nominal yield or coupon rate of 10%.

Covered options: A short options position in which the writer has the means of meeting the obligation. For example, a person who is short a call option and long the stock.

Credit agreement: An agreement between broker and customer on the conditions of a margin account.

Credit balance: Money on deposit in a customer's account.

Credit spreads: An options spread position in which the premium on the short position is greater than the premium on the long position.

CROP: See Compliance Registered Options Principal.

Crossed market: A market in which either a newly entered bid is higher than an existing asked price or a newly entered asked price is less than an existing bid price.

Crossover: The point at which the partnership goes from showing losses for tax purposes to showing income.

Cumulative preferred stock: A preferred stock whose dividends continue to accumulate even though they are not earned or declared.

Currency exchange risk: The risk that the value of an investor's domestic currency may drop against the value of the currency in which an investment is held. Much of this risk can be hedged away through the market for forwards and futures.

Current assets: Assets that are converted to cash within one year.

Current liabilities: Obligations that must be paid within one year.

Current ratio: Current assets divided by current liabilities.

Current yield: The ratio of the current income from an investment to the purchase price or the current price of the investment.

CUSIP number: A number assigned to each issue of securities by the Committee on Uniform Securities Identification Procedures to facilitate tracking lost, stolen, or counterfeit securities.

Custodian: The person appointed by the donor to manage a minor's account. Might be the donor, a guardian, or some other adult or institution such as a bank.

Customer: Any person or entity for whom the broker/dealer holds funds or securities, unless that entity is another broker/dealer. (Though municipal securities dealers may be conside