Glossary of Financial Terms starting with Alphabet ‘M’

Glossary of ‘Financial Terms’ starting with Alphabet ‘M’, i.e. ‘Meaning’ or ‘Definition’ of Common and Unusual terms relating to Accounting, Auditing, Company Law, GST, Income Tax, Investments, etc., along with the ‘Context’ in which they are used.

MIT

Market if touched (MIT). A limit order that automatically becomes a market order if the price is reached.

Maintenance Margin

The minimum margin that must be maintained on a futures contract.

Management Charge/ Fees

The amount a mutual fund pays to its investment adviser for services rendered, including management of the fund’s portfolio.

Manipulation of financial markets

Activities whose objective is to alter prices in financial markets through the use of techniques that result in unnatural market prices, often through the use of wash sales or reporting of fictional or apparent market prices.

Maple Leaf

Debt warrants entitling the holder to purchase a Government of Canada Bond.

Margin

An advance payment of a portion of the value of a stock transaction. The amount of credit a broker or lender extends to a customer for stock purchase.

Markdown

A charge levied by a broker when buying securities on its own account from a customer. (These purchases as principals from customer take place at the best bid prices minus a commission equivalent to markdown).

Marked to market basis

The process whereby the book value or collateral value of a security is adjusted to reflect current market value.

Market capitalization

The market value of a company, calculated by multiplying the number of shares issued and outstanding by their current market price.

Market Maker

A member firm who give two way quotation for particular security (ies) and who is under an obligation to buy and sell them subject to certain conditions such as overall exposure, spread etc.

Market Model

This relationship is sometimes called the single-index model. The market model says that the return on a security depends on the return on the market portfolio and the extent of the security’s responsiveness as measured by beta (b). In addition, the return will also depend on conditions that are unique to the firm. Graphically, the market model can be depicted as a line fitted to a plot of asset returns against returns on the market portfolio.

Market Price

The last reported sale price for an exchange traded security.

Marketable Lot

A fixed minimum number, in which or in multiples of which, shares are bought and sold on the stock exchange. For shares whose face value is Rs. 10, the marketable or trading lot may be 50 or 100. For Rs. 100 shares the market lot is usually 5 or 10. Companies may, however, decide on other lots, such as 1 share for Rs. 500, although it is now rare. Any number of share less than the marketable lot makes an odd lot, difficult to buy and disadvantageous to sell. When companies issue bonus or rights shares in less than 1:1 ratio, odd lots are often the result.

Marking Up Prices

Prices fixed by the Stock Exchange to facilitate settlement of bargains in the specified securities, particularly at the end of the settlement period.

Mark to market margin (MTM)

Collected in cash for all Futures contracts and adjusted against the available Liquid Net worth for option positions. In the case of Futures Contracts MTM may be considered as Mark to Market Settlement.

Marking Up Prices

Prices fixed by the Stock Exchange to facilitate settlement of bargains in the specified securities, particularly at the end of the settlement period.

Markup

A charge levied by a broker when selling securities from its own account to a customer. These sales as principals to a customer take place at the best ask price plus a commission equivalent to markup.

Matched Transaction

A check is carried out on the computer to find out whether purchases and sales as reported by the members match. The transactions, thus compared are called matched transactions.

Maturity (Date)

The date on which a loan, bond, or debenture becomes due for payment.

Maturity Value

The amount an investor receives when a security is redeemed at maturity not including any periodic interest payments. The value usually equals the par value although on zero coupon, compound interest and multiplier bonds, the principal amount of the security at issuance plus the accumulated investment return on the security is included.

Merchant Banker

Any person who is engaged in the business of issue management either by making arrangement regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management.

Merger

The non-hostile and voluntary union of two companies.

MIBOR

Mumbai Interbank Bid and Offer rates. Calculated by the average of the interbank offer rates based on quotations at nearly 30 major banks.

Microcap fraud

Microcap fraud typically takes one of the two forms. The first ‘the pump and dump scheme’ often involves fraudulent sales practices, including pressure tactics from boiler room operations where a small army of sales personnel could call potential investors using scrips to induce them to purchase house stocks, i.e. the stocks in which the firm makes a market or has large inventory. The information conveyed to investors often is at best exaggerated and at worst completely fabricated. Increasingly these stocks are being touted on the internet by unregistered promoters. The promoters of these companies, and often company insiders, typically hold large amounts of stock and make substantial profits when the stock price rises following intense promotional efforts. Once the price rises, insider and brokers sell, realizing their profits. Second as part of pump and dump, unscrupulous brokers often employ a variety of fraudulent sales practices including bait and switch tactics, unauthorized trading, no net sales policies and churning.

Money laundering

Process of converting the proceeds of illegal activities, disclosure of which would trigger financial losses or criminal prosecution – into real or financial assets whose origins remain effectively hidden from law enforcement officials and from society in general.

Money Market

The market encompassing the trading and issuance of short-term non-equity debt instruments, including treasury bills, commercial paper, bankers’ acceptance, certificates of deposits etc. The market may be local or international.

Money market mutual funds

Schemes investing exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc.

Mortgage backed securities

Securities backed by mortgage loans, including pass-through securities, modified pass-through securities, mortgage-backed bonds, and mortgage pay-through securities.

Mortgage Trust

Unit trust which invests in mortgage loans. Effectively the unit trust invests money in real estate and receives an interest return with security over the property which has been purchased. The interest which is charged on mortgage trust loans is normally higher than that other sources of finance like banks so that the investor usually receives a very competitive rate or return.

Moral Hazard

The risk that a party to a transaction has not entered into a contract in good faith has provided misleading information about its assets, liabilities or credit capacity or has an incentive to take unusual risks in a desperate attempt to avoid losses.

Moving Average

The average of security or commodity prices over a period of few days or up to several years showing the trends up to the last interval. Each time the average is taken , the oldest price is dropped and the latest price is added. Thus the average is moving one.

Multilateral netting

Multilateral netting is an arrangement among three or more parties to net their obligations. In settlement systems of this type transfers are irrevocable, but are only final after the completion of end-of-day-settlement.

Mutual Funds/ Unit Trusts

Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. A fund established in the form of a trust to raise monies through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instruments.

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