Glossary of Financial Terms starting with Alphabet ‘S’

Glossary of ‘Financial Terms’ starting with Alphabet ‘S’, 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.

SEC (U.S.)

Securities and Exchange Commission (SEC) The US Government agency that regulates securities trading. It has civil enforcement powers only and must seek criminal prosecution through the US Justice Department.

SIPC (Pronounced ‘Si-Pick’) (U.S.)

Acronym for the Securities Investor Protection Corporation, a corporation created by Congress (although not a government agency) which will provide funds to protect investors cash and stocks left with brokers who are covered by SIPC should the brokerage firm fail. There are, however, definite limits to the amounts SIPC will provide and to the circumstances under which such payments will be made.

Safe Harbor (U.S.)

Another way of fighting off an unfriendly takeover by a company. Here, the company that is the object of the takeover goes out and buys a radio station, airline, or similar business, under the assumption that ownership of a subsidiary in such a heavily regulated industry will make acquisition of the company less attractive.

Samurai Bonds

Foreign bonds offered in the Japanese Bond Market.

Saturday Night Special (U.S.)

A surprise tender offer with a 7-10 day expiration period. So called because the strategy often involves announcing it over the weekend, thus denying the rival management time to respond.

Sauda Book

Members and authorized assistants are given a book called “Sauda Book” to record transactions of sales and purchases.

Scorched Earth Policy (U.S.)

Extreme defence tactics by a defending company taking on heavy debt or selling off the key assets to save itself, to ward off a takeover.

Screen based trading

Form of trading that uses modern telecommunication and computer technology to combine information transmission with trading in financial markets.

Sector fund

A fund that invests primarily in securities of companies engaged in a specific investment segment. Sector funds entail more risk, but may offer greater potential returns than funds that diversify their portfolios.

Secondary Market

The market for previously issued securities or financial instruments.

Securities Lending Scheme

A scheme formed in 1997 for lending of securities through an approved intermediary to a borrower under an agreement for a specified period with the condition that the borrower will return equivalent securities of the same type or class at the end of the specified period along with the corporate benefits accruing on the securities borrowed.

Securitization

The process of homogenizing and packaging financial instruments into a new fungible one. Acquisition, classification, collateralization, composition, pooling and distribution are functions within this process.

SEDAR

An electronic filing system (the System for Electronic Document Analysis Retrieval) in Canada that enables companies to file prospectuses and continuous disclosure documents.

Self clearing member

A member of a clearing corporation or clearing house of the derivatives exchange or derivatives segment of a stock exchange who may clear and settle transactions on its own account or on account of its clients only and shall not clear or settle transactions in securities for any other trading members.

Selling Short

A manner in which an investor sells securities he does not posses in the hope of buying them back later at a lower price.

Sensitive Index

A share price index based on 30 active scrips developed by the Bombay Stock Exchange with 1978-79 as the base year.

Settlement Date

The date specified for delivery of securities between securities firms.

Settlement Period

For administrative convenience, a Stock Exchange divides the year into a number of settlement periods so as to enable members to settle their trades. All transactions executed during the settlement period are settled at the end of the settlement period.

Settlement risk (principal risk)

The risk that the seller of a security or funds delivers its obligation but does not receive payment or that the buyer of a security or funds makes payment but does not receive delivery. In this event, the full principal value of the securities or funds transferred is at risk.

Share transfer agent

Any person, who on behalf of any body corporate maintains the record of holders of securities issued by such body corporate and deals with all matters connected with the transfer and redemption of its securities. It can also be a department or division (by whatever name called) of a body corporate performing the above activities if, at any time the total number of the holders of securities issued exceed one lakh.

Shark Repellent (U.S.)

Special provisions in a company’s charter or bylaws designed to deter bidders.

Shelf Registration (U.S.)

Here a company wishing to sell new stocks or bonds to the public can file a single plan with the Securities and Exchange Commission, outlining its intentions to sell such securities over the next two years. Once the plan – called a registration statement – has been filed and is sitting on the shelf at the SEC, the company may then sell all or part of the securities, without any further procedures, at any time it feels market conditions are right.

Short Covering

Buying of stocks by a seller to complete his previous commitments.

Short position

In futures, the short has sold the commodity or security for future delivery; in options, the short has sold the call or the put and is obligated to take a futures position if he or she is assigned for exercise.

Short squeeze

A situation in which a lack of supply and an excess demand for a traded stock forces the price upward. If a stock price starts to rise rapidly, the trend may continue to escalate because the short sellers will likely want out. For example, say a stock rises 15% in one day, those with short positions may be forced to liquidate and cover their position by purchasing the stock. If enough short sellers buy back the stock, the price is pushed even higher.

Single stock derivatives

A single transaction equivalent to the simultaneous sale of a put and purchase of a call for a given stock. Single stock futures essentially allow investors to sell a stock short without waiting for a downtick as would otherwise be required.

Sleeping Beauty (U.S.)

A desirable company, often with considerable cash on its balance sheet, that is vulnerable to a takeover attempt by another company.

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).

Special Delivery

Delivery and payment beyond fourteen days’ limit subject to the exact date being specified at the time of contract and authorised by the Stock Exchange.

Specified Shares

A group of equity shares in which carry forward of transactions from one settlement period to the next is permitted.

Spin off

When a company decides that a subsidiary needs to stand on its own, it might do a spin-off, distributing shares of the new entity to existing shareholders, or selling the new business to its managers or even its employees.

Split

Sub-division of a share of large denomination into shares of smaller denominations. Also means sub-division of holdings.

Spoofing

Placing a limit order at a better price than the current market price for purchase or sale of thinly traded scrips and then endeavouring to cancel the initial limit order in order to induce buy or sell.

Spot Delivery Contract

A contract which provides for

(a) actual delivery of securities and the payment of a price therefore either on the same day as the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefore through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality;

(b) transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository.

Stag

i. An applicant, for a new issue of shares, who hopes to sell the shares on allotment at a profit once trading commences in the secondary market.

ii. A speculator who buys and sells stocks rapidly for fast profits.

Stagflation

The combination of sluggish economic growth, high unemployment and high inflation.

Stagnation

Period of low volume and inactive trading on the securities market.

Staggered Board (U.S.)

A board of directors in which only a certain number of the directors say, a third, are elected each year. This is considered one effective method through which a company might protect itself against an unwelcome takeover attempt. With a staggered board, an outside group could only obtain control of a minority of the board of directors in any given year, since holdover directors elected in earlier years would continue to serve.

Stakeholder

Any individual or group who has an interest in a firm; in addition to shareholders and bondholders, includes labor, consumers, suppliers, the local community and so on.

Stamp Duty

The ad valorem duty payable by buyer for transfer of shares in his name. Also payable on contracts issued by a stock-broker.

Standard Price

The standard price of a security is generally worked out as a weighted average price of all recorded transactions for that security adjusted to the nearest rupee.

Stock dividend

A dividend paid to stockholders in shares of stock of the issuing corporation, issued to stockholders or record out of the unissued stock of the corporation, involving no payment of cash, and used to reflect positive interest in the security.

Stock Index Future

A futures contract whose price varies in line with the movements of a stock market index.

Stock lending

The lending of a security by the registered owner, to an authorized third party, for a fixed or open period of time, for an agreed consideration secured by collateral. The demand to borrow securities comes mainly from market makers to cover short positions or take arbitrage opportunities.

Stop Loss Order (or) Stop Order

An order to sell a security when it declines to a specified price.

Stock exchange

Any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.

Stock option

The right to purchase shares of common stock in accordance with an agreement, upon payment of a specified amount; a compensation scheme under which executives are granted options to purchase common stock over an extended option period at a stated price.

Stock splits

A distribution of company’s own capital stock to existing stockholders with the purpose of reducing the market price of the stock, which would hopefully increase the demand for the shares.

Straddle

A combination strategy in which the same position is taken in the same number of puts as calls.

Straight through processing (STP)

The processing of a trade, whose data is compliant with internal and external requirements, through systems from post-execution through settlement without manual intervention. Simply put it means seamless integration of trades from initiation to settlement without manual intervention.

Strike Price

The price, in contracts for put options and call options, at which the option can be exercised. Sometimes called the exercise price or basis price.

Subaccount

Sub-account includes foreign corporates or foreign individuals and those institutions, established or incorporated outside India and those funds, or portfolios, established outside India, whether incorporated or not, on whose behalf investments are proposed to be made in India by a Foreign Institutional Investor.

Sub broker

Any person not being a member of a stock exchange who acts on behalf of a stock-broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock-brokers.

Subscribed Capital

The amount of equity and preference capital subscribed to by the shareholders either fully or partly paid up with calls in arrears.

Swap

A financial transaction which exploits arbitrage opportunities between markets and in which two counter parties agree to exchange streams of payments over time according to a predetermined rule.

Swap buyback

The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.

Swap reversal

An Interest rate swap designed to end counterparty’s role in another Interest rate swap, accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.

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.

Sweat equity

A sweat equity share is an equity share issued by the company to employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions.

SWIFT

Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a dedicated computer network to support funds Transfers messages internationally between over 900 member banks world-wide.

Switching

When a trust manager group has a stable of investments, it sometimes allows investors to switch between them. It may or may not charge a fee for this right or grant a discount to existing investors.

Synchronized or Pre-arranged trading

Trading on the electronic screen in such a way that trades are put simultaneously in the system of the stock exchange with prior understanding with counterparty by synchronizing the logging in or of trades so that desired quantity matches at desired price.

Systemic risk

Risk that affects an entire financial market or system, and not just specific participants. It is not possible to avoid systemic risk through diversification.

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