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Glossary of terms used on this site

  Glossary of terms used on this site
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Glossaries

Term Definition
Cash Market

A market for sale of security against immediate delivery, as opposed to the futures market.

Cash Settlement

The settlement provision on some options and futures contracts that do not require delivery of the underlying security. For options, the difference between the settlement price on the underlying asset and the option’s exercise price is paid to the option holder at exercise. For futures contracts, the exchange establishes a settlement price on the final day of trading and all remaining open positions are marked to market at that price.

Churning

An unethical practice employed by some brokers to increase their commissions by excessively trading in a client’s account. In the context of the stock market, churning refers to a period of heavy trading with few sustained price trends and little movement in stock market indices.

Circuit Breaker

A system to curb excessive speculation in the stock market, applied by the Stock Exchange authorities, when the index spurts or plunges by more than a specified per cent. Trading is then suspended for some time to let the market cool down.

Circular trading

A fraudulent trading scheme where sell or buy orders are entered by a person who knows that the same number of shares at the same time and for the same price either have been or will be entered. These trades do not represent a real change in the beneficial ownership of the security. These trades are entered with the intention of raising or depressing the prices of securities.

Clearing

Settlement or clearance of accounts, for a fixed period in a Stock Exchange.

Clearing House

A department of an exchange or a separate legal entity that provides a range of services related to the clearance and settlement of trades and the management of risks associated with the resulting contracts. A clearing house is often central counterparty to all trades, that is, the buyer to every seller and the seller to every buyer.

Clearing member

A member of a clearing corporation or clearing house of the derivatives exchange or derivatives segment of an exchange, who may clear and settle transactions in securities.

Closing Price

The rate at which the last transaction in a security is struck before the close of the trading hours.

Confirmation process

The procedure for verifying trade details with a counterparty. This is generally done by exchanging via fax or mail a document (i.e. a confirmation) identifying the trade details and any governing legal documentation and verifying the accuracy of the information provided by the counterparty (i.e. matching).

Contract Note

A note issued by a broker to his constituent setting out the number of securities bought or sold in the market along with the rate, time and date of contract.

Counter party risk

The risk that between the time a transaction has been arranged and the time of actual settlement, the counterparty to the transaction will fail to make the appropriate payment.

Custodian

An organization, usually a bank or any other approved institutions, that hold the securities and other assets of mutual funds and other institutional investors.

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