Campbell R. Harvey's Hypertextual Finance Glossary

Copyright © 2008. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

S

Fifth letter of a Nasdaq stock symbol specifying a beneficial interest.

SA

The two-character ISO 3166 country code for SAUDI ARABIA.

SAIF

See: Savings Association Insurance Fund

SAR

The ISO 4217 currency code for the Saudi Arabian Riyal.

SATURNS

See Structured Asset Trust Unit Repackagings.

SB

The two-character ISO 3166 country code for SOLOMON ISLANDS.

SBD

The ISO 4217 currency code for the Solomon Islands Dollar.

SC

The two-character ISO 3166 country code for SEYCHELLES.

SCR

The ISO 4217 currency code for the Seychelles Rupee.

SD

The two-character ISO 3166 country code for SUDAN.

SDD

The ISO 4217 currency code for the Sudanese Dinar.

SDR

See: Special drawing rights

SE

The two-character ISO 3166 country code for SWEDEN.

SEAQ

See: Stock Exchange Automated Quotation System

SEC

See: Securities & Exchange Commission

SED

See: Shipper's Export Declaration

SEHK

See: Stock Exchange of Hong Kong

SEK

The ISO 4217 currency code for the Swedish Krona.

SHP

The ISO 4217 currency code for the Saint Helena Pound.

SIAC

See: Security Industry Automated Corporation

SIC

See: Standard Industrial Classification

SIMEX

See: Singapore International Monetary Exchange

SG

The two-character ISO 3166 country code for SINGAPORE.

SGD

The ISO 4217 currency code for the Singapore Dollar.

SH

The two-character ISO 3166 country code for SAINT HELENA.

SI

The two-character ISO 3166 country code for SLOVENIA.

SIT

The ISO 4217 currency code for the Slovenian Tolar.

SJ

The two-character ISO 3166 country code for SVALBARD AND JAN MAYEN.

SK

The two-character ISO 3166 country code for SLOVAKIA.

SKK

The ISO 4217 currency code for the Slovak Republic Koruna.

SL

The two-character ISO 3166 country code for SIERRA LEONE.

SLL

The ISO 4217 currency code for the Sierra Leone Leone.

SM

The two-character ISO 3166 country code for SAN MARINO.

SMBS

See: Stripped mortgage backed securities

SN

The two-character ISO 3166 country code for SENEGAL.

SO

The two-character ISO 3166 country code for SOMALIA.

SOES

See: Small Order Execution System

SOS

The ISO 4217 currency code for the Somalian Shilling.

SOXS

See: Sarbanes Oxley Act of 2002

SPDR

The Standard and Poor's depositary receipt. This is a tracking stock which trades like an index mutual fund which follows the S&P 500. It trades continuously.

SR

The two-character ISO 3166 country code for SURINAME.

SRG

The ISO 4217 currency code for the Surinam Guilder.

ST

The two-character ISO 3166 country code for SAO TOME AND PRINCIPE.

STD

The ISO 4217 currency code for the Sao Tome & Principe Dobra.

SV

The two-character ISO 3166 country code for EL SALVADOR.

SVC

The ISO 4217 currency code for the El Salvador Colon.

SWIFT

See: Society for Worldwide Interbank Financial Telecommunications

SY

The two-character ISO 3166 country code for SYRIAN ARAB REPUBLIC.

SYP

The ISO 4217 currency code for the Syrian Pound.

SZ

The two-character ISO 3166 country code for SWAZILAND.

SZL

The ISO 4217 currency code for the Swaziland Lilangeni.

SACE

The Italian export credit agency.

Safe harbor

Often used in risk arbitrage as a form of shark repellent. A target company acquires a business so onerously regulated that 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

Holding by a bank of bonds and money market instruments. For a fee, the bank clips coupons and presents for payment at maturity.

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.

Salary

Regular wages and benefits an employee receives from an employer.

Salary freeze

A temporary halt to increases in salary due to financial difficulties experienced by a company.

Salary reduction plan

A plan allowing employees to contribute pre-tax income to a tax-deferred retirement plan.

Salary Reduction Simplified Employee Pension Plan (SARSEP)

A low-cost, no-frills version of a 401(k) employee savings plan available to companies with 25 or fewer employees. It allows employees to make pretax contributions to their IRAs through salary reduction each year. The Small Business Job Protection Act of 1996 replaced SARSEPs with SIMPLE (Savings Incentive Match Plan for Employees) plans. Existing SARSEPs were allowed to add new participants, but new plans could not be formed after December 31, 1996.

Sale

An agreement between a buyer and a seller on the price to be paid for a security, followed by delivery.

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 at purchase of shares, usually payable as a commission to a marketing agent, such as a financial adviser, who is thus compensated for assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.

Sales completion

In the context of project financing, the state in which the project has reached physical completion and has delivered product or generated revenues in satisfaction of a sales completion test.

Sales Contract

Contract between a seller and buyer for the sale of goods, services, or both.

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 literature

Material written by an institution selling a product, which informs potential buyers of the product and its benefits.

Sales load

See: Sales charge

Sales tax

A percentage tax on the selling price of goods and services.

Sales-type lease

The leasing out of a firm's own equipment, such as a printing company leasing its own presses, thereby competing with an independent leasing company.

Sallie Mae

See: Student Loan Marketing Association

Salomon Brothers World Equity Index (SBWEI)

A top-down, float capitalization-weighted index used to measure the performance of fixed-income and equity markets. It includes approximately 6000 companies in 22 countries.

Salomon Brothers Non-U.S. Dollar World Government Bond Index

A benchmark index that includes institutionally traded bonds other than U.S. issues that have a fixed rate and a remaining maturity of one year or longer.

Salvage value

Scrap value of plant and equipment.

Same-Day Funds Settlement (SDFS)

A method of settlement used in trading between well-collateralized parties in good-the-same-day federal funds used by the Depository Trust Company for transactions in US government securities, short-term municipal notes, medium-term commercial paper notes, CMOs, and other instruments.

Same-day substitution

Offsetting changes in a margin account during the day that result in no overall change in the balance of the account.

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.

Santa Claus Rally

Seasonal rise in stock prices in the last week of the calendar year, between Christmas and New Year's Day.

Sao Paulo Stock Exchange

See: Bolsa de Valores de Sao Paulo

S&P

Standard & Poor's Corporation.

S&P 500 Composite Index

Index of 500 widely held common stocks that measures the general performance of the market.

S&P phenomenon

Tendency of stocks newly added to the S&P composite index to rise in price due to a large number of buy orders as S&P-related index funds add the stock to their portfolios.

S&P Rating

Rating service provided by S&P that indicates the amount of risk involved with different securities.

Sarbanes Oxley Act of 2002

Legislation passed largely as a result of a number of accounting scandals. Among the many features is the creation of the Public Company Accounting Oversight Board. This board is charged to: The Board shall: 1) register public accounting firms; 2) establish, or adopt, by rule, auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers; (3) conduct inspections of accounting firms; (4) conduct investigations and disciplinary proceedings, and impose appropriate sanctions; (5) perform such other duties or functions as necessary or appropriate; (6) enforce compliance with the Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect thereto; (7) set the budget and manage the operations of the Board and the staff of the Board.

Saturday night special

Often used in risk arbitrage. Sudden attempt by one company to take over another by making a public tender offer.

Saucer

Technical chart pattern depicting a security whose price has reached bottom and is moving up.

Savings Association Insurance Fund (SAIF)

A government organization that replaced the Federal Savings and Loan Insurance Corporation as the provider of deposit insurance for thrift institutions.

Savings bank

An institution that primarily accepts consumer savings deposits and to make home mortgage loans.

Savings bond

A government bond issued in face value denominations from $50 to $10,000, with local and state tax-free interest and semiannually adjusted interest rates.

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.

Savings element

Used in the context of life insurance, the cash value built up in a policy, which equals the amount of premium paid minus the cost of protection. This excess is invested by the insurance company, and the returns are tax-deferred inside the policy.

Savings Incentive Match Plan for Employees (SIMPLE) 401(k) plan

A tax-deferred retirement savings plan similar to a conventional 401(k) plan, redesigned with specific rules to meet the needs of small employers. The Small Business Job Protection Act of 1996 created these plans for companies with fewer than 100 employees. An employee's contributions are indexed for inflation, and employers must make annual annual matching contributions.

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 rate

Personal savings as a percentage of disposable personal income.

Scalability

The ability to increase the size of a business while either maintaining or increasing its profit margin.

Scale

Payment of different rates of interest on CDs of varying maturities. A bank 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. That is, the project allows the firm to grow larger in the context of their current business rather than diversify into new businesses.

Scale in

Gradually taking a position in a security or market over time.

Scale order

Order to buy (sell) a security that specifies the total amount to be bought (sold) and the amount to be bought (sold) at successively decreasing (increasing) price intervals; often placed in order to average the price.

Scaling

How the characteristics of an object change as you change the size of your measuring device. For a three dimensional object, it could be the volume of an object covered as you increase the radius of a covering sphere. In a times series, it could be the change in the amplitude of the time series as you increase the increment of time.

Scalp

To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day.

Scalping

Buying up the good IPOs.

Scattered

Used for listed equity securities. Unconcentrated buy or sell interest.

Scenario analysis

The use of horizon analysis to project total returns under different reinvestment rates and future market yields.

Schedule C

Describes membership requirements and procedures of NASD, in its bylaws.

Schedule 13d

Disclosure form required when more than 5% of any class of equity securities in a publicly held corporation is purchased.

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. Any technique a company that has become the target of a takeover attempt uses 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.

S Corporation

A corporation that elects not to be taxed as a corporation. That is, the corporation does not directly pay federal income tax on its earnings. Similar to a partnership, it passes its income or losses and other tax items on to its shareholders.

Screen stocks

To analyze various stocks in search of stocks that meet predetermined criteria. For example, a simple value screen would sort all stocks by their price-to-book ratio and pick the stocks with the lowest ratios as candidates for the value portfolio.

Scrip

A temporary document that represents a portion of a share of stock, often issued after a stock split or spin-off.

Scripophily

Collecting stock and bond certificates for their scarcity, rather than for their value as securities.

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 (e.g., oil prices/imports) so that relative comparisons can be drawn from month to month all year.

Seasoned

In the case of equity, having gained a reputation for quality with the investing public and enjoying liquidity in the secondary market; in the case of convertibles, having traded for at least 90 days after issue in Europe, and 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 using a cash offer or a rights offer.

Seat

Position of membership on a securities or commodity exchange, bought and sold at market prices.

SEC fee

Small fee the SEC charges to sellers of equity securities on an exchange.

Second market

The OTC market.

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.

Second-preferred stock

Preferred stock issue that has less priority in claiming dividends and assets in liquidation than another issue of preferred stock.

Second round

Stage of venture capital financing following the start-up and first round stages and before the mezzanine level stage.

Second-to-die insurance

Insurance policy that, on the death of the spouse dying last, pays a death benefit to the heirs that is designed to cover estate taxes.

Secondary distribution/offering

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 NYSE, 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 Offering

An IPO in which privately held shares in a corporation are sold to the public.

Secondary market

The market in which securities are traded after they are initially offered in the primary market. Most trading occurs in the secondary market. The New York Stock Exchange, as well as all other stock exchanges and the bond markets, are secondary markets. Seasoned securities are traded in the secondary market.

Secondary mortgage market

Buying and selling existing mortgage loans, which are often pooled and traded as mortgage-backed securities.

Secondary stocks

Stocks with smaller market capitalization, less quality and more risk than blue chip issues that behave differently than larger corporations' stocks.

Second mortgage lending

Loans secured by real estate previously pledged in a first mortgage.

Secert Ballot

In the context of corporate governance, this is also known as confidential voting. An independent third party or employees sworn to secrecy are used to count proxy votes, and the management usually agrees not to look at individual proxy cards. This can help eliminate potential conflicts of interest for fiduciaries voting shares on behalf of others, or can reduce pressure by management on shareholder-employees or shareholder-partners.

Section 16(a)

Provision of the Securities Exchange Act of 1934 that requires company insiders to file periodic reports disclosing their holdings and changes in beneficial ownership of the company's equity securities.

Section 16(b)

Provision of the Securities Exchange Act of 1934 that requires that any profit realized by a company insider from the purchase and sale, or sale and purchase, of the company's equity securities within a period of less than six months must be returned to the company. It is also known as the "short-swing profit" rule.

Section 83(b) Election

A tax filing within 30 days of grant that allows employees granted stock to pay taxes on the grant date instead of on the date restrictions lapse. If an employee files the election, taxes are based on the fair market value on the grant date, with any future appreciation taxed as a capital gain. If the employee does not file an election, taxes are based on the fair market value on the date the restrictions lapse, which will be higher assuming the stock has appreciated in value.

Section 423

The government agency responsible for the supervision and regulation of the securities industry and markets, as well as public securities offerings and the ongoing disclosure obligations of public companies.

Section 482

US Department of Treasury regulations governing transfer prices.

Sector

Used to characterize a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.

Sector allocation

Investment of certain proportions of a portfolio in certain sectors. See: Industry allocation.

Sector diversification

Constituting of a portfolio of stocks of companies in each major industry group.

Sector fund

A mutual fund that concentrates on a relatively narrow market sector. These funds can experience higher share price volatility than some diversified funds because sector funds are subject to common market forces specific to a given sector.

Sector rotation

An active asset management strategy certain sectors, that tactically overweights and underweights depending on expected performance. Sometimes called rotation.

Secular

Long-term time frame (10-50 years or more).

Secured bond

A bond backed by the pledge of collateral, a mortgage, or other lien, as opposed to an unsecured bond, called a debenture .

Secured debt

Debt that has first claim on specified assets in the event of default.

securities

Paper certificates (definitive securities) or electronic records (book-entry securities) evidencing ownership of equity (stocks) or debt obligations (bonds).

Securities Act of 1933

First law designed to regulate securities markets, requiring registration of securities and disclosure.

Securities Acts Amendments of 1975

Legislation to encourage the establishment of a national market system together with a system for nationwide clearing and settlement of securities transactions.

Securities analysts

Related: Financial analysts

Securities and commodities exchanges

Exchanges on which securities, options, and futures contracts are traded by members for their own accounts and for the accounts of customers.

Securities & Exchange Commission (SEC)

A federal agency that regulates the US financial markets. The SEC also oversees the securities industry and promotes full disclosure in order to protect the investing public against malpractice in the securities markets.

Securities and Exchange Commission Rules

Rules enacted by the SEC to assist in the regulation of US financial markets.

Securities Exchange Act of 1934

Legislation that created the SEC, outlawing dishonest practices in the trading of securities.

Securities Exchange of Thailand (SET)

The only stock market in Thailand, based in Bangkok.

Securities Industry Association (SIA)

An association of broker-dealers who sell taxable securities, which lobbies the government, records industry trends, and keeps records of broker profits.

Securities Industry Committee on Arbitration (SICA)

A private group that provides mediation services in case of customer complaints against securities firms.

Securities Investor Protection Corporation (SIPC)

A nonprofit corporation that insures customers' securities and cash held by member brokerage firms against the failure of those firms.

Securities loan

The loan of securities between brokers, often to cover a client's short sale; or a loan secured by marketable securities.

Securities markets

Organized exchanges plus over-the-counter markets in which securities are traded.

Securitization

Creating a more or less standard investment instrument such as the mortgage pass-through security, by pooling assets to back the instrument. 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 on a graph 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 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 (SIAC)

Entity that executes automated DOT orders.

Security interest

The creditor's right to take property or a portion of property offered as security.

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 Line

The linear relationship between expected asset returns and betas posited by the Capital Asset Pricing Model.

Security market plane

A plane that shows the relationship between expected return and the beta coefficient of more than one factor.

Security ratings

Commercial rating agencies' assessment of the credit and investment risk of securities.

Security selection

See: Security selection decision

Security selection decision

Choosing the particular stocks or bonds or other investment instruments to include in a portfolio.

Seed money

The first contribution by a venture capitalist toward the financing of a new business, often using a loan or purchase of convertible bonds or preferred stock. See: Mezzanine level and second round.

Seek a market

Search for a securities buyer or seller.

Segmented Market

A market in which there are impediments to the free flow of labor, capital, and information.

Segregation of securities

SEC rules to dictate how customers' securities may be used by broker-dealers in broker loans.

Seigniorage

The amount of goods and services that the government obtains by printing new money in a given period. Often we consider this in real terms, by dividing the new money by the price level.

Select ten portfolio

A unit investment trust that buys and holds for one year the ten stocks in the Dow Jones Industrial Average with the highest dividend yields.

Selective hedging

Protecting investments during some time periods and not during others.

Selected dealer agreement

The set of rules governing the selling group in an underwriting.

Self-amortizing mortgage

Mortgage whose entire principal is paid off in a specified period of time with regular interest and principal payments.

Self-directed IRA

An IRA that the account holder can after appointing a custodian manager to carry out investment instructions.

Self-employed income

Taxable income of a person involved in a sole proprietorship or other sort of free-lance work.

Self-employment tax

A tax self-employed people must pay to qualify them to receive Social Security benefits at retirement.

Self-liquidating loan

Loan to finance current assets. The sale of the current assets provides the cash to repay the loan.

Self-regulatory organization (SRO)

Organizations that enforce fair, ethical, and efficient practices in the securities and commodity futures industries, including all national securities and commodities exchanges and the NASD.

Self-selection

Consequence of a contract that induces only one group to participate.

Self-Similar

When small parts of an object are qualitatively the same, or similar to the whole object. In certain deterministic fractals, like the Sierpinski Triangle, small pieces look the same as the entire object. In random fractals, small increments of time will be statistically similar to larger increments of time. See: Fractal.

Self-supporting debt

Bonds sold to finance a project that will produce enough revenue through tolls or other charges to retire the debt . See: revenue bond.

Self Tender

A company buys back a certain percentage of its own shares through a tender offer.

Self-tender offer

A company that tenders for its own shares.

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 specialist's book, the specialist for its own account, and broker-dealers.

Sell hedge

Related: short hedge.

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

Sale of securities under pressure. See: Dumping.

Sell order

An order that may take many different forms by an investor to a broker to sell a particular stock, bond, option, future, mutual fund, or other holding.

Sell out

Liquidation of a margin account after a customer has failed to bring an account to a required level by producing additional equity after a margin call.
The selling of securities by a broker when a customer fails to pay for them.
The complete sale of all securities in a new issue.

Sell plus order

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. (In a limit order, sale cannot be lower than the limit, regardless of tick.)

Sell price

See: Redemption price

Sell-side analyst

A financial analyst who works for a brokerage firm and whose recommendations are passed on to the brokerage firm's customers. Also called Wall Street analyst.

Seller financing

Funding a purchase by a seller's loan to the buyer, the buyer takes full title to the property when the loan is fully repaid.

Seller's market

Market in which demand exceeds supply. As a result, the seller can dictate the price and the terms of sale.

Seller's option

Delayed settlement/delivery in a transaction.

Seller's points

In reference to a loan, seller's points consist of a lump sum paid by the seller to the buyer's creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount.

Selling climax

A sudden drop in security prices as sellers dump their holdings.

Selling concession

The discount underwriters offer the selling group on securities in a new issue.

Selling dividends

Inducing a prospective customer tobuy shares in order to profit from a dividend scheduled in the near future.

Selling, general, and administrative (SG&A) expenses

Expenses such as salespersons' salaries and commissions, advertising and promotion, travel and entertainment, office payroll and expenses, and executives' salaries.

Selling on the good news

A strategy of selling stock shortly after a company announces good news and the stock price rises. Investors believe that the price is as high as it can go and is on the brink of going down.

Selling group

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

Selling short

Selling a stock not actually owned. 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.

Selling short against the box

Selling short stock that is actually owned by the seller but held in the box, meaning it is held in safekeeping. The seller borrows securities needed to cover as the stock in the box may be inaccessible, or the seller may not wish to disclose ownership. The traditional motive for this transaction was to defer capital gains taxes. However, this method became infeasible under the Taxpayer Relief Act of 1997.

Selling the spread

A spread whose option to be sold is trading at a higher premium than the option to be bought.

Selling Syndicate

A group of underwriters that issues a firm's securities by buying them from the issuing firm and reselling them to a group of smaller brokerage firms for eventual sale to individual investors.

Semistrong-form efficiency

A form of pricing efficiency that profits the price of a 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"

Market language: "I bought your stock - 'send it in' (and possibly more)."

Senior debt

Debt whose terms in the event of bankruptcy, require it to be repaid before subordinated debt receives any payment.

Senior mortgage bond

A bond that, in the event of bankruptcy, will be redeemed before any other bonds are repaid.

Senior refunding

Replacement by the issuer of securities with 5-to 12-year maturities with securities of 15-year or longer maturities, in order to delay, reduce, or consolidate payment.

Senior security

A security that, in the event of bankruptcy, will be redeemed before any other securities.

Seniority

The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated debt is repaid.

Sensitive market

A market that reacts to a great extent to good or bad news.

Sensitivity analysis

Analysis of the effect on a project'sprofitability of changes in sales, cost, and so on.

Sentiment indicators

The general feeling of investors about the state of the market, such as whether they are bullish or bearish.

Separate customer

Method of allocating insurance by the Securities Investor Protection Corporation. Each account that is under the name of a different person or group of people is entitled to maximum protection.

Separate tax returns

Tax returns of married persons who choose to file their returns individually, usually because this approach produces lower overall tax payments.

Separate Trading of Registered Interest and Principal Securities (STRIPS)

Long-term notes and bonds divided into principal and interest-paying components, which may be transferred and sold in amounts as small as $1000. STRIPS are sold at auction at a minimum par amount, varying for each issue. The amount is an arithmetic function of the issue's interest rate.

Separation property

The property that portfolio choice can be divided 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 degree of risk aversion.

Separation theorem

Theory that the value of an investment to an individual is not dependent on consumption preferences. That is, investors will want to accept or reject the same investment projects by using the NPV 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 autocorrelation.

Serial entrepreneur

Business person that successfully starts (does not kill) a number of different businesses.

Serial redemption

The redemption of a serial bond.

Series

Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Stocks: shares that have common characteristics, such as rights to ownership and voting, dividends, or par value. 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 document.

Series E bond

A local and state tax-free bond issued by the U.S. government from 1941 to 1979, which was then replaced by Series HH bonds.

Series EE bond

See: Savings bond

Series HH bond

See: Savings bond

Service charge

A component of some finance charges, such as the fee for triggering an overdraft checking account into use.

Set-aside

A percentage of a municipal or corporate bond underwriting that is allocated for handling by a minority-owned broker/dealer firm.

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 construct that serves as the nexus for the contracting relationships.

Set up

Applies mainly to convertible securities. Arbitrage involving going long the convertible and short a certain percentage of the underlying common. Antithesis of Chinese hedge.

Setoff

Money held on behalf of a borrower that may be applied to repay the loan, but usually without the permission of the borrower.

Settle price

An average of the trading prices in the futures market during the last few minutes of trading.

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 three business days after the trade. For mutual funds, settlement usually occurs in the US the day following the trade. In some regional markets, foreign shares may require months to settle.

Settlement options

The various possibilities open to a beneficiary under a life insurance policy as to how the benefit will be paid out.

Settlement price

A figure determined by the closing range that 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 Standards Board (FASB) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled if the company sponsoring the pension plan wishes 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.

Severally but not jointly

An agreement between members of an underwriting group buy a new issue (severally), but not to assume joint liability for shares left unsold by other members.

Severance

A settlement received after being released from a corporation. In the context of corporate governance, an agreement that assures high-level executives of their postions or some compensation and are not contingent upon a change in control.

Segmented market

A market that is partially or wholly isolated from other markets by one or more market imperfections.

Shadow calendar

A backlog of securities issues registered with the SEC, awaiting the determination of an offer date.

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.

Shadows

The thin lines above and below the real body on a candlestick line.

Shakeout

A dramatic change in market conditions that forces speculators to sell their positions, often at a loss.

Sham

A business transaction, such as a limited partnership, that is entered into for the sake of avoiding tax.

Shanghai Stock Exchange

One of two major securities markets in China.

Share broker

A discount broker who charges per share traded, and reduces the per unit charge as the number of shares traded increases, as opposed to a dealer who charges a percentage of the dollar amount of the trade.

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 repurchase 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.

Shared Appreciation Mortgage (SAM)

A mortgage with a low rate of interest, offset by giving the lender some portion of the appreciation in the value of the underlying property.

Shareholder

Person or entity that owns shares or equity 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 general overall discussion by management of successful and failed strategies. Provides guidance for looking at specific parts of the report.

Shares

Certificates or book entries representing ownership in a corporation or similar entity.

Shares authorized

The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding.

Shark repellant

Often used in risk arbitrage. Examples are 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 corporations, 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 manager's index-like tendencies. Named after William Sharpe, Nobel Laureate, and developer 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 developer of the capital asset pricing model.

Shelf offering

Offering of registered securities covered by a prospectus whose 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. SEC Rule 415, adopted in the 1980s, 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 SEC, can go to the market as conditions become favorable with a minimum of administrative preparation and expense.

Shell corporation

An incorporated company with no significant assets or operations, often formed to obtain financing before beginning actual business, or as a front tax evasion.

Shenzhen Stock Exchange

One of two major securities markets in China.

Shipper's Export Declaration (SED)

Document required by the U.S. Department of Commerce for exports of certain controlled items, and/or shipments to certain countries, and/or shipments anywhere that exceed certain dollar amounts. This document is used to monitor shipments of controlled goods.

Shipping Documents

A generic term for the various typesof forms required for overseas shipments, such as commercial invoices, transport documents, packing lists, origin certificates, etc.

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.

Shock absorbers

See: Circuit breakers

Shogun bond

Dollar bond issued in Japan by a nonresident.

Shootout

Venture capital jargon. Refers to two or more venture capital firms fighting for the startup.

Shop

Wall Street slang for a firm.

Shopped stock

Sell inquiry that has been seen by or 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.

Short against the box

A short sale of a stock is where the seller actually owns the stock, but does not want to close out the position.

Short Bias

In the context of hedge funds, a style of management where part or all of the fund consists of short sales.

Short bonds

Bonds with short (not much time to maturity) current maturities.

Short book

See: Unmatched book.

Short coupon

A bond payment covering less than six-months' interest, because the original issue date is less than six months from the first scheduled interest payment. A bond with a short time to maturity, usually two years or less.

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. A special trading situation where a short sale is allowed on a minustick. The owners of a convertible trading at parity can sell the equivalent amount of common short on a minus tick, assuming they have the firm intention to convert.

Short hedge

The sale of futures contracts 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

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, although 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 interest theory

The theory that a large interest in short positions in stocks will precede a rise in the market prices, because the short positions must eventually be covered by purchases of the stock.

Short-Form Registration

A procedure that allows a firm to condense its registration statement and prospectus by referencing financial data already on file with the SEC.

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 drop.

Short ratio(or short interest ratio)

Number of shares of a security that investors have sold short divided by average daily volume of the security (measured over 30 days or 90 days). There are various interpretations of this ratio. When people short, it is usually (but not always) because they are pessimistic about the security's future performance. Shorting involves buying at at some point however. Hence, some would interpret a high short ratio as an indicator that there will be some buying pressure on the security that would increase its price.

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-sale rule

An SEC rule requiring that short sales be made only in a market that is moving upward; this means either on an uptick from the last sale, or showing no downward movement.

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

Trade settlement made prior to the standard five-day period due to customer request.

Short-short test

A repealed IRS restriction, that used to limit profits from short-term trading, which three months, to 30% of gross income. The penalty for exceeding this limit would be the loss of certain tax-free benefits.

Short squeeze

When a lack of supply tends to force prices upward. In particular, 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 involves both purchase and sale. In short straddle one put and one call are sold.

Short-term capital gain

A profit on the sale of a security or mutual fund share that has been held for one year or less. A short-term capital gain is taxed as ordinary income.

Short-term interest rates

Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates.

Short-term reserves

Investments in interest-bearing bank deposits, money market instruments, U.S. Treasury bills, and short-term bonds.

Short tender

Practice prohibited by SEC that involves the use of borrowed stock to respond to a tender offer.

Short-term

Any investments with a maturity of one year or less.

Short-term bond fund

A bond mutual fund holding short to intermediate-term bonds that have maturities of three to five years.

Short-term debt

Debt obligations, recorded as current liabilities, requiring payment within the year.

Short-term financial plan

A financial plan that covers the coming fiscal year.

Short-term gain (or loss)

A profit or loss realized from the sale of securities held for less than a year that is taxed at normal income tax rates if the net total is positive.

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, and quesi-government entities such as local housing and urban renewal agencies.

Short-term trend

Erratic price movements that last less than three weeks.

Shortage cost

Costs that fall with increases in the level of investment in current assets.

Shortfall risk

The risk of falling short of any investment target.

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 salesperson propose available stock for sale or purchase, along with the asking/bid price. See: Bidding buyer.

Show stopper

A legal barrier, such as a scorched-earth policy or shark repellant system, that firms use to prevent a takeover.

Show and tell list

Used in the context of general equities. Block list which is full of real customer indications (rather than profile).

Shrinkage

Discrepancy between a firm's actual inventory and its recorded inventory due to theft, deterioration, loss, or clerical problems.

Shut out the book

Used for listed equity securities. Exclude a public bid or offer from participation in a print.

Side effects

Effects of a proposed project on other parts of the firm.

Side-by-side trading

Trading a security and an option on the same security on the same exchange.

Sidelines

Hypothetical position referring to noninvolvement in a stock; merely watching.

Sideways market

See: Horizontal price movement

Sight deposit account

Similar to a demand deposit. Funds in a sight account can be transferred quickly without restriction to another account or converted into cash. Term is mainly used in Europe

Sight draft

Demand for immediate payment.

Sight Letter of Credit

A letter of credit made payable to a beneficiary upon presentation to the opener of conforming documents.

Signal

To convey 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

Notion that insiders in a firm have information that the market does not have, and that 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 appr