financial markets glossary.

21/01/2019

When starting out in financial services or moving across from another sector, the sheer number of acronyms and terms can be confusing. Here is an A to Z of some of the more common terms you may encounter:

term

definition

AIFMD Alternative Investment Fund Managers Directive, a European Union directive that regulates fund managers that manage alternative investment funds
AIM The ‘Alternative Investment Market’ – a stock market in London for small, new companies.
AML Anti Money Laundering is a term that describes the legal controls that require financial institutions and other regulated entities to prevent, detect and report money laundering activities
Analyst Analyst Often an entry position for graduates in investment banks. This involves the study of companies and markets and making recommendations.
Anti Bribery and Corruption Anti Bribery and Corruption Legislation under The Bribery Act 201, came into effect in 2011 to deal with crimes of bribery, being bribed, the bribery of foreign public officials, and the failure of a commercial organisations to prevent bribery on their behalf
Back Office Back Office Where the accounting is done and the settlements made for stock trading firms.
Basel I / II / III The Basel Accords refer to the banking supervision accords issued by the Basel Committee on Banking Supervision (BCBS)
Big Bang The name given to the de-regulation of the UK stock exchange in October 1986.
Bond Bond A certificate issued by a borrower as a receipt for a loan longer than 12 months, indicating rate of interest and repayment date.
Broker Broker An intermediary who buys or sells securities, foreign exchange or other financial instruments.
Capital Markets The markets for long and medium term securities.
CF10 Control Function 10 Compliance Oversight, is essential certification for all compliance officers to demonstrate an appropriate level of competence
CF11 Control Function 11 Anti Laundering Reporting, is essential certification for all compliance officers to demonstrate an appropriate level of competence
CHAPS The UK institution for the settlement of GBP payments.
Chinese Wall Chinese Wall Commonly employed in investment banks, this information barrier is designed to prevent exchanges of information within an organisation that could cause a conflict of interest or insider trading.
CIS Collective Investment Scheme is a way of investing money together with other investors to allow for more diversification, the hiring of a manager and other benefits of achieving economies of scale
Clearing House A 'central' body guaranteeing contracts in options and futures on behalf of its members.
COBs COBs Conduct of Business Sourcebooks published by the Financial Conduct Authority and Prudential Regulation Authority
COLL Collective Investment Schemes, replaced CIS
Commodoties Goods such as oil, petrol and metal traded on commodity markets.
Compliance Terminology to describe ethical best practice in banking and financial services (conforming to regulatory and legislative standards)
Corporate Finance The department of an investment bank that deals with take-overs, mergers and specialist advice to clients.
CREST Co. The paperless London Stock Exchange settlement system introduced in July 1996.
Derivatives Financial products whose price is derived from another product.
Discounting The process of buying or selling a security at less than its face value.
Dodd Frank The Dodd–Frank Wall Street Reform and Consumer Protection Act, to promote the financial stability of the US by improving accountability and transparency in the financial system
EMIR European Market Infrastructure Regulation, created to increase the stability of the over-the-counter (OTC) derivative markets throughout the EU
Equity The generic word used for stocks and shares. Can also be used as a substitute word for 'total shareholders funds'.
FATCA Foreign Account Tax Compliance Act requires reporting to the US Internal Revenue Service (IRS), of financial accounts held overseas by US persons. It was designed to combat offshore tax evasion and recoup federal tax revenues
FCA Financial Conduct Authority, one of the successors to the Financial Services Authority (FSA) to regulate both retail and wholesale financial firms providing services to consumers
Fixed Income Securities that will only pay a fixed rate of interest. Due to the element of certainty, they will never yield the high returns of shares that do well.
Front Office The 'dealing' room system involved in buying/selling of securities.
FSA Financial Services Authority. The now-defunct regulatory body in the UK that once assumed responsibility for control of all markets in the UK - FX, MM, insurance etc.
Fund Management Advising on investments and managing money for corporate and private clients.
Futures The contract which fixes a price and date in the future for two parties to buy/sell a commodity or security.
Hedge Fund A high risk investment managed to obtain maximum returns.
HFT A High-frequency trading uses sophisticated technological tools to trade securities
Investment Banking The term used to describe a range of activities including trading, corporate finance, fund management, private equity and mergers & acquisitions.
Investment Trust A company whose core business is investing in equities. Known as a 'closed' fund.
JMLSG Joint Money Laundering Steering Group, made up of leading UK trade associations in the financial services industry, provides industry guidance on countering money laundering practices and interpreting UK regulations
KIID Key Investor Information Document must be provided to anyone who invests in a fund which comes under the UCITS regulatory directive
LIFFE London International Financial Futures Exchange. MARGIN The deposit required from a broker by a Clearing House that determines the amount of business that the broker can conduct.
MAD Market Abuse Directive is one of the main measures in the EU Financial Services Action Plan, which is designed to help complete a single market in financial services for the EU
Merchant Banks The UK term for Investment banks. MLR Minimum Lending Rate. Rate of interest that the Bank of England will lend to discount houses.
MiFID II / III / IV Markets in Financial Instruments Directive is an EU law that provides harmonised laws across all member states plus Iceland, Norway and Liechtenstein, to increase competition and consumer protection in investment services
Mutual Funds The generic term for 'pooled' investment institutions such as unit trust funds. Unit trust funds are known in the USA as mutual funds.
NASDAQ North American Securities Dealers Automated Quotations. A highly computerised dealing system for US technology stocks outside the recognised exchanges.
non-UCITs AIFs which are not UCITS schemes or Qualified Investor Schemes, their investment powers are less restricted than UCITS schemes and can be marketed to retail investors
OEIC Open-ended investment company, the preferred legal form of new open-ended investment over the older unit trust. Developed to be similar to European SICAVs and U.S. mutual funds.
OFAC Office of Foreign Assets Control administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign states, organizations, and individuals
Options The right but not the obligation to sell or buy equities, bonds, foreign exchange or interest rate contracts at a future date but at a price to be agreed now.
PRA Prudential Regulation Authority, one of the successors to the Financial Services Authority (FSA), is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms
Primary Market The market where securities are first issued.
Private Equity Investment in shares in new companies. This is high risk yet can offer high returns.
RDR A Retail Distribution Review was carried out by the FSA to enhance consumer confidence in the retail investment market through changes to the way financial services are delivered to consumers
Risk Management The analysis of factors that could cause loss to a company and how to avoid or minimise them.
SEC US Securities and Exchange Commission is a federal agency primarily responsible for enforcing federal securities laws and regulating the securities industries, stock and options exchanges and other electronic securities markets in the US.
Seconday markets Buying and selling of securities after their first issue.
Securities A generic term for equities, bonds and gilts.
Stock A fixed interest security traded on the Stock Exchange.
Takeover Panel The Panel on Takeovers and Mergers (or PTM) is a regulatory body charged to ensure that all shareholders are treated equally during takeover bids
TCF Treating Customers Fairly is focused on ensuring consumer protection in the context of retail financial services
Tradpoint UK based computerised stock trading system started in September 1996.
Trader Buys and sells bonds, shares and other financial products.
TRAX The system into which all bond transactions have to be entered within 30 minutes of execution to allow confirmation to take place.
UCITs Undertakings for Collective Investment in Transferable Securities Directives, EU directives that aim to allow collective investment schemes to operate freely throughout the EU on the basis of a single authorisation from one member state
Underwrite Where a financial institution(s) agrees to purchase any unsold shares which have not been purchased in a new issue situation. This ensures that the issue is fully subscribed.
Venture Capital Funding that is provided for high risk activities where conventional loans may not be available
Volcker Rule A specific section of the Dodd–Frank Wall Street Reform and Consumer Protection Act to restrict US banks from making certain kinds of speculative investments that do not benefit their customers