The Corner for the edition of May 16, 2014

Today, more than ever there are more words and acronyms on Wall Street that leaves even the Pentagon in the dust. This is especially true in regard to many of the New York Stock Exchange’s procedures, operational departments and electronic trading vehicles. For your convenience some of these words and acronyms are reviewed below.

ADR: American depositary receipt. A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.

BBSS: Broker Booth Support System. A state-of-the-art order-management designed exclusively for NYSE licensed members. BBSS enables member firms to quickly and efficiently process and manage their orders and selectively route orders via Universal Trading Platform (see UTP) directly to either the trading post or the booths on NYSE trading floor. The system allows NYSE to handle more than billion traded shares.
DTCC: Depository Trust & Clearing Corporation. Central securities certificate depository through which post-trade services are provided to financial exchanges. DTCC affects security deliveries between each other via computerized bookkeeping entries thereby reducing the physical movement of stock certificates. It is also known as a settlement system.

DRIP: Dividend Reinvestment Plan. A program offered by companies that allow investors to buy their stock directly from the company, without using a brokerage firm. DRIP allows investors to use their dividends to purchase additional shares of stock in the company.
FINRA: Financial Industry Regulatory Authority. According to FINRA, “We’re an independent, not-for-profit organization authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly.” They are a non-governmental self- regulatory organization.

GTC: Good-’Til-Canceled Order.  An order to buy or sell at a specific price until the investor cancels the order.

IPO: Initial Public Offering.  A corporation’s first offering of stock to the public.

ITS: Intermarket Trading System.  An electronic network of US exchanges and broker/dealers firms in that make markets in stocks. The ITS system displays quotes of stocks traded on multiple exchanges. This allows investors and traders to get the best possible price of a stock.
NASDAQ:  The second largest stock exchange in America. There is no exchange floor but is rather a “global electronic marketplace” that is an automated information network providing brokers and dealers with price quotations on the securities traded over-the-counter.

OTC: Over-The-Counter. A market for securities made up of dealers who may or may not be members of a securities exchange. The OTC market is conducted using “an electronic inter-dealer quotation services such as OTC Link (a service offered by OTC Markets Group) and the OTC Bulletin Board (OTCBB, operated by FINRA).” The system deals mainly with stocks of companies without sufficient shares, stockholders or earnings to warrant listing on an official stock exchanges. OTC member firms may act either as principals or dealers (buying or selling stock from their own inventory and charging a markup) or as a broker or agent and charging a commission.

REIT: Real Estate Investment Trust. An investment which is similar to a mutual fund except that it holdings invested in real estate. Yields are very good since REITs are required to distribute to investors as much as 90 percent of their income.

SIAC: Securities Industry Automation Corporation. It is an independent organization established by the New York and the former American Stock Exchange (ASE was purchased by NYSE Euronext in 2006.) SIAC provides “automation, data processing, clearing and communication services.”

SIPC: Securities Investors Protection Corporation. A safeguard for investors’ accounts and created by Congress. SIPC insures that cash and securities on deposit with a brokerage are insured up to $500,000 per customer, in the event that the brokerage goes out of business.
Stock Watch: The NYSE’s state-of-the-art computer surveillance unit. Stock Watch monitors the stock market for suspicious signals and detects illegal transactions.

Triple-Witching Hour : The last trading hour on the third Friday of March, June, September and December when stock options and stock index futures on the stock index options expire concurrently.

Quote of the Week: “People often say that this or that person has not yet found himself.  But the self is not something that one finds. It is something that one creates.”—Thomas Szasz

Bart Ward is the chief executive officer of Ward & Co. Ltd., an Anoka-based registered investment adviser – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.

Comments Closed