The Institute also runs financial training workshop programs for people employed in the securities industry, including in-house training programs. The Institute's comprehensive Continuing Professional Development program includes seminars, luncheon speakers and corporate briefings.
Securitisation
The `packaging' of an income stream from selected assets and issuing of securities to investors backed by those assets. Securitisation enables relatively illiquid instruments (eg. mortgages) to be converted into marketable securities with active secondary markets. (See also Mortgage-backed Certificates and National Mortgage Market Corporation).
Security
a) In relation to financial markets, the paper right to a (generally tradeable) asset. In this context the term includes Bills of Exchange, bonds, share certificates or any other interest-bearing paper traded on financial markets; b) An asset pledged to ensure the repayment of a financial obligation (eg. loan), and forfeited in the event of a default on that obligation.
Security Analysis
a) The process of assessing the prospective future benefits of a security, the conditions under which those benefits will arise, and the likelihood of those conditions occurring or persisting; b) Examination of the value of assets put forward as security for a loan or other financial accommodation.
Security Valuation Model
A model for calculating the price at which a security should sell. Typically based on the precept that the value of a security is the sum of the present value of the estimated future income stream.
Security value
Is the market value of a stock times it’s LVR.
Self-insured
a) In relation to superannuation, referring to a fund which itself takes on responsibility for paying death or disablement benefits to its members rather than paying an external insurer to accept the risk; b) More generally, referring to companies who pay insurance premiums for their own business into a fund they directly control rather than using an insurance company to write a policy.
Seller's Market
A condition of the market in which there is a scarcity of goods available, and hence, sellers can obtain better conditions for sale or higher prices. (Opposite of Buyer?s Market).
Semi-Government Paper
Fixed interest securities issued by a Semi-Government Authority, normally of greater than 6 months' duration, and often issued by a central issuing authority (eg. NSW Treasury Corporation). Of high credit standing, normally carrying a government guarantee. Often referred to as 'Semis'.
Sensitivity
The amount of change in a variable produced by a given change in a factor input (eg. a change in earnings per share caused by a change in interest rates or A$).
Sensitivity Analysis
A method of testing the responsiveness of an option price or indeed of any estimated outcome to changes in inputs.
Service Fee
Usually a monthly fee levied to cover bank cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware
Settlement
In relation to share trading, an arrangement between brokerage houses for the payment or receipt of cash or securities. It represents the final consummation of a securities transaction and is handled through the stock clearing corporation.
Settlement Date
The date on which the final consummation of a securities transaction takes place and payment is made.
Settlement Risk
In relation to foreign exchange transactions, the exposure of one party to another on the value date of the contract. It is the risk that one party, having received settlement of one currency amount from the counterparty, is unable to effect settlement of the other currency amount.
SFE
Abbreviation for Sydney Futures Exchange.
SGC
Abbreviation for Superannuation Guarantee Charge.
Share
The ownership of part of a company; a contract between the issuing company and the owner of the share which gives the latter an interest in the management of the corporation, the right to participate in profits and, if the company is dissolved, a claim upon assets remaining when all debts have been paid. (See also Equity).
Share Capital
The capital of a company subscribed by its shareholders. (See also Authorised Capital).
Share Certificate
A piece of paper representing legal evidence of ownership of a stipulated number of shares in a company. Also known as Scrip.
Shareholder
The owner of one or more issued shares of a company who is normally entitled to: a) a proportionate share of the issuing company's undivided assets; b) dividends when declared by the directors; and c) the right of proportionate voting power.
Share Price Index
An index measuring movements in the prices of shares, but not of their dividends (as opposed to an Accumulation Index, which measures movements in both price and dividend income).
Share Ratio
A derivative contract developed by the Australian Stock Exchange in 1994 that allows investors to gain exposure to an equity, not on the basis of whether it goes up or down in price, but on the basis of its performance relative to index. Share ratios allow investors to hedge company specific risk during periods of potential volatility, because they do not pick the direction of the overall market, rather how a share will perform relative to it. At the time of going to print (April 1996), contracts were available for eight underlying shares.
Share Register
A register recording all of a company's shareholders and the number of shares they each hold.
Share Price Index Futures
See SPI Futures.
Sharpe Ratio
A statistical measure which attempts to show the performance of a portfolio's return in risk adjusted terms. It is calculated by dividing the portfolio's excess return over the risk-free rate by the risk (ie. standard deviation) of portfolio returns. The higher the Sharpe Ratio, the better the portfolio's return in risk adjusted terms. A Sharpe Ratio higher than one can be considered to be very good, while a ratio below 0.1 shows that the portfolio has been poorly rewarded for the risk undertaken.
Shelf Company
A company which has been incorporated, but has not traded.
Short Position
An excess of sales over purchases of a relevant commodity, currency or investment instrument. (Opposite of Long Position).
Short Selling
The sale of a security that is not yet owned, in the expectation that its price will fall so that it can be bought back later at a profit.
Shoulder
See Head.
SIA
Abbreviation for Securities Institute of Australia.
Simple Interest
The interest paid on the initial investment alone, as distinct from compound interest, which includes interest earned on previous interest payments as well as on the initial investment.
Sinking Fund
A fund into which a bond issuer makes periodic payments over the life of the bond in order to systematically reduce the amount of principal due on its expiry.
SIS Legislation
See Superannuation Industry Supervision Legislation.
Smaller Companies
Generally, companies listed outside the top 100 shares on the stock exchange.
Smoothing
The retention and application of investment fluctuation reserves to maintain a consistent crediting rate in a superannuation fund, notwithstanding volatility in the fund's actual earnings rate from year to year.
Snail Trail
A graphical depiction of a fund's risk and return performance over time, relative to industry averages. Risk (measured in terms of the standard deviation of returns) is measured on the horizontal axis, and returns on the vertical axis. The point where the two lines intersect in the middle of the graph represents the average risk and return of all funds surveyed within the sample. Against this matrix, the historical performance of a particular fund over consecutive time periods is plotted, and then joined by a line to create the 'snail trail' like plot. The preferable sector for a fund to be in is the top left-hand quadrant, which represents consistent above average returns and below average risk relative to the sample of managers or funds surveyed.
Soft Dollars
Payment for research-related services by commissions generated from trading rather than fees.
Society for Worldwide Interbank Financial Telecommunication
A non-profit Electronic Trade Confirmation
(SWIFT)
System that provides secure messaging services and interface software to financial institutions globally.
Sole Purpose Test
The threshold test under OSSA and, subsequently SIS Legislation, with which a superannuation fund must comply in order to qualify as a complying fund and be eligible for concessional taxation status. The test requires that the fund be maintained for the sole purpose of providing its members with retirement benefits (or providing its members' beneficiaries or dependants with benefits in the event that the member dies before retirement). Certain other 'ancillary' purposes are permitted within the sole purpose test, including payment of disability benefits for a member's retirement due to ill-health or in other circumstances approved by the Insurance and Superannuation Commission.
Specialist Manager
An investment manager which confines its investment activity to specific asset classes (eg. equities, fixed interest, property, overseas shares, etc) instead of (or as well as) balanced funds. (See also Balanced Manager).
Specialist Sector Management
An approach to portfolio management involving the appointment of separate investment managers for individual asset classes, as opposed to the appointment of one or more balanced managers across all asset classes in which a fund is invested.
Special Situation
A term often used to describe an unusual investment opportunity due to either some special development or to perceived market mis-pricing.
Specific Risk
Uncertainty in the return of a share arising from factors that are specific to the company concerned. It is unrelated, or, at most, distantly related, to events that impact on other comparable firms or the market as a whole. Unlike market risk, specific risk can be diversified away. (See also Systematic Risk).
Speculator
One who is willing to assume a relatively large and generally undiversified risk in the hope of extraordinary gain. Speculators do, in fact, help give depth to securities markets. (See also Investor).
SPI Futures
Abbreviation for Share Price Index Futures. One of the important futures contracts offered on the Sydney Futures Exchange. It trades around the underlying physical level of the All Ordinaries Index. The difference narrows the closer the contract gets to its expiry date at the close of each calendar quarter.
Split
A division of a company's shares into a greater number of units by reducing the par value (where applicable) of each share. In the case of a $10 share, a four for one split would mean that four new shares would be issued for each old share at an `after-split' price of $2.50.
Split Funding
The use of more than one investment manager to provide diversification of management as well as diversification of styles and classes of investments. Superannuation funds often split their portfolios managers to improve their chances of meeting investment objectives and reduce risk.
Spot Commodity
See Cash Commodity.
Spot Price
The present physical market price of the relevant commodity, currency or investment instrument.
Spot Rate
The present conversion price of one currency into another, being the exchange rate for immediate delivery (ie. within two business days) of currencies to be exchanged.
Spread
a) In relation to share, bond and currency markets, the difference between the bid price and the ask (offering) price, incorporating both an estimate of demand and potential profit for the seller; b) In relation to unit trusts, the difference between the allocation and redemption price of units, as a result of transaction costs incurred in buying and selling the underlying securities which make up the value of the trust; c) In relation to options markets, the holding of a long position and an offsetting short position, usually in contracts with the same underlying security or asset.
Squeeze
A situation in futures markets in which those who are in a short position cannot repurchase their contracts, except at a price substantially higher than the value of these contracts in relation to the rest of the market. A squeeze can usually be attributed to scarce supply of the underlying physical commodity.
SSN
Abbreviation for Substantial Shareholder Notice.
Stag
An investor in the share market who aims for quick gains by subscribing to new share issues and then selling once the shares commence trading on the exchange.
Stamp Duty
A State Government charge levied on certain property and securities transactions.
Standard & Poors (S&P)
A United States credit rating agency. S&P also maintains a range of United States sharemarket indices; the most widely quoted is the S&P 500. (See also Australian Ratings, Moody?s).
Standard Deviation
A statistical measure of the dispersion of a set of numbers around a central point. If the standard deviation is small, the frequency of distribution is concentrated within a narrow range of values. For a normal distribution, about two thirds of the observations will fall within one standard deviation of the mean. Standard deviation is a commonly used measure of risk because the higher the standard deviation the higher the uncertainty of the return. As standard deviation measures the volatility of investment returns, it is an important measure of risk. Also known as Standard Error.
Standard Error
Another term for Standard Deviation.
Standard Variable Rate
The rate which lenders apply to their 'premium’ home loan product. Carries features such as a redraw facility, portability, salary account and mortgage offset.
Statutory Authority
A public (or semi-government) authority established by legislation, and having the power to make legally enforceable decisions and regulations. Examples includes bodies responsible for electricity generation, gas, water supply, etc.
Statutory Fund
A fund established by Life Insurance Companies, consisting of life insurance policy holder funds. Two or more statutory funds often exist, with the Number One Fund being low risk andcapital guaranteed, and the Number Two Fund and following funds being higher risk or equity linked.
Stock
A generic term for equities (shares) and, less frequently, bonds. (See also Security).
Stockbroker
A professional person who buys and sells securities on behalf of others in return for a commission (or brokerage).
Stock Selection
The selection of an individual security within an asset class. For example, stock selection in relation to equity investments is made after analysing the financial standing, future earnings prospects and valuation of the shares of the company concerned. Along with asset allocation, stock selection is a key way in which investment managers add value. (See also Attribution Analysis).
Stop
A point in the market whereby a trade is automatically executed at that level. Usually relates to futures positions.
Stop Loss
a) A client's instruction to a broker to sell in the event that a stock falls to a certain level; b) In relation to foreign exchange markets, stop-loss trading refers to a strategy under which foreign currency is sold when it falls below a certain level.
Straddle
A combination of put and call options which provides a profit if there is a large fluctuation either way in the underlying asset.
Strangle
A position in option markets consisting of a long (short) call and a long (short) put, where both options have the same expiration date, but different exercise prices.
Strategic Asset Allocation
The composition of an asset mix within a portfolio, constructed with the objective of meeting the long-term liabilities of a fund, rather than being based on short-term views of relative performance of the various asset classes. Usually a benchmark is derived in this fashion. (See also Asset Allocation, Tactical Asset Allocation).
Stratified Sampling
See Index Fund.
Strict Liability
The legal liability that applies even where the act or omission in question is committed inadvertently and/or without the intent to fail to meet a duty or obligation.
Strike Price
Another term for Exercise Price.
Strip Hedging
Constructing a series of hedges to cover an extended period.
Subordinated Debt
Unsecured bonds that rank behind other debt, but ahead of shareholders, in the event of liquidation. (See also Mezzanine Finance).
Subscription
An agreement to purchase a certain offering, eg. a certain number of shares for a stipulated price. Such an offer is not binding unless accepted by the properly authorised representatives of the issuer.
Subsidiary
A company which is wholly or partly owned by another company but which (unlike a branch office) is still a distinct legal entity responsible for its own tax, regulatory compliance, etc.
Substantial Sharehold Notice (SSN)
A form of notification which must be completed by a shareholder once he or she exceeds a certain proportion of the shareholdings in a company.
Sugar-coated Pill
A term that describes when a company persuades its shareholders to approve a contentious matter by combining it with an unrelated beneficial one (eg. combining a proposed dividend with a proposed alteration of shareholder rights). (See also Poison Pill).
Superannuation
A means of setting aside funds during working life for use as retirement income, under a regulatory system which provides certain taxation incentives and prudential controls for the benefit of contributors.
Superannuation Complaints Tribunal
A tribunal established under the SIS Legislation to conciliate and, if necessary, review complaints brought before it by individuals who are affected by decisions of trustees of superannuation or approved deposit funds.
Superannuation Guarantee Charge (SGC)
A policy introduced in 1991/92 Federal Budget, providing that, as from 1 July 1992, all employers who fail to contribute a prescribed level and standard of contributions to complying superannuation funds on behalf of their employees are required to pay a charge to make up those contributions. The SGC is scheduled to increase to 9% by 1999, and to be complemented by a compulsory additional 3% employee contribution, to be phased in from the 1997/98 financial year. A further means-tested Government 'co-contribution' to match the employee contribution has also been foreshadowed to take effect from 1998/99 (although at the time of printing April 1996 it was unclear whether this co-contribution would be delivered as a cash contribution to fund members or in the form of a tax rebate). The combination of these measures will mean that, by the turn of the century, up to 15% of wages and salaries of Australian workers will be invested in compulsory superannuation.
Superannuation Industry Supervision (SIS) Act/Legislation
Legislation enacted by the Commonwealth Government in 1993, and commencing on 1 July 1994 for the regulation, responsibilities and activities of superannuation funds. The SIS Legislation replaces the previous Occupational Superannuation Standards Act and Regulations and brings the industry under the sole supervisory authority of the Insurance and Superannuation Commission. (See also Complying Fund, Public Offer Fund, Regulated Superannuation Fund).
Surplus
An excess of revenue or income over expenditure. (Opposite of Deficit).
Surrender Value
The amount due to the policy holder if a life insurance policy is cancelled and cashed in, prior to the maturity date.
Swap
An interest rate, currency or equity exchange transaction involving two parties. In the case of an interest rate swap, one party is obliged to pay a fixed interest rate to the other party in return for a floating interest rate. In the case of a currency swap, one party is obliged to make payments in another specified currency. In practice with an interest rate swap only the net flow resulting from the exchange takes place; that is, the net payment will flow one way or the other in a given interest period depending on the level of the floating rate. For a currency swap the net exchange is settled in one of the specified currencies. Where both floating rate and currency elements exist in combination, the transaction is generally described as a currency and interest rate swap. Equity swaps can involve a variety of different transactions (eg. swapping the return in one market for that of another).
Swaption
An option to enter into an interest rate swap transaction at a future date.
SWIFT
Abbreviation for Society for Worldwide Interbank Financial Telecommunication.
Switching Facility
The ability to transfer units between two funds or components of a unit trust eg. between a Growth Fund and Protected Growth Fund.
Switching Fee
The lender may impose a switching fee where an existing borrower wishes to change from one loan type to another e.g. Variable Rate Loan to Fixed Rate Loan
Sycom
Abbreviation for Sydney Overnight Computerised Market, the after hours screen dealing system operated by the Sydney Futures Exchange.
Sydney Futures Exchange (SFE)
The main market in Australia for the exchange of financial and commodity futures. The Sydney Futures Exchange commenced operations in 1960 as the Sydney Greasy Wool Futures Exchange, and changed to its current name in 1972 to reflect its expanding role. (See also Futures Contract, Financial Futures).
Symmetric Hedge
A derivative position that protects the value of a specified percentage of a total exposure. The hedge is maintained at this level and only adjusted to the specified level for movements in the market value of the underlying assets.
Syndication
An arrangement between a number of different parties or financial institutions to jointly devote resources to a particular undertaking. (See also Joint Venture).
Synthetic
See Derivative.
Synthetic Option
An option position replicated by overlaying a varying position in the underlying asset with a partial holding of cash.
Synthetic Overlay
The use of derivative securities (particularly futures) by one manager (ie. the overlay manager) to reduce risk in another portfolio which may be managed by another fund manager. Equities and currency portfolios in particular lend themselves to overlay strategies. (See also Currency Overlay, Protection Overlay, Tactical Asset Allocation Overlay).
Systematic Risk
One of the components into which the risk of an asset, as defined by its price volatility, is usually divided, the other is specific risk. The systematic risk is the portion of the risk that relates to movements in the underlying market of which this asset forms part. Systematic risk is normally measured in terms of beta. It should not be confused with systemic
Systemic Risk
Risk pertaining to the fundamentals of a system as a whole eg. in the case of banking, the risk of failure of the Payments System or, in the case of property, a collapse of valuations owing to there being no buyers in the market. Systemic risk should not be confused with systematic risk, which relates to risks associated with individual securities rather than markets as a whole.
A, B,
C, D, E,
F, G, H,
I, J, K,
L, M, N,
O, P, Q,
R, S, T, U,
V, W, X,
Y, Z.
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