Stock Market Glossary of Terms

A | BCDEFGHIJKLMNOPQRSTUVWXY | Z


A

What is an Annual General Meeting (AGM)?

An annual meeting of company directors and shareholders required by law where directors inform shareholders and the public of the company's performance and future prospects. Shareholders can also vote on specific company changes.

What is an Annual Report?

An annual report is a financial report issued by a company to its shareholders stating the company's financial performance and other company specific issues.

What is the Australian Stock Exchange (ASX)?

The Australian Stock Exchange or ASX is Australia's main market place for trading equities, government bonds and other fixed interest securities (see separate listings).

What is an ASX code?

An ASX code is a unique code used by the ASX to identify listed companies- for example, National Australia Bank's ASX code is NAB.

Who are ASIC (Australian Securities and Investments Commission)?

ASIC is the Government body responsible under the Corporations Law for regulating companies, investment advisors and related sectors.

Back to top

B

What is a Bear Market?

A bear market is when share prices have been falling and are expected to fall in the immediate future.

What are Blue Chip shares?

Blue chip shares are shares in companies that have the ability to consistently make profits in good or bad times, with reduced risk- for example National Australia Bank or Commonwealth Bank of Australia.

What is Brokerage?

Brokerage is the fee paid to a stockbroking firm for buying or selling shares. GST is charged on brokerage (see separate listing).

What is a Bull Market?

A bull market is when share prices have been rising and are expected to rise in the immediate future.

Back to top

C

What is a Capital Gain?

A capital gain is the difference between the capital proceeds from the sale of an investment and the cost base of the investment. A gain is only made if the proceeds exceed the cost of the investment.

What is a Capital Loss?

A capital loss is the difference between the capital proceeds from the sale of an investment and the cost base of the investment. A loss is only made if the cost of the investment exceeds the proceeds.

What is a Contract Note?

A written document issued by a broker confirming a transaction between the stockbroking firm and the client. A contract note details the costs, type and quantity of the transaction along with the settlement date of the securities.

What are CUFS?

CUFS stands for CHESS Units of Foreign Securities. They are the equity component of the product and apply to foreign securities only- for example, securities in James Hardie Industries NV are CUFS as the company is incorporated in the Netherlands.

What is CHESS?

CHESS stands for Clearing House Electronic Sub-register System, which is ASX's central register for electronic transfer of share ownership.

What does it mean to have a CHESS Sponsor?

If you have a CHESS sponsor, all your shareholding related transactions, including changing your registered address, must be actioned through your CHESS sponsor (also referred to as broker.

Do I have to be sponsored by a broker under the CHESS system?

No. Sponsorship by a broker is purely a personal choice.

What is a CHESS Sub-register?

An entity's register for shares and other financial products that records all the CHESS holders' details and transactions.

What is Cum-Dividend?

Shares sold cum-dividend (cum meaning 'with') entitle the buyer to the current dividend.

Back to top

D

What is the Date of Transfer?

The date of transfer is the date on which the securities are transferred to another party.

What is a Death Certificate?

A Death Certificate is the official document issued after a person has died.

What are Debentures?

Debentures are loans made to a company at a fixed rate of interest and for a fixed term. The debentures are secured over the company's assets.

What is a Delisted Company?

A delisted company is a company that no longer has securities quoted on the ASX.

What does Divesting mean?

Divesting refers to the selling off or disposing of an investment.

What is a Dividend?

A dividend is a distribution of part of the company's net profits to shareholders. Dividends are usually expressed in 'cents per share' or as a percentage (see dividend yield in separate listing).

What is a Dividend Advice?

A dividend advice is a statement sent out to shareholders along with the dividend cheque attached (in the case where shareholders have not opted for direct credit) advising the shareholder of the details of the dividend paid. The statement also contains the shareholders current registered address and SRN or HIN.

What is a Dividend Imputation Credit?

A dividend imputation credit is the tax credit that is passed on to shareholders who receive franked dividends. Shareholders are entitled to a rebate for tax already paid by an Australian company under the provisions of the Income Tax Assessment Act to eliminate double taxing.

What is a Dividend Reinvestment Plan (DRP)?

A dividend reinvestment plan allows shareholders to reinvest all or part of their dividends to increase their holding as appose to receiving a cash payment. Only a selected number of Australian listed companies offer a DRP.

What is Dividend Yield?

Dividend yield is the annual rate of return of dividends earned from a share expressed as a percentage. To work out a dividend yield is it- the total amount of dividends paid per annum divided by the last sale price of the shares.

Back to top

E

What are Equities?

Equities is another term for shares or stocks held in a company.

What is Ex-Dividend?

Shares sold ex-dividend entitle the seller to retain the current dividend.

Who is an Executor?

An Executor is an individual or entity (can be more than one) named in the Will of a deceased person who has the right but not the obligation to act on behalf of the Estate. An executor can revoke this right through the Probates Office.

Back to top

F

What does the Franking Rate refer to?

The Franking Rate refers to the amount of tax the company has already paid.

What does Fully Franked mean?

Fully Franked refers to fully franked dividends. Receiving a dividend that is fully franked means the company has already paid the tax on the profits. To eliminate double taxing on your dividends, the shareholder is able to receive an imputation credit (also referred to as a tax credit). See separate listing.

Back to top

G

What are Government Bonds?

Government Bonds are debt securities or a debenture security, which has been issued by the Government. Interest is usually paid twice yearly at a fixed rate for the life of the debenture.

What is a Grant of Probate (Probate)?

Probate is the official document issued by the Probates Office that proves the individual(s) or entity(s) named in the Will who have been appointed as executor(s).

What is Growth?

Growth refers to the capital appreciation of an investments share price, rather than the income received from dividends.

What is GST?

GST stands for Goods and Services Tax, which is a tax of 10% on most goods and services- for example, Stockbrokers charge GST on brokerage.

Back to top

H

What is a Holder Identification Number (HIN)?

A Holder Identification Number or HIN is a unique number allocated by the CHESS sponsor to identify a holder on a CHESS sub-register. A HIN is a 10 digit number beginning with an 'X'.

What is a Holder Number?

A Holder Number is a unique identifying number allocated by the issuer of securities (see SRN). You will commonly see SRN's referred to as Holder Numbers for Insurance Australia Group (IAG) shareholdings.

Back to top

I

What is an Initial Public Offering (IPO)?

An IPO is the initial offering of securities to the public in a company that is listing on a stock exchange.

What does Investing mean?

Investing refers to the commitment of capital to a financial product or instrument to gain a financial return.

Back to top

J, K, L

What is a Less-than-Marketable Parcel/Unmarketable Parcel of shares?

A less-than-marketable parcel of shares is a parcel of shares with a total value less than $500.

What is a Listed Company?

A listed company is a company that has securities quoted on the ASX.

Back to top

M

What is a Margin Lender?

A Margin Lender is a financial institution that will allow an investor to borrow funds to invest in the stock market- for example, Smith Barney Citigroup allow a Loan to Value Ration (LVR) of 75% for most Australian blue chip stocks.

What is a Marketable parcel of shares?

A Marketable parcel of shares is generally a parcel of shares with a total value of more than $500.

What is Market Price?

The Market Price is the generally the last traded price on the ASX. The market price could also be the most recently quoted bid or offer price.

Back to top

N, O

What is an Off-Market Transfer?

An Off-Market Transfer is the transfer of securities between parties without using a stockbroker. They are completed by way of an Australian Standard Transfer form through the share registries for Issuer Sponsored holdings, or through the broker or margin lender for CHESS holdings.

What does OFP stand for?

OFP stands for Ordinary Fully Paid refers to Ordinary Fully Paid Shares.

What does ORD refer to?

ORD is an abbreviation for Ordinary, which refers to Ordinary Shares. Ordinary shares are ranked behind Preference shares however they are the most commonly traded security in Australia.

What is an Option?

An Option is a contract between two parties giving the taker (or buyer) the right, but not the obligation, to buy or sell an underlying asset at a certain price on or before a certain date.

Back to top

P

What does Party Franked mean?

Partly Franked refers to partly franked dividends. Receiving a dividend that is partly franked means the company has already paid a part of the tax on the profits. Partly franked dividends also carry imputation credits.

What does PRF refer to?

PRF is an abbreviation for Preference, which refers to Preference Shares. Preference shares are ranked ahead of Ordinary shares in the event of a liquidation of a company's assets.

Back to top

Q

What is a Quotation?

A Quotation is defined by the ASX listing rules as official quotation. Official quotation means that the securities are officially on the market for trading and have a quotable market price.

Back to top

R

What is a Record Date?

A Record Date is the date at which an investor must be a registered shareholder on the company's share register in order to be entitled to benefit from a corporate action. The most common corporate actions are dividend payments, rights issues, Share Buy-Backs, Share Purchase Plans and Initial Public Offerings (IPO). See separate listing.

What is a Rights Issue?

A Rights Issue offers shareholders the right to purchase new shares in the same company, usually at a discount to the market price.

Back to top

S

What is a Security-holder Reference Number (SRN)?

A Security-holder Reference Number or SRN is a number allocated by an issuer to identify a holder on an issuer-sponsored register. An SRN is a 10 digit number beginning with an 'I'.

What is the Settlement Date?

The settlement date is the date the securities will settle after the purchase or sale of a holding, usually referred to as T+3 (today plus 3 days).

What are Shares?

A share is a part ownership in a company. When a company makes a net profit it can distribute this amount to shareholders in the form of a dividend (see separate listing).

Who maintains the Shareholder Details?

A share registry (see separate listing) maintains all the relevant shareholder details such as the amount of shares, the registered address of shareholders and dividend details.

What is a Share Price?

The share price is the last trading price of the securities quoted on the ASX (see separate listing).

Who are the Share Registrars?

The main shareholder registries in Australia are Computershare Investor Services Limited and ASX Perpetual Limited which maintain over 80% of all public companies listed on the Australian Stock Exchange (see separate listing).

What is a Split?

A Split occurs when a company adjusts its shares on issue along with either reducing or increasing the share price- for example, a company may have a 2:1 split where by the shareholder will receive 2 shares for every 1 share held at a certain date. In this example the share price would then be adjusted from $2 to $1.

Is Stamp Duty payable on quotable securities?

Stamp Duty was abolished for all quotable securities in July 2001. Stamp duty was also abolished for non-quotable securities in VIC & WA.

What are Stocks?

Stock is another term used for shares or equities held in a company.

Back to top

T

What is a Takeover?

Takeovers occur when a company or individual's wishing to gain control or to buy out the shareholders of an existing company. The company or individual's make a bid to obtain the shares in the form of a bidder's statement, which is then distributed to shareholders, which they can either accept of decline the offer. (Other specific rules apply for takeovers that have not been discussed above).

Back to top

U

What is a Unit?

A unit in a trust.

What is an Underwriter?

An Underwriter guarantees to the company that the funds sought will be raised and that any funds not raised will be taken up by the underwriter.

What is an Unlisted Company?

An unlisted company is a company not listed on a stock exchange.

What are Unsecured Notes?

Unsecured notes are loans made to a company at a fixed rate of interest and for a fixed term. The Unsecured notes are not secured over the company's assets.

Back to top

V, W, X

What is a Will?

A Will is the last testaments of a deceased person. The Will identifies who has been appointed to act on behalf of the Estate, along with who the assets and other possessions are to be distributed to.

Back to top

Y, Z

What is Yield?

The yield is the return earned on an investment taking into account the annual income and its present value.

Back to top