Financial Terms related to Trade This document is part of the valuable contents available at www.ftpall.com, a free online glossary with more than five thousand financial and business terms. This document can be copied and distributed freely Find thousands of financial terms at www.ftpall.com respecting its original format. It is forbidden its transcription, translation or change on its format without authorization of its author or editor. TRADE Balance of trade • Net flow of goods (exports minus imports) between countries. Basket trades • Related: Program trades. Blended trade • Is the combination of two or more bonds or tranches executed as a single position. Often this is done to offset the individual, lopsided risks in two very different instruments. By doing such a trade, an investor or portfolio manager is trying to create a more stable investment. Block trade www.ftpall.com 2|Page • A trade so large that the normal auction market cannot absorb it in a reasonable time at a reasonable price. In general, 10,000 shares of stock or $200,000 worth of bonds would be considered a block trade. • A large trading order, defined on the New York Stock Exchange as an order that consists of 10,000 shares of a given stock or a total market value of $200,000 or more. Bucketing or to bucket trades • Refers to several illegal activities. Most common is the holding of customer orders Find thousands of financial terms at www.ftpall.com by a broker who does not report an immediate execution to the client. In this case the broker would try to take advantage of a known buy (or sell) and do an intermediate trade for himself. For example, a customer gives a market order to buy and the broker executes an immediate transaction. However, the market advances and then the broker sells the instrument at which time he fills the customer order. The client then missed the benefit of the lower price. Sometimes, the term is used for the action of inappropriately using a client's funds for unauthorized trading. Butterfly trade • Is the sale of two units of a futures contract and the purchase of two units of a futures contract. Here, the contracts are positioned across three different delivery months. One pattern would be buy 1 March, Sell 2 April, and Buy 1 May. This strategy is also used in the credit markets. Chicago board of trade • Abbreviated CBOT. The oldest commodity exchange in the United States; established in 1886. The exchange lists agricultural commodity futures such as corn, oats, and soybeans, in addition to more recent innovations such as GNMA mortgages and the NASDAQ 100 Index. Counter trade www.ftpall.com 3|Page • The exchange of goods for other goods rather than for cash; barter. Cross trade • Is a transaction that is not exposed to the public by outcry or usual trading practices. This type of matching trade is permissible provided it is done in accordance with the rules and regulations of the particular exchange and other regulatory organizations. The letter Xcan indicate this type of transaction on a ticker tape. It may be also used on a ticket or blotter. Seethe related Ex-Pit and Exchange for Physicals. Find thousands of financial terms at www.ftpall.com Curve trader • A trader who does arbitrages along the yield curve. Day trader • Is a market participant who has a same-day transaction horizon. Often the positions are held for minutes or hours but they are offset by the end-of-the-market- day. Exchange traded fund • Abbreviated ETS. An open-ended Mutual Fund that can be continuously traded throughout the day. ETFs attempt to replicate the changes of an index of a specific financial market, so active management is unnecessary. See also: Index Fund. Flat trades • (1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid, accrued interest. (2) Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat. • (1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid, accrued interest. (2) Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat. www.ftpall.com 4|Page Floor trader • An exchange member who executes transactions from the floor of the exchange only for his own account. • A member who generally trades only for his own account, for an account controlled by him or who has such a trade made for him. Also referred to as a local . • Is a member of an exchange who trades for his or her own personal account. This compares to a Floor Broker. Find thousands of financial terms at www.ftpall.com Forward trade • A transaction in which the settlement will occur on a specified date in the future at a price agreed upon the trade date. Free trade • Refers to the unrestricted or unimpeded process of conducting business or transactions. Free trade area of the americas • A trading bloc that would extend the NAFTA and the Mercosur Group to create a free trade zone from the Arctic to Cape Horn. Gap trade • A market is said to gap trade when prices in it move discontinuously from range to range in response to announcements of economic numbers. General agreement on tariffs and trade gatt • A treaty that has governed world trade throughout most of the postwar era; it extends free trading rules to broad areas of economic activity and is policed by the World Trade Organization (WTO). Good trader • A Treasury coupon issue that can readily be bought and sold in size. If a trader can www.ftpall.com 5|Page short $10 or $20 million of an issue and sleep at night, that issue is said to be a good trader. Information less trades • Trades that are the result of either a reallocation of wealth or an implementation of an investment strategy that only utilizes existing information. Information motivated trades • Trades in which an investor believes he or she possesses pertinent information not Find thousands of financial terms at www.ftpall.com currently reflected in the stock's price. North american free trade agreement nafta • The treaty establishing free trade and open markets between Canada, Mexico, and the United States. Posttrade benchmarks • Prices after the decision to trade. Pre trade benchmarks • Prices occurring before or at the decision to trade. Program trades • Also called basket trades, orders requiring the execution of trades in a large number of different stocks at as near the same time as possible. Related: block trade Publicly traded • Companies whose common shares are listed and trade on a stock exchange. Publicly traded assets • Assets that can be traded in a public market, such as the stock market. Registered trader www.ftpall.com 6|Page • A member of the exchange who executes frequent trades for his or her own account. Reversing trade • Entering the opposite side of a currently held futures position to close out the position. Risk return tradeoff • The expectation that for accepting greater risk, investors must be compensated Find thousands of financial terms at www.ftpall.com with greater returns. Risk/return trade off • The balance an investor must decide on between the desire for low risk and high returns; low levels of uncertainty (low risk) are associated with low potential returns, and high levels of uncertainty (high risk) are associated with high potential returns. Rogue trader • Is a person who operates outside the limits of his authority. There may or may not be criminal intent. Often these rogues try to hide losses but in the process incur even greater ones. Often these traders take on larger positions which are not authorized in order to recoup open losses. Spot trade • The purchase and sale of a foreign currency, commodity, or other item for immediate delivery. Terms of trade • The weighted average of a nation's export prices relative to its import prices. Thinly traded • Infrequently traded. www.ftpall.com 7|Page To trade numbers • To trade securities based on the release of a new economic statistic (number), e.g., trading based on announcement of the latest number for the CPI, the U.S. trade deficit, etc. Trade • A transaction involving the sale and purchase of a security. • A verbal (or electronic) transaction involving one party buying a security from Find thousands of financial terms at www.ftpall.com another party. Once a trade is consummated, it is considered done or final. Settlement occurs 1-5 business days later. Trade acceptance • Written demand that has been accepted by an industrial company to pay a given sum at a future date. Related: banker's acceptance. Trade credit • Credit granted by a firm to another firm for the purchase of goods or services. Trade date • The date on which a transaction is initiated. The settlement date (the day cash and the asset officially changes ownership) may be the trade date or a later date. • The date on which a security trade occurs. • In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 3 business days after the trade. • Is the date of the transaction. Trade debt www.ftpall.com 8|Page • Accounts payable. Trade draft • A draft addressed to a commercial enterprise. See: draft. Trade house • A firm which deals in actual commodities. • Is a company which deals in the actual or physical commodities. These firms may also do an important amount of futures or options related business. Find thousands of financial terms at www.ftpall.com Trade on top of • Trade at a narrow or no spread in basis points to some other instrument. • Trade at a narrow or no spread in basis points relative to some other bond yield, usually Treasury bonds. Trade restrictions • Are taxes, tariffs, capital constraints, multiple currency rates dependent on type of transaction, quotas, and other impediments or requirements to execute an exchange of goods, services or financial transactions. Traders • Persons who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread. Traders can also be of the sort who takes proprietary positions whereby they seek to profit from the directional movement of prices or spread positions. Upstairs trader • Is an institutional trader or money manager who is not on the floor of an exchange. Uptick trade www.ftpall.com 9|Page • Related: Tick-test rules Volatility trades • Are options strategies which seek to profit by increases in volatility, decreases in volatility, or stable volatility. These trades can include: Butterflies, Condors, Straddles, and Strangles. When issued trades • Typically there is a lag between the time a new bond is announced and sold and Find thousands of financial terms at www.ftpall.com the time it is actuafly issued. During this interval, the security trades, wi, "when, as, and if issued." World trade organization • Abbreviated WTO. International body that polices world trading practices and mediates disputes between member countries. X or cross trade • Is a transaction that is not exposed to the public by outcry or usual trading practices. This type of trade is permissible provided it is done in accordance with the rules and regulations of the particular exchange and other regulatory organizations. The letter X can indicate this type of transaction on a ticker tape. It may be also used on a ticket or blotter. See the related Ex-Pit and Exchange for Physicals.