Glossary

If there are any omissions or you require any further clarification of any definitions please contact us.

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

lapse	-	An option "lapses" if it expires worthless, that is, it has no intrinsic value on expiry.
lapsed rights premium	-	If you do not take up the rights issue, and decide to let the offer lapse, the company may decide to issue to you a lapsed rights premium. The issue of a premium is at the discretion of the company. For clients that lapse, the nil paid shares will be removed from their account once the issue has expired.
Letter of Allotment	-	Confirmation of the number of shares allotted to a shareholder.
Letter of Indemnity	-	In a case where the original share certificate has been lost, you will need to complete a letter of indemnity. This is basically a request to the registrar to issue new stock or share certificates to replace an original which has been lost, destroyed or stolen. There may be a charge for this.
Letter of Renunciation	-	The form on the back of an allotment letter which enables the client to pass on a share entitlement received through a rights issue.
leverage	-	The US term for gearing.
liability	-	A claim on a company's assets.
LIFFE	-	Pronounced 'life', the London International Financial Futures and Options Exchange. Merged with the London Commodity Exchange in September 1996, it is the world's largest futures and options exchange .
Limit Expiry period	-	The number of trading days that you instruct Saga Share Direct to monitor your limit order. This can be for the current trading day only or for a number of trading days up to a maximum of 30. Same day only for cert traders - Ł2k minimum.
Limit Order	-	An order that specifies the minimum price at which you want to sell, or the maximum price at which you want to buy.
Limit Price	-	The maximum or minimum price at which you are wiling to buy or sell specified shares.
Limit Status	-	These are orders that have been accepted, but have not yet been dealt because the limit price set by you has not been achievable. Whilst orders are in this status on your 'Order Status/Cancel' page then you will see a 'Cancel' button next to the order, meaning you have the option to cancel the order before it is dealt.
liquid market	-	A liquid market means there are plenty of shares in a particular company being bought and sold every day.
liquidation	-	The process of ending a company's existence. A company is obliged or chooses to go into liquidation when it can no longer pay its debts.
liquidity	-	The ability to buy or sell an asset quickly and in large volume without substantially affecting the asset's price.
listed company	-	This is a Public Limited Company whose shares have been admitted to the London Stock Exchange's daily official list. It has to comply with the Exchange's listing regulations.
listing rules	-	Rules book for listed companies which governs their behaviour - commonly known as the Yellow Book.
long position	-	A long position is when someone buys (holds) a warrant or holds the underlying asset. Contrasts with Short position.
long dated	-	A Gilt with a life of 15 years or more.
LSE	-	London Stock Exchange. Originated as New Jonathans Coffee House in 1773, then it joined the United Kingdom's regional exchanges to form the Stock Exchange of Great Britain. In 1995 the Dublin Stock Exchange left the alliance, then the Exchange became known as the London Stock Exchange.

mandatory quote	-	The period of time Monday to Friday when all registered market makers in a security must display their prices. For the Stock Exchange Automated Quotes this is 8.00am to 4.30pm.
margin	-	Borrowing money to use specifically for buying securities of any kind in a brokerage account.
market	-	A place where transactions are undertaken including the London Stock Exchange, AIM and PLUS. All exchanges are markets.
market capitalisation	-	The total market value of all of a firm's outstanding shares, calculated by multiplying a firm's share price by the number of shares outstanding.
market index	-	An index such as the FTSE-All Share has a base of 100, or more usually 1000, at a fixed moment in time. For the FTSE, this is January 3rd, 1984. Firms are sometimes given weightings in the index according to their market capitalisation. The index gives the percentage rise or fall in value of the market over the relevant timescale.
market makers	-	Stock Exchange member firms which are obliged to make a continuous two-way price, that is to offer to buy and sell securities during market hours.
market size	-	The number of shares that can be traded at a given quote price. To trade more than this amount would be to trade outside of the Market size.
market value	-	The value of an asset based upon the price it would obtain on the open market.
maturity	-	Another word for redemption.
Maxi ISA	-	A type of ISA which you are committing your full ISA allowance for both components to one individual ISA provider. You can only take out one Maxi ISA in any one tax year.
maximum trailing value	-	The maximum number of pence per share that a share price can fall from its peak value, for sales, or rise above its lowest value, for purcahses, in order for a Trailing Stop Order to be dealt.
mediums	-	Government stocks that have 5 to 15 years until repayment.
merger	-	When two or more companies agree to merge into one and pool their interests to avoid the expense of a take-over.
mid price	-	The price half way between the prices quoted in the London Stock Exchange's Daily Official List. The prices found in the newspapers are the mid price.
Minimum Trailing Value	-	The minimum number of pence per share that a share price is required to fall from its peak value, for sales, or rise above its lowest value, for purchases, in order to trigger a Trailing Stop Order.
minimum quote size	-	The minimum number of shares in which market makers are obliged to display prices on.
money market fund	-	A highly liquid mutual fund that invests in short-term securities and seeks to maintain a stable net asset value of Ł1 per share.
mutual company	-	A company that has no shares but is owned by policyholders or members for example building societies, friendly societies or co-operatives.
mutual fund	-	The US equivalent of a Unit Trust.

NASDAQ	-	The National Association of Securities Dealers Automated Quotation, NASDAQ is the second largest Stock Exchange in the USA. Involves many of the US's high technology stocks.
negotiable	-	A certificate that is transferable by delivery and which, in the case of a registered certificate, has been duly endorsed and guaranteed. Transferable from one party to another.
net asset value (NAV)	-	The market value of individual units (unit trusts)/shares (OEICs). It is calculated each business day by adding the value of all investments in the fund's portfolio, then subtracting expenses and dividing the result by the number of units/shares issued.This may be different to the share price.
net profit	-	The amount remaining once all company expenses has been deducted.
net relevant earnings	-	Earnings on which personal pension contributions are based. For the employed, this is usually gross remuneration (including bonuses and other taxable benefits) less any allowable business expenses (e.g. professional membership subscriptions paid for by the employer). For the self-employed they are broadly equivalent to taxable profits.
net sales	-	Gross sales less any taxes, returns, allowances and discounts or rebates given to customers.
new issue	-	A company going to the market for the first time. New shares are issued into the market.
NIKKEI	-	The index of the 225 leading stocks that are traded on the Tokyo Stock Exchange
nil paid shares	-	When a rights issue is announced, you receive nil paid rights in your account to indicate your right (but not obligation) to participate in the rights issue. Nil paid rights can be sold in the Market (although they have a limited life span - please contact Saga Share Direct if you wish to sell). If you decide to take up the rights issue, you cannot then sell your nil paid rights.
no-load fund	-	A open-ended investment that imposes no front end charge on investors.
nominal value	-	Under current UK law companies must have a nominal or par value. The nominal value of most company shares is 25p. Nominal value is of very little significance to a shareholder, since what matters is the market price of the shares. Shares have no fixed value; they are only worth what others will pay for them.
nominee	-	Legal agreement where one person or firm holds shares on behalf of another, who remains the beneficial owner.
non optional / mandatory	-	A corporate action which share holders have approved or for which shareholder approval is not necessary. Upon the effective date all outstanding securities must be exchanged for new securities and or cash.
Normal Market Size	-	Calculated on the previous year's average daily turnover of each individual stock, and is currently 2.5% of the total volume of shares for each company. Market makers are not obliged to give a quote for a transaction above normal market size.
not dealt status	-	This is an order that we did not deal due to any of the following reasons: The stock was unavailable for trading; Due to a change in your dealing circumstances since your order was placed your order has been rejected.

occupational pension	-	A type of pension scheme provided by an employer, who must make contributions into it.
OEIC	-	Open Ended Investment Company. A collective investment fund similar to a unit trust. The major differences are that OEICs quote a single price rather than a bid and offer price and they are governed by Company law rather than trust law. Most new funds launched today are established under the OEIC structure and it is widely predicted that, over time, most Unit Trusts will convert to OEICs.
PLUS	-	PLUS is the UK's independent market and provides a trading facility for unquoted and unlisted securities. It is authorised and regulated by the Financial Services Authority.
offer	-	This indicates that a shareholder is prepared to sell at a particular price.
Offer for Sale	-	One method by which a company can issue new shares and gain stock market listing. The company or its advisers invite the public to buy shares not yet in issue at a given price. Sometimes there is a minimum subscription level and if subscriptions fall below this level, the issue will be aborted.
Offer for Subscription	-	Here the company coming to the market prepares all the necessary documentation itself and invites applications for the shares. Very rarely used now.
offer price	-	The price at which a market maker will sell shares to investors, therefore the price that the buyer pays. This is generally lower than the bid price. The difference between the two is known as the bid/offer spread.
open offer	-	Often accompanies additional share placings by quoted companies and gives the right to claw back shares, usually at below the market price, that have been placed with instructions.
opening purchase	-	A transaction in which the seller of an option becomes the writer.
opening price	-	The price at which a stock starts dealing. Can refer to market opening or to when stock first became listed.
optional / voluntary offer	-	An offer in which a client must make a decision in which to participate or not, e.g. Open Offer.
options	-	The right (but not obligation) to buy or sell an underlying investment at a certain point in the future at the price agreed today.
order	-	A dealing instruction submitted to Saga Share Direct.
order expiry period	-	The number of trading days that you instruct Saga Share Direct to montior your order. This can be for a number of trading days up to a maximum of 30.
ordinary shares	-	A common form of share. The holder of ordinary shares are the owners of that company, the holders also receive dividends which vary in amount.
out of the money	-	When the exercise price is above, in the case of calls or below, in the case of puts, the current market price of the underlying security, that is, it has no intrinsic value.
outstanding orders	-	All orders with a status of 'Pending' and 'Limit'. If you have 'Outstanding Orders' on your account there will be a difference between the 'Cash Available to Invest' sum and the 'Amount Available to Invest' sum displayed in Account View. You can view your list of 'Outstanding Orders' via the Order Status area.
oversubscribed	-	Circumstances where people have applied for more shares than are available in a new issue.

Panel on Takeover and Mergers (PTM)	-	The body that ensures that takeovers and mergers are conducted fairly on behalf of all shareholders.
paper offer	-	An offer of shares in the bidding company that may be ordinary, loan notes or another alternative.
pari passu	-	This term is usually used to describe new issues of securities which have the same rights as similar issues already in existence. It means "equal in all respects."
passive investment management	-	Same as index funds.
pending status	-	These are orders that have been accepted, but which have not yet been dealt, for example orders placed 'At best' outside of market hours. Whilst orders are in this status on your 'Order Status/Cancel' page then you will see a 'Cancel' button next to the order, meaning you have the option to cancel the order before it is dealt.
PEP	-	Personal Equity Plan. A scheme which allows investment in a number of shares and carries various tax benefits, such as the receipt of dividends without paying tax on the income, and sales where profits are free from capital gains tax. It has not been possible to add cash to a PEP since 1999, although you can deal in existing PEP(s) or transfer them to us.
perks	-	See 'benefits'.
personal pension	-	A tax-efficient way to accumulate savings for retirement. Contributions into a pension fund receive tax relief and a proportion of the eventual payout can be taken tax free from age 50. The remainder must be used (either on retirement or by age 75) to buy an annuity to provide income for the rest of the investor's life. Personal pensions can be either individual arrangements, or provided by an employer (known as Group Personal Pensions) although unlike an occupational pension there is no requirement for the employer to contribute.
phased retirement	-	Personal pension holders who do not wish to take their pension all at once can stagger purchase of annuities over several years.
physically settled	-	Settlement of a warrant by the delivery or receipt of an actual underlying asset. This is the opposite of a cash settled warrant, which settles purely in cash.
PIBS	-	Permanent Interest Bearing Shares are fixed interest bearing investments issued by building societies and are listed on the London Stock Exchange
placing	-	Term used to describe when a company's broker contacts his own clients and offers the shares to them. The general public will not necessarily be offered any shares.
portfolio	-	A selection of different investments held by you.
portfolio manager	-	A named individual who is responsible for the initial construction and the ongoing running of a client's portfolios to meet investment goals agreed with the client.
portfolio valuations	-	A statement of your holdings and their market value at any given point.
preference shares	-	Similar to ordinary shares but preference shares normally pay a fixed dividend and rank ahead of ordinary shares for dividend payment and in a company liquidation.
Price /Earnings Ratio	-	The share price of a company divided by the earnings per share. A high P/E ratio implies that the company is well thought of for its future prospects.
Price Improver	-	A service that automatically links direct with major market makers to instantaneously identify the most competitive price available to us, giving you the chance to beat the price displayed by the London Stock Exchange.
Proshare	-	Is an independent, not-for-profit organisation supported by the London Stock Exchange and British Industry, that promotes responsible equity-based investment for individuals and to further the interests of private investors.
prospectus	-	A formal written document describing the history, background of managers, fund objectives, a financial statement and other essential data of the company that wants to sell its shares on the stock market.
PTM Levy		A nominal charge of Ł1 on deals with considerations of Ł10,000 and over paid to the Panel for Takeovers and Mergers.

quartile ranking	-	Categorises funds within a sector into four equal bands based on their performance over a specified period. Top or first quartile contains the top 25% of funds, through to the bottom or 4th quartile which contains the bottom 25% of funds.
quoted price	-	Price at which the last sale and purchase of a particular share or commodity took place.