Term Description
active investing An investment strategy whereby an investor continuously monitors a portfolio with the aim of outperforming a benchmark.
(ADR) American depository receipts A negotiable certificate issued by a US bank representing a specific number of shares of a foreign stock traded on a US stock exchange. ADRs make it easier for Americans to invest in foreign companies, due to the widespread availability of dollar-denominated price information, lower transaction costs and timely dividend distributions.
alpha A technical risk ratio that expresses the “excess return” on an investment. Alpha takes the volatility (price risk) of a unit trust fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha.
All Share Index (ALSI) An index designed to reflect the movement of the equity market. The FTSE/JSE All Share Index represents 99% of the full market capital value (i.e. before the application of any investability weightings) of all ordinary securities listed on the Main Board of the JSE which qualify under the rules of eligibility. The FTSE/JSE All Share Index contains the leading securities listed on the JSE, measured by market capitalisation.
AltX The AltX (Alternative Exchange) is the JSE’s board for small and medium-sized companies in South Africa. Established in 2003, AltX provides smaller companies not yet able to list on the JSE Main Board with a clear growth path and access to capital.
algorithmic trading A trading system using mathematical models to determine decision-making on the financial markets. Computer-based algorithmic trading is most commonly used by large institutional investors because of the large number of shares they purchase every day. Complex algorithms allow these investors to obtain the best possible price without significantly affecting the stock’s price and increasing purchasing costs.
analyst A trained professional who performs financial and business analysis with a view to making investment recommendations, e.g. buy, sell or hold a particular security.
annual general meeting (AGM) This is a meeting of the shareholders of a company, which must be held within six months of the end of the company’s financial year and 18 months after the previous meeting. Shareholders vote at these meetings according to the number of voting shares they hold.
annual financial statements Sometimes known as an Annual Report, this is a document required by the Companies Act to be presented once a year at the annual general meeting. The statements must consist of a balance sheet, income statement, directors’ report and auditor’s report. They must be prepared in accordance with International Financial Reporting Standards, and fairly present the state of the company and its profit or loss for the year.
annual results The financial results of a company for a particular financial year. The JSE listing requirements compel companies to produce annual results within a set time.
arbitrage The practice of taking advantage of any price difference between two or more markets, with a view to making a profit, when trading in financial instruments.
asset A tangible or intangible economic resource from which one can expect future benefit. An asset is anything of value that can be converted into cash. Examples of assets include:
  • Cash and cash equivalents – certificates of deposit, cheque and savings accounts, money market accounts, physical cash;
  • Real property – land and any structure that is permanently attached to it;
  • Personal property – everything that you own that is not real property such as boats, collectibles, household furnishings, jewellery and vehicles; and
  • Investments – annuities, bonds, cash value of life insurance policies, unit trusts, pensions, retirement plans, stocks and other investments.
authorised shares The maximum number of shares of stock that a company can issue. This number is specified initially in the company’s charter, but it can be changed with shareholder approval. Generally a much greater number of shares is authorised than required, to give the company flexibility to issue more stock as needed. Also called authorised stock or shares authorised.
African Securities Exchanges Association (ASEA) An associated founded in 1993 with the aim of establishing mutual co-operation and exchange of information among its member exchanges. For more information please visit http://www.africansea.org.
bid The highest price any buyer is willing to pay for a given security at a given time; also called bid price.
block trade A large number of securities being traded.
bond A type of long-term debt that various institutions issue on the understanding that they will pay interest to the holders of that debt. Investors loan money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, governments and state-owned enterprises to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents.
bond futures A contractual obligation for the contract holder to purchase or sell a bond on a specified date at a predetermined price. A bond future can be bought in a futures exchange market and the prices and dates are determined at the time the future is purchased.
bond options The option to buy or sell a bond at a particular price either on or before the expiry date of the option.
B-ordinary shares These shares are of a different class to ordinary shares; holders have fewer or no voting rights and may not have a right to payment of capital if a company is dissolved.
bottom up An investment strategy in which companies are considered based simply on their own merit, without regard for the sectors they are part of or the current economic conditions. A person following this strategy will be looking very closely at the company’s management, history, business model, growth prospects and other company characteristics.
BRICS Exchange Alliance An initiative to expose investors to the BRICS economies (Brazil, Russia, India, China and South Africa) by means of their exchanges.
BRICSMART The range of benchmark equity index derivative products created by the BRICS Exchange Alliance providing access to the BRICS market by means of benchmark equity index derivatives.
broker Someone who intermediates between a buyer and seller and receives commission in exchange for executing orders.
brokerage The stockbroker’s fee for completing a securities transaction. Brokerage is usually calculated on a sliding scale depending on the total value of the transaction. Brokerage rates used to be set by the Registrar of Stock Exchanges (in consultation with the Minister of Finance and the JSE) but since deregulation of the JSE in November 1995, stockbrokers have set their own individual rates.
Bubble When share prices are abnormally high because of investor sentiment and are expected to fall back to “normal” levels soon.
bulls and bears Names used to define market sentiment: a bull market indicates prices are rising while a bear market indicates prices are falling.
buy-side Refers to institutions that buy securities exchange services, as opposed to those that sell them (see sell-side).
Capital The money that a company raises against the issue of shares and uses to invest in assets and other resources to produce more money and ultimately profits.
capped index The capped index limits the weight of individual companies on the indices to a predetermined level.
CBOE (Chicago Board of Exchange) The world’s largest options exchange
CCNs (carbon credit note) These products give investors exposure to carbon credits generated by carbon dioxide emission-reducing projects.
central order book An anonymous record of unexecuted orders waiting to be matched. The top priority order is executed before other orders in the book, and before other orders at an equal or worse price held or submitted by other brokers.
CFD (contract For difference) A leveraged derivative financial product whose value is derived from the value of another asset like a share or market index. When you trade CFDs you take a position on the change in value of the underlying asset over time.
Companies Act Legislation that governs the manner in which companies in South Africa can operate.
CPSS (Committee on Payment and Settlement Systems) The CPSS is a standard-setting body for payment, clearing and securities settlement systems. It also serves as a forum for central banks to monitor and analyse developments in domestic payment, clearing and settlement systems as well as in cross-border and multicurrency settlement schemes.
CSD (central securities depository) A CSD is a specialist financial organisation holding securities such as shares either in certificated or uncertificated (dematerialised) form so that ownership can be easily transferred through a book entry rather than the transfer of physical certificates. 
Can Do Futures and Options These are derivative products that provide the advantages of derivatives but also offer the flexibility of over-the-counter (OTC) contracts.
capital markets Financial markets on which securities are bought and sold.
Clearing This refers to all activities pertaining to an equity security in the trading system, from the moment a commitment is made regarding a transaction to the moment when it is settled.
Close The closing time for a stock exchange, when the trading period has been concluded.
closed period The time period between when a listed company’s financial results are completed and when these are announced to the public. This closed period is meant to prevent any insider trading ahead of the release of the results.
closing auction The final stage in a trading session, determining closing prices following the results of the trading session.
closing price The last price a share is traded at for the day.
COB (central order book) A stock exchange’s centralised record book, which automatically executes trades when prices match.
co-location Refers to data centres that are in close proximity to a stock exchange’s servers, offering faster access to the equity market at a premium price.
commodity derivative These are investment tools that allow investors to profit from certain items without possessing them.
Commodity Derivatives Market Provides investors with exposure to the grains market in South Africa and Southern Africa; also offers derivatives on precious metals and crude oil.
commodity ETFs Exchange Traded Funds that invest in physical commodities such as agricultural goods, natural resources and precious metals. A commodity ETF may be focused on a single commodity and hold it in physical storage or may invest in futures contracts.
commodity ETNs These Exchange Traded Notes occur when an investor lends money to the issuer (bank). In return the investor will receive a return on the specific commodity benchmark.
compounding The ability to generate earnings from previous earnings which have been reinvested; generally refers to interest computed on both the principal and the accrued interest.
consideration The price paid for a debt instrument, calculated by applying the yield-to-redemption figure to obtain the present value of future cash inflows.
convexity Measures the rate of change in Bond duration (see Modified Duration) with respect to changes in interest rates. Positive convexity occurs when durations shorten as interest rates rise or lengthen as interest rates decrease. Negative convexity occurs when durations lengthen as interest rates rise or shorten as interest rates decrease. Mortgages typically have negative convexity because, as interest rates rise, the incentive to prepay is reduced, thus extending the duration of the mortgage.
corporate governance The relationship between all stakeholders in a company. This includes the shareholders, directors and management of a company as defined by the corporate charter, bylaws, formal policy and rule of law. Ethical companies are said to have excellent corporate governance.
corporation The most common form of business organisation, and one which is chartered by a state and given many legal rights as an entity separate from its owners.
correction When a share price falls for a short period, but rises in the long run.
coupon The annual rate of interest payable by the issuer on the face value of a debt instrument.
credit bureau An agency which collects and sells information about the creditworthiness of individuals. A credit bureau or credit reporting agency does not make any decisions about whether a specific person should be extended credit or not. However, it does collect information that it considers relevant to a person’s credit habits and history, and uses this information to assign a credit score to indicate how creditworthy a person is. When a prospective creditor approaches a credit reporting agency to inquire about a particular person, they are sold a credit report which contains all the information relevant to the person and the credit score calculated by the agency (some creditors might have an ongoing subscription to credit bureau). The prospective creditor then uses that information to decide whether to extend the desired credit to the applicant or not. A credit bureau can also be called a consumer reporting agency.
cross rate The exchange rate between two currencies that are not the official currencies of the country that the exchange was quoted in. Cross rates usually do not involve the US dollar. For example, an investor in the United States could get the cross rate of the euro to the Canadian dollar.
crude oil futures and options Contracts that allow investors the right to buy or sell the underlying commodity at a fixed price on a future date. The underlying instrument is light sweet crude oil futures.
Currency Derivatives Market Provides investors with exposure to the foreign currency market; offers currency futures and options, as well as exposure to the RAIN (Rand Index).
currency ETFs Exchange Traded Funds (ETFs) invested in a single currency or basket of currencies. Currency ETFs aim to replicate movements in currency in the foreign exchange market by holding currencies either directly or through currency-denominated short-term debt instruments.
currency ETNs These Exchange Traded Notes occur when an investor lends money to the issuer (bank). In return the investor will receive a return on the specific currency benchmark.
currency futures and options Contracts that allow investors the right to trade the underlying exchange rate for a period in the future, or buy and sell an underlying foreign currency at a fixed price on a future date.
currency risk The risk that the operations of a business or the value of an investment will be affected by changes in exchange rates. For example, if money must be converted into a different currency to make a certain investment, changes in the value of the currency will affect the total loss or gain on the investment when the money is converted back. This risk usually affects businesses, but it can also affect individual investors who make international investments. It is also called exchange rate risk.
designated advisor Someone who advises a company applying to list on the stock exchange, overseeing compliance and other regulations.
daily move Refers to the difference between a given share’s high price and low price during one day of trade.
dark pool This term defines a network that allows traders to buy or sell large or block orders without having significant market impact. The resulting efficient execution does, however, diminish transparency.
day trader A trader who speculates on securities by buying and selling financial instruments during the course of one trading day.
debenture A debt instrument that is not secured by collateral or any physical assets (unlike a corporate bond, which is secured by stated assets).
Debt A financial obligation that one party owes a second party as a result of borrowing.
debt/equity ratio A measure of a company’s financial leverage. The debt/equity ratio is equal to long-term debt divided by common shareholders’ equity. Typically the data from the prior fiscal year is used in the calculation. Investing in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest rates, due to the additional interest that has to be paid out for the debt. For example, if a company has long-term debt of R3 000 and shareholders’ equity of R12 000, then the debt/equity ratio would be 3 000 divided by 12 000 = 0.25. It is important to realise that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.
debt instrument A formal, written undertaking, issued by a borrower, acknowledging a given debt and various aspects of it, notably the level and timing of interest payments and date(s) of redemption. Such an instrument is bought and sold, the beneficiary of the terms of the debt instrument being whoever is registered as its owner when one of its benefits becomes payable.
default The inability of a trading firm to meet its trading commitments.
Delisting A listed security’s removal from the stock exchange on which it has been traded.
derivative A type of security or financial instrument whose value or price is derived from its underlying asset; in effect a contract between parties. The main derivatives on the JSE are futures and options.
discount warrants These allow investors to gain exposure to an underlying asset at a lower cost than that of vanilla warrants. Investors are able to pay less for these warrants because with discount warrants the potential profit is limited compared to that of the more conventional call and put warrants.
disposable income The amount of after-tax income that is available for an individual or household to divide between spending and personal savings.
Dividend When company profits are good, the company pays a dividend to people who hold shares in that company.
dividend ETFs Any Exchange Traded Fund that seeks to provide high yields by investing in a basket of high-dividend-paying common stocks, preferred stocks or REITs.
dividend futures Derivative contracts that are used to hedge against any dividend risk accompanying trade in Single Stock Futures (SSFs). They can be traded without offering exposure to an underlying equity.
dividend policy A policy that determines the dividends to be paid out to shareholders by a company.
dividends tax A tax levied against shareholders when they receive company dividends.
dividend yield A way to measure how much cash (dividend) you are getting for each rand invested in a company’s share, i.e. your dividend received as a percentage of the company’s share price.
double The bid and offer prices provided by an inter-dealer broker on a given instrument at any given moment during trading hours.
dual listed A company is dual listed when its securities are listed on more than one stock exchange.
Dutch disease The deindustrialisation of a nation’s economy that occurs when the discovery of a natural resource raises the value of that nation’s currency, making manufactured goods less competitive with other nations, increasing imports and decreasing exports. The term originated in the Netherlands after the discovery of North Sea gas.
earnings per share (EPS) Total earnings divided by the number of shares outstanding. Companies often use a weighted average of shares outstanding over the reporting term. EPS can be calculated for the previous year (“trailing EPS”), for the current year (“current EPS”), or for the coming year (“forward EPS”). Note that last year’s EPS would be actual, while current year and forward year EPS would be estimates.
Exchange traded Contract For Difference A Contract For Difference (CFD) can be defined as an agreement (contract) to exchange the difference in value of a particular asset between the time at which a contract is opened and the time at which it is closed. An eCFD is an exchange traded CFD that is listed and traded on the exchange and cleared by JSE Clearing.
EIFs (equity index futures) Contracts that expose investors to the price movements of a basket of equities without having to trade the individual equities; they give the investor the right to buy or sell an underlying listed financial instrument at a fixed price on a future date.
enterprise value A measure of what the market believes a company’s ongoing operations are worth. Enterprise value is equal to the company’s market capitalisation minus cash and cash equivalents plus preferred stock plus debt). The number is of importance to individual investors and to potential acquirers considering a takeover attempt.
ETFs (Exchange Traded Funds) An Exchange Traded Fund is a fund made up of a portfolio of shares that reflect the composition of an index. The fund is listed on a recognised exchange and trades like a normal security. An important feature of an ETF is that investors have a delivery right to the underlying shares comprising the index as mirrored by the portfolio holding. Because ETFs can be redeemed for their underlying shares, the fund will trade close to its net asset value. Otherwise, arbitrage opportunities will exist.
ETNs (Exchange Traded Notes) These are contractual obligations whereby issuers agree to pay the holders a return linked to an agreed-upon financial instrument, like shares, the interest rate, an index, and so on.
ETPs (Exchange Traded Products) Securities that are traded on the stock exchange, the value of which is derived from underlying investment instruments like commodities, currencies, share prices or the interest rate.
equity derivatives market A class of derivatives whose value is at least partly derived from one or more underlying equity securities. Options and futures are by far the most common equity derivatives, but there are many other types of equity derivatives that are actively traded.
equity ETNs The purpose of Exchange Traded Notes (ETNs) is to create a type of security that combines features of bonds and Exchange Traded Funds (ETF). Similar to ETFs, ETNs are traded on major exchanges.
equity index futures Contracts that expose investors to the price movements of a basket of equities without having to trade the individual equities; they give the investor the right to buy or sell an underlying listed financial instrument at a fixed price on a future date.
equity options Contracts that allow investors the right to buy or sell shares at a fixed price on a future date.
exchange control A type of control that governments put in place to restrict the amount of local or foreign currency being purchased. Sometimes a ban on currencies is also put in place.
exposure The degree to which a portfolio or other investment is susceptible to risk from certain factors. For example, a share in a company whose main business is importing would be highly exposed to the rand/dollar exchange rate.
face value The nominal amount assigned to a security by the issuer.
FSB (Financial Services Board) Financial regulatory agency that oversees the non-banking financial services industry in South Africa.
fixed income Describes a debt instrument that pays an unchanging amount of money to its holder (owner) at prescribed times.
FIX Short for Financial Information Exchange Protocol, a messaging system used by brokers worldwide.
FPI (Financial Planning Institute) An internationally recognised professional body for financial planners in South Africa.
franchise A form of business organisation in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor’s trade name and usually with the franchisor’s guidance, in exchange for a fee.
free float The proportion of shares of a publicly traded company traded in the stock market.
free float market capitalisation For each company, this is calculated by multiplying the current market place by the number of shares after the free float weighting has been applied.
floating rate Describes the coupon rate of a security that, in terms of the instrument’s tenor (qv), changes in line with another interest rate, such as JIBAR (qv).
foreign operations Those parts of the business of a company that are not conducted in South Africa. Example: the Australian operations of BHP Billiton.
forward contract A cash market transaction in which a seller agrees to deliver a specific cash commodity to a buyer at some point in the future. Unlike futures contracts (which occur through a clearing firm), cash forward contracts are privately negotiated and are not standardised. Further, the two parties must bear each other’s credit risk, which is not the case with a futures contract.
fund of funds A unit trust fund which invests in other funds.
fungible Interchangeable. The term is often used to apply to financial instruments which are identical in specifications. For example, options and futures contracts are highly fungible, since they are highly standardised arrangements. On the other hand, forwards and swaps are not, since they are customised arrangements. Instruments that are highly fungible tend to be very liquid, and so transaction costs tend to be low.
fund manager The person or entity responsible for managing investment portfolios on behalf of investors and implementing a particular investment strategy.
futures close-out Executing a security transaction by taking a buy or sell position, thereby nullifying an open position.
futures market Central financial exchange on which standardised futures contracts can be traded.
futures contract A contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a pre-determined price in the future.
gearing A financial ratio that describes the level of a company’s net debt in relation to its equity capital. Companies with high gearing –more long-term liabilities than shareholder equity – are considered speculative. Gearing explains how a company finances its capital, either through outside lenders or through shareholders. Also known as financial leverage.
gross domestic product (GDP) The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
global financial crisis Economic crisis of 2007-2008 characterised by the collapse of banking institutions and bank bailouts by governments, together with stock market downturns; considered the worst financial crisis since the Great Depression of the 1930s.
gold futures and options Contracts that allow investors the right to buy or sell the underlying commodity at a fixed price on a future date. The underlying instrument is gold futures.
gold standard A monetary system that backs its currency with a reserve of gold, and allows currency holders to convert their currency into gold.
HFT (high frequency trading) A type of algorithmic trading that allows trades to be moved in and out of positions in seconds or fractions of a second.
hard commodity A commodity that is extracted by mining, like metals (see soft commodity).
headline earnings The real earnings of a company for a given period, excluding profits or losses from the sale or termination of discontinued operations, fixed assets, etc.
hedge A derivative instrument to protect an investment from unfavourable changes in value.
hedging Taking an offsetting investment position that will reduce the risk of adverse price movements.
IDX (international derivatives) Derivatives products that expose investors to the price movements of shares listed internationally without having to set up foreign trading accounts.
IOSCO (International Organisation of Securities Commissions) An association of organisations that regulates global securities and futures markets.
IPO (initial public offering) The first sale of the stock of a private company to the public; a stock market launch.
index A simulated portfolio of securities that represents a particular market or a portion of that market.
index future A futures contract on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract.
index tracker funds A type of unit trust fund that provides the same returns as an index according to a market value weighting. A tracker fund is virtually the same as an index fund.
index warrants Index warrants are very similar to vanilla warrants except that the underlying asset is not a share but an index. An index warrant is settled by cash payment, calculated using an index multiplier assigned by the issuer when the warrant is first issued.
inflation risk The possibility that the value of assets or income will decrease as inflation shrinks the purchasing power of a currency. Inflation causes money to decrease in value at some rate, and does so whether the money is invested or not.
insider trading Buying or selling a security when having access to non-public or “inside” information about that security.
institutional investor Entity with large amounts to invest, such as investment companies, brokerages, insurance companies, pension funds, investment banks and endowment funds. Institutional investors are covered by fewer protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves. They account for a majority of overall volume.
interest rate derivatives A financial instrument based on an underlying financial security whose value is affected by changes in interest rates. Interest rate derivatives are hedges used by institutional investors such as banks to combat the changes in market interest rates.
Interest Rate Derivatives Market Market for interest rate derivatives, which are hedges used to combat any changes in market interest rates.
Interest Rate Market Market providing investors with the opportunity to trade products in both the cash and derivative markets.
interim results A company’s reported results for the first six months of its financial year.
integrated report Holistic overview of a company’s performance, taking into account not only financial results but also its strategy, governance, prospects and ability to create value.
investment bank An individual or institution which acts as an underwriter or agent for corporations and municipalities issuing securities. Most also maintain broker/dealer operations, maintain markets for previously issued securities, and offer advisory services to investors. Investment banks also have a large role in facilitating mergers and acquisitions, private equity placements and corporate restructuring. Unlike traditional banks, investment banks do not accept deposits from and provide loans to individuals.
investment horizon The length of time an investor is expected to hold a security or portfolio before it is liquidated.
investor relations A department within medium to large companies that gives investors information on the company’s dealings and financial performance.
inward listing Occurs when an external or foreign entity invests in a local market.
JIBAR (Johannesburg Interbank Agreed Rate) The Johannesburg Interbank Agreed Rate (JIBAR) is the money market rate used in South Africa. It is calculated as the average interest rate at which banks buy and sell money.
JIBAR Future A futures contract that allows market participants to manage interest rate risk within a regulated market, based upon the Johannesburg Interbank Agreed Rate (JIBAR).
JSE Limited The Johannesburg Stock Exchange is the largest stock exchange in Africa.
JSE Socially Responsible Investment (SRI) Index The SRI Index was a pioneering initiative – the first of its kind in an emerging market, and the first to be launched by an exchange, and has been a driver for increased attention to responsible investment into emerging markets like South Africa.
JSE Virtual Trader A simulated trading platform that allows participants to experience real-time trading.
JSE was “up” When the majority of share prices of the companies listed on the JSE increased.
JSE was “down” When the majority of share prices of the companies listed on the JSE decreased.
Krugerrand A South African gold coin, first minted in 1967.
latency The measure of a time delay in a system; minimising latency is desirable in capital markets.
linked units Property loan stock companies issue these part-share, part-debenture units, which give investors the opportunity to invest in a diverse portfolio of immovable property.
liquidity The ease with which an asset or security can be bought or sold in the market without causing a significant price movement in the market.
liquidity ratio Total value of cash and marketable securities divided by current liabilities. For a bank this is the cash held by the bank as a proportion of deposits in the bank. The liquidity ratio measures the extent to which a corporation or other entity can quickly liquidate assets and cover short-term liabilities, and therefore is of interest to short-term creditors. Also called cash asset ratio or cash ratio.
liquidity risk The risk that arises from the difficulty of selling an asset. An investment may sometimes need to be sold quickly. Unfortunately, an insufficient secondary market may prevent the liquidation or limit the funds that can be generated from the asset. Some assets are highly liquid and have low liquidity risk (such as stock of a publicly traded company), while other assets are highly illiquid and have high liquidity risk (such as a house).
listed A security that has met an exchange’s various requirements, designed to protect investors, is given formal approval by being added to its list of securities.
loan An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan (though modern capital markets have developed many ways of managing this risk).
MAP (managed account platforms) Platforms for fee-based investment management products that work with strict investment controls around trading, investment allocation and risk management.
market regulator A body appointed by Government to regulate one or several markets so as to ensure their integrity. The regulator of South Africa’s Bond Market is the Financial Services Board.
MMI (money market instrument) Money market instruments are debt securities that generally give the owner the unconditional right to receive a stated, fixed sum of money on a specified date. These instruments usually are traded, at a discount, in organised markets; the discount is dependent upon the interest rate and the time remaining to maturity.
MTM (mark-to-market) A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark-to-market aims to provide a realistic appraisal of an institution’s or company’s current financial situation.
Main Board The primary section of the JSE, upon which the largest companies are listed.
mandated investments Any investments made by or through any third party regulated by legislation on behalf of the actual owner of the funds pursuant of a mandate given by the owner to the third party. Mandated investments would include domestic ownership by pension funds, collective investment schemes, insurance company policyholder funds, medical schemes and other forms of mandated investment as defined in the Department of Trade and Industry Code of Practice. Example: Government Employees Pension Fund.
margin When trading derivative products, the exchange requires the payment of both initial margins and variation margins. The initial margins are determined by the clearing house and vary depending on historical price volatility. The variation margin is a daily flow of funds (profits/losses) resulting from any open position calculated through a methodology of mark-to-market.
market abuse Securities law violations, which include insider trading, market manipulation or money laundering.
market capitalisation The total market value of share capital issued by a publicly traded company.
market crash When a market’s value falls by more than 20% during a short period of time.
market price A security’s last reported sale price, i.e. the price as determined dynamically by buyers and sellers in an open market. Also called market value.
market sentiment The feeling or mood of investors about a market.
market surveillance The prevention and investigation of any illegal, manipulative or abusive trading practices in securities markets.
MSCI South Africa Index An index that measures the performance of the large and mid-cap segments of the South African market.
Member A trader or product issuer that has been granted JSE Equity Market membership.
modified duration A value given to a fixed-income instrument (or portfolio of them) from which can be approximately calculated the change in the instrument’s price resulting from a 100 basis points change in interest rates. The higher the duration value, the greater the change in the instrument’s price.
money market ETFs Money market funds offer investors a way to put cash to work in a variety of low-risk, short-term securities, including commercial paper, repurchase agreements, Treasury bills and certificates of deposit.
multi-asset-class ETFs A combination of asset classes (such as cash, equity or bonds) used as an investment. A multi-asset-class investment would contain more than one asset class, thus creating a group or portfolio of assets. The weights and types of classes will vary according to the individual investor.
National Treasury South African government department that manages national economic policy and government finances.
notes Debt instruments with initial maturities of more than one year but less than 10 years.
N-Ordinary Shares These shares are identical to ordinary shares but their shareholders have minimal or zero voting rights.
OTC (over-the-counter) A security traded in some context other than on a formal exchange. The phrase can be used to refer to stocks that trade via a dealer network as opposed to on a centralised exchange. It also refers to debt securities and other financial instruments such as derivatives that are traded through a dealer network.
opening auction Determines the market price when there is uncertainty about market conditions.
opportunity cost The cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for. Opportunity cost analysis is an important part of a company’s decision-making processes, but is not treated as an actual cost in any financial statement.
options The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time. For stock options, the amount is usually 100 shares.
options contract A financial derivative representing a contract sold by the option writer to the option holder.
Ordinary Shares Represent equity ownership in a company and entitle the owner to vote on shareholder matters and receive dividends.
PLSs (property loan stocks) Common or preferred stock shares that are used as collateral to secure a loan from another party. The loan will earn a fixed interest rate, much like a standard loan, and can be secured or unsecured.
price discovery The provision by one or more sources of real-time prices obtaining in a given market.
price risk The risk that the value of a security or portfolio of securities will move in the future. Basically, it’s the risk that you will lose money due to a fall in the market price of a security that you own.
PRI (Principles for Responsible Investment) A United Nations-supported initiative whereby institutional investors take environmental, social and corporate governance (ESG) issues into account when making investment decisions.
prospectus This is a requirement of the Companies Act for every company that is making an offer of shares to the public. It must be lodged with the Registrar of Companies and must conform to Schedule 3 of the Companies Act. The purpose of the prospectus is to ensure that members of the public wishing to purchase the shares on offer are aware of certain key information concerning the company and its directors.
PUTs (property unit trusts) A property unit trust (PUT) is a portfolio of investment-grade properties which date back to 1969 when two trusts were established and listed on the JSE Limited. Each portfolio is listed on the JSE under Real Estate Investment Trusts. A PUT generates value for the investor in two ways: through rental income of the properties in the portfolio; and through the appreciation in the values of these properties over time.
panic selling When investors are selling in reaction to pure emotion and fear.
par value The nominal amount assigned to a security by the issuer.
passive investing An investment strategy whereby the performance of a particular major index is tracked or replicated.
platinum futures and options Contracts that allow investors the right to buy or sell the underlying commodity at a fixed price on a future date. The underlying instrument is platinum futures.
Preference Shares Instruments that have debt (fixed dividends) and equity (capital appreciation) characteristics, giving shareholders a higher claim on assets and earnings than ordinary shareholders.
pre-listing statement A company wishing to list on the stock exchange must produce this prospectus for investors, which provides prescribed information on the company, its business and its prospects.
premium The amount by which a bond or stock sells above its par value. The amount by which a closed-end fund’s market price exceeds the value of its holdings. An additional cost above the normal cost. The amount that the buyer of an option pays to the seller. A regular periodic payment for an insurance policy, here also called insurance premium. The amount by which the first trading of an IPO exceeds its offering price. Opposite of discount.
price/earnings ratio (p/e ratio) Shows how much investors are willing to pay for each rand of the company’s earnings. If a company’s shares are currently trading at a P/E of 20, it means that an investor is willing to pay R20 for R1 of the company’s current earnings.
primary market The market that relates to the sale of “new issues” or common stocks or bonds, where a financial instrument is introduced for the first time, typically when a company raises capital through listing.
public company A limited liability company that offers its securities for sale to the public on a stock exchange or over-the-counter market.
put option An option to sell assets at an agreed price on or before a particular date.
Quanto Futures and Options Types of derivatives in which the underlying traded product references a foreign underlying traded product – the instrument is settled in another currency at a fixed rate. Gives investors exposure to foreign commodities free of exchange-rate influence.
quarterly index review The quarterly review of the FTSE Africa Index Series constituents takes place in March, June, September and December.
RAIN (Rand Index) This index tracks the combined movement of the rand against a basket of currencies from South Africa’s five most active international trading partners.
rate of exchange Rate at which one currency may be converted into another. Generally, one unit of the home currency is expressed in terms of another currency. For example, an American bank may quote the exchange rate between the dollar and the yen as the number of dollars needed to buy one yen. Also called exchange rate or foreign exchange rate or currency exchange rate.
redemption Repayment of the face value of a debt instrument by its issuer (the borrower).
REITs (real estate investment trusts) Investment vehicles with tax advantages that invest in and derive their income from real estate properties and mortgages.
retail investor Individual investors who buy and sell small amounts of securities for themselves.
risk Also known as market risk. The probability that a share price will go down rather than up. All investments have an element of risk, which is harder to quantify than their return, and therefore very often left to “gut feel”. The quantifiable likelihood of loss or less-than-expected returns. Examples: currency risk, inflation risk, principal risk, country risk, economic risk, mortgage risk, liquidity risk, market risk, opportunity risk, income risk, interest rate risk, prepayment risk, credit risk, unsystematic risk, call risk, business risk, counterparty risk, purchasing-power risk, event risk.
ROE (return on equity) A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal year’s after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage. It is used as a general indication of the company’s efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. Investors usually look for companies with returns on equity that are high and growing.
ROI (return on investment) A measure of a corporation’s profitability, equal to a fiscal year’s income divided by common stock and preferred stock equity plus long-term debt. ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better. More generally, the income that an investment provides in a year.
SADR (South African depository receipts) South African depository receipts (SADRs) are not actual shares of stock, but receipts representing shares. They are handled and traded just like shares. They offer the same economic, corporate and voting rights enjoyed by investors holding underlying shares directly. An SADR may represent one share, several shares or a fraction of a share, so its price may differ from that of the share it represents, but should still be reflective of the price.
SARB (South African Reserve Bank) The South African Reserve Bank is the central bank of the Republic of South Africa. The primary purpose of the Bank is to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa. Together with other institutions, it also plays a pivotal role in ensuring financial stability.
Satrix Satrix securities are Exchange Traded Funds listed on the JSE. They seek performance of the main FTSE/JSE indices by holding the constituent companies of the index in exactly the weighting they are allocated for that index.
SAVI Dollar The South African Volatility Index (SAVI Dollar) is a forecast of 90-day implied volatility of the rand against the dollar, allowing investors to gauge market sentiment with regard to the local currency market.
SAVI Squared A variance future contract that obliges the holder to buy or sell variance at a predetermined variance strike price at a specified future time, offering investors direct exposure to volatility.
SAVI Top 40 A forecast of equity market risk in South Africa, allowing investors to gauge market sentiment with regard to the local equity market.
SAVI White Maize A three-month forward-looking index, allowing investors to gauge market sentiment with regard to the local white maize market.
scrip Physical share certificate(s). Since 2001, physical share certificates have been replaced by electronic entries that settle through Strate.
SENS The JSE’s real-time Stock Exchange News Service (SENS).
settlement The daily payment of net sums of money by an exchange’s users to each other, after the clearing process has been completed. It is usually carried out by banks acting as settlement agents on behalf of users.
SPAC (special purpose acquisition company) A collective investment scheme, set up like a shell company, which allows stock market investors to invest in private equity-type transactions such as leveraged buyouts.
spread The difference in yield between a government benchmark bond and another fixed-income instrument with the same coupon rate and redemption date, due to a difference in the perceived credit-worthiness of the issuers. Also used to describe the gap between a broker’s bid and offer prices for an instrument, and the yield difference between two government bonds having different redemption dates
SRI Index (Socially Responsible Investment Index) This index measures company policies, performance and reporting in relation to environmental, social and governance (ESG) principles as well as social sustainability.
SRO (self-regulating organisation) An organisation that has a degree of regulatory authority over its members and their representatives within an industry or profession.
SSFs (Single Stock Futures) A contract that allows investors the right to buy or sell individually listed shares at a fixed price on a future date.
SWIX (Shareholder Weighted Indices) The Indices have been designed to represent the performance of companies listed on the JSE, while providing the investor with indices that exclude foreign shareholding. The constituents of both the FTSE/JSE Shareholder Weighted Top 40 Index and FTSE/JSE Shareholder Weighted All Share Index are identical to the respective headline indices, with the only difference being the constituents’ weightings in the indices. The Shareholder Weighted Indices use the share register to reduce constituent weights by foreign shareholding.
secondary listing Secondary listing status means that once an applicant issuer is listed, it will only be required to comply with the listings requirements of the exchange where it has its primary listing, save as otherwise specifically stated in the listings requirements.
seller’s price The price at which someone is prepared to sell a security. At the end of the day’s trade, there is often a seller who was not able to find a buyer for his shares at the price he wants, so that his price remains in the seller’s column until the next trading day. The lowest seller’s price is reported in papers as it stood at the close of trade on the previous day.
sell-side The part of the financial industry involved with the creation, promotion, analysis and sale of securities. Sell-side individuals and firms work to create and service stock products that will be made available to the buy side of the financial industry. 
settlement The date on which an executed security trade must be settled. Market convention currently stipulates T+5 where trades settle five business days after the trade is executed.
share register A list of active owners of a company’s shares.
shareholder weighted index Calculated by excluding the foreign-held shares in issue for particular security.
silver futures A contract that allows investors the right to buy or sell silver at a fixed price on a future date.
single-equity warrants (Vanilla Warrants) A Vanilla Warrant is one of the most common types of covered warrant traded. It is very similar to a call or a put option. Vanilla Warrants are typically settled by cash, and physical delivery of the stock rarely occurs.
small cap Refers to stocks with a relatively small market capitalisation.
soft commodity A commodity such as coffee, cocoa, sugar and fruit. This term generally refers to commodities that are grown, rather than mined. Soft commodities play a major part in the futures market. They are used both by farmers wishing to lock in the future prices of their crops, and by speculative investors seeking a profit.
speculation Buying shares with the intention of selling them after a very short period, to make a quick profit.
speculator One who takes greater risks in trading financial instruments with the expectation of greater rewards.
sponsor Usually a private equity investment firm engaged in leveraged buyout transactions; companies owned by sponsors may raise equity in public markets through an initial public offering (IPO).
Spot Bond Bonds are long-term loans where borrowers pay bond holders interest over time and repay the full loan amount on the date of maturity; spot deals are transacted on a standard T+3 settlement date and forward deals after T+3 (see T+3).
stock An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation’s assets and profits. Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example, if a company has 1 000 shares of stock outstanding and a person owns 50 of them, then he or she owns 5% of the company. Most stock also provides voting rights, which give shareholders a proportional vote in certain corporate decisions. Only a certain type of company called a corporation has stock; other types of companies such as sole proprietorships and limited partnerships do not issue stock. Also called equity or equity securities or corporate stock.
stokvel Group saving scheme allowing a number of people to pool their savings towards particular objectives.
Strate Share Transactions Totally Electronic. Strate is an electronic settlement system for transactions on the JSE and off-market trades.
surveillance Oversight of a market by a regulatory authority to protect its stability by ensuring that its rules are observed and that traders are always financially able to meet their trading commitments.
suspended share Trading a security may be stopped if there is a lack of, or adverse, financial information on that security – once the security is suspended its shares cannot be traded until the suspension is lifted.
T+3 An equity settlement cycle that comes into effect post-trading, indicating that it takes trade plus three (T+3) business days to settle a trade.
tax A fee charged (“levied”) by a government on a product, income or activity. If tax is levied directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called an indirect tax. The purpose of taxation is to finance government expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning. Since public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good or service, and so they need to be provided by the government or a quasi-government agency, which tend to finance themselves largely through taxes.
time value of money The idea that a Rand now is worth more than a dollar in the future, even after adjusting for inflation, because a dollar now can earn interest or other appreciation until the time the dollar in the future would be received. This theory has its base in the calculation for present value.
trading The buying and selling (i.e. exchange) of already-issued shares.
TRI (Total Return Index) A type of equity index that tracks the capital gains of a group of stocks over time and assumes that any cash distributions, such as dividends, are reinvested back into the index.
today’s high The highest price a share is traded at for the day.
today’s low The lowest price a share is traded at for the day.
Top 40 Dividend Index The FTSE/JSE Top 40 Dividend Index represents the cumulative value of ordinary declared cash dividends announced and paid by the individual constituents of the underlying FTSE/JSE Top 40.
Top 40 Equity ETFs The FTSE/JSE Top 40 Index contains the 40 largest companies in terms of market capitalisation.
underwriting The procedure by which an underwriter brings a new security issue to the investing public in an offering. In such a case, the underwriter will guarantee a certain price for a certain number of securities to the party that is issuing the security (in exchange for a fee). Thus, the issuer is secure that they will raise a certain minimum from the issue, while the underwriter bears the risk of the issue. The process of insuring someone or something. The process by which a lender decides whether a potential creditor is creditworthy and should receive a loan.
unit trusts A collective investment in which investors can buy units.
value investing An investment strategy whereby investors select stocks that trade for less than their real value.
variation margin Refers to a deposit a broker might request from a client so that initial margin requirements of his position keep up with any losses.
volatility A statistical measure that determines a financial instrument’s price variations over time.
volume The number of shares that change hands between sellers and buyers.
WEF (World Economic Forum) An independent international organisation committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas.
WFE (World Federation of Exchanges) The membership association of publicly regulated stock, futures and options exchanges, based in Paris.
warrants A financial security that gives investors the option to buy (call warrants) or sell (put warrants) an underlying asset at an agreed price on or before an agreed date, allowing investors to benefit from both bull and bear markets.
yield The income return on an investment, namely the interest or dividends received.
ZAMACE (Zambian Agricultural Commodities Exchange) Zambia’s sole commodities exchange.