Glossary
Call
No Liability (N.L.) and sometimes Limited Liability (Ltd.) companies have shares that are not fully paid. A call may be made for the payment of part, or all, of this outstanding capital. Holders of shares in N.L. companies may choose not to pay the call and forfeit their shares, hence the name No Liability. Holders of shares in Limited Liability companies cannot forfeit the shares and are legally obliged to pay a call. See contributing share.
Call option/warrant
Option / warrant contract which gives the holder the right, but not the obligation, to buy the underlying asset at the exercise price at or before a fixed expiry date.
Cap
Defined level which limits the upside potential of an investment product.
Capital
For individuals, the money or other assets owned for the purpose of investing. For a company, the funds received from owners or investors to further its business objectives.
Capital depreciation
A decrease in the value of a capital asset.
Capital gain
The difference between what you paid for an asset (including buying costs) and what you got when you sold it (less selling costs).
Capital gains tax
Tax on the profit from the sale of capital assets such as shares or property.
Capital gains tax event
An event such as sale of shares, issue of a loss declaration or cancellation of shares that is recognised by the Australian Tax Office as an event that crystallises a capital gain or loss.
Capital growth
Increase in the value of an asset such as an investment in shares.
Capital guarantee
A product where investors are protected against significant loss of the amount invested. Can contain clauses and performance hurdles that limit the protection. Also called capital protection.
Capital loss
When the proceeds from the sale of a security are less than the cost of the investment.
Capital protected warrants
Warrants where the issuer promises that the investor gets back at least a certain value set out by the issuer.
Capital stable fund
A fund that invests across a range of asset classes but with a significant portion in defensive assets such as fixed interest investments and cash and a small portion in growth assets such as shares and property. This type of fund aims to provide a moderate level of income with some capital growth.
Cash
Currency, coins, cheques, and balances in bank accounts - a current asset.
Cash advance
Cash withdrawn from a credit card account. A transaction fee is usually charged, as well as interest.
Cash commodity
Actual physical asset underlying a futures contract. Sometimes called "spot commodity".
Cash covered
Derivatives position, such as a written option contract, where the option writer meets their margin obligations with cash.
Cash extraction
Strategy where investors apply with their shares to receive a similar amount of instalment warrants plus a cash payment. Not available to self-managed superannuation funds.
Cash investments
Money invested in short-term, interest-paying investments. Having money in a bank account is an example of a cash investment
Cash issues
New issue of shares for cash made to existing shareholders in proportion (e.g. 1 new share for every 2 shares held) to their existing shareholding for the purpose of raising additional capital for the company. It is usually issued at a discount to the market price.
Cash management account
A transaction account used to receive cash from investments such as dividends or proceeds of sales, and from which new investments are purchased.
Cash market
The market for securities and physical commodities. Often referred to as the underlying market.
Cash out facility
Offered by many retailers such as supermarkets, where you can take out extra cash from your cheque or savings account when you pay for purchases with your debit card
Cash price
Price in the market place for actual cash or spot commodities to be delivered via customary market channels.
Cash rate
The interest rate charged on overnight loans between banks. The Reserve Bank of Australia (RBA) sets a target cash rate in order to control monetary policy.
Cash settled warrant
A warrant for which settlement obligations are met by payment of cash from issuer to holder, rather than the purchase or sale of an underlying asset.
Cash settlement
Where settlement is completed by a cash payment rather than sale of an underlying asset.
Caveat
In relation to property law, a caveat is a legal notice that shows who has an interest in your property. You can't register a dealing (for example, to sell the property) until all caveats are removed or you get the consent of any people who hold a caveat. To put a caveat on your property or remove a caveat, contact your state's Land Titles Office.
CDIs CUFS and DIs
A CHESS Depository Interest (CDI) is a financial product quoted on the Australian Securities Exchange which confers a beneficial interest in the foreign financial product to which it relates. CDIs are a type of depository receipt. There are two types of CDIs, CHESS Units of Foreign Securities (CUFS); and Depository Interests (DIs).
Centre Point
ASX trade matching facility for anonymous execution at the prevailing midpoint of the best bid and offer in ASX TradeMatch.
Certificated sub-register
That part of an Issuer's register for a class of its securities that is administered by the Issuer and records legal title to securities through a paper certificate in that class. Note: The register may be of shares, options or other securities.
Chargeback
A return of funds from a retailer or service provider to a consumer's bank account, line of credit or credit card, often initiated by the consumer's bank.
Charting
See technical analysis.
CHESS
ASX's Clearing House Electronic Sub-Register System which is ASX's settlement system and central register for electronic transfer of share ownership and associated cash payments.
CHESS sub-register
That part of an Issuer's register for a class of Approved Financial Products that is administered by ASX Settlement and records legal title to Financial Products through uncertificated holdings in that class. Note: The register may be of shares, options, managed investments or other financial products that are Approved Financial Products under the ASX Settlement Operating Rules.
Child
ATO term - The term 'child' refers to a type of form used by the ATO that has both a 'parent' and 'child' section. It is used when information on the form relates to more than one client. The 'parent' section relates to a super fund while the 'child' section relates to the fund member.
Churning
The process of moving a customer from one financial product to another in order for an adviser or broker to earn a fee. This practice usually has little or no benefit to the customer.
Circulating asset
Assets (e.g. trading stock, debtors) that a company is usually able to use, dispose, and deal with in the ordinary course of business without the need to obtain the secured creditor's consent
Circulating security interest
A security interest held by a secured creditor in circulating assets of a company. Previously known as a 'floating charge'
Class
Securities are in the same class only if the same rights and obligations attach to them. Differences arising from the requirements of the listing rules relating to restricted securities are to be ignored. Example: Partly paid securities are in a different class to fully paid securities. Fully paid securities that rank equally except for the next dividend or distribution are in the same class (but may be traded separately until they merge with the other shares in the class). Fully paid ordinary securities classified as restricted securities are in the same class as fully paid ordinary securities that are not classified as restricted securities.
Class of options
Option contracts of the same type - either call options or put options - covering the same underlying instrument/underlying security.
Classified asset
Asset of a kind referred to in paragraph (a) of the definition of restricted securities in ASX Listing Rules.
Clearing
The process of matching, registering and guaranteeing transactions.
Clearing account
Either an accumulation account (a holder record maintained in CHESS by a broker to facilitate settlement of CHESS approved securities with clients who are not participants) or a settlement account (a holder record maintained in CHESS by a participant non-broker to facilitate settlement of CHESS approved securities with other participants).
Clearing house
Either ASX Clear or ASX Clear (Futures) depending on the instrument.
Clearing participant
Participant of ASX Clear to whom fulfilment of all contracts, registered in their own names, is guaranteed.
Clearout
A clearout occurs when your lender has not been able to get in touch with you, despite making reasonable efforts to contact you.
Closed end fund
Fund that has a fixed number of shares or units on issue.
Closing out
To liquidate a position by taking an equal and opposite position, e.g. a trader who has bought a futures contract, would close out, or get out of the contract, by taking out a contract to sell.
Closing purchase
Trade that liquidates an investor's written position.
Co-borrower
A person who borrows money jointly with you. Each person is responsible for the loan, so if one of you does not pay, the other person must pay the full amount.
Co-cons
ATO term - Co-contributions - A payment made by the government to boost super savings of an individual who has made eligible personal contributions to their super.
Co-contribution
A payment made by the Government to the super fund of a low or middle income earner to reward them for making personal contributions to super. If you earn less than $37,697, the Australian Government will contribute $0.50 for every $1.00 of after-tax super contribution you make, up to a maximum of $500.
Cold call
An unexpected call or visit by an unknown person, trying to sell something.
Collateral
Property or assets you put up as security for a loan.
Collateralised debt obligations (CDO)
A bundle of individual loans such as car loans, credit card debt or corporate debt put together and sold as a single investment
Collectables
Items that are rare or in demand and may increase in value over time. Examples include artwork, antiques, coins and wine.
Commission
A fee paid to an adviser or salesperson as an incentive for selling a particular product. An upfront commission is based on the sale amount of the product. An ongoing commission is based on the balance of the account.
Committee of inspection
A small group of creditors, or their representatives, appointed by the creditors of a company in external administration to assist and advise the external administrator. The committee of inspection monitors the conduct of the external administration, may approve certain steps in the administration and may give directions to the external administrator. The external administrator must have regard to, but is not always required to comply with, such directions
Commutation
Process of converting part or all of a pension or annuity into a lump sum.
Company name
Complete name of listed company, as reported to the Australian Securities Exchange.
Company options (exchange traded options)
Right to take up certain securities on specified terms within or at a specified time.
Company secretary
Person required to be appointed under the Corporations Law and usually having the responsibility for all the record-keeping within the company.
Comparison rate
A rate that helps you work out the true cost of a loan. It includes the interest rate, and most fees and charges relating to a loan, reduced to a single percentage figure.
compliance
In accordance with established legislation and the intent and spirit of the laws and regulations.
compliance activities
ATO term - Direct interventions we initiate to ensure taxpayers comply with their tax and superannuation obligations.
Compound interest
Interest paid on the initial principal and the accumulated interest on money borrowed or invested.
Comprehensive insurance
Cover that provides the policy holder with broad protection. For example, comprehensive car insurance will cover loss or damage to your car and any damage you may accidentally cause to other people's property.
Compromise
Agreement to accept a lower amount in full payment of a debt
Concessional super contributions
Concessional super contributions are payments put into your super fund from your pre-tax income and are tax deductable for self-employed people. They include your employer's super guarantee (SG) contributions.
Condition of release
A nominated event you must satisfy to be able to access superannuation savings. Examples include permanently retiring from the workforce after reaching preservation age, reaching age 65 or becoming totally and permanently disabled.
Confirmation
Written document confirming a transaction between two dealers or a broker and a client which details the costs, type and quantity of shares traded. Also known as a 'Contract note'.
Conflict of interest
A situation in which someone in a position of trust has competing professional and personal interests which could make it difficult for them to remain impartial.
Conservative
Style of investing that seeks to achieve stable returns.
Construction loan
A type of home loan for people who are building their own home.
Consumer credit insurance (CCI)
Insurance that covers you if something happens that affects your capacity to meet the payments on your loan. CCI usually covers risks such as illness, death, disability or involuntary unemployment.
Consumer lease
A consumer lease is an agreement where you get a hire an item (eg tv, fridge, washing machine), receive the item straight away and make regular payments until the term of the agreement finishes. At the end of the agreement term you will have paid more than the purchase price of the goods. These agreements might also be known as a rent to own, rent to buy agreement.
Consumer price index (CPI)
Records the change in purchasing power by measuring changes, over time, in the weighted average price of consumer goods and services such as food, transport and medical care. It represents consumption expenditure by households in Australian metropolitan areas.
Contango
Situation in which futures market prices are progressively higher in the future delivery months than in the nearest delivery month. Contango is the opposite of backwardation.
Contingent asset
An asset that might arise if a certain event occurs (e.g. current legal action taken by a company may result in an asset if the company wins the case)
Contingent liability
A liability that might arise if a certain event occurs (e.g. a current legal action against a company may result in a liability if the company loses the case)
Contract interest
Contract interest is paid daily by holders of long positions and received daily by holders of short positions in ASX CFDs. The Contract Interest Rate is fixed to the target overnight cash rate as determined by the Reserve Bank of Australia.
Contract month
Month in which delivery or cash settlement is to be made in accordance with a futures, options or warrant contract.
Contract multiplier
Number used to determine the dollar value of an index future, option, warrant or CFD contract.
Contract note
Written document confirming a transaction between two dealers or a broker and a client which details the costs, type and quantity of shares traded. Also known as a 'Confirmation'.
Contract size
The number or quantity of the underlying represented by a futures, options or warrant contract.
Contract unit
Amount of the underlying asset to which the contract refers.
Contract value
Value or worth of a contract at the time of making that contract.
Contracts for difference (CFD)
Leveraged instruments that enable you to gain exposure to shares, indices and commodities. Traders can take positions on both rising and falling markets. Profits and losses are magnified. Both long and short positions are exposed to potential margin calls.
Contributing share
Shares that have been partly paid for. At a future date the shareholder will be required to pay the balance outstanding, unless the company is a no liability company in which case shares can be forfeited instead.
Contributory
A shareholder might be liable to contribute toward a company's debt in a liquidation if their shares are not fully paid
Controller
Person who, in ASX's opinion, has a substantial interest in the equity of the holder of, or a substantial economic interest in, restricted securities and each intermediate entity through which that interest occurs.
Controller
A person appointed by a secured creditor to deal with assets subject to a security interest. This includes a receiver and a receiver and manager
Controllership
When a person appointed by a secured creditor to deal with assets subject to a security interest, is dealing with a company's assets that are subject to that person's control (i.e. an appointment of a controller)
Convergence
Process whereby the price of a derivative contract aligns with the price of the underlying financial instrument or commodity. This usually occurs at maturity.
Conversion ratio
Number of warrants that must be exercised to require the transfer of the underlying instrument.
Convertible debt security
Unsecured note or debenture that is classified as an equity security because it is convertible into an equity security.
Convertible note
Loan made to a company at a fixed rate of interest with the right to be either redeemed (i.e. repaid by the company) for cash or converted into ordinary shares at a predetermined date or within a certain period.
Convertible securities
Bond or other debt instrument that can be exchanged for shares of the issuer.
Conveyancer
A conveyancer helps you meet all legal requirements involved with purchasing your home. They'll handle most of the paperwork and questions you have about the process. They review and explain the terms and conditions of the contract.
Cooling-off period
A period of time in which you can get out of a contract for the purchase of goods or services, if you change your mind. The rules on cooling-off periods vary between states and territories. Details of a cooling-off period will be included in the contract, if the good or service has one.
Corporate action
Action taken by an entity for the purpose of giving an Entitlement to Holders of a class of the entity's securities. Examples of corporate actions include rights issues, bonus issues, dividends or other payments, or offers under a buy- back scheme.
Corporate bond
A debt security issued by a company to investors to raise money to finance its business activities. Sometime called fixed-income securities because the issuer promises to pay a specific amount of interest on a regular basis and repay the principle on a set date.
Corporation
A corporation includes all bodies corporate and certain types of unincorporated bodies, but excludes certain corporate bodies.
Corporations law
The national scheme of Australian legislation dealing with the regulation of companies and the securities and futures industries.
Cost of carry
Cost factored into the pricing of derivatives instruments (excluding CFDs). It reflects the cost of holding the underlying over the life of the contract, less the amount that the contract holder would receive in income from the underlying, such as dividends, during this time.
Coupon
Interest payment paid at regular intervals by the issuer to owners of Interest Rate Securities.
Coupon rate
The annual interest rate on a bond, paid by a bond issuer, relative to the face value of the bond.
Court liquidation
A liquidation that starts as a result of court order, made after an application to the court, usually by a creditor of the company
Cover
To cancel a short position in an asset by the purchase of an equal quantity of the same asset. Also known as short covering.
Covered warrant
Warrant issuer places the securities of an underlying warrant in a trust or other custodial arrangement. See also fully covered warrant.
Credit allowed for stale refund cheque
ATO term - After 15 months, a cheque that has not been presented, replaced or cancelled will be pronounced stale. The amount of the cheque will be credited back to a client's account.
Credit card
A plastic card that gives you access to money the bank has agreed to lend you for a certain period of time.
Credit contract
A document that contains the details of a loan, including the term interest, rate, fees and charges, and repayments. Credit providers must provide you with a credit contract.
Credit file
A file kept by a credit reporting agency that shows your credit history. Lenders access the information in your file to help them decide whether to lend to you.
Credit guide
Anyone engaging in credit activities (for example, by providing credit or credit assistance to you) must give you a credit guide. A credit guide will contain information about the lender, such as their licence number and external dispute resolution(EDR) scheme membership. It will also include the sort of costs you might pay if you take a loan from the lender.
Credit interest
ATO term - The ATO pays interest if we are late paying contributions to the super fund. The transfer is late if it occurs more than 60 days after we have all the relevant information required to calculate the entitlement. Interest will also be applied to most USM claims paid after 1 July 2013.
Credit limit
The maximum amount a bank will lend you under a loan or a credit contract.
Credit offset
ATO term - A credit which has been offset against another debt.
Credit rating
An assessment of the credit-worthiness of individuals and corporations, based on their borrowing and repayment history.
Credit report (credit reference)
A report that details your credit history, including every time you have applied for credit or defaulted on a repayment. It is held by a credit reporting agency and a lender must ask you for permission to get this report.
Credit reporting agency
An organisation that collects and sells credit information on individuals and companies.
Credit transferred in from superannuation
ATO term - Occurs when a payment has been transferred from another ATO account into a customer's super co-contribution account.
Credit union
Community-based financial institution owned by its members that offers traditional banking services like savings accounts and loans, listed on the APRA website as a credit union. See also building society
Creditor
A person who is owed money
Creditor-defeating disposition
The disposition of property for less than the market value of the property or the best price reasonably obtainable, and which prevents, hinders or significantly delays the property from becoming available to benefit creditors in the winding up.
Creditors' trust
A separate legal arrangement to deal with creditor claims. Creditor claims are often transferred to a creditors' trust as part of a deed of company arrangement
Creditors' voluntary liquidation
A liquidation for insolvent companies, initiated by the company's director(s) and shareholders
Critical Information Summary (CIS)
A document supplied by a telecommunications provider that contains information about what you will pay and what you will get for your money. The information is presented in the same way so you can easily compare one provider's price and service with others.
Crossed trade
Where both the buy and sell parties (unrelated entities) are from the same market participant.
Cum (general)
Meaning "with". Cum dividend means that shares are being traded with the current dividend attached and thus the buyer rather than the seller receives the dividend declared. Cum-Rights Shares quoted "cum-rights" entitle the buyer to participate in a New Issue of shares then current.
Cum-dividend
Cum means 'with'. Shares quoted cum dividend entitle the buyer to the current dividend. The price of the shares will usually reflect the amount of the dividend. Similarly, shares 'cum rights' entitle the buyer to participate in the new issue of shares. The opposite is ex-dividend.
Cumulative preference dividends
Dividends on preference shares that accrue as a commitment of the company if they are not paid in any year. Arrears of cumulative preference dividends must be paid before any dividends are paid to ordinary shareholders. Unless specifically stated to be non-cumulative, dividends on all preference shares are deemed to be cumulative.
Currency risk
The risk that the value of your investments will be affected by changes in foreign currency exchange rates.
Currency warrants
Give holders exposure to movements in two different currency exchange rates.
Current assets
Cash or other assets of the entity that would in the ordinary course of operations of the entity be consumed or converted into cash within twelve months after the end of the last financial year of the entity.
Current delivery (month)
The derivatives contract which matures and becomes deliverable during the present month; also called the spot month.
Current liabilities
Obligations that are expected or could be required to be discharged on demand or within twelve months. In a company's annual report, this figure shows the amount of debt due to be repaid within twelve months.
Current ratio
A measure of liquidity that shows a company's ability to pay its short-term debts.
Current Ratio = (Current assets / Current liabilities) = number of times covered
