Market Structure Flashcards

All 55 terms in this deck

The full list, for reference and search.

Accredited Investor

An accredited investor is someone who meets SEC income or net worth thresholds (currently $200,000 in annual income, $300,000 jointly, or $1 million in net worth excluding a primary residence) that qualify them to invest in unregistered securities like hedge funds, private placements, and many venture deals.

Activist Investor

An activist investor buys a meaningful stake in a public company specifically to pressure management into changes, such as cutting costs, selling a division, replacing executives, or returning cash to shareholders.

Bear Market

A bear market is a decline of 20% or more from a recent high, typically accompanied by pessimism about earnings or the economy and often (but not always) a recession.

Blue Sky Laws

Blue sky laws are state-level securities regulations that require companies offering securities to register the offering and disclose meaningful information, aimed at preventing fraudulent investment schemes.

Borrow Fee

The borrow fee is the annualized interest rate a short seller pays to borrow shares, charged daily against the position's market value.

Broker

A broker is a licensed firm or individual that executes buy and sell orders on behalf of clients, acting as the intermediary between an investor and the exchange or market maker on the other side of the trade.

Brokerage Account

A brokerage account is the account you open with a broker to hold cash and securities and to place trades.

Bull Market

A bull market is a sustained period of rising prices, most often defined as a broad index climbing 20% or more from its low without a comparable reversal.

Consumer Price Index (CPI)

The CPI measures the average change over time in prices paid by consumers for a fixed basket of goods and services, from groceries to rent to gasoline, and it is the most widely quoted gauge of inflation.

Custodian

A custodian is a financial institution that holds securities and other assets on behalf of clients, providing safekeeping separate from whoever manages or advises on those assets.

Days to Cover

Days to cover is short interest divided by average daily trading volume — the number of typical trading days it would take every short seller to buy back their position.

Dead Cat Bounce

A dead cat bounce is a brief, sharp recovery inside an ongoing decline that fails and gives way to new lows.

Dow Jones Industrial Average (DJIA)

The Dow is a price-weighted index of 30 large, established US companies, first published in 1896 and still one of the most quoted market benchmarks despite covering far fewer companies than the S&P 500.

ETF (Exchange-Traded Fund)

An ETF is a fund that holds a basket of assets and trades on an exchange like a single stock — buy SPY and you own a sliver of all 500 S&P companies with one ticker, tradable any second the market is open.

Ex-Dividend Date

The ex-dividend date is the first trading day a stock trades without the right to its upcoming dividend.

Failure to Deliver (FTD)

A failure to deliver happens when the seller of a security does not hand over the shares by the settlement date — under the US T+1 cycle, one business day after the trade.

Fed Funds Rate

The fed funds rate is the interest rate the Federal Reserve targets for overnight loans between banks, and it is the primary lever the Fed uses to tighten or loosen financial conditions across the whole economy.

Federal Reserve (The Fed)

The Federal Reserve is the US central bank, tasked by Congress with a dual mandate of stable prices and maximum employment.

Gross Domestic Product (GDP)

GDP is the total dollar value of all goods and services produced within a country over a given period, and it is the broadest single measure of economic size and growth.

Hard to Borrow (HTB)

Hard to borrow describes a stock with so little lendable supply that brokers restrict or surcharge short selling in it.

Hedge Fund

A hedge fund is a pooled investment vehicle for wealthy individuals and institutions that uses a wider toolkit than a typical mutual fund, including short selling, leverage, and derivatives, in pursuit of returns that are not simply tied to a rising market.

Index

A stock index is a calculated number that tracks the combined performance of a defined basket of stocks, serving as the market's scoreboard.

Inflation

Inflation is the rate at which prices for goods and services rise across the economy, eroding the purchasing power of a fixed amount of money over time.

Institutional Investor

An institutional investor is an organization, rather than an individual, that pools large amounts of capital to invest: pension funds, mutual funds, hedge funds, insurance companies, and endowments.

Interest Rate

An interest rate is the cost of borrowing money, or the return earned on lending it, expressed as an annual percentage.

IPO (Initial Public Offering)

An IPO is the first sale of a company's shares to the public, converting a private company into one listed on an exchange.

LIBOR

LIBOR (the London Interbank Offered Rate) was, for decades, the benchmark interest rate banks charged each other for short-term loans, and it underpinned trillions of dollars of mortgages, corporate loans, and derivatives worldwide.

Liquidity

Liquidity is how easily an asset can be bought or sold at a price close to its last traded price, without the act of trading itself moving that price.

Lockup Expiration

Lockup expiration is the date insiders and pre-IPO investors become free to sell shares they were contractually barred from selling after a company's debut — typically 90-180 days post-IPO.

Market Breadth

Market breadth measures how many stocks are participating in a market move, as opposed to how far the index itself traveled.

Mutual Fund

A mutual fund pools money from many investors into a professionally managed portfolio, priced once per day at net asset value (NAV) after the close.

NASDAQ

NASDAQ is the second-largest US stock exchange, launched in 1971 as the first fully electronic market, with no physical trading floor.

NYSE (New York Stock Exchange)

The NYSE is the largest stock exchange in the world by the total market value of its listed companies, operating from Wall Street in New York since 1792.

Preferred Stock

Preferred stock pays a fixed dividend and ranks ahead of common shares in the capital stack, but it usually carries no voting rights and no claim on the growth of the business.

Prime Rate

The prime rate is the interest rate large commercial banks charge their most creditworthy corporate customers, and it moves in lockstep with the Fed funds rate, typically sitting about 3 percentage points above it.

Pump and Dump

A pump and dump is illegal market manipulation: promoters accumulate a thinly traded stock, inflate the price with coordinated hype and misleading claims, then sell their shares into the buying they created, leaving late buyers with a collapsing stock.

Quantitative Easing (QE)

Quantitative easing is a central bank policy of buying large quantities of bonds (usually government bonds) to inject money into the financial system and push down longer-term interest rates, used when short-term rates are already near zero and conventional rate cuts have no more room to work.

Recession

A recession is a significant, broad decline in economic activity lasting more than a few months, visible in GDP, employment, and industrial production.

Record Date

The record date is the day a company takes a snapshot of its shareholder register to determine who receives a declared dividend or gets to vote at a shareholder meeting.

Retail Investor

A retail investor is an individual who buys and sells securities for a personal account, as opposed to an institution trading on behalf of pooled client or company money.

Reverse Split

A reverse split merges multiple shares into one, multiplying the price while leaving each holder's dollar value unchanged: in a 1-for-10, 1,000 shares at $0.40 become 100 shares at $4.00.

Russell 2000

The Russell 2000 tracks 2,000 small-cap US stocks and is the standard benchmark for small-cap performance, the way the S&P 500 is the standard for large caps.

S&P 500

The S&P 500 is a market-cap-weighted index of roughly 500 large US companies chosen by a committee to represent the broad economy, and it is the benchmark most US fund managers and retirement accounts are measured against.

Secondary Offering

A secondary offering is a sale of stock by a company that is already public, priced and marketed like a mini-IPO.

Share Buyback

A share buyback is a company repurchasing its own stock, shrinking the share count so each remaining share owns a larger slice of the business.

Shareholder

A shareholder is anyone who owns at least one share of a company's stock, which makes them a partial owner of that company with a claim on its residual profits and assets after all other obligations are paid.

Short Interest

Short interest is the total number of a company's shares currently sold short and not yet bought back.

Short Selling

Short selling is selling shares you have borrowed, betting the price falls so you can buy them back cheaper, return them, and keep the difference.

SOFR (Secured Overnight Financing Rate)

SOFR is the US benchmark interest rate that replaced LIBOR, based on the actual cost of borrowing cash overnight using US Treasury securities as collateral.

SPAC

A SPAC (special purpose acquisition company) is a shell corporation that IPOs with no business — just cash in trust, almost always $10.00 per share — and a mandate to merge with a private company, taking it public through the back door.

Stock Exchange

A stock exchange is a regulated marketplace where buyers and sellers trade listed securities under a common set of rules: standardized contracts, published prices, and a central mechanism for matching orders.

Stock Split

A stock split divides each existing share into multiple shares, cutting the price proportionally while leaving every holder's dollar value unchanged.

T+1 Settlement

T+1 settlement means a securities trade becomes final one business day after the trade date: sell stock on Tuesday and the cash is officially yours Wednesday.

Ticker Symbol

A ticker symbol is the short letter code an exchange assigns to a listed security so it can be quoted and traded without spelling out the company name every time.

VIX

The VIX is Cboe's index of expected S&P 500 volatility over the next 30 days, computed from the prices of a strip of SPX options.