55 terms

Market Structure — 55 terms defined

Every market structure term in the StockTools glossary, in plain language with a worked example — and connected to the free calculator that puts it to work.

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Accredited InvestorAn 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.Market Structure Activist InvestorAn 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. Activists typically disclose their stake and their demands publicly to build support from other shareholders.Market Structure Bear MarketA 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. It is the mirror image of a bull market and the phase most buy-and-hold plans are actually tested against.Market Structure Blue Sky LawsBlue 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. The name comes from early 20th-century concern about promoters selling securities backed by nothing more than "the blue sky."Market StructureBorrow FeeThe borrow fee is the annualized interest rate a short seller pays to borrow shares, charged daily against the position's market value. Easy-to-borrow large caps cost 0.25-1% a year — background noise. Hard-to-borrow squeeze names have printed rates of 100-700% at peak demand.Market Structure BrokerA 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. Every retail trade in the US passes through a broker, whether the client ever thinks about that layer or not.Market Structure Brokerage AccountA brokerage account is the account you open with a broker to hold cash and securities and to place trades. A standard cash account requires paying for securities in full; a margin account lets you borrow against your holdings to buy more than your cash balance alone would allow.Market Structure Bull MarketA 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. It reflects optimism about earnings, the economy, or both, and it feeds on itself: rising prices draw in more buyers, which pushes prices higher still.Market Structure 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. It is published monthly by the Bureau of Labor Statistics.Market Structure CustodianA 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. Custodians typically do not make investment decisions; they hold the assets and handle settlement, recordkeeping, and corporate actions like dividends.Market Structure Days to CoverDays 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. Ten million shares short in a stock that trades two million shares a day is 5 days to cover.Market Structure Dead Cat BounceA dead cat bounce is a brief, sharp recovery inside an ongoing decline that fails and gives way to new lows. The mechanics behind the pop are short covering and dip buyers anchoring to recent higher prices — neither of which is the sustained demand a real bottom requires.Market Structure 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. Price-weighted means a $500 stock moves the index more than a $50 stock, regardless of which company is actually larger.Market Structure 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.Market Structure Ex-Dividend DateThe ex-dividend date is the first trading day a stock trades without the right to its upcoming dividend. Buy the shares any time before the ex-date and you collect the payment; buy on the ex-date or later and the dividend goes to the seller.Market Structure 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. The buyer paid, the shares never arrived, and the trade sits unsettled on the books of the clearing system.Market Structure Fed Funds RateThe 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. The Fed sets a target range, not a single number, and adjusts it at scheduled policy meetings roughly eight times a year.Market Structure 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. It carries out that mandate mainly by setting short-term interest rates and, at times, by buying or selling large quantities of bonds.Market Structure 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. Quarterly GDP growth (or contraction) is the headline number used to describe whether the economy is expanding, stalling, or shrinking.Market Structure Hard to Borrow (HTB)Hard to borrow describes a stock with so little lendable supply that brokers restrict or surcharge short selling in it. The opposite designation is easy to borrow (ETB), where shares are plentiful and the locate is automatic and near-free.Market Structure Hedge FundA 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. Despite the name, many hedge funds take large directional bets rather than hedging in the literal sense.Market Structure IndexA stock index is a calculated number that tracks the combined performance of a defined basket of stocks, serving as the market's scoreboard. The S&P 500 tracks roughly 500 large US companies; the Nasdaq-100 tracks the biggest non-financial Nasdaq names; the Dow tracks 30 blue chips.Market Structure InflationInflation 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. The Federal Reserve targets roughly 2% annual inflation as consistent with healthy growth; sustained readings well above that erode savings and pressure the Fed toward higher interest rates.Market Structure Institutional InvestorAn 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. Institutions account for the large majority of daily US equity trading volume.Market Structure Interest RateAn interest rate is the cost of borrowing money, or the return earned on lending it, expressed as an annual percentage. It is the single input that touches nearly every corner of markets at once: bond prices, mortgage rates, corporate borrowing costs, and the present value of future stock earnings.Market Structure 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. Investment banks underwrite the deal: they build the order book from institutional investors, set the offering price, and typically earn fees around 4-7% of the proceeds.Market Structure LIBORLIBOR (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. It was phased out after a rate-rigging scandal exposed that some banks had been submitting false rates to benefit their own trading positions.Market Structure LiquidityLiquidity 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. A stock trading millions of shares a day with a penny-wide bid-ask spread is liquid; a thinly traded small cap where a single order can move the price 5% is not.Market Structure Lockup ExpirationLockup 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. On that date, the supply of sellable stock can jump from the IPO float to several times that.Market Structure Market BreadthMarket breadth measures how many stocks are participating in a market move, as opposed to how far the index itself traveled. The core reading is advancers versus decliners: 2,400 NYSE stocks up against 500 down is broad strength; an index gain carried by five mega caps while decliners outnumber advancers is narrow.Market Structure Mutual FundA mutual fund pools money from many investors into a professionally managed portfolio, priced once per day at net asset value (NAV) after the close. Enter an order at 10 a.m. or 3:59 p.m. and you get the same price: that evening's NAV. There is no intraday trading.Market Structure NASDAQNASDAQ is the second-largest US stock exchange, launched in 1971 as the first fully electronic market, with no physical trading floor. It became the natural home for technology companies, and its composite index is now dominated by a small number of mega-cap names.Market Structure 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. It uses a hybrid model that still assigns a Designated Market Maker to each listed stock alongside fully electronic trading.Market Structure Preferred StockPreferred 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. It behaves like a bond wearing equity's clothes: the payout is set at issuance (typically a percentage of a $25 or $100 par value), and the price trades mostly on interest rates and credit quality rather than earnings.Market Structure Prime RateThe 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. Consumer products like credit cards and home equity lines of credit are frequently priced as prime plus a spread.Market Structure Pump and DumpA 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. It violates federal securities law, and the SEC and DOJ prosecute both the promoters and, increasingly, paid influencers who tout without disclosing compensation.Market Structure 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.Market Structure RecessionA recession is a significant, broad decline in economic activity lasting more than a few months, visible in GDP, employment, and industrial production. In the US it is formally dated after the fact by the National Bureau of Economic Research, not by the popular shorthand of two straight quarters of negative GDP growth.Market Structure Record DateThe 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. If your shares are settled in your name by the close of the record date, you are on the list.Market Structure Retail InvestorA 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. Retail investors typically trade in far smaller size and do not have the research staff, direct exchange access, or negotiated fees institutions command.Market Structure Reverse SplitA 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. Same $400, fewer shares, higher print.Market Structure Russell 2000The 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. It is reconstituted once a year, when companies that have grown too large roll out and newly-qualifying small caps roll in.Market Structure S&P 500The 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. Larger companies (by float-adjusted market cap) move the index more than smaller ones.Market Structure Secondary OfferingA secondary offering is a sale of stock by a company that is already public, priced and marketed like a mini-IPO. When the company issues new shares, the raise is dilutive — every existing holder owns a smaller slice. When existing insiders sell their own shares, the company gets nothing and the share count is unchanged, but a large holder is cashing out.Market Structure Share BuybackA share buyback is a company repurchasing its own stock, shrinking the share count so each remaining share owns a larger slice of the business. The same net income spread over fewer shares mechanically raises earnings per share: retire 5% of the float and EPS climbs about 5% with zero operational improvement.Market Structure ShareholderA 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. Common shareholders typically get one vote per share on major corporate matters.Market Structure Short InterestShort interest is the total number of a company's shares currently sold short and not yet bought back. It is usually quoted as a percentage of the float: 40 million shares short against a 100 million share float is 40% short interest.Market Structure Short SellingShort selling is selling shares you have borrowed, betting the price falls so you can buy them back cheaper, return them, and keep the difference. Sell borrowed stock at $30, buy it back at $22, and the $8 per share is profit minus borrow costs.Market Structure 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. Unlike LIBOR, which relied on bank estimates, SOFR is derived from real, observable transactions, which makes it much harder to manipulate.Market Structure SPACA 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. The merger is called a de-SPAC.Market Structure Stock ExchangeA 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. Listing on one requires meeting minimum standards for share price, market value, and financial reporting.Market Structure Stock SplitA stock split divides each existing share into multiple shares, cutting the price proportionally while leaving every holder's dollar value unchanged. In a 4-for-1 split, 100 shares at $400 become 400 shares at $100 — same $40,000 position, same ownership percentage, same market cap.Market Structure T+1 SettlementT+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. The US moved from T+2 to T+1 on May 28, 2024, halving the window between execution and settlement.Market Structure Ticker SymbolA 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. US symbols run from one to five letters: AAPL for Apple, KO for Coca-Cola, GOOGL for Alphabet's class A shares.Market Structure VIXThe 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. A VIX of 20 translates to the options market pricing roughly a 20% annualized swing — about 1.25% expected daily moves (20 divided by the square root of 252 trading days).Market Structure