Also called safe deposit box which banks lease to their customers in burglarproof and fireproof vaults. The purpose of bank safes is the safe storage of valuables.
Securities can be deposited with banks for safekeeping and administration. A safe custody account (the counterpart of an account for money transactions) is set up for each customer; it indicates the types, nominal amounts or quantities, code numbers etc. of the securities deposited, as well as the name and address of the depositing party (custody account-holder). These regulations apply to jacket custody and analogously to collective custody. For checking purposes, banks maintain two types of safe custody ledgers: personal custody accounts and asset custody accounts. The former classification is by name of the custody account-holder, the latter by type of security. Asset custody accounts are especially important for the administrative work carried out by banks. Special types of custody accounts include joint or trustee securities accounts. Collective custody is more efficient and less costly than jacket custody. The German Safe Custody Act (DepotG) constitutes the legal basis for the safekeeping and administration of securities by banks. It serves to protect persons who deposit their securities with banks, particularly in the event of bankruptcy of the depository bank.
The price banks charge their customers for managing their securities portfolios. This includes, above all, safe custody and administrative services. The latter includes expenses incurred in connection with interest and dividend payments as well as capital repayments. The related costs are charged to custody account-holders as safe custody charges on a quarterly or annual basis.
Bank account onto which employers makes regular salary or wage payments for their employees; also referred to as giro account, current account or personal account.
Special form of leasing whereby a company sells assets to a leasing company and immediately leases them back for further use. With the proceeds received from the sale the company frees up capital and increases its liquidity in the short term while retaining the use of the asset. The regular leasing payments may have a negative effect over time. Moreover, the company is no longer the owner and thus no longer benefits from future increases in value unless the company has an option to buy the asset at its residual book value for tax purposes at the end of the leasing period and exercises this option. Frequently, a company's aim is to disclose hidden reserves to improve its earnings. Sale and leaseback transactions are usually carried out in the real estate sector as a means of avoiding paying the normal rate of inheritance tax or gift tax to the tax authorities when the property is transferred (e.g. to the next generation).
Settlement of a trade on the same business day. The clearing company Clearstream for example settles orders between business partners the same day if it receives the orders by 10 a.m. via paperless data transfer.
A type of bank with business activities defined in the German Act concerning Savings and Loan Associations as comprising the taking of deposits from customers, on the basis of whose accumulated deposits loans are subsequently granted for the financing of homebuilding measures. Savings and loan associations are banks pursuant to § 1 German Banking Act (KWG).
In Germany, savings banks are public sector banks pursuant to § 1 German Banking Act (KWG) which, on the basis of the savings bank laws of the federal states and the corresponding articles of association issued for each savings bank, generally conduct all standard banking transactions with private clients, companies, local authorities and institutional customers. Guarantors of savings banks are local authorities (cities, administrative districts) or public sector unions.
The most common form of saving in Germany. The interest rate (basic savings rate) is variable but can be fixed for a certain period through an agreement between the customer and the bank. Interest is credited to the account at the end of each calendar year or upon closure of the account. The bank can pay over funds with debt-discharging effect to any person presenting the savings book. The bank, however, is not obliged to pay over funds without checking that person's identity. Banks can grant customers the right to withdraw a maximum of EUR 2,000 per calendar month without observing a period of notice. If in individual cases banks allow customers to withdraw sums above the agreed limit, an early withdrawal penalty is charged. Savings books are increasingly being replaced by so-called Sparcards.
A savings certificate is a fixed-income investment product offered by banks. Terms range up to ten years. Interest rates are fixed over the entire term and thus fixed in advance. In the case of savings certificates with normal interest rates, savers invest a certain amount for which interest is credited annually. With discounted savings certificates, interest and compound interest for the entire term is added to the purchase price, as a result of which the purchase price is significantly below its face value (repayment amount). It is generally not possible to return savings certificates prior to maturity.
The Schutzgemeinschaft für allgemeine Kreditsicherung, a German credit rating agency, is a joint institution of Germany's banking industry. It provides information to its contract partners to protect them against losses in consumer credit transactions and mortgage loans. However, it also serves to protect consumers against excessive debt. Details concerning the granting of current accounts, credit and non-contractual behaviour resulting from such contracts are stored at the SCHUFA and made available to the contract partners. By signing the so-called SCHUFA clause, the customer consents to the transfer of data.
A scrip is understood to be the actual security certificate (e.g. the share or bond). In exchange, the investor receives the sheet with the interest or dividend coupons and the renewal coupon (talon).
New shares issued in a capital increase from company funds are known as scrip shares or bonus shares. They are issued to a company's shareholders at a certain ratio to existing shares for no consideration. In the balance sheet, reserves are converted into share capital; this transfer between positions under shareholders' equity has no effect on the company's overall equity situation. Existing shareholders are not given something for nothing as a result of this corporate action alone, because they already participated in the reserves beforehand with their shares. The frequently used term "bonus share" is therefore a little misleading.
The price of the shares existing before the corporate action is reduced by this issue of new shares under the capital increase. In purely arithmetic terms, however, the value of a shareholder's shareholding remains unchanged after the transaction. However, the shareholder does profit from the capital adjustment if he receives an unchanged percentage dividend on the new shares. In this case, owing to the higher return, the price of the shares could increase after the scrip share issue. Often, though, the optical reduction of the share price connected with the share split is enough to cause an increase in the share price.
The SDAX® is the index comprising 50 small companies, so-called small caps, which have a lower trading volume and market capitalization than the shares listed in the MDAX®. The index is continually calculated by Deutsche Börse each trading day as a price and performance index. The composition of the SDAX® is reviewed semiannually and adjusted if necessary.
The counterpart of the primary market referring to the market for outstanding securities, above all equities and bonds. The stock exchanges are the most important secondary markets.
New public offering of corporate equity already listed on the stock exchange. This typically involves placing shares of major shareholders, family members or other privately held shares with new shareholders.
Purchase of investments from the portfolio of a venture capital firm by another private equity company. This is how venture capital funds sell portfolio companies that are not performing according to plan and which would otherwise have to be written off completely. In some cases, the entire (residual) portfolio of the venture capital firm is sold if a follow-on financing is uncertain. Typically, the buyer acquires holdings that are in a mature stage, avoiding the riskier early stage of financing. For the startup company, a secondary purchase usually entails significant risks but, in some cases, is its only chance of survival.
The Securities Acquisition and Takeover Act (WpÜG), which took effect on January 1, 2002, regulates offers to acquire shares or comparable securities at joint stock companies or partnerships limited by shares domiciled in Germany. The Act distinguishes between simple acquisition offers, takeover bids and mandatory bids. Takeover bids are defined as bids aimed at exceeding a control threshold of 30% of voting rights. Whoever exceeds the control threshold of 30% without having made a takeover bid in advance must make a mandatory bid. Special rules apply to takeover and mandatory bids, among other things, on the consideration of the bidder, the bid price and the scope for action of the management board of the target company.
The SEC (Securities and Exchange Commission), created by federal law in 1934, is the securities and market regulator in the U.S. Its tasks comprise monitoring the integrity and regularity of trading as well as compliance with exchange regulations. The SEC has extensive control and sanction powers.
Keeping securities in collective custody with central securities depositories is a secure, efficient and convenient way of administering securities. However, securities must be registered and authorized for collective custody. Transfer of title is carried out by book transfer, i.e. without physical delivery. The safe-custody accountholder is entitled to a certain share of the collective securities holdings.
Act governing the safekeeping and acquisition of securities. The Securities Deposit Act serves to protect depositors' securities ownership rights in the course of safekeeping business and to promote securities ownership.
Identification number that allows a clear identification of securities and thus facilitates securities trading. In Germany the securities identification number (WKN) is a six-figure number. The International Security Identification Number (ISIN) is a worldwide classification index that was also introduced as a standard in Germany in 2003. The WKN is included in the German ISIN. The twelve-digit ISIN is made up of a two-digit country code, a nine-digit national code and a verification code. The WKN is included in the sixth to eleventh digit.
In securities lending, owners of securities lend their securities or bonds on condition that, upon expiry of a typically very short lending period of a few days, securities of the same type and quality are returned. The borrower pays the lender a fee in return. During the lending period, the lender can use the securities to meet his own delivery obligations while the borrower can boost the performance of his securities account.
The purchase of securities eligible as collateral by the central bank with simultaneous agreement on repurchase at a specific future date. The securities in question must be listed on a stock exchange in official trading or the regulated market. A monetary policy tool: the central bank can, among other things, steer the allocation of central bank funds to banks through securities repurchase agreements. In the allocation of securities repurchase agreements, a distinction is made between fixed and variable rate tenders.
In Germany, securities are regulated according to a three-tier structure: the Federal Financial Supervisory Authority BaFin) as the highest authority, the stock exchange supervisory authorities of the federal states and the trading supervisory offices of the stock exchanges. Their aim is to ensure the viability of the German market for securities and derivatives trading in accordance with the Securities Trading Act (WpHG). This is done, for example, by fighting insider trading and creating greater transparency.
The Securities Trading Act (WpHG) regulates the securities industry and securities trading in Germany. Among other things, it defines ad hoc rules and insider trading rules. The Federal Financial Supervisory Authority (BaFin) is responsible for monitoring compliance with the rules.
Creation of tradable securities from loan claims, deposit positions and ownership rights in the wider sense. Examples of securitized rights are asset-backed securities and mortgage-backed securities (MBS). Rights are often evidenced through so-called SPVs (special purpose vehicles), companies whose sole purpose is to issue these securities and whose assets are comprised of the ownership rights contributed to the company.
An instrument for capital raising and capital investment purposes. The term securities generally refers to fungible (marketable) securities. Securities can be in the form of equities, bonds and other debt instruments. Securities do not include banknotes, bills of exchange and cheques, for instance. A securities trade is understood to be the purchase or sale of securities for own or third-party account.
Document evidencing a private right through possession of that document in order to assert the right. Securities are, for example, banknotes, cheques, bills of exchange, shares, bonds, mortgage certificates, etc. Transfer of the rights requires the presentation or submission of the security. More strictly speaking, securities are marketable securities, including debt securities, shares and investment certificates.
Equity capital invested in business start-ups by venture capital firms or wealthy individuals to finance research and development to lead a product or service to market maturity.
Component of company financial reporting. Provides information on a company's key businesses and its environment. Apart from providing information on the company's asset, financial and earnings situation, risks and opportunities are also addressed. Segment reporting is primarily based on the operative segments of the company and reflects the company's internal organizational and reporting structure.
Forward transatcion in which the seller sells securities that he does not own. He hopes to be able to cover the securities by the performance date at a cheaper price than at the closing of the contract and thus to take in the difference as profit.
SEPA stands for the Single Euro Payments Area in Europe. The SEPA credit transfer payment scheme launched in January 2008 affects all cross-border and domestic euro payments in SEPA countries. Under SEPA, the maximum execution timeframe for a basic credit transfer in euro is three banking days (this maximum execution time will be cut to one banking day as from 2012). Payments will be made using the BIC (Bank Identifier Code) and IBAN (International Bank Account Number) to identify the beneficiary’s account.
Also jacket custody. Securities held in separate custody are kept separate from holdings of the bank or third parties. Securities are held in separate custody if they are not admitted to collective custody by a securities clearing and deposit bank, or at the depositor's request. The name of the owner is noted on the strip of paper wrapped around the securities. The advantage of separate custody for the customer is that he can receive the original of the securities deposited with the bank. Opposite: collective custody.
This expression refers to the punctual payment of an interest or capital debt relating to fixed-income securities. Service in this sense also covers redemption. Interest payments are mostly annual, sometimes semi-annual or made in one sum at the end of the maturity.
Execution of a financial transaction, in particular a forward contract. A distinction is made between cash settlement (settlement by cash payment of the difference between the strike price and the market price of the underlying asset) and physical settlement (delivery of the underlying asset).
The share is a security which embodies an equity ownership right in a company. Shares are issued by joint stock corporations (Aktiengesellschaft/AG) or limited partnerships based on shares (Kommanditgesellschaft auf Aktien/KGaA). In its external form, the share consists of a share certificate and a dividend coupon sheet with talon. The owner of a share, the so-called "shareholder", owns a share of the company's share capital - in percentage terms or in the nominal amount printed on the share. The rights securitized by a share are regulated in the Stock Corporation Act and in the respective company's Articles of Association. A shareholder's basic rights include the right to attend the AGM, the right to vote at the AGM, the right to a share of the companys profits, the right to subscribe to new shares (pre-emptive right), the right to information and the right to a share of liquidation proceeds.
Subscribed capital of a joint-stock company, divided up into equity shares. The statutory nominal capital is at least 50,000 euros, but is usually much higher. The par value indicates the fraction of a company's nominal capital represented by a single share. No-par shares, on the other hand, securitize ownership in proportion of the number of shares owned to the company's total number of shares. Share capital can only be raised or decreased with the approval of the General Meeting.
A share index is a key figure showing the development of share prices in a certain segment of the stock market. Its purpose is to document on a representative basis the development of this sub-section of the global financial market. Share indices can be sub-divided into "all share" indices, "selection" indices or "sector" indices. Among the best known indices are the DAX®, the Dow Jones Industrial Average Index and the Standard & Poor's 500 Index in the U.S.A., the Financial Times Index in the United Kingdom and the Nikkei Index in Japan. In general, share indices are a simple, but useful, gauge of sentiment (stock market barometer) for business activity in national economies or for the development of certain industries or sectors of the economy.
In a share split of, for example, 1 for 5, a shareholder receives five new shares for one share without having to pay consideration. The part of share capital represented by the share, however, is reduced in accordance with the split ratio. In the case of shares with a nominal value, the nominal value of the share is reduced accordingly. A share split is often carried out to make a share appear cheaper and therefore to encourage investors to buy it. The shareholder's share of ownership in the company is unchanged after the share split. The company's share capital is simply spread out over more shares than before the split.
The owner of shares is referred to as the shareholder. He has certain membership rights, which are regulated in detail in the Stock Corporation Act. His most important rights include the right to attend the AGM, the right to vote, certain rights to information, the right to subscribe to new shares (pre-emptive right), and the right to a share of liquidation proceeds. In addition, the shareholder is entitled to a share of the company's profits, provided the profits are not excluded from distribution to the shareholders by legislation, the articles of association (e.g. the obligation to form reserves) or by a resolution passed by the shareholders in general meeting. The shareholder has no direct influence on the management of the company. However, he can be invited by the management board to participate in decisions taken by the annual general meeting on specific questions of management. He acquires membership by subscribing to, or purchasing, the shares and he reliquishes ownership by selling his shares. Only his investment is liable for the company's financial obligations.
Shareholder value refers to the benefit (capital gains and dividends) accruing to shareholders from their investment. The shareholder value approach contains all aspects of company management aimed at increasing the long-term value of the company.
Shareholders' equity is an item on the liabilities side of the balance sheet. It includes subscribed capital (share capital), additional paid-in capital, retained earnings, profit or loss brought forward, and the net income or loss for the year. Without equity capital it is virtually impossible to obtain debt financing as lenders require borrowers to have sufficient liable capital.
Special form of Pfandbrief. Ship Pfandbriefe are issued on the basis of the law on ship mortgage banks to obtain long-term funds for shipbuilding. They are covered by ship mortgages.
By selling a security that he does not (yet) own, the seller has a short position in that paper. This transaction is based on the speculation that the price of the security will fall. Someone, for example, sells a share he does not own in order to buy it more cheaply on the market. The concept of "going short" is also referred to as short selling. Opposite: long position.
They are understood to be fixed-interest securities with maturities of up to four years. They have less price volatility than long-term bonds, which is why investors prefer them, in particular, during phases of uncertain or rising interest rate trends.
Price calculated only once per trading day, usually halfway through the exchange session, for shares in the Official Market segment. This price is determined primarily for stocks which, owing to their small trading volume, are not admitted to continuous trading. The lead broker collects all buy and sell orders on any given day and establishes the single cash price (or cash settlement price) that allows the greatest number of shares to change hands (principle of highest volume transacted). Single cash prices are also determined for stocks admitted to continuous trading if there are orders that cannot be executed for lack of a suitable counterparty at the time the single cash price is fixed.
Unit of payment and account of the International Monetary Fund through which its members can, if necessary, obtain loans to meet their international payment obligations.
Type of investment which, in contrast to retail funds, is not issued to the general public but offered to a limited group of investors. Special funds are tailored to the needs of certain institutional investors (not natural persons), for instance insurance companies, pension funds and social security organizations.
These funds are regulated by law and are subject to specific investment guidelines suited to the requirements of private provision for retirement. They offer a balanced portfolio inasmuch as they combine the advantages of investments in equities with investments in fixed-income instruments and real estate fund units. Special funds for retirement provision are governed by special conditions. Investments are mainly in securities backed by real assets. The equities portion is limited to a maximum of 75%; the portions invested in open-ended real estate funds and directly owned real estate are limited to a maximum of 30%. Revenues from special funds for retirement provision are not distributed, but have to be re-invested by the fund management company.
Depending on the volume of their business, banks can be divided into universal banks and specialized banks. Specialized banks generally restrict themselves to one or a few banking services pursuant to § 1( 1) German Banking Act. Specialized banks include, in particular, mortgage banks, building societies, special purpose banks (e.g. Industriekreditbank AG, the Landwirtschaftl. Rentenbank, the Deutsche Ausgleichsbank, etc.), capital investment companies (e.g. DWS), central securities depositories (e.g. Deutsche Börse Clearing AG) and guarantee banks.
Specialized funds differ from normal investment funds in that they are focused on specific countries, industrial and business sectors or on specific securities such as convertible bonds or bonds with warrants. Investing in specialized funds requires a higher risk appetite and an understanding of business issues. Apart from the higher potential gains, the restriction to specific market segments also involves greater risks.
Originally: risky transactions made in an attempt to anticipate future events; in other words, buying and selling on the basis of (anticipated) price movements, particularly on securities, commodities and property markets, and in stock market trading. A speculator buys securities hoping for a rapid rise in the market price and that he will be able to resell them at a profit (bull), or sells securities on the assumption that market prices will continue to fall, enabling him to buy them back cheaply (bear).
Period during which gains from the private sale of securities are taxable. In Germany, the speculation period for securities is 12 months. Capital gains arising from the purchase and sale of securities during this period are subject to income tax. Gains are offset against losses made in the corresponding year. A total net gain of less than EUR 512 per calendar year is tax-exempt. If the tax exemption limit is exceeded, all gains made within the speculative gain is taxable.
For a split-coupon bond, the interest rate does not remain constant over the entire term. However, the amount of interest earned is fixed in advance and does not depend on developments on the capital markets. The interest rate changes according to a schedule agreed at the time of issue. The agreement generally provides for several interest-free years with an above-average coupon for the remaining years.
In securities trading, the difference (spread) between the best buy and sell price for a security at a certain time. The narrower the gap between the bid and ask price, the higher the market liquidity of the security and the lower the transaction costs for the investor. The term is also used to compare two different interest rates, for example the difference between the interest rate of a fixed-income security to a benchmark security (e.g. government bond, Pfandbrief) or a reference rate (EURIBOR, LIBOR).
If a majority shareholder - either directly or indirectly - holds at least 95% of the share capital of a German company, he can buy out the company's remaining shareholders against a reasonable cash payment. A squeeze out requires a resolution by the General Meeting taken at the request of the majority shareholder. Upon entry of this resolution into the Commercial Register, the shares of the squeezed-out minority shareholders are transferred by operation of law to the majority shareholder. The appropriateness of the cash payment can - once the squeeze out has been carried out (entry of the resolution on the transfer of shares into the Commercial Register) - be reviewed by a court under arbitration proceedings initiated by a former shareholder.
Shares issued to the employees of a joint stock corporation to enable them to participate directly in the company's business performance or risk. Buyers of staff shares are usually subject to a black-out period of up to five years for the sale of their shares. Otherwise, the shares carry the same rights as other shares.
Stakeholders include, apart from the shareholders (the owners), employees (including management), customers (e.g. demanding quality and reliability), suppliers, capital markets (including lenders) and the government (e.g. claim on tax revenues, environmental protection) and the general public (political parties, associations, the media etc.). In contrast to the shareholder value principle, which is centered on the needs and expectations of the company's owners (e.g. the shareholders of a stock company), the stakeholder principle attempts to assess the company in its overall socio-economic context and reconcile the interests of the various stakeholder groups.
The European Central Bank (ECB) offers commercial banks the opportunity to obtain credit within defined limits (marginal lending facility) or invest unlimited deposits (deposit facility). The interest rates of both of these facilities generally represent the upper and lower limit of the overnight rate (EONIA) in the euro area. Prior to the introduction of the euro, the interest rate corresponding to the interest rate of the marginal lending facility, was the Lombard rate in Germany, while the discount rate was the rate corresponding to the interest rate of the deposit facility. The interest rate of the marginal lending facility is typically significantly higher than the corresponding market rate and the interest rate of the deposit facility significantly lower than the corresponding market rate. Banks therefore only use these facilities when they have no alternative.
Instructions issued by a payer to his bank to pay fixed sums to a specified recipient at regular intervals. Standing orders are primarily used to pay rent, insurance premiums, taxes and the like. A direct debit order differs from a standing order inasmuch as the payee initiaties the transaction based on anauthorization to withdraw funds from the payer's account.
A place where dealers meet regularly to conclude commercial transactions in negotiable assets, especially securities and commodities. A stock exchange brings supply and demand together in the same way as a market. The aim is to facilitate the conclusion of contracts according to standard business conditions between persons admitted to trading.
The German Stock Exchange Act regulates the organization of the German stock exchanges. It consists of six sections: 1. General provisions on exchanges and exchange bodies; 2. Pricing on stock exchanges and the broker system; 3. Admission of securities to stock exchange trading on the official market; 4. Admission of securities to and their inclusion in trading on the regulated market; unofficial regulated market; 5. Provisions concerning electronic trading facilities and quasi-stock-exchange systems; 6. Provisions on penalties and fines; concluding provisions.
Place at which a stock exchange is located. In the Federal Republic of Germany, there are seven stock exchanges: Berlin-Bremen, Düsseldorf, Frankfurt am Main, Hamburg, Hanover, Munich and Stuttgart. Up to the First World War, there were 29 stock exchanges in Germany, including the product exchanges. In 1935, there were still 21, reduced to nine after the National-Socialist stock exchange reform: Berlin, Breslau, Düsseldorf, Frankfurt, Hamburg (including Bremen), Hanover, Leipzig, Munich and Stuttgart.
The council consists of 18 honorary members elected for 3 years. They include representatives of banks, market participants, issuers and capital investors. The duties of the stock exchange council are set out in the stock exchange rules. They include the issuance of the stock exchange rules and the fee regulations, the rules of procedure for the management, the conditions for transactions on the stock exchange, the arbitration rules (stock exchange arbitration tribunal) and the business conditions for futures and options trading on the exchange.
For the admission of securities to trading on the official or regulated market, the Stock Exchange Act and the Securities Prospectus Act, among other things, impose a general duty to write a prospectus and to file it with the stock exchange listing office. The prospectus contains all important information about the security, the issuer, the company's structure, its financial situation, business activities and all bodies and companies involved in the issue. It should allow the formation of an accurate judgement of the issuer's assets and liabilities, financial situation, profits and losses and future prospects. The Federal Financial Supervisory Authority checks the prospectus for formal, but not material, correctness. The issuer and issuing syndicate are responsible and liable for the correctness of the content.
Also known as price fixing, the fixing of market prices for all securities listed on the stock exchange. Exchange prices in floor trading on the Frankfurt Stock Exchange are determined by the official brokers. The process is governed by the Exchange Rules. The trade is concluded at the price at which most orders (purchases and sales) can be executed (principle of maximum possible execution). The market price of securities can be quoted once during a trading day on the stock exchange (standard quotation) or more than once a day on a continuous basis (variable quotation).
Depending on the type of asset traded, a distinction is drawn between stock exchanges, where securities are traded, currency exchanges for foreign exchange, futures and options exchanges for futures contracts, options and warrants, and commodities exchanges for fungible commodities. There are specialized exchanges for, e.g. metals, sugar, cotton, energy or for services such as freight, shipping and insurance.
In organizational terms, stock market supervision has a three-tier structure: Federal Financial Supervisory Authority (BaFin), the regional Exchange Supervisory Authority and the Trading Surveillance Office as a self-governing entity of the stock exchange. These regulatory institutions are not structured hierarchically, but separated on a parallel basis by their respective functional competences and committed to cooperation. The exchange supervisory authorities and the trading surveillance offices are responsible for monitoring the proper formation of prices on the stock exchanges. The Federal Financial Supervisory Authority, on the other hand, is responsible for investigating breaches of insider law and for compliance with disclosure regulations.
The total value of trades concluded in a particular security or the total market in the respective currency at a certain point in time or within a certain period.
A stop-loss order is a strategy for avoiding extensive losses in securities trading. With a stop-loss order, a sell order is executed automatically if a share price falls below a previously defined level. The investor must not constantly follow the share price and can limit his losses if the market moves unexpectedly.
The strike price is the price at which the underlying asset can be purchased at the end of the maturity (European option) or at any time during the maturity (American option). The strike price is also known as "exercise price".
Special form of bond: on the basis of a subordination agreement, the claims of owners of subordinated bonds are satisfied after those of owners of the issuing company's senior bonds. In the event of an insolvency, subordinated bonds are therefore not served first from the liquid assets.
In securities business, public invitation to investors to subscribe to new bonds, shares or other new issues at banks within a certain period. However, the subscription does not entitle the customer to a corresponding allotment.
(1) In a capital increase at a joint stock corporation, the subscription ratio states for how many existing shares one new share may be purchased.
(2) When referring to warrants, the subscription ratio states how many units of the underlying asset the holder of a warrant can buy or sell in case of exercise.
A shareholder's right to purchase new shares issued by a company in a capital increase in the proportion of his present holding in share capital to the increase in share capital. If a company raises its capital, for example, from € 10 million to € 11 million, the existing shareholder can subscribe 1 new share for ten "old" shares at a price determined by the company; in this case, the subscription ratio is one for ten. On the other hand, if he does not take up the offer, he can sell his rights on the stock exchange. The profit on this sale is the compensation for the price loss which he suffers on his existing shareholding after the markdown for the rights issue and which is caused by the fact that the total market value of all previously issued shares is now spread over a larger number of shares following the capital increase.
The arithmetic value of the subscription right is calculated on the basis of the following formula:
(Price of old share) - (New share subscription price) / (Subscription ratio + 1)
Example: subscription ratio 1 for 10, new share subscription price € 120, price of old share € 140.
Value of subscription right R = (€ 140 - € 120) / (10 + 1) = € 1.82
Simultaneous transfer of amounts by a single account holder to several beneficiaries. For this purpose, a summary list is prepared for each beneficiary. This type of transfer is used primarily in the giro network of the Deutsche Bundesbank. Summary transfers are used if an account holder submits more than five transfer orders on the bank's own forms or if a bank wants to forward its own credit advices through the central bank.
The supervisory board is typically one of the management bodies of a joint stock corporation. The two other management bodies are the management board and the annual general meeting. A supervisiory board can also be established at a German limited liability company (GmbH), the regulations of the German Stock Corporation Act then apply accordingly. The task of the supervisory board is to monitor the company's management, in other words the management board which it has elected, and to advise it on strategic issues. Furthermore, it has audit duties (in particular with respect to the company's annual and consolidated financial statements) and reporting duties. The legal basis for the work of the supervisory board is formed by the German Stock Corporation Act and the articles of association of the respective joint stock corporation. In addition, practically all supervisory boards have their own terms of reference. Many supervisory boards have committees for specific subjects, the most frequent ones here being the audit committee and the personnel committee. At most companies, the supervisory board consists of representatives of the shareholders and also - a feature peculiar to Germany - of representatives of the employees. The German Corporate Governance Code makes various demands on a supervisory board member's personal profile, especially of his/her specialist abilities and his/her loyalty to the company.
Contractual arrangements to exchange future cash flows. In the case of pure interest rate swaps, two borrowers with different credit ratings exchange interest payment obligations denominated in the same currency. It is important that interest rates payable on the same principal amount are subject to different interest rate calculations (fixed vs. variable) and that no mutual capital claims arise as a result of the swap. The purpose of a swap is to exchange a more favourable credit rating for a corresponding fee. One party receives a consideration for the use of its credit rating, while the other party benefits from lower interest payments. The same applies to currency swaps. Here, exchanged payment obligations are denominated in different currencies.
Option on a swap. Agreement giving the buyer of the option the right, in return for the payment of an option premium, to enter into a swap on a prearranged date, at a fixed term and rate of interest.
Society for Worldwide Interbank Financial Telecommunication based in La Hulpe, Belgium. As the name indicates, an international cooperative of banks, founded in 1973, that maintains a telecommunications network (SWIFT network) for the exchange of messages among banks, brokerages, stock exchanges and other financial institutions. In these messages, one bank for example informs another bank that it has a wire transfer for a customer, asking the beneficiary bank to collect the equivalent amount at a specified date from the specified clearing account and to forward the amount to the beneficiary. SWIFT settles financial transactions of approximately 7,800 financial institutions in more than 200 countries, achieving daily trading volumes of six billion dollars (4.8 billion euros).
Temporary association, in particular, of banks, to handle larger financing projects while distributing the risk. Syndicates are now primarily formed to place securities (flotations).
Syndicated loans are based on mid to long-term loan agreements between a borrower and two or more banks that have joined together into a syndicate. The purpose of this constellation is to be able to satisfy the borrower's need for financing even if the volume of the loan exceeds the capabilities of one single bank. In addition, the credit risk is reduced for each of the individual banks in the syndicate.