Any subsequent trading that affects an established position in a security or derivative. Follow-up actions are taken to change the amount of exposure an investor has in a position, or to limit a strategy's losses or profits. For example, an investor who is long in shares of Company XYZ may be nervous about future losses. He or she could take the follow-up action of purchasing a put option for the stock, which would minimize losses in the event of a downturn.
An employee of a member firm who executes trades on the exchange floor on behalf of the firm's clients. Also known as a "pit broker". Basically, floor brokers receive orders from their firms, which have been placed by the firms' clients, and executes these orders at the best possible prices. Floor brokers should not be confused with floor traders who execute orders for their own accounts.
A fixed dollar amount, generally in the context of fees or commissions paid for services. For transactions above a certain minimum size, flat dollar fees may be preferable to fees charged on a percentage basis. Flat dollar amounts are usually specified in contracts and thus are independent of transaction sizes. Flat dollar fees on stock transactions charged by online brokerages have made it much more economical for the average retail investor to trade stocks. For most services, cost-conscious consumers combined with companies competing for their business will usually cause flat dollar fees to replace fees based on a percentage of the transaction's value.
A price quote on a security, made by a dealer or market maker, that guarantees a bid or ask price up to the amount quoted. This differs from a nominal quote wherein the price and quantity of a bid or ask quote are not firmly posted. For example, if a market maker posts a bid firm price quote of $25 @ 10K, this tells other dealers and investors that this market maker will buy up to 10,000 shares for a price of $25. If the quote were to be nominal, then the seller of the security could try to negotiate for a better price and the market maker might move on its price - for example, being willing to purchase for $25.75.
The action of completing or satisfying an order for a security or commodity. It is the basic act in transacting stocks, bonds or any other type of security. For example, if a trader places a buy order for a stock at $50 and a seller agrees to the price, the sale has been made and the order has been filled. The $50 price is the execution price, which also makes it the fill price - it is the price that allows the transaction to be completed.
The broker or dealer that finalizes and processes an order on behalf of a client. The orders sent to executing brokers are assessed for appropriateness, and if the order is deemed practical, the executing broker will then carry out the order. If the order is rejected, the customer is notified and the stock is not traded. once the executing broker has assessed the validity of the order, it is then submitted onto the clearing broker who clears the trade. However, since executing brokers are paid through commission, the possibility exists that this incentive may encourage numerous trades even though they may not be suitable.
A type of trade made on the floor of a securities exchange in which a large block of shares traded actually represents many buy and sell orders that have been pooled and executed as one transaction. Exchange distributions are recorded on the ticker tape after the trade has taken place.
A method by which the market capitalization of an index's underlying companies is calculated. Free-float methodology market capitalization is calculated by taking the equity's price and multiplying it by the number of shares readily available in the market. Instead of using all of the shares outstanding like the full-market capitalization method, the free-float method excludes locked-in shares such as those held by promoters and governments.Calculated as: The free-float method is seen as a better way of calculating market capitalization because it provides a more accurate reflection of market movements. When using a free-float methodology, the resulting market capitalization is smaller than what would result from a full-market capitalization method.Free-float methodology has been adopted by most of the world's major indexes, including the Dow Jones Industrial Average and the S&P 500..
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