The company or financial institution which creates and administers an exchange-traded fund. To set up the ETF, the sponsor creates the underlying index around which the ETF will be passively managed. The initial securities chosen for the fund are then delivered to the ETF sponsor by various institutional investors, who in exchange receive creation units – large blocks of ETF shares numbering 100,000 or more. The holders of the creation units then market individual ETF shares to retail investors via the open market (stock exchanges); the ETF sponsor typically will deal only with the creation units and institutional shareholders and will not trade shares directly with retail investors. Watch: Understanding ETF Taobiz explains ETF Sponsor ETF sponsors have created quite a large industry for themselves in the time since the introduction of the first ETF, in 1993. Some of the larger, more diversified ETF sponsors may hold a portion of a fund’s securities in-house, while others are more strictly focused on marketing, index maintenance and market liquidity. The sponsor also redeems physical securities for creation units should the holders of the creation units wish to make the swap. When changes need to be made to an ETF portfolio due to changes in the underlying index, the sponsor will work with its creation-unit holders to exchange securities out for new ones that will reflect the updated index.
An exchange-traded fund (ETF) that tracks other ETFs rather than stocks, bonds or derivatives. ETFs of ETFs track the performance of other ETFs, which may have direct exposure to the underlying securities they track. Watch: Understanding ETF Taobiz explains ETF Of ETFs ETFs of ETFs are tools that provide more diversification than regular ETFs. They can be constructed based on certain desirable factors such as risk levels, time horizons or sectors. One of these financial instruments can give an investor broad exposure to many different sectors and regions. Typically, ETFs have a lower expense ratio compared to more managed funds such as mutual funds.
Shares held in an escrow account and in most cases cannot be traded or transfered until certain circumstances like time horizon have been reached. The use of escrow for holding shares is often done during acquisitions and for performance-based executive incentives. Taobiz explains Escrowed Shares These shares can be held by an escrow company or by the exchange the shares trade on. Let's say a company puts up shares as a guarantee on an acquisition. Should that firm rescind the offer, they're likely to lose the shares.
A hybrid debt instrument that is linked to the equity markets. Equity-linked securities can be in the form of a single stock, a group of stocks or an equity-based index, such as the S&P 500. The return on investment is dependent upon the performance of the underlying equities that are linked to the security. This type of security will often offer a guarantee of principal plus perhaps a small gain in return for a reduced payout of equity gains. Taobiz explains Equity-linked Security - ELKS Equity-linked securities first appeared in the 1990s and have been offered in the form of annuities, mutual funds and CDs. Most equity-linked securities will limit the equity gains that their investors can realize, either in the form of a reduced percentage of gains (such as 70% of all gains with no limit), or an absolute cap (meaning that the investor gets 100% of the gain up to a certain amount each year in total return, such as 10%). For example, an investor with a 70% cap will see $7,000 of gain from a $100,000 investment if the underlying equities post a 10% gain for the year. However, the same investor with the same investment amount in a security with a 10% cap will only see the first $10,000 of gain in a year even if the underlying equities rise by 50%.
A stock index comprised of companies related to the actress Eva Longoria. Some analysts believe that Eva Longoria has enough influence over consumers that her endorsements will materially affect product sales. Taobiz explains Eva Longoria Stock Index On the popular television show "Desperate Housewives", Longoria often promotes consumer goods. Outside of acting, she has endorsement deals with companies such as Hanes, Bebe and L'Oreal. These companies are included in the Eva Longoria Stock Index, under the premise that her fans will increase the revenues of the promoted products.
The increase in the value of a discounted instrument as time passes and it approaches maturity. The value of the instrument will accrete (grow) at the interest rate implied by the discounted issuance price, the value at maturity and the term to maturity. |||For example, a three-month note maturing at $100 is issued at $98. Between issuance and maturity, the value of the bond will increase until it reaches its full value of $100, which is the amount that will be paid at maturity. Accretion can be accounted for in a straight-line method, whereby the increase is evenly spread throughout the term, or by constant interest, whereby the increase is heaviest closest to maturity.
A negotiable security (receipt) that is issued by a European bank, and that represents securities which trade on exchanges outside of the bank’s home country. Abbreviated as "EDRs", these securities are traded on local exchanges and used by banks - and issuing companies in the U.S. and other countries - to attract investment capital from the European region. Also known as "Euro Depository Receipts", which may or may not imply that the euro is the currency the receipt is issued upon. Taobiz explains European Depository Receipt - EDR While the euro isn’t the only currency that can be used to issue and trade European Depository Receipts, it is the most common because of its widespread adoption in Europe. American Depository Receipts (ADRs) are the equivalent of this type of bank receipt in the U.S. Investors in EDRs are entitled to the same dividends and capital gains as the investors who hold common shares in the same company.
The value, at any given time, of a multi-year instrument that accrues interest but does not pay that interest until maturity. The most well-known applications include zero-coupon bonds or cumulative preferred stock. |||Accreted value may not have any relationship to market value. For example, a 10-year, 10% zero-coupon bond with a final maturity of $100 will have an accreted value of perhaps $43.60 in year two. If current market interest rates fall, the fair market value of that bond will be higher than its accreted value; if rates rise, the value of the bond will be less than its accreted value.
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