Capital Market Terminologies

Capital Market
A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Capital markets may be classified as primary markets and secondary markets. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere. (Ref. Wikipedia).

Money Market
The money market became a component of the financial markets for assets involved in shortterm borrowing, lending, buying and selling with original maturities of one year or less. It provides liquidity funding for the global financial system. The instruments bear differing maturities, currencies, credit risks, and structure. Therefore they may be used to distribute the exposure. Distinguish between the money markets and capital markets: The primary difference between the money and capital markets is maturity period of the securities traded in them. The money market handles transactions within the short-term credit instruments while the capital market handles transactions in long-term financial instruments. Typically, a maturity period above one year would be categorized long-term, and less than one year would be categorized short-term.

Stock Exchange
The stock exchange provides a sound and stable securities market where shares can be bought and sold. The stock exchange provides listed companies with a channel seek capital fund from the public and at the same time it provides the investors a place to buy and sell shares of the listed companies. The exchange also monitors the market to ensure that it is working efficiently, fairly and transparently.

Investment Banker
An investment banker is a financial specialist involved as an intermediary in the merchandising of securities. They facilitate the flow of savings from those economic units that want to invest to those units that want to raise funds. The three main functions of an investment banker are underwriting, distributing, and advising.

Share
Share capital (UK English) or capital stock (US English) refers to the portion of a company's equity that has been obtained (or will be obtained) by trading stock to a shareholder. Each share represents a small stake in the total paid up capital of a company.

Book closure / Record Date

While a company a dividend, right/ bonus shares or intends to hold any AGM/ EGM; it declares a book legislature closer provider/ Record Date to register the name of shareholders. Only shareholders whose names appear on the register after the book closure/ Record Date are eligible to attend in the AGM/ EGM and also to receive dividends & bonus shares and entitlement to right shares, if any.

What is IPO?
IPO refers to Initial Public offering. IPO means while a company wants to raise fund from the general public, it goes for public offering after completing necessary regulatory compliances.

What is 'Circuit Filter?

Circuit Filter is the maximum permissible deviation of the price (specified as percentage), of an aggressor order from the last trade price.

What is 'Market Lot?

A Market Lot is the smallest tradable unit for an instrument except those traded in the Odd lot book. All order quantities can only be an integral multiple of the Market lot.

What is 'Odd Lot?

Stock market shares are generally bought and sold in market lots, which are easy to trade. Any number of shares less than the market lot makes an odd lot. Odd lots typically arise from bonus or rights issues.

What does TESA mean?

TESA (The Electronic Security Architecture) is The DSE trading system and is used to trade Ordinary shares of listed companies, Mutual funds, Bonds and Debentures.

What is MSA?

MSA refers to Member Server Application. Brokers can use MSA to monitor and control their trader(s). There can be only one MSA per broker house. All the traders (TWS) have to connect to the trading system through MSA.

Who are ARs?

AR refers to Authorized Representative. ARs are certified trader for trading during the trade execution time. They are appointed by the brokerage house and licensed by Securities and Exchange Commission.

What is TWS (Trader Workstation)?

Traders (AR) can trade on the stock exchange using either TESA supplied workstation software or through their own custom developed broker system. This kind of workstation is called TWS.

Mutual Fund
A Mutual Fund is a trust Fund established with the intention of investing a pool of savings in various types of securities for the benefit of investors. Initially a mutual fund collects the funds from small investors and then they are invested into the securities of different types, thus diversifying the portfolio. Due to diversification of investment and professional management, investing through mutual fund carries lesser risk then investing individually. Open-Ended Mutual Fund Open-ended mutual funds are those Funds where subscription and redemption of units are allowed on a continuous basis. These schemes do not have a fixed maturity period. Investors can buy or repurchase the units at any time at NAV /NAV based prices declared by the fund manager on daily or weekly basis Closed-End Mutual Fund Closed-end mutual funds are those Funds where the shares are initially offered to the public and are then traded in the secondary market.

Asset Management Company AMC refers to that kind of company which undertakes the task of floating and managing the
schemes delegated by the trustee. The company is usually considered professionally sound and experts who are known for smart stock picks. AMC charges a fee for the services it renders to the fund. The company acts as the investment manager of the fund under broad supervision and direction of the trustees. Key Players for launching a Mutual Fund

Sponsor: The sponsor of the fund provides the primary capital for launching the fund. As a result, the sponsor sets the policies and guidelines of the Mutual fund. The constitution of the mutual fund is set on a trust deed and it is executed by the sponsor in favor of the trustee of the fund (usually named in the trust deed). Sponsors of the fund can invest at least 10% or more. The number of sponsors in any fund can be more than one. Trustee: The trustee is considered to be the guardian of the fund and ensures compliance of SEC and other rules and oversees the implementation of the trust deed. The Trustee also safeguards the properties of the fund for all its stake holders. Asset Manager: The asset management company makes the day-to-day investment decisions for the Mutual Fund and is responsible for the performance of the fund. The function of the asset manager also includes: Activities relating to regulatory protection and reporting, Preparation and distribution of prospectus, annual and periodic report of the Mutual Fund and other papers for the investors Accounting activities and preparation of tax return and Insurance and other services Custodian: Custodians are financial institutions that keep the securities of the mutual fund in safe custody. It also retains the following documentation for the clients: Statement of receipt and distribution of Securities & money; Detailed statement relating to the right of the clients on the Securities possessed on behalf of the clients; Detailed statement of registration of securities; Ledger of Accounts for each Client and Detailed statement of order received & given from the clients.