Daily Price Limits
| See Limit (Up or Down).
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Dated Date
| The date from which interest begins to accrue on a new bond issue.
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Day Order
| An order that expires automatically at the end of each day's trading session. There may be a day order with time contingency. For example, an "off at a specific time" order is an order that remains in force until the specified time during the session is reached. At such time, the order is automatically canceled.
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Day Trade
| The buying and selling of the same security on the same day.
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Day Trader
| Speculator who takes positions in commodities and then liquidates them prior to the close of the same trading day.
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Day Traders
| Commodity traders, generally members of the exchange on the trading floor, who take positions in commodities and then offset them prior to the close of trading on the same trading day.
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Day Trading
| Opening and closing the same position or positions within the same trading session.
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DBO
| See Delivery Balance Order.
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Dealer
| A firm that functions as a market maker and that, as such, positions the security to buy and sell versus the public and/or brokerage community.
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Dealer Option
| A put or call on a physical commodity, not originating on or subject to the rules of an exchange, in which the obligation for performance rests with the writer of the option. Dealer options are normally written by firms handling the underlying commodity and offered to public customers, although the reverse may also be true.
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Debenture
| A debt instrument whose backing lies in the goodwill of the issuer rather than on any tangible assets.
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Debenture Bond
| A debt that is issued by a corporation and that is backed or secured by the good name of the issuing company.
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Debit Balance
| The amount of loan in a margin account.
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Deck
| The orders for purchase or sale of futures and option contracts held by a floor broker.
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Declaration (of Options)
| See Exercise.
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Declaration Date
| See Expiration Date.
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Deed of Trust
| The trust agreement drawn up when a corporation plans to issue bonds or other debt securities. It includes such items as assets, interest payments, maturity dates, etc. Also, see indenture.
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Default
| Failure to perform on a futures contract as required by exchange rules, such as failure to meet a margin call, or to make or take delivery.
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Deferred Annuity
| An annuity plan in which payments are to be made at some set date in the future.
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Deferred Delivery
| The more distant months in which futures trading is taking place, as distinguished from the nearby futures delivery months.
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Deferred Futures
| The futures contracts that expire during the most distant months. Also called Back Months. See Forward Purchase or Sale.
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Deficit
| A negative balance of trade (or payments); expenditures are greater than income/revenue.
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Deliverable Grades
| See Contract Grades.
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Deliverable Stocks
| Stocks of commodities located in exchange approved storage, for which receipts may be used in making delivery on futures contracts. In the cotton trade, the term refers to cotton certified for delivery. Also see Certificated Stocks.
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Delivery
| The tender and receipt of the actual commodity, the cash value of the commodity, or of a delivery instrument covering the commodity (e.g., warehouse receipts or shipping certificates), used to settle a futures contract. See Notice of Delivery.
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Delivery Balance Order (DBO)
| An order issued by the clearing corporation to any firm that, after the day’s trades are netted, has delivery or sale position remaining. The order defines what is to be delivered to whom.
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Delivery Date
| The date on which the commodity or instrument of delivery must be delivered to fulfill the terms of a contract.
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Delivery Instrument
| A document used to effect delivery on a futures contract, such as a warehouse receipt or shipping certificate.
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Delivery Month
| The specified month within which a futures contract matures and can be settled by delivery.
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Delivery Notice
| The written notice given by the seller of his intention to make delivery against an open short futures position on a particular date. This notice, delivered through the clearing house, is separate and distinct from the warehouse receipt or other instrument that will be used to transfer title.
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Delivery Option
| A provision of a futures contract which provides the short with flexibility in regard to timing, location, quantity, or quality in the delivery process.
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Delivery Points
| Those locations designated by commodity exchanges where stocks of a commodity represented by a futures contract may be delivered in fulfillment of the contract.
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Delivery Price
| The price fixed by the clearing house at which deliveries on futures are invoiced--generally the price at which the futures contract is settled when deliveries are made.
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Delivery Versus Payment (DVP)
| Settlement of security transactions used by institutional customers. Certificates are delivered to a bank designated by the customer whereupon the bank makes payment on delivery.
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Delivery, Current
| Deliveries being made during a present month. Sometimes current delivery is used as a synonym for nearby delivery.
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Delivery, Nearby
| The nearest traded month. In plural form, one of the nearer trading months.
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Delta
| See Delta Value.
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Delta - "Neutral Hedge Ratio"
| Percentage of the price movement in the underlying instrument that will be translated into price movement in a particular option series. For example, a delta of 50% indicates that the option will move up or down by about half of the movement in the underlying instrument. As a general rule, the delta for a call option increases. as the instrument price rises, and decreases as the instrument price declines.
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Delta Margining
| An option margining system used by some exchanges for exchange members and/or floor traders which equates the changes in option premiums with the changes in the price of the underlying futures contract to determine risk factors on which to base the margin requirements.
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Delta Value
| The expected change in an option's price given a one-unit change in the price of the underlying futures contract or physical commodity.
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Deposit
| The initial outlay required by a broker of a client to open a futures position, returnable upon liquidation of that position.
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Depository
| A central location for keeping securities on deposit.
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Depository Receipt
| See Vault Receipt.
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Depository Trust Company (DTC)
| A corporation, owned by banks and brokerage firms, that holds securities, arranges for their receipt and delivery, and arranges for the payments in settlement.
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Depreciation
| A decline in the value of a currency due to market forces.
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Derivative
| A financial instrument, traded on or off an exchange, the price of which is directly dependent upon (i.e., "derived from") the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement (e.g., the movement over time of the Consumer Price Index or freight rates). Derivatives involve the trading of rights or obligations based on the underlying product, but do not directly transfer property. They are used to hedge risk or to exchange a floating rate of return for fixed rate of return.
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Derivative Zeros
| Zero coupon bonds created by stripping coupon and principal payments from a U.S. Treasury Security.
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Derivatives
| Trades that are constructed or derived from another security (stock, bond, currency, or commodity). Derivatives can be both exchange and non-exchange traded (known as Over the Counter or OTC). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.
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Designated Order Turnaround (DOT)
| An order routing and execution reporting system of the NYSE.
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Designated Self Regulatory Organization (DSRO)
| Self regulatory organizations (i.e., the commodity exchanges and the National Futures Association) must enforce minimum financial and reporting requirements for their members, among other responsibilities outlined in the CFTC's regulations. When a futures commission merchant (FCM) is a member of more than one SRO, the SROs may decide among themselves which of them will be responsible for assuming these regulatory duties and, upon approval of the plan by the Commission, be appointed the "designated self regulatory organization" for that FCM.
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Devaluation
| The deliberate downward adjustment of a currencies value versus the value of another currency normally caused by official announcement.
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Diagonal Spread
| A spread between two call options or two put options with different strike prices and different expiration dates.
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Differential
| The fraction of a point added to the purchase price or subtracted from the sale price of odd lot orders. The charge represents compensation to the dealer/specialist for executing the odd lot order.
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Differentials
| The discount (premium) allowed for grades or locations of a commodity lower (higher) than the par of basis grade or location specified in the futures contact. See Allowances.
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Director
| A corporate board member elected by stockholders.
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Disclosure Document
| The document that must be provided to and signed by prospective customers that describes fees, performance, etc.
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Discount
| (1) A downward adjustment in price allowed for delivery of stocks of a commodity of lesser than contract grade against a futures contract; (2) sometimes used to refer to the price differences between futures of different delivery months, as in the phrase "July at a discount to May" indicating that the price of the July future is lower than that of May.
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Discount Basis
| Method of quoting securities wherein the price is expressed as an annualized discount from maturity value. For example, a note which borrows $.981/1.00 today, and repays the full loan ($1.00/$1.00) in 90 days, would sell at a discount of 8 percent (360/90 x 2%). The quote would be 92(100-8).
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Discount Bond
| A bond selling below par; a "Pure" Discount Bond is one without coupon and always sells below par. See also Discount Basis.
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Discount Broker
| A broker whose commission rates are lower than full service brokers. Discounters usually provide little in additional services beyond trade execution.
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Discount Rate
| Rate of interest charged by the Federal Reserve to member banks that borrow from it.
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Discretionary Account
| An arrangement by which the holder of the account gives written power of attorney to another, often his broker, to make buying and selling decisions without notification to the holder; often required to as a Managed Account or Controlled Account.
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Disintermediation
| The process wherein moneys are withdrawn from financial intermediaries (e.g., the banking system). The instigation for this process may be non-competitive returns offered by the intermediary, uncertainty or a variety of other reasons, resulting in a shrinkage in credit for the system as a whole.
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Distant or Deferred Delivery
| Usually means one of the more distant months in which futures trading is taking place.
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District Business Conduct Committee (DBCC)
| Part of the NASD that investigates, reviews, and renders a verdict on customer complaints or other industry improprieties.
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Diversification
| An investing or trading strategy in which positions are maintained in a variety of underlying instruments, for the purpose of reducing risk and increasing bottom-line profits.
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Diversification Method
| An option trading strategy consisting of the purchase of broad spectrum of non-correlated instruments (for options - calls and puts) in order to insulate a portfolio from the impact of a single event effecting a group of correlated markets, i.e. a major rise in interest rates.
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Dividends
| A portion of a corporation’s assets paid to stockholders on a per-share basis. Preferred stock is supposed to pay a regular and prescribed dividend amount. Common stock pays varying amounts when declared.
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DNR (Do Not Reduce)
| An instruction that informs the order handling personnel not to reduce the price of the order by the amount of dividends, if and when paid by the corporation. DNR is placed on buy limit, sell stop and sell stop limit GTC orders.
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Dollar Bonds
| A type of municipal revenue bond whose price quotes are given in dollars (e.g., 91 or 105) instead of a yield basis.
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Dollar Cost Averaging
| An investment method used in mutual funds by which clients invest the same dollar amount periodically. Because mutual funds permit the buying of fractional shares, all of the investor’s payment is used in the acquisition of fund shares.
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Dollar-Denominated
| Foreign securities that pay interest and principal in U.S. dollars.
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Dominant Future
| That future having the largest number of open contracts.
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Double Hedging
| As used by the CFTC, it implies a situation where a trader holds a long position in the futures market in excess of the speculative limit as an offset to a fixed price sale even though the trader has an ample supply of the commodity on hand to fill all sales commitments.
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Double Taxation
| Corporations pay taxes on revenue before paying dividends. The dividends, in the hands of the stockholder, are taxed again as ordinary income. Hence "double" taxation.
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Downstairs Trader
| A trader who operates on the floor of an exchange and who "trades" positions against the public market. See also Upstairs Trader.
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Downtick
| A listed equity trade whose price is lower than that of the last different sale.
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DRD
| Dividend Received Deduction (DRD) is a tax credit for institutional holders on received dividends. DRD allows U.S. corporations to exclude taxes on 70% of dividends received from the preferred stocks of other corporations. This credit increases to 80% in the case of any dividend from a 20% owned corporation. DRD does not apply for individual investors.
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DSRO
| See Designated Self Regulatory Organization.
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Dual Trading
| Dual trading occurs when
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Due Diligence Meeting
| The last meeting between corporate officials and underwriters prior to the issuance of the security. At the meeting, the content of the prospectus is discussed, and relevant parts of the underwriting are put into place.
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Duration
| A measure of a bond's price sensitivity to changes in interest rates.
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Dutch Auction
| Method of sale whereby the lowest price at which the entire issue can be sold is established as the uniform price for the entire issue.
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