L
| The fourth category in the Federal Reserve's method of reporting money supply, including M3 plus other liquid assets.
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Large Order Execution (LOX) Procedures
| Rules in place at the Chicago Mercantile Exchange that authorize a member firm which receives a large order from an initiating party to solicit counterparty interest off the exchange floor prior to open execution of the order in the pit and that provide for special surveillance procedures. The parties determine a maximum quantity and an "intended execution price." Subsequently, the initiating party's order quantity is exposed to the pit; any bids (or offers) up to and including those at the intended execution price are hit (acceptable). The unexecuted balance is then crossed with the contraside trader found using the LOX procedures.
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Large Traders
| A large trader is one who holds or controls a position in any one future or in any one option expiration series of a commodity on any one contract market equaling or exceeding the exchange or CFTC-specified reporting level.
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Last Notice Day
| The final day on which notices of intent to deliver on futures contracts may be issued.
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Last Sale Price
| The price of an instrument (or option) at the latest transaction consummated.
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Last Trading Day
| Day on which trading ceases for the maturing (current) delivery month.
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Leading Indicators
| Economic variables that are considered to predict future economic activity (i.e. Unemployment, Consumer Price Index, Producer Price Index, Retail Sales, Personal Income, Prime Rate, Discount Rate, and Federal Funds Rate).
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Leaps
| Long-dated, exchange-traded options.
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Legal Transfer
| A type of transfer that requires legal documentation in addition to the normal forms. Usually in the name of a deceased person, a trust, or other third party.
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Letter of Renunciation
| This applies to a rights issue and is the form attached to an Allotment Letter which is completed should the original holder wish to pass his entitlement to someone else or to renounce his rights absolutely.
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Leverage
| The potential to increase financial gains as a percentage of an investment. In futures trading, one speaks of the leverage afforded by margin deposits-often representing only 5 to 10 percent of the market value of the futures contract-made as performance bonds. Leverage gives a trader the benefit of price movement on the full contract.
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Leverage Contract
| A contract, standardized as to terms and conditions, for the long-term (ten years or longer) purchase (long leverage contract) or sale (short leverage contract) by a leverage customer of leverage commodity which provides for
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Leverage Dealer
| See Leverage Transaction Merchant.
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Leverage Transaction Merchant (LTM)
| Any individual, association, partnership, corporation, or trust that is engaged in the business of offering to enter into, entering into, or confirming the execution of leverage contracts, or soliciting or accepting orders for leverage contracts, and who accepts leverage customer funds or extends credit in lieu of those funds.
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Leveraged Contract
| A standardized agreement calling for the delivery of a commodity with payments against the total cost spread out over a period of time. Principal characteristics include: Standard units and quality of a commodity and of terms and conditions of the contract; payment and maintenance of margin; close out by offset or delivery (after payment in full); and no right to or interest in a specific lot of the commodity. Leverage contracts are not traded on exchanges.
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Liability
| Any claim against the corporation, including accounts payable, salaries payable, and bonds.
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LIBOR
| Stands for London Interbank Offer Rate. The interest rate that the largest international banks will lend to each other.
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Licensed Warehouse
| A warehouse approved by exchange from which a commodity may be delivered on a futures contract. See Regular Warehouse.
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Life of Contact
| Period between the beginning of trading in a particular futures contract and the expiration of trading. In some cases this phrase denotes the period already passed in which trading has already occurred. For example, "The life-of-contract high so far is $2.50." Same as Life of Delivery or Life of the Future.
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LIFFE
| The London International Financial Futures Exchange. Consists of the three largest UK futures markets.
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Limit
| In relation to dealing instructions, a restriction set on an order to buy or sell, specifying the minimum selling or maximum buying price. See Price Limit, Variable Limit, Position Limit.
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Limit (Up or Down)
| The maximum price advance or decline from the previous day's settlement price permitted during one trading session, as fixed by the rules of an exchange. See Daily Price Limits.
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Limit Move
| A price that has advanced or declined the limit permitted during one trading session as fixed by the rules of a contract market.
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Limit Only
| The definite price, stated by a customer to a broker, restricting the execution of an order to buy for not more than or to sell for not less than that stated price.
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Limit Order
| An order to purchase at or below (or to sell at or above) a specified price (the "limit price"). Limit orders can be executed only when the limit price is consistent with the bid/asked quotation at any point subsequent to the entering of the order. Limit orders are either "good-till-canceled" or "day orders".
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Limited Risk
| An investment where the possible loss cannot exceed a pre-determined amount. For option purchases, this amount is initial cost of options plus associated transaction fees.
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Limited Tax Bond
| A municipal bond whose ability to pay back principal and interest is based on special tax.
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Limited Trading Authorization
| An account in which the customer gives the power to buy and sell only in his account to another person.
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Liquid (Or Liquidity)
| The ease in which a purchase or sale can be made without disrupting existing market prices.
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Liquid and Illiquid Markets
| The ability of a market to buy and sell at ease with no impact on price stability. A market is described as liquid if the spread between the bid and the offer is small. Another measure of liquidity is the presence of buyers and seller, with more players creating tighter spreads. Illiquid markets have few players, hence, wider dealing spreads.
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Liquid Assets
| Assets that can be easily converted into cash. Examples: money market fund shares, US Treasury Bills, bank deposits, etc.
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Liquid Market
| A market in which selling and buying can be accomplished with ease, due to the presence of a large number of interested buyers and sellers willing and able to trade substantial quantities at small price differences.
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Liquidate
| To sell (or purchase) futures contracts of the same delivery month purchased (or sold) during an earlier transaction or make (or take) delivery of the cash commodity represented by the futures market.
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Liquidation
| (1) Closing out a position. (2) An action taken by the margin department when a client hasn’t paid for a purchase.
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Liquidity
| The characteristic of a market that enables investors to buy and sell securities easily.
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Listed Options
| An option that trades on a national option exchange.
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Listed Securities
| Securities that trade on a national exchange.
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Listed Stock
| Stock that has qualified for trading on an exchange.
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Load
| The sales charge on the purchase of the shares of some open-end mutual funds.
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Loan Consent Agreement
| An agreement whereby the customer gives the brokerage firm permission to lend his securities.
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Loan Market Value
| Value of securities in customer’s account.
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Loan Program
| Primary means of government agriculture price-support operations, in which the government lends money to farmers at pre-announced rates with the farmers' crops used as collateral. Default on these loans is the primary method by which the government acquires stocks of agricultural commodities.
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Loan Stock
| Stock bearing a fixed rate of interest. Unlike a Debenture, loan stocks may be unsecured.
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Loan Value
| The amount of money, expressed as a percentage of market value, that the customer may borrow from the firm.
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Local
| A member of a U.S. exchange who trades for his own account and/or fills orders for customers and whose activities provide market liquidity. See Floor Trader.
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Locked-In
| A hedged position that cannot be lifted without offsetting both sides of the hedge (spread). See Hedging. Also refers to being caught in a limit price move.
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London Gold Market
| Refers to the five dealers who set (fix) the gold price in London
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London Option
| A generic term sometimes used to describe options on physical commodities or on futures contracts traded abroad (typified by options on London commodity markets). These options, which often had nothing whatsoever to do with legitimate foreign markets, gained notoriety--prior to their ban in the United States in 1978--because of the sales practices and fraud allegations associated with the American dealers who sold them.
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Long
| (1) One who has bought futures contracts or the cash commodity (depending upon the market under discussion) and has not yet offset that position. (2) ("Going Long") the action of taking a position in which one has bought futures contracts (or the cash commodity) without taking the offsetting action. For example, if you had no position and you bought five contracts, you would be long. However, if your previous position was one of having sold five contracts (i.e., "being short five"), and you then bought five contracts to offset that position, your second action would not be referred to as going long because your position when the second action is concluded would be zero. Long is also used with similar meanings as an adjective or adverb.
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Long Hedge
| Buying futures contracts to protect against possible increasing prices of commodities. See also Hedging.
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Long Position
| (1) In a customer’s account, securities that are either fully paid for (a cash account) or partially paid for (a margin account). (2) Any position on the firm’s security records that has a debit balance.
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Long the Basis
| A person or firm that has bought the spot commodity and hedged with a sale of futures is said to be long the basis.
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Longer-Term Option
| An option contract having more than a few months until expiration.
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Long-Term Bonds
| Bonds that mature in more than ten years.
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Lookback Option
| An option whose payoff depends on the minimum or maximum price of the underlying asset during some portion of the life of the option.
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Lot
| A unit of trading. See Even Lot, Job Lot, and Round Lot.
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LTM
| Leverage Transaction Merchant.
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