Safekeeping
The storage and protection of customers' securities, typically held in a vault, provided as a service by a bank or institution acting as agent for the customer.
Sales credit
An additional cost added to the price of the bond.
Savings bond
A bond issued by the Federal Government designed specifically for individual investors. The bonds come in denominations ranging from $50 to $10,000. Interest earned on the bonds is tax exempt from both state and local income taxes.
Scale
The coupon rates, offering prices and yields for each maturity of a serial bond.
Scalper
A trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight.
Scenario analysis
An examination of expected investment performance over a variety of assumed economic conditions (e.g., a wide range of interest rate environments).
Secondary market
The market in which an investor purchases a security from someone other than the issuer of the bond. This is sometimes called aftermarket.
Secondary mortgage market
The market in which existing mortgages or mortgage securities are bought and sold.
Secured debt
Debt backed by specific assets or revenues of the borrower. In the event of default, secured lenders can force the sale of such assets to meet their claims.
Secured obligation
A debt backed by physical assets. In the event of default, these assets can be used for repayment of the interest and principal.
Securities Act of 1933
Federal legislation designed to protect the public in the issuance and distribution of securities by requiring full disclosure of accurate information about an issue.
Securities and Exchange Commission (SEC)
A federal agency consisting of five commissioners appointed by the President on a rotating basis for five-year terms. The President designates the chairperson. No more than three commissioners may be of the same political party. This agency was created in the Securities Exchange Act of 1934 to oversee the Securities Act of 1933. The SEC promotes full disclosure and fair practices by the securities market.
Securities Industry Automation Corporation (SIAC)
SIAC runs the computer systems and communications networks that power the NYSE and AMEX and disseminate U.S. market data worldwide.
Security
Common or preferred stock, a bond of a corporation, government, or quasi-government body. Collateral pledged by a bond issuer (debtor) to an investor (lender) to secure repayment of the loan. A financial instrument showing ownership of equity (such as common stock), indebtedness (such as a debt security), a group of mortgages (such as MBS), or potential ownership (such as an option).
Selling hedge or short hedge
Selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. When the cash commodities are sold, the open futures position is closed by purchasing an equal but opposite position to the position taken in the original sale of the futures contracts. Hedgers use the futures markets to protect their business from adverse price changes.
Senior securities
Bonds and other debt obligations, fixed-rate capital securities and preferred stock that are considered senior to common stock within an entity's capitalization structure.
Separate Trading of Registered Interest and Principal of Securities (STRIPS) The Treasury Department's program under which eligible securities are authorized to be separated into principal and interest components, and transferred separately. These components are maintained in book-entry accounts and transferred in TRADES (Treasury / Reserved Automated Debt Entry System).
A REMIC class that receives principal payments in a prescribed sequence.
Sequential pay REMIC
The most basic type of REMIC, in which all tranches receive regular interest payments, but principal payments are directed initially only to the first tranche until it is completely retired. Once the first tranche is retired, the principal payments are applied to the second tranche until it is fully retired and so on.
Serial bond
A bond issue with stated maturity dates spread over several consecutive years.
Serial notes
Mortgage-backed securities comprising consecutively-numbered equal units of $25,000. The units are retired by number. The maturity date indicated on each unit is the date by which the unit would be retired if no prepayments of principal were made on the mortgages in the pool.
Serious delinquency
A single-family mortgage that is 90 days or more past due, or a multi-family mortgage that is two months or more past due.
Servicer
The institution that acts on behalf of the trustee for the benefit of security holders in collecting funds from the borrower, advancing funds in the event of delinquencies, and, in the event of default, taking the property through the foreclosure process.
Servicing
Collection and pooling of principal, interest, and escrow payments on mortgage loans and mortgage pools, as well as certain operational mortgage loans and mortgage pools, as well as certain operational procedures such as accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquency loan follow-up and loan analysis. The party providing the servicing receives a servicing fee. It also includes the processes of billing, collecting and disbursing payments, and filing reports on a mortgage loan. The servicer deducts a servicing fee from monthly interest payments and passes the remainder of the payment to investors (either directly or through a paying agent).
Servicing fee
The amount retained by the mortgage servicer from monthly interest payments made on a mortgage loan.
The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as settlement price or closing price.
Settlement date
Date agreed to by the buyer and seller of a security for the delivery of securities and payment of funds.
The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as settle or closing price.
Short
(n) One who has sold futures contracts or plans to purchase a cash commodity. (v) Selling futures contracts or initiating a cash forward contract sale without offsetting a particular market position.
Short-term debt
Debt with a maturity of less than one year.
Short hedge
Selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. When the cash commodities are sold, the open futures position is closed by purchasing an equal but opposite position to the position taken in the original sale of the futures contracts. Hedgers use the futures markets to protect their business from adverse price changes.
Short position
An inventory position that reflects the sale of bonds that are not owned at the time of the sale.
Short sale
A sale of securities not owned by the seller at the time of the transaction. This sale requires the purchase of the securities at a time in the future to cover the trade. A seller is usually expecting the price of the security to decline when a short sell is made.
Simulation Analysis of Financial Exposure (SAFE)
A sophisticated risk-analysis computer program that monitors the risk of clearing members and large-volume traders at the Chicago Board of Trade. It calculates the risk of change in market prices or volatility to a firm carrying open positions.
Single-dealer systems
Single-dealer systems allow investors to execute transactions directly with a specific dealer.
Single-issuer pool
A mortgage-backed securities pool issued under the Ginnie Mae I or II programs, which consists of only one loan package and which has only one issuer.
Single monthly mortality (SMM)
The percentage of outstanding mortgage loan principal that prepays in one month. See constant prepayment rate (CPR).
Sinker
A bond with a sinking fund. In a sinking fund, an issuer sets aside money on a regular basis, sometimes from current earnings, for the specific purpose of redeeming debt.
Sinking fund
A fund to which excess revenues are contributed by the issuer in order to retire the outstanding bonds in accordance with the sinking fund schedule. In the case of a mandatory sinking fund (MSF), bonds WILL be called according to the schedule provided.
SMMEA
Secondary Mortgage Market Enhancement Act of 1984
SMMEA securities
Securities that are both ultimately secured by a first-lien mortgage loan and rated in one of the top two rating categories by at least one nationally recognized statistical rating.
Special assessment bond
A bond secured by a special tax or other source of revenue, such as a gasoline tax.
Special obligation bond
A bond secured by a specific source of revenues.
Special tax bond
A bond secured by a special tax, such as a gasoline tax.
Sponsor
An investment firm that organizes a unit investment trust and offers the units for sale.
Spot
Usually refers to a cash market price for a physical commodity that is available for immediate delivery.
The futures contract month closest to expiration. Also referred to as nearby delivery month.
Spread
The price difference between two related markets or commodities. The difference between the bid and asked prices for a bond. Typically, in the context of pricing debt securities, the difference in percentage or basis points between the yield of a non-Treasury debt security being priced and the yield of a comparable Treasury security. Also refers generally to the difference in yields or coupon rates between any two debt securities.
Spreading
The simultaneous buying and selling of two related markets in the expectation that a profit will be made when the position is offset. One example of spreading is the purchase of one futures contract and the sale of another futures contract of the same commodity but for different delivery months. Other examples include the purchase and sale of futures contracts of the same commodity for the same delivery month, but on different futures exchanges and the purchase of one futures market and the sale of a different, but related, futures market with the same delivery month.
Standard & Poor's (S&P) credit ratings
A Standard & Poor's credit rating is a current opinion of the credit worthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs.) It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.
State (municipal bonds only)
This is the state in which the bond was issued.
Stepped coupon
A bond with a coupon rate that increases periodically, until final maturity.
Stock index
An indicator used to measure and report value changes in a selected group of stocks. How a particular stock index tracks the market depends on the sampling of stocks, the weighting of individual stocks, and the method of averaging used to establish the index.
Stock market
A market in which shares of stock are bought and sold.
Stockholders' equity
The sum of proceeds from the issuance of stock and retained earnings less amounts paid to repurchase common shares.
Stop-limit order
A variation of a stop order in which a trade must be executed at the exact price or better. If the order cannot be executed, it is held until the stated price or better is reached again.
Stop order
An order to buy or sell when the market reaches a specified point. A stop order to buy becomes a market order when the futures contract trades (or is bid) at or above the stop price. A stop order to sell becomes a market order when the futures contract trades (or is offered) at or below the stop price.
The price at which the futures contract underlying a call or put option can be purchased (if a call) or sold (if a put). Also referred to as exercise price.
Stripped mortgage-backed security (SMBS)
Securities created by "stripping" or separating the principal and interest payments from the underlying pool of mortgages into two classes of securities, with each receiving a different proportion of the principal and interest payments.
Structure risk
Risk related to structure that is other than fixed-rate and non-redeemable. For example, securities with principal or interest payments that are determined by reference to one or more interest rate indices or with interest rates that otherwise may vary exhibit structure risk.
Subject AMT
Bonds with interest that may be subject to the Alternative Minimum Tax (AMT) when a taxpayer has certain tax preference items or deductions. Each individual should consult with his/her tax advisor to determine potential exposure to the AMT.
Subject offerings
Indications of offerings that are contingent on availability and / or other criteria, and must be verified before an execution of the order can take place.
Subordinated securities
Securities with a promise to pay that cannot legally be fulfilled until payments on certain other obligations have been made.
Subordination
A structure which gives preferential rights to certain classes to enhance their credit.
Super floater
A floating-rate class that pays a rate of interest that resets periodically as a multiple of the benchmark index. A floating-rate REMIC tranche whose rate is based on a formulaic relationship to a representative interest rate index.
Super PO
A principal-only security structured as a companion bond.
Supply, Law of
The relationship between product supply and its price.
Support
The place on a chart where the buying of futures contracts is sufficient to halt a price decline.
Suspension
The end of the evening session for specific futures and options markets traded at the Chicago Board of Trade.
Swap
The sale of a block of bonds and the purchase of another block of similar market value. Swaps may be made to establish a tax loss, upgrade credit quality, extend or shorten maturity, etc.
Symbol
Bonds that are listed and traded on the major exchanges have a symbol similar to stocks. For example, an IBM bond maturing in 2007 might have a symbol such as IBM07.