Accelerated Death Benefit
A provision or rider that allows the policyowner to receive all or part of the benefits of his life insurance benefits while he is still alive in the event of a terminal illness.
Accidental death and dismemberment insurance
A policy that pays the beneficiaries a set amount, under the terms of the policy, for certain serious injuries or death resulting from a covered accident.
Actuary
An expert trained in the mathematics approaches to anticipate, measure and manage risk.
Administrative expense charge
An amount charged by the insurer and/or administrator (sometimes separately delineated) to pay the costs of administering the policy.
Age
Age is shown on the first schedule which can be either the Insured's age next birthday, or last birthday, or nearest birthday.
Agent
An insurance salesperson who sells and services policies on behalf of the insurance commpany. He is paid on a commission basis.
Annual limits
Maximums on the dollar amounts the plan will pay for any given year.
Proposal Form A signed request for life insurance giving information about the prospective policyholder, including age, sex, and if it is subject to underwriting, it will also asks a series of health related questions.
Assignment
Assignment is a written notice to the insurer informing that the policy owner has assigned or given his legal rights of his policy to a third party. The insurer is not legally responsible for the validity or sufficiency of the assignment.
Automatic Premium Loan (APL)
If Insured is unable to pay premium and policy has acquired a cash value, the insurance company will deduct the premium from the cash value. Interest is charged on the amount of premium loan outstanding. An automatic premium loan will reduce the cash value.
B
Backdating of commencement date
Insurance policy backdated to an earlier date (not more than 6 months) to benefit the proposer.
Beneficiary
The person, persons or entity designated to receive the death benefits from a life insurance policy when you die.
Bonus It is a form of surplus distribution by the Company.
C
Cancellation
A termination of a policy before its normal expiration date.
Cash Dividends (CD)
Money paid annually to policy holder for policies that participates in the insurance co’s surplus or profits.
Cash Value
The money that accumulates in the life insurance policy while the policy is in force, (normally after 3 years)
Claim
A request for reimbursement for damages on an insured loss.
Commencement of risk
The risk on the policy starts when the policy is issued and the insurer receives the first premium in full.
Compound Revisionary Bonus (CRB)
Bonus declared as a percentage of the sum assured with compounded interest added plus bonuses to date.
Convertible term insurance
A term life policy that gives the policyowner the option of exchanging it for another plan without providing evidence of insurability (e.g., a current medical report and exam and underwriting).
Cooling off period
15 days grace period where the policy owner may cancel his policy by a written request.
Cost of insurance
see “mortality charge”
Counter Offer Letter
A document given by the insurance company indicating that a loading is required on top of the normal charges.
Critical Year Term
A forecasted premium paying term for a participating policy with the assumption that the policy owner keeps all dividends declared or cash value with the insurer for future premium paying purposes
D
Death benefit
Amount paid to the beneficiary upon your death.
Declarations page
The front page of your policy containing information such as the exact name of your insurance company, the policy number, your coverages, the amounts of your coverages, and your deductibles.
Dismemberment riders
Dismemberment riders are those that provide benefits on the occurrence of dismemberment (and usually on death also).
Dividend
Money paid annually to a policyholder of participating policies reflecting the insurance company’s favorable operating experience. Dividends are usually not guaranteed.
E
Effective Date
The date the insurance coverage begins
Elimination period
The number of days of care that you pay before your insurance plan picks up the benefits.
Encashment Bonus
Bonus declared by the insurance company from their investment surplus. It is declared in addition to cash value and is payable upon surrender of policy.
Endorsement
An addition to a policy that modifies its benefits.
Endowment
Life insurance payable to the policyholder if living, on the maturity date stated in the policy, or to a nominee if the insured dies prior to that date.
Enrollment period
The period during which individuals may enroll for an insurance policy, Medicare, HMO benefits.
Evidence of insurability
Statement or proof of a person’s health, finances, lifestyle, habits, or job to the extent that they affect his or her acceptability for insurance.
Exclusions
Conditions or procedures that are not covered. Every health care plan has its own list of exclusions and limitations. Some of the more common ones are experimental medications/treatments/procedures, sickness or injury as a result of war, attempted suicide, cosmetic surgery, etc.
F
Female Discount
Premium rates applicable to females. It has been statistically proven that females generally live longer than males of the same age group, consequently lower risk. This spells a lower premium rate for females.
Free look
The period during which you may reconsider the purchase of an insurance policy, cancel, and get a full refund. The clock starts running the day you receive the policy.
G
Grace Period
The period of time following the premium date which allows the policy holder to pay his overdue premium without penalty (normally 30 days). Policy remains in force.
Group life
Life insurance plans provided often through one’s job, association, or other organization where the individual members of the group receive certificates rather than policies as evidence of their insurance.
Guaranteed renewable An agreement by an insurance company to insure a person for as long as premiums are paid.
I
Illustration
A computer-generated printout of an insurance company’s explanation of how the life insurance policy will work for a prospective policyholder. It may project each year’s premium payment, cost index, dividends, and death benefit as well as guaranteed interest payments (if any). Sometimes called a “ledger statement”.
Incontestability Clause
This clause prevents the insurer from calling into question a policy, after the expiry of two years from the Effective Date of the policy or Reinstatement Date, whichever is later, on grounds of misrepresentation in the proposal form, medical report or any document which led to the issuance of the policy. Insurer can void the policy even after expiry of the contestable period if fraudulent misrepresentation on a material fact can be proven.
Insured
An insured (or assured) is the person whose life is insured under the policy and whom the proceeds of a claim will be forwarded to. Insured can be more than 1 person.
L
Lapse
Termination of a policy upon the policy owner’s failure to pay the premium within the grace period.
Lapsed policy
A policy terminated because of failure to pay the premium(s).
Level Premium
Premium charged is uniformed throughout the duration of the policy.
Loading
Additional costs on top of the normal premium due to speecial risk.
Loan
Borrowing against your policy’s accumulated cash value.
Loan interest
A charge made on the loan.
M
Maturity
The time at which the insurance company makes payment to the policy holder if he is still alive.
Modal Premium
Adjustments (Mode of Payment) Adjustments made to the annual premium in order to determine the appropriate amount to be paid at each premium due date for the mode of payment chosen. For example, if a policyholder decides to on a half-yearly basis, the modal premium would be slightly more than half of the annual premium.
Mortality charge
The charges a company makes against the policy to cover the policy’s share of the cost of death claims, based upon a mortality table used by the insurance company. Also called the “cost of insurance”.
N
Nominee
A nominee may be referred to a person nominated by the policyholder to receive the policy money either to receive it beneficially or as an executor.
Non-Forfeiture Provisions (NPF)
After a policy has acquired a cash value and during the lifetime of the insured, the policy owner may elect one of the following non-forfeiture options: - Option 1 To surrender the policy for its cash value. Option 2 To continue the basic policy as non-participating paid-up insurance for a reduced amount payable. The reduced amount will represent the amount of coverage, which the cash value will purchase as a single premium.
Non-participating policy
A life insurance policy, which is not eligible for the distribution of dividends paid out of the surplus earnings of the company.
Non-smoker Adjustment / Discount
A discount or reduction in the premiums payable by non-smokers. It is generally accepted that non-smokers, on average, live longer than smokers, thus lower risk.
Notice of claim Written document to make a claim and filed to the insurance company within 90 days of the occurrence of the claim.
O
Ordinary life insurance
Usually applied to level premium whole life policies.
P
Paid Up Value
The policy holder stops paying future premium and converts the cash value into payment of future premiums.
Paid-up Insurance
Insurance on which all required premiums have been paid. The term is frequently used to mean the reduced paid-up insurance available as a nonforfeiture option.
Participating
The policy owner participates in the distribution of surplus.
Participating Policy
A policy in which the policy owner is entitled to receive dividend paid out of the company's surplus earnings
Payor
The person who pays the premium. This term is usually used when the person making the premium payments is different from the insured. Exaple: Payor is the father, insured is the son.
Physical examination Physical examination and/or medical history that is required to qualify for health insurance.
Policy
The document that stipulates the terms and conditions of the insurance contract. It includes the policy book and Supplementary Contracts (if any)
Policy Anniversary
Policy Anniversary is any anniversary of the Policy Date shown on the First Schedule.
Policy Loan
Loan made by the insurance company to the policy holder on the cash value of his policy
Policy Owner
The Policy Owner is the person in whose name the policy is made out to. The name is found in the First Schedule. If it is subsequently changed, it will be found under the assignment clause.
Policy Period
The amount of time the policy provides coverage
Policy reserves
Funds held by a life insurance company specifically to fulfill its policy obligations.
Policy Size Adjustment / Large Sum Assured Discount
A premium reduction given as an incentive to a policy owner who purchases a policy with a large sum insured.
Policy Term
Period for which an insurance policy provides coverage
Pre-existing Condition (For Critical Illness Rider)
A physical and/or mental condition of an insured which first manifested itself prior to the issuance of the policy or which existed prior to issuance and for which treatment was received.
Premium
The amount paid by the insured to buy the insurance policy.
Premium date
Premium date is the date on which a premium falls due.
Premium expense charges
An amount deducted from each premium payment that reduces the amount credited to the policy.
Premium waiver provision
An optional provision that takes effect if the policy owner becomes disabled. The disabled person will not have to pay premiums for the duration of the disability, including lifetime disability
Primary Assurance
Also known as basic policy.
Proof of loss
Documents that you give the insurer to support your request for payment of losses.
Proposal Form
A signed request for life insurance giving information about the prospective policyholder, including age, sex, and if it is subject to underwriting, it will also asks a series of health related questions
R
Rating tables
Tables that companies use to classify risks
Reinstatement
The resumption of coverage under a policy that has lapsed because of nonpayment of the premium after the grace period has ended
Renewability
Group health insurance plans are normally 1 year term. Insurers generally review the claims experience of the group at each renewal date and make a renewal offer – often at a different premium. The company then decides whether to accept the renewal offer.
Renewable term
A term policy that guarantees the policy owner the right to renew coverage at the end of the term, without presenting evidence of insurability. Premiums increase at each renewal since the insured’s age increases.
Reversionary Bonus (RB)
Bonus declared by the insurance company from their investment surplus. It is declared in addition to the sum assured and payable upon death or total permanent disability of the insured.
Rider
Also known as supplementary contracts. Extensions to the basic policy for additional charge which is incorporated in the First Schedule and forms part of the policy.
Risk
Risk is the chance of loss.
Risk factor
A factor that is expected, possibly with support of statistical evidence, to have an influence on the intensity of risk in insurance contract. Example: smoking is a factor that increases risk; working in an oil-rig in the middle of an ocean is a factor that increases risk.
S
Simple Revisionary Bonus (SRB)
Bonus that is declared base on a percentage of the sum assured only.
Stamp Duty
Stamp duty is the tax that is levied on the policy document.
Suicide Clause
Provision that excludes coverage on suicide within a year of policy issuance.
Sum Assured
The amount payable upon the death of the insured or upon any other contingencies covered under the terms of the basic policy.
Supplementary Contracts
Also known as rider. Extensions to the basic policy for additional charge which is incorporated in the First Schedule and forms part of the policy.
Surrender
Terminating or canceling a policy before its maturity date and cashing in its cash surrender value
Surrender charges Fees that are deducted if your life insurance policy is cashed in prematurely
Surrender Value
Amount payable on termination of policy.
T
Terminal or Maturity Bonus
Bonus payable at policy maturity. This is in addition to the sum of the annual bonuses declared at the end of every year during the term of the policy. However, this type of bonus is not payable on death or total and permanent disability. The rate is at the discretion of the company.
Temporary Partial & Continous Disability
Insured is only capable of performing only part of his/her usual occupation after the occurrence of his/her injury. The disability is both partial and temporary.
Temporary Total & Continous Disability
Temporary total disablement is disabilities that prevent the insured from performing all of his/her job functions. This means that the insured is totally disabled, but only temporarily.
Term Insurance
A Life insurance policy which provides a stated benefit payable to a nominee/assignee only when an insured dies within a specified period. No maturity value if insured survives at the end of the term.
Terminal Bonus or Terminal Dividend
A Bonus/Dividend that may be payable on death/surrender/maturity of a particpating policy. The amount payable is not guaranteed and depends on the performance of the Company at the time of event.
Total & Permanent Disability (TPD)
Disability that renders the insured incapable of work or occupation by which he earns a living provided that such disability lasts not less than six months. At the end of the 6 months he must be certified total and permanently disabled (TPD). If insured is a minor, TPD is defined as totally unable by reason of accident or sickness to perform independently his activities of daily living without frequent attention of a third party and is likely to remain permanently disabled. Such disability must last more than six months.
U
Underwriter
An individual in an insurance company who assesses insurance risks on which can be accepted and on what terms.
Underwriting
The insurance company’s process for determining whom it will insure and on what term.
W
Waiting period
The time that must pass after becoming insured before the policy will begin to pay benefits for a pre-existing condition or specified illness.
Waiver
An amendment to a policy that excludes coverage for certain medical conditions.
Whole Life Insurance
A Life time protection for life assured. Normally it is 85 years of age. The benefit is payable upon death, TPD or at maturity (if any) of the life assured.
Tuesday, September 9, 2008
Wednesday, September 3, 2008
What is Sukuk?
Sukuk is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed income, interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.
Conservative estimates by the Ten-Year Framework and Strategies suggest that over $700 billion of assets are managed according to Islamic investment principles.[1] Such principles form part of Shari'ah, which is often understood to be ‘Islamic Law’, but it is actually broader than this in that it also encompasses the general body of spiritual and moral obligations and duties in Islam.
Sharia-compliant assets worldwide are worth an estimated $500 billion and have grown at more than 10 per cent per year over the past decade, placing Islamic finance in a global asset class all of its own. In the Gulf and Asia, Standard & Poor's estimates that 20 per cent of banking customers would now spontaneously choose an Islamic financial product over a conventional one with a similar risk-return profile.
With its Arabic terminology and unusual prohibitions, Sukuk financing can be quite mystifying for the outsider. A good analogy is one of ethical or green investing. Here the universe of investable securities is limited by certain criteria based on moral and ethical considerations. Islamic Finance is also a subset of the global market and there is nothing that prevents the conventional investor from participating in the Islamic market.
History
In classical period, Islam sakk (sukuk) – which is cognate with the European root "cheque" (which itself derives from Persian)- meant any document representing a contract or conveyance of rights, obligations or monies done in conformity with the Shariah. Empirical evidence shows that sukuk were a product extensively used during medieval Islam for the transferring of financial obligations originating from trade and other commercial activities.
The essence of sukuk, in the modern Islamic perspective, lies in the concept of asset monetisation - the so called securitisation - that is achieved through the process of issuance of sukuk (taskeek). Its great potential is in transforming an asset’s future cash flow into present cash flow. Sukuk may be issued on existing as well as specific assets that may become available at a future date.
Valued at the end of 2006 more than US$ 50bn the sukuk market is due for an exponential rise in 2007 with every issue likely to be oversubscribed 5 to 6 times amid a fast growing interest in the western countries.
Principle
Shari’ah requires that financing should only be raised for trading in, or construction of, specific and identifiable assets. Trading in indebtedness is prohibited and so the issuance of conventional bonds would not be compliant. Thus all Sukuk returns and cashflows will be linked to assets purchased or those generated from an asset once constructed and not simply be income that is interest based. For borrowers to raise compliant financing they will need to utilise assets in the structure (which could be equity in a tangible company). Equity financing is Shari’ah compliant and fits well with the risk/return precepts of Islam.
As Shari’ah considers money to be a measuring tool for value and not an asset in itself, it requires that one should not be able to receive income from money (or anything that has the genus of money) alone. This generation of money from money (simplistically interest) is "Riba", and is forbidden. The implications for Islamic financial institutions is that the trading and selling of debts, receivables (for anything other than par), conventional loan lending and credit cards are not permissible.
This principle is widely understood to mean uncertainty in the contractual terms and/or the uncertainty in the existence of an underlying asset in a contract and this causes issues for Islamic scholars when considering the application of derivatives. Shari’ah also incorporates the concept of "Maslahah" or "public benefit", denoting that if something is overwhelmingly in the public good, it may yet be transacted – and so hedging or mitigation of avoidable business risks, may fall into this category but there is still much discussion yet to come.
Conservative estimates by the Ten-Year Framework and Strategies suggest that over $700 billion of assets are managed according to Islamic investment principles.[1] Such principles form part of Shari'ah, which is often understood to be ‘Islamic Law’, but it is actually broader than this in that it also encompasses the general body of spiritual and moral obligations and duties in Islam.
Sharia-compliant assets worldwide are worth an estimated $500 billion and have grown at more than 10 per cent per year over the past decade, placing Islamic finance in a global asset class all of its own. In the Gulf and Asia, Standard & Poor's estimates that 20 per cent of banking customers would now spontaneously choose an Islamic financial product over a conventional one with a similar risk-return profile.
With its Arabic terminology and unusual prohibitions, Sukuk financing can be quite mystifying for the outsider. A good analogy is one of ethical or green investing. Here the universe of investable securities is limited by certain criteria based on moral and ethical considerations. Islamic Finance is also a subset of the global market and there is nothing that prevents the conventional investor from participating in the Islamic market.
History
In classical period, Islam sakk (sukuk) – which is cognate with the European root "cheque" (which itself derives from Persian)- meant any document representing a contract or conveyance of rights, obligations or monies done in conformity with the Shariah. Empirical evidence shows that sukuk were a product extensively used during medieval Islam for the transferring of financial obligations originating from trade and other commercial activities.
The essence of sukuk, in the modern Islamic perspective, lies in the concept of asset monetisation - the so called securitisation - that is achieved through the process of issuance of sukuk (taskeek). Its great potential is in transforming an asset’s future cash flow into present cash flow. Sukuk may be issued on existing as well as specific assets that may become available at a future date.
Valued at the end of 2006 more than US$ 50bn the sukuk market is due for an exponential rise in 2007 with every issue likely to be oversubscribed 5 to 6 times amid a fast growing interest in the western countries.
Principle
Shari’ah requires that financing should only be raised for trading in, or construction of, specific and identifiable assets. Trading in indebtedness is prohibited and so the issuance of conventional bonds would not be compliant. Thus all Sukuk returns and cashflows will be linked to assets purchased or those generated from an asset once constructed and not simply be income that is interest based. For borrowers to raise compliant financing they will need to utilise assets in the structure (which could be equity in a tangible company). Equity financing is Shari’ah compliant and fits well with the risk/return precepts of Islam.
As Shari’ah considers money to be a measuring tool for value and not an asset in itself, it requires that one should not be able to receive income from money (or anything that has the genus of money) alone. This generation of money from money (simplistically interest) is "Riba", and is forbidden. The implications for Islamic financial institutions is that the trading and selling of debts, receivables (for anything other than par), conventional loan lending and credit cards are not permissible.
This principle is widely understood to mean uncertainty in the contractual terms and/or the uncertainty in the existence of an underlying asset in a contract and this causes issues for Islamic scholars when considering the application of derivatives. Shari’ah also incorporates the concept of "Maslahah" or "public benefit", denoting that if something is overwhelmingly in the public good, it may yet be transacted – and so hedging or mitigation of avoidable business risks, may fall into this category but there is still much discussion yet to come.
Malaysian bond market
Instruments traded on the Malaysian bond market comprise conventional and Islamic papers which includes the following:
Government Securities
Malaysian Treasury Bills (MTB) and Malaysian Government Securities (MGS) are short term and long term papers issued on conventional basis by the Malaysian Government to manage the economy. Government Investment Issues (GII) are intended for similar purposes but are issued based on Islamic principles. MGS Floating Securities are issued based on spread basis.
Bank Negara Papers
Bank Negara Bills (BNB) and Bank Negara Notes (BNN) are issued by the Central Bank for its market operations.
Cagamas Papers
Cagamas Berhad is the National Mortgage Corporation whose business is to promote the secondary mortgage market in Malaysia. Cagamas funds its business operation by issuing Notes, Bonds & Sanadat. Sanadat is an Islamic bond.
Private Debt Securities (PDS)
Private debt securities comprise short and long term debt securities issued by private corporations on conventional or Islamic basis.
Asset Backed Securities (ABS)
ABS are securities backed by assets such as mortgages, loans, receivables, etc and are issued by private or quasi Government corporations. ABS is also issued on an Islamic basis in Malaysia.
Source: http://www.klse.com.my/website/bm/trading/bonds/instruments_traded.html
Government Securities
Malaysian Treasury Bills (MTB) and Malaysian Government Securities (MGS) are short term and long term papers issued on conventional basis by the Malaysian Government to manage the economy. Government Investment Issues (GII) are intended for similar purposes but are issued based on Islamic principles. MGS Floating Securities are issued based on spread basis.
Bank Negara Papers
Bank Negara Bills (BNB) and Bank Negara Notes (BNN) are issued by the Central Bank for its market operations.
Cagamas Papers
Cagamas Berhad is the National Mortgage Corporation whose business is to promote the secondary mortgage market in Malaysia. Cagamas funds its business operation by issuing Notes, Bonds & Sanadat. Sanadat is an Islamic bond.
Private Debt Securities (PDS)
Private debt securities comprise short and long term debt securities issued by private corporations on conventional or Islamic basis.
Asset Backed Securities (ABS)
ABS are securities backed by assets such as mortgages, loans, receivables, etc and are issued by private or quasi Government corporations. ABS is also issued on an Islamic basis in Malaysia.
Source: http://www.klse.com.my/website/bm/trading/bonds/instruments_traded.html
Islamic Capital Market Terms
Bai` Bithaman Ajil (BBA)
A contract which refers to the sale and purchase transaction for the financing of assets on a deferred and instalment basis with a pre-agreed payment period. The sale price will include a profit margin.
Bai` al-`Inah
A contract involving the sale and buy-back transaction of assets by a seller. A seller sells an asset to a buyer on a cash basis and later buys it back on a deferred payment basis where the price is higher than the cash price. It can also be applied when a seller sells an asset to a buyer on a deferred basis and later buys it back on a cash basis, at a price which is lower than the deferred price.
Bai` al-Istijrar
A contract whereby the supplier agrees to supply a particular product on an ongoing basis, e.g. monthly, at an agreed price and an agreed mode of payment.
Bai` al-Dayn
A transaction involving the sale and purchase of securities or debt certificates which conforms with the Shariah. Securities or debt certificates are issued by a debtor to a creditor as evidence of indebtedness.
Bai` al-Muzayadah
An action by a person to sell his asset in the open market, which is accompanied by the process of bidding among potential buyers. The asset for sale is awarded to the person who offers the highest price. It is a sale and purchase transaction based on tender.
Bai` al-Salam
A contract whereby payment is made in cash at point of contract but delivery of asset purchased is deferred to a pre-determined date.
Bai` al-Wafa'
A contract with a condition that when the seller pays back the price of the goods sold, the buyer returns the goods to the seller.
Dhaman
A contract of guarantee whereby a guarantor underwrites any claim and obligation that should be fulfilled by the owner of an asset. This concept is also applicable to a guarantee provided on a debt transaction in the event a debtor fails to fulfil his debt obligation.
Gharar
Gharar is an element of deception either through ignorance of an essential element of the goods, the price, or through faulty description of the goods, in which one or both parties stand to be deceived. E.g. gambling is a form of gharar because the gambler is ignorant of the result of the gamble.
Gharar is divided into three types, namely gharar fahish (excessive), which vitiates the transaction, gharar yasir (minor) which is tolerated and gharar mutawassit (moderate) which falls between the other two categories. Any transaction can be classified as forbidden activity because of excessive gharar.
Haq Maliy
Haq maliy is a right on the financial assets, e.g. haq dayn (debt rights) and haq tamalluk (ownership rights).
Hibah
A gift awarded to a person.
Hiwalah
A contract which allows a debtor to transfer his debt obligation to a third party.
Ibra'
An act by a person to withdraw his rights to collect payment from a person who has the obligation to repay the amount borrowed from him.
Ijarah
A manfaah (usufruct) type of contract whereby a lessor (owner) leases out an asset or equipment to a client at an agreed rental fee and pre-determined lease period upon the `aqd (contract). The ownership of the leased equipment remains in the hands of a lessor.
Ijarah Thumma Bai`
A contract which begins with an ijarah contract for the purpose of leasing the lessor's asset to the lessee. Consequently, at the end of the lease period, the lessee will purchase the asset at an agreed price from the lessor by executing a purchase (bai`) contract.
Istisna`
A purchase order contract of assets whereby a buyer places an order to purchase an asset to be delivered in the future. The buyer requires the seller or a contractor to construct the asset and deliver in the future according to the specifications given in the sale and purchase contract. Both parties decide on the sale and purchase prices and the settlement can be delayed or arranged based on a schedule of work completed.
Ittifaq Dhimni
A sale and repurchase of an underlying asset whose prices are agreed by the parties prior to the completion of the contract. This is an agreement which must be reached before the contract can be concluded to allow for the bidding process (bai` al-muzayadah) to take place.
Ji`alah
Contract of reward – a unilateral contract promising a reward for a specific act or accomplishment.
Kafalah
It has the same meaning as dhaman.
Khilabah
A form of fraud, either in word or deed by a party to the trading contracts with the intention of inducing the other party into making a contract. This is prohibited according to the Shariah.
Khiyanah
Deception, by not disclosing the truth or breaching an agreement in a hidden way. This is prohibited according to the Shariah.
Mal
Something which has value and can be gainfully used according to the Shariah.
Maisir
Any activity that involves betting whereby the winner takes the bet and the loser loses his bet. This is prohibited according to the Shariah.
Mudharabah
A contract made between two parties to finance a business venture. The parties are a rabb al-mal or an investor who solely provides the capital and a mudarib or an entrepreneur who solely manages the project. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio. If the business is a loss, it will be borne solely by the a provider of the capital.
Murabahah
A contract referring to a sale and purchase transaction for the financing of an asset whereby the cost and profit margin (mark-up) are made known and agreed to by all parties involved. The settlement for the purchase can be settled either on a deferred lump sum basis or on an instalment basis, and is specified in the agreement.
Musyarakah
A partnership arrangement between two parties or more to finance a business venture whereby all parties contribute capital either in the form of cash or in kind. Any profit derived from the venture is distributed based on a pre-agreed profit sharing ratio and a loss is shared on the basis of capital contribution.
Muqasah
Debt settlement by a contra transaction.
Qabdh
Qabdh means possession, which refers to a contract of exchange. Generally, qabdh depends on the perception of `urf or the common practices of the local community in recognising that the possession of a good has taken place.
Qardh Hasan
A contract of loan between two parties on the basis of social welfare or to fulfil a short-term financial need of the borrower. The amount of repayment must be equivalent to the amount borrowed. It is, however legitimate for a borrower to pay more than the amount borrowed as long as it is not stated or agreed at the point of contract.
Rahn
An act whereby a valuable asset is used as a collateral for a debt. The collateral will be used to settle the debt when a debtor is in default.
Riba
An increase, in a loan transaction or in exchange of a commodity, accrued to the owner (lender) without giving an equivalent counter value or recompensation in return to the other party. It covers interest both on commercial and consumer loans, and is prohibited according to the Shariah.
Sarf
A buying and selling of currencies.
Suftajah
A credit instrument issued to enable a creditor to use or cash it at another pre-determined venue and at a future date.
Sukuk
A document or certificate, documenting the undivided pro-rated ownership of underlying assets. The sak (singular of sukuk) is freely traded at par, premium or discount.
Shariah
Islamic law, originating from the Qur`an (the holy book of Islam), and its practices and explanations rendered by the prophet Muhammad (pbuh) and ijtihad of ulamak (personal effort by qualified Shariah scholars to determine the true ruling of the divine law on matters whose revelations are not explicit).
Tadlis al-`aib
Refers to the activity of a seller intentionally hiding the defects of goods. This activity is prohibited according to the Shariah.
Takaful
A form of Islamic insurance based on the principle of ta`awun or mutual assistance. It provides mutual protection of assets and property and offers joint risk sharing in the event of loss incurred by one of its members. Takaful is similar to mutual insurance in that members are the insurers as well as the insured.
Tanajush
Refers to a conspiracy between a seller and a buyer wherein the buyer is willing to purchase the goods at a higher price. This is done so that others would rush to buy the goods at a higher price, resulting in the seller obtaining a huge profit. This transaction is not permissible in Islam.
Ta`widh
Penalty agreed upon by contracting parties as compensation which can be rightfully claimed by the creditor when the debtor fails or is late in meeting his obligation to pay back the debt.
Ujrah
Financial payment for the utilisation of services or manfaat. In the context of today's economy, it can be in the form of salary, wage, allowance, commission, etc.
`Urbun
A deposit or earnest money forming part payment of the price of goods or services paid in advance, but is forfeited if the transaction is cancelled. The forfeited money is considered as hibah (gift).
'Uqud al-Mu'awadat
Contracts of exchange.
'Uqud al-Tabarruat
Charitable contracts.
'Uqud al-Ishtirak
Contracts of partnership.
Wakalah
A contract which gives a person the power to nominate someone to act on his behalf, as long as he is alive, based on the agreed terms and conditions.
Wadiah Yad Dhamanah
Goods or deposits kept for safekeeping with another person, who is not the owner. As wadiah is a trust, the depository becomes the guarantor and guarantees repayment of the whole amount of the deposits, or any part thereof outstanding in the accounts of the depositors, when demanded. The depositors are not entitled to any share of the profits but the depository may provide returns to the depositors as a token of appreciation.
Zakat
A tax, which is prescribed by Islam on all persons having wealth above a certain amount at a rate fixed by the Shariah. According to the Islamic belief zakat purifies wealth and souls. The objective is to take away a part of the wealth of the well-to-do to distribute among eight categories of people stated in the Quran.
source: http://www.sc.com.my/eng/html/icm/Glossary.html
A contract which refers to the sale and purchase transaction for the financing of assets on a deferred and instalment basis with a pre-agreed payment period. The sale price will include a profit margin.
Bai` al-`Inah
A contract involving the sale and buy-back transaction of assets by a seller. A seller sells an asset to a buyer on a cash basis and later buys it back on a deferred payment basis where the price is higher than the cash price. It can also be applied when a seller sells an asset to a buyer on a deferred basis and later buys it back on a cash basis, at a price which is lower than the deferred price.
Bai` al-Istijrar
A contract whereby the supplier agrees to supply a particular product on an ongoing basis, e.g. monthly, at an agreed price and an agreed mode of payment.
Bai` al-Dayn
A transaction involving the sale and purchase of securities or debt certificates which conforms with the Shariah. Securities or debt certificates are issued by a debtor to a creditor as evidence of indebtedness.
Bai` al-Muzayadah
An action by a person to sell his asset in the open market, which is accompanied by the process of bidding among potential buyers. The asset for sale is awarded to the person who offers the highest price. It is a sale and purchase transaction based on tender.
Bai` al-Salam
A contract whereby payment is made in cash at point of contract but delivery of asset purchased is deferred to a pre-determined date.
Bai` al-Wafa'
A contract with a condition that when the seller pays back the price of the goods sold, the buyer returns the goods to the seller.
Dhaman
A contract of guarantee whereby a guarantor underwrites any claim and obligation that should be fulfilled by the owner of an asset. This concept is also applicable to a guarantee provided on a debt transaction in the event a debtor fails to fulfil his debt obligation.
Gharar
Gharar is an element of deception either through ignorance of an essential element of the goods, the price, or through faulty description of the goods, in which one or both parties stand to be deceived. E.g. gambling is a form of gharar because the gambler is ignorant of the result of the gamble.
Gharar is divided into three types, namely gharar fahish (excessive), which vitiates the transaction, gharar yasir (minor) which is tolerated and gharar mutawassit (moderate) which falls between the other two categories. Any transaction can be classified as forbidden activity because of excessive gharar.
Haq Maliy
Haq maliy is a right on the financial assets, e.g. haq dayn (debt rights) and haq tamalluk (ownership rights).
Hibah
A gift awarded to a person.
Hiwalah
A contract which allows a debtor to transfer his debt obligation to a third party.
Ibra'
An act by a person to withdraw his rights to collect payment from a person who has the obligation to repay the amount borrowed from him.
Ijarah
A manfaah (usufruct) type of contract whereby a lessor (owner) leases out an asset or equipment to a client at an agreed rental fee and pre-determined lease period upon the `aqd (contract). The ownership of the leased equipment remains in the hands of a lessor.
Ijarah Thumma Bai`
A contract which begins with an ijarah contract for the purpose of leasing the lessor's asset to the lessee. Consequently, at the end of the lease period, the lessee will purchase the asset at an agreed price from the lessor by executing a purchase (bai`) contract.
Istisna`
A purchase order contract of assets whereby a buyer places an order to purchase an asset to be delivered in the future. The buyer requires the seller or a contractor to construct the asset and deliver in the future according to the specifications given in the sale and purchase contract. Both parties decide on the sale and purchase prices and the settlement can be delayed or arranged based on a schedule of work completed.
Ittifaq Dhimni
A sale and repurchase of an underlying asset whose prices are agreed by the parties prior to the completion of the contract. This is an agreement which must be reached before the contract can be concluded to allow for the bidding process (bai` al-muzayadah) to take place.
Ji`alah
Contract of reward – a unilateral contract promising a reward for a specific act or accomplishment.
Kafalah
It has the same meaning as dhaman.
Khilabah
A form of fraud, either in word or deed by a party to the trading contracts with the intention of inducing the other party into making a contract. This is prohibited according to the Shariah.
Khiyanah
Deception, by not disclosing the truth or breaching an agreement in a hidden way. This is prohibited according to the Shariah.
Mal
Something which has value and can be gainfully used according to the Shariah.
Maisir
Any activity that involves betting whereby the winner takes the bet and the loser loses his bet. This is prohibited according to the Shariah.
Mudharabah
A contract made between two parties to finance a business venture. The parties are a rabb al-mal or an investor who solely provides the capital and a mudarib or an entrepreneur who solely manages the project. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio. If the business is a loss, it will be borne solely by the a provider of the capital.
Murabahah
A contract referring to a sale and purchase transaction for the financing of an asset whereby the cost and profit margin (mark-up) are made known and agreed to by all parties involved. The settlement for the purchase can be settled either on a deferred lump sum basis or on an instalment basis, and is specified in the agreement.
Musyarakah
A partnership arrangement between two parties or more to finance a business venture whereby all parties contribute capital either in the form of cash or in kind. Any profit derived from the venture is distributed based on a pre-agreed profit sharing ratio and a loss is shared on the basis of capital contribution.
Muqasah
Debt settlement by a contra transaction.
Qabdh
Qabdh means possession, which refers to a contract of exchange. Generally, qabdh depends on the perception of `urf or the common practices of the local community in recognising that the possession of a good has taken place.
Qardh Hasan
A contract of loan between two parties on the basis of social welfare or to fulfil a short-term financial need of the borrower. The amount of repayment must be equivalent to the amount borrowed. It is, however legitimate for a borrower to pay more than the amount borrowed as long as it is not stated or agreed at the point of contract.
Rahn
An act whereby a valuable asset is used as a collateral for a debt. The collateral will be used to settle the debt when a debtor is in default.
Riba
An increase, in a loan transaction or in exchange of a commodity, accrued to the owner (lender) without giving an equivalent counter value or recompensation in return to the other party. It covers interest both on commercial and consumer loans, and is prohibited according to the Shariah.
Sarf
A buying and selling of currencies.
Suftajah
A credit instrument issued to enable a creditor to use or cash it at another pre-determined venue and at a future date.
Sukuk
A document or certificate, documenting the undivided pro-rated ownership of underlying assets. The sak (singular of sukuk) is freely traded at par, premium or discount.
Shariah
Islamic law, originating from the Qur`an (the holy book of Islam), and its practices and explanations rendered by the prophet Muhammad (pbuh) and ijtihad of ulamak (personal effort by qualified Shariah scholars to determine the true ruling of the divine law on matters whose revelations are not explicit).
Tadlis al-`aib
Refers to the activity of a seller intentionally hiding the defects of goods. This activity is prohibited according to the Shariah.
Takaful
A form of Islamic insurance based on the principle of ta`awun or mutual assistance. It provides mutual protection of assets and property and offers joint risk sharing in the event of loss incurred by one of its members. Takaful is similar to mutual insurance in that members are the insurers as well as the insured.
Tanajush
Refers to a conspiracy between a seller and a buyer wherein the buyer is willing to purchase the goods at a higher price. This is done so that others would rush to buy the goods at a higher price, resulting in the seller obtaining a huge profit. This transaction is not permissible in Islam.
Ta`widh
Penalty agreed upon by contracting parties as compensation which can be rightfully claimed by the creditor when the debtor fails or is late in meeting his obligation to pay back the debt.
Ujrah
Financial payment for the utilisation of services or manfaat. In the context of today's economy, it can be in the form of salary, wage, allowance, commission, etc.
`Urbun
A deposit or earnest money forming part payment of the price of goods or services paid in advance, but is forfeited if the transaction is cancelled. The forfeited money is considered as hibah (gift).
'Uqud al-Mu'awadat
Contracts of exchange.
'Uqud al-Tabarruat
Charitable contracts.
'Uqud al-Ishtirak
Contracts of partnership.
Wakalah
A contract which gives a person the power to nominate someone to act on his behalf, as long as he is alive, based on the agreed terms and conditions.
Wadiah Yad Dhamanah
Goods or deposits kept for safekeeping with another person, who is not the owner. As wadiah is a trust, the depository becomes the guarantor and guarantees repayment of the whole amount of the deposits, or any part thereof outstanding in the accounts of the depositors, when demanded. The depositors are not entitled to any share of the profits but the depository may provide returns to the depositors as a token of appreciation.
Zakat
A tax, which is prescribed by Islam on all persons having wealth above a certain amount at a rate fixed by the Shariah. According to the Islamic belief zakat purifies wealth and souls. The objective is to take away a part of the wealth of the well-to-do to distribute among eight categories of people stated in the Quran.
source: http://www.sc.com.my/eng/html/icm/Glossary.html
GLOSSARY OF CAPITAL MARKET TERMS
Allotment
The allocation of new securities to an applicant for a new issue.
Annual General Meeting
Mandatory yearly meeting of a company for the purposes of receiving the directors' report and statement of accounts for the year, declaring a dividend, electing directors and auditors and determining the auditors' remuneration.
Annual Report & Accounts
A document to be forwarded to shareholders by the directors of a company on an annual basis which contains, amongst others, the annual audited accounts of the company.
Arbitrage
Buying on one exchange and selling on another at virtually the same moment to take advantage of a price variation in a company's shares listed on the two exchanges.
Articles of Association
The documents of a company that govern the management and administration of that company.
Asset Backing A handy yardstick for shareholders. It is the net assets of a company (assets less liabilities) divided by the number of shares.
At Discretion
An instruction given by a client to his broker, for the broker to buy or sell a stock at his (the broker's) discretion.
At Limit
An order placed which sets a limit on either the lowest or highest price, for which a share is bought or sold.
At Market (also At Best)
An instruction to buy or sell at market price. Allows the broker/dealer complete freedom of action. Should be treated with caution and used only when a share must be sold.
Authorised Capital
The nominal amount of capital that a limited company is permitted to raise under the capital clause in its Memorandum of Association.
Averaging
Buying more of the same shares, generally on a falling market, to lower the average cost per share. (Can also average up, thereby raising the average cost per share).
Balance Sheet
A company's year-end statement of assets and liabilities.
Bear Market
A stock market in which sellers dominate, resulting in generally falling prices.
Beta
The beta reflects the sensitivity of a share or portfolio relative to the overall market development.
Bid
Indicated willingness to purchase at a specified price.
Blue Chips
The shares of a company known to make profits in good and bad times. As there is a low risk of capital loss, the dividend and earnings yield are proportionately low.
Board Lot
Shares are normally traded in specific amounts called Board Lots, currently 100 units. Any amount less than board lots are called special lots or odd lots.
Bond
A document recording a loan and specifying the date of maturity and the rate of interest to be paid.
Bonus Issue
Distribution of capital funds (usually from a revaluation of assets or a share premium reserve) to shareholders in the form of shares for which payment is not required.
Bourse
A French term for stock exchange, grain exchange or exchange dealing in commodities.
Break-even Point
The price level at which a particular strategy neither makes nor loses money.
Broker (Stockbroker)
An agent, authorised to buy and sell shares on behalf of a client.
Brokerage
A fee charged for the broker's services. Also called commission.
Bull Market
A stock market in which buyers dominate and where prices are on a rising trend.
Buy side
Buy side is a financial term used in financial security trading. As opposed to the sell side, which refers to banks and brokerages who are required to be market makers in a given security, the buy side refers to firms which buy and sell as customers of these market makers, usually taking speculative positions or making relative value trades.
Cagamas Papers
Cagamas Berhad is the National Mortgage Corporation whose business is to promote the secondary mortgage market in Malaysia. Cagamas funds its business operation by issuing Notes, Bonds & Sanadat. Sanadat is an Islamic bond.
Calls
An instalment called up by a company on contributing or partly paid shares. A legal liability for shareholders of other than a "No Liability" company.
Capital Gain/ Loss
Profit/loss made on the sale of a capital asset.
Cash Market
The underlying market of a futures product.
CDS (Central Depository System) Account
It is an account opened under the investor’s name (applicant must be at least 18 years old) with a stockbroking company. This account will enable the investor to buy and sell shares and to carry out activities on other non-equity counters (i.e., bonds, warrant, loan stock, etc.) which are under CDS.
Closing Price
The price of a share or security at the end of a day's stock market trading.
Class of Shares
A document recording a loan and specifying the date of maturity and the rate of interest to be paid.
Commission
A fee charged for the broker's services. Also called brokerage.
Companies Act 1965
The Act of Parliament that governs companies.
Company
A separate legal entity, incorporated under the Companies Act 1965, carrying on a business or trade. A company may be private or public, limited by shares or unlimited, or limited by guarantee.
Contra Transactions
The procedures in giving orders to buy and sell in a contra transaction are the same. The only difference is that the client pays the broker or the broker pays the client for the difference in price between his buy and sell transaction. If the buy cost is higher than the sell proceeds, it results in a contra loss which the client pays to the broker. If the sell proceeds are higher, it results in a contra profit which the broker pays to the client. Contra dealing is not a right of the client but rather a privilege accorded by the stockbroking company to its clients. This means that the stockbroking company is not obliged to allow contra dealing facilities for all its clients.
Contract Month
The trading month(s) that is available to trade at any one point.
Contract Note
Document sent by brokers to clients of a purchase or sale of shares. It confirms the transaction, giving details of price, brokerage, stamp duty and clearing fee.
Convergence
This refers to the tendency of cash and futures prices coming together as a futures contract nears expiration.
Corporate bond
A debt instrument for a loan which is issued by a borrower to an investor who is the buyer of the bond and lender of the money. In return for the money, the issuer agrees to pay regular interest to the bondholder for the term of the loan and the principal sum borrowed upon maturity.
Cum
A prefix meaning "with". A share quoted "cum-dividend" means the buyer is entitled to a dividend currently attaching to it, similarly with cum-rights and cum-bonus.
Day Order
An order that is placed for execution just for that day only.
Day Trading
Refers to establishing and liquidating the same position(s) within the same trading day.
Debenture
A fixed interest security which has a maturity date and a specified rate of interest. The assets of the borrowing company are charged against the debenture issue; details of the charge are included in a Debenture Deed drawn up to protect the debenture holder.
Debt/Equity Ratio
The relationship between a company's borrowing and its shareholders' capital funds.
Delivery Month
The calendar month in which physical delivery of a futures contract must be made.
Direct Business
In relation to the KLSE, any share transactions effected outside the Exchange, including:
crossing, that is transaction between two stockbroking companies; or
"married" transaction between two clients within a stockbroking company.
Discount
The amount by which the price of a share is quoted below its paid-up value.
Dissolution
The winding up of a company by way of compulsory liquidation or voluntary liquidation.
Dividend Cover
The number of items a company's annual dividend could be paid out of current earnings.
Dividend Yield
The amount of a company's annual dividend expressed as a percentage of the current price of the share of that company.
Earnings Per Share
The amount of a company's annual profits or earning attributable to each ordinary share of that company.
Equity
Another name for the ordinary shares of a company.
Electronic Trading Platform (ETP)
ETP is the acronyms of Electronic Trading Platform. The ETP shall be the centralised price and trade repository and dissemination for the primary and secondary bond market. It is an efficient and facilitative market control system for Bursa to supervise the bond market. ETP facilitates the trading and reporting of all secondary market activities. The key business components that contribute to the business of ETP are the provisions of 1) central order book for matching, trade reporting and negotiation, 2) a comprehensive dissemination system for price/yield and trade information dissemination, 3) data storage for market history data referential maintenance for exchange administrator, 4) real time market surveillance system. The core ETP system interfaces with other systems such as the FAST (Fully automated system for Tendering) and Information vendors. The capital market is divided into the primary and secondary market. The capital market comprises the conventional market and Islamic market. Primary market activities include the insurance or lender of debt securities & money market transactions. Primary market is the source of referential data for trading in secondary market. Secondary market activities include trading of Government Securities (MGS, MTB and GII) and Private Debt Securities (PDS). Transactions that are available on ETP are Outright buy and sell, When Issued, Reallotment, Repo or Securities Buy Back Agreement, Securities Borrowing and Lending. The bond investors comprise secondary market participants such as the Financial Institutions, institutions investors and fund managers.
Ex
Prefix meaning "without", the opposite to "cum". The purchaser is not entitled to dividends, bonus shares or rights previously attached to the share.
Face Value
The actual paid-up value of a share. Seldom the same as the market value.
Float
Term given to the commencement or listing of a new company on the stock market.
Gilt Edged
A term usually associated with government or semi-government securities, more generally used on British markets.
Growth Stocks
Shares of companies with good prospects for increasing profits and capital size. Likely to bring shareholders future capital gains through a share price rise, high dividends, share bonuses or rights issues.
Guarantor
Person or entity who is legally bound to pay a financial obligation incurred by the person taking the financing if that person fails to pay.
Hedge
The purchase or sale of a futures contract as a temporary substitute for a transaction to be made at a later date, usually it involves opposite positions in the cash market and the futures market at the same time.
Initial Margin
The amount of liquid funds that a customer must put up before establishing a futures contract. The rate is determined by the Clearing House and will vary depending on the volatility of the futures market.
Indices
In relation to a stock exchange, calculations made on an index number basis to indicate the movements in the general level of prices of securities listed on that stock exchange.
Insider Trading/ Dealing
Insider trading or dealing is the purchase or sale of a company's securities effected by or on behalf of a person with knowledge of relevant but non-public material information regarding that company. The insider is in a position to make massive gains by selling or buying securities before information that might affect the price of the company's securities (price-sensitive information) is made public. Insider trading is an offence under the Companies Act 1965 and the Securities Industry Act 1983.
Issued Share Capital
The total number of shares issued by a company.
Last Trading
The final trading day of a particular futures contract as determined under an exchange’s rules. All outstanding futures contracts will be settled either by cash settlement (monetary settlement) or by physical delivery.
Liquidation
The winding up of a company, which may either be compulsory or voluntary.
Liquidity of the Market
The state of affairs in a stock market in which it is generally easy to convert securities into cash and vice versa, without causing a movement in prices.
Loan Stock
A security issued by a company in respect of a loan made by investors.
Long
One who has bought a futures contract(s) to establish a market position.
Long Hedge
The purchase of a futures contract(s) in anticipation of actual purchases in the underlying market at a future date. Used as protection against an increase in the cash price.
Manipulations
The act of transacting in the securities of a company that will have or is likely to have the effect of raising or lowering or maintaining the price of the company's securities on a stock market, with the intention of inducing other persons to purchase or subscribe for the company's securities. Such acts are illegal under the Securities Industry Act 1983.
Margin
The collection of margin on all positions held by a clearing participant is fundamental to the operations of Bursa Clearing (Derivatives) to protect itself against losses arising from a clearing participant’s default. The margin level is set to cover the maximum one-day price movement (derived from a statistical formula) with a confidence factor of at least 99%. The level of margin is based on historical price volatility, current and anticipated market conditions, and other risk factors. Bursa Clearing (Derivatives) adopts a gross margining concept where each client account of a clearing participant is margined separately. The total margin for a clearing participant is the sum of the margins for all the individual client accounts of the clearing participant. The proprietary position of a clearing participant is margined on a net position. The Approved Collateral for margin coverage are RM cash and approved foreign currencies; Approved shares; and Letters of Credit.
Margin Call
Margin call occurs whenever the market moves against the investor’s position(s). The Clearing House will demand the Clearing Member (or by a Brokerage firm) to collect from its clients the additional cash funds that is required to be topped-up into their trading account to cover the adverse price movement.
Mark-to-Market
Daily evaluation of open futures contract(s) that an investor holds to reflect profit / losses. All futures positions are marked-to-market using the settlement price.
Market Capitalisation
The total value of a listed company's shares based on current market price.
Marketable Parcel
Shares traded on a stock exchange as set in multiples based on share price.
Market Bids
A scale on which trading bids, through a stock exchange, are based.
Memorandum of Association
The document of a company that lays down its name, registered office, objectives, share capital and the liability of its members in the event of winding up.
Merger
In general terms, the amalgamation of two business enterprises into a new entity.
Minimum Bid
A minimum bid is the permissible change on the offer to buy price over the previous done or quoted price. When trading on Bursa Malaysia, bids and offers for shares within different price ranges follow different minimum bids.
Negotiated Commission
The amount of fee to be paid to a stockbroker as agreed upon between client and stockbroker and not subject to a scale stipulated by the stock exchange concerned.
Nominee Company
A company formed by a stockbroking company, bank or other institution for the purpose of holding shares on behalf of the beneficial owners of the shares.
Odd Lots
Not a marketable parcel, i.e. less than board lot. Can be bought or sold but the broker's commission rate is higher than for amounts that are at least the board lot.
Offer
Indicates willingness to sell at a certain price.
Offer for Sale
One way in which the shares of a company are offered to the public, normally through an issuing house.
Official List
In respect of the Kuala Lumpur Stock Exchange, the list of all securities which have been admitted for quotation in accordance with the Exchange's Listing Requirements.
Offsetting
Liquidation of a futures contract by purchasing or selling an identical contract. Also known as close-out.
Open Contract
Contracts which have been bought or sold without the opposite transaction taken place or closed-out by subsequent sale or purchase.
Open Interest
Number of futures contracts that are yet to be closed-out. Refers to unliquidated purchases or sales.
Option
Right to take up or sell shares at an agreed price at or before a specified future date. Prefixed with terms of "call" or "put".
Option/warrant
An instrument that gives the holder the right but not the obligation, to subscribe for a particular instrument, e.g. new ordinary shares, at a pre-determined exercise price within a stipulated validity time frame (exercise period). The warrant becomes worthless after the expiry of the exercise period.
Paid-Up Capital
The amount of a company's authorised capital which has been subscribed by shareholders.
Par Value
The nominal price of a share, loan stock or debenture.
Pari Passu
In relation to a statement that newly issued shares rank pari passu with all existing shares, such newly issued share rank equally in every respect with all the other shares of the same class previously issued.
Physical Delivery
The tender and receipt of an actual commodity, financial instrument, cash or any other instrument or product for the purpose of settlement of a futures contract.
Portfolio
A selection of securities held by an investor.
Premium
The amount by which a share is quoted above its paid-up value.
Price Earnings Ratio
The relationship between the price of a share and the earnings of the company attributable to that share, the result being expressed as the current share price divided by the latest available figure of earnings per share.
Price Limit
The maximum price fluctuation allowed on a contract during a trading session according to the rules of the Exchange.
Private Company
A company in which the number of its members is restricted to 50.
Privatisation
The Government's exercise of the transfer to private ownership companies or public enterprises owned by the Government.
Prospectus
The document to be issued by a company intending to make an issue of shares to the public.
Proxy
One who is given written authority to vote for and on behalf of a shareholder at a meeting of the company.
Quotation
The prices bid and offered by buyers and sellers for securities listed on a stock exchange.
Receiver
An official appointed to wind up the affairs of a company.
Registrar
The official or corporation responsible for maintaining a company's share register.
Registrar of Companies
The public official appointed to administer the Companies Act 1965 and the Securities Industry Act 1983.
Remisier
An agent of a stockbroking company who brings business to that company in return for a share of the brokerage or commission.
Renunciation
The action of a shareholder in not taking up new shares attached as a right to the share he currently holds by renouncing such a right.
Reserves
The accumulated capital of the company which belongs to the shareholders, and is represented by various company assets. "Secret Reserves" are those created by understating assets as a result of unnecessarily writing off investment, plant and machinery in the Profit and Loss account or making excessive provisions for contingencies.
Rights
Companies raise additional capital by offering to existing shareholders the rights to subscribe for new shares, at a price usually below the current market price. These rights, while current, attract a price of their own and can be traded on any stock exchange.
Roll Over
A spread trading procedure, which involves the shift of one month’s position into another month where the purchase and sale of 2 separate contract months are traded simultaneously. The open position of one month is immediately closed and opened into the other month at the same time.
SCORE
The acronym for "System on Computerised Order Routing and Execution", the automated trading system of the Kuala Lumpur Stock Exchange.
Scrip
Share certificate
Securities
The generic term for any instrument traded on a stock exchange.
Securities Industry Act 1983
The Act of Parliament governing the business of dealing in securities, stock exchanges and related matters in Malaysia.
Securities Commission
Established by the Ministry of Finance to streamline the activities relating to equity and futures markets.
Securities Commission Act 1993
The Act of Parliament under which the Securities Commission was established on 1 March 1993.
Securities Industry (Central Depositories) Act 1991
The Act of Parliament which governs the activities relating to the Central Depository.
Sell side
Sell side is an expression used to refer to firms that take orders from Buy side firms and then work the orders. This is typically achieved by splitting them into smaller orders which are then sent directly to an exchange or to other firms. Sell side firms are paid through commissions charged on the sales price of the stock. Sell side firms employ research analysts, traders and salespeople who collectively strive to generate ideas and execute trades for Buy side firms, enticing them to do business. Part of the research analyst's job includes publishing research reports on public companies, these reports analyze their business and provide recommendations on the purchase or sale of the stock.
Settlement Price
The daily price at which the clearing house mark-to-market all trades. Settlement prices are used to determine both margin calls and invoice prices for products that require physical delivery
Share
In relation to a company, a security representing a portion of the holder's capital in that company. There are basically two types of shares, namely ordinary shares and preference shares. 1) Ordinary shares give holders the rights of ownership of the company, such as the right to share in the profits of the company by way of dividend, the right to vote in general meeting and to elect and dismiss directors. 2) Preference Shares have a preferential position over ordinary shares, in regard to the payment of dividends and the division of the company's assets. Some preference shares may have a cumulative entitlement in that dividends not paid can be carried forward and must be paid prior to an ordinary dividend payment or distribution on liquidation. Some preference shares are "participating" with ordinary shares in all dividend above a set rate, in addition to their own preferential dividend rate. Other preference shares are redeemable at a certain date.
Share Split
When a company reduces the paid or face value of its shares, and issues further shares in the same proportion, e.g., 100,000 RM 2 ordinary shares could be split into 200,000 RM 1 ordinary shares.
Short
One who has sold a futures contract(s) to establish a market position.
Short Hedge
The sale of a futures contracts(s) to eliminate or reduce the possible decline in value of ownership of an approximate equal amount of the underlying instrument.
Short Selling
The action of a person selling shares which he does not own at the time of selling.
Spot Month
Refers to the nearest delivery month of a futures contract.
Stag
One who applies for a new security with the intention of selling it at the first available opportunity.
Stockbroker
An agent who buys and sells shares on behalf of his clients and is paid brokerage or commission for his services.
Stock Exchange
An organisation providing the market-place or facility for the buying and selling of stocks and shares.
Sukuk
Sukuk is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed income, interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.
Trustee Security
A security which meets the requirements of legislation relating to the use of funds by trustees.
Underwriter
An organisation, normally a merchant bank or a broking firm, that guarantees a minimum level of subscription to a share or debt issue. If public subscriptions fail to reach the minimum level, the underwriter takes up the shortfall. Underwriters often have sub-underwriters to share the risk.
Unit trusts
Pools of money managed by an investment company. They offer investors a variety of choice, depending on the fund and its investment objective.
Unsecured Note
A fixed interest security with a maturity date and specified rate of interest. Unlike a debenture, it is not secured by a charge over the issuing company's assets. Unsecured note holders rank ahead of shareholders in the event of the company's liquidation.
Vendors' Shares
Shares allotted instead of cash to persons or companies as a consideration for acquisition of property. These shares are restricted in respect to transfer.
Volume
The number of transactions in a futures contract transacted during a specified period of time.
Winding Up
The voluntary or compulsory liquidation of a company.
Yield
Similar meaning as returns.
The allocation of new securities to an applicant for a new issue.
Annual General Meeting
Mandatory yearly meeting of a company for the purposes of receiving the directors' report and statement of accounts for the year, declaring a dividend, electing directors and auditors and determining the auditors' remuneration.
Annual Report & Accounts
A document to be forwarded to shareholders by the directors of a company on an annual basis which contains, amongst others, the annual audited accounts of the company.
Arbitrage
Buying on one exchange and selling on another at virtually the same moment to take advantage of a price variation in a company's shares listed on the two exchanges.
Articles of Association
The documents of a company that govern the management and administration of that company.
Asset Backing A handy yardstick for shareholders. It is the net assets of a company (assets less liabilities) divided by the number of shares.
At Discretion
An instruction given by a client to his broker, for the broker to buy or sell a stock at his (the broker's) discretion.
At Limit
An order placed which sets a limit on either the lowest or highest price, for which a share is bought or sold.
At Market (also At Best)
An instruction to buy or sell at market price. Allows the broker/dealer complete freedom of action. Should be treated with caution and used only when a share must be sold.
Authorised Capital
The nominal amount of capital that a limited company is permitted to raise under the capital clause in its Memorandum of Association.
Averaging
Buying more of the same shares, generally on a falling market, to lower the average cost per share. (Can also average up, thereby raising the average cost per share).
Balance Sheet
A company's year-end statement of assets and liabilities.
Bear Market
A stock market in which sellers dominate, resulting in generally falling prices.
Beta
The beta reflects the sensitivity of a share or portfolio relative to the overall market development.
Bid
Indicated willingness to purchase at a specified price.
Blue Chips
The shares of a company known to make profits in good and bad times. As there is a low risk of capital loss, the dividend and earnings yield are proportionately low.
Board Lot
Shares are normally traded in specific amounts called Board Lots, currently 100 units. Any amount less than board lots are called special lots or odd lots.
Bond
A document recording a loan and specifying the date of maturity and the rate of interest to be paid.
Bonus Issue
Distribution of capital funds (usually from a revaluation of assets or a share premium reserve) to shareholders in the form of shares for which payment is not required.
Bourse
A French term for stock exchange, grain exchange or exchange dealing in commodities.
Break-even Point
The price level at which a particular strategy neither makes nor loses money.
Broker (Stockbroker)
An agent, authorised to buy and sell shares on behalf of a client.
Brokerage
A fee charged for the broker's services. Also called commission.
Bull Market
A stock market in which buyers dominate and where prices are on a rising trend.
Buy side
Buy side is a financial term used in financial security trading. As opposed to the sell side, which refers to banks and brokerages who are required to be market makers in a given security, the buy side refers to firms which buy and sell as customers of these market makers, usually taking speculative positions or making relative value trades.
Cagamas Papers
Cagamas Berhad is the National Mortgage Corporation whose business is to promote the secondary mortgage market in Malaysia. Cagamas funds its business operation by issuing Notes, Bonds & Sanadat. Sanadat is an Islamic bond.
Calls
An instalment called up by a company on contributing or partly paid shares. A legal liability for shareholders of other than a "No Liability" company.
Capital Gain/ Loss
Profit/loss made on the sale of a capital asset.
Cash Market
The underlying market of a futures product.
CDS (Central Depository System) Account
It is an account opened under the investor’s name (applicant must be at least 18 years old) with a stockbroking company. This account will enable the investor to buy and sell shares and to carry out activities on other non-equity counters (i.e., bonds, warrant, loan stock, etc.) which are under CDS.
Closing Price
The price of a share or security at the end of a day's stock market trading.
Class of Shares
A document recording a loan and specifying the date of maturity and the rate of interest to be paid.
Commission
A fee charged for the broker's services. Also called brokerage.
Companies Act 1965
The Act of Parliament that governs companies.
Company
A separate legal entity, incorporated under the Companies Act 1965, carrying on a business or trade. A company may be private or public, limited by shares or unlimited, or limited by guarantee.
Contra Transactions
The procedures in giving orders to buy and sell in a contra transaction are the same. The only difference is that the client pays the broker or the broker pays the client for the difference in price between his buy and sell transaction. If the buy cost is higher than the sell proceeds, it results in a contra loss which the client pays to the broker. If the sell proceeds are higher, it results in a contra profit which the broker pays to the client. Contra dealing is not a right of the client but rather a privilege accorded by the stockbroking company to its clients. This means that the stockbroking company is not obliged to allow contra dealing facilities for all its clients.
Contract Month
The trading month(s) that is available to trade at any one point.
Contract Note
Document sent by brokers to clients of a purchase or sale of shares. It confirms the transaction, giving details of price, brokerage, stamp duty and clearing fee.
Convergence
This refers to the tendency of cash and futures prices coming together as a futures contract nears expiration.
Corporate bond
A debt instrument for a loan which is issued by a borrower to an investor who is the buyer of the bond and lender of the money. In return for the money, the issuer agrees to pay regular interest to the bondholder for the term of the loan and the principal sum borrowed upon maturity.
Cum
A prefix meaning "with". A share quoted "cum-dividend" means the buyer is entitled to a dividend currently attaching to it, similarly with cum-rights and cum-bonus.
Day Order
An order that is placed for execution just for that day only.
Day Trading
Refers to establishing and liquidating the same position(s) within the same trading day.
Debenture
A fixed interest security which has a maturity date and a specified rate of interest. The assets of the borrowing company are charged against the debenture issue; details of the charge are included in a Debenture Deed drawn up to protect the debenture holder.
Debt/Equity Ratio
The relationship between a company's borrowing and its shareholders' capital funds.
Delivery Month
The calendar month in which physical delivery of a futures contract must be made.
Direct Business
In relation to the KLSE, any share transactions effected outside the Exchange, including:
crossing, that is transaction between two stockbroking companies; or
"married" transaction between two clients within a stockbroking company.
Discount
The amount by which the price of a share is quoted below its paid-up value.
Dissolution
The winding up of a company by way of compulsory liquidation or voluntary liquidation.
Dividend Cover
The number of items a company's annual dividend could be paid out of current earnings.
Dividend Yield
The amount of a company's annual dividend expressed as a percentage of the current price of the share of that company.
Earnings Per Share
The amount of a company's annual profits or earning attributable to each ordinary share of that company.
Equity
Another name for the ordinary shares of a company.
Electronic Trading Platform (ETP)
ETP is the acronyms of Electronic Trading Platform. The ETP shall be the centralised price and trade repository and dissemination for the primary and secondary bond market. It is an efficient and facilitative market control system for Bursa to supervise the bond market. ETP facilitates the trading and reporting of all secondary market activities. The key business components that contribute to the business of ETP are the provisions of 1) central order book for matching, trade reporting and negotiation, 2) a comprehensive dissemination system for price/yield and trade information dissemination, 3) data storage for market history data referential maintenance for exchange administrator, 4) real time market surveillance system. The core ETP system interfaces with other systems such as the FAST (Fully automated system for Tendering) and Information vendors. The capital market is divided into the primary and secondary market. The capital market comprises the conventional market and Islamic market. Primary market activities include the insurance or lender of debt securities & money market transactions. Primary market is the source of referential data for trading in secondary market. Secondary market activities include trading of Government Securities (MGS, MTB and GII) and Private Debt Securities (PDS). Transactions that are available on ETP are Outright buy and sell, When Issued, Reallotment, Repo or Securities Buy Back Agreement, Securities Borrowing and Lending. The bond investors comprise secondary market participants such as the Financial Institutions, institutions investors and fund managers.
Ex
Prefix meaning "without", the opposite to "cum". The purchaser is not entitled to dividends, bonus shares or rights previously attached to the share.
Face Value
The actual paid-up value of a share. Seldom the same as the market value.
Float
Term given to the commencement or listing of a new company on the stock market.
Gilt Edged
A term usually associated with government or semi-government securities, more generally used on British markets.
Growth Stocks
Shares of companies with good prospects for increasing profits and capital size. Likely to bring shareholders future capital gains through a share price rise, high dividends, share bonuses or rights issues.
Guarantor
Person or entity who is legally bound to pay a financial obligation incurred by the person taking the financing if that person fails to pay.
Hedge
The purchase or sale of a futures contract as a temporary substitute for a transaction to be made at a later date, usually it involves opposite positions in the cash market and the futures market at the same time.
Initial Margin
The amount of liquid funds that a customer must put up before establishing a futures contract. The rate is determined by the Clearing House and will vary depending on the volatility of the futures market.
Indices
In relation to a stock exchange, calculations made on an index number basis to indicate the movements in the general level of prices of securities listed on that stock exchange.
Insider Trading/ Dealing
Insider trading or dealing is the purchase or sale of a company's securities effected by or on behalf of a person with knowledge of relevant but non-public material information regarding that company. The insider is in a position to make massive gains by selling or buying securities before information that might affect the price of the company's securities (price-sensitive information) is made public. Insider trading is an offence under the Companies Act 1965 and the Securities Industry Act 1983.
Issued Share Capital
The total number of shares issued by a company.
Last Trading
The final trading day of a particular futures contract as determined under an exchange’s rules. All outstanding futures contracts will be settled either by cash settlement (monetary settlement) or by physical delivery.
Liquidation
The winding up of a company, which may either be compulsory or voluntary.
Liquidity of the Market
The state of affairs in a stock market in which it is generally easy to convert securities into cash and vice versa, without causing a movement in prices.
Loan Stock
A security issued by a company in respect of a loan made by investors.
Long
One who has bought a futures contract(s) to establish a market position.
Long Hedge
The purchase of a futures contract(s) in anticipation of actual purchases in the underlying market at a future date. Used as protection against an increase in the cash price.
Manipulations
The act of transacting in the securities of a company that will have or is likely to have the effect of raising or lowering or maintaining the price of the company's securities on a stock market, with the intention of inducing other persons to purchase or subscribe for the company's securities. Such acts are illegal under the Securities Industry Act 1983.
Margin
The collection of margin on all positions held by a clearing participant is fundamental to the operations of Bursa Clearing (Derivatives) to protect itself against losses arising from a clearing participant’s default. The margin level is set to cover the maximum one-day price movement (derived from a statistical formula) with a confidence factor of at least 99%. The level of margin is based on historical price volatility, current and anticipated market conditions, and other risk factors. Bursa Clearing (Derivatives) adopts a gross margining concept where each client account of a clearing participant is margined separately. The total margin for a clearing participant is the sum of the margins for all the individual client accounts of the clearing participant. The proprietary position of a clearing participant is margined on a net position. The Approved Collateral for margin coverage are RM cash and approved foreign currencies; Approved shares; and Letters of Credit.
Margin Call
Margin call occurs whenever the market moves against the investor’s position(s). The Clearing House will demand the Clearing Member (or by a Brokerage firm) to collect from its clients the additional cash funds that is required to be topped-up into their trading account to cover the adverse price movement.
Mark-to-Market
Daily evaluation of open futures contract(s) that an investor holds to reflect profit / losses. All futures positions are marked-to-market using the settlement price.
Market Capitalisation
The total value of a listed company's shares based on current market price.
Marketable Parcel
Shares traded on a stock exchange as set in multiples based on share price.
Market Bids
A scale on which trading bids, through a stock exchange, are based.
Memorandum of Association
The document of a company that lays down its name, registered office, objectives, share capital and the liability of its members in the event of winding up.
Merger
In general terms, the amalgamation of two business enterprises into a new entity.
Minimum Bid
A minimum bid is the permissible change on the offer to buy price over the previous done or quoted price. When trading on Bursa Malaysia, bids and offers for shares within different price ranges follow different minimum bids.
Negotiated Commission
The amount of fee to be paid to a stockbroker as agreed upon between client and stockbroker and not subject to a scale stipulated by the stock exchange concerned.
Nominee Company
A company formed by a stockbroking company, bank or other institution for the purpose of holding shares on behalf of the beneficial owners of the shares.
Odd Lots
Not a marketable parcel, i.e. less than board lot. Can be bought or sold but the broker's commission rate is higher than for amounts that are at least the board lot.
Offer
Indicates willingness to sell at a certain price.
Offer for Sale
One way in which the shares of a company are offered to the public, normally through an issuing house.
Official List
In respect of the Kuala Lumpur Stock Exchange, the list of all securities which have been admitted for quotation in accordance with the Exchange's Listing Requirements.
Offsetting
Liquidation of a futures contract by purchasing or selling an identical contract. Also known as close-out.
Open Contract
Contracts which have been bought or sold without the opposite transaction taken place or closed-out by subsequent sale or purchase.
Open Interest
Number of futures contracts that are yet to be closed-out. Refers to unliquidated purchases or sales.
Option
Right to take up or sell shares at an agreed price at or before a specified future date. Prefixed with terms of "call" or "put".
Option/warrant
An instrument that gives the holder the right but not the obligation, to subscribe for a particular instrument, e.g. new ordinary shares, at a pre-determined exercise price within a stipulated validity time frame (exercise period). The warrant becomes worthless after the expiry of the exercise period.
Paid-Up Capital
The amount of a company's authorised capital which has been subscribed by shareholders.
Par Value
The nominal price of a share, loan stock or debenture.
Pari Passu
In relation to a statement that newly issued shares rank pari passu with all existing shares, such newly issued share rank equally in every respect with all the other shares of the same class previously issued.
Physical Delivery
The tender and receipt of an actual commodity, financial instrument, cash or any other instrument or product for the purpose of settlement of a futures contract.
Portfolio
A selection of securities held by an investor.
Premium
The amount by which a share is quoted above its paid-up value.
Price Earnings Ratio
The relationship between the price of a share and the earnings of the company attributable to that share, the result being expressed as the current share price divided by the latest available figure of earnings per share.
Price Limit
The maximum price fluctuation allowed on a contract during a trading session according to the rules of the Exchange.
Private Company
A company in which the number of its members is restricted to 50.
Privatisation
The Government's exercise of the transfer to private ownership companies or public enterprises owned by the Government.
Prospectus
The document to be issued by a company intending to make an issue of shares to the public.
Proxy
One who is given written authority to vote for and on behalf of a shareholder at a meeting of the company.
Quotation
The prices bid and offered by buyers and sellers for securities listed on a stock exchange.
Receiver
An official appointed to wind up the affairs of a company.
Registrar
The official or corporation responsible for maintaining a company's share register.
Registrar of Companies
The public official appointed to administer the Companies Act 1965 and the Securities Industry Act 1983.
Remisier
An agent of a stockbroking company who brings business to that company in return for a share of the brokerage or commission.
Renunciation
The action of a shareholder in not taking up new shares attached as a right to the share he currently holds by renouncing such a right.
Reserves
The accumulated capital of the company which belongs to the shareholders, and is represented by various company assets. "Secret Reserves" are those created by understating assets as a result of unnecessarily writing off investment, plant and machinery in the Profit and Loss account or making excessive provisions for contingencies.
Rights
Companies raise additional capital by offering to existing shareholders the rights to subscribe for new shares, at a price usually below the current market price. These rights, while current, attract a price of their own and can be traded on any stock exchange.
Roll Over
A spread trading procedure, which involves the shift of one month’s position into another month where the purchase and sale of 2 separate contract months are traded simultaneously. The open position of one month is immediately closed and opened into the other month at the same time.
SCORE
The acronym for "System on Computerised Order Routing and Execution", the automated trading system of the Kuala Lumpur Stock Exchange.
Scrip
Share certificate
Securities
The generic term for any instrument traded on a stock exchange.
Securities Industry Act 1983
The Act of Parliament governing the business of dealing in securities, stock exchanges and related matters in Malaysia.
Securities Commission
Established by the Ministry of Finance to streamline the activities relating to equity and futures markets.
Securities Commission Act 1993
The Act of Parliament under which the Securities Commission was established on 1 March 1993.
Securities Industry (Central Depositories) Act 1991
The Act of Parliament which governs the activities relating to the Central Depository.
Sell side
Sell side is an expression used to refer to firms that take orders from Buy side firms and then work the orders. This is typically achieved by splitting them into smaller orders which are then sent directly to an exchange or to other firms. Sell side firms are paid through commissions charged on the sales price of the stock. Sell side firms employ research analysts, traders and salespeople who collectively strive to generate ideas and execute trades for Buy side firms, enticing them to do business. Part of the research analyst's job includes publishing research reports on public companies, these reports analyze their business and provide recommendations on the purchase or sale of the stock.
Settlement Price
The daily price at which the clearing house mark-to-market all trades. Settlement prices are used to determine both margin calls and invoice prices for products that require physical delivery
Share
In relation to a company, a security representing a portion of the holder's capital in that company. There are basically two types of shares, namely ordinary shares and preference shares. 1) Ordinary shares give holders the rights of ownership of the company, such as the right to share in the profits of the company by way of dividend, the right to vote in general meeting and to elect and dismiss directors. 2) Preference Shares have a preferential position over ordinary shares, in regard to the payment of dividends and the division of the company's assets. Some preference shares may have a cumulative entitlement in that dividends not paid can be carried forward and must be paid prior to an ordinary dividend payment or distribution on liquidation. Some preference shares are "participating" with ordinary shares in all dividend above a set rate, in addition to their own preferential dividend rate. Other preference shares are redeemable at a certain date.
Share Split
When a company reduces the paid or face value of its shares, and issues further shares in the same proportion, e.g., 100,000 RM 2 ordinary shares could be split into 200,000 RM 1 ordinary shares.
Short
One who has sold a futures contract(s) to establish a market position.
Short Hedge
The sale of a futures contracts(s) to eliminate or reduce the possible decline in value of ownership of an approximate equal amount of the underlying instrument.
Short Selling
The action of a person selling shares which he does not own at the time of selling.
Spot Month
Refers to the nearest delivery month of a futures contract.
Stag
One who applies for a new security with the intention of selling it at the first available opportunity.
Stockbroker
An agent who buys and sells shares on behalf of his clients and is paid brokerage or commission for his services.
Stock Exchange
An organisation providing the market-place or facility for the buying and selling of stocks and shares.
Sukuk
Sukuk is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed income, interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.
Trustee Security
A security which meets the requirements of legislation relating to the use of funds by trustees.
Underwriter
An organisation, normally a merchant bank or a broking firm, that guarantees a minimum level of subscription to a share or debt issue. If public subscriptions fail to reach the minimum level, the underwriter takes up the shortfall. Underwriters often have sub-underwriters to share the risk.
Unit trusts
Pools of money managed by an investment company. They offer investors a variety of choice, depending on the fund and its investment objective.
Unsecured Note
A fixed interest security with a maturity date and specified rate of interest. Unlike a debenture, it is not secured by a charge over the issuing company's assets. Unsecured note holders rank ahead of shareholders in the event of the company's liquidation.
Vendors' Shares
Shares allotted instead of cash to persons or companies as a consideration for acquisition of property. These shares are restricted in respect to transfer.
Volume
The number of transactions in a futures contract transacted during a specified period of time.
Winding Up
The voluntary or compulsory liquidation of a company.
Yield
Similar meaning as returns.
Tuesday, September 2, 2008
THE SECURITIES MARKET IN MALAYSIA
1. Securities Commission
The Securities Commission (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is responsible for the regulation and development of capital markets in Malaysia through the Securities Commission Act 1993, Capital Markets and Services Act 2007 and Securities Industry (Central Depositories) Act 1991. The SC is a self-funding statutory body with investigative and enforcement powers, and reports to the Minister of Finance.
The SC regulates the offerings and issues of securities by public companies, and debentures by private companies. It also regulates the listing of such securities on Bursa Malaysia, as well as matters relating to take-overs and mergers of companies, and unit trust schemes. It is the sole approving and registering authority for prospectuses of all securities (other than unlisted recreational clubs). The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007.
The SC introduced the Capital Market Masterplan (CMP) in 2001. This is a comprehensive plan that charts the strategic positioning and future direction of the Malaysian capital market for the next 10 years. The Masterplan prioritises the immediate needs of the capital market and charts its direction and long-term growth in anticipation of global developments to its environment. Visit the SC website at http:www.sc.com.my for more information on the SC and the CMP.
2. Bursa Malaysia Berhad
Bursa Malaysia Berhad (Bursa Malaysia) is an exchange holding company, listed on the Main Board of Bursa Malaysia Securities on 18 March 2005 . Bursa Malaysia operates a securities, derivatives and offshore exchanges, clearing houses for securities and derivatives and a central depository. The company also disseminates stock quotes and information related to securities listed on the exchange. The securities exchange, established in 1973, provides a central market place for buyers and sellers to transact business in the shares, warrants, fixed income securities and various other securities of listed companies. Diversity of products also includes options and futures derivatives contracts and multi-currency off-shore instruments, traded on the derivatives exchange and offshore exchange, respectively.
Bursa Malaysia today is one of the largest bourses in Asia with almost 1,000 listed companies offering a wide range of investment choices to the world. Companies are either listed on Bursa Malaysia Securities Main Board for larger capitalised companies, the Second Board for medium sized companies or the MESDAQ Market for high growth and technology companies.
In assisting the development of the Malaysian capital market and enhancing global competitiveness, Bursa Malaysia is committed to maintaining an efficient, secure and active trading market for local and global investors.
(i) Market Participants
a) Stockbroking Companies
Currently, there are 34 stock broking companies (including five foreign brokers) offering services in the dealing of securities listed on Bursa Securities. Of these, 13 are categorised as Investment Banks. Investment banks hold merchant banking license issued by Bank Negara Malaysia under the Banking and Financial Institutions Act 1989 (BAFIA) as well as Capital Markets Services license issued by the Securities Commission under the Capital Markets & Services Act 2007. As such, investment banks are able to offer a full scope of integrated capital market and financial services which include corporate finance, debt securities trading and dealing in securities. One stock broking company still holds the universal broker status. A u niversal brokers is able to offer integrated capital market services.
As at the end of 2007, there were 146 branches.
b) Trading Participants
A Trading Participant is a company which owns at least one Preference Share of Bursa Malaysia Derivatives to conduct business as a futures broker licensed by the Securities Commission under the Capital Markets and Services Act 2007 and carries on trading in Contracts traded on the Bursa Malaysia Derivatives. Currently, there are 18 Trading Participants.
(ii) Investor Protection
In the interest of protecting investors, Bursa Malaysia currently maintains three compensation funds, namely Compensation Fund of Bursa Securities, the Fidelity Fund of Bursa Derivatives and the Compensation Fund of Bursa Depository to compensate investors who have suffered losses falling within the circumstances specified under the relevant securities laws and rules. The funds are administered by the Compensation Committee.
(iii) Risk Management
Bursa Malaysia 's enterprise risk management (ERM) framework, through the supervision of the Risk Management Committee (RMC) is aimed at managing and controlling risks appropriately for the Group. Key risks are identified and ranked for likelihood of occurrence and magnitude of impact while the appropriate action plans are developed to manage significant residual risks.
source: http://www.mida.gov.my/en/view.php?cat=3&scat=30&pg=159
The Securities Commission (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is responsible for the regulation and development of capital markets in Malaysia through the Securities Commission Act 1993, Capital Markets and Services Act 2007 and Securities Industry (Central Depositories) Act 1991. The SC is a self-funding statutory body with investigative and enforcement powers, and reports to the Minister of Finance.
The SC regulates the offerings and issues of securities by public companies, and debentures by private companies. It also regulates the listing of such securities on Bursa Malaysia, as well as matters relating to take-overs and mergers of companies, and unit trust schemes. It is the sole approving and registering authority for prospectuses of all securities (other than unlisted recreational clubs). The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007.
The SC introduced the Capital Market Masterplan (CMP) in 2001. This is a comprehensive plan that charts the strategic positioning and future direction of the Malaysian capital market for the next 10 years. The Masterplan prioritises the immediate needs of the capital market and charts its direction and long-term growth in anticipation of global developments to its environment. Visit the SC website at http:www.sc.com.my for more information on the SC and the CMP.
2. Bursa Malaysia Berhad
Bursa Malaysia Berhad (Bursa Malaysia) is an exchange holding company, listed on the Main Board of Bursa Malaysia Securities on 18 March 2005 . Bursa Malaysia operates a securities, derivatives and offshore exchanges, clearing houses for securities and derivatives and a central depository. The company also disseminates stock quotes and information related to securities listed on the exchange. The securities exchange, established in 1973, provides a central market place for buyers and sellers to transact business in the shares, warrants, fixed income securities and various other securities of listed companies. Diversity of products also includes options and futures derivatives contracts and multi-currency off-shore instruments, traded on the derivatives exchange and offshore exchange, respectively.
Bursa Malaysia today is one of the largest bourses in Asia with almost 1,000 listed companies offering a wide range of investment choices to the world. Companies are either listed on Bursa Malaysia Securities Main Board for larger capitalised companies, the Second Board for medium sized companies or the MESDAQ Market for high growth and technology companies.
In assisting the development of the Malaysian capital market and enhancing global competitiveness, Bursa Malaysia is committed to maintaining an efficient, secure and active trading market for local and global investors.
(i) Market Participants
a) Stockbroking Companies
Currently, there are 34 stock broking companies (including five foreign brokers) offering services in the dealing of securities listed on Bursa Securities. Of these, 13 are categorised as Investment Banks. Investment banks hold merchant banking license issued by Bank Negara Malaysia under the Banking and Financial Institutions Act 1989 (BAFIA) as well as Capital Markets Services license issued by the Securities Commission under the Capital Markets & Services Act 2007. As such, investment banks are able to offer a full scope of integrated capital market and financial services which include corporate finance, debt securities trading and dealing in securities. One stock broking company still holds the universal broker status. A u niversal brokers is able to offer integrated capital market services.
As at the end of 2007, there were 146 branches.
b) Trading Participants
A Trading Participant is a company which owns at least one Preference Share of Bursa Malaysia Derivatives to conduct business as a futures broker licensed by the Securities Commission under the Capital Markets and Services Act 2007 and carries on trading in Contracts traded on the Bursa Malaysia Derivatives. Currently, there are 18 Trading Participants.
(ii) Investor Protection
In the interest of protecting investors, Bursa Malaysia currently maintains three compensation funds, namely Compensation Fund of Bursa Securities, the Fidelity Fund of Bursa Derivatives and the Compensation Fund of Bursa Depository to compensate investors who have suffered losses falling within the circumstances specified under the relevant securities laws and rules. The funds are administered by the Compensation Committee.
(iii) Risk Management
Bursa Malaysia 's enterprise risk management (ERM) framework, through the supervision of the Risk Management Committee (RMC) is aimed at managing and controlling risks appropriately for the Group. Key risks are identified and ranked for likelihood of occurrence and magnitude of impact while the appropriate action plans are developed to manage significant residual risks.
source: http://www.mida.gov.my/en/view.php?cat=3&scat=30&pg=159
Glossary of Malaysian Investment Acronyms
ABS
Asset-Backed Securities
ADA
Authorized Depository Agent (MCD)
ADM
Authorised Direct Members (MCD)
AG
Accountant General (Ministry of Finance, Government of Malaysia)
AGM
Annual General Meeting
AML
Anti-Money Laundering
AMLA
Anti-Money Laundering Act 2001
AMLATFA
Anti Money Laundering and Anti-Terrorism Financing Act 2001
AML/CTF
Anti-Money Laundering/Counter Financing of Terrorism
APEC
Asia-Pacific Economic Cooperation
ASB
Amanah Saham Bumiputera (subsidiary of PNB)
ASN
Amanah Saham Nasional (subsidiary of PNB)
ASEAN
Association of South-East Asian Nations
AUM
Assets Under Management
AWAS
Advanced Warning and Surveilance System
BAFIA
Banking and Financial Institutions Act 1989
BC
Banker’s Cheque
BG
Bank Guarantee
BGB
Bank Guaranteed Bonds
BI
Bonus issue
BIDS
Bonds & Information Dissemination System (BNM)
BIS
Bank for International Settlements
BLR
Base Lending Rate - minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions' cost of funds and other administrative costs.
BNB
Bank Negara Bills (issued by BNM)
BNM
Bank Negara Malaysia (Malaysia's Central Bank)
BNN
Bank Negara Notes (issued by BNM)
bps
Basis points, e.g. 10bps is 0.1%
BSE
Bumiputera Stock Exchange
CADI
Cumulative Advance / Decline Indicator
CAGAMAS
Malaysian National Mortgage Corporation
CAGR
Compound Annual Growth Rate
CAR
Capital Adequacy Ratio
CARDS
Certificates for Amortizing Revolving Debts
CCIRS
Cross Currency Interest Rate Swap
CCM
Companies Commission of Malaysia
CDO
Collaterized Debt Obligations
CDRC
Corporate Debt Restructuring Committee (BNM)
CDS
Central Depository System - operated by MCD, a computerised system for the central handling and deposit of shares and other securities traded on Bursa Malaysia. CDS was launched in 1992, and fully implemented by 1996.
CDS
Credit Default Swap
CFA
Chartered Financial Analyst - an international professional designation offered by the CFA Institute of USA, for finance and investment professionals, particularly in the fields of investment management, investment banking and financial analysis of stocks, bonds and their derivative assets.
CIC
Capital Issue Committee
CLOB
Central Limit Order Book
CMDF
Capital Market Development Fund
CMO
Collateralized Mortgage Obligation
CMP
Capital Market Masterplan (SC)
CRM
Customer Relationship Management
CTR
Cash Threshold Reports (for AML)
D/E
Debt/ Equity Ratio
DVP
Delivery Versus Payment - service offered by SCANS in 1999 for institutional investors
DY
Dividend Yield
EAFE INDEX
The Europe, Australasia & Far East Index
EALIS
External Assets & Liabilities Information System - BNM's system to facilitate report on external assets & liabilities position of banking and non-banking sector
EBIT
Earnings before Interest and Taxes
EBITDA
Earnings before Interest, Taxes, Depreciation and Amortization
ECM
Exchange Control of Malaysia (Exchange Control Rules from BNM)
ECOS
Electronic Client Ordering System
EDMS
Electronic Documents Management System
EFT
Electronic Funds Transfer
EGM
Extraordinary General Meeting
EMAS
Exchange Main Board All Share Index - launched in 1991
EMBI
Emerging Markets Bond Index
EPF
Employees Provident Fund or KWSP
EPS
Earnings Per Share
ERM
Enterprise Risk Management
ESOS
Employees Share Option Scheme
ETF
Exchange Traded Fund
ETP
Electronic Trading Platform
EVA
Economic Value Added
FAST
Fully Automated System for Tendering - BNM's automated system for tendering, bids submission and processing of tender for scripless securities in the Malaysian debt securities market.
FATF
Financial Action Task Force (AML)
FCPO
Crude Palm Oil Futures
FDSS
Fixed Delivery and Settlement System - introduced to bring about a more efficient clearing and settlement system
FIA
Futures Industry Act 1993
FIBV
Federation Internationale des Bourses de Valeurs
FIC
Foreign Investment Committee
FIDS
Fraud Information Database System - BNM's repository of all fraud and attempted fraud cases reported by the financial institutions, and frauds detected and investigated by BNM
FINS
Financial Intelligence System - BNM's reporting system developed to cater for submission of Suspicious Transaction Reports (STRs) and Cash Threshold Reports (CTRs) from reporting institutions.
FKB3
3-Month Kuala Lumpur Interbank Offered Rate Interest Rate Futures
FKLI
Kuala Lumpur Composite Index Futures
FLR
Front-line regulator
FMCG
Fast Moving Consumer Goods (Industry)
FMG3
Three-Year Malaysian Government Securities Futures
FMG5
Five-Year Malaysian Government Securities Futures
FMGA
Ten-Year Malaysian Government Securities Futures
FMUTM
Federation of Malaysian Unit Trust Managers
FPKO
Crude Palm Kernel Oil Futures
FPX
Financial Process Exchange (facility for payment or transfer of funds via the Internet provided by MEPS)
FRA
Forward Rate Agreement - a contractual agreement between two parties to fix the rate of interest for a future period on a specified notional principal, such as a loan or deposit. A FRA is used to hedge an asset or liability. It is also a widely used instrument for investment, trading and arbitraging.
FRS
Financial Reporting Standards - issued by the Malaysian Accounting Standards Board
FSA
The Financial Services Authority (UK)
FSMP
Financial Sector Master Plan (issued by BNM)
FT
Funds Transfer
FTSE
Financial Times Stock Exchange Index
FTT
Foreign Currency Telegraphic Transfer
GCP
General Clearing Participant - existing clearing Participants (Futures Brokers) of Bursa Malaysia allowed to clear Ethylene OTC Futures for clients
GDY
Gross Dividend Yield
GIA
General Investment Account
GII
Government Investment Issues - similar to MGS but are issued based on Islamic principles (issued by BNM)
GIPS
Global Investment Performance Standards - a globally recognised collection of ethical guidelines drawn up by the CFA Institute for uniform and modern performance reporting within asset management.
GLC
Government-Linked Company
GO
General Offer
IB
Investment Bank
IBFF
Inter-Broker Fidelity Fund
IBFIM
Islamic Banking and Finance Institute Malaysia Sdn. Bhd.
IBG
Interbank GIRO (MEPS) - An electronic funds transfer payment system for interbank payments up to a maximum of RM100,000 per transaction
IBS
Islamic Brokerage System
ICM
Islamic capital market
ICP
Islamic Commercial Papers
ICULS
Irredeemable Convertible Unsecured Loan Stock
ICUN
Irredeemable Convertible Unsecured Notes
IFRS
International Financial Reporting Standards
IIFM
International Islamic Financial Market
IIMM
Islamic Interbank Money Market
IOFC
International Offshore Financial Centre
IOSCO
International Organization of Securities Commissions
IPC
Infrastructure Project Companies
IPO
Initial Public Offering
IPP
Independent Power Producer
IPRE
Income-producing Real Estate
IR
Investor Relations
IRR
Internal Rate of Return
IRS
Interest Rate Swap. IRS transaction is a contract between two parties to exchange interest rate payments (cash flows) at a future date. It allows the flexibility to convert a fixed rate asset/liability to a floating rate asset/liability and vice versa. There are basically two types of swaps which are traded daily by most markets - interest rate swaps (IRS) and currency swaps.
ISB
Islamic Stockbroking - AmInvestment is the second bank to set up an ISB unit in the country after Bank Islam Malaysia Bhd.
ISIN
International Securities Identification Number
ITC
Investment Tax Credit
IVR
Interactive Voice Response - a phone technology that allows a computer to detect voice and touch tones using a normal phone call
KLCCH
Kuala Lumpur Commodities Clearing House
KLCE
Kuala Lumpur Commodity Exchange - which was merged with Malaysia Monetary Exchange (MME) to form COMMEX. COMMEX subsequently merged with KLOFFE in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)
KLCI
Kuala Lumpur Composite Index or KLSE Composite Index
KLIBOR
Kuala Lumpur Inter Bank Offered Rate
KLOFFE
Kuala Lumpur Options and Financial Futures Exchange - which began operations in 1995 has subsequently been merged with COMMEX in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)
KLSE
Kuala Lumpur Stock Exchange (Bursa Malaysia)
KLSE CI
KLSE Composite Index - launched in 1986
KWSP
Kumpulan Wang Simpanan Perkerja or Employees Provident Fund
KYC
Know Your Customer (Policy) required under AMLA
Labuan IOFC
Labuan International Offshore Financial Centre
LFX
Labuan International Financial Exchange (Bursa Malaysia)
LHDN
Lembaga Hasil Dalam Negeri (Inland Revenue Board)
LIBID
London Interbank Bid Rate
LIBOR
London Interbank Offered Rate
LIFFE
London International Financial Futures Exchange
LME
London Metal Exchange
LO
Licensing Officer
LOFSA
Labuan Offshore Financial Services Authority
LOSR
Location of Share Registrars
LSE
London Stock Exchange
M&A
Memorandum & Articles of Association or
Mergers & Acquisitions
MARC
Malaysian Rating Corporation Berhad
MASA
Maklumat Saham (“share information”) was introduced in 1987, and MASA II was introduced in 1990. In 1994, WinStock which is a more integrated information system replaced MASA II.
MASB
Malaysian Accounting Standards Board
MAVCAP
Malaysia Venture Capital Management Bhd
MBO
Management Buy Out
MCD
Malaysian Central Depository Sdn Bhd - set up in 1990 to operate scripless trading through the Central Depository System (CDS) - a computerised system for the central handling and deposit of shares and other securities traded on Bursa Malaysia.
MECD
Ministry of Entrepreneur and Coorperative Development
MEPS
Malaysian Electronic Payment System Sdn Bhd - A consortium set up by domestic banking institutions to provide shared banking services, such as shared ATM network and Interbank GIRO.
MESDAQ
Malaysian Exchange of Securities Dealing and Automated Quotation
MFBA
Malaysian Futures Brokers Association
MGO
Mandatory General Offer
MGS
Malaysian Government Securities - long term papers issued on conventional basis by the Malaysian Government to manage the economy. MGS Floating Securities are issued based on spread basis.
MIDF
Malaysian Industrial Development Finance
MIDFCCS
MIDF Consultancy and Corporate Services Sdn Bhd
MIER
Malaysian Institute of Economic Research
MIFC
Malaysia International Islamic Financial Centre
MIH
Malaysian Issuing House
MLR
Minimum Lending Rate
MM
Money Market
MME
Malaysia Monetary Exchange - which was merged with KLCE to form COMMEX. COMMEX subsequently merged with KLOFFE in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)
MoF
Ministry of Finance
MoM
Month on Month
MoU
Memorandum of Understanding
MSCI
Morgan Stanley Capital International
MTB
Malaysian Treasury Bills
MTDC
Malaysian Technology Development Corporation
MTM
Mark-to-Market - Daily evaluation of open futures contract(s) that an investor holds to reflect profit / losses. All futures positions are marked-to-market using the settlement price.
MTN
Medium Term Notes
MYKAD
Malaysian National Identity Card
NASDAQ
National Association of Securities Dealers Automatic Quotation
NAV
Net Asset Value
NCD
Negotiable Certificate of Deposit
NID
Negotiable Instrument of Deposit, is a financial instrument issued by banks for the deposit of a specific sum of money for a fixed period of time at a prefixed interest rate. An NID can be bought or sold before the date of maturity.
NIDC
Negotiable Islamic Debt Certificate is the Shariah-based alternative to the Negotiable Certificate of Deposit (NCD), using e.g. using the concept of Al-Mudharabah (profit-sharing) or Al-Bai Bithaman Ajil (Deferred payment sale)
NOI
Net Operating Income
NOPAT
Net Operating Profit after Tax
NTA
Net Tangible Assets
NYSE
New York Stock Exchange
O&G
Oil and Gas (Industry)
OECD
Organisation for Economic Co-operation and Development
OFS
Offer for sale
OI
Open Interest - number of futures contracts that are yet to be closed-out
OKLI
Kuala Lumpur Composite Index Options
OPR
Overnight Policy Rate (set by Bank Negara’s Monetary Policy Committee)
OTC
Over-the-counter
PAL
Provisional Allotment Letter
PDS
Private Debt Securities
PE or P/E
Price to earnings ratio
PF
Project Finance
PLC
Public-listed company
PNB
Permodalan Nasional Berhad
QoQ
Quarter on Quarter
RAM
Rating Agency Malaysia Berhad
REIT
Real Estate Investment Trust
RENTAS
Real Time Electronic Transfer of Funds & Securities - BNM's system for electronic funds transfer, replacing SPEEDS. Minimum amount per transmission is RM10,000 except if the Remitting party is a government body.
REPO
Repurchase Agreement - the bank sells its money market instruments approved by Bank Negara Malaysia to an investor, with an understanding to buy back the said instruments at an agreed price (interest rate) on a specific future date.
RI
Rights issue
RIIAM
Research Institute of Investment Analysis Malaysia
ROC
Registrar of Companies - The public official appointed to administer the Companies Act 1965 and the Securities Industry Act 1983.
ROS
Restricted offer for sale
RSB
Redeemable Secured Bonds
RUB
Redeemable Unsecured Bonds
RULS
Redeemable Unsecured Loan Stock
SAC
Syariah Advisory Council
SBI
Second Board Index
SBL
Securities Borrowing and Lending
SC
Securities Commission - a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is responsible for the regulation and development of capital markets in Malaysia through the Securities Commission Act 1993, Capital Markets and Services Act 2007 and Securities Industry (Central Depositories) Act 1991. The SC is a self-funding statutory body with investigative and enforcement powers, and reports to the Minister of Finance.
SCA
Securities Commission Act 1993
SCANS
Securities Clearing Automated Network Services Sdn Bhd (Bursa Malaysia) - computerised central clearing house formed in 1984.
SCORE
System on Computerised Order Routing and Execution - implemented in 1989 to replace the outcry system and the trading floor at the stock exchange's premises. The fully automated trading and matching was introduced in 1992.
SCP
Special Clearing Participant - companies involved in the trading of ethylene product
SDR
Special Drawing Rights
SEC
U.S. Securities and Exchange Commission
SGX
Singapore Exchange Limited - inaugurated on 1 December 1999, following the merger of the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX).
SIA
Securities Industry Act 1983 - The Act of Parliament governing the business of dealing in securities, stock exchanges and related matters in Malaysia.
SICDA
Securities Industry (Central Depositories) Act 1991
SIDC
Securities Industry Development Centre (established by the SC)
SMF
Share Margin Financing
SMI
Small and Medium-sized Industry
SPV
Special Purpose Vehicle
SSF
Single Stock Futures
SRI
Socially Responsible Investing (Strategy)
SRR
Statutory Reserve Requirement
STR
Suspicious Transaction Report (for BNM required under AMLA)
SWF
Sovereign wealth funds
SWIFT
Society for Worldwide Interbank Financial Telecommunication - operates a worldwide financial messaging network allowing financial institutions to securely and reliably exchange financial transactions.
TSR
Transferable Subscription Rights
UB
Universal Broker
UT
Unit Trust
VCC
Venture capital company
VCMC
Venture capital management company
WACC
Weighted Average Cost of Capital
WEBS
World Equity Benchmark Shares
WinSCORE
Broker Front-End System - Windows version of SCORE (Bursa) launched in 1994 allowing each dealer to have a single integrated workstation which incorporates order-entry as well as real-time price information.
WTO
World Trade Organisation
YoY
Year on Year
YTD
Year to-date
YTM
Yield to Maturity (bonds)
Asset-Backed Securities
ADA
Authorized Depository Agent (MCD)
ADM
Authorised Direct Members (MCD)
AG
Accountant General (Ministry of Finance, Government of Malaysia)
AGM
Annual General Meeting
AML
Anti-Money Laundering
AMLA
Anti-Money Laundering Act 2001
AMLATFA
Anti Money Laundering and Anti-Terrorism Financing Act 2001
AML/CTF
Anti-Money Laundering/Counter Financing of Terrorism
APEC
Asia-Pacific Economic Cooperation
ASB
Amanah Saham Bumiputera (subsidiary of PNB)
ASN
Amanah Saham Nasional (subsidiary of PNB)
ASEAN
Association of South-East Asian Nations
AUM
Assets Under Management
AWAS
Advanced Warning and Surveilance System
BAFIA
Banking and Financial Institutions Act 1989
BC
Banker’s Cheque
BG
Bank Guarantee
BGB
Bank Guaranteed Bonds
BI
Bonus issue
BIDS
Bonds & Information Dissemination System (BNM)
BIS
Bank for International Settlements
BLR
Base Lending Rate - minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions' cost of funds and other administrative costs.
BNB
Bank Negara Bills (issued by BNM)
BNM
Bank Negara Malaysia (Malaysia's Central Bank)
BNN
Bank Negara Notes (issued by BNM)
bps
Basis points, e.g. 10bps is 0.1%
BSE
Bumiputera Stock Exchange
CADI
Cumulative Advance / Decline Indicator
CAGAMAS
Malaysian National Mortgage Corporation
CAGR
Compound Annual Growth Rate
CAR
Capital Adequacy Ratio
CARDS
Certificates for Amortizing Revolving Debts
CCIRS
Cross Currency Interest Rate Swap
CCM
Companies Commission of Malaysia
CDO
Collaterized Debt Obligations
CDRC
Corporate Debt Restructuring Committee (BNM)
CDS
Central Depository System - operated by MCD, a computerised system for the central handling and deposit of shares and other securities traded on Bursa Malaysia. CDS was launched in 1992, and fully implemented by 1996.
CDS
Credit Default Swap
CFA
Chartered Financial Analyst - an international professional designation offered by the CFA Institute of USA, for finance and investment professionals, particularly in the fields of investment management, investment banking and financial analysis of stocks, bonds and their derivative assets.
CIC
Capital Issue Committee
CLOB
Central Limit Order Book
CMDF
Capital Market Development Fund
CMO
Collateralized Mortgage Obligation
CMP
Capital Market Masterplan (SC)
CRM
Customer Relationship Management
CTR
Cash Threshold Reports (for AML)
D/E
Debt/ Equity Ratio
DVP
Delivery Versus Payment - service offered by SCANS in 1999 for institutional investors
DY
Dividend Yield
EAFE INDEX
The Europe, Australasia & Far East Index
EALIS
External Assets & Liabilities Information System - BNM's system to facilitate report on external assets & liabilities position of banking and non-banking sector
EBIT
Earnings before Interest and Taxes
EBITDA
Earnings before Interest, Taxes, Depreciation and Amortization
ECM
Exchange Control of Malaysia (Exchange Control Rules from BNM)
ECOS
Electronic Client Ordering System
EDMS
Electronic Documents Management System
EFT
Electronic Funds Transfer
EGM
Extraordinary General Meeting
EMAS
Exchange Main Board All Share Index - launched in 1991
EMBI
Emerging Markets Bond Index
EPF
Employees Provident Fund or KWSP
EPS
Earnings Per Share
ERM
Enterprise Risk Management
ESOS
Employees Share Option Scheme
ETF
Exchange Traded Fund
ETP
Electronic Trading Platform
EVA
Economic Value Added
FAST
Fully Automated System for Tendering - BNM's automated system for tendering, bids submission and processing of tender for scripless securities in the Malaysian debt securities market.
FATF
Financial Action Task Force (AML)
FCPO
Crude Palm Oil Futures
FDSS
Fixed Delivery and Settlement System - introduced to bring about a more efficient clearing and settlement system
FIA
Futures Industry Act 1993
FIBV
Federation Internationale des Bourses de Valeurs
FIC
Foreign Investment Committee
FIDS
Fraud Information Database System - BNM's repository of all fraud and attempted fraud cases reported by the financial institutions, and frauds detected and investigated by BNM
FINS
Financial Intelligence System - BNM's reporting system developed to cater for submission of Suspicious Transaction Reports (STRs) and Cash Threshold Reports (CTRs) from reporting institutions.
FKB3
3-Month Kuala Lumpur Interbank Offered Rate Interest Rate Futures
FKLI
Kuala Lumpur Composite Index Futures
FLR
Front-line regulator
FMCG
Fast Moving Consumer Goods (Industry)
FMG3
Three-Year Malaysian Government Securities Futures
FMG5
Five-Year Malaysian Government Securities Futures
FMGA
Ten-Year Malaysian Government Securities Futures
FMUTM
Federation of Malaysian Unit Trust Managers
FPKO
Crude Palm Kernel Oil Futures
FPX
Financial Process Exchange (facility for payment or transfer of funds via the Internet provided by MEPS)
FRA
Forward Rate Agreement - a contractual agreement between two parties to fix the rate of interest for a future period on a specified notional principal, such as a loan or deposit. A FRA is used to hedge an asset or liability. It is also a widely used instrument for investment, trading and arbitraging.
FRS
Financial Reporting Standards - issued by the Malaysian Accounting Standards Board
FSA
The Financial Services Authority (UK)
FSMP
Financial Sector Master Plan (issued by BNM)
FT
Funds Transfer
FTSE
Financial Times Stock Exchange Index
FTT
Foreign Currency Telegraphic Transfer
GCP
General Clearing Participant - existing clearing Participants (Futures Brokers) of Bursa Malaysia allowed to clear Ethylene OTC Futures for clients
GDY
Gross Dividend Yield
GIA
General Investment Account
GII
Government Investment Issues - similar to MGS but are issued based on Islamic principles (issued by BNM)
GIPS
Global Investment Performance Standards - a globally recognised collection of ethical guidelines drawn up by the CFA Institute for uniform and modern performance reporting within asset management.
GLC
Government-Linked Company
GO
General Offer
IB
Investment Bank
IBFF
Inter-Broker Fidelity Fund
IBFIM
Islamic Banking and Finance Institute Malaysia Sdn. Bhd.
IBG
Interbank GIRO (MEPS) - An electronic funds transfer payment system for interbank payments up to a maximum of RM100,000 per transaction
IBS
Islamic Brokerage System
ICM
Islamic capital market
ICP
Islamic Commercial Papers
ICULS
Irredeemable Convertible Unsecured Loan Stock
ICUN
Irredeemable Convertible Unsecured Notes
IFRS
International Financial Reporting Standards
IIFM
International Islamic Financial Market
IIMM
Islamic Interbank Money Market
IOFC
International Offshore Financial Centre
IOSCO
International Organization of Securities Commissions
IPC
Infrastructure Project Companies
IPO
Initial Public Offering
IPP
Independent Power Producer
IPRE
Income-producing Real Estate
IR
Investor Relations
IRR
Internal Rate of Return
IRS
Interest Rate Swap. IRS transaction is a contract between two parties to exchange interest rate payments (cash flows) at a future date. It allows the flexibility to convert a fixed rate asset/liability to a floating rate asset/liability and vice versa. There are basically two types of swaps which are traded daily by most markets - interest rate swaps (IRS) and currency swaps.
ISB
Islamic Stockbroking - AmInvestment is the second bank to set up an ISB unit in the country after Bank Islam Malaysia Bhd.
ISIN
International Securities Identification Number
ITC
Investment Tax Credit
IVR
Interactive Voice Response - a phone technology that allows a computer to detect voice and touch tones using a normal phone call
KLCCH
Kuala Lumpur Commodities Clearing House
KLCE
Kuala Lumpur Commodity Exchange - which was merged with Malaysia Monetary Exchange (MME) to form COMMEX. COMMEX subsequently merged with KLOFFE in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)
KLCI
Kuala Lumpur Composite Index or KLSE Composite Index
KLIBOR
Kuala Lumpur Inter Bank Offered Rate
KLOFFE
Kuala Lumpur Options and Financial Futures Exchange - which began operations in 1995 has subsequently been merged with COMMEX in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)
KLSE
Kuala Lumpur Stock Exchange (Bursa Malaysia)
KLSE CI
KLSE Composite Index - launched in 1986
KWSP
Kumpulan Wang Simpanan Perkerja or Employees Provident Fund
KYC
Know Your Customer (Policy) required under AMLA
Labuan IOFC
Labuan International Offshore Financial Centre
LFX
Labuan International Financial Exchange (Bursa Malaysia)
LHDN
Lembaga Hasil Dalam Negeri (Inland Revenue Board)
LIBID
London Interbank Bid Rate
LIBOR
London Interbank Offered Rate
LIFFE
London International Financial Futures Exchange
LME
London Metal Exchange
LO
Licensing Officer
LOFSA
Labuan Offshore Financial Services Authority
LOSR
Location of Share Registrars
LSE
London Stock Exchange
M&A
Memorandum & Articles of Association or
Mergers & Acquisitions
MARC
Malaysian Rating Corporation Berhad
MASA
Maklumat Saham (“share information”) was introduced in 1987, and MASA II was introduced in 1990. In 1994, WinStock which is a more integrated information system replaced MASA II.
MASB
Malaysian Accounting Standards Board
MAVCAP
Malaysia Venture Capital Management Bhd
MBO
Management Buy Out
MCD
Malaysian Central Depository Sdn Bhd - set up in 1990 to operate scripless trading through the Central Depository System (CDS) - a computerised system for the central handling and deposit of shares and other securities traded on Bursa Malaysia.
MECD
Ministry of Entrepreneur and Coorperative Development
MEPS
Malaysian Electronic Payment System Sdn Bhd - A consortium set up by domestic banking institutions to provide shared banking services, such as shared ATM network and Interbank GIRO.
MESDAQ
Malaysian Exchange of Securities Dealing and Automated Quotation
MFBA
Malaysian Futures Brokers Association
MGO
Mandatory General Offer
MGS
Malaysian Government Securities - long term papers issued on conventional basis by the Malaysian Government to manage the economy. MGS Floating Securities are issued based on spread basis.
MIDF
Malaysian Industrial Development Finance
MIDFCCS
MIDF Consultancy and Corporate Services Sdn Bhd
MIER
Malaysian Institute of Economic Research
MIFC
Malaysia International Islamic Financial Centre
MIH
Malaysian Issuing House
MLR
Minimum Lending Rate
MM
Money Market
MME
Malaysia Monetary Exchange - which was merged with KLCE to form COMMEX. COMMEX subsequently merged with KLOFFE in 2001 to form MDEX (now known as Bursa Malaysia Derivatives)
MoF
Ministry of Finance
MoM
Month on Month
MoU
Memorandum of Understanding
MSCI
Morgan Stanley Capital International
MTB
Malaysian Treasury Bills
MTDC
Malaysian Technology Development Corporation
MTM
Mark-to-Market - Daily evaluation of open futures contract(s) that an investor holds to reflect profit / losses. All futures positions are marked-to-market using the settlement price.
MTN
Medium Term Notes
MYKAD
Malaysian National Identity Card
NASDAQ
National Association of Securities Dealers Automatic Quotation
NAV
Net Asset Value
NCD
Negotiable Certificate of Deposit
NID
Negotiable Instrument of Deposit, is a financial instrument issued by banks for the deposit of a specific sum of money for a fixed period of time at a prefixed interest rate. An NID can be bought or sold before the date of maturity.
NIDC
Negotiable Islamic Debt Certificate is the Shariah-based alternative to the Negotiable Certificate of Deposit (NCD), using e.g. using the concept of Al-Mudharabah (profit-sharing) or Al-Bai Bithaman Ajil (Deferred payment sale)
NOI
Net Operating Income
NOPAT
Net Operating Profit after Tax
NTA
Net Tangible Assets
NYSE
New York Stock Exchange
O&G
Oil and Gas (Industry)
OECD
Organisation for Economic Co-operation and Development
OFS
Offer for sale
OI
Open Interest - number of futures contracts that are yet to be closed-out
OKLI
Kuala Lumpur Composite Index Options
OPR
Overnight Policy Rate (set by Bank Negara’s Monetary Policy Committee)
OTC
Over-the-counter
PAL
Provisional Allotment Letter
PDS
Private Debt Securities
PE or P/E
Price to earnings ratio
PF
Project Finance
PLC
Public-listed company
PNB
Permodalan Nasional Berhad
QoQ
Quarter on Quarter
RAM
Rating Agency Malaysia Berhad
REIT
Real Estate Investment Trust
RENTAS
Real Time Electronic Transfer of Funds & Securities - BNM's system for electronic funds transfer, replacing SPEEDS. Minimum amount per transmission is RM10,000 except if the Remitting party is a government body.
REPO
Repurchase Agreement - the bank sells its money market instruments approved by Bank Negara Malaysia to an investor, with an understanding to buy back the said instruments at an agreed price (interest rate) on a specific future date.
RI
Rights issue
RIIAM
Research Institute of Investment Analysis Malaysia
ROC
Registrar of Companies - The public official appointed to administer the Companies Act 1965 and the Securities Industry Act 1983.
ROS
Restricted offer for sale
RSB
Redeemable Secured Bonds
RUB
Redeemable Unsecured Bonds
RULS
Redeemable Unsecured Loan Stock
SAC
Syariah Advisory Council
SBI
Second Board Index
SBL
Securities Borrowing and Lending
SC
Securities Commission - a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is responsible for the regulation and development of capital markets in Malaysia through the Securities Commission Act 1993, Capital Markets and Services Act 2007 and Securities Industry (Central Depositories) Act 1991. The SC is a self-funding statutory body with investigative and enforcement powers, and reports to the Minister of Finance.
SCA
Securities Commission Act 1993
SCANS
Securities Clearing Automated Network Services Sdn Bhd (Bursa Malaysia) - computerised central clearing house formed in 1984.
SCORE
System on Computerised Order Routing and Execution - implemented in 1989 to replace the outcry system and the trading floor at the stock exchange's premises. The fully automated trading and matching was introduced in 1992.
SCP
Special Clearing Participant - companies involved in the trading of ethylene product
SDR
Special Drawing Rights
SEC
U.S. Securities and Exchange Commission
SGX
Singapore Exchange Limited - inaugurated on 1 December 1999, following the merger of the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX).
SIA
Securities Industry Act 1983 - The Act of Parliament governing the business of dealing in securities, stock exchanges and related matters in Malaysia.
SICDA
Securities Industry (Central Depositories) Act 1991
SIDC
Securities Industry Development Centre (established by the SC)
SMF
Share Margin Financing
SMI
Small and Medium-sized Industry
SPV
Special Purpose Vehicle
SSF
Single Stock Futures
SRI
Socially Responsible Investing (Strategy)
SRR
Statutory Reserve Requirement
STR
Suspicious Transaction Report (for BNM required under AMLA)
SWF
Sovereign wealth funds
SWIFT
Society for Worldwide Interbank Financial Telecommunication - operates a worldwide financial messaging network allowing financial institutions to securely and reliably exchange financial transactions.
TSR
Transferable Subscription Rights
UB
Universal Broker
UT
Unit Trust
VCC
Venture capital company
VCMC
Venture capital management company
WACC
Weighted Average Cost of Capital
WEBS
World Equity Benchmark Shares
WinSCORE
Broker Front-End System - Windows version of SCORE (Bursa) launched in 1994 allowing each dealer to have a single integrated workstation which incorporates order-entry as well as real-time price information.
WTO
World Trade Organisation
YoY
Year on Year
YTD
Year to-date
YTM
Yield to Maturity (bonds)
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