B

Backwardation

On futures markets, a market where a commodity is in shortage, causing near contract months to sell at a premium and distant contract months to sell at discount.

Bai al-Salam

Payment for future delivery, which in its simplest form is the advance payment in full of the purchase price by the purchaser for specified assets which the seller undertakes to supply to the purchaser at a later date.

Balloon maturity

The last bonds of an issue maturing in a substantially larger amount than those of earlier maturities.

Bandhani

An Indian form of trading in which the contract price is not allowed to go beyond floor and ceiling prices, set on the first day, throughout the life of the contract, thus restricting excessive volatility.

Bank Interchange Code (BIC)

A unique code identifying a market participant.

Bargain

A transaction dealt through the London Stock Exchange which is a contract to buy or sell an agreed quantity of stock at an agreed price.

Basis

The difference between the cash price and futures price.

Basis grade

The grade of a commodity used as the standard of the futures contract.

Basis point (bp)

1% of 1%.

Basis price

The price expressed in terms of yield to maturity or annual rate of return.

Basket

The purchase or sale of equity securities, which comprise a pre-defined group of securities.

Bear

An investor who believes that prices are going to fall.

Bear market

A prolonged period of generally falling prices.

Bearer security

A security whose owner is not registered on the books of the issuer.

Bed-and-breakfast deal

Selling shares one day and buying them back the next, for tax purposes at the end of the financial year.

Benchmark

A standard used for comparison

Beneficial owner

The true owner of a security. The registered holder of the shares may act as a nominee to the true shareholder.

Best ask

The lowest quoted offer of all competing Market Makers to sell a particular stock at any given time.

Best bid

The highest quoted bid of all competing Market Makers to buy a particular stock at any given time.

Best execution

The obligation of Market Makers, broker/dealers, and others to execute customer orders at the best price available at the time the trade is entered.

Beta

A measurement of the relationship between the risk of an individual stock or stock portfolio and the risk of the overall market. The beta is a measure of the sensitivity of an investment’s return to market movements. A diversified portfolio of high beta stocks is more risky than a diversified portfolio of low beta stocks.

Bid offer spread

The difference between the bid and offer prices of a security.

Bid price

The price at which a buyer has offered to purchase a security or commodity.

Bid/ask spread

The difference between the price at which a Market Maker is willing to buy a security (bid), and the price at which the firm is willing to sell it (ask). The spread narrows or widens according to the supply and demand for the security being traded.

Big Board

A popular term for the New York Stock Exchange.

Big figure

A market expression for the part of the price which is the least significant in terms of quotation movement.

Black box trading

A proprietary computerised trading system whose formulas and calculations are not disclosed or readily accessible. Users enter information and the system utilises pre-programmed logic to return output to the user, which may include trading signals and other data.

Black-Scholes model

An option pricing formula initially derived by Fisher Black and Myron Scholes for securities options and later refined by Black for options on futures.

Block

A large amount of shares, normally 10,000 shares or more.

Block crossing network

An Alternative trading system (ATS) that handles large blocks of stock for institutions, which may be matched in a "dark pool".
See also Dark pools

Block trade

The purchase or sale of stock in a large quantity, normally 10,000 shares or more.

Block volume

The aggregate volume of trades of 10,000 shares or more.

Blue chips

Shares with the highest status and quality as investments. Blue-chip stocks are normally relatively high-priced stocks with a long record of dividend payments.

Bonus issue

See Capitalisation issue

Book transfer

The transfer of title to a buyer without a physical movement of the product.

Book value

Common shareholder's equity on a per share basis. It is calculated by subtracting liabilities from assets and dividing the result by the number of outstanding shares of stock. The book value is not necessarily the same as the market value.

Borsa

Italian for stock exchange.

Bourse

French for stock exchange. The word Bourse is thought to originate from the town of Bruges in Belgium. In the early 13th century, merchants from the main commercial centres, particularly from Genoa and Venice, used to gather in front of the house of the Van der Buerse family in Bruges.

Briefkurs

The asked (offered price) on German and Swiss stock exchanges.

Broker

An agent, often a member of a stock exchange firm, who executes public orders to buy and sell securities and commodities. For this service a commission is usually charged. Brokers are agents working on commission and not principals or agents acting on their own account.

Brokerage fee

A fee charged by a broker for executing a transaction.

Broker–dealer

See Dealer

Bulge

A rapid price advance.

Bull

An investor who believes that prices are going to rise.

Bull market

A prolonged period of generally rising prices.

Bull spread

An option position composed of both long and short options of the same type, either calls or puts, designed to be profitable in a declining market. An option with a lower strike price is bought and one with a higher strike price is sold.

Bulldogs

Sterling bonds issued in the UK by foreign institutions.

Butterfly spread

(i) A futures butterfly spread is a spread trade in which multiple futures months are traded simultaneously at a differential. The trade basically consists of 2 futures spread transactions with either 3 or 4 different futures months at one differential.
(ii) An options butterfly spread is a spread trade in which multiple options months and strike prices are traded simultaneously at a differential. The trade basically consists of 2 options-spread transactions with either 3 or 4 different options months and strikes at one differential.

Buyer/taker

The purchaser of an option, whether a call or put option. The buyer may also be referred to as the option holder. Option buyers receive the right, but not the obligation, to enter a futures/securities market position.

Buy-side trader

An individual, such as a pension or mutual fund portfolio manager, who effects trades for an institutional investor.

By-products

Products generated from the same raw materials.