Common Acronyms and Abbreviations in the Securities Industry

8.2 Common Acronyms and Abbreviations

In the fast-paced world of the securities industry, understanding and efficiently using acronyms and abbreviations is crucial for both exam success and professional practice. This section aims to familiarize you with the most common acronyms you’ll encounter while preparing for the Securities Industry Essentials (SIE) Exam. Recognizing these acronyms will not only help you comprehend study materials more quickly but also enhance your ability to navigate the exam content with confidence.

Purpose and Importance

Acronyms and abbreviations are a staple of the financial industry, serving as shorthand for complex terms and concepts. This guide provides you with a comprehensive list of these acronyms, complete with full terms and brief explanations. By mastering these, you will improve your ability to interpret industry jargon, which is essential for both the exam and your future career in securities.

Organization

The acronyms are presented in alphabetical order for easy reference. For each acronym, we provide the full term and a brief description to enhance your understanding. This section is designed to be a quick reference tool, allowing you to familiarize yourself with these terms efficiently.

A

• ADR: American Depositary Receipt

  • A negotiable certificate issued by a U.S. bank representing a specified number of shares in a foreign stock, traded on U.S. exchanges.

• AUM: Assets Under Management

  • The total market value of the investments that a person or entity manages on behalf of clients.

• AML: Anti-Money Laundering

  • A set of procedures, laws, and regulations designed to stop the practice of generating income through illegal actions.

• ATS: Alternative Trading System

  • A trading venue that is not regulated as an exchange but is a venue for matching the buy and sell orders of its subscribers.

B

• BD: Broker-Dealer

  • A person or company that is in the business of buying and selling securities on behalf of its customers (broker), its own account (dealer), or both.

• BSA: Bank Secrecy Act

  • A U.S. law requiring financial institutions to assist U.S. government agencies in detecting and preventing money laundering.

C

• CIP: Customer Identification Program

  • A U.S. requirement, under the USA PATRIOT Act, for financial institutions to verify the identity of individuals wishing to conduct financial transactions.

• CTR: Currency Transaction Report

  • A report that U.S. financial institutions are required to file for each transaction in currency of more than $10,000.

D

• DPP: Direct Participation Program

  • A business venture designed to let investors participate directly in the cash flow and tax benefits of the underlying investments.

• DTC: Depository Trust Company

  • A central securities depository providing post-trade settlement services to the financial markets.

E

• ECN: Electronic Communication Network

  • A type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges.

• ETF: Exchange-Traded Fund

  • A type of investment fund and exchange-traded product, i.e., they are traded on stock exchanges.

F

• FINRA: Financial Industry Regulatory Authority

  • A private American corporation that acts as a self-regulatory organization (SRO) for member brokerage firms and exchange markets.

• FOMC: Federal Open Market Committee

  • The branch of the Federal Reserve Board that determines the direction of monetary policy.

G

• GAAP: Generally Accepted Accounting Principles

  • A collection of commonly followed accounting rules and standards for financial reporting.

• GTC: Good ‘Til Canceled

  • An order to buy or sell a security that remains active until the investor decides to cancel it or the trade is executed.

H

• HSA: Health Savings Account
  • A tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).

I

• IA: Investment Adviser

  • A firm or individual that provides advice about securities to clients and is registered with the SEC or state regulators.

• IPO: Initial Public Offering

  • The process of offering shares of a private corporation to the public in a new stock issuance.

J

• JTWROS: Joint Tenants with Right of Survivorship
  • A type of account that is owned by at least two people, where all tenants have an equal right to the account’s assets and are afforded survivorship rights.

K

• KYC: Know Your Customer
  • The process of a business verifying the identity of its clients and assessing potential risks of illegal intentions for the business relationship.

L

• LLC: Limited Liability Company

  • A business structure in the United States whereby the owners are not personally liable for the company’s debts or liabilities.

• LTD: Limited

  • A type of incorporation used in the United Kingdom, Ireland, and Canada, denoting a private limited company.

M

• MBS: Mortgage-Backed Security

  • An asset-backed security that is secured by a mortgage or collection of mortgages.

• MSRB: Municipal Securities Rulemaking Board

  • A U.S. self-regulatory organization that regulates the issuance and trading of municipal securities.

N

• NAV: Net Asset Value

  • The value per share of a mutual fund or an ETF on a specific date or time.

• NASAA: North American Securities Administrators Association

  • An organization devoted to investor protection, which represents state securities regulators.

O

• OCC: Options Clearing Corporation

  • A United States clearinghouse based in Chicago that specializes in equity derivatives clearing.

• OTC: Over-the-Counter

  • A decentralized market where securities not listed on major exchanges are traded directly between parties.

P

• P/E: Price-to-Earnings Ratio

  • A ratio for valuing a company that measures its current share price relative to its per-share earnings.

• PIP: Personal Investment Plan

  • A plan that allows individuals to invest in a range of funds with certain tax advantages.

Q

• QIB: Qualified Institutional Buyer

  • An investor that is deemed financially sophisticated and is legally recognized by securities market regulators to need less protection than most public investors.

• QTIP: Qualified Terminable Interest Property Trust

  • A trust that allows a grantor to provide for a surviving spouse and maintain control of how the trust’s assets are distributed once the surviving spouse has died.

R

• REIT: Real Estate Investment Trust

  • A company owning and typically operating real estate which generates income.

• RMD: Required Minimum Distribution

  • The minimum amount you must withdraw from your account each year.

S

• SEC: Securities and Exchange Commission

  • A U.S. government oversight agency responsible for regulating the securities markets and protecting investors.

• SRO: Self-Regulatory Organization

  • An organization that regulates its own members through the adoption and enforcement of rules, such as FINRA.

T

• TIPS: Treasury Inflation-Protected Securities

  • A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation.

• T+2: Trade Date Plus Two Days

  • The current standard settlement period for securities transactions in the U.S.

U

• UIT: Unit Investment Trust

  • An investment company that offers a fixed, unmanaged portfolio, generally of stocks and bonds, as redeemable units to investors for a specific period of time.

• UGMA: Uniform Gifts to Minors Act

  • An act that allows minors to own securities without the need for a guardian or trustee.

V

• VIX: Volatility Index

  • A real-time market index representing the market’s expectations for volatility over the coming 30 days.

• VCT: Venture Capital Trust

  • A type of publicly listed closed-end fund found in the United Kingdom, designed as a way to encourage investment into small expanding companies.

W

• WACC: Weighted Average Cost of Capital

  • A calculation of a firm’s cost of capital in which each category of capital is proportionately weighted.

• W-2: Wage and Tax Statement

  • A form used in the United States to report wages paid to employees and the taxes withheld from them.

X

• XD: Ex-Dividend
  • A classification used by stock exchanges to indicate when a declared dividend belongs to the seller rather than the buyer.

Y

• YTM: Yield to Maturity

  • The total return anticipated on a bond if the bond is held until it matures.

• YTD: Year to Date

  • The period beginning the first day of the current calendar year up to the current date.

Z

• ZBA: Zero Balance Account
  • A checking account in which a balance of zero is maintained by automatically transferring funds from a master account in an amount only large enough to cover checks presented.

Significance for the SIE Exam

Recognizing and understanding these acronyms is crucial for efficient comprehension of the SIE Exam content. Familiarity with these terms reduces confusion and increases your speed in answering questions, allowing you to focus on applying your knowledge effectively.

Reference

For a complete list of common acronyms and abbreviations, refer to Appendix B. This list serves as a quick reference guide to help you prepare for the exam and enhance your understanding of the securities industry.

SIE Exam Practice Questions: Common Acronyms and Abbreviations