| Term |
Explanation |
| AIM | The Alternative Investment Market is the junior market on the London Stock Exchange where smaller companies are traded. Companies quoted on AIM may be less liquid than companies listed on the main market and may have a wider spread. |
| Ask | Same as the offer. |
| At best order | An order placed with a broker with no price specified. The broker will try and execute the order at the best price available according to brokerage's best execution policy. |
| Beneficial owner | A shareholder who holds their shares in a nominee account will not be listed on the share register as the legal registered owner of the share but will be entitled to receive all of the benefits of holding the shares such as the dividend. |
| Bid | The price another buyer is willing to buy shares at. This is the price at which shares can be sold. |
| Consideration | The value of a share transaction. This is calculated by the number of shares multiplied by the price the transaction took place.
E.g. If you buy 1000 shares at 158 pence per share then the consideration is 1580 pounds. |
| CREST | A paperless system of recording share ownership. When stocks are held electronically they are likely to be held within the CREST system. |
| Dividend | A profitable company may choose to distribute some of its profits by paying a dividend to holders of its shares. Shareholders will be entitled to a dividend payment if they hold the share on the date the share goes ex-dividend. |
| Ex-dividend | On the ex-dividend date, shareholders who are the registered owner or a beneficial owner of a share will become entitled to the dividend. |
| Illiquid | If a share is said to be illiquid then it may trade infrequently or in small amounts. The spread could be wide and it could be difficult to sell shares in an illiquid stock. |
| Investing for income | Selecting stocks and possibly bonds that pay a higher dividend without expecting much capital appreciation. |
| Investing for growth | Selecting stocks that you expect to appreciate in value (rising share price). |
| Limit order | A fixed price order. If there is no matching buyer or seller to fill the order then it will remain on the order book. |
| Liquid | If a share is said to be liquid then it can be expected to trade regularly and the spread should be quite narrow. |
| Main market | The main market of the London Stock Exchange where larger companies are listed. |
| Market maker | The role of a market maker is to quote prices to buy and sell shares in the stocks for which they are registered as a market maker. Sometimes a broker can obtain a better price for their customer by telephoning a market maker instead of taking a price from the order book. |
| Offer | The price another seller is willing to accept. This is the price at which shares are available to buy. |
| Order book | A book of limit orders representing buyers and sellers of the stock whose orders are waiting to be filled. |
| Registered owner | The person who is named on the share register as the legal registered owner of the shares. |
| Share register | A list of all of the holders of shares in a company. |
| Spread | The difference between the bid price and the offer price.
E.g. If the bid price is 98 pence per share and the offer price is 100 pence per share then the spread is 2p wide. You should pay attention to the spread when placing a trade as stocks with a wide spread can be illiquid. |
| Stamp duty | A tax paid on the purchase of shares when the transaction is paper-based (a share certificate is issued). It is calculated at 0.5% of the consideration rounded up to the next 5 pounds. There is no stamp duty payable on considerations of 1000 pounds or less.
E.g. If the consideration is 1001 pounds then the stamp duty payable is 10 pounds. For more information on stamp duty please visit www.direct.gov.uk page on Stamp Duty. |
| Stamp duty reserve tax (SDRC) | A tax paid on the purchase of shares when the transaction is electronic (no share certificates are issued). It is calculated at 0.5% of the consideration rounded up or down to the nearest penny. SDRC is applicable to all purchases.
E.g. If the consideration is 1000 pounds then the stamp duty reserve tax payable is 5 pounds. For more information on stamp duty reserve tax please visit www.direct.gov.uk page on stamp duty. |
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