BY
BRIAN W. LEITE
An Insider's Guide to the Real Language of
Trading and Exchanges
Over 2700 Entries
I get Dealer's lingo to indicate the net price that must be offered a natural buyer in order to bid for stock from a natural seller. This price excludes any potential markdown to the seller. For example, ZVZZT, I'm catching a buyer … I get $25 for 100,000. You can bid your seller $24.90. See also COSTS ME.
I would Trader's jargon meaning "I am willing to complete my order within the stated parameters." For example, XYZ, take 50,000 for sale at a quarter, I would.
iceberg order Industry slang for a block reserve order. A large electronic limit order entered on an exchange or into an electronic communications network that makes only a small quantity visible to other market participants and holds the majority of the order hidden from view yet accessible for execution.
if it fits Trader's jargon used to indicate that there is no implied or assumed obligation to participate in a trade. For example, XYZ, I can offer you 25,000 at $50.25, if it fits. Also known as if you care.
if you care Trader's jargon used to indicate that there is no implied or assumed obligation to participate in a trade. For example, XYZ, right now I can pay $50.25 for 100,000 if you care. Also known as if it fits.
illiquid Describes a thinly traded stock that cannot readily be bought or sold. For example, This stock has gotten so illiquid, it doesn't look like I'll ever be able to trade out of my position.
imbalance (of orders) A situation in which orders on one side of the market outweigh orders on the other side to the extent that achieving a clearing price becomes difficult. May result in a temporary trading halt. See also ORDER IMBALANCE.
immediacy The extent to which an order can be executed immediately. In a market lacking liquidity, demand for immediacy can be supplied by dealers.
immediate or cancel order (IOC order) An order that that must be either partially or completely executed as soon as it is presented to the marketplace. Any unexecuted portion must be canceled immediately thereafter. See also FILL OR KILL ORDER.
immediate order An abbreviation of immediate or cancel order, as in XYZ, buy 25,000 at $50.30 immediate.
immediate settlement Settlement of a trade immediately following execution.
implementation risk The risk that transaction costs will be greater than expected.
implementation shortfall The difference between the decision price and the ultimate execution price of a trade. The term is frequently used in reference to algorithmic trading. Also known as slippage.
implementation shortfall algorithm A type of order execution algorithm that seeks to optimize the trade-off between market impact and price risk.
implicit transaction costs Trading impact costs. Costs derived from paying the spread or pushing the share price up or down to facilitate execution.
in and out A rapid, speculative round trip trade, as in ZVZZT, I just traded in and out of 50,000 shares, made a dime.
in and out trader See DAY TRADER.
in balance inventory Actual INVENTORY matches TARGET INVENTORY for a broker/dealer.
in between Describes a price that is higher than the best bid but lower than the best ask, as in XYZ, I'd be willing to offer your buyer 50,000 shares somewhere in between.
in hand In possession of a firm order. For example, ZVZZT, I have 25,000 to buy in hand, but there's probably more behind.
in here Another term for in line, as in XYZ, I've got size for sale in here.
in house Equivalent to "on the trading desk." Upstairs traders generally prefer to pair off as many customer orders as possible in house in order to generate commissions on both sides of a trade. Internalizers generally prefer to keep customer orders in house in an attempt to capture a portion of the bid/asked spread.
in house cross See CROSS.
in line Within the current inside market, as in ZVZZT, I'd sell you 50,000 somewhere in line. See also WORK IN LINE.
in play Describes the stock of a company that has become, or is rumored to become, the target of a takeover. For example, There is huge volume in XYZ options today … looks like it might be in play.
in sympathy The change of price in a particular stock that occurs as a result of price movement in another stock, as in My guess is that ZVZZT is trading down in sympathy with XYZ.
in the black Profitable, as in We need to get the desk back in the black next week, or there's going to be hell to pay.
in the box 1. Trader's jargon that basically means make a market. The box referenced is the NASDAQ Workstation. For example, I see Morgan is finally back in the box in ZVZZT. He was the ax for such a long time. 2. A term indicating that a delivery of securities has been received.
in the doghouse Out of favor, as in Unfortunately, I think we may be in the doghouse with my best customer.
in the hole Below the best bid. For example, It looks like 1,000,000 XYZ just traded in the hole. I’ll try to find out what happened. Printing a trade in the hole is not allowed under Reg NMS without an exemption.
in the market Describes a price that is in between the best bid and best offer, as in ZVZZT, I'd lose 10,000 shares somewhere in the market.
in the middle Describes a price that is exactly halfway between the best bid and the best ask For example, Tell your buyer I'll offer 50,000 XYZ in the middle.
in the penalty box A slang term to describe a stock that trades at a relatively low valuation. For example, Boy they really put ZVZZT in the penalty box after they pooched the quarter.
in the red To show a loss.
in the stock See PRICED IN THE STOCK.
in the tank Describes the position of a stock experiencing a very sharp break in price. For example, Unbelievable. Twenty minutes after I buy the stock the thing goes in the tank.
in touch with A situation in which a trader possesses an indication of interest from a potential buyer or seller but does not have a firm order. For example, ZVZZT, we cross 100,000 at $25, come out in touch with two ways.
in your hands A synonym for not held, as in ZVZZT, take an order to buy 25,000 at the market, in your hands.
inactive post The post at the New York Stock Exchange where inactive stocks were traded in ten share lots.
inactive stock A stock with a very low average daily volume.
inappropriate order exposure Providing the details of a customer order to another trader for the benefit of the other trader rather than the benefit of the customer.
independent broker A floor broker who executes orders on behalf of other brokers, usually house brokers. Also known as a two dollar broker.
index arbitrage A statistical arbitrage strategy whereby stock index futures are bought (sold) while the underlying components are simulaneously sold (bought) in an effort to exploit divergences between actual and theoretical prices between the two baskets.
index fund An investment fund designed to match the returns of a particular market index.
indexed limit order A limit order whose price will automatically change as the value of a specified index changes. Also known as a floating limit order.
indexing Adjusting the components of a diversified portfolio to match that of an index. A PASSIVE INVESTMENT strategy.
indicated market A quote that represents only a best estimate of price. Not a firm quote.
indication 1. The range of potential opening prices for a stock as provided by a specialist (or designated market maker). For example, Right now, XYZ is indicated $50-$52. I'll let you know more when he tightens that up. Also known as a pre-opening indication. 2. An abbreviation of indication of interest.
indication of interest (IOI) 1. In general terms, an expressed desire to trade a specific stock within certain parameters. Not a firm order. For example, XYZ, let me know if it gets down to the $50.10 level. I may have interest in buying 25,000 additional. 2. More specifically, an electronic notice posted by a sell side trader (and viewed by his buy side counterparts) of a general desire (but not a firm commitment) to trade a specific stock under certain terms. An IOI includes side (buy, sell) and approximate size (small, medium, large). For example, ZVZZT, I’m indicated as a large buyer. I've got nothing natural, but I'll bid your guy $25 for 50,000 to start a conversation. See also SUPER MESSAGE, FIX MESSAGE, and AUTEX. 3. A message sent from one electronic trading venue to various other electronic venues in search of a potential trading counterparty.
indicative match price A price provided by a specialist (or designated market maker) at which orders appear to pair off naturally for the opening auction or closing auction of a particular stock. For example, As of now, XYZ is looking $50 on 100,000.
Inet ECN See INSTINET.
information asymmetry An academic term for a situation in which news may be known by some market participants, but not by all.
information motivated trade A trade that is based on information that the trader believes is not accurately reflected in the current price of the stock.
information-oriented technical trader An INFORMED TRADER who profits from statistical anomalies and systemic valuation mistakes of other informed traders.
informationless trade A trade that is not primarily motivated by an expected movement in the price of the stock being traded. An example would be the sale of a stock as part of an overall asset reallocation.
informative price An academic term for a market price that is close to FUNDAMENTAL VALUE.
informed trader An academic term for a profit seeking trader who possesses sufficient public and private information to form a reasoned estimate of fundamental value. Informed traders buy assets that they consider undervalued and sell assets that they considered overvalued. Includes VALUE TRADERS, NEWS TRADERS, INFORMATION-ORIENTED TECHNICAL TRADERS, AND ARBITRAGEURS.
inquiry A customer request for a firm dealer quote.
inside An abbreviation for inside market, as in ZVZZT, what's the inside right now?
inside information Another term for material nonpublic information.
inside market The best bid and offer. Usually refers to over-the-counter stocks. Also called the inside quote.
inside quote The best bid and offer. Usually refers to over-the-counter stocks. Also called the inside market.
inside spread The price difference between the best bid and the best offer. Usually refers to over-the-counter stocks.
inside the market Between the best bid and the best ask.
inside the quote limit order A buy order with a limit price that is higher than the best bid or a sell order with a limit price that is lower than the best ask.
insider trading The illegal practice of trading based on material nonpublic information.
Insider Trading and Securities Fraud Enforcement Act of 1988 A federal law that greatly increased the penalties for insider trading.
Insider Trading Sanctions Act of 1984 A federal law that proscribed civil and criminal penalties for insider trading violations.
Instinet The first electronic communications network. In 1969, the Institutional Networks Corporation launched an automated system that allowed institutional investors to trade directly with each other. Such trading became known as the FOURTH MARKET. As Instinet expanded, it created the "green screen" montage in 1977 and opened trading to the sell side in 1983. In 2002, Instinet merged with rival ECN Island to form the Inet ECN. The Inet ECN separated from the Instinet agency brokerage business in 2003 and was acquired by NASDAQ in 2005. NASDAQ has subsequently fully integrated Inet into the NASDAQ trading platform. The Instinet agency brokerage business was acquired by Nomura Holdings in 2007.
institution A organization that makes a business of holding assets. Includes mutual funds, pension funds, insurance companies, bank investment departments, endowment funds, and foundations.
institutional account The account of an institutional investor held at a broker/dealer.
institutional broker A broker who executes trades primarily for institutional investors.
institutional brokerage A brokerage firm whose clients are primarily institutional investors.
institutional investor A large professional investment organization. Includes mutual funds, pension funds, insurance companies, bank investment departments, endowment funds, and foundations.
Institutional Networks Corporation See INSTINET.
institutional pot The portion of a new issue that is set aside by the lead underwriter to place with institutional investors. Also known more simply as the pot.
institutional sales The department of a broker/dealer responsible for the dissemination of the firm's research product to institutional investors. Also known as research sales.
institutional salesperson Another name for research salesperson.
institutional trader A trader that works for an institutional investor. Also known as a buy side trader.
institutional trading The interaction between institutional traders and their sell side counterparts in sales trading, market making, and listed trading.
institutionalization Described the (one time) growing dominance of institutional investors in the financial markets. Reg NMS and the rise of HIGH FREQUENCY TRADING curtailed institutionalization.
instrument A general term for any financial security.
intermarket sweep order (ISO) An electronic immediate or cancel limit order that has been routed by a trader to a particular market center with instructions to execute the order only within that center. Therefore, an ISO will not be forwarded to any other trading center even if another center is displaying a superior quote (which would normally be required under Reg NMS). In order to receive a trade through exemption with Reg NMS, the trader generating the ISO must simultaneously route additional ISOs to any other trading center displaying a superior quote with a size sufficient to execute against the full displayed size of any protected quote in that center.
Intermarket Trading System (ITS) Was an electronic link between the New York Stock Exchange, the American Stock Exchange, and the regional stock exchanges introduced in 1978. ITS allowed specialists, floor brokers, and floor traders on any exchange to send an electronic order directly to any specialist on another exchange posting a better bid or offer.
intermediate term A period of time from approximately two months to six months. Also known as medium term.
internal cross See CROSS.
internal match Offsetting buy and sell orders in a specific stock within a particular alternative trading system or matching engine.
internalization The IN HOUSE execution of all (or nearly all) marketable customer orders received by a broker/dealer directly from one of the firm's proprietary trading accounts either at the NBBO or with price improvement. As opposed to forwarding orders to another trading center. Best execution requirements remain in force.
internalizer A MARKET MAKER or BLOCK POSITIONER that uses its own capital to take the other side of customer orders. Those acting as market maker handle a very large percentage of marketable order flow from retail investors. They initially seek to match or provide price improvement compared to the NBBO. If they are unwilling to commit capital to a particular order, they route the order to other trading centers. Block positioners, on the other hand, primarily facilitate trading for institutional customers.
interpositioning An illegal practice in which a specialist (or a dealer) who possesses equal buy and sell orders that are executable against each other instead executes both sides against his own proprietary trading account in order to capture a spread as well as generate a commission or commission equivalent.
interrogation device Any information retrieval system capable of displaying quotes, last sale data, and current transaction reports.
intraday Within the same day, as in We're really starting to see some intraday volatility.
inventory A position held in a broker/dealer's proprietary trading account for eventual resale (or repurchase), as in ZVZZT, I will go ahead and sell your guy 35,000 at $25.20 out of inventory. Broker/dealers manage inventories by adjusting their quotes to influence the buy and sell decisions of their customers (preferable), by initiating trades with other traders (less preferable), or by hedging positions. See also TARGET INVENTORY, IN BALANCE INVENTORY, OUT OF BALANCE INVENTORY, and INVENTORY IMBALANCE.
inventory imbalance The difference between actual INVENTORY and TARGET INVENTORY.
inventory risk The risk that a dealer's position will lose value due to an adverse price move. For example, Guys, heading into the end of the year, let's try to keep the inventory risk to a minimum.
investment 1. Securities purchased primarily for income and safety of principal and secondarily for potential capital appreciation. 2. Securities purchased in the expectation of generating positive long term returns. 3. Industry slang for a losing short term speculative commitment that unwillingly becomes a long term holding. See INVOLUNTARY INVESTOR.
Investment Advisers Act of 1940 A federal law that requires financial advisors and advisory firms to register with the Securities and Exchange Commission.
investment bank A financial institution that underwrites securities for corporations and/or municipalities. Most investment banks also engage in securities trading, provide brokerage services, and offer advisory services.
investment banking house See INVESTMENT BANK.
investment buying Purchasing securities in the expectation of generating positive long term returns.
investment speculation The purchase of securities ostensibly for interest and dividend payments but also with the full intention of closing the position should there be a material price increase.
Investment Technology Group (ITG) An agency brokerage and financial technology firm. ITG is best known for creating the POSIT electronic crossing network in 1987.
investor 1. One who buys securities to hold primarily for income and safety of principal and secondarily for potential capital appreciation. 2. One who buys securities in the expectation of generating positive long term returns. 3. A slang term for a person who unwillingly converts a losing short term speculative commitment into a long term holding. An involuntary investor.
involuntary investor A person who unwillingly converts a losing short term speculative commitment into a long term holding.
IOC order An abbreviation of immediate or cancel order.
IOI An abbreviation of indication of interest.
irregular market A market characterized by erratic price movements.
Island ECN An electronic communications network established in 1996. Became a preferred online trading platform for day traders, retail investors, and SOES bandits. Acquired by Instinet in 2002.
ISO An abbreviation of intermarket sweep order.
issue 1. A security that has been offered for sale to investors. 2. Offering securities to investors.
issued shares Shares held by investors. Includes officers and insiders as well as the general public.
ITG An abbreviation for Investment Technology Group.
ITS An abbreviation for Intermarket Trading System.
ITW An abbreviation for in touch with.
Copyright 2016 by Brian W. Leite. All rights reserved. Reproduction of all or part of this dictionary without explicit permission is prohibited..