NISM Series XII (SMF) key terms

Financial instruments that represent an ownership stake, a creditor relationship, or a contractual right, and which can be bought, sold, or transferred in a market. Examples include shares, bonds, and units of mutual funds.

The segment of the capital market where a company or issuer sells newly created securities directly to investors to raise fresh capital, as happens in an initial public offering or a bond issue.

The marketplace where investors trade securities that have already been issued, allowing holders to exit and new buyers to enter without the issuing company receiving any funds from the trade.

The first sale of a company's shares to the general public, converting a privately held firm into a listed one and typically raising capital through an offer document filed with the regulator.

The market for long-term financial instruments, such as equity shares and long-dated debt, where savers supply funds to governments and companies needing finance for more than one year.

The segment where short-term instruments with maturities of up to one year, such as treasury bills and commercial paper, are issued and traded, supporting liquidity management for institutions and the government.

A unit of ownership in a company that carries voting rights and a residual claim on profits and assets, with dividend payments depending on the company's discretion and performance.

A class of share that gives holders a fixed or formula-based dividend and priority over equity holders in dividend payment and asset distribution, usually with limited or no voting rights.

A debt instrument issued by a company acknowledging a loan, typically carrying a fixed interest rate and a defined maturity, and often secured by a charge on the issuer's assets.

A tradable debt security in which the issuer promises to pay periodic interest and return the principal at maturity, commonly issued by governments, municipalities, and corporations.

The stated annual interest rate that a bond issuer pays on the face value of the security, expressed as a percentage, regardless of the bond's current market price.

The total annualised return an investor earns by holding a bond until maturity, assuming all interest and principal payments are made on time and reinvested at the same rate.

A short-term money market instrument issued by the government at a discount to face value and redeemed at par on maturity, used to manage short-term borrowing and cash flow.

An unsecured, short-term promissory note issued by large creditworthy companies to raise working capital, typically sold at a discount and maturing within one year.

A pooled investment vehicle that collects money from many investors and invests it in a diversified portfolio of securities, with units priced based on the underlying net asset value.

The per-unit value of a mutual fund scheme, calculated by subtracting the fund's liabilities from the market value of its assets and dividing the result by the number of outstanding units.

A facility allowing an investor to contribute a fixed amount to a mutual fund scheme at regular intervals, promoting disciplined investing and averaging the purchase cost over time.

A regulated marketplace where buyers and sellers meet, directly or through brokers, to trade listed securities under standardised rules, with price discovery and settlement handled through approved systems.

A registered intermediary who executes buy and sell orders on behalf of clients in exchange for a commission or fee, and who must comply with client onboarding and conduct rules.

An institution that holds securities in electronic form on behalf of investors, enabling book-entry transfer and reducing the risks associated with physical share certificates.

An intermediary, usually a broker or bank, that acts as the interface between investors and a depository, opening accounts and processing electronic transfers of securities on client instruction.

An account with a depository participant in which an investor's securities are held electronically, allowing sale, purchase, and transfer without physical certificates.

An entity that assumes the counterparty risk in trades by acting as the buyer to every seller and the seller to every buyer, and that manages margins and settlement obligations.

A member of a clearing corporation who settles trades on behalf of trading members, maintains the required margins, and ensures funds and securities obligations are honoured.

The process by which a trade is completed, involving the transfer of funds from the buyer and delivery of securities from the seller, usually on a fixed cycle after the trade date.

A settlement cycle in which trades are settled on a continuous basis, with pay-in and pay-out occurring a fixed number of working days after the trade date.

The total market value of a company's outstanding shares, calculated by multiplying the current share price by the number of shares in issue, used to gauge company size.

The portion of a company's shares that is available for public trading, excluding holdings of promoters, strategic investors, and locked-in shareholders, often used in index construction.

A statistical measure that tracks the performance of a defined basket of securities, used as a benchmark for market performance and as an underlying for derivatives and index funds.

A financial contract whose value is derived from an underlying asset such as a stock, index, currency, or commodity, commonly used for hedging risk or taking speculative positions.

A standardised agreement to buy or sell an underlying asset at a predetermined price on a specified future date, with both parties obligated to honour the contract.

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a stated price within a defined period, in exchange for a premium.

The statutory regulator for Indian securities markets, responsible for protecting investors, promoting market development, and regulating intermediaries, exchanges, and public offers.

An offer document filed before a public issue that contains most details of the offering but omits the final issue price and size, which are filled in after the bidding process.

A portion of a company's profits distributed to shareholders, usually declared per share and paid out of distributable reserves, subject to approval by the board and shareholders.

The ease with which a security can be bought or sold in the market without significantly affecting its price, generally higher for actively traded and widely held instruments.

The conversion of physical securities certificates into electronic form held with a depository, enabling faster transfer, safer custody, and elimination of risks such as forgery and loss.

The difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept for a security, often used as a measure of market liquidity.