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Glossary of Financial Terms — M 






Maintenance and Replacement Fund

A fund provided in most electric utility mortgage indentures requiring minimal annual property additions based on a percentage of revenues and/or assets to maintain or replace depreciable property. Deficiencies must usually be made up by deposit of cash, bonds or additional unfunded property. Deposited cash can often be used to redeem bonds at the special (lower) call price which frequently does not carry refunding protection.


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Maintenance Margin

The amount to which the initial margin for a futures position may be depleted by adverse price changes before additional margin is required to restore the initial margin amount.


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Maloney Act of 1938

Legislation allowing the over-the-counter market to establish the National Association of Securities Dealers to regulate itself. It was designed to protect the public from unfair practices and insure continued public confidence in the securities industry.


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Management Fee

A fixed percentage (usually 20 %) of the gross underwriting spread which accrues only to the managers.


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A firm which deals with the issuer of securities on behalf of the underwriting group. There may be a number of co-managers, but only the one “running the books” is directly responsible for distributing securities throughout a syndicate.


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The difference between the market value of collateral pledged to secure a loan and the face value of the loan itself.


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Margin Call

A call for cash in a margin position.


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1. The prices at which a security can actually be bought and/or sold.
2. A locale where a security is known to be traded.


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The ease with which an asset can be sold at a given price.


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Market Order

An order given to buy or sell a particular security at the best immediately obtainable price.


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Market Price

The most current price of a security. 

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Market Risk

The risk that current interest rates may change and thus adversely affect current market prices.


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Market Value

Market price times quantity.


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Master Page

A Process Charter page where text is stored that is displayed on all pages for the one file; i.e. team name, file name, modified date.


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Match Book

The collection of repurchase and reverse repurchase agreements done with customers. Securities acquired through reverse repurchase agreements are “matched,” or paired off, against a repo on the same security for the same period of time. The investment banker running the march book acts as principal in all transactions and incurs any liabilities. Repos done to finance dealer positions are not considered part of the match book.


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Matched Sales

The opposite of repurchase agreements. In the context of match book operations, refers to lending money and taking securities as collateral. In reference to Federal Reserve actions, a means of temporarily absorbing reserves by selling securities under and agreement to subsequently repurchase them. Also known as Reverse Repurchase agreements.


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The date on which a loan, bond, mortgage or other debt security becomes due and is to be repaid.


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Member Firm

A securities brokerage firm having one or more partners or officers who are members of the New York Stock Exchange.


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Method or System of Issue

Auction: A method of issue where brokers or dealers submit bids to the issuer on either a price or yield basis. Auction rules vary considerably across markets.
Competitive Auction: There are two types of competitive auctions: English and Dutch. In an English auction, bidders buy bonds at their bid price if they bid above the stop price. In a Ditch auction, bidders buy bonds at the stop price as long as their bid prices are above the stop price. For an oversubscribed auction, bids at the stop price are scaled proportionately.

Non-Competitive Auction: An auction at which bidders receive bonds at the average price.

Subscription Offering: Practice of issuing a security(s) by allotment to distributors or a syndicate who agree to distribute the issue(s) by pro-curing subscribers. The terms of the issue(s) are widely publicized in advance.

Syndicate: A group consisting of managers, underwriters and selling groups that is responsible for distributing new issues or taps.

Tap (or reopening): A method of reissuing an already existing bond, also the term used to describe such an issue.


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Model Portfolio

Reflects the primary strategies to be reflected in an investment portfolio of a given style.


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Modern Portfolio Theory

The theoretical framework for designing investment portfolios based upon the risk and reward characteristics of the entire portfolio, which is held not to be equivalent to the aggregation of the individual securities of the portfolio. The major tenet of the theory holds that reward is directly related to risk, which can be divided into two basic parts: 1) systematic risk (portfolios’ behavior as a function of the market’s behavior), and 2) unsystematic risk (portfolios’ behavior attributable to selection of individual securities). Because un-systematic risk can be largely eliminated through diversification, the portfolio will be subject principally to systematic risk.


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Monetary Policy

Monetary policy is the process by which the government, central bank, or monetary authority manages the money supply to achieve specific goals—such as constraining inflation or deflation, maintaining an exchange rate, achieving full employment or economic growth. Monetary policy is generally referred to as either being an expansionary policy, or a contractionary policy. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy has the goal of raising interest rates to combat inflation (or cool an otherwise overheated economy).


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Money Market Fund

A mutual fund whose investments are in high-yield money market instruments such as federal securities, CDs and commercial paper. Its intent is to make such instruments, normally purchased in large denominations by institutions, available indirectly to individuals.


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Money-weighted Return

Also known as dollar-weighted return, the internal rate of return taking the flows into consideration.


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Morningstar, Inc., an independent rating agency commonly referenced in regard to the investment style and risk/return characteristics of mutual funds.


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A conveyance of an interest in real property given as security for the payment of a debt.


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Mortgage-Backed Securities

Bonds which are a general obligation of the issuing institution but are collateralized by a pool of mortgages.


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Mortgage Banker

A firm that supplies its own funds for mortgage loans which are later sold to permanent investors. Usually they continue to service the loans for a specified fee.


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Mortgage Bond

A bond backed by a lien against real property.


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Mortgage Insurance

A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds.


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One who borrows money, giving as security a mortgage or deed of trust on real property; a debtor.


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Mutual Funds

Mutual funds pool money from all their investors and buy different stocks with it. This portfolio of stocks, bonds, or other securities is administered by a team of one or more managers from an investment company who make buy and sell decisions on component securities. Capital is contributed by smaller investors who buy shares in the mutual fund rather than the individual stocks and bonds in its portfolio. The risk and reward from all of the stocks is shared by all of the investors. This is a way for investors to diversify their risk and own many stocks for not a lot of money. The return on the fund’s holdings is distributed back to its contributors, or shareholders, minus various fees and commissions. This system allows small investors to participate in the reduced risk of a large and diverse portfolio that they could not otherwise build themselves. They also have the benefit of professional managers overseeing their money who have the time and expertise to analyze and pick securities.


The most common way for individuals to invest in the stock market is through mutual funds. Many people invest in mutual funds through an employer-sponsored 401(k) investment account meant for retirement. Often employees can decide how to invest the money in their accounts, generally by choosing from a list of mutual funds. There are all kinds of mutual funds, including index funds that track different types of stocks, and more specialized funds that invest in certain industries or use certain strategies. Bond funds, balanced funds, general equity fund, global funds and sector funds are also types of mutual funds.


There are two types of mutual funds, open and closed-ended. Shares in closed-end funds, some of which are listed on the New York Stock Exchange, are readily transferable in the open market and are bought and sold, like other stock. These funds do not accept new contributions from investors, but only reinvest the return on the existing portfolio. Open-end funds sell their own new shares to investors, stand ready to buy back their old shares, and are not listed on exchanges. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them. Many open-ended funds allow contributors extra perks, such as the ability to write checks with their portion.


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Investors should consider the investment objectives, risks, charges and expenses of any mutual fund carefully before investing. This and other information is contained in the fund’s prospectus and summary prospectus, if available, which may be obtained by contacting your financial advisor. Please read them carefully before you invest or send money.

Information contained herein is believed to be reliable, but the accuracy and completeness of this material cannot be guaranteed.


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