Open ended fund

In an open-end fund, the units of a mutual fund are bought and sold by the fund company itself. The price at which you buy this fund is usually higher than the price at which you can sell the fund to the fund company. In this mutual fund, there are no restrictions on the amount of shares the fund can or will issue. Depending upon the demand, the fund continues to issue shares no matter how many investors there are. In this case, the fund companies also give option to the investors to buy back their shares when investors wish to sell. Mostly mutual funds are open-end funds and they are more conservative and provide consistent returns. Generally, Open-end funds are managed actively and are priced according to their net asset value.

Closed ended fund

Unlike an open-end fund, where the buying and selling of funds are conducted by the fund company itself, the units of close-end funds are traded on a stock exchange. The market price of the shares in closed ended fund is determined by supply and demand and not by net-asset value (NAV).

Load

This is the total price of buying a unit of a mutual fund. It is actually a kind of fee or commission charged to an investor when buying or redeeming shares in a mutual fund. Mostly funds sell units at a premium to its underlying NAV, and purchase them at NAV. When the fund company charges a load while selling its units, it is called entry load. When it charges a load at the time of buying the units back from an investor, it is called exit load. Most mutual funds today carry some load, since there is always a cost incurred in the operation of the fund and as a result of numerous shareholder transactions. Sometimes, though this load thing acts as a burden for investors and is very effective in discouraging them from trading the mutual fund in short-term or using it for purposes other than investment. It is also a source of income for the Asset Management Company which operates the mutual fund.

Quote driven trading:

Trading where brokers/market makers give buy/ sell quote for a scrip simultaneously.

Record date:

Record date is the date on which the beneficial ownership of an investor is entered into the register of members. Such a member is entitled to get all the corporate benefits.

Rematerialisation of shares:

It is the process through which shares held in electronic form in a depository are converted into physical form.

Rolling settlement:

The settlement process where every day is a settlement day. For example T+2 rolling settlement means that the shares traded on Monday would be settled on Wednesday and so on.

Screen based trading:

When buying/selling of securities is done using computers and matching of trades is done by a stock exchange computer without human intervention.

Secondary Market:

The market for already listed and issued securities of a company.

Settlement:

It refers to the scrip-wise netting of trades by a broker after the trading period is over.

Settlement guarantee:

Settlement guarantee is the guarantee provided by the clearing corporation of clearing house for settlement of all trades even if a party defaults to deliver securities or pay cash.

Splitting/Consolidation:

The process of splitting shares that have a high face value into shares of a lower face value is known as splitting. The reverse process of combining shares that have a low face value into one share of higher value is known as consolidation.

Spot trading:

Trading by delivery of shares and payment for the same on the date of purchase or on the next day.

Stop transfer:

The instruction given by a registered holder of shares to the company to stop the transfer of shares as a result of theft, loss etc.

Stock Broker:

Member of a stock exchange, who acts as an agent for buyers and sellers of securities in the secondary securities market.

Sub broker:

An agent of a stock broker whom assists clients in buy/sale of a security of a company in secondary securities market.