Investor education
Glossary of market terms
No jargon without a definition. Every term you are likely to meet on the exchange, explained in plain language.
29 terms
- Ask (offer)Trading
- The lowest price at which a seller is currently willing to sell a security. If you buy immediately at market, this is roughly what you pay.
- Best executionRegulation
- An intermediary's obligation to take all sufficient steps to obtain the best possible result for a client order, considering price, cost, speed and likelihood of execution and settlement.
- BidTrading
- The highest price a buyer is currently willing to pay. If you sell immediately at market, this is roughly what you receive.
- Bid–ask spreadTrading
- The gap between the bid and the ask. It is a real cost of trading: buy at the ask and sell at the bid and you lose the spread even if the price never moves.
- BondInstruments
- A debt security. The issuer borrows from you, pays interest at set intervals, and repays the principal at maturity.
- BrokerMarket participants
- An intermediary that executes orders as an agent on behalf of clients, without taking positions on its own account.
- Central Securities Depository (CSD)Infrastructure
- The institution that holds securities in electronic form and records ownership. Settlement of trades takes place across CSD accounts.
- Contract noteTrading
- The written confirmation issued after a trade, stating the security, quantity, price, commission and settlement date.
- CouponInstruments
- The interest payment a bond makes to its holder, usually expressed as an annual percentage of the bond's face value.
- DealerMarket participants
- A firm licensed to trade securities on its own account as well as for clients. By quoting two-way prices, a dealer adds liquidity that a pure agency broker cannot.
- DepthTrading
- The volume of orders resting at each price level. Depth determines how large an order the market can absorb without the price moving against you.
- DividendInstruments
- A distribution of company profits to shareholders. Dividends are declared at the board's discretion and are never guaranteed.
- DurationInstruments
- A measure of a bond's price sensitivity to interest rate changes, approximately the percentage price change for a one percentage point move in yield.
- ECMARegulation
- The Ethiopian Capital Market Authority, the regulator responsible for licensing and supervising capital market participants in Ethiopia.
- EquityInstruments
- Ownership in a company, represented by shares. Equity holders rank last in insolvency and have an uncapped claim on future profits.
- ESXInfrastructure
- The Ethiopian Securities Exchange, the venue on which listed Ethiopian securities are traded by admitted trading members.
- Face value (par)Instruments
- The amount a bond repays at maturity. Market price can trade above or below this figure.
- Limit orderTrading
- An order specifying the worst price you will accept. It protects you from a bad fill but may not execute at all.
- LiquidityTrading
- How easily a security can be bought or sold without materially moving its price. Illiquid securities can be difficult to exit at a fair price.
- Market makerMarket participants
- A dealer that continuously quotes both a bid and an ask, committing its own capital so that other participants can trade when they need to.
- Market orderTrading
- An order to trade immediately at whatever price is available. It guarantees execution but not price, in a thin book the result can be well away from the last traded price.
- PortfolioInvesting
- The complete set of investments held by an investor, considered together rather than as isolated holdings.
- Primary marketInfrastructure
- Where securities are issued for the first time and the proceeds go to the issuer, as in an initial public offering.
- ProspectusRegulation
- The formal disclosure document an issuer publishes when offering securities, setting out its business, finances and risk factors.
- Secondary marketInfrastructure
- Where existing securities are traded between investors. The issuer receives no proceeds; this is what an exchange principally hosts.
- SettlementInfrastructure
- The completion of a trade: securities are transferred to the buyer's depository account and cash to the seller, within the exchange's settlement cycle.
- VolatilityInvesting
- The degree to which a price fluctuates over time. Higher volatility means a wider range of possible outcomes, in both directions.
- YieldInstruments
- The return on an investment expressed as a percentage. For bonds, yield to maturity accounts for both coupon payments and any difference between purchase price and face value.