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Exchange-Traded Note (ETN)
Exchange-traded notes (ETNs) are types of unsecured debt securities that track an underlying index of securities and trade on a major exchange like a stock. ETNs are similar to bonds but do not pay interest payments. Instead, the prices of ETNs fluctuate like stocks. The ETN pays investors the return received from the index they track at the maturity date, less any fees or commissions. An ETN is typically... -
Exchange-Traded Product (ETP)
Exchange-traded products (ETPs) are types of securities that track underlying securities, an index, or other financial instruments. ETPs trade on exchanges similar to stocks meaning their prices can fluctuate from day-to-day and intraday. However, the prices of ETPs are derived from the underlying investments that they track. The term “ETPs” is generally used when referring to both ETFs and ETNs. -
Exemptive Relief
Most ETFs are registered under the Investment Act of 1940 – often referred to as the ’40 Act – as open-end investment companies. As such, they are subject to the specific provisions of the ’40 Act as they pertain to open-end funds. However, several of the customary features of an ETF are not consistent with the requirements of the ’40 Act. Thus, a key part of the process in... -
Fixed Income Arbitrage
An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income arbitrage strategy, the investor assumes opposing positions in the market to take advantage of small price discrepancies while limiting interest rate risk. Fixed-income arbitrage is primarily used by hedge funds and leading investment banks. The most common fixed-income arbitrage strategy is swap-spread arbitrage. This consists of taking opposing long and short... -
Flat
A price that is neither rising nor declining. In forex, the condition of being neither long nor short in a particular currency. Also referred to as ‘being square’. A bond that is trading without accrued interest. If a stock over the last month has been trading around $30, it can be thought of as trading flat. If you had no positions in the U.S. dollar or your long and... -
Flexible Spending Account (FSA)
Some employers offer flexible spending accounts (FSA), sometimes called cafeteria plans, as part of their employee benefits package. You contribute a percentage of your pretax salary, up to the limit your plan allows, which you can use to pay for qualifying expenses. Qualifying expenses include medical costs that aren’t covered by your health insurance, childcare, care for your elderly or disabled dependents, and life insurance. (Source: Yahoo! Finance) -
Floater (see Floating Rate Bond)
A bond or other type of debt whose coupon rate changes with market conditions (short-term interest rates). Also known as “floating-rate debt.” For example, a floater bond may have the coupon rate set at “T-bill rate plus 0.5%.” This type of instrument is more beneficial to the holder as interest rates are rising because it allows the holder to participate in the upward movement in rates. Conversely a floater... -
Floating Rate Bond
A debt security whose interest rate is adjusted periodically to reflect changing money market rate. -
Fractional Shares/Fractional Share Trading
The ability to buy or hold less than one share of a stock. Fractional shares allow smaller investors to own slivers of stocks and thus opening up the ability to invest in expensive stocks like Amazon (NASDAQ: AMZN), Berkshire Hathaway (NYSE: BRKA), Booking Holdings, Inc. -formerly Priceline (NASDAQ: BKNG), Alphabet (NASDAQ-GOOG), Chipotle (NYSE: CMG); Autozone (NYSE: AZO). Investors participating in dividend reinvestment programs often receive fractional shares. Fractional share...
