Banking and Stock Glossary
Venture capital financing instrument. Financing is provided in the early development stage of a company, i.e. as seed and start-up capital. It is used to finance anything from a business concept, the production of initial prototypes, through to the start of production and marketing. The potential for commercial success is difficult to assess in this phase. Owing to the risk involved, financing takes the form of capital provided by venture capital companies or wealthy individuals (business angels).
Also: profit per share. Key figure for assessing a company's earning power. It expresses how much of a company's net income is attributable to each individual share. This figure is needed to work out the price-earnings ratio (PER) of a share.
EBIT (Earnings Before Interest and Taxes) is a profit ratio that measures a company's profit prior to deduction of interest and taxes. It reflects the earning power of a company from its ongoing operations, irrespective of its capital structure. This measure makes it possible to compare the profit results of companies with different debt leverage ratios.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is a profit ratio that measures a company's profit before deduction of interest, taxes and depreciation. It reflects the company's earning power from its ongoing operations, irrespective of its capital structure and propensity to invest.
Abbreviation for European Bank for Reconstruction and Development.
Ecash is an electronic payment system for purchasing goods and services on the Internet.
Abbreviation for European Central Bank.
Net interest return designates the actual interest rate earned by an investment in any given year. It takes into account buying and sellings fees, prices valid at time of purchase or sale, as well as any discounts or premiums. A security's maturity and repayment conditions also influence the net interest return. Opposite: nominal interest rate.
Abbreviation for European Investment Bank.
In economics, elasticity is a measure of responsiveness i.e. how a variable reacts to a change in one of the factors influencing it. Price elasticity of supply, for instance, shows the extent to which supply for an economic asset changes in response to a rise or fall in the price of that asset.
Paperless execution of banking transactions by means of electronic data processing.
German cashless retail electronic payment system in which customers use their bank customer card and PIN. The amount due is debited in voucherless form to the customer's personal account.
Electronic commerce is the exchange of business information, goods or services using the Internet. This leads to cost savings (as a result of automation), improved services (24-hour availability) and worldwide competition. E-commerce takes place between suppliers and consumers (Business-to-Consumer) and between companies (Business-to-Business).
Characteristic of securities necessary for them to be accepted as a means of collateral for Lombard loans.
A ward is understood to be a minor under the care of a guardian. The ward's capital assets must be invested, puruant to § 1806 ff. German Civil Code (BGB), in an especially secure manner ("eligible for investment of ward money"). The investment is usually in fixed-income securities that have been expressly declared as eligible for the investment of ward money by the lawmakers.
In Germany, the formation of wealth by wage and salary earners is supported by an employee savings allowance. It is a state subsidy for cash payments which the employer invests for the employee (wealth formation payment).
Abbreviation for European Monetary Union.
An endorsement transfers property rights of a negotiable instrument made payable to order (such as a cheque or bill of exchange), including all ensuing claims. An endorsement is written on the instrument itself. With his endorsement the beneficiary declares that the debitor has to pay to a new creditor (endorsee) on maturity.
Although consisting simply of the endorser's signature, it fulfils all the functions of an endorsement. Besides the endorsement in blank, there is also the endorsement in full, which includes, besides the endorser's signature, the name of the endorsee (the new entitled party).
Capital market access provided by Deutschene Börse within the Open Market (formerly: Regulated Unofficial Market) for small and medium-sized companies as an alternative to EU-regulated segments. The Entry Standard is primarily aimed at qualified investors who are able to assess and accept the potential risks related to the investment in shares of the respective company. Investors must be aware that shares of the company are not admitted to trading at an EU-regulated market and that this part of the Open Market is not subject to the uniform transparency standards and the strict provisions for investor protection on organized markets in the EU.
Abbreviation for Euro Overnight Index Average, which is a measure of the effective interest rate prevailing in the euro overnight market. EONIA is calculated, with the help of the European Central Bank (ECB), as a weighted average of the interest rates on unsecured overnight lending transactions on the interbank market in the Euro area. The necessary data is reported by a representative panel of EURIBOR prime banks.
This financial term has different meanings:
1) The equity method of accounting is used in consolidated financial reporting to determine income derived from a company X's investment in another company Y over which it exerts a significant influence, but which is not a subsidiary or joint venture of X's Group.
2) A method of determining shareholder value, i.e. the market value of a company's equity. It is a variation of the Discounted Cash Flow (DCF) method where the value of a business is calculated by discounting future cash flows attributable to equity capital providers at the company's cost of equity. Shareholder value is defined as the aggregate total of these discounted amounts (cash value). By contrast, the entity approach discounts the future cash surpluses available to providers of equity and debt capital using the total cost of capital. This is used to calculate the market value of the entire company, i.e. including both equity and debt capital.
Abbreviation for European System of Central Banks.
Abbreviation for European Exchange. Eurex is one of the world's biggest futures and options exchanges, formed by an amalgamation of DTB (Deutsche Terminbörse) and SWX Swiss Exchange member SOFFEX (Swiss Options and Financial Futures Exchange). Besides its futures and options exchange, Eurex offers an OTC trading platform for fixed-income securities (Eurex Bonds), the electronic settlement of repo business (Eurex Repo) and serves as central counterparty (Eurex Clearing AG).
Clearing-house and central counterparty for on-exchange trades executed on the Frankfurt Stock Exchange (Xetra or floor trades) in German equities that are subject to collective safe custody, denomoinated in Euro and listed on Xetra. In its role as central counterparty, it additionally assures the fulfillment and clearing of trades on the Eurex derivatives exchange, Eurex Bonds and Eurex Repo.
Abbreviation for European Interbank Offered Rate. Euribor is the benchmark rate at which euro interbank term deposits within the eurozone are offered by one prime bank to another.
The name of the European single currency, the world's second most important currency after the U.S. dollar. It is under the control of the European Central Bank in Frankfurt am Main and is the official currency in 13 of the 27 EU member states and six other countries. In addition, seven other EU countries have fixed exchange rates against the Euro.
Commercial paper traded on international money markets (Euromoney markets) and issued primarily by prime addresses to cover short-term borrowing requirements. Maturities are generally under one year.
Bonds underwritten by an international syndicate (of banks) and simultaneously placed in a number of countries. Generally denominated in one of the major currencies U.S. dollars, euro, yen or pounds sterling. Eurobonds can be issued by government entities, international institutions and major companies.
The first cross-border payment system launched by European banks in the 1960's. Encashment was assured by a cheque guarantee card known as the eurocheque card (or ec card for short). The guarantee function was discontinued in early 2002. Since then banks have adopted debit cards (bank customer cards), which can be used for cashless payment or to withdraw cash from ATMs. Unlike credit cards, the cardholder's current account is debited immediately after making a purchase. German banks generally combine their debit cards with ec/Maestro cards. Today "ec" no longer stands for eurocheque but for the German electronic cash system.
Clearing system for international securities transactions set up in 1968 by the Morgan Guaranty Trust Co. in Brussels. Today, Euroclear operates the central securities depositories in France, the Netherlands, Belgium, the U.K. and Ireland, as well as Euroclear Bank, the international central securities depository in Brussels.
(Eurodollar market) Market for limited-term dollar loans, generally with short repayment periods, established in 1957. Trading is conducted in U.S. dollars and other convertible currencies between banks outside the U.S.A. (primarily in Europe, Canada and Japan, including foreign subsidiaries of U.S. banks). The principal market is London. Additionally, there is the eurocapital market, the market for eurobonds, public-sector debentures and German mortgage bonds (Pfandbriefe).
Euronote facilities are financial agreements which enable the issuer to procure liquid funds, up to a certain limit, during a fixed programme period of five to ten years through the revolving placement of euronotes. It is essential for this construction that the banks involved (underwriters) undertake to purchase the euronotes at a contractually agreed rate of interest, or to alternatively provide book credits (backup or standby facilities), if the borrower does not succeed in selling his euronotes on the market. Since the euronotes themselves only have a duration of several months, the borrower may have to make a renewed offer once this period has expired (= Revolving Underwriting Facilities, RUFs, or Note Issuance Facilities, NIFs).
Short-dated money market paper issued on the euromarket by non-banks. Euronote interest rates are linked to a money-market reference rate. In contrast to Euro Commercial Paper, that results in standard maturities of one, three or six to twelve months.
The European Bank for Reconstruction and Development (or EBRD for short) was established in 1991. The EBRD uses the tools of investment to help build market economies and nurture the transformation to private enterprise in countries from central Europe to central Asia. The EBRD is owned by 61 countries and two intergovernmental institutions, the European Commission and the European Investment Bank. .
The ECB, domiciled in Frankfurt am Main, is the joint monetary authority of the Member States of the European Monetary Union and together with the national central banks forms the European System of Central Banks (ESCB). Its primary objective is to maintain stability of the price level in the Euro area. A further objective is to support economic policies to achieve a high level of employment and sustainable and non-inflationary growth. The ECB has two decision-making bodies: the Governing Council, and the General Council; the Executive Board is its executive body.
An association of Central Securities Depositories and International Central Securities Depositories , or (I)CSDs, in Europe, founded in 1997. The association aims to build up a common European infrastructure to support European central banks' interbank lending operations involving securities as collateral. There are also plans to build up mutual accounts among CSDs to facilitate the cross-border settlement of securities transactions.
The EEMU constitutes a significant part of the European Union. One of its major accomplishments was the adoption of the euro as a single currency. All EU Member Countries also belong to the EEMU.
The European Investment Bank (EIB), domiciled in Luxembourg, was set up in 1958 by the Treaty of Rome establishing the European Economic Community. The main aim of the EIB, the European Union's financing institution, is to contribute to the integration, balanced development and economic and social cohesion of the Member Countries. The EIB raisies substantial volumes of funds on the capital markets and makes them available at the most favourable terms for financing investment projects according to the objectives of the Union. Outside the EU, the EIB implements the financial components of agreements concluded under European development aid and cooperation policies.
Buy or sell option which can be exercised only at maturity. Opposite: American option (American style).
An association based in Brussels which represents and promotes the interests of the European private equity and venture capital industry. Its role includes arranging contacts for companies seeking private equity providers.
See European option.
The European System of Central Banks (ESCB) is made up of the European Central Bank (ECB) and the national central banks of all EU Member States. The system is coordinated by two decision-making bodies: the ECB Governing Council and the Executive Board. The primary objective is to maintain price stability. The basic tasks of the ESCB are to define and implement the monetary policy of the Community, to hold and manage the official foreign reserves of the Member States, to conduct foreign exchange operations, to promote the smooth operation of payment systems in the Euro area, and to help execute banking supervision rules and stability measures for financial systems taken by the responsible authorities. The ESCB has a number of monetary policy instruments at its disposal to steer money supply and liquidity in line with stability requirements.
Abbreviation for European Private Equity & Venture Capital Association
The price for securities and other fungible goods traded on an exchange. The exchange price is expressed as a percentage of the nominal value or in euro per unit. The official exchange price is determined by exchange brokers.
Rate of exchange between two currencies. Fixed exchange rates involve restrictions of capital imports and exports. Floating exchange rates, by contrast, are driven by supply and demand on foreign exchange markets. Exchange rates refer to cashless payments, while the banknote rate is the exchange rate for notes and coins.
Law requires each stock exchange to have exchange rules. The exchange rules are issued by the stock exchange council in agreement with the entity responsible for the stock exchange. They ensure that the stock exchange can perform its tasks and that the interests of customers and traders are protected. Specifically, the exchange rules regulate the organization of the stock exchange, the tasks of the stock exchange council, the stock exchange management and the trading surveillance office, the publication of all prices and trading volumes. They also regulate admission to stock exchange membership and participation in stock exchange trading.
The exchange supervisory authority is usually the regional Ministry for Economic Affairs. The authority has the power to oversee stock exchange trading activities directly and comprehensively and also has emergency competence for the pursuit of breaches of insider law. In the fulfilment of its supervisory and control tasks, the exchange supervisory authority is entitled to use the services and resources of the trading surveillance office of the stock exchange and to issue directions to the office. The trading surveillance office has functional competence for the comprehensive monitoring of day-to-day trading activities. It records systematically and in full chronological order all stock exchange trading data and evaluates it. As an independent stock exchange body, the trading surveillance office is not subordinated to the stock exchange management.
An exchange-traded fund, or ETF, is a type of mutual fund, usually a passively managed index fund, whose investment objective is to achieve the same return as a particular market index. Xetra Funds is the market segment of Deutsche Börse AG in which exchange-traded index funds ( XTF Exchange Traded Funds segment) and actively managed funds (Xetra Active Funds segment) are electronically traded via Xetra. These funds are traded just like shares, though the price is not fixed once a day, but variable throughout the day on the basis of supply and demand. There is no front-end load, but investors must pay a spread, i.e. the difference between the buying and the selling price, as well as the customary fees for stock exchange transactions.
The day on which the owner of an option exercises his option right. In the case of European-style options, the exercise day can only be the expiration day at the end of the maturity. With American-style options, the option holder can exercise at any time during the maturity.
Period during which an option can be exercised (only American-style). When the option period ends, the option right expires and the option lapses.
See strike price.
An exit is the means by which a financial investor is able to realize its investment in a company. Generally speaking four exit routes are available: (1) the former proprietors buy back the stake held by a financial investor (buy-back), (2) the stake is sold to another company, usually in the same industry (trade sale), (3) a third-party, often another financial investor, takes over the stake from the financial investor's portfolio (secondary purchase), or (4) the stake in a company is listed on the stock exchange (going public).
Engineered financial products, relating to warrants and other leverage products, with a strongly speculative character. Issuers are constantly creating and launching products with innovative new names to meet fast-changing investor demand. Though exotic options offer the chance of quick and sizeable price gains, there is also the risk of equally quick losses, right up to a complete loss of the investment.
Day on which an option right expires; for American-style options the last day of the exercise period, for European-style options the exercise date.
| Copyright © Deutsche Bank AG |