What is the Investment Advisor Registration Depository (IARD)?
The IARD system is maintained by FINRA, and keeps track of all adviser registrations, which states they are licensed to work in, all licenses they hold, and any customer complaints. It simplified the registration requirements of the Investment Advisers Act of 1940. The Investment Adviser Registration Depository (IARD) was established in 2001 to streamline the registration requirements of the Investment Advisors Act of 1940. The act required that all advisers register with the SEC and the states in which they practice. Continue reading...
What is Publication 15-b on Fringe Benefits?
IRS Link to Publication — Found Here IRS Publication 15-b outlines the different types of fringe benefits available to employees and describes which ones are taxable to the employee and which ones are not. Fringe benefits might include anything from the use of a company car to an employee life insurance policy paid for by the employer. Fringe benefits may be provided to regular employees or independent contractors (1099 employees). Some examples of fringe benefits include tuition reduction, group disability and cafeteria plans, and childcare benefits. Continue reading...
What is the Broadening Wedge Descending (Bullish) Pattern?
The Broadening Wedge Descending pattern forms when the price of a pair makes lower lows (1, 3, 5) and lower highs (2, 4), forming a downtrend. This pattern may form when large investors spread out their selling over a period of time. When the initial selling occurs, other market participants react to the falling price and jump on the bandwagon to participate. Then the value investors begin to buy, believing the price has fallen too much, which spurs the original large investor to resume buying again as well. Continue reading...
What is a Leveraged Buyout?
A leveraged buyout occurs when members of management use outside borrowed capital to buy a controlling share in the company. Often times, the assets of the company being acquired are used as collateral for the borrowed capital. The purpose of leveraged buyouts is to acquire another company without having to commit a lot of working capital up front. In a typical leveraged buyout, you may see a ratio of 90% debt financing to 10% equity used to acquire the company. Continue reading...
What is a Market Maker?
A market maker is a broker-dealer firm or a registered individual that will hold a certain number of shares of a security in order to facilitate trading. There could be as many as 50 market makers for one particular security, and they compete for customer order flows by displaying buy and sell quotations for a guaranteed number of shares. The market maker spread refers to the difference between the amount a market maker is willing to pay for a security and the amount that the other party is willing to sell it. Continue reading...
What are Collateralized Debt Obligations (CDOs)?
Collateralized Debt Obligations (CDOs) are bond-like investments backed by debts such as mortgages. The mortgages or debt obligations are pooled together and divided into tranches based on the maturity date and coupon payments and sold as securities (CDOs). If interest rates change and the borrowers in the underlying pools can refinance their debts, the CDOs will experience some volatility as the obligations are paid off early, but how much volatility depends on which tranche the investment is in. Continue reading...
What are forward contracts?
Forward contracts are agreements to exchange specific assets on a specific date, at a price determined at the outset. Forward contracts are similar to futures contracts, but they are over-the-counter private contracts drafted for specific purposes, quantities, and dates that satisfy the specific needs of the counter-parties. These contracts are mostly entered into by institutional investors seeking a hedge against risks such as interest rates and exchange rates. Continue reading...
What is a Credit Spread?
Credit Spread is an indication of the default risk perceived in corporate bonds at the current time. The credit spread is the difference between the yield on the safest bonds and the riskiest bonds. How much does it cost corporations to issue bonds, in terms of the yield expected by investors in the current market? Typically, a higher spread indicates a more unstable economy. Buyers of large quantities of bonds tend to insure their purchases, and the cost of the insurance is usually reflected in so-called CDS's (Credit Default Swaps). The more expensive the CDS's are, the more risky it is to purchase the bond. Continue reading...
What is the EURO STOXX 50?
The EURO STOXX 50 is an index designed to give a broad representation of stock performance across the euro zone. The EURO STOXX 50 is an index comprised of the 50 largest and most liquid stocks in the euro zone, and is designed to “provide a blue-chip representation of Super-sector leaders in the Eurozone.” The performance of the EURO STOXX 50 is generally a good indicator for how Europe’s economy is doing. Continue reading...