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MARGINING

This is the method used by derivative counterparties to protect each other from default. Let’s say that two parties agree to a spread bet whereby one bets on the FTSE 100 rising and the other on it falling. Each one might be required to lodge a deposit with a clearing house of say 10% of …

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LONDON STOCK EXCHANGE (LSE)

This is the main market in London for publicly traded shares. The LSE only lets certain companies join its lists subject to them meeting the requirements of its Listing Rules. There are two lists available – the official list for the larger, better established firms and the Alternative Investment Market (AIM) for smaller, faster growing …

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LOAN TO VALUE

This term describes the relationship between a loan secured on an asset and the value of that asset. So for example if a mortgage for £75k is secured on a house worth £100k, the LTV is 75%. The lower the LTV the more secure the deal is for the mortgage lender and the lower the …

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LLOYD’S MEMBER

The insurance market known as Lloyd’s of London is funded by its members. These are firms or individuals who are prepared to fund insurance underwriting syndicates at Lloyd’s in return for a share in its underwriting profits (the profits it hopes to make from the premium it charges for helping clients to insure risky assets). …

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LIMIT ORDER

An order to trade at no worse than the price stated. For example a limit order to buy 2,000 shares at £2.50 is, in effect, an instruction to buy the shares for £2.50 or less. Equally a limit order to sell is an instruction to not sell shares for less than a particular price. READ …

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LIFETIME ALLOWANCE

This sum, which is set by the government, represents the maximum amount you can withdraw from a pension fund without being hit for additional penalty tax charges. If the total amount you have saved exceeds this sum at the point you crystallise the fund (by, for example, making a withdrawal or reaching the age of …

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LIBOR

The London Inter-Bank Offered Rate is a key benchmark rate for financial markets that influences the price of many products including mortgages. It represents the average rate at which certain key banks are prepared to lend to each other in sterling. This rate is published daily by the British Bankers Association (BBA). Companies can usually …

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LEVERAGE

This is a US term which is broadly equivalent to the UK term gearing. It describes the relationship between a firm’s debt and equity funding with highly levered firms being those that carry a high level of debt relative to equity. This means they can offer higher returns on equity than non-levered firms when times …

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LEGAL SHAREHOLDER

If your name appears on a share register then you are the legal owner of the underlying shares. However a broker may put themselves on the register instead to make the administration of many small client holdings easier. In that situation the broker is the legal holder while the underlying investor is the beneficial holder. …

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LARGE CAP STOCKS

These are shares in big firms that are typically available on the top lists of public exchanges such as the London Stock Exchange. So for example FTSE 100 stocks are large caps. They are usually relatively easy to trade and widely held by both institutional and retail investors. READ MORE