Investment and Finance

The U.S. (SEC)Securities and Exchange Commission is requiring that all major U.S. Stock and Options Exchanges, as well as Nasdaq, change from fractional pricing to decimal pricing. U.S. brokerage firms will therefore be required to use decimal pricing. Decimalization pricing is expected to be beneficial for individual investors. Pricing is more easily understood in dollars and cents, which may encourage more people to buy and sell stocks and options. Decimalization pricing may also achieve savings for investors to the extent that it provides an opportunity to buy and sell stocks and options in smaller price increments per share.

The U.S. stock and options markets are the only major markets still trading in fractions. The conversion to decimal pricing is intended to make the U.S. markets more compatible with other related markets. This conversion will make the U.S. markets more competitive with foreign markets, which already price, quote and trade in decimals.

No mixed pricing will be allowed for a single stock or option. During the phase-in period, a select group of stocks and options will be priced in decimals, while all others will be priced in fractions. Once the phase-in is fully implemented, pricing, quoting and trading will only be done in decimals. An exception to this rule is the exercise price for options. They will remain in fractions during the phase-in period. Option premiums will be expressed decimally in dollars and cents.

The following websites are available for more information about Decimalization: The New York Stock Exchange at www.NYSE.com, the American Stock Exchange at www.AMEX.com, the Securities Industry Association at www.SIA.com, and the National Association of Securities Dealers at www.NASD.com.

In the stock market "margin" refers to buying of stock or other investments on credit. The use of margin permits you to leverage the assets in your portfolio to increase the amount of securities you may own. This in turn increases the potential return on your investments in a bullish rising market. The use of margin also increases investment Risk since in a declining market the potential loss is similarly magnified by this leverage. Investors trading on margin must be prepared to deposit additional cash or securities to meet margin calls should the prices of stocks held in their accounts decrease. If the taxpayer is unable to make the deposit, the brokerage house has the right to sell the collateral securities and charge any market loss to the taxpayers account. You should make sure you do not over extend yourself when using margin to buy stocks. The use of margin also results in additional costs to you since interest is charged on your margin balance.

In the Stock Market, common stocks of well-known companies with histories of profit growth and dividend payment, as well as quality management, products, and services are known as "Blue Chip Stocks".
Blue chip stocks are usually high-priced and low-yielding. It is believed the term "blue-chip" comes from the game of poker in which the blue chip holds the highest value.

CATS (Certificates of Accrual on Treasury Securities)are Issues from the U.S. Treasury sold at a deep discount from their face value. They are called Zero Coupon securities because they require no interest payments during their lifetime, but they return the full face value at maturity. They cannot be called away.

A Debenture is an unsecured debt offering by a corporation, promising only the general assets as protection for creditors.