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Letter S

• Secondary markets

  A secondary market is a market of already issued securities. Transactions in the secondary market do not create or liquidate financial receivables for debtors.

  With a change in holder, cash does not move between investors and debtors, but between investors. The debtor is not affected by the transactions in the secondary market, while the creditor transfers the rights of repayment to other persons.

  The economic function of the secondary market with securities is a change in the structure of their holders. The issuer of a share often has no chance of preventing purchases or sales.

• Securities

  A security is understood to mean a tradable (i.e. a transferrable) financial instrument, in the sense that the instrument may be bought and sold. It is the tradability characteristic that is important for the given instrument to be considered a security. This is because not all financial assets may be traded.

• Securities issue

  Upon the issue of a security, the issuer represents the supply side. The primary subscriber of a security represents the demand side. It generally applies that the issuer of a security is not able to determine clearly in advance the interest in the given issue. It is only an estimate.

  An issue is understood to be a collection of mutually substitutable securities issued by a certain issuer based on its decision. In this decision the issuer primarily determines the type of security (e.g. share, bond, participation certificate), nominal value and the number.

• Segmentation theory

  It does not use the concept of a forward interest rate, but it distinguishes between the preferences of individual investors.

  Short-term and long-term debentures are negotiated in different markets, a short-term and a long-term market, which are mutually exclusive, i.e. the long-term interest rate does not depend on the development of the short-term interest rate.

• Share markets

  Share markets are markets on which shares are traded, i.e. instruments having, in theory, infinite validity. Shares exist until such time as the relevant public limited company is closed by its liquidation, division or merger with another company.

• Share risk

  Share risk – risk on shares: the risk of a change (not necessarily limited to a decrease) in the share price.

• Shares

  These are securities giving their holder (the shareholder) the right to share in the management of the company, its profit and any liquidation balance if the company is closed.

• Short sale

  Short sale means that the investor sells a security that he does not own. The intention is to sell a security at the momentary price in the expectation of repurchasing the security at some point in the future at a lower price.

  In order for an investor to realise a short sale, he borrows the security from another investor, who owns the given security. During the borrowing period the short seller must pay the lender of the security all the returns associated with the security (dividends, coupons, etc.).

  At the end of the short sale the short seller then buys the given security on the market and returns it to the lender. The short seller will make a profit (loss) if he buys the security for a lower (higher) price. A short sale is not subject to a time limitation. Collateral, which the lender accepts from the short seller, may represent a time limitation on a short position.

• SIPO

  see collection

• Spot

  A spot is a prompt transaction: purchase or sale of one currency for another for the current rate of exchange in the financial market at a given moment.

• Spot yield curve

  Dependence between the expected yield until the definite due date of the respective instrument, and the definite date is called spot yields curve.

  It is important that debentures are issued under the same conditions with the exception of the due date, so that the differences in yields are dependent only on that time, i.e. there must be the same risk of debentures, the same taxation, it has to have the same time of payment, etc.

• Spread of portfolio yields

  The calculation of the spread of portfolio yields is more complicated. It is wrong to assume that the spread of portfolio yields is a weighted average of the spreads of the individual component parts of a portfolio, i.e. the application of a similar approach as in the determination of the mean yield of a portfolio.

  One of the main principles of the present portfolio theory is that the risk of a portfolio is normally lower than the sum total of risks of the individual component parts.

• Swap

  Swap is an English expression for exchange: it designates a sale of one currency for another one with a repurchase after a certain period of time for a rate agreed in advance.

• SWIFT

  SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the organisation ensuring standardized international payments. SWIFT is a fully automated network enabling simple, fast and fully secured communication between banks. Each SWIFT member bank has its own unique identification code – BIC.

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