See: Federal Reserve Board; Margin; Regulation T; Selling Short

Fiduciary
Person, company, or association entrusted with the control of assets for the benefit of another, known as the beneficiary. Most states have laws governing the conduct of fiduciaries. Some states maintain a list of securities, known as the legal list, which are permissible investments for fiduciaries acting on behalf of their beneficiaries. Other states simply use the prudent man rule which requires that fiduciaries act as a prudent man or woman would with regard to how they invest on behalf of their beneficiary. In addition, the document appointing the fiduciary will establish parameters and guidelines for their activities with respect to the beneficiary's assets. Some examples of fiduciaries are executors of wills, administrators of estates, receivers in bankruptcy, trustees, and custodians for minors.

See: Legal List; Prudent Man Rule

FIFO (First In, First Out)
Method of accounting for the purchase and sale of securities for tax purposes whereby the first security purchased is assumed to be the first security sold. For instance, under FIFO, or first in, first out accounting, an investor who purchased 100 shares of XYZ in January and another 100 shares of XYZ in March, and then sold 100 shares of XYZ in November, would have sold the first 100 shares bought in January. In contrast, the LIFO method, or last in, first out would allocate the shares bought in March as the shares sold.

See: LIFO

Fill
The execution of a client's order to buy or sell a security. An order is considered filled when the total number of shares is completely bought or sold. If less than the order's full amount is executed, it is known as a "partial fill."

See: Execution

Fill or Kill (FOK) Order
A limit order to buy or sell a security in which the client instructs the broker to execute the order immediately in its entirety. If the order cannot be executed, it is canceled. FOK orders are usually used when a client wants to transact a large quantity of a security--one that would cause a significant price change if a market order to buy or sell were entered.

See: Fill; Limit Order; Market Order

Financial Market
Market for the exchange of capital and credit in the economy. Financial markets include the stock market, bond market, commodities market, and foreign exchange market. Financial markets may also be categorized as either money markets or capital markets. Money markets deal in short term debt instruments whereas capital markets trade in long term debt and equity instruments.

See: Debt Instrument; Money Market

Financial Pyramid
An investment strategy which apportions an investor's assets based on four categories of risk. The largest portion of assets are invested in safe, liquid investments. The second largest portion of assets is allotted to low-risk investments with the objectives of income and long-term growth. Third are assets categorized as medium-risk, and fourth, the smallest portion of assets, is comprised of high-risk investments.

See: Liquidity; Risk

Financial Statement
A record of the financial status of an individual, company or association. The financial statement includes a balance sheet, an income statement and may also include other financial analysis such as a cash flow statement.

See: Balance Sheet; Income Statement

Financial Supermarket
A company that offers a large variety of financial services. For instance, some financial supermarkets may offer banking services, securities brokerage, real estate brokerage, and insurance products--all under the same roof.

See: Broker

Firm Commitment
A type of underwriting whereby the underwriter agrees to purchase the entire issue from the issuer, regardless of his ability to sell the securities to the public. Any unsold shares cannot be returned to the issuer. Also called a "Firm Commitment Underwriting."

See: Firm Commitment Underwriting; Underwrite

Firm Commitment Underwriting
A type of underwriting whereby the underwriter agrees to purchase the entire issue from the issuer, regardless of his ability to sell the securities to the public. Any unsold shares cannot be returned to the issuer.

See: Firm Commitment; Underwrite

Firm Order
1: An order to buy or sell for the proprietary account of the broker-dealer, or firm.

2: An order to buy or sell which is not conditional.

Firm Quote
A quote by a market maker for a security which requires the market maker to purchase or sell a round lot of the security at the quoted bid or offer. This is in contrast to a nominal or subject quote which may require further negotiation or review and must be identified as such.

See: Market Maker; Nominal Quotation; Round Lot; Subject

First Call Date
First date on which part or all of a bond may be redeemed, or called, by the issuer, at a prespecified price. The first call date is specified in the bond's indenture. Bond brokers generally will quote callable bonds by giving both the yield to maturity and the yield to call.

See: Call; Indenture; Yield To Call; Yield To Maturity

First-In First-Out (FIFO)
Method of accounting for the purchase and sale of securities for tax purposes whereby the first security purchased is assumed to be the first security sold. For instance, under first in, first out accounting, or FIFO, an investor who purchased 100 shares of XYZ in January and another 100 shares of XYZ in March, and then sold 100 shares of XYZ in November, would have sold the first 100 shares bought in January. In contrast, the LIFO method, or last in, first out would allocate the shares bought in March as the shares sold.

See: Last-In First-Out

First Preferred Stock
A class of preferred stock that has preferential claim over other classes of preferred stock and common stock with regard to claims on dividends and assets.

See: Dividend; Preferred Stock

Fitch's Rating Service
A rating agency for municipal and corporate bonds, preferred stock, commercial paper, and other debt instruments.

See: Moody's Investors Service; Rating; Standard & Poor's Corporation

Fixed Annuity
Unlike a variable annuity, this contract is fully guaranteed, offering fixed payments either for life or for a specified time frame. Also, unlike a variable annuity, this contract will offer a minimum guaranteed interest rate.

See: Variable Annuity

Fixed Assets
Assets owned by a corporation which are not generally intended for sale in the normal course of the business. These assets represent tangible property and are highly illiquid. Buildings, machinery, equipment, furniture and fixtures are examples of fixed assets.

See: Illiquid; Liquidity

Fixed Income Investment
A security that pays a fixed rate of return, such as a bond or preferred stock. Fixed income investments offer protection against market risk, but do not protect holders against the risk of inflation.

See: Debt Security; Inflation; Preferred Stock; Rate Of Return; Risk

Flat
A bond term that means it is trading without accrued interest. Bonds which are in default of interest or principal are traded flat. This means that accrued interest will be received by the buyer if and when it is paid, but no accrued interest will be paid to the seller.

See: Income Bond; Principal

Flat Market
A market distinguished by horizontal price movement that is usually the result of low activity.

See: Horizontal Price Movement; Volume

Flight to Quality
The movement of capital by investors to the safest possible investment. Flights to quality usually occur when the market is declining or a specific situation occurs within the marketplace that unsettles investors. Money market investors, for example, may only buy government securities if a major bank fails.

See: Bear Market; Government Agency Securities; Money Market; Risk

Float
The number of shares of a security currently outstanding and available for trading by the public.

See: Outstanding Stock

Floor
The area of an exchange where securities are bought and sold.

See: Floor Broker; Floor Trader; Post; Stock Exchange

Floor Broker
A member of an exchange - who may or may not be employed by a member firm - who executes orders on the floor of the exchange. The floor broker executes orders for customers and therefore acts as agent. In contrast, the floor trader is buying and selling for his own account and is acting as principal.

See: Agency; Floor; Floor Trader; Principal

Floor Trader
A member of an exchange who trades on the floor of the exchange for his own account. In contrast, the floor broker is buying and selling for the accounts of customers and is acting as agent.

See: Agency; Floor; Floor Broker

FNMA (Federal National Mortgage Association)
A government sponsored corporation that purchases mortgages from lenders, repackages them and then sells them. The agency, which is known as Fannie Mae, deals in both government-backed and conventional mortgages.