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Finance GlossaryBook Entry Securities
Book Entry Securities
Definition of Book Entry Securities
Book entry securities are financial instruments like stocks, bonds, ETFs, and others whose ownership is recorded and tracked electronically. Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.
For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.
Book entries have made ownership certificates obsolete as they track who owns what electronically.
The trades are settled by the depository like NSDL or CSDL which sends the buyer a statement confirming ownership.
For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.
Book entries have made ownership certificates obsolete as they track who owns what electronically.
The trades are settled by the depository like NSDL or CSDL which sends the buyer a statement confirming ownership.
Related Terms
Settlement Cycle
The settlement cycle refers to the time taken to complete a trade once it is executed. Equities in India have T+1 days for settlement. This indicates the shares and funds are exchanged only one business day after the trade is executed. A shorter settlement cycle reduces counterparty risk. It also ensures that investors get faster access to their money or securities.
Bull Market
Bull market is a positive trend in the stock market where price of shares increase by 20% or more after falling by 20%. Investors may say they’re bullish or expect a bull market to arrive when they believe that there will be prolonged periods of increase in the stock market.
Market Sentiment
Market Sentiment reflects the overall attitude or mood of investors toward a particular market, stock, or asset class. It shows whether participants are generally optimistic or pessimistic. It may influences price movements in the short term.
Margin Call
Margin call occurs when a brokerage firm requires the investor to deposit funds in their account or sell their securities in order to meet the minimum margin requirement in their account because the value of their leveraged investments has dropped below a required level. If market participants fail to do so, the broker forcibly closes the position to protect their loaned funds.
Margin Trading
Margin trading is a strategy that involves borrowing funds from a broker to take bigger positions in stocks, commodities, currencies, futures, or options.
Cash Contract
A cash contract is an agreement between two parties in which the delivery of goods is involved at a predetermined price and date. Typically, bulk buyers like big companies enter into cash contracts on the spot price of a commodity.
These companies aren’t in the business of speculation. As a result, the delivery of goods is always involved in cash contracts, unlike futures where the contract can be settled with cash without taking delivery.
These companies aren’t in the business of speculation. As a result, the delivery of goods is always involved in cash contracts, unlike futures where the contract can be settled with cash without taking delivery.
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