Explain the following terms as used on the stock exchange market: (a) Backwardation (b) Bear (c) Jobber (d) Jobber's turn (e) Brokerage

Answer Details

Stock exchange terms explained

1. Backwardation: This is a charge or premium paid by a bear (a seller of shares he does not yet own) to the buyer for permission to postpone the delivery of the securities to a later settlement date. It is the penalty for deferring delivery.
2. Bear: A bear is a speculator on the stock exchange who expects the price of shares to fall. He sells shares he does not own, hoping to buy them back later at a lower price and profit from the difference.
3. Jobber: A jobber (or dealer) is a member of the stock exchange who buys and sells securities in his own name and on his own account. He deals with brokers rather than the public and makes his living from the difference between his buying and selling prices.
4. Jobber's turn: This is the profit made by a jobber, being the difference between the lower price at which he buys a security and the higher price at which he sells it. It is the margin between his bid price and offer price.
5. Brokerage: This is the commission or fee charged by a stockbroker for buying or selling securities on behalf of a client. It is usually calculated as a percentage of the value of the transaction.