Scrip Dividend

One payable in scrip, or in other words, a due bill, sometimes bearing interest at the legal rate and usually convertible into stock, but having no voting power and entitled to no dividend until so converted.

Second Mortgage

The mortgage that is a lien after the first mortgage.

Securities Company

Same as holding company; a company which owns the securities of other companies and depends for its income upon the interest and dividends yielded by these securities. It usually issues bonds as well as stock itself. Its bonds are collateral trust bonds, being secured by bonds or stocks of other companies owned by it. A securities company is not necessarily a controlling company - it is not necessary that it should possess a majority of the stocks of the companies whose securities are included in its assets.

Seller's Option

A seller's option is, in effect, a put. In stocks sold on seller's option the seller may, when the option is for more than three days, put (deliver) the stock on any day within the specified time on one day's notice to the buyer. In a contract for four or more days the buyer, unless the contract is flat (without interest), pays to the seller interest at the legal rate on the price of the stock up to the day of delivery. The amount of a dividend becoming due during the pendency of a contract is payable by the seller to the buyer. No contract on seller's (or buyer's) option for less than 4 days or which extends beyond 60 days can be entered into on the New York Stock Exchange.

Selling Short

In Wall Street this consists in selling stocks not owned, and borrowing them for immediate delivery. When finally bought in (covered) the borrowed stocks are returned. If, in the interval between selling and buying, the stocks have declined, the trade is profitable; if there has been an advance it is unprofitable. See Short.

Settlement, The

The fortnightly settlement on the London Stock Exchange, which formerly lasted for three consecutive days, now takes four days, as the "carry-over" in mining shares begins the day before the ordinary "carry-over." According to the London custorn, payments and deliveries in stock transactions are made only twice a month instead of every day as is the case in New York.

Short

One who has sold a stock which he does not possess and has borrowed the stock for delivery to the buyer, is short of that stock. One who is short of several stocks is said to be short of the market. One who is short is a bear.

The object of selling short is, of course, to repurchase subsequently at a lower figure. The rules of the New York Stock Exchange enforce the completion of each transaction entered into "regular way" on the day following the transaction. Hence, the speculator who has sold short is forced to borrow the stock he has sold, but does not own and make actual delivery of it next day to the purchaser. This he accomplishes through his broker by paying the market value of the stock to the one from whom he borrowed it and then returning the borrowed stock to the lender when he has covered, or in other words, bought back the stock.

When a speculator is short of stock (has sold stock which he did not own) on which a dividend becomes due, he has to pay the amount of the dividend to the person from whom he borrowed the stock, to make delivery to the one to whom he sold the stock.

In speculation in grain, cotton, coffee and other commodities, contracts to receive and deliver the property are entered into the same as in stocks.

Sinking Fund

A fund to which are contributed amounts of money at specified times for the redemption of a debt. For instance, when a sinking fund is established for the redemption of an issue of bonds a certain amount of money is added to the fund each year (or at other stated intervals) until finally the fund amounts to enough to redeem (pay off) the bonds.

Sometimes the money paid into a sinking fund is invested in other bonds (or other securities), the interest payments (or dividends) received from which help to swell the sinking fund. It is not infrequently the case that a sinking fund is established to redeem drawn bonds.

Sinking Fund Bond

A bond, provision of the payment of the principal of which, is made by the creation of a sinking fund. See Sinking Fund.

Special Aid Bond

One of an issue in aid of some enterprise, as a railroad or manufacturing concern, which is expected to benefit the nation, state or municipality which issues the bonds.

Special Assessment Bond

One of an issue of municipal bonds payable, principal and interest, from special taxes levied upon particular property, for an improvement from which this property derives special benefit.