MARKET STRUCTURE DICTIONARY

dabbling  Trading lightly, as in I've been dabbling in ZVZZT for a while now, but now I'm thinking about loading up.

daily high  The highest trade price recorded on a particular day.

daily low  The lowest trade price recorded on a particular day.

daisy chain  Old industry slang meaning create the illusion of activity in a stock through fictitious trading or washed sales in order to generate speculative interest and artificially inflate the price. 

dark liquidity  Firm orders hidden from the view of other market participants but available for execution.  Examples would include a HIDDEN RESERVE ORDER or an order held in a DARK POOL. 

dark pool  A type of ALTERNATIVE TRADING SYSTEM where members post liquidity that is essentially hidden from the marketplace and unavailable to non-members.  Such liquidity is not displayed in any order book and is therefore not reflected in the NBBO. 

dark pool aggregator  A computer system that links various independent dark pools in order to theoretically offer greater liquidity to potential customers.

dark reserve order  An electronic limit order that does not display any size and is not visible to other market participants. 

dark trading  Using dark pools as the primary trade execution tool.  Implies secretiveness.

dash (---)  A dash is often used as a written abbreviation for at the market.

day around order  An instruction to cancel and replace an unexecuted day order with a new day order that contains some alteration to the original order (normally a change in price).  For example, XYZ, day around buy 25,000 at $50.25 cans $50.

day order  An order that expires at the end of the regular trading session if it has not been executed.  All orders are automatically considered day orders unless indicated otherwise. 

day trade  A type of trade where a position is established and closed the same day. 

day trader  A retail trader who trades very actively for his own account.  Individual positions are generally held for very short periods of time. 

days to cover  One method of measuring the relative size of the overall short position in a stock.  Derived by dividing the current short interest by the average daily volume.  The result is the average number of days it would take to bring the short interest to zero if short covering accounted for 100% of the trading volume.

dead  Quiet and slow, as in The market hasn't been this dead since 1975.

dead cat bounce  Industry slang for a brief minor move higher during a bear market.  For example, I wouldn't chase XYZ. It looks like an old fashioned dead cat bounce to me.

dead duck  An archaic slang term for a ruined speculator. 

dead money  A stock or an investment with a relatively small chance for appreciation in the short to medium term.  For example, Forget about ZVZZT.  It's going to be dead money until they can somehow get the stock relisted on NASDAQ.

deadwood  Industry lingo for a stock that has underperformed and appears set to continue in its underperformance.  For example, We've got to get some of this deadwood out of the portfolio before year end.

dealer  An individual/firm who stands ready to trade from his/its own account as principal.  In contrast to a BROKER. 

dealer market  A market dominated by dealers acting as principal rather than by brokers acting as agent.  Dealers post most of the quotes and arrange most of the trades.  The over-the counter market is predominantly a dealer market.  Sometimes referred to as a QUOTE DRIVEN MARKET.  In contrast to an AUCTION MARKET.

dealer spread  1.  The difference between the bid price and the offer price quoted by a dealer.  2.  See MARKUP and MARKDOWN. 

dealing desk  Equivalent of a trading desk, but often refers specifically to a foreign exchange trading desk. 

deceptive trading strategies  Strategies employed by large traders to confuse other traders who are trying to discover their true trading intentions.  See also DEFENSIVE TRADING STRATEGIES.

decimal trading  Quoting and trading stocks in decimals instead of fractions.  For example, XYZ is $50.15 bid, offered at $50.20 or Buy 25,000 ZVZZT at $25.05.  See also FRACTIONAL TRADING.

decimalization  The process of changing the method of pricing securities in a given market from fractions to decimals.  Occurred in the U.S. equity markets in 2001.

decision price  The market price at the time a portfolio manager determines he wishes to trade.  Used in implementation shortfall analysis. 

decline  A drop in price.  For example, This stock has declined every single day since I bought it.  Much more of this, and I may be looking for a new job.  Opposite of ADVANCE.

deep market  A market in which traders can buy or sell a substantial quantity of stock without significantly affecting the market price. 

defensive liquidity supplier  A trader who uses exposed information about trading intentions to avoid getting run over by large traders.

defensive trading strategies  Strategies employed by large traders to minimize the negative impact of order exposure.  See EVASIVE TRADING STRATEGIES, DECEPTIVE TRADING STRATEGIES, and OFFENSIVE TRADING STRATEGIES.

delayed  Describes non-current quotes or news.

delayed delivery  The prearranged delivery of securities after the normal settlement date. 

delayed opening  An intentional postponement of the start of trading for a particular stock on a particular day.  Usually due to a significant news event and/or an order imbalance.  For example, It looks like its going to be a delayed opening in XYZ.  I'll come back to you with a look as soon as I get one.

delayed settlement  The settlement of a trade after the normal settlement date.

delete  To remove a stock from trading on an organized exchange. 

delist  To remove a stock from trading on an organized exchange. 

delivery  The transfer of the ownership rights of a security from one party to another.

delivery versus payment  The simultaneous delivery of stock in exchange for an asset.  Payment is usually in the form of money.  See also DELIVERY VERSUS RECEIPT.

delivery versus receipt  The simultaneous delivery of stock in exchange for a receipt.  See also DELIVERY VERSUS PAYMENT.

delta (of an option)  An general, a measure of the sensitivity of the value of an option to a change in the price of the underlying asset.  More specifically, a mathematical estimate of the change in value of the premium of an option given a $1 change in price of the underlying asset.  Long calls = positive delta.  Long puts = negative delta.  Short puts = positive delta, short calls = negative delta.

delta one  A term used to describe linear (non-option) derivative products where changes in the value of the underlying assets results in a proportional (or nearly proportional) change in value for the derivative.  Examples include equity return swaps, forward contracts, futures contracts, and exchange traded funds (ETFs).

delta one trading desk  The upstairs trading operation of a bank or broker/dealer that focuses on trading delta one products.  Generally, such desks tend to act as an OTC  block dealer in linear (non-option) derivative products for institutional clients (e.g. equity return swaps against a basket), then seek to generate arbitrage profits in the process of hedging the position.  

demand liquidity  An expressed desire to trade quickly. One who demands liquidity will hit bids and take offers. 

demutualizaion  The process of conversion from a membership organization to a corporation.  All major exchanges have demutualized in recent years.  

Denver Stock Exchange  A regional exchange located in Denver, Colorado.  Closed in 1936. 

departure price order  An order that utilizes an algorithmic trading strategy in an attempt to optimize the trading curve between the arrival time and the completion time.

depository  1.  A centralized location where stock certificates are placed and stored.  2.  A financial institution that issues American depository receipts on behalf of a foreign corporation.

Depository Trust and Clearing Corporation (DTCC)  The world's largest post trade financial services company.  DTCC is a holding company that provides securities clearance, settlement, and custody services through its subsidiaries.  It was created in 1999 primarily to combine the operations of its two largest subsidiaries, the Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC).  DTCC is co-owned by various exchanges, banks, and brokerage houses.

Depository Trust Company (DTC)  The world's largest central securities depository.  DTC was created in 1973 to improve efficiencies in settlement by immobilizing physical stock certificates, executing book entry deliveries, recording book entry pledges of securities, and processing income distributions.  Shares deposited at DTC are held in the nominee name Cede & Co.  DTC is owned by the Depository Trust and Clearing Corporation (DTCC).

depressed market  A market in which the supply of stock for sale far exceeds the demand for stock.  Results in a weakening of prices. 

depressed price  Describes the price of a stock that is perceived to be relatively undervalued due to depressed market conditions.

depth  The extent to which shares can be bought or sold without significantly affecting the market price.

depth of market  The ability of a market to absorb trades of substantial size without significantly affecting the market price.

derivative contracts  Financial instruments that derive their value from the values of underlying instruments.  Contractural agreements between two or more parties that specify an exchange of benefits and liabilities based on the values and fluctuations of underlying instruments.  Examples include FORWARD CONTRACTS, FUTRUES CONTRACTS, OPTIONS, and SWAPS.  

designated market maker (DMM)  Successor to the specialist on the New York Stock Exchange and the American Stock Exchange (NYSE MKT).  DMMs are required to maintain a fair and orderly market in their assigned stocks, facilitate price discovery, match incoming orders, and provide price improvement when possible. 

Designated Order Turnaround system (DOT)  A computerized system launched in 1976 that was designed to electronically route smaller orders to the floor of the New York Stock Exchange.  Was supplanted by SuperDOT in 1984.  

desk, trading  See trading desk.

desk trader  A trader who is restricted to processing customer orders only.  Does not have access to the firm's proprietary accounts. 

Detroit Stock Exchange  A regional stock exchanged founded in 1907 in Detroit, Michigan.  Closed in 1976. 

dicker  To bargain or haggle over price or terms.  For example, I'm not going to dicker with you in ZVZZT.  I'll pay you $25.10 for 10,000 immediate, but that's it.

differential  Historically, the charge added by dealers to customer odd lot trades. 

digested stock  Stock purchased by long term investors, as in Since XYZ looks like it is fully digested, I bet it works higher from here.

digits deleted  A designation from an exchange tape indicating that one or more digits has been removed from quotes and reported trades due to tape delay. 

dip  A temporary drop in price.  Often follows a prolonged uptrend.  For example, I wouldn't worry too much about this dip in ZVZZT.  I bet it bounces nicely after they report earnings.

direct access broker  A broker that provides DIRECT MARKET ACCESS (DMA).

direct access trading  A type of trading provided by direct access brokers in which professional trading customers use electronic trading systems to connect directly with the various market centers.  See DIRECT MARKET ACCESS (DMA).

Direct Edge  An electronic communications network originally founded in 1998 as the Attain ECN.  It was acquired by Knight Capital in 2005 and rebranded as Direct Edge.  Became an official electronic exchange in 2010.  Subsequently controlled by a consortium of investment firms, operating two exchanges - the EDGA Exchange and the EDGX Exchange.  Merged with the BATS Exchange in 2013.

direct market access (DMA)  A general term for electronic trading systems that allow buy side firms and professional traders to interact directly with the various market centers.  Under a DMA arrangement, broker/dealers that possess a membership on a particular trading venue offer the use of that membership to DMA customers.  This allows DMA customers bypass traditional broker/dealer trading desks, use their own trading systems, and ultimately have greater control over their own orders. 

directed order  An order that contains specific instructions concerning the routing destination.  For example, XYZ, sell 15,000 at $50.25, and I want it all on the floor.

dirty stock  A stock that fails to meet the requirements for GOOD DELIVERY.

discretion  Latitude granted to a trader to use his own personal judgment while executing an order, as in Buy 50,000 XYZ at $50.00 with $0.10 discretion.  See also NOT HELD ORDER.

discretionary order  1.  An order that grants the trader the authority to use his own personal judgment while executing the order.  See also NOT HELD ORDER.  2.  An electronic order that displays a limit of one price but will also source liquidity at a higher price (buy order) or lower price (sell order) if it becomes available.

discretionary trading  Incorporating personal judgment into the trading process. Discretionary traders may use fundamental or technical analysis to uncover trading opportunities, but rely on intuition and experience when deciding how and when and to trade.  As opposed to SYSTEMATIC TRADING.

discretionary pool  Historically, a formally organized fund in which the pool manager had the freedom to trade as he saw fit.  Similar to a BLIND POOL.

disorderly market  An excessively volatile market.  Often caused by significant order imbalances.

display book  An order management tool used by exchanges to organize, record, display, and execute limit orders. 

display instructions  Customer instructions that specify how an execution trader should display unexecuted portions of a limit order.  For example, ZVZZT, work 25,000 to buy with an ultimate $25.60 top.  You can be in the machines, but don't show more than a couple hundred shares at a time.

display precedence  A rule in many market centers that gives displayed orders precedence over undisclosed orders at the same price.  See also PRECEDENCE.

displayed order  An order that can be viewed by other market participants. 

disregard tape (DRT)  A somewhat archaic term meaning not held.

distress selling  1.  The enforced liquidation of a position due to a failure to maintain sufficient equity in a margin account.  2.  Selling under duress without particular regard to price. 

distributed access market  A general term for a market in which traders arrange trades from their own offices using telephones or electronic trading systems.  An over-the-counter market. 

distribution  The gradual (and quiet) sale of a large long position.  The goal is the minimization of price disruption.  Opposite of ACCUMULATION. 

distribution stock  The relatively small amount of stock that is sold at any given time during the distribution of a larger block. 

DK  An abbreviation of don't know the trade. 

DMM  An abbreviation of designated market maker. 

DNI order  An abbreviation of do not increase order.

DNR order  An abbreviation of do not reduce order.

DNS order  An abbreviation of do not ship order.

do a job  A request to execute an order with particular care.  For example, ZVZZT, buy 25,000 tight.  It’s a new customer, so do a job please.

do not increase order (DNI Order)  A good 'til cancelled buy limit order, sell stop order, or sell stop limit order that specifically instructs the trader not to increase the number of shares bought (or sold) in the event of a stock dividend or stock split.  For example, Open Buy 10,000 XYZ at $50, do not increase.

do not reduce order (DNR order)  A good 'til cancelled buy limit order, sell stop order, or sell stop limit order that specifically instructs the trader not to decrease the limit price by the amount of an ordinary cash dividend on the ex-dividend date.  For example, Open sell 5000 XYZ at $50, stop limit, do not reduce.

do not ship order (DNS order)  An order that must be executed only in the trading venue to which it is sent.  The order is not to be routed away to obtain an execution.

doghouse  The home of out of favor stocks.  For example, ZVZZT used to be such a great trader back in the day.  How did it end up in the doghouse?

done  1.  Describes a filled buy order or a completed sell order, as in XYZ, you are done on 50,000.  2.  An abbreviation of done that way.

done for day  An official report sent to a customer that indicates there will be no more partial executions forthcoming on a particular order.  Everything that will be done that day on that order has been reported.

done that way  Trader's lingo meaning "I accept your proposition."  For example, John at Morgan might state, ZVZZT, I can pay $25 for 50,000.  Bill at Monty could respond, Done that way to indicate that he has indeed sold all 50,000 shares of ZVZZT to John at $25.

done your way  A synonym for done that way.

don't fight the tape  A phrase that advises speculators not to trade against the prevailing trend.  For example, Joe, this XYZ position is killing me.  I'm thinking about doubling down. --- Jim, let me remind you one more time that you are supposed to be a trader not an investor, so don’t fight the tape.

don't know (DK)  1.  An industry expression used to indicate ex post disagreement about the terms of a trade.  This disagreement can range from a minor trade break to an outright disavowal of a legitimate trade.  For example, You guys are coming in to us on a buy of 25,000 XYZ at $50.  We DK that trade.  Whose name do you have on the ticket again?   2.  An unresolved trade break.

dope  A slang term for an unsophisticated trader.  For example, I told Jim not to trust the desk analyst over at Bear.  The guy is a dope … he just doesn’t get it.

DOT  An abbreviation of Designated Order Turnaround system. 

double auction market  A type of AUCTION MARKET characterized by the interaction of brokers who control orders from multiple sellers as well as from multiple buyers.   Such markets often employ the services of auctioneers known as specialists (or Designated Market Makers).  The New York Stock Exchange has historically been one of the most prominent examples of a double auction market.

double up  To increase the size of a position by 100% as the position moves against the trader, as in If I double up on my ZVZZT position right here, I can get my average down to $25.50.

double witching day  A day on which a double witching hour occurs.

double witching hour  The last hour of the official trading session on the major stock exchanges on a day when two classes of stock futures and stock option contracts expire simultaneously.

down  Indicates a value that is lower in one time period than it was in a prior time period.  For example, The Dow was down for the third straight day today which may lead to some bargain hunting tomorrow.

down market  A market trending lower. 

downside risk  The chance that a commitment will move against the trader, as in The stock seems so washed out, what really is your downside risk?

downtick  A price that is lower than the price of the previous trade. 

downtrend  A stock or a market that exhibits net declining prices, as in If this downtrend continues, we'll likely start seeing some individual investors exit the market.

draw  A regular payment made by a broker/dealer to a trader/employee that is then deducted from the trader's share of the commissions/trading profits.

dried up  Come to a halt.  For example, Volume in ZVZZT has completely dried up.  It’s going to be tough building a position at this rate.

drill bit stock  Industry slang for a stock that trades for less than $1.00.  The fractional stock prices are similar to fractional drill bit sizes.  For example, After Monty gets done hammering ZVZZT, we'll be lucky if it isn't a drill bit stock.

drive  Vigorously work to force prices higher or lower, as in Window dressing will likely drive prices higher heading into year end.

driving the bus  Describes the actions of a customer who is the most proactive in establishing the terms of a multi party (block) trade.  This power may be derived from relative size or from level of aggressiveness.  For example, Look, I'll go along with whatever your other ZVZZT buyer is doing.  He's the one really driving the bus here, not me.

drop  1.  A decline in price, as in The market dropped fifty points today.   2.  To discontinue making a market in a stock, as in If ZVZZT continues to trade below $5, we're probably going to have to drop the stock.

DRT  An abbreviation for disregard tape.

dry powder  Trader's jargon for cash held in reserve in order to take advantage of more favorable future prices.  For example, ZVZZT, let's put the order back on the shelf for now.  I want to keep some dry powder for the close.  See also BULLETS.

DTC  An abbreviation of Depository Trust Company.

DTCC  An abbreviation of Depository Trust and Clearing Corporation.

dual listing  A stock that has been admitted to dealings on more than one exchange. 

dual trader  Another term for broker/dealer.

dull market  A quiet market, as in The gurus always say,’ Never short a dull market’.

dump  1.  To aggressively sell a stock at the market, regardless of the effect on price.  For example, I am sick of watching this stock go down every day.  Just dump it.  2.  To sell a stock very quickly, usually in large quantities.  For example, Word on the Street is that a large Boston account just dumped their XYZ position.

dupe  An abbreviation of “duplicate.”  For example, ZVZZT, take an order to buy 50,000 with a $25 top.  If Joe already called it in, it should only be one order ... don't want to dupe it.

DVP  An abbreviation for delivery versus payment.

DVR  An abbreviation for delivery versus receipt.

dynamic hedging  In general, a hedging strategy in which risks associated with non-linear derivative positions (e.g. options) are mitigated by routinely adjusting hedges (in the underlying asset) as the price of the underlying asset changes.  More specifically, volatility (options) dealers often run an unbalanced book, holding more short option positions in inventory than long options positions due to client supply/demand disequilibrium.  Instead of attempting to balance their book with long options, volatility dealers will hedge risks by positioning the underlying asset and routinely adjust those hedges as the price of the underlying asset changes.  

dynamic market monitoring device  Any INTERROGATION DEVICE that provides real time quotes and trade data.