Capital Markets Glossary

Algorithmic execution is the use of rules-based software to work an order in the market over time, splitting it into smaller child orders to reduce market impact. Common strategies include VWAP, TWAP and percentage of volume (POV).

Anti-money laundering (AML) is the set of laws, controls and procedures that stop the financial system being used to disguise the proceeds of crime or to finance terrorism. It covers client screening, transaction monitoring and the reporting of suspicious activity.

An application programming interface (API) is a defined way for software systems to exchange data and instructions. Trading platforms expose APIs, commonly REST and WebSocket, for orders, positions, market data and account services.

The beneficial owner is the person or entity that enjoys the economic benefits of a security, such as dividends and price gains, even when it is registered in the name of a nominee or custodian.

Best execution is a broker's obligation to take sufficient steps to obtain the best possible result for a client order, considering price, costs, speed, likelihood of execution and settlement, and order size. Firms evidence it with an execution policy and regular monitoring of execution quality.

A call auction is a trading phase in which orders are collected for a period without matching and then executed together at the single price that maximises traded volume. Exchanges use auctions for the open, the close and to restart trading after a halt.

A capital call is a request from a private fund manager for investors to transfer part of the capital they have committed, to fund new investments or fees. Investors track commitments, calls and distributions to know their unfunded exposure.

The Capital Market Authority (CMA) is the securities regulator of Saudi Arabia, responsible for licensing market intermediaries, supervising the Saudi Exchange and protecting investors. Kuwait's securities regulator is also known as the Capital Markets Authority, and since 1 January 2026 the UAE's federal securities regulator has been the Capital Market Authority, successor to the SCA.

A central counterparty (CCP) is a clearing house that steps between the buyer and seller of a trade through novation, becoming the buyer to every seller and the seller to every buyer. It guarantees settlement and manages counterparty risk through margin and a default fund.

A central securities depository (CSD) is the institution that holds securities in book-entry form, maintains the register of ownership and settles transfers of securities between its participants. Most markets have one national CSD, such as Edaa in Saudi Arabia.

A circuit breaker is a market rule that pauses trading, or moves it into an auction, when prices move beyond set limits within a short time. It gives the market time to absorb information and prevents disorderly price swings.

A clearing member is a firm admitted to a clearing house or CCP that clears trades for its own account and, as a general clearing member, for other brokers and their clients. It posts margin to the CCP and contributes to its default fund.

Client classification sorts clients into regulatory categories, typically retail, professional and eligible counterparty, which set the level of protection, disclosure and product access each client receives. Clients are classified at onboarding and reviewed when their circumstances change.

A cold wallet stores the private keys that control digital assets offline, away from internet-connected systems, to protect holdings against hacking. Withdrawals from cold storage typically require several independent approvals.

Collateral is cash or securities pledged to secure an obligation, such as a margin loan, a securities loan or a repo. Its value is reduced by haircuts and monitored daily against the exposure it covers.

Continuous trading is the main session phase in which each incoming order is matched immediately against the order book whenever buy and sell prices cross. It contrasts with an auction, where orders are collected and executed together at one price.

Copy trading is a service in which a follower's account automatically replicates the trades of a selected lead trader or strategy, in proportion to the capital the follower allocates. Providers apply risk limits and suitability rules to every follower.

A corporate action is an event initiated by an issuer that affects its securities, such as a dividend, stock split, rights issue, bonus issue, merger or coupon payment. Custodians and brokers capture each event, calculate every holder's entitlement and update positions and cash.

A crypto exchange is a trading venue where clients buy and sell digital assets. It combines a matching engine, wallets and custody with client onboarding and transaction monitoring.

A custodian is a regulated institution that holds clients' securities and cash in safekeeping, settles their trades and services their assets. Global custodians reach many markets through a network of local sub-custodians.

A custody wallet is a digital-asset wallet operated by a custodian or platform on behalf of its clients, where the operator controls the private keys and records each client's holdings in its books. It lets institutions offer digital assets with the same controls as traditional custody.

Delivery versus payment (DVP) is a settlement method in which securities are delivered only if, and at the same time as, the matching cash payment is made. It removes principal risk, the risk that one side delivers and the other does not.

Direct market access (DMA) lets a client send orders straight to an exchange order book using a broker's membership and infrastructure, while the broker's pre-trade risk controls still apply. It gives institutional and active traders speed and control over order placement.

Discretionary portfolio management is a mandate in which a client authorises a manager to make investment decisions and trade on the client's behalf, within an agreed investment policy. It differs from an advisory mandate, where the client approves every decision.

A dividend is a distribution of a company's profits to its shareholders, paid in cash or in additional shares. Entitlement is fixed by the record date, and the share price usually adjusts on the ex-date.

Drift is the gradual deviation of a portfolio's actual weights from its target allocation as prices move and cash flows in or out. Rebalancing is triggered when drift exceeds an agreed tolerance.

A drop copy is a real-time duplicate of execution reports sent to a party other than the order sender, such as a risk desk, clearing firm or compliance team. It lets them monitor fills independently of the trading session.

The Dubai Financial Services Authority (DFSA) is the independent regulator of financial services conducted in or from the Dubai International Financial Centre (DIFC). It licenses and supervises firms, markets and funds in the DIFC.

Edaa, the Securities Depository Center, is the central securities depository of Saudi Arabia. It holds listed securities in book-entry form, maintains the ownership register, settles trades and processes corporate actions.

The ex-date is the first trading day on which a security trades without the right to an upcoming dividend or other entitlement. A buyer on or after the ex-date does not receive that entitlement.

An execution management system (EMS) is trading software focused on working orders in the market, with real-time market data, algorithms, smart order routing and transaction cost analysis. Traders use it to get orders filled at the best possible price.

A family office is a private organisation that manages the investments, wealth planning and administration of one family (a single-family office) or several (a multi-family office). It typically oversees listed portfolios, private investments and holding entities together.

The Financial Information eXchange (FIX) protocol is the industry-standard messaging protocol for electronic trading. Buy side, sell side and venues use it to send orders, receive executions and exchange allocations.

The Financial Services Regulatory Authority (FSRA) is the regulator of financial services in Abu Dhabi Global Market (ADGM), the international financial centre of Abu Dhabi. Its remit includes securities, funds and virtual assets activity in ADGM.

Forced liquidation is the sale of a client's positions by the broker when margin falls below a set threshold and a margin call has not been met. It brings the account back within limits and protects the lender from credit loss.

A foreign ownership limit is a cap on the share of a listed company that foreign investors may hold, in aggregate or individually. Brokers and custodians monitor the remaining headroom before accepting foreign buy orders.

Free of payment (FOP) is a settlement in which securities move without a simultaneous cash payment. It is used for portfolio transfers between custodians, collateral movements and in-kind subscriptions.

A haircut is the percentage reduction applied to the market value of an asset when it is used as collateral, reflecting its price volatility and liquidity. A 20% haircut means a holding worth 100 counts as 80 of collateral.

Initial margin is the collateral a client or clearing member must deposit to open a leveraged or derivatives position. It is sized to cover potential losses over the time needed to close the position out.

ISO 15022 is the securities messaging standard behind the SWIFT MT 5xx message series, used for settlement instructions, confirmations, statements and corporate action notices. It remains widely used in custody and settlement.

ISO 20022 is the global financial messaging standard built on structured, data-rich XML (MX) messages for payments, securities and trade services. Payments have moved to it, and securities settlement, custody and corporate actions messaging is following.

ITCH and OUCH are compact binary exchange protocols: ITCH-style feeds publish every order book event for full-depth market data, and OUCH-style interfaces let members enter and manage orders with very low latency. Many exchanges use protocols of this style alongside FIX.

Know your customer (KYC) is the process of verifying a client's identity, understanding their financial profile and source of funds, and assessing their risk before and throughout the relationship. KYC records are refreshed periodically and whenever a client's risk changes.

Know your transaction (KYT) is the real-time screening of digital-asset transfers using blockchain analytics, to flag funds linked to sanctioned addresses, fraud or other illicit activity. It extends AML monitoring to on-chain deposits and withdrawals.

Level 1 market data is the top of the order book: the best bid and offer with their sizes, the last trade price and volume, and daily statistics such as open, high, low and close.

Level 2 market data, also called market depth, shows several price levels of the order book with the total size at each level, and in some markets individual orders. Traders use it to judge liquidity beyond the best price.

A limit order is an instruction to buy or sell at a specified price or better. It guarantees the price but not execution, and rests in the order book until it is filled, cancelled or expires.

A liquidity provider is a firm that supplies buy and sell prices to a market or to a broker, such as a bank, market maker or electronic trading firm, so that clients can trade when they need to.

Look-through reporting shows an investor's exposure to the underlying holdings of funds, holding companies and other vehicles, rather than only the vehicles themselves. It reveals true concentration by issuer, sector, country and currency.

Maintenance margin is the minimum equity a client must keep in a margin account once a position is open. If equity falls below it, the broker issues a margin call.

Maker-checker, also called the four-eyes principle, requires one person to enter or change a record and a second authorised person to approve it before it takes effect. It guards against error and fraud in payments, limits, fees and client data.

A mandatory corporate action applies to every holder without a choice, such as a cash dividend or stock split, while a voluntary corporate action requires each holder to elect, such as a tender offer or rights subscription. Mandatory-with-options events apply a default unless the holder chooses an alternative.

A margin call is a demand from a broker or clearing house for a client to add cash or collateral, or reduce positions, because account equity has fallen below the required margin. If it is not met in time, positions can be liquidated.

Margin trading is buying securities with money borrowed from a broker, using the cash and securities in the account as collateral. It amplifies both gains and losses, so brokers apply margin requirements and monitor positions continuously.

A market data feed is the real-time stream of prices, quotes, trades and reference data published by exchanges and data vendors. Trading screens, algorithms and risk systems all consume it.

A market maker is a firm that continuously quotes both buy and sell prices in a security, often under an agreement with the exchange that sets maximum spreads and minimum quote sizes. Its quotes keep the market liquid for other participants.

A market order is an instruction to buy or sell immediately at the best available price. It prioritises certainty of execution over price, so the fill can differ from the last quoted price in fast or thin markets.

Market surveillance is the monitoring of orders and trades to detect abusive or manipulative behaviour such as spoofing, layering, wash trades and insider dealing. Exchanges also use it to check that market makers meet their quoting obligations.

A matching engine is the core exchange software that receives orders, maintains the order book and pairs buy and sell orders according to the venue's priority rules, usually price first and then time. It also runs the auction and session phases of the trading day.

A model portfolio is a target set of holdings and weights that a manager maintains centrally and applies to many client accounts. Each linked account can then be rebalanced to the same strategy in one step.

Money-weighted return (MWR) measures the return an investor actually earned, taking into account the timing and size of contributions and withdrawals. It is the portfolio's internal rate of return (IRR).

A multi-tenant platform serves many client institutions from one shared software deployment, with each tenant's data, configuration and branding kept separate. Every tenant benefits from the same upgrades at once.

Muqassa, the Securities Clearing Center, is the central counterparty for the Saudi capital market. It novates trades executed on the Saudi Exchange, guarantees their settlement and calculates the net obligations of clearing members.

Murabaha is a Shariah-compliant cost-plus sale in which a financier buys an asset and sells it to the customer at a disclosed mark-up, usually with deferred payment. It replaces an interest-bearing loan with a trade contract.

Net asset value (NAV) is the value of a fund's or portfolio's assets minus its liabilities. For a fund, NAV per unit is that value divided by the units in issue, and it is the price at which investors subscribe and redeem.

Netting offsets buy and sell obligations between parties so that only the net quantity of securities and the net amount of cash are settled. Multilateral netting through a CCP greatly reduces the number and value of settlements.

A nominee is a party, often a custodian or a broker's nominee company, registered as the legal holder of securities on behalf of the beneficial owners. Nominee holding simplifies settlement and asset servicing.

An omnibus account holds the assets of many clients pooled in a single account in the intermediary's name at the depository or sub-custodian. The intermediary keeps the breakdown by client in its own books.

An order and execution management system (OEMS) combines an OMS and an EMS in one application, so portfolio decisions, compliance checks, order routing and execution share one data set and one workflow.

An order book is the live list of buy and sell orders for a security, organised by price level. It shows market depth and is what the matching engine uses to execute trades.

An order management system (OMS) is the system of record for orders across their lifecycle, from creation and pre-trade compliance to routing, allocation and post-trade booking. Brokers, banks and asset managers use it to control who can trade what and to keep a full audit trail.

A pre-trade risk check validates an order against limits before it reaches the market, such as buying power, order size, price collars, position and concentration limits, and restricted lists. Orders that breach a limit are rejected or routed for approval.

A price band, or price limit, is the range around a reference price within which orders are accepted and trades can execute. Static bands are fixed for the session, while dynamic bands move with the last traded price.

Prime brokerage is a bundle of services a bank or broker provides to hedge funds and other professional investors: financing, securities lending for short sales, clearing and settlement, custody and consolidated reporting.

A Qualified Foreign Investor (QFI) was a foreign institution registered with Saudi Arabia's Capital Market Authority to invest directly in listed Saudi securities, under a framework that ran from 2015 to January 2026. Since 1 February 2026, foreign investors of all categories can invest directly in the Saudi Main Market without QFI qualification.

Rebalancing is the buying and selling needed to bring a portfolio back to its target allocation or model. It can run on a calendar schedule or whenever drift breaches a set threshold.

Reconciliation is the regular matching of a firm's internal records of cash and securities against external sources such as custodians, depositories, banks and counterparties, followed by investigation of any breaks. It confirms that client positions and the books agree.

The record date is the date on which an issuer checks its register to decide which holders receive a corporate action entitlement. The ex-date is set relative to it according to the market's settlement cycle.

Regulatory reporting is the periodic and event-driven submission of data to regulators and tax authorities, such as transaction reports, capital and liquidity returns, client asset reports and FATCA and CRS filings. Accurate reporting depends on clean trade, client and position data.

A repurchase agreement (repo) is a short-term secured loan in which one party sells securities and agrees to buy them back at a set price on a later date. The price difference is the interest, known as the repo rate.

A reverse repo is the other side of a repo: one party buys securities and agrees to sell them back later at a set price, in effect lending cash against collateral. Investors use it to earn a secured return on surplus cash.

Riba is the Arabic term for interest, or any predetermined excess on a loan, which is prohibited under Shariah. Islamic financial products are structured around trade, leasing or partnership instead.

A routing destination is any venue or counterparty an order can be sent to, such as an exchange, broker, market maker or liquidity pool, typically connected over FIX.

The Saudi Central Bank (SAMA) is Saudi Arabia's central bank, responsible for monetary policy and for supervising banks, insurers and finance companies. Securities business in the Kingdom is regulated separately by the Capital Market Authority.

The Securities and Commodities Authority (SCA) was the UAE's federal regulator for securities and commodities markets outside the financial free zones. Since 1 January 2026 its role has passed to the UAE Capital Market Authority (CMA), which supervises the onshore listed markets of Abu Dhabi and Dubai and the firms that serve them.

Securities lending is the temporary transfer of securities from a lender to a borrower against collateral and a fee, with the borrower obliged to return equivalent securities. Borrowers use it to cover short sales and settlement shortfalls, and lenders earn extra income on their holdings.

A segregated account holds a single client's assets separately, in an account in that client's name or designation at the depository or custodian. It gives the clearest view of ownership and strong protection, at a higher operating cost than an omnibus account.

The settlement cycle, written as T+1 or T+2, is the number of business days after the trade date (T) on which securities and cash change hands. Several major markets have moved equities to T+1, while T+2 remains standard in many others.

Shariah screening tests securities against Islamic principles, excluding companies whose core business is impermissible and those that exceed financial-ratio limits on debt, interest income and cash. The screening rules are set and overseen by a Shariah board.

A Shariah supervisory board is a panel of Islamic scholars that reviews and approves an institution's products, contracts and screening rules, and issues rulings on their compliance. Its approvals are reviewed periodically as products and markets change.

Smart order routing (SOR) automatically decides where to send an order, or how to split it across venues, based on price, liquidity, cost and speed. It helps firms achieve best execution in fragmented markets.

Software as a service (SaaS) delivers software over the internet as a hosted subscription, with the provider running the infrastructure, upgrades and monitoring. Institutions can also choose private cloud or on-premise deployment where regulation requires it.

A stablecoin is a digital token designed to hold a stable value, usually by being backed one-for-one by a fiat currency or by high-quality reserve assets. It is widely used to move value between digital-asset platforms.

Straight-through processing (STP) is the automated flow of a trade from order capture through settlement and accounting without manual re-keying. Higher STP rates mean fewer errors and lower operating cost.

A sub-custodian is a local custodian appointed by a global custodian or broker to hold assets and settle trades in a specific market. It connects directly to that market's depository and handles local asset servicing.

Suitability is the requirement that a recommended product or portfolio matches the client's objectives, financial situation, knowledge, experience and risk tolerance. Firms assess it at onboarding and before advice or discretionary decisions.

Sukuk are Shariah-compliant investment certificates that give holders an undivided ownership interest in underlying assets or projects, with returns paid as profit or rent instead of interest. They are often described as Islamic bonds.

Swap-based access gives a foreign investor the economic return of local shares through a total return swap with a local broker or bank that holds the underlying position, without the investor holding legal title. It was a common route into markets with restrictions on direct foreign investment.

SWIFT MT messages are the fixed-format financial messages exchanged over the SWIFT network; the MT 5xx series covers securities, such as MT540 to MT543 settlement instructions, MT535 holdings statements and MT564 corporate action notices.

SWIFT MX messages are the XML-based ISO 20022 messages exchanged over SWIFT, carrying richer and more structured data than MT messages. They are the successor format for payments and, progressively, for securities messaging.

Tabadul Hub is a digital exchange hub built on mutual market access, connecting regional exchanges so investors can reach several markets through a single point of access. It was launched in 2022 by Abu Dhabi Securities Exchange (ADX).

Tadawul, the Saudi Exchange, operates Saudi Arabia's equities, debt and derivatives markets, including the Main Market and the Nomu Parallel Market. Trades executed on it clear through Muqassa and settle through Edaa.

Tawarruq is a Shariah-compliant financing structure in which a customer buys a commodity from a financier on deferred payment and then sells it to a third party for immediate cash. It is widely used for Islamic margin financing and liquidity management.

Time in force is an order instruction that sets how long an order stays active, for example Day, Good-Till-Cancelled (GTC), Immediate-or-Cancel (IOC) or Fill-or-Kill (FOK).

Time-weighted return (TWR) measures a portfolio's performance independently of the timing and size of external cash flows, by chaining the returns of the sub-periods between flows. It is the standard measure for comparing investment managers.

Tokenization is the representation of ownership of a real-world or financial asset, such as a bond, fund unit or property, as a digital token on a blockchain. It can make issuance, transfer and fractional ownership faster and more efficient.

TWAP (time-weighted average price) is an execution algorithm that releases an order in even slices over a set period, aiming to achieve the average price over that time. It suits orders where steady participation matters more than following volume.

The Virtual Assets Regulatory Authority (VARA) is the Dubai regulator that licenses and supervises virtual asset service providers operating in Dubai outside the DIFC.

VWAP (volume-weighted average price) is the average price of a security over a period, weighted by the volume traded at each price. A VWAP algorithm schedules an order in line with expected trading volume to achieve a price close to the market VWAP.

A white-label platform is technology built by one provider and offered by another firm under its own brand, such as a broker's web and mobile trading apps. The firm controls branding, configuration and the client relationship.