Banking Terms - Set 1 (TPPA, Bond, Proxy Voting, Dutch Auction, Share Premium)

Share Premium

This corporate event pays shareholders an amount in cash/issue bonus shares to the shareholders, from the shares premium reserve. Share Premium is what the company gains, when it sells its shares at a price higher than the face value of the same [Company having a history of good financial performance may sell its shares at a higher price].

E.g. If a company sells its share whose face value is $1 at a price of $2, the company earns a share premium of $1 per share.

Dutch Auction

An action by a party wishing to acquire a security. Holders of the security are invited to make an offer to sell, within a specific price range. The acquiring party will buy from the holder with lowest offer.

E.g. An investor places a bid for 50 shares at $50 while another investor offers at $45 etc... Once all the bids are submitted, units that are going to be sold will be allotted to the bidders from the highest bids down. But, each bidder will pay the lowest price of all the allotted bids (i.e.) even the investor who has placed a bid for $50 for 50 shares will end up paying only $40, considering that as the last successful bid.

Proxy Voting

Every publicly traded company has an annual general meeting where management presents several decisions that need shareholder approval. The approval is given by means of voting for or against each decision. Shareholders may attend the meeting in person or vote by proxy - electronically or by mail via their brokers and custodian.
Issues covered in a proxy statement can include proposals for new additions to the board of directors, information on bonus and any declarations made by company management etc.

Bond

A bond is a debt instrument requiring the issuer (also called the debtor or borrower) to repay to the lender/investor, the amount borrowed plus interest (coupons) over a specified period of time.
Usually, it’s of three types: Short term[1-5 yrs.], Medium term [5-12 yrs.] & Long term [> than 12 yrs.]

E.g. A company as a means to raise funds for its needs, will issue bonds with certain face value and buy money from the lenders [third party who are buying those bonds] which will be repaid to the bondholders during maturity/call-back.

Third Party Payment Aggregators (TPPA) or Merchant Aggregators

Merchant Aggregators or Payment Aggregators are service providers through which e-commerce merchants can process their payment transactions. Aggregators allow merchants to accept credit card and bank transfers without having to setup a merchant account with a bank or card association. The merchant is paid by the aggregator. Payment aggregators typically hold consumer credit card information to allow for faster purchases or hold money in an account to allow for future purchases. Firms such as PayPal, Google Checkout and Amazon Payments are examples of Payment Aggregators.