Information signalling

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• ASBAThe mandatory payment mechanism for public and rights issues, in which your bank blocks the application money in your own account and debits it only if you actually get an allotment.
• Base Minimum CapitalThe deposit every trading member must keep with the exchange purely to meet contingencies — it earns the member no trading exposure at all, and its size depends on what kind of trading the member does.
• Book built issueA public issue in which the price is discovered from investor bids inside a price band, rather than fixed by the issuer in advance, with allotment made at the cut-off price.
• Debenture trusteeThe SEBI-registered trustee of the trust deed securing an issue of debentures — the debenture holders' agent, standing between them and the issuer for the life of the paper.
• MarginThe money a buyer or seller must deposit before a trade is allowed to stand, so that the clearing corporation is covered if they fail to bring in funds or to deliver securities.
• NovationThe clearing corporation stepping into the middle of every trade — becoming the buyer to every seller and the seller to every buyer — so that neither side carries the other's default risk.