Investors in the stock market have a really raw time. Financial jargon often seems to use different interchangeable terms for exactly the same thing - income, profits, earnings - which is which, what do you use, and where? Penetrating this lexicon is even more confusing when it comes to trading American shares. At Stockopedia we recently expanded our coverage to include US markets and as part of our Guide to Getting Started in US Shares, we did some jargon busting. Some of this may seem obvious, but here goes…
US market basics
The City vs Wall St - These terms shouldn’t really need to be introduced but they do act as general labels for anything related to financial markets on each side of the pond. As is typically the case with all things American, we need an entire British city to match a single US street! It’s not unusual to hear: “In the City the FTSE 100 closed down 25 points at…” or: “On Wall Street traders celebrated an unexpected interest rate cut by…”, but of course you knew that already.
Shares vs Stocks - In the UK, almost all terminology for equity ownership relates to the term share, whereas for some reason in the US it’s all about stocks. Where UK investors would refer to Ordinary Shares, Americans will refer to Common Stock. We have Shareholders, they have Stockholders. Share Prices vs Stock Quotes. You get the drift. Just to mix matters up a bit, the Brits trade shares on the London Stock Exchange, and in fact historically many government bonds were called stocks. We've even heard of a UK shares website called Stockopedia with some nifty StockRanks. Confusing eh?
Small vs Micro - Everything in America is bigger. The bagels are big, the burgers are huge and the stocks are enormous. As a result there’s a lot of inflation in how American’s classify their stocks. In the UK we consider small-caps to be anything under a market capitalisation of £350m, but in America anything under $1bn is thought of as a micro-cap. Paul Scott might find himself quite baffled! Here’s how the bands of stocks relate:
| Capitalisation Band | UK Terminology | US Terminology |
| Mega Cap | - | > $100bn+ |
| Large Cap | > £2bn (FTSE 100) | < $100bn |
| Mid Cap | < £2bn (FTSE 250) | < $10bn |
| Small Cap | < £350m | < $2.5bn |
| Micro Cap | < £20m | < $100m |
Directors vs Insiders - While insider trading is something that gets you jailed in the UK, in the US…
