Guide to Analysing Companies

part of euronext (which owns several exchanges), are likely
to dominate the derivatives business internationally, partly
F
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FUNGIBLE
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by establishing electronic platforms which form the basis of a
market.
Futures commission merchant
A person or company authorised to buy and sell futures or
options in the United States. Those filling this role must be li-
censed by the commodity futures trading commis-
sion. The job of a futures commission merchant (fcm) is
similar to that of a broker in the securities markets. As well
as accepting orders to buy and sell futures, an fcm can hold a
client’s money or securities in a margin account. Some
firms may be authorised to deal on a client’s behalf in both the
cash and futures markets.
F
FUTURES COMMISSION MERCHANT
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Gg
Gearing
The indebtedness of a company expressed as a percentage of its
equity capital, referred to in the United States as leverage. A
highly leveraged company is one with a lot of borrowings com-
pared with its equity. The more long-term debt that a company
has, the greater is the financial gearing. Shareholders benefit to
the extent that the return on the borrowed money exceeds
the interest cost. In theory, the shares should rise corre-
spondingly in value. (See also leveraged buy-out.)
General policy
An insurance policy that gets around a trader’s need to insure
each shipment separately. The trader and the insurer agree in
advance on cover up to a certain ceiling. The trader then merely
advises the insurer of the nature and value of shipments as and
when they are made and until (in total) they reach the ceiling. 
Gilts
Short for gilt-edged security, so called because the original
certificates for UK government bonds had gilded edges and
were literally as good as gold. Like Treasury securities in the
United States, gilts are regarded as having no risk of default.
They are therefore used as a benchmark against which the
yields, or interest rates, of other, riskier bonds are set. Gilts,
like Treasuries, have a variety of maturities depending on the
borrowing needs of the government of the day. Gilt futures
(that is, futures contracts based on UK government bonds) are
traded on euronext.liffe. corporate bonds with a high
credit rating (that is, with little likelihood of default) are
sometimes described as gilt-edged securities; stocks of a
similar or better standing are usually referred to as blue chips.
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