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Understanding the Current Market Value of a Security: A Legal Perspective
Definition & Meaning
The current market value of a security refers to the price at which a security can be bought or sold in the market at a given time. This value is determined by various factors, including the type of security and market conditions. For security futures, the current market value is calculated based on the daily settlement price multiplied by the number of shares or the contract multiplier, depending on whether the underlying instrument is a stock or a narrow-based security index. For other securities, it is typically the most recent closing sale price reported by a recognized quotation service. If no recent price is available, an estimate may be used.
Table of content
Legal Use & context
The term "current market value of a security" is commonly used in financial and legal contexts, particularly in areas such as securities regulation, investment management, and financial reporting. It is crucial for determining margin requirements, assessing the value of portfolios, and executing trades. Legal forms related to securities transactions often require accurate reporting of this value, allowing individuals and businesses to manage their investments effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A trader holds a security future for a stock that has a daily settlement price of $50. If the contract represents 100 shares, the current market value of the security future is $5,000 (50 x 100).
Example 2: An investor checks the closing price of a stock, which is $30. This price represents the current market value of that security for the day.
Relevant laws & statutes
Major regulations related to the current market value of securities can be found in the Commodity Exchange Act and the rules set forth by the Commodity Futures Trading Commission (CFTC). Specifically, 17 CFR 41.43 outlines the definitions and calculations for security futures.
Comparison with related terms
Term
Definition
Differences
Market Price
The price at which a security is currently trading in the market.
Current market value may include estimates when no recent price is available, while market price is strictly the latest transaction price.
Book Value
The value of an asset as recorded on the balance sheet.
Current market value reflects real-time trading conditions, while book value is based on historical costs.
Common misunderstandings
What to do if this term applies to you
If you need to determine the current market value of a security, start by checking reliable financial news sources or quotation services for the latest prices. If you're preparing legal documents or making investment decisions, consider using US Legal Forms' templates to ensure compliance and accuracy. If the situation is complex, consulting a financial advisor or legal professional may be beneficial.
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