Financial Terms related to Exchange

This document is part of the valuable contents

available at www.ftpall.com, a free online
glossary with more than five thousand financial
and business terms.

This document can be copied and distributed freely

Find thousands of financial terms at www.ftpall.com

respecting its original format. It is forbidden its
transcription, translation or change on its format
without authorization of its author or editor.

EXCHANGE
1035 exchange

• Is a transaction that permits the exchange of a life insurance contract for another
insurance contract or annuity. It can be with the same or different company. It is
important to research the specifics because some of the product exchanges only
work one way. For example, an annuity can not be exchanged for a life policy.

American stock exchange

• Abbreviated AMEX. A market located in New York City that handles approximately
one-fifth of all securities trades within the United States.

• Abbreviated AMEX. The second-largest stock exchange in the United States. It

trades mostly in small-to medium-sized companies.

Bill of exchange

• General term for a document demanding payment.

Chicago mercantile exchange

www.ftpall.com 2|Page

• Abbreviated CME. A not-for-profit corporation owned by its members. Its primary

functions are to provide a location for trading futures and options, collect and
disseminate market information, maintain a clearing mechanism and enforce trading
rules.

Commodities exchange center

• Abbreviated CEC. The location of five New York futures exchanges: Commodity
Exchange, Inc. (COMEX), the New York Mercantile exchange (NYMEX), the New
York Cotton Exchange, the Coffee, Sugar and Cocoa exchange (CSC), and the New

Find thousands of financial terms at www.ftpall.com

York futures exchange (NYFE). common size statement A statement in which all
items are expressed as a percentage of a base figure, useful for purposes of
analyzing trends and the changing relationship between financial statement items.
For example, all items in each year's income statement could be presented as a
percentage of net sales.

Convertible exchangeable preferred stock

• Convertible preferred stock that may be exchanged, at the issuer's option, into
convertible bonds that have the same conversion features as the convertible
preferred stock.

Exchange

• The marketplace in which shares, options and futures on stocks, bonds,

commodities and indices are traded. Principal US stock exchanges are: New York
Stock Exchange (NYSE), American Stock Exchange (AMEX) and the National
Association of Securities Dealers (NASDAQ)

• A market where stocks are bought and sold. For example: New York Stock
Exchange (NYSE), American Stock Exchange (AMEX), National Association of
Securities Dealers Automated Quotations Stock Market (NASDAQ), Over the
Counter (OTC).
www.ftpall.com 3|Page

Exchange controls

• Governmental restrictions on the purchase of foreign currencies by domestic

citizens or on the purchase of the local domestic currency by foreigners.

Exchange for physicals

• Is an ex-pit transaction whereby physical commodities or actual financial

instruments are exchanged for futures contracts. This flexible technique is permitted
for bona fide hedging transactions. This procedure allows for grades, quantities,
locations, and delivery dates which are different than those stipulated for good

Find thousands of financial terms at www.ftpall.com

delivery under the standard contract rules.

Exchange of assets

• Acquisition of another company by purchase of its assets in exchange for cash or

stock.

Exchange of stock

• Acquisition of another company by purchase of its stock in exchange for cash or

shares.

Exchange offer

• An offer by the firm to give one security, such as a bond or preferred stock, in
exchange for another security, such as shares of common stock.

Exchange rate

• The price of one country's currency expressed in another country's currency.

• The price at which one currency trades for another.

Exchange rate mechanism

• Abbreviated ERM. The methodology by which members of the EMS maintain their
currency exchange rates within an agreed upon range with respect to other member
countries.
www.ftpall.com 4|Page

Exchange rate risk

• Also called currency risk, the risk of an investment's value changing because of
currency exchange rates.

• a) The danger that an unexpected change in the exchange rate between the dollar
and the currency in which a project's cash flows are denominated can reduce the
market value of that project's cash flow; b) The risk caused by varying exchange
rates between two currencies.

Exchange rate risk capital budgeting

Find thousands of financial terms at www.ftpall.com

• Danger that an unexpected change in the exchange rate between the dollar and
the currency in which the project's cash flows are denominated can reduce the
market value of that project's cash flow.

Exchange risk

• The variability of a firm's value that results from unexpected exchange rate
changes or the extent to which the present value of a firm is expected to change as
a result of a given currency's appreciation or depreciation.

Exchange traded fund

• Abbreviated ETS. An open-ended Mutual Fund that can be continuously traded

throughout the day. ETFs attempt to replicate the changes of an index of a specific
financial market, so active management is unnecessary. See also: Index Fund.

Exchangeable security

• Security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.

Expectations theory of forward exchange rates

• A theory of foreign exchange rates that holds that the expected future spot foreign
exchange rate t periods in the future equals the current t-period forward exchange
www.ftpall.com 5|Page

rate.

Fixed exchange rate

• A country's decision to tie the value of its currency to another country's currency,
gold (or another commodity), or a basket of currencies.

Floating exchange rate

• A country's decision to allow its currency value to freely change. The currency is
not constrained by central bank intervention and does not have to maintain its

Find thousands of financial terms at www.ftpall.com

relationship with another currency in a narrow band. The currency value is
determined by trading in the foreign exchange market.

Foreign exchange

• Currency from another country.

• Refers to currencies other than the United States dollar. It also refers to
transactions, activities, and operations for trading, hedging, and investing in multiple
currencies.

Foreign exchange controls

• Various forms of controls imposed by a government on the purchase/sale of foreign

currencies by residents or on the purchase/sale of local currency by nonresidents.

Foreign exchange dealer

• A firm or individual that buys foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling
prices, or spread.

Foreign exchange fx risk

• The risk that a long or short position in a foreign currency might, due to an adverse
movement in the relevant exchange rate, have to be closed out at a loss. The long
or short position may arise out of a financial or commercial transaction.
www.ftpall.com 6|Page

Foreign exchange manager

• The manager responsible for monitoring and managing the firm's exposure to loss
from currency fluctuations.

Foreign exchange rate

• The value of two currencies with respect to each other.

• The price at which one currency trades for another.

Foreign exchange risk

Find thousands of financial terms at www.ftpall.com

• This refers to the possibility of losing money due to changes in exchange rates. Net
Foreign Exchange Exposure will create a FX risk even if the bank is perfectly
hedged with respect to duration, credit risk, etc.

• The risk that a long or short position in a foreign currency might have to be closed
out at a loss due to an adverse movement in the currency rates.

Foreign exchange swap

• An agreement to exchange stipulated amounts of one currency for another

currency at one or more future dates.

Forward exchange rate

• Exchange rate fixed today for exchanging currency at some future date.

• The rate of exchange between two currencies at some specified future date.

Gold exchange standard

• A system of fixing exchange rates adopted in the Bretton Woods agreement. It

involved the U.S. pegging the dollar to gold and other countries pegging their
currencies to the dollar.

Historical exchange rate

• An accounting term that refers to the exchange rate in effect when an asset or
www.ftpall.com 7|Page

liability was acquired.

London international financial futures exchange

• Abbreviated LIFFE. A London exchange where Eurodollar futures as well as

futures-style options are traded.

Membership or a seat on the exchange

• A limited number of exchange positions that enable the holder to trade for the
holder's own accounts and charge clients for the execution of trades for their

Find thousands of financial terms at www.ftpall.com

accounts.

New york stock exchange

• Abbreviated NYSE. Also known as the Big Board or The Exhange. More than 2,00
common and preferred stocks are traded. The exchange is the older in the United
States, founded in 1792, and the largest. It is located on Wall Street in New York
City

• The largest stock exchange in the United States. It is a corporation, operated by a

board of directors, and it is responsible for setting policy, supervising Exchange and
member activities, listing securities, overseeing the transfer of members' seats on
the Exchange, and judging whether an applicant is qualified to be a specialist.

Nominal exchange rate

• The actual foreign exchange quotation in contrast to the real exchange rate that
has been adjusted for changes in purchasing power.

Organized exchange

• A securities marketplace wherein purchasers and sellers regularly gather to trade

securities according to the formal rules adopted by the exchange.

Organized securities exchanges

• Tangible organizations that act as secondary markets in which outstanding

www.ftpall.com 8|Page

securities are resold.

Philadelphia stock exchange

• Abbreviated PHLX. A securities exchange where American and European foreign

currency options on spot exchange rates are traded.

Ratio of exchange

• The ratio of the amount paid per share of the target company to the per-share
market price of the acquiring firm.

Find thousands of financial terms at www.ftpall.com

Ratio of exchange in market price

• The ratio of the market price per share of the acquiring firm paid to each dollar of
market price per share of the target firm.

Real exchange rates

• Exchange rates that have been adjusted for the inflation differential between two
countries.

Securities and exchange commission

• A federal government agency comprised of five commissioners appointed by the

President and approved by the Senate. The SEC was established to protect the
individual investor from fraud and malpractice in the marketplace. The Commission
oversees and regulates the activities of registered investment advisers, stock and
bond markets, broker/dealers, and mutual funds.

• The federal regulatory body that governs the sale and listing of securities in the
United States. In Canada, securities regulation is a provincial responsibility.

• Abbreviated SEC. Commission created by Congress to regulate the securities

markets and protect investors. It is composed of five commissioners appointed by
the president of the United States and approved by the Senate. The SEC enforces,
among other acts, the Securities Act of 1933, the Securities Exchange Act of 1934,
www.ftpall.com 9|Page

the Trust Indenture Act of 1939, the Investment Company Act of 1940, and the
Investment Advisers Act of 1940. The statutes administered by the SEC are
designed to promote full public disclosure and protect the investing public against
fraudulent and manipulative practices in the securities markets. Generally, most
issues of securities offered in interstate commerce or through the mails must be
registered with the SEC.

• The SEC is a federal agency that regulates the U.S. financial markets.

Securities and exchange commission sec

Find thousands of financial terms at www.ftpall.com

• Agency created by Congress to protect investors in securities transactions by
administering securities legislation.

Securities exchange act of 1934

• Is the Federal Law which covers brokers and dealers (B/Ds) and secondary market
activities. This compares to the Securities Act of 1933 which focuses on new issues.

Securities exchanges

• The secondary marketplace that allows for the subsequent trading of financial
securities created in the primary market.

Simex singapore international monetary exchange

• A leading futures and options exchange in Singapore.

Spot exchange rate

• The rate of exchange between two currencies on any given day.

• Exchange rate on currency for immediate delivery. Related: forward exchange rate.

Stock exchange

• A formalized secondary market for financial securities that allows investors to buy
and sell preferred and common shares. For example the Toronto Stock Exchange
(TSX), NASDAQ, and New York Stock Exchange (NYSE).
www.ftpall.com 10 | P a g e

• Formal organizations, approved and regulated by the Securities and Exchange

Commission (SEC), that are made up of members that use the facilities to exchange
certain common stocks. The two major national stock exchanges are the New York
Stock Exchange (NYSE) and the American Stock Exchange (ASE or AMEX). Five
regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and
Cincinnati. The Arizona stock exchange is an after hours electronic marketplace
where anonymous participants trade stocks via personal computers.

The exchange

Find thousands of financial terms at www.ftpall.com

• A nickname for the New York stock exchange. Also known as the Big Board. More
than 2,000 common and preferred stocks are traded. The exchange is the oldest in
the United States, founded in 1792, and the largest. It is located on Wall Street in
New York City.