rate The price of one country's currency expressed in another country's currency. Exchange Rate Mechanism (ERM) The methodology by which members of the EMS maintain their currencyexchange rates within an agreed-upon range with respect to other member countries. Exchange rate risk Also called currency risk; the risk that an investment's value will change because of currency exchange rates. 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'sappreciation or depreciation. Exchange of stock Acquisition of another company by purchase of its stock in exchange for cash or shares. Exchange Traded Funds (ETF) Also known as ETF. A basket of stocks similar to an index mutual fund. However, there are a number of important differences between ETFs and mutual funds. The ETF can be traded within the day, they can be shorted, purchased on margin and there even exists options on some ETFs. Exchangeable Applies mainly to convertible securities. Means the issuer, if so stated, may substitute a convertible debenture for an existing convertible preferred with identical terms. Most often used when a corporation has an immediate need for equitycapital and a low tax rate, and expects either or both conditions to change. This would make the debenture less attractive if the interest tax-deductibility is lost. Exchangeable instrument Applies mainly to convertible securities. Bond or preferred stock that may be exchangeable into the common stock of a different publiccorporation. Exchangeable Security Investment instrument that grants its holder the right to exchange it for the common stock of a firm other than the issuer of the instrument. Excise tax Federal or state tax placed on the sale or manufacture of a commodity, typically a luxury item e.g., alcohol. Exclusionary self-tender A firm'soffer to buy a given amount of its own stock while excluding targeted stockholders. Exclusive In the context of general equities, having sole possession of the customer order/indication; not in competition with other dealers. Execution The process of completing an order to buy or sell securities. Once a trade is executed, it is reported by a Confirmation Report; settlement (payment and transfer of ownership) occurs in the U.S. between one (mutual funds) and three (stocks) days after an order is executed. The time varies greatly across countries. In France, for example settlements are only once per month. Execution costs The difference between the execution price of a security and the price that would have existed in the absence of a trade, which can be further divided into market impact costs and market timing costs. Exempt List Sophisticated investors, usually institutional investors, who are considered informed enough that new issues can be marketed to them without a prospectus. This exemption reduces the cost of private placements. Exempt securities Instruments exempt from the registration requirements of the Securities Act of 1933 or the margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis, commercial paper, and private placements. Exemption Direct reductions from gross