Definition of The Exchange

The Exchange

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.

Basket options

Packages that involve the exchange of more than two currencies against a base currency at
expiration. The basket option buyer purchases the right, but not the obligation, to receive designated
currencies in exchange for a base currency, either at the prevailing spot market rate or at a prearranged rate of
exchange. A basket option is generally used by multinational corporations with multicurrency cash flows
since it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each
of the currencies that make up the basket.

Big Board

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

Broker

An individual who is paid a commission for executing customer orders. Either a floor broker who
executes orders on the floor of the exchange, or an upstairs broker who handles retail customers and their
orders.

Clearing member

A member firm of a clearing house. Each clearing member must also be a member of the
exchange. Not all members of the exchange, however, are members of the clearing organization. All trades of
a non-clearing member must be registered with, and eventually settled through, a clearing member.

Counter trade

The exchange of goods for other goods rather than for cash; barter.

Crawling peg

An automatic system for revising the exchange rate. It involves establishing a par value around
which the rate can vary up to a given percent. The par value is revised regularly according to a formula
determined by the authorities.

Cross rates

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
that are both expressed in terms of a third currency.

Electronic data interchange (EDI)

The exchange of information electronically, directly from one firm's
computer to another firm's computer, in a structured format.

Historical exchange rate

An accounting term that refers to the exchange rate in effect when an asset or
liability was acquired.

Initial margin requirement

When buying securities on margin, the proportion of the total market value of
the securities that the investor must pay for in cash. The Security exchange Act of 1934 gives the board of
governors of the Federal Reserve the responsibility to set initial margin requirements, but individual
brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by
the exchange.

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 accounts.

New York Stock Exchange (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 lcoated on Wall Street in New York City

Opening, the

The period at the beginning of the trading session officially designated by the exchange during
which all transactions are considered made "at the opening". Related: Close, the

Organized exchange

A securities marketplace wherein purchasers and sellers regularly gather to trade
securities according to the formal rules adopted by the exchange.

Pit

A specific area of the trading floor that is designed for the trading of commodities, individual futures, or
option contracts.
Pit committee
A committee of the exchange that determines the daily settlement price of futures contracts.

Political risk

Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of
foreign currency, or other changes in the business climate of a country.

Post

Particular place on the floor of an exchange where transactions in stocks listed on the exchange occur.

Registered trader

A member of the exchange who executes frequent trades for his or her own account.

Relative purchasing power parity (RPPP)

Idea that the rate of change in the price level of commodities in
one country relative to the price level in another determines the rate of change of the exchange rate between
the two countries' currencies.

Trading range

The difference between the high and low prices traded during a period of time;
with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading.

Transaction exposure

Risk to a firm with known future cash flows in a foreign currency that arises from
possible changes in the exchange rate. Related:translation exposure.

Wild card option

The right of the seller of a Treasury Bond futures contract to give notice of intent to deliver
at or before 8:00 p.m. Chicago time after the closing of the exchange (3:15 p.m. Chicago time) when the
futures settlement price has been fixed. Related: Timing option.

transfer price

an internal charge established for the exchange
of goods or services between organizational units
of the same company

Depreciation

a) Of capital stock: decline in the value of capital due to its wearing out or becoming obsolete.
b) Of currency: decline in the exchange rate.

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