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Flashcards in TD Investing Terminology Deck (155):
1

Accrued Interest

The accumulated interest paid to a seller of a bond by the buyer (unless the bond is in default). The buyer of a fixed-income security must pay the seller of the security to compensate the seller for holding the security between the last coupon date and the settlement date.

2

Agency Bonds

Bonds issued by Federal Crown Corporations. These agencies are special purpose corporations created by an act of the Canadian parliament. These Corporations are either direct obligations of the Government of Canada or fully guaranteed by the Government of Canada and carry the same credit quality. Examples of these agencies are Export Development Bank, Canadian Mortgage and Housing Corp., Farm Credit Corporation and Business Development Bank of Canada.

3

Amortization

The process of incrementally reducing debt through installment payments of principal and interest.

4

Arbitrage

The simultaneous sale and purchase of the same or equal security in such a way as to take advantage of a price difference in separate markets.

5

Arrears

Interest or dividends that were not paid when due and are still owed.

6

Ask Price

The lowest price a prospective seller is willing to accept.

7

All or none order (AON)

A limited price order that is to be executed in its entirety or not at all (no partial transaction). AON orders are not shown on the specialist's book because they cannot be traded in pieces. Therefore, they will not show on the Bid or Ask.

8

American Depository Receipt (ADR)

A security created by a U.S. bank that evidences ownership to a specified number of shares of a foreign security held in a depository in the issuing company's country of domicile. The certificate, transfer and settlement practices for ADRs are identical to those for U.S. securities. U.S. investors often prefer ADRs to direct purchase of foreign shares because of the ready availability of price information, lower transaction costs and timely dividend distribution.

9

American-style option

An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.

10

AMEX

American Stock Exchange

11

AMEX Composite Index

The American Stock Exchange introduced the AMEX Composite Index with a new ticker symbol, XAX, on January 2, 1997. The XAX is a market capitalization-weighted, price appreciation index, and replaces the AMEX Market Value Index (XAM) which, since its inception, has been calculated on a total return basis to include the reinvestment of dividends paid by AMEX companies. The AMEX Composite Index is more comparable with other major indices, which reflect only the price appreciation of their respective components.

12

Annual report

The formal report on a company's finances and operations sent to all owners of shares in the company. It discloses the company's business activity during the year.

13

Annuity

A type of investment contract that pays you regular income, usually after retirement.

14

Arrears

Money that was not paid when it was due, and which is still owing. Most commonly referred to in the context of dividends.

15

Ask

The price at which someone who owns a security offers to sell it; also known as the asked price.

16

Assets

Everything you, or a company, owns or are owed. Any possessions that have value.

17

Assignment

The receipt of an exercise notice by an options writer that requires him to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.

18

At-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if xyz stock is trading at $54, then the xyz 54 option is at the money.

19

Averages and Indices

Statistics that are used to measure the state of the stock market or the economy. They are based on the performance of selected stocks or other indicators, such as the Dow Jones Industrial Average and the TSE 300 Composite Index.

20

Average Maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life.

21

ACCRUED INTEREST

Interest that is due on a bond or other fixed income security since the last interest payment was made. This often occurs for bonds purchased on the secondary market, since bonds usually pay interest every six months, but the interest is accrued by the bondholders every day. When a bond is sold, the buyer pays the seller the market price plus the accrued interest. The buyer will receive the full interest payment at the next pay date.

22

ACCUMULATED DIVIDEND

A dividend that is due, but not yet paid, to a preferred shareholder.

23

ALLOTMENT

The amount of securities assigned to each of the participants in a new issue syndicate.

24

Bid

The highest price a prospective buyer is willing to pay for a particular security

25

Crossed Market

Occurs when the National Best Bid price is greater than the National Best Offer price for a security

26

Execution Quality

A measure of how well a firm is able to obtain the best terms available on the orders they receive. Execution quality can be evaluated on many criteria, including the speed of execution, the price obtained on the execution and the percentage of the order that was executed at expected prices

27

Liquidity

The amount of shares available for buying or selling in a particular security. Securities with more shares available at the bid and offer prices have greater liquidity than those with fewer shares

28

Locked Market

Occurs when the National Best Bid price is equal to the National Best Offer price for a security

29

Market Centre

Any exchange market maker, over the counter market maker, alternative trading system, national securities exchange, or national securities association

30

Market Maker

An individual or entity that simultaneously provides both a bid and offer price to help ensure liquidity for trading in a particular security

31

Market Order

An order to buy or sell a security at the best available price

32

Marketable Order

A market or marketable limit order where at least some portion of the order can be immediately filled at a particular market price

33

Marketable Limit Order

Any buy order with a limit price equal to or greater than the National Best Offer at the time of order receipt, or any sell order with a limit price equal to or less than the National Best Bid at the time the order is received

34

National Best Bid and Offer (NBBO)

The highest bid and lowest offer price for a security across all markets where the security is traded

35

Offer

The lowest price a prospective seller is prepared to accept to sell a particular security

36

Order Router

Proprietary software that receives your order, scans the available markets, and sends your order to one or more markets to be executed

37

Price Improvement

Orders that are executed at a price superior to the National Best Bid or Offer at the time the order is received

38

Balloon

A large principal repayment in the later years of some serial bonds.

39

Bankers' Acceptance (BA's)

BA's are short term promissory notes issued by corporations with the unconditional guarantee of a major Canadian chartered bank. The guarantee reduces risk and consequently increases price and lowers yield compared to Commercial Paper. BA's are typically issued in terms of 30 days, 60 days, 90 days, 6 months and a year. When these notes are issued directly by financial institutions they are called Bearer Deposit Notes (BDN's).

40

Bank of Canada

The central Bank of Canada was founded in the 1930s to facilitate the functioning of the financial system. The Bank conducts monetary policy to manage the Canada's money supply and influence interest rates. In addition, it is responsible for issuance of currency and advises the government on foreign exchange and fiscal policy.

41

Bank Rate

The minimum rate at which the Bank of Canada will make short-term advances to the chartered banks and money-market dealers. The trend of the bank Rate affects the prime lending rate that chartered banks give to their most creditworthy borrowers. It is therefore a base for the general level of short-term interest rates and a very important determinant of bond market prices.

42

Basis Point

One one-hundredth of a percentage point. This is the most common measure of changes in bond yields. For example, if a bond yielding 6.09% changes in price to yield 6.20%, it is said to have increased 11 basis points. Basis points (bps) are commonly referred to as "beeps".

43

Bear Market

A prolonged period of time for which the prices of bonds are decreasing and yields are rising.

44

Bearer Bonds

Bonds that do not have the owner’s name registered on the books of the issuing corporation or government and are payable to the bearer. Bearer bonds are negotiable by the holder, since it is not in registered form.

45

Benchmarks

In the bond market, the commonly quoted and actively traded mid-term and long-term Government of Canada bonds. In the United States, they are the most recently issued 10-year and 30-year treasury bonds. Benchmarks, also known as bellwethers, are usually considered to be a measure of the direction and magnitude of yield and price changes in the bond market.

46

Bid Price

The highest price a prospective buyer is willing to pay.

47

Bond

Evidence of a debt on which the issuer promises to pay the holder in a prescribed amount of time a specified amount of both interest and principal. Technically, a bond has assets pledged against it as security for the loan with the exception of government bonds. In practice, however, the term is often used to describe debentures; these evidences of indebtedness are backed by the general creditworthiness of the issuer and are not secured by assets.

48

Bond Rating

A measure of expected performance, quality and safety of a bond issue. Dominion Bond Rating Service (DBRS) is the primary rating service in Canada. Moody's and Standard and Poor's are the two largest agencies in the United States.

49

Bond Ratio

The percentage of a company's outstanding debt as a part of the company's total capitalization. This ratio is used by analysts to assess risk inherent in a particular issue or company's debt.

50

Bonded Debt

Also known as funded debt. It is the portion of an issuer's total debt represented by longer term bonds.

51

Book Entry Bond / BEO (book entry only)

A bond that has no certificate. Records of ownership are are kept by a depository and its members (banks and brokerage firms). Bonds issued now are almost exclusively book-entry, or book-based.

52

Bull Market

A period of rising bond prices and declining yields.

53

Bank rate

The minimum interest rate the Bank of Canada charges when it makes short-term loans to banks and other financial institutions. Since 1980, the Bank Rate has been set at 0.25% of 1% (25 basis points) above the weekly average tender rate of 91-day Government of Canada Treasury Bills.

54

Basis point

One-hundredth of a percentage point (0.01%).

55

Bear

Someone who expects that the market in general, or the price of a specific investment, will go down.

56

Bear market

A weak market where prices are falling.

57

Bearer security

Any investment which does not have the owner's name listed on it or in the records of the company that issued it. A bearer security may be sold or cashed in by the person who holds it.

58

Beneficiary

The person (or in some cases the estate) named to receive the value of an insurance policy, trusteed account or investment account.

59

Benefit

The money an insurance company pays when you make a claim for something covered by an insurance policy.

60

Beta

Measure of a stock's risk in relation to the market. 0.7 means a stock price is likely to move up or down 70% of the market change; 1.3 means the stock is likely to move up or down 30% more than the market

61

Bid

The price a prospective buyer is prepared to pay at a particular time for trading a unit of a given security.

62

Breakout

A rise in a security's price above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by technical analysts as a buy or sell indication.

63

Bid and ask quotations

Bid is the highest price a buyer will pay for a share or other type of investment. Ask is the lowest price the person selling the share will accept. Together they are referred to as a quotation or quote.

64

Blue chip

A leading, well-known company's stock from which you could expect consistent growth and dividend payments over the long term.

65

Board lot

A standard trading amount, usually 100 shares, which has been agreed upon by stock exchanges.

66

Bond

A certificate you receive for a loan you make to a company or government. In return, the issuer of the bond promises to pay you interest at a set rate and to repay the loan on a set date.

67

Book value

For an individual investor, book value is the amount you originally invested plus any interest or dividends you earned that have been reinvested.

68

Bull

Someone who expects that the market in general, or the price of a particular investment, will go up.

69

Bull market

A strong market where values are rising.

70

Business day

Any day when most businesses and government offices are open for business. A calendar day is any day of the year.

71

Buy on stop order

A buy order not to be executed until the market price rises to a definite price. Once the security has traded at least one board lot at that price, the order is then treated as a market order.

72

BEST EFFORTS

For clients buying new issues, best efforts are made to fill a client's order based on the actual number of shares available from the brokerage firm. Share allocations may also be set by the issuer so that a maximum number of clients can participate in the issue.

73

BOUGHT DEAL

In securities underwriting, this is a firm commitment by an underwriter or underwriting group to purchase an entire issue outright from the issuing company. Typically, the underwriters put up a portion of their own capital and borrow the rest from a commercial bank. Then all members of the underwriting group resell the issue to the public at a pre-set price.

74

Call

The action taken to pay the principal of bond prior to the stated maturity date.

75

Callable Bond

A condition of a bond permitting the issuer to redeem it before maturity on specified dates at specified prices.

76

Call Protection

A dollar amount paid as a penalty or premium by an issuer who exercises the right to redeem securities prior to the maturity date. It is a also used to describe a period of time in which the bond cannot be called.

77

Canada Call (Doomsday Call)

A Canada call issue is simply a bond which may be called back by the issuer to redeem the debt prior to the maturity date at an equivalent yield of a Government of Canada bond of the same maturity plus a premium (example, Canada call + 15bps). The holder of the bond is paid the calculated price (based on the yield plus the additional 15bps) or par whichever is higher. Typically there are not many doomsday calls redeemed before maturity as it is not advantageous for the issuer to do so. This feature is more commonly attached to corporate issues.

78

Canadian Bond Rating Service / CBRS

Effective October 31, 2000, CBRS combined operations with Standard & Poor's. S&P provides credit ratings of Canadian borrowers in the bond market. They specialize in publishing unbiased research on the credit quality of public sector debt and corporate bonds. See also S&P Credit Ratings.

79

Canadas

The term is often used when referring to marketable bonds issued by the Canadian Government.

80

Certificate of Deposit

Negotiable certificates issued by most chartered banks and trust companies, usually with minimum face value of $5,000 and denominations of $1,000. Maturity terms vary from 30 days to 5 years. Although the term to maturity is fixed, CDs may be pre-encashable at a penalty rate lower than the original fixed rate.

81

Closing Quotation

A market maker's final bid and asked prices for an issue at the end of a business day.

82

Collateral

Assets pledged by a borrower until a loan is repaid. These assets are subject to seizure if the loan is in default.

83

Commercial Paper

Short-term debt issued by non-financial corporations with terms up to one year. This paper is sold at a discount and matures at par. It is typically available in terms of 30 days, 60 days, 90 days, 6 months and a year. The difference between cost of proceeds and the maturity amount is treated as interest income. All commercial paper offered by
TD Waterhouse Canada Inc.
is rated R-1(Prime Credit Quality) by the Dominion Bond Rating Service.

84

Commission

A fee paid to an investment dealer when the dealer acts as an agent in a securities transaction. The dealer does not receive a commission when acting as a principal in the trade.

85

Convertible Bond

A bond, debenture or preferred share which may be exchanged for common shares usually of the same company, at a set price and usually by a set date. A forced conversion clause may be used by a company to force an exchange if the value of its common shares goes above the value of the conversion ratio or conversion price. Most convertible bonds trade on a listed exchange such as the TSE.

86

Corporate Bond

These are debt instruments companies issue that are considered financial obligations of a corporation. Generally, corporate bonds are broken down into four sectors: industrial, financial, transportation, and utility. They can be issued in both callable and non-callable formats.

87

Coupon

This is the portion of the bond that provides the holder an interest payment at a pre-determined rate. Coupons are the amount of interest that will be paid on annual basis. Most bonds, however, pay interest semi-annually.

88

Coupon Frequency

Most bonds pay interest on a semi-annual basis. For example, a holder of 10000 face of a 6.50% Government of Canada bond maturing 1 June 2004 would receive $650.00 interest annually (10000 * 6.50%). The interest would be broken down into two $325.00 payments; one on June 1st and the other on December 1st. Some bonds pay interest on a monthly basis and others, such as Eurobonds, pay interest annually.

89

Current Yield

A crude measure of an investor's return on a bond calculated by dividing the annual interest on the bond by the market price. It does not take into account any capital gain or loss. For example, a bond with a 10% coupon bought at discount of $80.00 has a current yield of 12.5% (10%/800 per 1000 face).

90

CUSIP

The 9-digit alpha-numeric ID assigned to securities including bonds by the Committee on Uniform Security Identification Procedures. It was established as a uniform method of identifying securities.

91

Callable

An investment, such as a bond, that can be 'called in' and repaid by the company or government that issued it, before it would normally be due. You are generally paid extra interest if your investment is called in early.

92

Call option

An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.

93

Canadian Investor Protection Fund (CIPF)

The Fund covers client's losses of securities and cash balances. A limit has been placed by CIPF on the coverage provided for a customer's general accounts equal to $1,000,000 for losses related to securities and cash balances. Separate accounts of customers are each entitled to the maximum coverage of $1,000,000 unless they are combined with other separate accounts. For more information, please see the CIPF Web site or call 416-866-8366.

94

Capital gain or loss

The profit or loss you make when you sell an investment. Tax consequences may result.

95

Certificate

The document showing that you own a bond, stock, or other investment.

96

CFP

Certified Financial Planner

97

CIPF

See Canadian Investor Protection Fund.

98

Commission

The fee you pay for buying or selling investments.

99

Common share

An investment that gives you part ownership of a company and allows you to vote on major decisions affecting the company.

100

Compound interest

Interest paid on your initial investment, and then also on the interest as it builds up. Over a period of several years, compounding can have a dramatic effect in making your investment grow.

101

Confirmation

A printed notice sent to you to confirm you have bought or sold an investment.

102

Convertible

A type of investment, usually a bond, debenture or preferred share, which you may exchange for common shares usually of the same company, at a set price and usually by a set date. The company may force you to exchange if the price of its common shares goes above the value of your preferred shares.

103

Corporation

A legal entity that is separate and distinct from its owners. A corporation is allowed to own assets, incur liabilities, and sell securities, among other things.

104

Coupon

This is the portion of the bond that provides the holder an interest payment at a pre-determined rate. Coupons are the amount of interest that will be paid on annual basis. Most bonds, however, pay interest semi-annually.

105

CSC

Canadian Securities Course

106

Cum dividend

When you buy a share cum dividend it means you will receive an upcoming dividend that has already been announced. If you are not eligible to receive the dividend, the share is said to be ex dividend.

107

Cyclical share

A share which is particularly sensitive to changes in economic conditions.

108

CASH-ON-CASH YIELD

Yield is based on a similar pattern to that of a mortgage-backed security. The yield consists of an interest and a capital component. This is typically seen on investments such as trust units. The investment decreases over the life of the unit as the asset pool is used up. Upon maturity, the remaining assets are sold and paid out to the unit holders.

109

COMMON SHARES

Shares representing an ownership interest in a corporation. Holders of Common Shares have the right to receive remaining property of the corporation upon dissolution, after all other claims are satisfied. They, therefore, assume the risk of the business failing and the potential gain, if the share value of the business increases. They also elect the board of directors that controls the company.

110

CONTEXT OF THE MARKET

When a new issue is priced in the CONTEXT OF THE MARKET it means the exact price is not known during the marketing period. When the issue is priced, it will be priced according to the market price of the stock on a set date or range of dates. The exact price will be available the day after pricing occurs.

111

CONTRACTING DATE

The date when expressions of interests for a new issue are officially processed by
TD Waterhouse
into clients' accounts. A trade confirmation is printed and sent to the client, along with a final prospectus (if applicable).

112

CONVERTIBLE SECURITIES

Corporate securities (usually preferred stock or bonds) that are exchangeable by the owner for a fixed number of shares of common stock at a stipulated price. Convertible securities are usually bought by investors who want higher income than available from common stock combined with greater potential appreciation than available from regular bonds.

113

CONVERSION PRICE

The price at which convertible securities, such as bonds and preferred stock, can be converted into common stock at a set conversion ratio. For example, if the conversion ratio is 25 to 1, and you own a $1000 face value convertible bond, then the conversion price is $40 per share.

114

CONVERSION VALUE

Using the above example, the value of 25 shares at the current price per share of $32.00. Since the bond has a higher face value, it is better not to convert.

115

CONVERSION RATIO

The conversion ratio determines the number of shares of common stock for which a convertible security can be exchanged. The conversion ratio is determined upon issuance of the security and it's typically protected against dilution from stock splits, but not from secondary offerings. To determine conversion ratio, divide $1,000 par value by the conversion price.

116

CREDIT RATING

Assessment of a corporation's credit history and ability to pay its obligations. There are two major credit agencies serving the Canadian marketplace: Standard and Poor's and Dominion Bond Rating Service.

117

CUMULATIVE DIVIDEND

A provision requiring that unpaid accumulated dividends on preferred shares must be paid before dividends on any common shares.

118

Dealer

An individual or firm acting as a principal rather than a broker or agent. An individual or entity, such as a securities firm, that acts as a principal and stands ready to buy and sell for its own account. A dealer buys and sells securities and holds inventory.

119

Debenture

Indebtedness of a government or corporation that is backed strictly by the general credit of the issuer. Unlike a bond, no assets are pledged against a debenture. In practice, the terms bonds and debentures are often used interchangeably.

120

Default

A term used when a company breaks the terms of an agreement. For example, a company who fails to make a scheduled bond interest payment is said to be in default.

121

Denomination

The face amount or value of a bond. This is the amount the issuer agrees to pay on maturity. It also refers to the investment increment of bonds. For example, the minimum purchase or sell amount of a bond on WebBroker is $5,000 face with increments of $1,000 thereafter. The $5,000 minimum applies to strip bonds as well. Higher minimums apply to money market instruments and vary depending on issuer and term-to-maturity.

122

Discount

The difference between a bond's current market price and its face value. Generally, bonds with coupons below the prevailing interest rate will trade at a discount.

123

Discount Yield

The yield on money market instruments which are sold at a discount. Take, for example, a Government of Canada Treasury Bill sold at a cost of 98.60 ($9,860 per $10,000) and maturing at $10,000. To determine the yield, divide the discount ($140) by the cost ($9860) and multiply that number by 365 (days) divided by the number of days to maturity (90). The calculation results in a yield of 5.758%.

124

Diversification

The practice of buying several different types of securities over different asset classes, economic sectors, and maturities in order to reduce risk if one particular type of investment or sector performs poorly. Fixed Income securities are integral to asset class diversification. Within fixed income, investors can diversify by holding debt issued by companies in different sectors. Varying terms to maturity can also mitigate yield curve and reinvestment risk.

125

Dominion Bond Rating Service / DBRS

DBRS is an independent rating agency that assesses an entity’s ability to make timely payments of interest and principal. Similar to S&P, it assigns credit ratings based on a scale.

126

Downgrade

A reduced credit rating on a company's debt issued by a credit rating agency.

127

Duration

Duration is a measurement that allows an investor to compare bonds for potential price volatility by considering both the term and the coupon together. It is defined as the average time that it would take to receive all cash flows in terms of current dollars. Both coupon payments and principal are factored into the calculation.
Bonds with longer terms are more volatile than shorter term bonds because cash flows are received over a longer period of time, and therefore are subject to a greater deal of uncertainty. Similarly, market prices of higher coupon bonds are less volatile than a lower coupon bond because a greater proportion of the bond's total return is realized with the semi-annual payments than at maturity.

128

Day order

The request from a customer to either buy or sell a security, that, if not cancelled or executed the day it is placed, expires automatically at the end of the trading day. All orders are day orders unless otherwise specified.

129

Debenture

Another name for a bond. With a debenture, your money is secured by the credit of the company or government issuing it, rather than by specific assets.

130

Debt

Money that has been borrowed and must be repaid, usually with interest and by a set date.

131

Default

A term used when a person or company breaks the terms of an agreement.

132

Derivative

A financial security such as an option whose value is derived in part from the value and characteristics of another security, the underlying asset.

133

Director

A person elected by the holders of common shares at an annual meeting to direct a company's policies.

134

Discount to par

The amount by which a preferred share or bond is sold below its face value. The buyer then receives face value at maturity.

135

Discounted

The market price of a share is said to have been 'discounted' when an event that is expected to happen, such as an increase in dividends or lower earnings, has been reflected in its price.

136

Diversification

The practice of buying several different types of investments over a broad range of industries, sectors and companies in order to reduce your risk if one particular industry, sector or investment performs poorly.

137

Dividend

The part of a company's profits that you may receive if you are a shareholder of the company. Preferred shares earn a set dividend, while the dividends for common shares vary with the company's profits. Companies are under no legal obligation to pay dividends to their shareholders.

138

Dollar cost averaging

Investing a set amount in a specific investment at regular intervals. As a result, when the value of the investment goes down, you're buying more of it, and when it rises, you're buying less. The overall effect reduces the average cost of your investment.

139

Dow Jones Industrial Average - (DJIA)

The DJIA is a price-weighted average of 30 actively traded blue chip stocks, primarily industrials but including American Express Co. and American Telephone and Telegraph Co. Prepared and published by Dow Jones & Co., it is the oldest and most widely quoted of all the market indicators. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks. The DJIA is calculated by adding the closing prices of the component stocks and using a divisor that is adjusted for splits and stock dividends equal to 10% or more of the market value of an issue as well as substitutions and mergers. The average is quoted in points, not in dollars.

140

Emerging Market

A financial market of a developing country, usually a small market with a short operating history.

141

Extendible

A bond with a specific maturity date, but granting either the issuer or the holder, the option to extend the maturity date by a prescribed number of years.

142

Earnings Per Share (EPS)

Also referred to as Primary Earnings Per Share. Net income for the past 12 months divided by the number of common shares outstanding, as reported by a company. The company often uses a weighted average of shares outstanding over reporting term.

143

Electronic Data Gathering, Analysis, and Retrieval -EDGAR

An electronic system implemented by the SEC that is used by companies to transmit all documents required to be filed with the SEC in relation to corporate offerings and ongoing disclosure obligations. EDGAR became fully operational in 1995.

144

Ending Net Asset Value

The market value of a fund share on a predetermined end date.

145

Estate

Net assets at time of death.

146

Estate Planning

The total process of planning an estate, including: (a) creating and conserving an estate; (b) minimizing its shrinkage at death; (c) creating adequate liquidity for settling the estate; and (d) developing a proper plan for distributing the estate to the owner's heirs.

147

European-style option

An option contract that can be exercised only on the expiration date.

148

Ex-dividend

Interval between the announcement and the payment of the next dividend.

149

Ex-dividend date

The date on or after which a security begins trading without the dividend (cash or stock) included in the contract price.

150

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 three business days after an order is executed.

151

Executor / Estate Trustee

A person or corporation (i.e. Trust company) nominated in a will to effect the settlement of the testator's estate in accordance with the terms of the will.

152

Exercise

To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security.

153

Expiration date

The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the third Friday of the expiration month; brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.

154

EXCHANGE TRADED FUNDS (ETFs)

ETFs are similar to conventional mutual funds in that they provide investors with an affordable way to invest in a diversified basket of securities. But unlike conventional mutual funds, which can only be bought or sold at a price fixed at the end of each trading day, ETFs are listed on a stock exchange and can be traded throughout the day at changing market prices. In addition, you can buy ETFs on margin, as well as sell them short. ETFs also have a lower management expense ratio (MER) than conventional mutual funds and are more tax efficient because there is less buying and selling of the underlying portfolio.

155

EXPRESSION OF INTEREST

An expression of interest is a FIRM order to purchase a specific number of shares in a New Issue. Once you place an Expression of Interest, you are obligated to purchase that number of shares of the new issues, if available.