Glossary of Municipal Securities Terms

Second Edition (January 2004)

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EASTERN ACCOUNT – See:  SYNDICATE.

EBS – See:  EXECUTING BROKER SYMBOL.

ECONOMIC DEFEASANCE – See:  DEFEASANCE.

EFFECTIVE INTEREST COST – The rate at which the total debt service payable on a new issue of municipal securities would be discounted to provide a present value equal to the amount bid on the new issue.

EFFECTIVE INTEREST RATE – The actual rate of interest earned by the investor on securities, which takes into account the amortization of any premium or the accretion of any discount over the period of the investment.

ELECTRONIC BID – The process of submitting a competitive bid for a new issue of municipal securities through any of several proprietary services that facilitate the collection of bids by electronic means.

ELECTRONIC TRADING SYSTEM or PLATFORM – Any of several proprietary services that allow subscribers to display specific municipal securities for sale or to submit bids to purchase specific securities by electronic means.

ELIGIBLE SECURITIES – Typically refers to the types of securities authorized under the bond contract to be held in escrow for the purpose of defeasing bonds.  Compare:  PERMITTED INVESTMENTS.  See:  ESCROW DEPOSIT AGREEMENT.

ENTERPRISE ACTIVITY – A revenue-generating facility or system that provides funds necessary to pay debt service on securities issued to finance its construction or improvement.  The debt incurred for such facility or system is self-liquidating when the facility or system produces sufficient revenues to cover all debt service and other requirements imposed under the bond contract.  Common examples include water and sewer systems and power supply systems.  See:  ENTERPRISE FUND; SELF-SUPPORTING DEBT.

ENTERPRISE FUND – A fund established by a governmental entity to account for operations of an enterprise activity.  Enterprise funds generally are segregated as to purpose and use from other funds and accounts of the governmental entity with the intent that revenues generated by the enterprise activity and deposited to the enterprise fund will be devoted principally to funding all operations of the enterprise activity, including payment of debt service on securities issued to finance such activity.  In some cases, however, the governmental entity may be permitted to use moneys in an enterprise fund for other purposes and to use other funds to pay costs otherwise payable from the enterprise fund.  See:  ENTERPRISE ACTIVITY.

ENTERPRISE ZONE (EZ) BOND – A private activity bond issued to provide financing for projects (including certain commercial private activity bonds that could not otherwise be issued on a tax-exempt basis) located in federally-designated empowerment zones and enterprise communities. Issuers must meet specific ownership and employment targets relating to residents of the zone or community.  See:  PRIVATE ACTIVITY BOND – Exempt Facility Bonds.

ESCROW ACCOUNT – A fund established to hold moneys pledged and to be used solely for a designated purpose, typically to pay debt service on an outstanding issue in an advance refunding.  See:  ADVANCE REFUNDING; ESCROW DEPOSIT AGREEMENT.

ESCROW DEPOSIT AGREEMENT – An agreement that typically provides for the deposit of moneys or securities in an escrow account to refund an outstanding issue of municipal securities.  The agreement sets forth the manner in which funds are to be invested (generally in eligible securities) pending their expenditure and the schedule on which on-going debt service payments are to be made and early redemptions, if any, of securities are to occur.  See:  ADVANCE REFUNDING; ADVANCE REFUNDING DOCUMENT; ELIGIBLE SECURITIES; ESCROW ACCOUNT; ESCROWED SECURITIES.

ESCROWED SECURITIES – Securities that are held, typically in an escrow account, to be used solely for a designated purpose.  See:  ESCROW ACCOUNT.

ESCROWED TO MATURITY – See:  ADVANCE REFUNDING.

ESTABLISHED INDUSTRY SOURCES – With respect to a particular municipal securities transaction, the sources from which certain material information regarding the security is publicly available.  These sources include the system of nationally recognized municipal securities information repositories, the MSRB’s Municipal Securities Information Library system, the MSRB’s Transaction Reporting System, rating agency reports and other sources of information relating to the particular municipal securities transaction generally used by broker-dealers that effect transactions in that type of municipal securities.  MSRB rules obligate a broker-dealer to disclose to a customer at the time of trade all material facts about the transaction that are reasonably accessible to the market through established industry sources, as well as any other material facts known by the broker-dealer.  See:  MUNICIPAL SECURITIES INFORMATION LIBRARY; NATIONALLY RECOGNIZED MUNICIPAL SECURITIES INFORMATION REPOSITORY; TRANSACTION REPORTING SYSTEM.

ETHICAL WALL – See:  CHINESE WALL.

EVENT OF DEFAULT – See:  DEFAULT.

EXCHANGE ACT – See: SECURITIES EXCHANGE ACT OF 1934.

EXCISE TAX – A tax levied upon the manufacture, sale or consumption of commodities, upon the license to pursue certain occupations, or upon corporate privileges within a taxing jurisdiction.  Examples of such taxes include sales and use taxes and taxes on alcohol and cigarettes.  See:  TAX.

EXECUTING BROKER SYMBOL (EBS) – A symbol issued to broker-dealers by NASD for the purpose of identifying broker-dealers that execute municipal securities transactions reported to the MSRB’s Transaction Reporting System.

EXECUTIVE OFFICER – See: NON-MFP EXECUTIVE OFFICER.

EXEMPT FACILITY BOND – See:  PRIVATE ACTIVITY BOND – Exempt facility bond.

EXEMPT SECURITIES or EXEMPTED SECURITIES – Issues of securities not subject to registration requirements of the Securities Act of 1933 or the reporting requirements of the Securities Exchange Act of 1934.  In general, Treasury securities, agency securities and municipal securities are exempted from such requirements.  Compare:  REGISTERED SECURITIES.

EX-LEGAL or EX-LEGAL DELIVERY – A delivery of certificated securities in the secondary market without a copy of the legal opinion being provided.  See:  GOOD DELIVERY.

EXPECTED AVERAGE LIFE – The average life of a security (e.g., a super sinker) that can be redeemed prior to maturity on other than a scheduled basis.  The expected average life is calculated based on an estimation of the likely timing and amounts of redemptions occurring prior to maturity.  See:  AVERAGE LIFE; SUPER SINKER.

EXTENDED PRINCIPAL – The total principal amount of a trade that is calculated by multiplying the quantity purchased by the price of the security.  In the case of certain asset-backed or mortgage-backed securities, this result must be multiplied by a factor that represents the then current principal amount remaining outstanding, expressed as a decimal.  See:  FINAL MONIES.

EXTENDED SETTLEMENT – Agreement between a buyer and seller of securities to make delivery of securities on a date that is later than regular-way settlement.  Compare:  CASH TRADE; “REGULAR WAY” TRADE.  See:  DELAYED DELIVERY TRADE.

EXTRAORDINARY CALL or REDEMPTION – See:  REDEMPTION PROVISIONS.

EZ BOND – See: ENTERPRISE ZONE BOND.