|
A
B
C
D
E
F
G
H
I J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X Y Z
Accrual
The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.
Actualize
The underlying assets or instruments which are traded in the cash market.
Adjustable Peg
Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency , often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.
Adjustment
Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.
Agent Bank
(1) A bank acting for a foreign bank. (2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Appreciation
A currency is said to 'appreciate' when it strengthens in
price in response to market demand.
Aggregate Demand
Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and firms in other countries for good and services.
Aggregate Risk
Size of exposure of a bank to a single customer for both spot
and forward contracts.
Aggregate Supply
Total supply of goods and services in the economy from
domestic sources (including imports) available to meet aggregate
demand.
Agio
Difference in the value between currencies. Also used to
describe percentage charges for conversion from paper money into
cash, or from a weak into a strong currency.
Appreciation
Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage
The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials. The exchange rate differential or Swap points. May be derived from Deposit Rate differentials.
Arbitrage channel
The range of prices within which there will be no possibility to arbitrage between the cash and futures market.
Around
Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
Asset Allocation
Dividing instrument funds among markets to achieve diversification or maximum return.
Ask
The price at which the currency or instrument is offered.
Asset
In the context of foreign exchange is the right to receive from a counter party an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched Forward or spot deal.
At Best
An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better
An order to deal at a specific rate or better.
Authorized Dealer
A financial institution or bank authorized to deal in foreign exchange.
|
 |
|
|
B |
|
Back Office
Settlement and related processes.
Backwardation
Term referring to the amount that the spot price exceeds the forward price.
Balance of Payments
A systematic record of the economic transactions during a given period for a country. (1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements. (2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values.
Band
The range in which a currency is permitted to move. A system used in the ERM.
Bank line
Line of credit granted by a bank to a customer, also known as a " line".
Bank Rate
The rate at which a central bank is prepared to lend money to its domestic banking system.
Base currency
United States Dollars. The currency to which each transaction shall be converted at the close of each position.
Basis
The difference between the cash price and futures price.
Basis Point
For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms.
Basis trading
Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket
A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear Market
A prolonged period of generally falling prices.
Bear
An investor who believes that prices are going to fall.
Bid
The price at which a buyer has offered to purchase the
currency or instrument.
Book
The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities. If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book. Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York.
Bretton Woods
The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker
Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull Market
A prolonged period of generally rising prices.
Bull
An investor who believes that prices are going to rise.
Bundesbank
Germany’s Central Bank.
Buying Rate
Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
|
|
|
|
C
|
|
Cable
A term used in the foreign exchange market for the US
Dollar/British Pound rate.
Capital Risk
The risk arising from a bank having to pay to the counter party with out knowing whether the other party will or is able to meet its side of the bargain. see Herstatt.
Carry
The interest cost of financing securities or other financial instruments held.
Cash Delivery
Same day settlement.
Cash market
The market in the actual financial instrument on which a futures or options contract is based.
Cash
Normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same day deals.
Cash and Carry
The buying of an asset today and selling a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.
Cash Settlement
A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.
Central Bank
A nations main regulatory bank. Traditionally, its primary responsibility is development and implementation of monetary policy.
Central Rate
Exchange rates against the ECU adopted for each currency within the EMS. Currencies have limited movement from the central rate according to the relevant band.
Chartist
An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.
Clean float
An exchange rate that is not materially effected by official intervention.
Closed position
A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
Commission
The fee that a broker may charge clients for dealing on their behalf.
Confirmation
A memorandum to the other party describing all the relevant
details of the transaction.
Contract
An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract).
Conversion Account
A general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as Position Accounts.
Conversion
The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.
Conversion arbitrage
A transaction where the asset is purchased and buys a put option and sells a call option on the asset purchased, each option having the same exercise price and expiry.
Convertible currency
A currency that can be freely exchanged for another currency (and or gold) without special authorization from the central bank.
Copey
Slang for the Danish krone.
Correspondent Bank
The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.
Counter party
The other organization or party with whom the exchange deal is being transacted.
Counter value
Where a person buys a currency against the dollar it is the dollar value of the transaction.
Country risk
The risk attached to a borrower by virtue of its location in a particular country. This involves examination of economic, political and geographical factors. Various organizations generate country risk tables.
Cover
(1) To take out a forward foreign exchange contract. (2) To close out a short position by buying currency or securities which have been sold.
Covered Arbitrage
Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.
Covered Margin
The interest rate margin between two instruments denominated
in different currencies after taking account of the cost of
forward cover.
Crawling peg
A method of exchange rate adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line with certain economic or market indicators.
Credit Risk
The risk that a debtor will not repay; more specifically the
risk that the counterparty does not have the currency promised
to be delivered.
Cross Deal
A foreign exchange deal entered into, involving two
currencies, neither of which is the base currency.
Cross Rates
Rates between two currencies, neither of which is the US
Dollar.
Current Account
The net balance of a country's international payment arising
from exports and imports together with unilateral transfers such
as aid and migrant remittances. It excludes capital flows.
|
|
|
|
D
|
|
Day Trader
Speculators who take positions which are then liquidated
prior to the close of the same trading day.
Deal Date
The date on which a transaction is agreed upon.
Deal Ticket
The primary method of recording the basic information
relating to a transaction.
Dealer
An individual or firm acting as a principal, rather than as
an agent, in the purchase and/or sale of securities. Dealers
trade for their own account and risk.
Deflator
Difference between real and nominal Gross National Product,
which is equivalent to the overall inflation rate.
Delivery Date
The date of maturity of the contract, when the exchange of
the currencies is made. This date is more commonly known as the
value date in the FX or Money markets.
Delivery Risk
A term to describe when a counter party will not be able to complete his side of the deal, although willing to do so.
Depreciation
A fall in the value of a currency due to market forces rather
than due to official action.
Desk
Term referring to a group dealing with a specific currency or
currencies.
Details
All the information required to finalize a foreign exchange
transaction, i.e. name, rate, dates, and point of delivery.
Devaluation
The deliberate downward adjustment of a currency’s price,
normally by official announcement.
Direct quotation
Quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Dirty Float
Floating a currency when the rate is controlled by intervention by the monetary authorities.
|
|
|
|
E
|
|
Easing
Modest decline in price.
Economic Indicator
A statistic which indicates current economic growth rates and
trends such as retail sales and employment.
ECU
European Currency Unit.
EDI
Electronic Data Interchange.
Effective Exchange Rate
An attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.
EFT
Electronic Fund Transfer.
EMS
European Monetary System.
European Monetary System
A system designed to stabilize if not eliminate exchange risk between member states of the EMS as part of the economic convergence policy of the EU. It permits currencies to move in a measured fashion (divergence indicator) within agreed bands (the parity grid) with respect to the ECU and consequently with each other.
Exchange Control
Rules used to preserve or protect the value of a countries currency.
Exotic
A less broadly traded currency.
Exposure
In foreign exchange, a potential for gain or loss because of movement in foreign exchange rate. There are three primary types of exposure:
- Economic: The change in future earning power and cash flow arising from a change in exchange rates. In effect, it represents a change in the value of a company holding foreign currency.
- Transnational: A potential gain or loss arising from transactions that will definitely occur in the future, are currently in progress, or could have already been completed. A signed but not shipped sales contract, a receivable or foreign currency payment collected but not converted to local currency would all be examples of transaction exposure.
- Translation: The potential for change in reported earnings and/or the book value of the consolidated company equity accounts, as the result of a change in foreign exchange rates used to translate the foreign currency statements of subsidiaries and affiliates known as accounting exposure.
|
|
|
|
F
|
|
Fast Market
Rapid movement in a market caused by strong interest by
buyers and/or sellers. In such circumstances price levels may be
omitted and bid and offer quotations may occur too rapidly to be
fully reported.
Fed Fund Rate
The interest rate on Fed funds. This is a closely watched
short term interest rate as it signals the Feds view as to the
state of the money supply.
Fed Funds
Cash balances held by banks with their local Federal Reserve
Bank. The normal transaction with these funds is an inter bank
sale of a Fed fund deposit for one business day. Straight deals
are where the funds are traded overnight on an unsecured basis.
Fed
The United States Federal Reserve. Federal Deposit Insurance
Corporation Membership is compulsory for Federal Reserve
members. The corporation had deep involvement in the Savings and
Loans crisis of the late 80s.
Federal Reserve System
The central banking system in the United States.
Fill or Kill
An order which must be entered for trading, normally in a pit three times, if not filled is immediately canceled.
Fisher Effect
The relationship that exists between interest rates and exchange rate movements, so that in an ideal situation interest rate differentials would be exactly off set by exchange rate movements. See interest rate parity.
Fixed Exchange Rate
Official rate set by monetary authorities. Often the fixed
exchange rate permits fluctuation within a band.
Flexible Exchange Rate
Exchange rates with a fixed parity against one or more
currencies with frequent revaluation. A form of managed float.
Floating Exchange Rate
An exchange rate where the value is determined by market
forces. Even floating currencies are subject to intervention by
the monetary authorities. When such activity is frequent the
float is known as a dirty float.
FOMC
Federal Open Market Committee, the committee that sets money
supply targets in the US which tend to be implemented through
Fed Fund interest rates etc.
Foreign Exchange
The purchase or sale of a currency against sale or purchase
of another.
Forex
Term commonly used when referring to the foreign exchange market.
Forex Club
Groups formed in the major financial centers to encourage educational and social contacts between foreign exchange dealers, under the umbrella of Association Cambiste International.
Forward margins
Discounts or premiums between spot rate and the forward rate for a currency. Normally quoted in points.
Forward Operations
Foreign exchange transactions, on which the fulfillment of the mutual delivery obligations is made on a date later than the second business day after the transaction was concluded.
Forward Outright
A commitment to buy or sell a currency for delivery on a
specified future date or period. The price is quoted as the Spot
rate, minus or plus the forward points for the chosen period.
Forward Rate
Forward rates are quoted in terms of forward points, which
represents the difference between the forward and spot rates. In
order to obtain the forward rate from the actual exchange rate
the forward points are either added or subtracted from the
exchange rate. The decision to subtract or add points is
determined by the differential between the deposit rates for
both currencies concerned in the transaction. The base currency
with the higher interest rate is said to be at a discount to the
lower interest rate quoted currency in the forward market.
Therefore the forward points are subtracted from the spot rate.
Similarly, the lower interest rate base currency is said to be
at a premium, and the forward points are added to the spot rate
to obtain the forward rate.
Free Reserves
Total reserves held by a bank less the reserves required by
the authority.
Front Office
The activities carried out by the dealer , normal trading
activities.
Fundamentals
The macro economic factors that are accepted as forming the
foundation for the relative value of a currency, these include
inflation, growth, trade balance, government deficit, and
interest rates.
Fundamental Analysis
Thorough analysis of economic and political data with the
goal of determining future movements in a financial market.
FX
Foreign Exchange.
|
|
|
|
G
|
|
G7
The seven leading industrial countries, being US , Germany,
Japan, France, UK, Canada, Italy.
G10
G7 plus Belgium, Netherlands and Sweden, a group associated
with IMF discussions. Switzerland is sometimes peripherally
involved.
Gap
A mismatch between maturities and cash flows in a bank or
individual dealers position book. Gap exposure is effectively
interest rate exposure.
Going Long
The purchase of a stock or commodity for investment or
speculation.
Going Short
The selling of a currency or instrument not owned by the
seller.
Gold Standard
A monetary system that backs its currency with a reserve of
gold, and allows currency holders to convert their currency into
gold. The U.S. went off the gold standard in 1971.
Good Until Canceled
An instruction to a broker that unlike normal practice
the order does not expire at the end of the trading day,
although normally terminates at the end of the trading month.
Grid
Fixed margin within which exchange rates are allowed to fluctuate.
Gross Domestic Product
Total value of a country's output, income or expenditure produced within the country's physical borders.
Gross National Product
Gross domestic product plus " factor income from abroad" - income earned from investment or work abroad.
|
|
|
|
H
|
|
Hard currency
Any one of the major world currencies that is well traded and easily converted into other currencies.
Head and Shoulders
A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the price to drop to around the same level as the shoulder. A further modest rise or level will indicate a that a further major fall is imminent. The breach of the neckline is the indication to sell.
Hedge
The purchase or sale of options or futures contracts as a
temporary substitute for a transaction to be made at a later
date. Usually it involves opposite positions in the cash or
futures or options market.
Hedged position
One open buy position and one open sell position in the same currency.
Hit the bid
Acceptance of purchasing at the offer or selling at the bid.
|
|
|
|
I
|
|
IMF
International Monetary Fund, established in 1946 to provide
international liquidity on a short and medium term and encourage
liberalization of exchange rates. The IMF supports countries
with balance of payments problems with the provision of loans.
IMM
International Monetary Market part of the Chicago Mercantile
Exchange that lists a number of currency and financial futures.
Implied Volatility
A measurement of the market's expected price range of the
underlying currency futures based on the traded option premiums.
Implied Rates
The interest rate determined by calculating the difference
between spot and forward rates.
Indicative Quote
A market-maker's price which is not firm.
Industrial Production Index
A coincident indicator measuring physical output of
manufacturing, mining and utilities.
Inflation
Continued rise in the general price level in conjunction with
a related drop in purchasing power. Sometimes referred to as an
excessive movement in such price levels.
Initial Margin
The margin is a returnable deposit required to be lodged by
buyers and sellers with the clearing house to secure a new
futures or options position.
Inter-Bank Rates
The bid and offer rates at which international banks place
deposits with each other. The basis of the Interbank market.
Interest Arbitrage
Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.
Interest parity
One currency is in interest parity with another when the difference in the interest rates is equalized by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese Yen against sterling would bring about interest parity.
Interest rate Swaps
An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows be they payments or receipts that are exchanged.
Internationalization
Referring to a currency that is widely used to denominate trade and credit transactions by non residents of the country of issue. US dollar and Swiss Franc are examples.
Intervention
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
|
|
|
|
K
|
|
Kiwi
Slang for the New Zealand dollar.
|
|
|
|
L
|
|
Leading Indicators
Statistics that are considered to precede changes in economic
growth rates and total business activity, e.g. factory orders.
Liability
In terms of foreign exchange , the obligation to deliver to a counter party an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an un-matured forward or spot transaction.
Limit order
A request to deal as a buyer or seller for a foreign currency transaction at a specified price, or at a better price, if obtainable.
Liquidation
Any transaction that offsets or closes out a previously established position.
Liquidity
The ability of a market to accept large transactions.
|
|
|
|
M
|
|
Maintenance Margin
The minimum margin which an investor must keep on deposit in
a margin account at all times in respect of each open contract.
Make a market
A dealer is said to make a market when he or she quotes bid and offer prices at which he or she stands ready to buy and sell.
Managed float
When the monetary authorities intervene regularly in the market to stabilize the rates or to aim the exchange rate in a required direction.
Margin Call
A demand for additional funds. A requirement by a clearing
house that a clearing member (or by a brokerage firm that a
client) brings margin deposits up to a required minimum level to
cover an adverse movement in price in the market.
Margin
The amount of money or collateral that must be, in the first instance, provided or thereafter, maintained, to ensure against losses on open contracts. Initial must be placed before a trade is entered into. Maintenance or Variation margin must be added to initial to maintain against losses on open positions. Sometimes herein the amount that needs to be present to establish or thereafter maintained is sometimes herein referred to as necessary margin.
Mark to market
The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.
Market maker
A market maker is a person or firm authorized to create and maintain a market in an instrument.
Market Order
An order to buy or sell a financial instrument immediately at
the best possible price.
Micro Economics
The study of economic activity as it applies to individual
firms or well defined small groups of individuals or economic
sectors.
Mid-Price or Middle Rate
The price half-way between the two prices, or the average of
both buying and selling prices offered by the market makers.
Minimum Price Fluctuation
The smallest increment of market price movement possible in a
given futures contract.
Monetary Base
Currency in circulation plus banks' required and excess deposits at the central bank.
Moving Average
A way of smoothing a set of data, widely used in price time series.
|
|
|
|
N
|
|
Net Position
The number of futures contracts bought or sold which have not
yet been offset by opposite transactions.
|
|
|
|
O
|
|
Odd Lot
A non standard amount for a transaction.
Offer
The price at which a seller is willing to sell. The best
offer is the lowest such price available.
Offset
The closing-out or liquidation of a futures position.
Off-Shore
The operations of a financial institution which although
physically located in a country, has little connection with that
country's financial systems. In certain countries a bank is not
permitted to do business in the domestic market but only with
other foreign banks. This is known as an off shore banking unit.
Overnight Limit
Net long or short position in one or more currencies that a
dealer can carry over into the next dealing day. Passing the
book to other bank dealing rooms in the next trading time zone
reduces the need for dealers to maintain these unmonitored
exposures.
Overnight
A deal from today until the next business day.
|
|
|
|
P
|
|
Parity
(1) Foreign exchange dealer's slang for your price is the correct market price. (2) Official rates in terms of SDR or other pegging currency.
Parities
The value of one currency in terms of another.
Pegged
A system where a currency moves in line with another currency, some pegs are strict while others have bands of movement.
Pip
One unit of price change in the bid/ask price of a currency. For most currencies, it denotes the fourth decimal place in an exchange rate and represents 1/100 of one percent (.01%).
Position
The netted total commitments in a given currency. A position
can be either flat or square (no exposure), long, (more currency
bought than sold), or short ( more currency sold than bought).
|
|
|
|
Q
|
|
Quote
An indicative price. The price quoted for information
purposes but not to deal.
|
|
|
|
R
|
|
Rally
A recovery in price after a period of decline.
Range
The difference between the highest and lowest price of a
future recorded during a given trading session.
Rate
(1) The price of one currency in terms of another, normally against USD. (2) Assessment of the credit worthiness of an institution.
Reaction
A decline in prices following an advance.
Reciprocal currency
A currency that is normally quoted as dollars per unit of currency rather than the normal quote method of units of currency per dollar. Sterling is the most common example.
Resistance Point or Level
A price recognized by technical analysts as a price which is
likely to result in a rebound but if broken through is likely to
result in a significant price movement.
Revaluation
Increase in the exchange rate of a currency as a result of
official action.
Revaluation Rate
The rate for any period or currency which is used to revalue
a position or book.
Risk Management
The identification and acceptance or offsetting of the risks
threatening the profitability or existence of an organization.
With respect to foreign exchange involves among others
consideration of market, sovereign, country, transfer, delivery,
credit, and counterparty risk.
Risk Position
An asset or liability, which is exposed to fluctuations in
value through changes in exchange rates or interest rates.
Rollover
An overnight swap, specifically the next business day against
the following business day (also called Tomorrow Next,
abbreviated to Tom-Next).
Round trip
Buying and selling of a specified amount of currency.
|
|
|
|
S
|
|
Same day transaction
A transaction that matures on the day the transaction takes
place.
Selling Rate
Rate at which a bank is willing to sell foreign currency.
Settlement Date
The date upon which foreign exchange contracts settle.
Settlement Risk
Where a payment is made to a counter party before the counter value payment has been made. The risk is that the counter party's payment will not be received.
Short sale
The sale of a specified amount of currency not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.
Short-term interest rates
Normally the 90 day rate.
Sidelined
A major currency that is lightly traded due to major market interest being in another currency pair.
Slippage
Refers to the negative (or depreciating) pip value between where a stop loss order becomes a market order and where that market order may be filled.
Soft Market
More potential sellers than buyers, which creates an environment where rapid price falls are likely.
Spot
(1) The most common foreign exchange transaction. (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
Spot Next
The overnight swap from the spot date to the next business
day.
Spot Month
The contract month closest to delivery.
Spot Price/Rate
The price at which the currency is currently trading in the
spot market.
Spot Week
A standard period of one week swap measured from the current
value date of the currency spot rate.
Spread
(l)The difference between the bid and ask price of a currency. (2) The difference between the price of two related futures contracts.
Square
Purchase and sales are in balance and thus the dealer has no
open position.
Squawk Box
A speaker connected to a phone often used in broker trading
desks.
Squeeze
Action by a central bank to reduce supply in order to
increase the price of money.
Standard
A term referring to certain normal amounts and maturities for
dealing.
Sterilization
Central Bank activity in the domestic money market to reduce
the impact on money supply of its intervention activities in the
FX market.
Sterling
British pound, otherwise known as Cable.
Stocky
Market slang for Swedish Krona.
Support Levels
When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further down ward movement. See resistance point.
Swap Price
A price as a differential between two dates of the swap.
Swap
The simultaneous purchase and sale of the same amount of a
given currency for two different dates, against the sale and
purchase of another. A swap can be a swap against a forward. In
essence, swapping is somewhat similar to borrowing one currency
and lending another for the same period. However, any rate of
return or cost of funds is expressed in the price differential
between the two sides of the transaction.
Swissy
Market slang for Swiss Franc.
|
|
|
|
T
|
|
Technical Correction
An adjustment to price not based on market sentiment but
technical factors such as volume and charting.
Thin Market
A market in which trading volume is low and in which
consequently bid and ask quotes are wide and the liquidity of
the instrument traded is low.
Thursday/Friday Dollars
A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
Tick
A minimum change in price, up or down.
Today/Tomorrow
Simultaneous buying of a currency for delivery the following
day and selling for the spot day, or vice versa. Also referred
to as overnight.
Tomorrow Next (Tom Next)
Simultaneous buying of a currency for delivery the following
day and selling for the spot day or vice versa.
Trade Date
The date on which a trade occurs.
Tradeable Amount
Smallest transaction size acceptable.
Transaction Date
The date on which a trade occurs.
Transaction
The buying or selling of securities resulting from the
execution of an order.
Two Tier market
A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa.
Two-Way Quotation
When a dealer quotes both buying and selling rates for
foreign exchange transactions.
|
|
|
|
U
|
|
Uncovered
Another term for an open position.
Under-Valuation
An exchange rate is normally considered to be undervalued
when it is below its purchasing power parity.
Uptick
A new price quote at a price higher than the preceding quote.
|
|
|
|
V
|
|
Value Date
For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day.
Value Spot
Normally settlement for two working days from today. See
Value Date.
Volatility
A measure of the amount by which an asset price is expected
to fluctuate over a given period. Normally measured by the
annual standard deviation of daily price changes (historic). Can
be implied from futures pricing implied volatility.
Vostro Account
A local currency account maintained with a bank by another bank. The term is normally applied to the counter party's account from which funds may be paid into or withdrawn, as a result of a transaction.
|
|
|
|
W
|
|
Wash trade
A matched deal which produces neither a gain nor a loss.
Whipsaw
Slang for a condition of a highly volatile market where a
sharp price movement is quickly followed by a sharp reversal.
Working Day
A day on which the banks in a currency's principal financial
centre are open for business. For FX transactions, a working day
only occurs if the bank in both (all relevant currency centers
in the case of a cross are open) currencies is working.
|
|
|
|
Y
|
|
Yard
Slang for a billion.
© Copyright Frannor Trading
102 (Pty) Ltd 200
|
