Accrual – "Accrual" is 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.
Actualise – "Actualise" is the underlying assets or instruments, which are traded in the cash market.
Adjustable peg – An"adjustable peg" is the 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 (for example, the pegging of the Russian ruble to that of the American dollar), 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 – This is an official action, normally either by change in the internal economic policies to correct a payment imbalance or in the official currency rate.
Agent bank – (1) An "agent bank" is 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.
Aggregate demand – "Aggregate demand" is the term used to describe the total demand for goods and services in the economy. This includes the 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 – An "aggregate risk" is the size of exposure of a bank to a single customer for both spot and forward contracts.
Aggregate supply – An "aggregate supply" is the total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio – "Agio" is the 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 – "Appreciation" means/describes a currency strengthening in response to market demand rather than by official action.
Arbitrage – This word ("arbitrage") means/describes the simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differential, the exchange rate differential or swap points. May be derived from Deposit Rate differentials.
Arbitrage channel – An"arbitrage channel" is the range of prices within which there will be no possibility to arbitrage between the cash and futures market.
Around – "Around," is the word used in quoting forward "premium/discount." "Five–five around" would mean five points on either side of the present spot value.
Asset allocation – An "asset allocation" is the dividing instrument funds among markets to achieve diversification or maximum return.
Ask – The currency or instrument is offered at this price.
Asset – In the context of foreign exchange – this is the right to receive from a counterpart, 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 – This is an instruction, which is given or issued to a dealer to buy or sell at thebest rate that can be obtained.
At or better – This is an order to deal at a specific rate or better.
Authorised dealer – Is a financial institution or bank authorised to deal in foreign exchange.
Back office – Stands for, settlement and related processes.
Backwardation – Is a term referring to, the amount that the spot price exceeds the forward price.
Balance of Payments – The ("balance of payments") is a systematic record of the economic transactions during a given period for a country.
(1) The term is often used to mean either: (A) balance of payments on "current account" or (B) 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 – This word means the range in which a currency is permitted to move. A system used in the ERM.
Bank line – A "bank line" is a line of credit granted by a bank to a customer, also known as a "line."
Bank rate – A "base rate" is the rate at which a central bank is prepared to lend money to its domestic banking system.
Base currency – A "base currency" is the currency in which the operating results of the bank or institution are reported.
Basis – This is the difference between the cash price and futures price.
Basis point – A"basis point" is one percent of one percent.
Basis trading – Is the taking of opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket – Is the word used to talk about a group of currencies normally used to manage the exchange rate of a currency. This is sometimes referred to as a unit of account.
Bear market – A "bear market" is a prolonged period of generally falling prices.
Bear – Is the word given to an investor who believes that prices are going to fall.
Bid – This is the price at which a buyer has offered to purchase the currency or instrument.
Book – "Book" is 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 – "Passing the Book" usually refers to the transferring of the trading of the bank's positions to another office at the close of the day, e.g. from London to New York.
Bretton Woods – This was the place where the conference, which in 1944, gave rise to the establishment of the post–war foreign exchange system that remained intact until the early 1970s. This 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 – A "broker" is an agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account.
In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries, affiliates, and partners in many countries.
Bull market – A "bull market" is a prolonged period of generally rising prices.
Bull – Is the word given to an investor who believes that prices are going to rise.
Bundesbank – The German Central Bank, or the Central Bank of Germany
Buying Rate – The "buying rate" is the rate at which the market and a market maker in particular are willing to buy the currency. This is sometimes called a bid rate.
Cable – "Cable" is a term used in the foreign exchange market for the U.S. dollar/British pound rate.
Capital risk – "Capital risk" is the risk arising from a bank having to pay to the counter party without knowing whether the other party will, or is able, to meet its side of the bargain. See Herstatt.
Carry – "Carry" is the interest cost of financing securities or other financial instruments held.
Cash delivery – "Cash delivery" means: same day settlement.
Cash market – A"cash market" is the market in the actual financial instrument on which a futures or options contract is based upon.
Cash – "Cash" usually refers to an exchange transaction contracted for settlement on the day the deal is done/agreed. This term is mainly used in the North American markets and those countries which rely on 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 –"Cash and carry" is the term used when, 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 – Is a procedure for settling a futures contract where the cash difference between the future and the market price is paid instead of physical delivery.
Central bank – "The Central Bank" is a bank, which is responsible for controlling a country's monetary policy. It is normally the issuing bank and controls bank licensing and any foreign exchange control regime.
Central rate – "Central rate" means 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.
Clean float – A "clean float" means an exchange rate that is not materially affected by official intervention.
Closed position – A "closed position" is atransaction, which leaves the trade with a zero net commitment to the market with respect to a particular currency.
Commission – A "commission" is the fee that a broker may charge clients for dealing on their behalf.
Confirmation – This ("confirmation") is amemorandum to the other party describing all the relevant details of the transaction.
Contract – A "contract" is 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 "conversion account" is general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as position accounts.
Conversion – This is 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 "conversion arbitrage" transaction is 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 "convertible currency" is currency that can be freely exchanged for another currency (and/or gold) without special authorization from the central bank.
Copey – This is slang for the Danish krone.
Correspondent bank – This is foreign bank's representative who regularly performs services for a bank which has no branch in the relevant center, e.g. to facilitate the transfer of funds. In the U.S., this often occurs domestically due to interstate banking restrictions.
Counterparty – This is the other organization or party with whom the exchange deal is being transacted.
Counter value – Is where a person buys a currency against the dollar, it is the dollar value of the transaction.
Country risk – "Country risk" is 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 – Means two things (A) to take out a forward foreign exchange contract. (B) 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 – This is the interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover.
Crawling peg – This is 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 – A "credit risk" is 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 "cross deal" is a foreign exchange deal entered into involving two currencies, neither of which is the base currency.
Cross rates – Are the rates between two currencies, neither of which is the U.S. dollar.
Current account – Is 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.
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Day trader – Is the term given to speculators who take positions in commodities, which are then, liquidated prior to the close of the same trading day.
Deal date – "Deal date" means the date on which a transaction is agreed upon.
Deal ticket – This is the primary method of recording the basic information relating to a transaction.
Dealer – A "dealer" is 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 – "Deflator" is the word used, meaning the difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.
Delivery date – This is 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, which is used to describe when counterparty will not be able to complete his side of the deal, although willing to do so.
Depreciation – Means a fall in the value of a currency due to market forces rather than due to official action.
Desk – Is a term referring to a group dealing with a specific currency or currencies.
Details – Refers to all the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.
Devaluation – Is a deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.
Direct quotation – This is quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Dirty float – A "dirty float" is the floating of a currency when the rate is controlled by intervention by the monetary authorities.
Easing – A modest decline in price.
Economic indicator – An"economic indicator" is statistic that indicates current economic growth rates and trends, such as retail sales and employment.
ECU – The 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 – The "European Monetary System."
European Monetary System – A system that was 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 – An "exchange control" is a system of controlling inflows and outflows of foreign exchange. Devices include licensing multiple currencies, quotas, auctions, limits, levies and surcharges.
Exotic – A less broadly traded currency.
Exposure – (A) Net working capital – The current assets in a foreign currency minus current liabilities in the currency.
(B) Net financial method – The current assets in a foreign currency minus current liabilities and long–term debt in the currency.
(C) Monetary/non–monetary method – Monetary assets and liabilities in the foreign currency are valued at present exchange rates, while non–monetary items are entered at the relevant historic rates.
Fast market – "Fast market" means, 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 Fed's view as to the state of the money supply.
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 of the U.S. comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board. Membership in the Fed is compulsory for banks chartered by the Comptroller of Currency and optional for state–chartered banks.
Fill or Kill – An order, which must be entered for trading, normally in a pit three times. If not filled – it is immediately canceled.
Fisher effect – The "Fisher effect" is the relationship that exists between interest rates and exchange rate movements, so that in an ideal situation, exchange rate movements would exactly offset interest rate differentials. See interest rate parity.
Fixed exchange rate – A "fixed exchange rate" is the 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 revaluations. A form of managed float.
Floating exchange rate – An exchange rate, where market forces determine the value. 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 U.S., which tend to be implemented through Fed Fund interest rates etc.
Foreign exchange – This is the purchase or sale of a currency against sale or purchase of another.
Forex – Foreign Exchange.
Forex club – The "Forex Club" are 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 – "Forward margins" are discounts or premiums between spot rate and the forward rate for a currency. Normally quoted in points.
Forward operations – Are 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 – Is 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 represent 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 – Are the total reserves held by a bank minus the reserves required by the authority.
Front office – The activities carried out by the dealer I.e. Normal trading activities.
Fundamentals – Are 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.
FX – The Foreign Exchange.
G7 – The seven leading industrial countries, specifically the U.S., Germany, Japan, France, the UK, Canada, and Italy.
G10 – G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
Gap – Is a mismatch between maturities and cash flows in a bank or individual dealer's position book. Gap exposure is effectively interest rate exposure.
Geopolitical events – "Geopolitical events" are key, international, political, events. These events affect not only the foreign exchange market, but all other markets as well.
Going long – Is the purchase of a stock, commodity, or currency for investment or speculation.
Going short – Is the selling of a currency or instrument not owned by the seller.
Gold standard – The original system for supporting the value of currency issued. Where the price of gold is fixed against the currency, it means that the increased supply of gold does not lower the price of gold but causes prices to increase.
Good until cancelled – This is 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 – A "grid" is the fixed margin, within which, exchange rates are allowed to fluctuate.
Gross Domestic Product – The total value of a country's output, income, or expenditure produced within the country's physical borders.
Gross National Product – The Gross domestic product plus ?factor income from abroad" – income earned from investment or work abroad.
Hard currency – Is a currency, whose value is expected to remain stable or increase in terms of other currencies.
Head and shoulders – This ("Head and shoulders") phrase talks about a pattern in price trends which chartists consider indicating 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 that a further major fall is imminent. The breach of the neckline is the indication to sell.
Hedge – This is 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, futures, or options market.
Hit the bid – Acceptance of purchasing at the offer or selling at the bid.
IMF – "IMF" stands for, the International Monetary Fund, which was established in 1946 to provide international liquidity on a short and medium term and to encourage the 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 – This is the interest rate determined by calculating the difference between spot and forward rates.
Indicative quote – This is a market maker"s price, which is not firm.
Inflation – This is a 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 required by a Foreign Exchange firm to initiate the buying or selling of a determined amount of currency.
Interbank rates – "Interbank rates" are the bid and offer rates at which international banks place deposits with each other. The basis of the interbank market.
Interest arbitrage – "Interest arbitrage" is 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 a 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 – Is 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, whether payments or receipts are exchanged.
Internationalisation –"Internationalisation" refers to a currency that is widely used to denominate trade and credit transactions by non–residents of the country of issue. U.S. dollar and Swiss franc are examples.
Intervention – "Intervention" is an action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Kiwi – This is slang for the New Zealand dollar.
Leading indicators – "Leading indicators" are statistics that are considered to precede changes in economic growth rates and total business activity, e.g. factory orders.
Leverage – "Leverage" means that a trader can take a market position, much larger that that of the trader"s account value.
Liability – "Liability" , is in terms of foreign exchange, the obligation to deliver to counterparty an amount of currency; either with respect to a balance sheet, holding at a specified future date, or in respect of an un–matured forward or spot transaction.
Limit order – A "limit order" is an order to buy or sell a specified amount of a currency at a specified price or better.
Liquidation – "Liquidation" is any transaction that offsets or closes out a previously established position.
Liquidity – "Liquidity" is the ability of a market to accept large transactions.
Maastricht Treaty – The Maastricht Treaty was signed and ratified, by member states of the, EEC, in the town of Maastricht, in the Netherlands on 7 February 1992.
This treaty amended the 1957 Treaty of Rome, which was fundamental in the founding of what was then the EEC (The European Economic Community – now the EU). The final signing of the Maastricht Treaty was key in establishing new, European–wide, guidelines, for the environment and sustainable economic growth, for today"s EU.
Maintenance margin – A "maintenance margin" is the minimum margin, which an investor must keep on deposit in a margin account at all times with respect to 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 – Is 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 "margin call" is the demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.
Margin – For currencies, a deposit made to the forex firm on establishing a futures position account.
Mark to market – "Mark to market" is 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 – A "market order" is an order to buy or sell a financial instrument immediately at the best possible price.
Microeconomics – "Micro economics" is 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 – "Mid–price" or middle rate" is the price halfway between the two prices or the average of both buying and selling prices offered by the market makers.
Minimum price fluctuation – "Minimum price' fluctuation" is the smallest increment of market price movement possible, in a given futures contract.
Monetary base – "Monetary base" is the currency in circulation, plus banks' required and excess deposits at the central bank.
Moving average –"Moving average" is a way of smoothing a set of data, widely used in price time series.
Net Position – A"net position" is the amount of currency bought or sold, which have not yet been offset by opposite transactions.
Odd lot – An "odd lot" is a non–standard amount for a transaction.
Offer – An "offer" is the price at which a seller is willing to sell. The best offer is the lowest such price available.
Offset – "Offset" is the closing–out or liquidation of a futures position.
Offshore – "Offshore" is 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 offshore banking unit.
Overnight limit – An "overnight limit" is the 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 – "Overnight" means a deal from today until the next business day.
Parity – "Parity" is: (A) Foreign exchange dealer's slang for "your price is the correct market price." (B) Official rates in terms of SDR or other pegging currency.
Parities –"Parities" are the value of one currency in terms of another.
Pegged – "Pegged" is a system where a currency moves in line with another currency. Some pegs are strict while others have bands of movement.
Pip – "Pip" is the minimum fluctuation or smallest increment of price movement.
Position –"Position" is 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).
Profit taking – "Profit taking" is the unwinding of a position to realize profits.
Quote – A "quote" is an indicative price. The price quoted for information purposes but not to deal.
Rally – "Rally" is a recovery in price after a period of decline.
Range – A "range" is the difference between the highest and lowest price of a future recorded during a given trading session.
Rate – "Rate" (A) the price of one currency in terms of another, usually against the USD. (B) The assessment of the credit worthiness of an institution.
Reaction – "Reaction" is a decline in prices following an advance.
Reciprocal currency – A "reciprocal currency" is 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 – "Resistance point or level" is 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 –"Revaluation" is an increase in the exchange rate of a currency because of official action.
Revaluation rate – "Revaluation rate" is the rate for any period or currency, which is used to revalue a position or book.
Risk management –"Risk management" is the identification and acceptance or offsetting of the risks threatening the profitability or existence of an organization. With respect to foreign exchange, involves consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.
Risk position – "Risk position" is an asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.
Rollover – A"rollover" is an overnight swap, specifically the next business day against the following business day (also called Tomorrow Next, abbreviated to Tom–Next).
Round trip – A "round trip" is the buying and selling of a specified amount of currency.
Same day transaction – A "same day transaction" is a transaction that matures on the day the transaction takes place.
Selling rate – A "selling rate" is a rate at which a bank is willing to sell foreign currency.
Settlement date – A"settlement date" is the date by which an executed order must be settled by the transference of instruments or currencies and funds between buyer and seller.
Settlement risk – A "settlement risk" is a risk associated with the non–settlement of the transaction by the counter party.
Short sale – A "short sale" is 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 – A"short term interest rate" is normally the 90–day rate.
Sidelined – "Sidelined" a major currency that is lightly traded due to major market interest in another currency pair.
Soft Market – A "soft market" is a market that has more potential sellers than buyers, which creates an environment where rapid price falls are likely.
Spot – "Spot" (A) the most common foreign exchange transaction. (B) Spot or spot date, which refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
Spot next – "Spot next" means the overnight swap from the spot date to the next business day.
Spot price/rate – A "spot price/rate" is the price at which the currency is currently trading in the spot market.
Spread – "Spread" (A) the difference between the bid and ask price of a currency. (B) The difference between the price of two related futures contracts.
Square – "Square" means that the purchase and sales are in balance and thus the dealer has no open position.
Squawk box – A "squawk box" is speaker connected to a phone often used in broker trading desks.
Squeeze –"Squeeze," this is an action by a central bank to reduce supply in order to increase the price of money.
Stable market – A"stable market" is an active market, which can absorb large sales or purchases of currency without major moves.
Standard – "Standard" is a term referring to certain normal amounts and maturities for dealing.
Sterilisation – "Sterilisation" refers to Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.
Sterling – "Sterling" the British pound, otherwise known as cable.
Stocky – "Stocky" is the market slang for the Swedish Krona.
Stop loss order – "Loss and stop" is an order given to ensure that, should a currency weaken by a certain percentage, a short position will be covered even though this involves taking a loss. Realize profit orders are less common.
Support levels – "Support levels" this is the term used when an exchange rate depreciates or appreciates to a level where (A) Technical analysis techniques suggest that the currency will rebound, or not go below; (B) the monetary authorities intervene to stop any further downward movement. See resistance point.
Swap price – "Swap price." A price as a differential between two dates of the swap.
Swap – "Swap." This is 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 – "Swissy." This is market slang for Swiss franc.
Technical correction – A "technical adjustment" is an adjustment to price not based on market sentiment, but on technical factors such as volume and charting.
Thin market – A "thin market" is a market in which trading volume is low and in which bid and ask quotes are wide and the liquidity of the instrument traded is low.
Thursday/Friday dollars – "Thursday/Friday dollars" are a U.S. foreign exchange technicality. For example, a foreign bank buys dollars on Tuesday for a Thursday delivery.
If the bank leaves the funds overnight and transfers them on Friday by means of a clearinghouse cheque, then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
Tick – "Tick" is a minimum change in price, up or down.
Today/Tomorrow – "Today/Tomorrow" is the simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. This is also referred to as, "overnight!"
Tomorrow next (Tom next) – "Tomorrow next (Tom next)" is the simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
Trade date – A "trade date" is the date on which a trade occurs.
Tradable amount – A "tradable amount" is the smallest transaction size acceptable.
Transaction date – A"transaction date" is the date on which a trade occurs.
Transaction – A "transaction" is the buying or selling of currencies resulting from the execution of an order.
Two–tier market – A "two tier" market is the dual exchange rate system, where normally only one rate is open to market pressure, e.g. South Africa.
Two–Way quotation – A "two way quotation" is when a dealer quotes both buying and selling rates for foreign exchange transactions.
Uncovered – "Uncovered" is another term for/meaning an open position.
Under–valuation – "Under–valuation" means an exchange rate, which is normally considered to be undervalued when it is below its purchasing power parity.
Uptick – "Uptick" is a transaction executed at a price greater than the previous transaction.
Value date – "Value date" is/means 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 center coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day.
Value spot – A "value spot" is usually settlement for (two working days) from today. See value date.
Volatility – "Volatility" is a measure of the amount by which an asset price is expected to fluctuate over a given period.
Vostro account – A "vostro account," is a local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account, from which, funds may be paid into or withdrawn, as a result of a transaction.
Wash trade – A "wash trade" is a matched deal, which produces neither a gain nor a loss.
Whipsaw – "Whipsaw" is a term for where a trader takes a position, and then experiences a move against it, triggering stop loss limits and liquidation of positions, followed by a reversal and move in the original direction. Normally occurs in volatile markets.
Working day – A "working day" is a day on which the banks in a currency's principal financial center are open for business. For FX transactions, a working day only occurs if the bank in both financial centers are open for business (all relevant currency centers in the case of a cross are open).
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