Glossary

  • Proof of address (dated and posted within three months) and proof of identification.

  • Application Programming Interface.

  • The buy price.

  • Someone who forecasts prices will decline and/or a currency to depreciate.

  • The first currency in a currency cross or pair, e.g. GBP/USD, GBP is the base.

  • The interest rate set by a central bank.

  • Bank Automated Clearing System. Payments will take up to three business days to clear into a designated account.

  • The sell price.

  • Someone who forecasts prices to rise and/or a currency to appreciate.

  • An estimate of income and expenditure for a set period of time.

  • Where a client trades outside agreed parameters.

  • The Bank of England--the UK's central bank. 

  • The Pound to US Dollar (GBP/USD) exchange rate. 

  • Clearing House Automated Payment System. Faster than a BACS payment, and can be transferred and received on the same business day.

  • The two currencies involved in a transaction, e.g. GBP/EUR, USD/JPY, EUR/USD.

  • The primary method of recording basic information relating to a transaction.

  • Someone authorised to deal on the foreign exchange market, who by placing the order to buy or sell, acts as the principal or counterpart to a transaction.

  • A tone of language used to describe a situation that is seen to be non-aggressive. For instance: The Bank of England Governor made dovish comments about the future of monetary policy. 

  • A product of two or more moving components.

  • A down payment provided by clients as collateral to secure a forward trade.

  • Online Internet trading platforms that link the contributing banks around the world.

  • An economic indicator that measures the changes in sales of products with a life span in excess of three years.

  • The European Central Bank, governing monetary policy for the 19 member states in the Eurozone. 

  • The rate at which one currency can be traded for another.

  • The potential for running a profit or loss from fluctuations in market prices, risk.

  • Where an earlier deal is reversed thereby creating a neutral (flat) position.

  • The Federal Reserve, the US central bank. 

  • An economic indicator that refers to the total orders of durable and non-durable goods. The non-durable goods orders consist of food, clothing, light industrial products, and products designed for the maintenance of durable goods.

  • The simultaneous buying of one currency and selling of another.

  • London is the largest centre of foreign exchange trading. New York, Tokyo, Singapore, Zurich, Frankfurt, Hong Kong, Sydney, and Paris are also important.

  • A trade booked at today’s price but delivered at a specified date in the future, a way of locking in an exchange rate. 

  • A Forward/Forward deal is one where both legs of the deal have value dates greater than the current Spot value date.

  • Analysis of economic data and political factors to forecast future currency movements and values.

  • Usually comprises of the trading or dealing room/floor.

  • Forward rates are quoted in terms of forward points, which represents the difference between the forward and spot rates. 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, known as the Interest Rate Differential.

  • Foreign exchange deal that matures on any day past the Spot delivery date. Forward Points (Forward Pips or Forward Spread) Forward price used to adjust a spot price to calculate a forward price. It is based on the current spot exchange rate, interest rate differential (see Forward Rate) and the number of days to delivery.

  • The group of seven countries with the largest advanced economies in the world, which currently consists of Canada, France, Germany, Italy, Japan, the United States, and the United Kingdom.

  • Another name for the US Dollar.

  • A way of measuring the size and health of a country's economy, taking into account household spending, investment, government spending, and net exports. When GDP increases, the economy grows as a result of business expansion and people spending more money. 

  • A tone of language used to describe a situation that is seen to be aggressive.

  • A currency that is normally quoted as Dollars per unit of currency, rather than the normal quote method of units of currency per Dollar. Pound Sterling is the most common example, eg: 1 Pound buys 1.8000 US Dollars.

  • A Dealer's price that is not firm so can't be dealt on.

  • Acronym for International Bank Account Number, a standardised means of identifying bank accounts used for European cross-border payments.

  • A hedging transaction is one that protects an asset or liability against a fluctuation in the foreign exchange rate. Instruments used are varied and include Forwards, Futures, Options, and combinations of all of them. For commercial foreign exchange deals, the most common hedging tool is the Forward Contract.

  • A coincident indicator measuring physical output of manufacturing, mining, and utilities.

  • An economic condition reflecting a continued rise in the general price level in conjunction with a related drop in purchasing power.

  • The specification of the banks at which funds shall be paid upon settlement.

  • A specialist broker who acts as an intermediary between market makers who wish to buy or sell FX, without revealing their identities to other market makers.

  • Allows you to target a better exchange rate you’d like to transfer at, and if a positive market fluctuation occurs to reach it, your trade will be booked automatically to capitalise on the movement.

  • London Interbank Offered Rate - the benchmark interest rate for banks to lend to each other in the form of short-term loans.