Glossary

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

  • 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.

  • The ability of a market to accept large transactions with no impact on price stability.

  • Taking the left-hand side of a two-way quote i.e. selling the quoted currency.

  • A set payment instruction.

  • Margin is a cash deposit provided by clients as collateral to secure a trade and cover any losses (if any) that may result from adverse movements in exchange rates.

  • A demand for additional funds to restore the originally agreed margin percentage of a contract that has been affected by an adverse movement in the exchange rate.

  • The regular adjustment of an outstanding position to reflect accrued profits and losses, often required to calculate margin calls.

  • Participants routinely use Support Levels as a guide to place automated orders such as Stop Loss Orders. See Resistance Level.

  • A market maker is a dealer or firm authorised to create and maintain a market in foreign exchange by supplying prices and being prepared to buy or sell at those bid and ask prices.

  • Date for settlement of a contract.

  • Part of Central Bank monetary policy where the interest rate is decreased or the money supply increased to stimulate an economy.

  • A central bank's management of a country's money supply. Economic theory underlying monetary policy suggests that controlling the growth of the amount of money in the economy is the key to controlling prices and therefore inflation. However, central banks monetary capability is severely limited by global money movements. This forces them to use the indirect tool of exchange rate manipulation.

  • Part of Central Bank monetary policy where the interest rate is increased or the money supply reduced to ward off inflation.

  • A market consisting of financial institutions and dealers in money or credit who wish to either borrow or lend.

  • A process that enables institutions to settle only the net positions with one another at the end of the day, in a single transaction, not trade by trade as in gross settlement.

  • The rate at which a dealer is willing to sell currency at.

  • A combination of a Limit Order and a Stop Loss Order. If either order is achieved, the other order is automatically cancelled.

  • Any deal that has not been settled by physical payment or reversed by an equal and opposite deal for the same value date.

  • Onward Payment Instruction. Where you would like your broker to send your currency to.

  • An FX product/instrument that allows you to protect a rate but also allows you to benefit from favourable market movements. Caveats can be included in this product.

  • A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange-trading floor.

  • A forward deal that is not part of a swap operation.

  • The forward rate of a foreign exchange deal based on the spot price plus/minus forward points.

  • - Is an economy where high-growth rates placing pressure on production capacity resulting in increased inflationary pressures and higher interest rates.

  • Refers to the buying or selling of currencies between the hours of 9.00pm and 8.00am the following day. Stop Loss and Limit Orders are commonly used for this purpose.

  • An exchange rate between two countries that has been set by the governments involved and therefore does not fluctuate freely with market movements.

  • Politically Exposed Person.

  • Foreign exchange term representing the minimum fluctuation or smallest increment of price movement. It is a 100th part of a %, normally 10,000 of any spot rate. E.g. if the GBPUSD exchange rate is $1.5500, one pip is 0.0001.

  • Foreign exchange term representing 100 Pips (see Pip (Tick) above). E.g. if the GBPUSD exchange rate is $1.5500, one point is 0.01.

  • 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).

  • In the currency market, it is the amount of pips added added/subtracted from the spot price to determine a forward exchange rate.

  • An economic indicator which gauges the average changes on prices received by domestic producers for their output at all stages of processing.

  • The unwinding of a position to realise profits.

  • An indicative price.

  • A recovery in an exchange rate price after a period of decline.

  • The difference between the highest and lowest price of a currency recorded during a given trading period.

  • The price of one currency in terms of another.

  • A price level at which you would expect selling to take place and recognised by technical analysts as a price that a currency will struggle to move above, which could result in a rebound of the exchange rate. Market participants routinely use resistance levels as a guide to place automated orders such as limit orders.

  • Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods. RPIX excludes mortgage interest payments.

  • - Taking the right hand side of a two way quote i.e. buying the quoted currency.

  • The degree of uncertainty associated with an investment.

  • The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to commercial foreign exchange, correct risk management involves thorough financial analysis of the market and client's position and use of appropriate currency strategies.

  • The relationship between the risk and return on a currency. Usually, the more risk you are prepared to take, the higher the profit or loss you can expect.

  • Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies. E.g. next day (also called Tomorrow Next, abbreviated to Tom-Next).

  • A transaction that matures on the day the transaction takes place (Value Today).

  • Rate at which foreign currency is sold at.

  • Actual physical exchange of one currency for another to complete a transaction and honour a contract.

  • The date by which an FX contract between two parties must be settled by the transference of funds between buyer and seller.

  • Risk associated with the non-settlement of the transaction by the counter party.