Aggregate Risk: Size of exposure of a bank to a single customer for both spot and forward contracts.

Arbitrage: The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms.

Ask: The price at which the currency or instrument is offered.

At or Better: An order to deal at a specific rate or better.

At-the-money: An option whose strike/exercise price is equal to or near the current market price of the underlying instrument.

Aussie: Slang for the Australian dollar.

Back Office: Settlement and related processes.

Balance of Trade: The value of exports less imports.

Bank Rate: The rate at which a central bank is prepared to lend money to its domestic banking system.

Base Currency: The first currency quoted in a forex currency pair. For example, the basic rate of EUR/USD pair is EUR. The operating results of the bank or institution are reported in the base currency.

Basis Point: One per cent of one per cent.

Basis Risk: The difference between spot and forward prices.

Bear Market: A market condition in which the prices of securities are falling. A prolonged period of generally falling prices in a market.

Big Figure: Refers normally to the first three digits of an exchange rate that dealers treat as understood in quoting. For example a quote of "30/40" on dollar mark could indicate a price of 1.5530/40.

Bid Price: The price at which a buyer is willing to pay for a security.

BOE: Bank of England.

BOJ: Bank of Japan.

Broker: An individual or firm that charges a fee or commission for executing buy and sell orders on behalf of an investor.

Brokerage: Commission charged by a broker.

BUBA: Bundesbank, the Reserve Bank of Germany.

Buck: Slang for the US dollar.

Budget Deficit: A status of financial health in which expenditures exceed revenue.

Bullion: A term for gold bars, not coin.

Bull Market: A financial market of a group of securities in which prices are rising or are expected to rise; a prolonged period of generally rising prices in a market.

Bundesbank: Central Bank of Germany.

Buying Rate: Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.

Cable: A term used among forex traders referring to the GBP/USD exchange rate.

Cash Delivery: Same day settlement.

CBOE: Chicago Board Options Exchange.

CBOT or CBT: Chicago Board of Trade.

Central Bank: The entity responsible for overseeing the monetary system for a nation.

Certificate of Deposit (CD): A negotiable certificate in bearer form issued by a commercial bank as evidence of a deposit with that bank which states the maturity value, maturity rate and interest rate payable. CDs vary in size with maturities ranging from a few weeks to several years. CDs may normally be redeemed before maturity only by sale on the secondary market but may also be redeemed back to issuing bank through payment of a penalty.

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.

Clearing: The process of setting a number of items against one another and making fund transfers on the net balance only as part of the settlement process.

Closed Position: A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.

Closing Purchase Transaction: The purchase of an option identical to one already sold to liquidate a position.

CME: Chicago Mercantile Exchange.

Comex: Commodity Exchange of New York.

Commission: A fee charged by a broker or investment advisor in return for providing investment advice and/or dealing on their behalf.

Contract Expiration Date: The date on which a currency must be delivered to fulfil the terms of the contract. For options, the last day on which the option holder can exercise his right to buy or sell the underlying instrument or currency.

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).

Cover: Calls are sold on the underlying currency with strikes which are higher than the market price. The strike price limits the profit that can be realized from the position.

Counter Party: The other organisation or party with whom the exchange deal is being transacted.

Cover: To take out a forward foreign exchange contract. To close out a short position by buying currency or securities which have been sold.

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 Rates: Rates between two currencies, neither of which is the US Dollar.


Day Order: An order that if not executed on the specific day is automatically cancelled.

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.

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.

Deal Ticket: The primary method of recording the basic information relating to a transaction.

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 Month: The calendar month in which a futures contract comes to maturity and becomes deliverable.

Delivery Points: Those locations designated by futures exchanges at which the currency represented by a futures contract may be delivered in fulfilment of the contract.

Delivery: The settlement of a futures contract by receipt or tender of a financial instrument or currency.

Depreciation: A fall in the value of a currency due to market forces rather than due to official action.

Derivative: A financial contract whose value is based on the value of an underlying asset.

Devaluation: A deliberate downward adjustment to the value of a country's currency, relative to another currency, a group of currencies or standard.

Discount Rate: The rate at which a bill is discounted. Specifically, it refers to the rate at which a central bank is prepared to discount certain bills for financial institutions as a means of easing their liquidity, and is more accurately referred to as the official discount rate.

Easing: Modest decline in price.

ECB: Stands for European Central Bank, which is responsible for the monetary system of the European Union (EU) and the euro currency. It is responsible for the monetary policy of 17 countries in the Euro Zone.

Economic Indicator: Macroeconomic data that is used by investors to interpret current or future investment possibilities and judge the overall health of an economy.

End/End: Indicates that both the spot and forward maturity, or two forward maturities in a swap transaction, fall due on the last business day of appropriate calendar months.

Eurobonds: A long-term loan issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax.

Eurocurrency: A currency domiciled outside its country of origin normally held by non-residents.

Eurodollars: US dollars deposited in a bank (US or non-US) located outside the USA.

Eurofranc: Swiss Franc or Belgian Francs traded on the Eurocurrency market. Normally Swiss Francs are the more common currency.

European Union: The group formerly known as the European Community.

Exchange Control: A system of controlling inflows and outflows of foreign exchange, devices include licensing multiple currencies, quotas, auctions, limits, levies and surcharges.

Exchange Rate Risk: The risk of an investment's value changing due to changes in currency exchange rates.

Exotic: A less broadly traded currency.

Expiration Date (Options): the last date after which the option can no longer be exercised.

Expiration Month: The month in which an option expires.

Expiry Date: The last date on which an option can be bought or sold.

Exposure: (See Position and Mismatch) Various methods of calculating an exposure exist (i) Net working capital -The current assets in a foreign currency minus current liabilities in the currency; (ii) Net financial method -The current assets in a foreign currency minus current liabilities and long term debt in the currency; (iii) 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: 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: Stands for Federal Reserve which is the central bank of the United States and the most powerful financial institution in the world.

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.

Federal Reserve Board: The board of the Federal Reserve System, appointed by the US President for 14 year terms, one of whom is appointed for four years as chairman.

Federal Reserve System: The central banking system of the US comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board. Membership of the Fed is compulsory for banks chartered by the Controller of Currency and optional for state chartered banks.

Fill: When an order has been fully executed.

Fill or Kill: An order that, if cannot be filled in its entirety, will be cancelled.

Financial Future: A futures contract based on a financial instrument.

Firm Quotation: The price given in response to a request for a rate at which the quoting party is willing to execute a deal for a reasonable amount for spot settlement. Screen quotes are indicative. Quotes on matching systems are normally firm depending on systems requirement to reconfirm rate prior to completing matching.

Fixed Exchange Rate: Official rate set by monetary authorities. Often the fixed exchange rate permits fluctuation within a band.

Fixing: A method of determining rates by normally finding a rate that balances buyers to sellers. Such a process occurs either once or twice daily at defined times. Used by some currencies particularly for establishing tourist rates. The system is also used in the London Bullion market.

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.

Floor: An agreement with a counterparty that sets a lower limit to interest rates for the floor buyer for a stated time. || A term for an exchanges trading area (cf. screen based trading), normally the trading area is referred to as a pit in the commodities and futures markets.

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.

FOMC Minutes: Written record of FOMC policy-setting meetings are released three weeks following a meeting. The minutes provide more insight into the FOMC's deliberations and can generate significant market reactions.

Foreign Exchange: The purchase or sale of a currency against sale or purchase of another.

Forex: Foreign Exchange.

Forward Contract: Sometimes used as synonym for "forward deal" or "future". More specifically for arrangements with the same effect as a forward deal between a bank and a customer.

Forward Deal: A deal with a value date greater than the spot value date.

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.

Front Office: The activities carried out by the dealer , normal trading activities.

Fundamental Analysis: A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors.

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.

Futures Contract: A contract traded on a futures exchange which requires the delivery of a specified quality and quantity of a commodity, currency or financial instruments a specified future month, if not liquidated before the contract matures.

FX: Foreign Exchange.


G5: The Group of Five. The five leading industrial countries, being US, Germany, Japan, France, UK.

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 quick market move in which prices skip several levels without any trades occurring. Gaps usually follow economic data or news announcements.

GLOBEX: A system for global after hours electronic trading in futures and options developed by Reuters for CME and CBOT for use in conjunction with various exchanges around the world.

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 Cancelled: (GTC) 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.

Greenback: The US dollar’s nickname.

Gross: (GTC) Before deduction of tax.

Gross Domestic Product: GDP is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of the strength of economic activity. GDP represents the total value of a country’s production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the governments.

Gross National Product: (GNP) Gross domestic product plus "factor income from abroad" -income earned from investment or work abroad.

Head and Shoulders: Technical Analysis pattern in price trends which chartists 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 that a further major fall is imminent. The breach of the neckline is the indication to sell.

Hedge: A hedge is an investment position intended to offset potential losses/gains that may be incurred by a supplementary investment. A hedge is intended to reduce any substantial losses suffered by an individual or an organization.

Historical Volatility: The annualized standard deviation of percentage changes in futures prices over a specific period. It is an indication of past volatility in the marketplace.

Hit the Bid: Acceptance of purchasing at the offer or selling at the bid.

Hyperinflation: Very high and self sustaining inflation levels. One definition being the period while inflation exceeds 50% until it has dropped below that level for 12 months.

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.

Inconvertible Currency: Currency which cannot be exchanged for other currencies, because this is forbidden by the foreign exchange regulations.

Indicative Quote: A market-maker's price which is not firm.

Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Info Quote: Rate given for information purposes only.

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: Adjustments in cash to reflect the effect of owing or receiving the notional amount of equity.

Interest Rate Options: An agreement permitting a party to obtain a particular interest rate, issued both OTC and by exchanges.

Interest Rate Floor: An agreement which provides the buyer of the floor with a minimum interest rate for future lending requirements.

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.

Intervention: Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by several central banks to control exchange rates.

Intra Day Limit: Limit set by bank management on the size of each dealer's Intra Day Position.

Intra Day Position: Open positions run by a dealer within the day. Usually squared by the close.

Intrinsic Value: The amount by which an option is In-the-money. The intrinsic value is the difference between the exercise/strike price and the price of the underlying security.


Key Currency: Small countries, which are highly dependent on exports, orientates their currencies to their major trading partners, the constituents of a currency basket.

Kiwi: Slang for the New Zealand dollar.

Last Trading Day: The day on which trading ceases for an expiring contract.

Leverage: The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. For instance, if the investor has a capital of $10.000, he/she can execute trades with a capital of $1.000.000 at the leverage rate of 1:100. His/her profit/loss in each trade increases relative to the leverage rate.

Loonie: Slang for Canadian dollar.

LIBID: The London Interbank Bid Rate. The rate charged by one bank to another for a deposit.

LIBOR: Stands for London Interbank Overnight Rate, which is an interest rate at which banks can borrow funds from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association. It is announced every morning by 16 of the biggest banks in the world and taken as a reference by other financial institutions. Unlike its name, most of these banks are not English. However, it is commonly used as a financial jargon as it’s an old term.

LIFFE: London International Financial Futures Exchange.

Limit Order: A passive order which becomes automatically activated when the market price has reached the price you set as your limit order.

Lines: An arrangement by which a bank agrees to lend to the line holder during some specified period any amount up to the full amount of the line.

Liquidation: Any transaction that offsets or closes out a previously established position.

Liquidity: The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.

Long Hedge: The purchase of futures contracts for price protection purposes, as a defensive position against an increase in cash prices, or falling interest rates.

Long Position: Buying an instrument. An investor with a long position aims to profit from the price increase.


M0: Cash in circulation. Only used by the UK.

M1: Cash in circulation plus demand deposits at commercial banks. There are variations between the precise definitions used by national financial authorities.

M2: Includes demand deposits, time deposits and money market mutual funds excluding large CDs.

M3: In the UK it is M1 plus public and private sector time deposits and sight deposits held by the public sector.

M4: In the US it is M2 plus negotiable CDs.

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.

Margin: Borrowed money that is used to purchase securities.

Marginal Risk: The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract.

Margin Call: When the equity falls below a certain rate (usually 50%) of the margin used.

Margin Level: Represents the amount of an investors trading capital that is being held as margin at any particular time calculated by dividing the investors equity by the margın used to open positions.

Mark Up: Premium.

Market Amount: The minimum amount conventionally dealt for between banks.

Market Maker: Sells to and buys from its clients and is compensated by means of price differentials for the service of providing liquidity, reducing transaction costs and facilitating trade.

Market Order: An order to buy or sell a financial instrument immediately at the best possible price.

Maturity Date: The last trading day of a futures contract. Date on which a bond matures, at which time the face value will be returned to the purchaser. Sometimes the maturity date is not one specified date but a range of dates during which the bond may be repaid.

Micro Economics: The study of economic activity as it applies to individual firms or well defined small groups of individuals or economic sectors.

Mid Office: The control of the trading activity including position keeping.

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.

Mine: Expression used to indicate that the contacting party is willing to buy at the rate offered by the quoting bank.

Minimum Price Fluctuation: The smallest increment of market price movement possible in a given futures contract.

Minimum Reserve: Reserves required to be deposited at central banks by commercial banks and other financial institutions. Sometimes referred to as Registered Reserves.

Mio: Million.

MM: Money Markets.

Money: An officially-issued legal tender generally consisting of currency and coin.

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

Money Market Operations: Comprises the acceptance and re-lending of deposits on the money market.

Money Supply: The amount of money in the economy, which can be measured in a number of ways. See definitions of M0-M4.

Moving Average: A way of smoothing a set of data, widely used in price time series.

Multiple Exchange Rates: Different exchange rates for different types of transaction. The South African Rand is an example.

Mutual Fund: An open-end investment company. Equivalent to unit trust.

Nearby Month: The nearest actively traded delivery month, a.k.a. current delivery month, lead month.

Net Position: The number of futures contracts bought or sold which have not yet been offset by opposite transactions.

Nostro Account: A foreign currency current account maintained with another bank. The account is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident.

Note: A financial instrument consisting of a promise to pay rather than an order to pay or a certificate of indebtedness.

OECD: An international organization helping governments tackle the economic, social and governance challenges of a globalised economy.

Offer: For a financial instrument, the price at which a seller is willing to sell. The best offer is the lowest such price available.

Offered Market: Temporary situation where offers exceed bid.

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.

Old Lady: Old lady of Threadneedle Street, a term for the Bank of England.

Open Interest: The total number of outstanding option or futures contracts that have not been closed out by offset or fulfilled by delivery.

Open Market Operations: Central Bank operations in the markets to influence exchange and interest rates.

Open Position: Any trade that has been established, or entered, that has yet to be closed with an opposing trade.

Option: A contract conferring the right but not the obligation to buy (call) or to sell (put) a specified amount of an instrument at a specified price within a predetermined time period.

OTC: Over the Counter, the term used to describe futures and options not traded on an exchange. Trade is directly between buyers and sellers and there is no standardization of strikes or expirations; a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc.

Outright Deal: A forward deal that is not part of a swap operation.

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.


Parity: Foreign exchange dealer's slang for your price is the correct market price. || Official rates in terms of SDR or other pegging currency.

Parities: The value of one currency in terms of another.

Payment Date: The date on which a dividend or bond interest payment is scheduled to be delivered.

Petrodollars: Foreign exchange reserves of oil producing nations arising from oil sales.

PiP: Stands for Point In Percentage which is a unit of change in an exchange rate of a currency pair. Currency is typically traded of a lot size of 100,000 units of the base currency, therefore a trading position of one lot that experiences a 1 pip change corresponds to 0,0001 change in the price which is 10 units of the quoted currency (0,0001 * 100.000 = 10).

Point: 100th part of a per cent, normally 10,000 of any spot rate. Movement of exchange rates are usually in terms of points. || One percent on an interest rate e.g. from 8-9%. || Minimum fluctuation or smallest increment of price movement.

Position Limit: The maximum position, either net long or net short, in one future or in all futures of one currency or instrument combined which may be held or controlled by one person.

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).

Premium: The amount by which a forward rate exceeds a spot rate. || The amount by which the market price of a bond exceeds its par value. || Options, the price a put or call buyer must pay to a put or call seller for an option contract. || The margin paid above the normal price level.

Prime Rate: The rate from which lending rates by banks are calculated in the US. || The rate of discount of prime bank bills in the UK.

Profit Taking: The unwinding of a position to realize profits.

Quote: An indicative price. The price quoted for information purposes but not to deal.

Quota: A limit on imports or exports. || A country's subscription to the IMF.

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.

Real: A price, interest rate or statistic that has been adjusted to eliminate the effect of inflation.

Recession: A decline in business activity. Often defined as two consecutive quarters with a real fall in GNP.

Report: French term for premium.

Repo Rate: See Repurchase Agreement.

Repurchase Agreement: Agreements by a borrower where they sell securities with a commitment to repurchase them at the same rate with a specified interest rate.

Reserves: Funds held against future contingencies, normally a combination of convertible foreign currency, gold, and SDRs. Official reserves are to ensure that a government can meet near term obligations. They are an asset in the balance of payments.

Reserve Requirement: The ratio of reserves to deposits, expressed as a fraction prescribed by national banking authorities including USA.

Reserve Tranche: The 25% of its quota to which a member of the IMF has unconditional access, and for which there is no obligation to repay.

Resistance Level: The price level which, historically, a security has had difficulty going above.

Reuter Dealing: A system for screen based trading that has been in operation since the early 1980s now has a matching optional enhancement known as Dealing 2000-2.

Reversal: Process of changing a call into a put.

Revaluation: Increase in the exchange rate of a currency as a result of official action. || A calculated adjustment to a country's official exchange rate relative to a chosen baseline.

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.

Risk Reversal: A combination of purchasing put options with the sale of call options. The put limits downside, while the call limits the upside.

Rolling Over: The substituting of a far option for a near option of the same underlying stock at the same strike/exercise price.

Rollover: An overnight swap, specifically the next business day against the following business day (also called Tomorrow Next, abbreviated to Tom-Next).

Running a Position: Keeping open positions in the hope of a speculative gain.


Same Day Transaction: A transaction that matures on the day the transaction takes place.

Scalping: A strategy of buying at the bid and selling at the offer as soon as possible.

SDR: Special Drawing Right. A standard basket of five major currencies in fixed amounts as defined by the IMF.

Selling Rate: Rate at which a bank is willing to sell foreign currency.

Settlement Date: The date by which an executed order must be settled by the transference of instruments or currencies and funds between buyer and seller.

Settlement Price: The official closing price for a future set by the clearing house at the end of each trading day.

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

Short Contracts: Contracts with up to six months to delivery.

Short Covering: Buying to unwind a shortage of a particular currency or asset.

Short Forward Date/Rate: The term short forward refers to a period of up to two months, although it is more commonly used with respect to maturities of less than one month.

Short Position: Selling an instrument. An investor with a short position aims to profit from the price decrease.

Short Sale: The sale of a currency futures 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.

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: The difference between the bid and offer price of a security.

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.

Stable Market: An active market which can absorb large sale or purchases of currency without major moves.

Stagflation: Recession or low growth in conjunction with high inflation rates.

Standard: A term referring to certain normal amounts and maturities for dealing.

Standard and Poor’s: A US firm engaged in assessing the financial health of borrowers. The firm also has generated certain stock indices i.e. S & P 500.

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.

Stop Loss (S/L): A stop-loss order is designed to limit an investor’s loss on a position in a security.

Stop Order: An order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor's loss or locking in his or her profit.

Stop Out Level: When the margin level has fallen to or below 20%, investors positions will automatically close (starting from the least profitable position until the margin level requirement is met).

Straight: A bond with unquestioned right to repayment of principal and interest at the specified dates with no additional further rights or bonuses.

Support Level: The price level which, historically, a security has had difficulty falling below.

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.

SWIFT: Society for World-wide Interbank Telecommunications is a Belgian based company that provides the global electronic network for settlement of most foreign exchange transactions.

Swissy: Market slang for Swiss Franc.

Synthetics: Options or futures that create a position that is able to be achieved directly but is generated by a combination of options and futures in the relevant market. In foreign exchange a SAFE combines two forward contracts into a single transaction where settlement only involves the difference in values.

Take Profit (T/P): An order used by currency traders specifying the exact rate or number of pips from the current price point where to close out their current position for a profit.

Technical Analysis: A method of evaluating securities by analyzing statistics generated by market activity; in particular, historical price and volume.

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.

Tick (Size): A minimum change in price, up or down.

Time Value: That part of an option premium which reflects the length of time remaining in the option prior to expiration. The longer the time remaining until expiration, the higher the time value.

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.

Translation Loss/Profit: The calculation of loss or profit resulting from the valuation of foreign assets and liabilities for balance sheet purposes, when consolidating into the base currency.

Treasury Bills: Short-term obligations of a Government issued for periods of one year or less. Treasury bills do not carry a rate of interest and are issued at a discount on the par value. Treasury bills are repaid at par on the due date. In the UK they are normally for 91 days, and are offered at weekly tenders. In the US they are auctioned.

Treasury Bonds: Government obligations with maturities of ten years or more.

Treasury Notes: Government obligations with maturities more than one year but less than ten years.

Treasury Stock: Previously issued stock that has been repurchased by, or donated to, or otherwise are acquired by the issuing firm. Treasury stocks pay no dividends and have no voting privileges.

Turnover: The total money value of currency contracts traded is calculated by multiplying size by the number of contracts traded.

Two-Way Quotation: When a dealer quotes both buying and selling rates for foreign exchange transactions.

Ultimo: Continental term for month or year end.

Uncovered: Another term for an open position.

Under Reference (Order): Before finalizing a transaction all the details should be submitted for approval to the order giver, who has the right to turn down the proposal.

Under-Valuation: An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.

Undo: A colloquial term for reversing a transaction. e.g. a spot sale by means of a forward purchase or if done in error, a spot purchase.

Unemployment Rate: Measures the total workforce that is unemployed and actively seeking employment, measured as a percentage of the labor force.

Unit of Account: A device designed to provide a consistent value with varying currencies. e.g. ECU and SDR.

Up Tick: A transaction executed at a price greater than the previous transaction.


Value Date: For exchange contracts it is the day on which the two contracting parties exchange the currencies which are being bought or sold. For complete description see the chapter on trading. 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. The enquirer is the party who must make sure that his spot day coincides with the one applied by the respondent. The forward month’s maturity must fall on the corresponding date in the relevant calendar month. If the one month date falls on a non-banking day in one of the centres then the operative date would be the next business day that is common. The adjustment of the maturity for a particular month does not affect the other maturities that will continue to fall on the original corresponding date if they meet the open day requirement. If the last spot date falls on the last business day of a month, the forward dates will match this date by also falling due on the last business day. Also, referred to as Maturity Date.

Value Spot: Normally settlement for two working days from today. See Value Date.

Value Today: Transaction executed for same day settlement; sometimes also referred to as "cash transaction".

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.

Working Balance: Discretionary element in the monetary reserves of a central bank.

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.

Working Order: Where a limit order has been requested but not yet filled.

World Bank: A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.

Yard: A billion units.

Yield The percentage return from an investment.

Yield Curve: T - he graph showing changes in yield on instruments depending on time to maturity. A system originally developed in the bond markets is now broadly applied to various financial futures. A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities. A negative sloping curve has higher interest rates at the shorter maturities.

Zero Coupon Bond: A bond that pays no interest. The bond is initially offered at a discount to its redemption value.