BACS - "Bankers Automated Clearing Services" - the process for Sterling clearing for domestic banks. Usually takes 3 business days.
Base Currency - The currency against which other currencies are quoted. Example, the primary base currency is the U.S. dollar
Cable - A market term used for the British Pound Sterling
Cash Delivery - Same day settlement
CHAPS - "Clearing House Automated Payment System" - a faster means of making payments. Usually occurs on the same day.
Credit Line - The amount of foreign currency exposure a firm will allow a client to take
Exotic Currency - A currency with little liquidity and limited dealing, which is neither a major or minor currency
Exposure - The amount of money at risk due to Foreign Exchange movements.
Forward Rate - The rate at which two currencies can be exchanged on a preset future date, e.g. sterling dollar exchange rate today for transfer in 3 months time.
Forward Points - The difference between the spot rate and the forward rate.
Forward Contract - A contract to exchange a specific amount of one currency for another on a future date at a predetermined rate. A deposit is normally required for forward contracts.
GTC - "Good Till Cancelled" - A GTC foreign exchange order will be left in the market until executed or cancelled by you.
Hedge - Protection against future currency movements.
Major Currency - The euro, d-mark, Swiss franc, British pound, and Japanese yen.
Minor Currency - The Canadian dollar, the Australian dollar, and the kiwi are minor currencies
OCO - "One Cancels Other" - A combination of a 'Stop Loss' order and a 'Take Profit' order. When one of these two orders is executed, the other order is automatically cancelled.
Order - You can leave an "order" with us to transact on your behalf if a particular exchange rate is reached.
Overnight Position Limit - Position limits on a currency or aggregate on a series of currencies that a trader can carry during overnight trading hours. These limits are usually smaller than day light position limits.
Pip - The term used in the currency markets to denote the smallest incremental move an exchange rate can make
Spot Rate - The foreign exchange rate at which two currencies can be exchanged in 2 days time.
Spot Transaction - The exchange of one currency for another at a specified rate for settlement in 2 working days.
Stop Loss Order - A stop loss order is a means of limiting your risk from adverse exchange rates. A currency level is set. If that currency level is reached, the trade is automatically executed in the market. The currency level used for a stop loss order is always worse than the current market price. This is a way to protect yourself from adverse changes in exchange rates without needing to constantly monitor the rate.
Take Profit Order - Like a stop loss order, a take profit order first involves setting a currency level. Once that currency level is reached, the trade is executed in the market. The currency level used for a take profit order is always better than the current market price. This is a way to capitalise on improvements in exchange rates without needing to constantly monitor the rate.
Settlement Date - The date for the exchange of payments. |