Account Statement report
– This FXDD report will give the client
all the debit and credit activity that occurs
in the client account over a user specified time
period.
Account Status window –
The Account Status Window is the window that shows
the FXDD Margin Monitor. Including is account
balances, and the unrealized profit/loss on open
positions. It also has a numerical and graphical
representations of the FXDD margin levels for
the client given existing open positions.
Account Value – The current
value of a customers account given the amount
of money deposited and changes as a result of
profits and losses from existing and closed out
positions, credits and debits from daily rollovers,
and charges from such things as commissions, transfer
fees or bank related fees if applicable.
Aggregate Demand – Total
demand for goods and services in the economy.
It includes 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 – Size
of exposure of a single customer to a market related
movement.
Aggregate Supply – Total
supply of goods and services in the economy from
domestic sources (including imports) available
to meet aggregate demand.
Agreement – The FXDD Customer
Agreement. All clients must read and sign
the FXDD Customer
Agreement before opening an account with FXDD.
Application – The FXDD
software program.
Appreciation – Describes
a currency increasing or strengthening in response
to a market reaction
Arbitrage – The simultaneous
purchase and sale on different markets, of the
same or equivalent financial instruments to profit
from price or currency differentials.
Asset Allocation – Dividing
funds among different investment alternatives
in order to attempt to achieve diversification
or maximum return.
Ask – The price at which
the currency or instrument is offered for sale
by FXDD or another counterparty.
“At best” –
A specific instruction given to a dealer to buy
or sell at the best rate that can be obtained.
The term is synonymous with the term “at
the market” or is implied by the customer
issuing a “market
order”.
“At or Better” –
An order to deal at a specific rate/price or better.
Authorized Dealer – A
third party to which Customer grants trading authority
or control over a Customer's Account. FXDD does
not, by implication or otherwise, endorse or approve
of the operating methods of the Authorized Agent.
FXDD shall not be responsible with respect thereto.
Available Trading Power –
Given a customer's Account Value and existing
position, the amount of incremental foreign exchange
position, expressed in a specified currency, that
the customer could take. Mathematically, the Available
Trading Power = (Account Value * Maximum Trading
Leverage) – Open Positions Amount.
Back Office – The
customer support area for FXDD in charge of Account
setup, funds transfers into and out of the customer
account, trade reconciliation issues, customer
inquiries, and other activities that do not directly
involve the buying or selling of a currency pair.
Balance of Payments –
A systematic record of the real economic transactions
during a given period for a particular country.
Countries are either in a balance of payment excess
or balance of payment deficit. Prolonged balance
of payment deficits could lead to restrictions
in capital transfers, and or decline in currency
values.
Balance of Trade or Trade Balance
– In general terms, the value of exports
less imports for a particular country. A balance
of trade deficit is when a country imports more
than it exports. A balance of trade surplus is
when a country exports more than it imports. If
a country is in a prolonged trade deficit condition,
the currency versus its trading partners should
decline or weaken making the cost of imports more
expensive and exports cheaper for the trading
partners.
Bank line – Line of credit
granted by a bank to a customer, also known as
a " line".
Banking day (or Business day)
– Any day that commercial banks are open
for business in the financial center of the country
whose currency a position is taken.
Bank of Japan or BOJ –
The central bank of Japan.
Base currency – The first
currency in a currency pair. In the currency pair
EUR/USD, the Base Currency is the EUR. When entering
a contract with FXDD, the base currency remains
constant at a contracted lot value amount. For
example, if a lot is 100,000, the customer who
transacts to buy 1 lot of EUR/USD at a currency
rate of .9600 would be contracting to exchange
100,000 EUR for $96,000 USD.
Base Rate – A term used
predominantly in the UK for the rate used by banks
to calculate the interest rate charged to borrowers.
Top quality borrowers will pay a small amount
over base rate while lesser quality credits will
pay a rate much higher than the base rate.
Basis point – One per
cent of one per cent. The difference between 3.75%
and 3.76%.
Bear market – A situation
whereby there exists prolonged period of generally
falling prices for a particular investment product.
Bear Squeeze – The condition
in the market where investors or traders who are
short an investment product are forced to cover
their position because a rising market condition,
has inflicted losses on the account
Bear – An investor who
believes that price of an investment product is
going to fall.
Best-Efforts Basis – The
execution of an order at the next available price
taking into consideration the volume available
to buy or sell at that price and the quantity
and volume of orders that precede the customers
order.
Bid – The price at which
FXDD (or another counterparty) offers to buy the
currency pair from a customer.
Big Figure – Refers normally
to the first three digits of an exchange rate
that dealers treat as understood in quoting. NOTE:
A EUR/USD exchange rate of .9630 implies a “0”
as the first figure. So, the price would be 0.9630
with the big figure being 0.96.
Break or Break out – Term
used to describe a sudden or rapid fall in instruments
pricing away from a consolidated range.
Broker – an agent, who
executes orders to buy and sell currencies and
related instruments either for a commission or
on a spread.
Brokerage – Commission
charged by a broker.
Bull market – A prolonged
period of generally rising prices for a particular
investment product.
Bull – An investor who
believes that prices of particular investment
products are going to rise.
Bundesbank – The Central
Bank of Germany.
Business Day – Any day
on which commercial banks are open for business
other than Saturday or Sunday in the principal
financial center of the country in whose currency
a position is taken.
Buy Limit – Specifies
the highest price at which the purchase of the
Base Currency in a Currency Pair can be executed.
The limit price in a Buy limit
order should be BELOW the current dealing
Ask price.
Buy Stop – A Buy Stop
is a Stop Order that is placed ABOVE the current
dealing Ask price and is not activated until the
market Ask price is at or above the Stop Price.
The buy stop order, once triggered, becomes a
market order
to buy at the current market price.
Cable – A term used
in the foreign exchange market for the US Dollar/British
Pound rate.
Carry – The interest cost
of financing securities or other financial instruments
held.
Cash Delivery – Same day
settlement.
Cash – normally refers
to an exchange transaction contracted for settlement
on the day the deal is struck.
Cash on Deposit – Cash
on Deposit equals the amount of funds deposited
in the account, plus or minus the realized closed
position P/L and other debits or credits such
as rollovers,
and commission (if any).
Central Bank – A bank,
which is responsible for controlling a country's
or region's monetary policy. The Federal Reserve
is the central bank for the United States, the
European Central Bank is the central bank of Europe,
the Bank of England is the central bank of England
and the Bank of Japan is the central bank of Japan.
Central Bank Intervention –
The act by which a central bank or central banks
enter the spot foreign exchange market and attempt
to influence unbalanced supply and demand forces
through the direct purchase (or sale) of foreign
exchange.
CFTC – The Commodity Futures
Trading Commission, the US Federal regulatory
agency for futures traded on commodity markets,
including financial futures.
Chartist – An individual
who studies graphs and charts of historical data
in an attempt to find trends that will help predict
the direction and magnitude of a particular investment
product.
Client or Customer– A
FXDD Account holder. The Client can be an
Individual, Money
Manager, corporate
entity, trust
account, Co-Owner or any legal entity that
has an interest in the value of the account.
Closed position – A transaction
that is opposite in direction and magnitude to
an existing position that has the effect of realizing
a gain or loss.
CME – Chicago Mercantile
Exchange
Commission – The fee that
a broker may charge clients for dealing on their
behalf.
Confirmation – An electronic
or printed notice that describes all the relevant
details of a transaction.
Consumer Price Index –
Monthly measure of the change in the prices of
a defined basket of consumer goods including food,
clothing, and transport. Countries vary in their
approach to rents and mortgages.
Contract – An Over the
Counter (OTC) agreement done with FXDD to buy
or sell a specified amount of a particular currency
in return for a specified amount of another currency
for settlement on a specified Value Date (normally
the Spot Date). The contracted amounts are determined
by the foreign exchange rate that the two parties
contract to.
Conversion Rate – The
rate for a specific currency pair that is used
to convert (or sweep) non-US dollar profits/losses
into dollars at the end of a trading day.
Co-Owner – A person who
has a co-interest in a FXDD Account. Co-owners
are required to read, fill out and sign account
application forms and corresponding documents
including but not limited to the FXDD
Risk Disclosure document, and the W-8/W-9
forms.
Correspondent Bank – The
foreign banks representative who regularly performs
services for a bank which has no branch in the
relevant center, e.g. to facilitate the transfer
of funds.
Counter Currency – The
second currency in a currency pair. In the Currency
Pair EUR/USD, the Counter Currency is the USD.
Counterparty – The other
entity or party with whom the exchange deal is
being transacted.
Country risk – The risk
attached to a transaction by virtue of its association
to a particular country. This involves examination
of economic, political and geographical factors
of a particular country.
Cover – The act of performing
a transaction that closes out a position.
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 Currency Contract –
A spot contract to purchase or sell one foreign
currency in exchange for another specific foreign
currency. The currencies exchanged are not the
US Dollar.
Currency – A Foreign Currency
or US Dollar.
Currency Pair – The two
currencies in a foreign exchange transaction.
The “EUR/USD” is an example of a currency
pair.
Customer Account Application
– The FXDD
application that all clients and customers
must fill out and submit for acceptance by FXDD
before a transaction is to take place.
Daily Cut-off (or Close of Business
Day) – The single point in time
that signifies the end of that Business Day. The
Trade Date of any Contract entered into after
the Daily Cut-off shall be considered executed
on the next Business Day. The Daily Cut-off will
occur at a time selected on any Business Day solely
by FXDD and may be changed at the discretion of
FXDD.
Day Order – An order that
if not executed on the specific day is automatically
canceled.
Day trader – Speculators
who take positions in investment products, which
are then liquidated prior to the close of the
same trading day.
Deal Blotter – A listing
of all the deals that were executed over a specified
time period, usually the trading day.
Deal date – The date on
which a transaction is agreed upon.
Deal Ticket – The primary
method of recording the basic information relating
to a transaction.
Dealer – An individual
or firm acting as a principal, rather than as
an agent, in the purchase and/or sale of foreign
exchange. Dealers trade for their own account
and risk.
Dealing Desk – Generally
speaking, the collection of dealers working for
FXDD that facilitate the pricing and execution
of customer orders.
Default – Generally speaking
a breach of contract.
Depreciation – A fall
or decline in the value of a currency due to market
forces
Depth of market – A measure
of the size of volume available for transaction
purposes for a particular currency pair at a specific
point in time.
Details – All the information
required to finalize a foreign exchange transaction,
i.e. name, rate, and dates.
Devaluation – The deliberate
downward adjustment of a currency against its
fixed parities or bands, normally initiated by
a formal announcement by a country.
Discretionary Income –
Net of tax and fixed personal spending commitments.
DM, DMark – Deutsche Mark.
Domestic Rates – The interest
rates applicable to deposits in the country of
origin.
“Done” – The
term used by FXDD representative to indicate that
a verbal deal has been executed and is now a binding
deal.
Down tick – The sale of
a security (usually an equity or stock) at a price
lower than the previous one.
Easing – A decline
in interest rates initiated by the central.
ECU – European Currency
Unit.
Either way market – In
the Euro Interbank deposit market where both bid
and offer rates for a particular period are the
same.
Escrow account – Money
deposited with FXDD are deposited in an FDIC insured
escrow account at HSBC Bank USA, NA.
Euro – The exchange currency
of the European Union
Euro Rates – The interest
rates quoted for Euro-currencies over specific
periods.
Eurocurrency – A currency
deposited outside its country of origin.
Eurodollars – US dollars
deposited in a bank (US or non US) located outside
the USA.
European Union – The group
formerly known as the European Community.
Event Notifications window –
The window of FXDD that summarizes the transactions
that have occurred in a clients account over the
course of a business day.
Excess Margin Deposits –
Money deposited with FXDD that is not used for
margin against an existing open position.
Exchange – A physical
location where instruments are traded and often
regulated. Examples: the New York Stock Exchange,
the Chicago Board of Trade.
Exchange control – A system
of controlling inflows and out flows of foreign
exchange, devices include licensing multiple currencies,
quotas, auctions, limits, levies and surcharges.
Exotic – A less broadly
traded currency.
Fast market – The
rapid movement of prices or rates in a market
caused by disequilibria in supply and demand conditions
from buyers and/or sellers. In such circumstances
rates or prices may not be readily available to
clients until orderly markets resume.
Fed Fund Rate – The short
term (overnight) rate pegged by the Federal Reserve
Bank used to conduct monetary policy and affect
changes in the money supply that causes changes
in the level of activity in the United States
economy.
Fed Funds – Cash balances
held by banks with their local Federal Reserve
Bank.
Fed – The United States
Federal Reserve Bank.
Federal Open Market Committee
– Also known as the FOMC. The body of individuals
that decide the course of monetary policy that
will be conducted in United States. The FOMC is
directly responsible for pegging the Federal Funds
rate and the Discount Rate. Both rates are influential
in controlling the levels of money supply growth
and the levels of economic activity in the United
States.
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
Comptroller of Currency and optional for state
chartered banks.
Fill or Filled – A deal
that has been executed on behalf of a Customer's
Account given a Customer's Order. Once filled,
an Order cannot be canceled, amended or waived
by Customer.
Firm quotation – A verbal
price given in response to a request for a firm
rate at which the quoting party is willing to
execute a deal for a reasonable amount for spot
settlement.
Fiscal Policy – Use of
taxation as a tool in implementing monetary policy.
Fixed dates – The monthly
calendar dates similar to the spot. There are
two exceptions. For detailed description see value
dates.
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.
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.
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.
Foreign Exchange – The
purchase or sale of a currency against sale or
purchase of another.
Forex – Foreign Exchange.
Forward Deal – A deal
with a value date greater than the spot value
date.
Forward Forward – A forward
/ forward deal is one where both legs of the deal
have value dates greater than the current spot
value date.
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.
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.
FX – Foreign Exchange
FXDD – FXDirectDealer,
LLC
FXDD Demo Trading Platform –
FXDD maintains a
demo-trading platform that is a full feature
replica of the FXDD Internet Trading Platform
used by authorized FXDD margined clients to enter
into contracts to buy and sell foreign exchange
from FXDD. The demo-trading platform allows potential
FXDD clients to get used to the actual trading
platform's functionality and features without
risking their capital by executing contracted
trades. Since, the platform does not involve actual
deals or contracts, any profit or loss generated
by using the platform do not accrue nor are they
an obligation of the demo customer. It is strictly
for demonstration purposes only.
FXDD Internet Trading Platform
– The software application used by authorized
FXDD customers to contract foreign exchange transactions
for the purpose of speculating on the direction
of the currency movements. It is also referred
to simply as FXDD. Any transactions done on the
FXDD Internet Trading Platform is a legally binding
contract that the client is responsible for as
per the Customer
Agreement and other documents presented and
signed by the client.
FXDD Menu Bar – The Bar
included in the FXDD Window that allows the client
to access, format, position the various FXDD windows
including the various customer Reports windows,
Chart windows, Spot Book window, etc. It also
gives the client access to the FXDD Help Window.
FXDD Risk Disclosure document
– This FXDD
document outlines the risks associated with
opening an account with FXDD. All clients who
have a financial interest in FXDD are required
to read and sign the document in order to open
an account.
FXDD Title Bar – The bar
at the top of the FXDD Window that the Version
Number of the FXDD release and the world clocks.
FXDD Toolbar Icons – Icons
automatically displayed in the FXDD Window that
allow the user to access via a single mouse click,
the Event Notification, Account Status, Open Position,
Pending Orders, Spot Book, and Help Windows.
FXDD Window – The term
used to describe the entire space on a clients
computer screen that is home to all the other
FXDD windows that allow the client to monitor
positions and profit and losses, Pending Orders,
the Spot Book, Chart Window, etc.
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.
Going long – The act of
buying a currency pair. For example, if a client
bought the EUR/USD, he would be “going long”
the Euro.
Going short – The act
of selling a currency pair. For example, if a
client sold the EUR/USD, he would be “going
short” the Euro.
Good til canceled (GTC order)
– A specific 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.
GTC – SEE: Good til canceled.
“Hit the bid”
– Term used to describe the action of a
seller of a currency pair when wanting to sell
at the market bid side.
Holder – Buyer of a currency
pair.
Indicative quote –
A market-maker's price which is not “firm”
or “firm quotation.”
Initial margin requirement –
The minimum Margin Balance necessary to establish
a NEW Open Position. FXDIRECTDEALER reserves the
right to change the Initial Margin requirement
at it's sole discretion. The Initial Margin requirement
can be expressed as a percentage (i.e., 2% of
US dollar position amount) or can be calculated
by the Leverage Ratio. For example, a $100,000
position in USD/JPY would require $2,000 of margin
given a 2% Margin Requirement. Expressed as a
leverage ratio, if 50:1 leverage ratio is used
a $100,000 position would require the same Initial
Margin ($100,000 / 50 = $2,000).
Interbank Market – The
interbank market is the over-the-counter market
of dealers that make markets in foreign exchange
to one another.
Intervention – Buy or
sell action by a central bank in an attempt to
affect the value of its currency. Concerted intervention
refers to action by a number of central banks
to influence the value of exchange rates.
Intra day position – Open
positions run by a client of FXDD within the day.
Usually squared by the close.
Introducing Broker – A
person or legal entity that introduces customers
to FXDD often in return for compensation in terms
of a fee per transaction.
Introducing Brokers are prevented from accepting
margined funds from their clients.
Kiwi – Slang for
the New Zealand dollar.
Left-hand side –
Taking the left hand side of a two way quote i.e.
selling the quoted currency.
Leverage – The control
of a large notional position through the use of
a small amount of capital.
Limit
order – A Limit
Order is a Customer Order to Buy or Sell a
specific amount of a Currency Pair at a specific
user defined price. A Limit
Order does not guarantee execution; rather
it guarantees only that if execution occurs, it
will be at the stated Limit Price. Note that sometimes
the market briefly touches a limit price, only
to immediately retreat back away from the limit
price level with very little if any volume traded.
Under such circumstances the Limit
Order may not have be executed and the limit
order will remain in effect, until that time
when the order can be executed or until the Customer
cancels the order. A Limit
Order specifies that execution should be attempted
after the market reaches or goes through a set
price level - the limit price. Once issued, the
limit order
will be held pending until the limit price is
reached. Once the market hits or goes through
the limit price, the order is triggered and the
FXDD dealer attempts to execute the order at the
Limit Price.
Limit Price – The price
that the client specifies when entering a Limit
Order.
Liquid – The condition
in the market where there is ample amount of volume
to buy or sell.
Liquidation – Any transaction
that offsets or closes out a previously established
position.
Liquidation Level – The
account value level that initiates the liquidation
of all the client's open position at the best
price or exchange rate available at that moment.
Liquidation occurs when the Account Value is not
sufficient to maintain the current open position(s).
A client can prevent liquidation by depositing
additional margin into the account, or by closing
out existing open position(s).
Liquidation Level Excess/Deficit
– Remaining Account Value before automated
liquidation is triggered. The level is equal to
the Account Value – Liquidation % * Margin.
If loss on open position(s) exceeds this amount,
FXDD will automatically liquidate ALL open positions.
The level is represented graphically as the top
of the “brown”
level in the FXDD Margin Monitor.
Liquidity – The term used
to describe the amount of volume available to
buy or sell at a point in time.
Long – The term used to
describe a client who has opened a new position
by buying a currency pair.
Loss in Excess of their Margin Deposit
– There exists the opportunity for clients
to lose more than the margin that they initially
pledge to open and maintain a position.
Maintenance Margin –
The minimum margin, which an investor must keep
at FXDD to maintain an open position.
Maintenance Margin Excess/Deficit
– Remaining funds against which a customer
can maintain/hold a position(s) until a Margin
Call is triggered. Maintenance Margin Excess/Deficit
= Account Value – Maintenance % * Margin.
It is represented graphically as the top of the
“red” level
in the FXDD Margin Monitor.
“Make a market”
– A dealer is said to “make a market”
when a quoted bid and ask price is given to a
client. The price represents the firm prices that
the dealer is ready to buy or sell.
Margin Call – A demand
for additional funds to be deposited in a margin
account to meet margin requirements because of
adverse exchange rate movements.
Margin – The aggregate
amount of customer cash pledged against the aggregate
Open Position(s). The margin pledged is a function
of Maximum Trading Leverage Ratio. The higher
the leverage, the lower the pledged Margin. The
lower the leverage, the higher the Margin needed
to carry the position.
Mathematically, Margin =
Open Position Amount / Maximum Trading Leverage
Ratio. For example, a USD/CHF 100,000 USD
position at Maximum Trading Leverage Ratio 50:1
will require pledged Margin equal to 100,000/50
or $2,000.
Note: To calculate
margins for currency pairs, where USD is NOT the
Base (First) Currency (e.g. EUR/USD, GBP/USD…)
and crosses (EUR/JPY, GBP/JPY…), the Counter
Currency amount is first converted into USD using
the average exchange rate(s).
Example: Customer
buys 1 lot of EUR/USD when the price is .9600
– 9604. The average exchange rate is .9602.
Therefore, 100,000 EUR equals 96,020 USD. $96,020
/ 50 Leverage Ratio = $1,920.40
Mark to Market – The daily
adjustment of an account to reflect unrealized
profits and losses.
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 chosen
currency pair at the current market price. A Market
Order will be executed at the price displayed
at the moment user clicks the “Place”
button, but only if the currency price remains
within a price range (for example, 5 pips) set
by the FXDD.
Maximum Trading Leverage Ratio
– Leverage expressed as a ratio, available
to open a new position(s). For example, a leverage
ratio of 50:1 allows a client the ability to control
a $100,000 lot position with $2,000 of margin
($100,000 / 50 = $2,000).
Maximum Trading Power –
Mathematically, the Maximum Trading Power = Account
Value * Maximum Trading Leverage Ratio
Moving Average – A way
of smoothing a set of price/rate data by taking
the average price of data range of values.
Net Interest Rate Differential
– The difference in interest rates from
the countries of two different currencies. For
example, if the spot next rate for the Euro is
3.25% and the spot/next rate in the US is 1.75%,
the interest differential is 1.50% (3.25% - 1.75%
= 1.50%).
Netting – The method of
settling under which only the differences in the
traded currencies are settled at the close.
Foreign Exchange – FXDD
does not make physical delivery of foreign currency
into foreign bank accounts.
OCO Order (One Cancel the Other
Order) – A One
Cancels the Order is a Stop and Limit
orders set simultaneously, whereby once either
one is executed, the other is canceled. For example,
an OCO may be
place to close an existing position either with
a Limit (take
profit), or with a protective Stop
(stop loss).
Offer – The price at which
a dealer is willing to sell. The Offer is also
called the Ask or Ask Price.
Offered market - Temporary situation where offers
exceed bid.
Old Lady – Old lady of
Threadneedle Street, a term for the Bank of England,
the central bank of England.
Omnibus Account – An account
maintained by one broker with another in which
all of the accounts of the former are combined
and carried only in its name, rather than designated
separately.
Open position – The difference
between assets and liabilities in a particular
currency. This may be measured on a per currency
basis or the position of all currencies when calculated
in base currency.
Open Position window –
The FXDD window that shows all the current client
positions that are open.
Order(s) – Clients directions
either electronically via the FXDD Internet Trading
Platform, verbally or via an electronic chat application
like DirectDealer, to enter into a specific foreign
exchange contract with FXDD by buying or selling
a specified currency pair now or at a time when
the price meets the clients specific requirements.
OTC Margined Foreign Exchange
– Over-the-Counter (Off-exchange) Foreign
Exchange markets, in which markets participants,
such as FXDD and Customer, enter into privately
negotiated Contracts or other transactions directly
with each other for which margin is deposited
and pledged against outstanding positions.
Overnight - A deal from today until the next business
day.
Pip
– The smallest measure of movement for a
foreign exchange rate.
Pending Orders report –
The Pending Orders report will show all the pending
orders that the client has entered over the user
specified dates whether the Pending Order is executed
or not. Any Pending Order that is cancelled by
the client will still be displayed, giving the
client a full audit trail of the orders.
Pending Orders window –
The FXDD window that shows all the outstanding
orders that are still pending or outstanding.
Before closing FXDD if the client has any Pending
orders, the application will warn the client that
these orders are still outstanding. The orders
can remain even though the client is logged out.
However, they may be executed when the client
is offline.
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).
Principal – A dealer who
buys or sells stock for his/her own account.
Profit Taking – The unwinding
of a position to realize a profit.
Quote – Consists
of the Bid and Ask for a currency pair.
Quote Panel – The quote
panel is the section in the FXDD Window that displays
the quotes of major currencies and crosses
and allows access to FXDD charts.
Range – The difference
between the highest and lowest price of a future
recorded during a given trading session.
Rate – The price of one
currency in terms of another, normally against
USD.
Realized P/L – The profit
and loss generated from closed positions.
Regulated Market – A market
that is regulated usually by a governmental agency
that issues a number of guidelines and restrictions
designed to protect investors.
Reports window – The FXDD
Reports window is where the client can access
various account status reports that show in detail
the activity as a client of FXDD. There are 5
different Reports and the client can customize
any of the reports as to a specific time period.
The 5 reports are the Trading History, the Pending
Orders History, the Account History, the Session
History and the Account Statement.
Resistance Point or Level –
A price recognized by technical analysts as a
price which will usually stop a movement of a
foreign exchange rate from going higher. If a
resistance level is “broken” the technician
will conclude that the price movement of the instrument
will continue to go higher.
Right hand side – Corresponds
to the Ask or Offer price of a foreign exchange
rate. For example, given a price of .9630 - .9635,
the right hand side is .9635. The right hand side
is the side that a client would buy at.
Risk Capital – The amount
of money the Customer is willing to put at risk
and, which if lost would not, change the Customer's
lifestyle or the Customer's family lifestyle.
Rollover
– At the end of each business day, FXDD
will automatically
rollover or swap, all existing open positions
into the next spot date. The mechanics in effect
involve the simultaneous close of an existing
position and the opening of a new spot position.
FXDD will debit or credit the client's account
depending on the interest rate differential between
the base currency and the counter currency and
the direction of the client's position. For example,
if the client is long a currency pair where the
overnight rate for the base currency is higher
than the counter currency, the client will earn
a small credit for positions held overnight. If
the opposite is true, the client account will
be debited for the difference in the interest
rate differential. The fundamental reason is if
a client is long a higher yielding currency, he
should benefit from being able to invest and earn
a higher return overnight than what he has to
pay for being short the lower yielding currency.
Rollover credit – The
credit (in base currency terms) added to a client's
account that is long a higher yielding currency
overnight.
Rollover Debit – The debit
subtracted from a client's account that is long
a lower yielding currency overnight.
Running a position – The
act of keeping open positions in hopes of a speculative
gain.
Same day transaction –
A transaction that matures on the day the transaction
takes place.
Sell Limit – Specifies
the lowest price at which the sale of Base Currency
in a Currency Pair can be executed. The limit
price in a Sell limit order should be ABOVE the
current dealing Bid price.
Sell Stop – A Sell Stop
is a Stop Order that is placed BELOW the current
dealing Bid price and is not activated until the
market Bid price is is at or below the stop price.
The sell stop order, once triggered, becomes a
market order
to sell at the current market price.
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.
Short – Having an open
position that was created by selling a currency.
If you sold the EUR/USD, the client is said to
be “Short” the currency pair (sold
the base currency). If a client bought the EUR/USD,
he would be long the currency pair, but short
USD currency. Foreign exchange transactions assume
being long one currency and short another.
Short Covering – Buying
to unwind a short position of a particular currency
pair
Sophisticated Foreign Exchange Investor
– Investor possessing sufficient knowledge,
experience and/or capitalization to trade in Foreign
Exchange market. The investor has to decide for
him/herself if Forex is a suitable investment
vehicle for his or her purposes.
Sovereign risk – (1) Risk
of default on a sovereign loan; (2) Risk of appropriation
of assets held in a foreign country.
Speculative – Trading
Foreign Exchange is speculative in that there
is no guarantee that those who invest in Foreign
Exchange will make any money. The conditions also
exist that the client can lose his entire deposited
margin making trading FX highly speculative. Those
who trade foreign exchange should only risk that
capital which is considered risk capital, defined
as the amount of which if lost would not, change
the Customer's lifestyle or the Customer's family's
lifestyle.
Spot Book – The FXDD Spot
Book window will show the clients outstanding
Overnight Positions, the deals that were executed
during the course of the day, and the clients
existing open positions. The window includes relevant
information about the listed items in each of
the different section such as the deal rate, the
current value of the deal, the current mark to
market rate, the P/L, the time the deal was executed,
etc.
Spot – Spot or Spot date
refers to the spot transaction value date that
is two business days from the deals Trade Date.
In instances where there is holiday, weekend or
other day when the banks in the countries represented
by the currencies in the currency pair are closed,
the spot date will be adjusted forward to the
next value date where the banks are open. In the
case of US Dollar versus the Canadian dollar,
the spot date is 1 business day forward from the
Trade Date.
Spot price/rate – The
price at which a currency pair is currently trading
in the spot market.
Spot Settlement Basis –
The standardized settlement procedure for foreign
exchange transactions that sets the value date
2 business days forward from the Trade Date (see:
Spot).
Spread – The difference
between the bid and ask price for a foreign currency
price.
Square – The condition
whereby the client's purchases and sales are in
balance and there is no open position.
Squawk Box – A speaker
connected to a phone often used in broker trading
desks.
Sterling – British pound,
otherwise known as cable.
Stop loss order – A specific
order entered by the client to close out a position
if the price moves in the opposite direction of
the position by a certain amount of pips. In most
cases Stop Orders
are executed as soon as the market reaches or
goes through the Customer set Stop Price level.
Once issued, the stop order will be held pending
until the stop price is reached. Stop
orders may be used to close out a position
(Stop Loss),
to reverse a position, or open a new position.
The most common use is to protect an existing
position (by limiting losses or protecting unrealized
gains). Once the market hits or goes through the
stop price, the order is activated (triggered)
and FXDD will execute the order at the next available
price. Unlike a Limit
Order, a Stop
Order does not guarantee execution at the
stop price. Market conditions including volatility
and lack of volume may cause a Stop
order to be executed at a price different
than the order.
Stop Price Level – The
client entered price that activates a Stop
Loss Order.
Sweep/Sweeping – When
a client of FXDD has a P/L in another currency
other than US dollars, the P/L must be converting
at the close of each business day into US dollars,
at an exchange rate prevailing at the time (known
as the Conversion Rate). This process is called
sweeping. Note that until the P/L is swept, the
clients Account Value may fluctuate slightly (up
or down) as exchange rate for the Profit and Loss
currency changes. For example, if the client has
a profit in Yen, if the value of the yen rises
after the position is closes, but before the profit
is swept into dollars, the Account Value will
change. The change is only on the profit/loss
amount so the effect is minimal.
SWIFT – Society for World-wide
Interbank Telecommunications is Belgian based
company that provides the global electronic network
for settlement of most foreign exchange transactions.
The society is also responsible for the standardization
of the currency codes used for confirmation and
identification purposes (i.e.. USD = US Dollars,
EUR = The Euro, JPY = Japanese Yen)
Swissy – Market slang
for Swiss Franc.
"Take the Offer"
– A verbal market
order whereby the customer wants FXDD to pay
the Ask or Offer price for a customer desired
amount of lots.
Technical Correction –
An adjustment to price not based on market sentiment
but technical factors such as volume and charting.
Thin market – A market
condition in which trading volume and liquidity
is low and in which usually bid and ask quotes
are wider than normal.
Tick – A minimum change
in price, up or down.
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.
Trading margin Excess/Deficit
– Remaining funds against which a customer
can open a new position(s) or increase the amount
of an existing position(s) = Account Value –
Margin. It is a function of the position size
and the Profit and Loss on the existing position.
It is represented graphically as the top of the
“yellow”
level in the FXDD Margin Monitor.
Trading Platforms – A
software application where a client can give an
order to execute a transaction on that customers
behalf. FXDD
Trader and MetaTrader
are both examples of trading
platforms.
Transaction date – The
date on which a trade occurs.
Transaction – The buying
or selling of foreign exchange amount resulting
from the execution of an order.
Two-Way Quote – When a
dealer quotes a bid and ask price for foreign
exchange transactions to a customer.
Uncovered position –
Another term for an open position.
Unrealized P/L – Unrealized
P/L is the real time profit or loss on the current
open position(s), given the current exchange rate(s).
NOTE: The Unrealized
P/L is calculated using the price that the client
would need to deal on to liquidate the position.
For example, if the client were long EUR/USD,
the client would need to sell at the Bid side
of the current market. P/L is unrealized until
the position is closed out. The P/L will then
be added or subtracted from the Cash on Deposit
to get the new Cash on Deposit amount.
Up tick – A transaction
executed at a price greater than the previous
transaction.
US Dollar – The legal
tender of the United States of America.
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 months 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 centers then the operative date would be the
next business day that is common. The adjustment
of the maturity for a particular month does not
effect 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.
Wire Transfer – The
transfer of money electronically from one bank
to another.
Yard – Slang for
milliard, one thousand million. |
