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This term denotes the settlement date of a transaction. Spot is always two working-days after the date of the agreement of the transaction and is a market standard for deals requiring early settlement. It is possible for deals to be transacted for same-day or next day settlement depending on the time the transaction is concluded.


This term denotes an agreement to purchase or sell currency at a rate agreed today but for settlement at a predetermined date in the future. This allows clients to fix an exchange rate now against a future commitment e.g. delivery of goods and services or staged payments on a property purchase. A deposit or margin (see below) is required to secure forward transactions.

Option Forward

This term denotes a forward contract where the settlement date is not predetermined but is between two agreed dates in the future. Such contracts are beneficial to clients who wish to secure an exchange rate to meet a commitment but where the date of that commitment is flexible. When the settlement date is known the contract can be settled any time within the window. If the settlement becomes due after the further date, a contract can be extended though this may result in an alteration to the exchange rate. A deposit or margin will be required to secure option forward transactions.

Segregated Client Account

This is an account opened in the name of the client and for the sole use of the client, in which currencies purchased can be held until instructions are received to pay monies away.

Settlement Date

Shall mean the agreed date on which client should ensure cleared funds have been paid to the Company and the day on which the Company, having received cleared funds, will arrange to pay foreign currency to the Client’s designated account.

Further terms explained

ACB: Asian Central Bank.a group term used to describe the region's central banks who can be extremely active in the FX markets on a daily basis, mainly for USD reserve diversification but also for large volume speculation.

BIS: Bank for International Settlements, an international bank responsbile for monetary and financial cooperation and serving as a bank for central banks. The BIS often acts in the forex market, allowing central banks to mask their identity in an attempt to reduce market impact.

Barrier Option: A type of “exotic” option that comes into existence or ceases to exist once a certain price is reached. They are often added to a “vanilla” or typical option to make the premium less expensive. e.g. a 1.5700 GBP/USD call purchased when spot is at 1.5500 would be cheaper if there were a “knockout” built into in the option, for example at 1.5300. If 1.5300 trades before the expiration of the options, the whole structure would be “knocked out” and the seller of the option would be able to pocket the entire premium.

Bid: A buy order placed at, or below, the market price.

BOC: Bank of Canada

BOE: Bank of England

BOJ: Bank of Japan

BUBA: The market nickname for the Bundesbank, Germany’s central bank

Cable: Nickname for GBP/USD. Originates from the use of transatlantic cables to transact currency deals years ago.

Clearer:  One of the big four UK clearing banks (Barclays, Lloyds, HSBC, RBS). Historically, they were the main "clearers" of paper cheques.

Corporates: The treasury departments of large multinational corporations. They are responsible for hedging the forex exposures of their firms, which can have dramatic impact on earnings and the FX market.

Custodian Bank: A bank which holds securities in custody for other financial institutions, does their bookkeeping and settles their trading activity. Examples include Bank of New York Mellon, State Street and Northern Trust Co.

Delta: The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the “hedge ratio”.

Double-No-Touch (DNT) ; An options strategy which pays the owner of the structure if prices stay within a pre-defined range during the length of the contract. For instance a 1.30/.35 DNT would pay off if prices do not trade outside that range while the option is in force.

Dovish: A statement or stance related to monetary policy which implies an easing of policy (lower rates).

ECB: European Central Bank.

Ecofin: A council consisting of the economic and finance ministers of the European Union that meet once a month.

Eurogroup: A group of finance ministers of countries who are members of the Euro. It’s current head is Jean-Claude Junckers, the finance minister of Luxembourg.

EFSF : European Financial Stability Facility (ESF) is a legal instrument agreed by the 27 member states of the European Union on 9 May 2010, aiming at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty. Colloquially known as ‘euro SPV’ or ‘euro TARP’ .

Fed : US Federal Reserve. the US central bank.

Fibonacci retracements: A useful tool for traders as markets correct during trends. Technicians look for support on pullbacks at 38.2% of the uptrend or rebounds in an downtrend, 50% and 61.8%. Derived from the “golden ratio” of Italian mathematician Fibonacci.

Fixing: A preset time of day when bids and offers are aggregated and cleared at a published price. Popular fixings are the “ECB fix” at 12:15 GMT and the London fixings at 11.00 & 16:00 GMT. Fixings are used primarily by asset managers. They have a fiduciary responsibility to get their clients the best possible execution and the thinking is the fixing price is the most transparent of the day.

Funds: Market nickname for the USD/CAD currency pair.

Gamma:  Concepts in the options markets are expressed in terms of the Greek alphabet. Gamma refers to the rate of change in an option’s delta ( see above ) relative to the price of the underlying asset. A short gamma position will become shorter as the price of the underlying asset increases. As the market rallies, you are effectively selling more and more of the underlying asset as the delta becomes more negative.

Haircut: The difference between the value of a loan and the value of the collateral pledged to secure the loan

Hawkish:  A statement stance regarding monetary policy which implies tighter policy (higher rates)

IMM:  The International Monetary Market division of the Chicago Mercantile Exchange. This is the exchange where the bulk of the currency futures trading takes place worldwide.

IMF: International Monetary Fund. An organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Intervention: Action taken by central banks in co-ordinated or uniltateral fashion to support or weaken a partlicular currency, or add/drain liquidity to the money markets in an attempt to stabilize prevailing conditions.

JGB's: Japanese Government Bonds

Kampo; An arm of the Japanese postal savings system. They are institutional investors who move large amounts of Japanese savings into foreign investments. They sometimes act in forex markets at the behest of the Japanese government.

Loonie: Nickname for the Canadian dollar. Derives from the picture of a Loon on the $1 coin.

Model Fund: Hedge fund which uses some form of quantitative model to initiate and liquidate trades. The most familiar type of funds are
trend-followers like J.W. Henry and Co. Many of these funds trade at set times during the day, often at 10 am New York time.

Offer: A sell order placed at, or above, the market price.

Old Lady: A nickname for the Bank of England aka “The Old Lady of Threadneedle St.”

Operation Twist : The name given to a US Federal Reserve monetary policy easing operation that involves the purchase and sale of bonds. Last used in September 2011 in an attempt to lower long-term interest rates.

Plain Vanilla Option: The most basic option type with a simple expiration date and strike price with no additional features.

Prime Brokers: Firms which allow clients like hedge funds to use their credit facilities to access financial markets. For example, a hedge fund client of Bank X can trade in the interbank FX market using Bank X’s facility.

QE: Quantitative Easing. A strategy used by central banks to supply liquidity when interest rates have reached zero (or close to it). The central bank buys assets, typically government bonds, in an effort to inject money into the economy.

RBA: Reserve Bank of Australia, the Australian central bank

Real money:  Nickname for “end users” of foreign exchange, who trade to pay for transactions or liquidate proceeds from transactions in other markets like equities, fixed income and commodities.

Risk-Off : A bearish ( negative ) prevailing market sentiment.

Risk-On : A bullish ( positive ) prevailinng market sentiment.

Stop-loss: An order which closes out a market position once a certain price level trades in the market. For example, a sell order placed below the market price to protect against accelerating losses.

Sovereign Wealth Fund (SWF): A fund set up by a country with large foreign exchange reserves to help manage those reserves.

Sovereign Names:  An expression used either for sovereign wealth funds or central banks.

SNB: Swiss National Bank, the Swiss central bank.

Take- Profit : An order or exection which closes out a market position in order to realise the profit earned.

TARP: Troubled Asset Relief Programme. A US government programme created for the establishment and management of a Treasury fund, in an attempt to curb the financial crisis of 2007-2008

Yard: Market slang for billion.

MSP Foreign Exchange Services Limited. 2 Blackmoor, Roodlands Lane , Four Elms TN8 6PG UK Company Number 8708683  MSP Foreign Exchange Services only uses companies regulated by the Financial Services Authority under the Payment Services Regulations 2009, and authorised by HMRC for the provision of payment services. Company Number 8708683

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