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
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
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
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
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
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
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
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
Counter Currency – The second currency in a currency
pair. In the Currency Pair EUR/USD, the Counter Currency is
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
Cover – The act of performing a transaction that closes out
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
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
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
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
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 Citibank,
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
Eurodollars – US dollars deposited in a bank (US or non US)
located outside the USA.
European Union – The group formerly known as the European
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
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
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
Fixed dates – The monthly calendar dates similar to the spot.
There are two exceptions. For detailed description see value
Fixed exchange rate – Official rate set by monetary authorities.
Often the fixed exchange rate permits fluctuation within a
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
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 – The 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
Going long – The act of buying a currency pair. For example,
if a client bought the EUR/USD, he would be “going long” the
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
Holder – Buyer of a currency pair.
Indicative quote – A market-maker's price which is not “firm” or “firm
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
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
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
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
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
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
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
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
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
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
Realized P/L – The profit and loss generated from closed
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
Rollover credit – The credit (in base currency terms)
added to a client's account that is long a higher yielding
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
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
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
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
Trading Platforms – A software application where a
client can give an order to execute a transaction on that customers
behalf. FXDD and DirectDealer are both examples of
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
US Dollar – The legal tender of the United States of
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.