Jargon Buster
Acquisition
The act of one corporation acquiring control of another corporation or asset.
Around
Term used by dealers used when the forward premium/discount is near parity e.g. "three-three around" means 3 pips either side of the current spot price
Arbitrage (arb)
Riskless profit made by taking advantage of pricing discrepancies between 2 markets; buying securities in one country/market and selling them in another.
Ask Price
The price at which a bank, dealer or trader is willing to sell.
Bear
A Bear is an investor who believes that the prices in the market will decline.
Bear Market
A Bear Market is one where prices are falling or static (e.g. if the GBP/USD rate is dropping).
Bid or Bid Rate
The current price at which a broker/dealer is willing to buy.
Bid/Ask Spread
The difference in price in 'pips', between the Bid and Ask or Offer price, the amount being used to measure market liquidity.
Bid Offer
Bid Offer is the difference in price or spread between where one can buy a currency and one can sell it at the same moment.
Big Figure
The first (main) digits of an exchange rate. Because these rarely change in normal market fluctuations they may be omitted verbally in dealer quotes when market activity is high. E.g. if the USD/JPY rate was 107.40/107.45, it might be quoted as simply '40/45'.
Bonds
A long-term loan certificate issued by governments and organizations in order to raise capital. The capital is repaid with interest. A bond issued by a foreign institution is known as a bulldog in the UK, a Yankee in the USA, a samurai bond in Japan and so on.
Book
'The book' is the summary of a trader's or desks total positions.
Broker
An individual or company that acts as an intermediary, putting together buyers and sellers for a fee or commission. A Broker is a 'middle man' acting as a 'negotiator' for both customer (the trader) and supplier (the main market players like commercial or national banks and financial institutions).
Bull
An investor who believes a market will go up.
Bull Market
A market in which traders and investors are feeling positive and in which prices are rising.
Clearing
The process of settling a completed trade.
Clearing House
An institution that practices clearing, which significantly reduces the number of inter-bank payments.
Commission
a fee charged or received by a broker or other party as payment for a service; can be a fixed amount or a percentage of the value of the transaction.
Derivative
A contract that changes its value in relation to price movements of a related security, future or other financial instrument.
Forward
The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.
Hedge - A hedge is a position established in one market in an attempt to offset exposure to price fluctuations in some opposite position in another market with the goal of minimizing one's exposure to unwanted risk.
Getting Filled- An order you have been given to work by a client is successfully executed, the client is then filled.
Good Till Cancelled Order (GTC)
is an order to buy or sell at a specified price. The order remains open until filled or until the client cancels.
Leverage
The amount by which the amount to be traded exceeds the margin required to trade.
Liquidity
A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.
Margin
The minimum amount of funds required in a trader's brokerage account in order to open a position (enter a trade) or to maintain an open position.
Margin Call
A warning by the broker of the impending (or automatic) closing of a position if the margin falls below the required minimum during a trade.
Market Maker
is a dealer who regularly quotes both bid and ask prices, and is willing to make a two-sided market for any financial instrument.
Market Order
An order to a broker to buy a currency lot or stock at the current Ask price.
Maturity
The date for settlement or expiry of a financial instrument.
Offer
The price at which a market maker is willing to sell a security.
One Cancels Other (OCO) - When you are given two prices to work by a counterparty, whereby he/she gets 'filled' on one interest would automatically take him/her out of their other interest.
Over The Counter (OTC)
is used to describe transactions not conducted over an exchange.
Pip or PIP
last 2 numbers of an FX quote (I.e. in EUR/USD 1.4236 the "36." The 1.42 is the "big figure")
Settlement
The process by which a trade is entered into the books and records the details of a transaction.
Size - The total amount/volume of client's interest, of the total amount/volume on the bid or the offer.
Spread
The price difference, quoted as a number of pips, between bid and offer rates (buy and sell) for currency pairs.
Tick
Shortest interval used in stock trading and forex charting.
Volatility
The ability to change rapidly; rapid changes in exchange rates.
