Fintech
Fintech is the term used to describe a vast array of financial service companies. Numerous sectors are covered by this term, which goes beyond the main fintech categories. These include…
Base currency
In a currency pair quote, the base currency, also known as the primary currency, is the first currency shown. The second currency shown is referred to as the quote currency. Currencies…
Basis points (bp)
One basis point is equal to 1/100 of one percentage point or 0.01. This means that a rise of 1% is expressed as an increase of 100 basis points. In finance,…
Bid/Ask price
In foreign exchange, as in all financial markets, the bid price is the price that a buyer is willing to pay to acquire a particular asset, while the ask price…
Bitcoin
Bitcoin is a consensus network that enabled a new payment system and a digital currency, which was created in 2009. It is the first decentralized peer-to-peer payment network powered by…
Business foreign exchange
Business foreign exchange is the trading of currencies for purposes of real trade and not for speculation. This activity represents approximately 2% of the global $5.3 trillion daily FX market. The…
Cash flow hedge
A cash flow hedge is an investment position sold by banks and brokers to offset the losses and profit damage that could result from variations in prices. Example: a euro-denominated importer…
Central bank
A central bank is an autonomous or semi-autonomous institution entrusted with managing a state or monetary union’s monetary supply, currency and interest rates. They usually supervise the local commercial banking…
Central Counterparty Clearing House (CCP)
Central counterparty clearing houses (CCP) are entities, which are often operated by major banks, and are located in several European countries. They were created to make it easier to trade…
China National Advanced Payments System (CNAPS)
The China National Advanced Payments System (CNAPS) is a national payment protocol launched by the People’s Bank of China as a part of a wider plan to increase global use…
Chinese yuan
The Chinese yuan, or renminbi, is the official currency of the People’s Republic of China. Its ISO code is CNY although RMB can also be used. The yuan is the…
Chinese yuan payment
Chinese yuan payment refers to payments made to China in yuan renminbi (CNY), the currency of mainland China, (excluding Hong Kong and Macau). The Yuan was practically absent from international trade…
Clearing
Clearing (the clearing of payments) is the process by which an intermediary entity acts to ensure a transaction is carried out, from the initial agreement between counter-parties…
Client bank account
A client bank account is a bank account whose sole purpose is to hold client funds for transactional purposes. As client accounts cannot be accessed by third parties and are…
Close-out netting
Close-out netting is a netting method that reduces pre-settlement credit risk. It only applies to transactions between parties where there is a default. In close-out netting, the non-defaulting company is no…
Closed forward contract
A closed forward contract, (also known as an outright forward), is a forward contract establishing that a currency transaction will be completed at an agreed exchange rate and on a…
Closed forward contract
A closed forward, in contrast to an open forward, is a forward contract in which a currency transaction is to be completed at an agreed exchange rate on a specified…
Collateral
Collateral is the security required from the borrower in all kinds of financial transactions. It protects lenders against the risk of a payment default. If a borrower fails to pay the…
Continuous linked settlement (CLS)
CLS, or continuous linked settlement is an international payment system for the settlement of foreign exchange trades that eliminates settlement risk through a payment-versus-payment mechanism. Standard foreign exchange transactions involve a…
Counterparty
A counterparty is the opposing party in a financial transaction. Therefore, both parties in a transaction can be referred to as a counterparty. Entering into a contract with a counterparty generates…
Counterparty clearing house
Counterparty clearing houses are entities that aid the trading of derivatives and equities. Counterparty clearing houses make transactions more stable by assuming the credit risk that would otherwise be carried by…
Counterparty Credit Risk
Credit Risk is the possibility that a person or organisation will default on their loan repayments. Defining credit risk is key to calculating the interest rate on a loan. The…
Country risk
Country risk is the total risk associated with an investment in a foreign country. It includes political risk, changes to regulation and corporate law, economic risk, transfer risk, currency risk…
Credit risk
Credit risk is the possibility that an individual or organisation will default on their loan repayments. Defining the credit risk is key to calculating loan interest rates. The longer the repayment…
Cross rates
Cross rates are used to calculate the exchange rate for a currency pair whose exchange rate is not commonly quoted, for example, EUR/GBP, JPY/CHF or AUD/MXN. This process is known as…
Cross Rates
Cross rates are currency pairs which do not quote theU.S. dollar. Cross rates encompass all currency pairs which do not involve theU.S. dollar, either as the base or quote currency. Instead, two…
Cross-border payment
Cross-border payment is a transaction in which a company or individual in one country transfers money to an individual or company operating in a different country. The countries do not…
Cross-border risk
Cross-border risk describes the volatility of returns on international investments relating to events associated with a particular country, as opposed to events that affect a particular economic or financial player. Cross-border…
Cross-border trade (CBT)
Cross-border trade (CBT) is the exchange of goods or services between two countries. It is also known as international trade and international selling. When the two countries involved use different…
Currency appreciation
Currency appreciation is the increase in value of one currency against another. If the EUR/USD exchange rate moves from 1.10 to 1.15, the euro has appreciated by $0.05. One euro now…
Currency call option
A currency call option is the opposite of a currency put option. The holder of a currency call option has the right, but not the obligation, to buy a currency…
Currency converter
A currency converter is a mechanism that calculates the price of one currency against another, using a specific exchange rate. It is crucial to make sure that the exchange rates are…
Currency Converter
A currency converter calculates the amount of one currency you can buy with another currency. For example, a currency converter may calculate that you can buy $1,200 for €1,000. With a…
Currency depreciation
Currency depreciation is the opposite of currency appreciation. It is the decrease in value of one currency against another. If the EUR/GBP exchange rate falls from 0.75 to 0.72 the British…
Currency devaluation
Currency devaluation is a tool governments can use as part of their monetary policy to boost exports and improve a country’s trade balance if there is a trade deficit (or…
Currency exchange controls
Currency exchange controls are government restrictions that limit its citizens’ ability to purchase foreign currencies and limit purchases of the home currency from abroad. Also known as foreign exchange controls, these…
Currency exposure
Currencies are constantly exposed to fluctuations in exchange rates on the global foreign exchange market making them inherently liable to volatility. Holders of a given currency are vulnerable to its depreciation…
Currency forward
A currency forward, also known as a forward contract, is an agreement that allows the buyer to lock in an exchange rate the day on which the agreement is signed…
Currency future
A currency future is known as an FX future or foreign exchange future. This type of foreign exchange derivative sets the price at which one currency will be exchanged for…
Currency management
Currency management is the implementation of strategies to limit a company or institution’s exposure to currency risk. Currency management plays an important role in managing a company’s finances. To manage currency…
Currency Management
Thousands of companies use fintech platforms to exchange currency at reduced rates, lock in favourable rates for future use and reduce risk related to market volatility. Companies such as Kantox…
Currency news
Currency news, or FX news, focuses on new world currency developments in the foreign exchange market. The main currencies, including the U.S. dollar (USD), euro (EUR), pound sterling (GBP), Chinese…
Currency News
Currency news, or FX news, focuses on new developments for the world’s currencies in the foreign exchange market. The main currencies, includingU.S. dollar (USD), euro (EUR), pound sterling (GBP), Chinese…
Currency Pair
In foreign exchange, currencies are quoted in pairs and usually with their currency code, containing three letters, rather than the long version name of the currencies. For example, the euro -U.S….
Currency peg
A currency peg is a policy some central banks pursue to maintain their currency at a fixed value against a foreign currency. If a currency is ‘pegged’ to the euro the…
Currency peg
The policy that some central banks pursue, consisting on maintaining a fixed value for its currency against a foreign currency. In the case of being ‘pegged’ to the euro, it…
Currency pip
A currency “pip” (percentage in point) is a small measurement used in foreign exchange to represent percentages in exchange rate movements. One pip is equal to 1/100th of 1%. It…
Currency pip
A currency pip (percentage in point) is a small measurement used in foreign exchange to represent percentages in exchange rate movements. One pip is equal to 1/100th of 1%. It…
Currency put option
A currency put option is a hedging contract that gives the holder the right, but not the obligation, to sell a specific currency at a specific price within a defined…
Currency put option
A currency put option is a hedging contract that gives the holder the right, but not the obligation, to sell a specific currency at a specific price within a defined…
Currency risk
Currency risk (also known as foreign currency risk or exchange rate risk,) is the risk that accompanies cross-border operations involving more than one currency. When a company operates in a foreign…
Currency spot rate
The currency spot rate, or just spot rate, is the current exchange rate for any currency pair, for immediate settlement “on the spot”. For most currencies, the spot rate is…
Currency spot rate
The currency spot rate, or spot rate, is the current exchange rate applicable to a particular currency pair for ‘on-the-spot’ or immediate settlement. The exchange rate between two currencies is determined…
Currency spot trade
A currency spot trade, or spot trade, is the act of exchanging currency at the current rate for immediate ‘on-the-spot’ settlement. The spot rate (or spot price) for most currencies is…
Currency swap
A currency swap, also known as a foreign exchange swap, or FX swap, is an agreement that two parties will exchange two currencies on a specific date or multiple specified…
Currency swap
A currency swap, also known as a Foreign Exchange swap, or FX swap, is the agreement between two parties to exchange two currencies on a specific date or specific multiple…
Currency swing
A currency swing is a large fluctuation in the price of one currency against other currencies on the global foreign exchange market over a short period of time.
Currency Pair
In foreign exchange, currencies are quoted in pairs and usually with their currency code, containing three letters, rather than the long version name of the currencies. For example, the euro -U.S….
Currency peg
A currency peg is a policy some central banks pursue to maintain their currency at a fixed value against a foreign currency. If a currency is ‘pegged’ to the euro the…
Currency peg
The policy that some central banks pursue, consisting on maintaining a fixed value for its currency against a foreign currency. In the case of being ‘pegged’ to the euro, it…
Currency pip
A currency “pip” (percentage in point) is a small measurement used in foreign exchange to represent percentages in exchange rate movements. One pip is equal to 1/100th of 1%. It…
Currency pip
A currency pip (percentage in point) is a small measurement used in foreign exchange to represent percentages in exchange rate movements. One pip is equal to 1/100th of 1%. It…
Currency put option
A currency put option is a hedging contract that gives the holder the right, but not the obligation, to sell a specific currency at a specific price within a defined…
Currency put option
A currency put option is a hedging contract that gives the holder the right, but not the obligation, to sell a specific currency at a specific price within a defined…
Currency risk
Currency risk (also known as foreign currency risk or exchange rate risk,) is the risk that accompanies cross-border operations involving more than one currency. When a company operates in a foreign…
Currency spot rate
The currency spot rate, or just spot rate, is the current exchange rate for any currency pair, for immediate settlement “on the spot”. For most currencies, the spot rate is…
Currency spot rate
The currency spot rate, or spot rate, is the current exchange rate applicable to a particular currency pair for ‘on-the-spot’ or immediate settlement. The exchange rate between two currencies is determined…
Currency spot trade
A currency spot trade, or spot trade, is the act of exchanging currency at the current rate for immediate ‘on-the-spot’ settlement. The spot rate (or spot price) for most currencies is…
Currency swap
A currency swap, also known as a foreign exchange swap, or FX swap, is an agreement that two parties will exchange two currencies on a specific date or multiple specified…
Currency swap
A currency swap, also known as a Foreign Exchange swap, or FX swap, is the agreement between two parties to exchange two currencies on a specific date or specific multiple…
Currency swing
A currency swing is a large fluctuation in the price of one currency against other currencies on the global foreign exchange market over a short period of time.
Euro
The official single currency used by the current 19 members of the eurozone. It came into being officially on January 1, 1999 as the common currency for an initial 11 countries…
European Markets Infrastructure Regulation (EMIR)
The European Markets Infrastructure Regulation (EMIR) is an EU regulation implemented by the European Securities and Markets Authority (ESMA) that came into force on 16 August 2012. Its primary aim is…
Exchange rate
The term exchange rate refers to the amount of one currency required to buy one unit of another currency. For example if the euro/U.S. dollar exchange rate is 1.38, (which…
Exchange rate
An exchange rate is the amount of one currency that is needed to buy one unit of another currency. For example, the euro/US dollar exchange rate, also written as EURUSD,…
Exchange rate forecast
Exchange rate forecasts are predictions of the value of various currency pairs. Analysts like Reuters compile two types of exchange rate forecast (fundamental forecasts and technical forecasts), by regularly polling major…
Exchange Rate Forecast
Exchange rate forecasts are compiled by many analysts and financial entities for different currency pairs, despite the volatile nature of currencies, and the difficulty in predicting their movement. There are…
Exchange rate risk
Exchange rate risk, also known as currency risk, is the financial risk arising from fluctuations in the value of a base currency against a foreign currency in which a company…
Exotic currency
A currency that is thinly-traded and highly illiquid is an exotic currency. The label ‘exotic’ has nothing to do with the country of the currency’s location or size. There are…
Exotic currency
An exotic currency is a currency that is infrequently or thinly-traded and highly illiquid. ‘Exotic’ has nothing to do with the currency’s nationality, location or size. It’s often costly to trade…
Federal Reserve Wired Network (FEDWIRE)
Fedwire is the abbreviation for the Federal Reserve Wire Network, a real-time gross settlement (RTGS) funds transfer system that settles funds electronically between any of the United States banks registered…
Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) is a United Kingdom regulatory body that focuses on the regulation of financial services firms (retail and wholesale). It is funded by membership fees it…
Fintech
Fintech – a contraction of “finance” and “technology” – refers to financial service firms whose product or service is built on technology, often resulting in highly innovative, pioneering services The fintech…
Fintech
Fintech – a contraction of ‘finance’ and ‘technology’ – is the term used to describe companies that provide financial services using technology. One of the principal objectives of genuine fintech…
Fintech companies
Fintech companies provide financial services using technological innovation. The rise of fintech was made possible by developments in technology and changes in financial regulation. Fintech companies essentially offer alternatives to traditional…
Fixed currency rate
A fixed currency is a currency whose value is maintained by a central bank’s policy of pegging it to another, usually stronger, currency or to a standard value like gold.
Fixed Currency Rate
“The policy that country’s central bank pursues of maintaining a fixed value against, another country’s currency. In the case of being ‘pegged’ to the euro, it means a currency maintains…
Fixed exchange rate
The policy that country’s central bank pursues of maintaining a fixed value against, another country’s currency. In the case of being ‘pegged’ to the euro, it means a currency maintains…
Fixed exchange rate
A fixed exchange rate is a system in which one currency is pegged to a (usually stronger) currency, such as the euro, U.S. dollar or pound sterling. The aim is…
Flexible forward
A flexible forward is a type of forward contract used to hedge against the volatility generated by foreign exchange. Flexible forwards differ from a standard forward contract in that the…
Flexible forward
A flexible forward is a financial instrument used to hedge against foreign exchange market volatility. While standard forward contracts only allow the buyer to exchange currency at a given exchange rate…
Floating exchange rate
A floating exchange rate system determines a currency’s value in relation to other currencies based purely on the mechanisms of the foreign exchange market, free of government controls or restrictions…
Floating exchange rate
A floating exchange rate system determines a currency’s value in relation to other currencies. These currencies freely float, meaning that there are no government controls or restrictions to their trade,…
Foreign currency risk
Foreign currency risk, also known as exchange rate risk, is the financial risk arising from fluctuations in the value of a base currency against a foreign currency in which a…
Foreign exchange
Foreign exchange is the trading of one currency for another in the foreign exchange market. It is also commonly referred to as “forex”, “FX” or “currency exchange”. Foreign exchange is essential…
Foreign exchange
Foreign exchange means trading one currency for another. It is also commonly referred to as forex, FX or currency exchange. Foreign exchange is an essential part of international trade. If a…
Foreign exchange broker
A foreign exchange broker (also known as an FX broker or forex broker) buys and sells currencies on behalf of their clients. Along with banks, brokers were the traditional market makers…
Foreign exchange broker
A foreign exchange broker (also known as an FX broker or forex broker) buys and sells currencies on behalf of clients while charging a commission for the service. Brokers, along with…
Foreign exchange commission
Foreign exchange commission is the fee an intermediary (bank, broker or fx provider) charges their clients carrying out the currency exchange transaction on their behalf. Commission is a foreign exchange provider’s…
Foreign exchange commission
In foreign exchange, the commission is the fee charged for the service of carrying out the currency exchange transaction. Commissions are the primary source of profit for a foreign exchange provider,…
Foreign exchange hedge
A foreign exchange hedge is a type of financial derivative that allows companies to mitigate or ‘hedge’ against foreign exchange risk. The most popular hedging products are forward contracts and options
Foreign exchange hedge
A foreign exchange hedge is a type of financial derivative, which gives companies a means of eradicating, or ” “hedging””, their foreign exchange risk. In foreign exchange, companies can hedge risk through…
Foreign exchange hedging strategy
Foreign exchange hedging strategy is the management of currency volatility exposure when trading currencies. The principal method of hedging currency risk is through the use of hedging products, such as…
Foreign exchange hedging strategy
Foreign exchange hedging strategy is the management of exposure to currency volatility when trading currencies. The principal method of protecting against currency risk is the use of hedging products, such as…
Foreign exchange line of credit
A foreign exchange line of credit is a type of bank loan given to an individual or business in order to cover their foreign exchange obligations. Businesses often take out a…
Foreign exchange line of credit
A foreign exchange line of credit is a type of loan extended by a bank to an individual or a business in order to cover foreign exchange obligations. A business often…
Foreign exchange long position
In financial vocabulary, a long position or the expression “to go long on a certain asset” means to buy – and hold – that specific asset in the expectation that…
Foreign exchange long position
In financial vocabulary, a long position or the expression “to be long on a certain asset” means to buy –and hold- that specific asset, normally, expecting that its value will…
Foreign exchange market
The foreign exchange market (also known as the FX market or Forex market) is the largest market in the world, with an estimated $5.3 trillion exchanged every day. It is…
Foreign exchange market
The foreign exchange market (FX market / Forex market) is the largest market in the world, with an estimated $5.3 trillion exchanged every day. It is a global, decentralised exchange…
Foreign exchange netting
In general terms, netting refers to the practice of consolidating two different settlements in order to create a single value. When companies incur a loss in a particular business line,…
Foreign exchange netting
Netting is a concept whereby a business which has incurred losses uses gains made elsewhere to offset these losses. Netting in foreign exchange is used as a method of protection…
Foreign exchange opportunity cost
Opportunity cost can be understood as the amount of money one that could have been made by making a different investment decision. Foreign exchange opportunity cost is associated with forward contracts…
Foreign exchange opportunity cost
The foreign exchange opportunity cost is a concept in currency management, associated with forward contracts, financial instruments which offset exchange rate risk. The foreign exchange opportunity cost is the difference…
Foreign exchange outright
The foreign exchange outright rate is the exchange rate that applies to outright forward contract. In an outright forward contract, the buyer agrees to purchase a particular currency at a…
Foreign exchange outright rate
The foreign exchange outright rate is a concept in in currency management, associated with forward contracts, financial instruments which offset exchange rate risk.
Foreign exchange payment default
A payment default occurs when a counterparty fails to meet its contractual obligations to make a specific payment by a specific date. In foreign exchange, payment defaults are often a consequence…
Foreign exchange payment default
A payment default is the failure of one party to meet its contractual obligations to make a specified payment by a specified date. In foreign exchange, a payment default often occurs…
Foreign exchange risk
Foreign exchange risk (or currency risk) is the risk that accompanies cross-border operations involving more than one currency. When a company operates in a foreign currency or a number of foreign…
Foreign exchange risk
Foreign exchange risk comes from the danger of losing investment value due to changes in exchange rates. It is also known as currency risk, or exchange rate risk. If a…
Foreign exchange short position
In finance, a short position (which is also known as short selling or going short) means selling a specific asset in anticipation that its value will decrease, with the intention…
Foreign exchange short position
In finance, a short position or the expressions “short selling” or “going short” mean to sell a specific asset, that might be owned or borrowed, normally, with the expectation that…
Foreign exchange SWAP/FX SWAP
An FX swap, or foreign exchange swap, (also known as currency swap,) involves two simultaneous currency purchases, one on spot and the other through a forward contract, and is designed…
Forex alerts
Forex alerts – also known as FX alerts or exchange rate alerts – are automatic messages alerting recipients that a specific exchange rate has been reached. FX alerts are a popular…
Forex alerts
Forex alerts – also known as FX alerts or exchange rate alerts – are messages that alert the user once a specific exchange rate level has been hit. They are used…
Forex trading platforms
A foreign exchange trading platform is software programme that allows businesses and investors to buy and sell currencies on the foreign exchange markets during FX market opening hours, normally at…
Forex trading platforms
There are two main types of forex trading platform online. The first is designed for speculators and investors who trade currencies to make a profit on the foreign exchange market….
Forward contract
In the foreign exchange market, a forward contract is an agreement that gives you today’s exchange rate on an established settlement date in the future. These contracts are a simple,…
Forward contract
A forward contract in foreign exchange is an agreement which gives you today’s exchange rate on an established settlement date in the future. They are a simple, yet highly effective…
Forward contract opportunity profit
Forward contract opportunity profit is the savings a company makes when there is a downturn in an exchange rate, against which it has successfully hedged using a forward contract. Conversely, any…
Forward Contract Opportunity Profit
Forward contract opportunity profit represents the savings a company would make on any downturn in the exchange rate which it has successfully hedged against by using a forward contract
Forward points
In forward contracts, forward points are the basis points that are deducted from, or added to, the current spot rate to determine exactly what the forward rate will be on…
Forward Points
Forward points reflect interest rate differentials between two currencies in a currency forward contract, agreements in currency management allowing you to offset exchange rate risk. Within forward contracts, forward points…
Forward rate agreement (FRA)
A forward rate agreement, or FRA, is another name for a forward contract, or an over-the-counter agreement that allows a buyer and seller to fix the price, interest rate or…
Fully convertible currency
A fully convertible currency (also known as a freely convertible currency,) is one that can be traded on the global foreign exchange market free of any government restrictions or intervention….
Fully convertible currency
A fully convertible currency, also known as a freely convertible currency, is one which can be traded without any limitations imposed by government. They typically come from more stable countries,…
Functional currency
The functional currency is the legal tender used in a company’s primary economic environment. In other words, it is the currency of the country in which the company primarily generates…
Functional Currency
The functional currency is the currency of the primary economic environment in which a company operates. In other words, it is the currency of the location in which a company…
FX
FX is a commonly used abbreviation of foreign exchange, namely the trading of one currency for another on the foreign exchange market. FX is the world’s largest market, moving $5.3…
FX
FX is a common name used for “foreign exchange”, namely the trading of one currency for another in the foreign exchange market. The FX market is the largest in the…
FX broker
An FX broker (or forex broker) is an intermediary who trades on the foreign exchange market. They connect currency buyers with currency sellers, making a profit on each transaction. An FX…
FX broker
An FX broker is an intermediary market maker in foreign exchange who connects currency sellers to currency buyers, making a profit on each transaction. An FX broker typically levies a spread…
FX market participants
In traditional banking, four players were classed as FX market participants – those participating in the buying and selling of foreign currencies in the foreign exchange market: 1) Domestic and international…
FX Market Participants
There are four actors who can be classed as FX market participants in traditional banking, that is, those participating in the buying and selling of foreign currencies in the foreign…
FX SWAP
An FX swap, or foreign exchange swap, (also known as currency swap,) involves two simultaneous currency purchases, one on spot and the other through a forward contract, and is designed…
Inflation
Inflation is the pace at which the price of goods and services in an economy increase. A low, sustainable level of inflation is crucial for a healthy economy.
Interest rate risk
Interest rate risk is the risk that an investment’s market value will change due to interest rate variations or changes in the spread between the interest rate differential. Interest rate risk…
Interest rate risk
An interest rate risk is the risk that an investment’s value will change due to a change, either in the total level of interest rates, or in the bid/ask spread….
International bank account number (IBAN)
IBAN is the acronym for an International Bank Account Number, which is a universally recognised alphanumeric code used to identify a bank account. This system was designed to simplify international…
International transaction
An international transaction is a money transfer (often as part of a business deal) that crosses national borders, frequently involves two different currencies, and can even involve three currencies if…
International transaction
An international transaction is a transaction that crosses national borders and often involves two different currencies, or three even, if a reserve currency, such as theU.S. dollar is used. An exception…
Letter of credit
A letter of credit is used to ensure the completion of a transaction between a customer and a supplier. Letters of credit are issued by a bank to guarantee that…
Letter of credit
A letter of credit is employed to ensure completion of a transaction between a customer and a supplier. It is a bank letter guaranteeing that payment will be received by…
Leveraged trading
Leveraged trading is the practice of making an investment using borrowed funds to allow speculators to trade in larger volumes. In currency markets, forex brokers allow traders to open margin accounts…
Leveraged trading
Leveraged trading allows forex speculators to trade in larger volumes of currency. This speculative action has grown exponentially in recent years due to the sharp rise in number of online…
Limit order
In the foreign exchange market, a limit order specifies the maximum price to be paid in one currency when purchasing another, or the minimum price to be received in the…
Limit order
A limit order in foreign exchange is a transaction order with an indicated restriction on either the maximum price to be paid in one currency in order to purchase another,…
Line of credit
A line of credit is a loan facility agreement between a lender and a borrower to cover the borrower’s liquidity needs up to a specific credit limit – the total…
Line of credit
A line of credit is a loan facility agreement between a lender and a borrower. A total amount is agreed for the credit line. It is extended to creditworthy customers by…
Liquidity
Liquidity refers to the ability to convert assets into cash. Companies must maintain good levels of liquidity to be able to pay the bills on time.
Liquidity ratio
Liquidity ratios are used to measure the level of cash or assets that could quickly be converted into cash belonging to a company or individual. These assets are what allow…
Liquidity risk
Liquidity risk defines the possibility that a business or individual may become unable to meet their short-term financial obligations. The main reasons for liquidity issues include an inability to sell a…
Live exchange rates
Live exchange rates are the quotes at which currencies can be exchanged in real time on the forex market. These are acknowledged as being the only truly accurate rates for…
Live exchange rates
Live exchange rates are the only truly accurate rates in the foreign exchange market. This is because, like the global currency markets they mirror, they constantly change with market movements in…
Local currency payment
Local currency payment is a process in which the buyer pays their foreign supplier in that supplier’s local currency. Companies who traditionally paid their international suppliers in their own home currency…
Local currency payment
Local currency payment is when a buyer pays a foreign supplier in the currency of the foreign supplier. Companies that have traditionally made international payments to goods and services suppliers in…
Long currency hedge
A long currency hedge is a risk management method in which a party locks in the current exchange rate in order to avoid the consequences of adverse exchange rate fluctuations,…
Long Currency Hedge
Hedging is a strategy implemented to minimise risk. A hedge usually involves carrying out a transaction in one market to offset potential losses in another. A long currency hedge is when…
Major currency pair
Major currency pairs, (also known as “majors”,) are the most liquid, commonly traded currency pairs that account for the overwhelming bulk of all foreign exchange market trades. The most important major…
Major currency pair
Major currency pairs, also called the Majors, are the most highly liquid, commonly traded currency pairs, accounting for approximately the overwhelming bulk of all foreign exchange market trades. The four most…
Margin
Margin is a term with several meanings. There are two commonly used definitions, the first is used in financial accounting and the second is used in financial markets. In financial accounting,…
Margin call
A margin call, (also known as fed call or maintenance call) is a broker request to clients to deposit additional funds or securities in their margin account, as the collateral…
Margin Call
A margin call, also known as “fed call” or “maintenance call” is an action performed by brokers to their clients, requiring them to deposit additional funds or securities, when the…
Margin deposit
A margin deposit is a common type of deposit used in trading financial instruments including foreign exchange, futures and options contracts
Margin requirement
A margin requirement is the minimum amount of collateral a party has to deposit in order to hold a financial security. If a counterparty wishes to enter a forward currency contract,…
Margin requirement
Margin requirement is a minimum amount in collateral that must be deposited in order to hold a financial security. In currency exchange, if a counterparty wishes to enter a forward currency…
Mark to market
Mark-to-market accounting is the system used to obtain the market value of assets and liabilities through daily revaluation rather than referring to the “book value”. It is used to assess the…
Mark-to-market
Mark-to-market accounting (or marked to market accounting) is the system used to obtain the market value of assets and liabilities through daily revaluation, rather than referring to their book value. It…
Market maker
The U.S. Securities and Exchange Commission defines a market maker as “a firm that stands ready to sell a particular stock on a regular basis at a publicly quoted price”. In…
Market order
In foreign exchange markets, a market order is an investor’s instruction to immediately buy or sell a currency. Due to the volatile nature of foreign currency markets, market orders are executed…
Market Order
A market order is a tool in foreign currency exchange. A market order allows a party that wants to execute a currency trade to do so at a specific exchange…
Maturity date
In a financial context, the maturity date, or simply maturity is the date on which a financial instrument, such as a loan, securities contract and/or any other asset, falls due….
MEPS+
The MEPS+ or MAS Electronic Payments Systems as it is also known, is a gross settlement funds transfer system, specifically developed for large-value Singapore dollar (SGD) transactions and interbank fund…
Mid market rate
The mid-market rate is the mid-point between the buy and the sell prices of the two currencies to an exchange rate – what the buyer is prepared to pay and…
Mobile Payments
Allowing people to conduct transactions through their mobile phone or tablet, fintechs such as Square and SumUp have stolen a march on banks by leading innovation in mobile payments. Conversely,…
Money service business (MSB)
A money service business (MSB) is an organisation that transfers money or converts currencies. The term encompasses banks and other non-bank financial institutions, including investment firms, currency exchanges and insurance…
Money services business
A money services business (MSB) is an organisation that transfers money or converts currencies. The term encompasses banks and non-bank financial institutions, including investment firms, currency exchanges and insurance organisations. The…
Natural currency hedging
Natural currency hedging is a method of protecting a company against currency risk, which is one of the major risks to entities conducting business internationally.
Netting
In general terms, netting refers to the practice of consolidating two different settlements in order to create a single value. For instance, if Company A owes U.S. $50,000 to Company B…
Non-convertible currency
A non-convertible currency, also known as a blocked currency, is a legal tender that is not traded on the international foreign exchange market, usually due to government restrictions. Such measures are…
Non-Convertible Currency
A non-convertible currency, also known as a “blocked currency”, is the legal tender of a country that is not traded at all on the international foreign exchange market, usually because…
Non-deliverable forward contract
A non-deliverable forward (NDF) contract is necessary to settle international transactions with counterparties from countries with a non-convertible currency. A standard forward contract is an agreement between two parties to trade…
Non-deliverable forward contract (NDF)
A non-deliverable forward contract (NDF) is an outright forward contract that hedges against volatility in a non-convertible currency. In an NDF agreement, the parties specify an amount of the blocked currency…
Notional amount
In foreign exchange, the notional amount, (also known as the notional principal amount or the notional value,) is the amount of currency to be bought and sold. It is important to…
Notional amount
In foreign exchange, the notional amount, also known as the notional principal, or the notional value, is the amount of currency to be sold and bought. It is important to…
Open forward
An open forward contract allows the purchaser to complete a foreign exchange transaction on a future date based on today’s exchange rate. It is called an “open” forward contract as, unlike…
Open forward contract
An open forward contract is an agreement between two parties to exchange a currency at a specific exchange rate either in one go or in partial settlements over a limited…
Outright forward
An outright forward is a type of foreign exchange forward contract with a locked-in exchange rate and a specific delivery date. An outright forward contract allows the purchaser to buy…
Over the counter derivative
Over-the-counter derivatives (OTC derivatives) are securities that are typically traded via a dealer network rather than through a centralised exchange, such as the London Stock Exchange. They are known as…
Over-the-counter derivatives (OTC)
Over-the-counter derivatives (OTC derivatives) are securities that are normally traded through a dealer network rather than a centralised exchange, such as the London Stock Exchange. These securities are referred to as…
P2P Lending
P2P lending companies including Zopa, Funding Circle and MarketInvoice have seen a surge in popularity. Many businesses which were turned down for financing requests from banks turned to the P2P…
Partially convertible currency
A partially convertible currency is the legal tender in a country where the authorities only allow it to be traded up to a specific volume on the global foreign exchange…
Payment netting
Payment netting, (which is also known as settlement netting,) is the process of offsetting positive and negative values against each other to reduce cash flow risk. Payment netting is useful for…
Payment netting
Payment netting refers to grouping multiple cash flows into a single ‘netted’ amount. This is where positive and negative values are offset against each other, thereby reducing cash flow risk….
Payment Netting
Payment netting refers to grouping multiple cash flows into a single ‘netted’ amount. This is where positive and negative values are offset against each other, thereby reducing cash flow risk….
Peer to peer currency transaction
A peer-to-peer currency transaction (or P2P FX trade) involves the trading of two currencies with no third party involvement. It involves the disintermediation of the bank or broker acting as…
Peer to peer finance
Peer to peer (P2P) finance is a movement of companies within the alternative fintech sector that connects counterparties directly by cutting out the middleman market maker, usually a bank or…
Peer to peer foreign exchange (P2P FX)
Peer to peer foreign exchange (P2P FX) is a foreign exchange sector that cuts out the middleman (banks and brokers) and the related intermediation costs, by directly connecting the two…
Peer to peer foreign exchange (P2P FX)
P2P foreign exchange (peer-to-peer foreign exchange) is a sector within foreign exchange, which cuts out the middleman – banks and brokers – and the costs associated, by connecting two parties…
Peer-to-peer currency transaction
Peer to peer currency transactions cut out the middleman (banks and brokers) and the related intermediation costs, by directly connecting the two parties to an exchange. It involves matching two…
Peer-To-Peer Finance
Peer to peer (P2P) finance is a movement of companies within the alternative fintech sector that connects counterparties directly by cutting out the middleman market maker, usually a bank or…
Peer-to-peer finance (P2P)
Peer-to-peer (P2P) finance is a movement of companies within the alternative fintech sector that directly connects counterparties, cutting out the market maker middleman, usually a bank or broker. By using cutting-edge…
Pegged exchange rate
A pegged exchange rate, (also known as a fixed exchange rate,) is a system in which one currency is pegged to a (stronger) currency, such as the euro, U.S. dollar…
Pegged Exchange Rate
A pegged exchange rate, also known as a fixed exchange rate, is where the currency of one country is tied to a usually stronger currency, such as the euro,U.S. dollar…
Plain vanilla
A plain vanilla is the most standard form of a financial product. In foreign exchange, plain vanilla products include hedging tools such as currency forwards and options. These products are free…
Plain vanilla
A “plain vanilla” is the most standard of financial products. In foreign exchange, plain vanilla products include hedging tools such as currency forwards and options.
Product bundling
Product bundling is a marketing practice that involves selling a range of different goods or services as a unique end product. There are different types of product bundling. Closed bundle: the customer…
Quantitative easing
Quantitative easing (QE) is the large-scale purchasing of assets by a central bank using money that it has newly created. It is more colloquially referred to as “printing money”, though…
Quantitative easing (QE)
Quantitative easing (QE) is an economic stimulus programme in which a central bank buys large quantities of assets using newly printed money to increase liquidity, activate credit and ultimately revive…
Quote currency
In a currency pair quote, the quote currency, (also known as the secondary currency or terms currency,) is the second currency shown. For example, in the EUR/USD currency pair, the U.S….
Quote currency
In a currency pair quote, the quote currency, also known as the secondary currency, is the second currency shown. In the currency pair EUR/USD,U.S. dollar (USD) is the quote currency….
Repatriation of profits
Companies who make a profit in a foreign country with a different currency periodically repatriate this profit to the company’s home currency. Operating in several countries gives businesses access to more…
Repatriation of profits
Companies with profits made in foreign countries under a different currency periodically repatriate their profits into the company home currency. Operating in more countries means access to more customers and…
Reserve currency
A reserve currency is a currency that central banks hold as part of their foreign exchange reserves. This currency is often used for their international transactions. Reserve currencies are always strong…
Revolving credit
A revolving credit is a financial arrangement in which a bank or other lending institution allows a business or individual to borrow funds for purchases or investments as they require…
Risk diversification
Risk diversification consists of spreading risk out into numerous areas to ensure that the potential negative effects of exposure to any one variable are limited. Diversifying risk is done in order…
Risk premium
In finance, a risk premium is the extra compensation that a risky asset yields to a holder, in comparison with a risk-free asset. In foreign exchange terms, a risk premium can…
Risk premium
Risk premium is an extra form of compensation paid in order to cover risk. In currency exchange, risk premium may involve a supplier charging a foreign client a higher rate…
Sanctions screening
Sanctions screening is a centralised service that allows SWIFT (Society for Worldwide Interbank Financial Telecommunication) members to efficiently comply with international sanctions regulations. If a company directly or unwittingly authorises a…
Sanctions Screening
Sanctions screening is a centralised service for members of SWIFT (the Society for Worldwide Interbank Financial Telecommunication) to comply efficiently with international sanctions regulations. Should a company directly or unwittingly authorise…
Segregated bank account
A segregated bank account is an account in which a customer’s funds are kept separate from those belonging to a brokerage firm, FX provider or any other financial institution in…
Short currency hedge
Short hedging is a currency management tactic that can be used either to speculate or well as to hedge. In speculative terms, short hedging involves betting that a currency will go…
Single euro payment area (SEPA)
The Single Euro Payment Area is a payment system created by the European Union to increase efficiency in making euro transfers within the area and to reduce the costs associated…
Single Euro Payment Area or SEPA
The Single Euro Payment Area or SEPA is a European Union payment system designed to increase efficiency when making euro transfers and to reduce the costs of moving capital between…
Soft peg
A soft peg describes the type of exchange rate regime applied to a currency to keep its value stable against a reserve currency or a basket of currencies. Currencies with…
Spot trade
A spot trade is a transaction between two parties (the buyer and seller) that uses the spot rate. It is the simplest form of foreign currency exchange and is completed…
Spot trade
A “Spot trade” is a transaction between two parties – the buyer and the seller – at the “spot rate”. It is the simplest form of foreign currency exchange and…
Stagflation
Stagflation describes an economy experiencing little to no economic growth coupled with high rises in the price of consumer goods and services. Stagflation has disastrous consequences for an economy. It leads…
Stagflation
Stagflation is a term used to describe an economy that is stagnant and experiences little to no economic growth. Signs of stagflation include high rises in the price of consumer…
Stop loss order
Stop loss orders (or stop orders) are instructions to buy or sell an asset when its value reaches a specific level, known as the stop price. They allow investors to…
Stop loss order
Stop loss orders allow investors to lock in a minimum asset price before the potential for a further decrease in value. In currencies, a stop loss order can be used to…
Subsidiary
A subsidiary is a company, corporation or limited company in which another company holds a controlling interest. The company with the controlling interest (over 50% of the subsidiary’s voting stock) is…
Subsidiary
A subsidiary is a company, corporation or limited liability company whose controlling interest is owned by another company. The company with a controlling interest (more than 50% of the subsidiary’s voting…
SWIFT
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication, a cooperative organisation that operates the SWIFT messaging service, and is recognised as the fastest, most secure method for international…
SWIFT messages
SWIFT messages are the messages generated when funds are transferred internationally using the SWIFT international payment network. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication, and is renowned as…
SWIFT payment
A SWIFT payment is a cross-border payment processed through the Society for Worldwide Interbank Financial Telecommunication international payment network, which is internationally recognised as the fastest and most secure system…
The Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) is a United Kingdom regulatory body that oversees retail and wholesale financial service companies. It is funded by membership fees and is completely independent from…
Trade repository
Trade repositories are authorised central entities that manage and maintain records of all reported derivative transactions. All counterparties, including financial and non-financial organisations, must report all derivative contracts to a trade…
Trade repository
Trade repositories are approved entities managing and maintaining all reported derivative transactions. All counterparties, including financial and non-financial organisations must report all derivative contracts to a trade repository. In the European…
Trading platforms
People can now trade for themselves using a wide choice of online trading platforms. Some even provide services where the research is done for you and specific stocks or mutual…
Transaction risk
Transaction risk is the potentially detrimental effect of exchange rate fluctuation during the period between commitment to a contract and its subsequent settlement. When two companies that use different currencies enter…
Transaction risk
Transaction risk refers to the potentially detrimental effect of changes in the exchange rate during the period between commitment to a contract and its subsequent settlement. When two companies working in…
Value date
There are several definitions of value date as its use varies according to the sector. In finance the value date is also known as the maturity date and it refers to…
WM/ Reuters benchmark rates
Also known as “the 4pm fix”, as the WM/Reuters benchmark rates are announced at 4pm London time (GMT/BST) every working day. These are rates provided by the WM company and Thomson…
WM/Reuters benchmark rates
WM/Reuters benchmark rates are also known as the 4 pm fix, because these spot and forward foreign exchange rates are announced at 4 pm London time (GMT/BST) every working day….