[B]ACBs (Asian Central Banks)[/B]
They tend to recycle their reserves after intervening in the local currency market. For example, if the Bank of Korea sold the domestic currency and bought US dollars, they can then sell the dollars and buy Euros to diversify their reserves. ACBs are known as active jobbers (a trader who trades for small and usually short-term profits in course of a trading session, and who rarely holds positions overnight) and their activities can have quite an impact on markets, especially in low volatility environments.
[B]Ask[/B]
The market price at which you can buy a currency
[B]Aussie[/B]
Nickname for the Australian Dollar
[B]Barrier Option[/B]
An option whose payoff depends on whether or not the underlying asset has reached or exceeded a predetermined price level. There are knock-out options, which expire worthless if the underlying asset exceeds a certain price. For example, the buyer of a 1.37 EUR/USD barrier option will have a profit if price does not reach that level within a specified timeframe. A knock-in barrier has no value until the underlying asset reaches a certain price. For example, the buyer of a 1.65 GBP/USD barrier option will have a profit if price reaches that level. Generally, one side will try to protect the strike price placing orders ahead of it, while the other side will try to push price into the specified level if the current market rate is relatively close. Taking the first example again, the buyer of the 1.37 knock-out will place sell orders ahead of the level while the option seller will try to push price into the level.
[B]Bid[/B]
The market price at which you can sell a currency
[B]Bids[/B]
Resting limit orders to buy a currency at a specified price (lower than the current one)
[B]Big Figure[/B]
Refers normally to the first three digits in an exchange rate (e.g. 1.34, 1.35, 1.36, 1.37…). Interbank traders usually do not mention the big figures as it is assumed clients know them. For example, if a client asks the dealer for a quote in EUR/USD and the pair trades at 1.3550/52, the dealer might say „Bid 50, Ask 52“ instead of „Bid 1.3550, Ask 1.3552)
[B]BIS (Basel name)[/B]
Bank of International Settlements; an international organization of central banks through which its members can trade currencies without revealing their identity in the marketplace. If a CB buys a currency through a commercial bank, the dealer can pass on the information and soon most other institutional traders will know that they have bought. Through the BIS, CBs can hide their identity when trading directly or when placing orders in the market. Market participants pay close attention when the BIS is mentioned and short-term players will often try to front-run their orders.
[B]BoC[/B]
Bank of Canada
[B]BoE[/B]
Bank of England
[B]BoJ[/B]
Bank of Japan
[B]BoK[/B]
Bank of Korea
[B]BRICS[/B]
Term used for the group of largest emerging markets, which includes Brazil, Russia, India, China and South Africa
[B]BuBa[/B]
Bundesbank – the German central bank
[B]Bund[/B]
German 10 year government bond
[B]Cable[/B]
Nickname for the GBP/USD pair
[B]CBR[/B]
Central Bank of Russia
[B]Clearer[/B]
A term used for large banks. For example, UK clearer refers to one of the larger UK-based banks, i.e. Barclays, Lloyds or RBS.
[B]CME[/B]
Chicago Mercantile Exchange
[B]Corporate (Corps)[/B]
Corporations mostly trade in the FX market to hedge against currency risk.
[B]Crosses[/B]
Currency pairs not involving the US Dollar
[B]CTAs[/B]
Commodity Trading Advisors – they trade with money from investors through Managed Futures Accounts and usually apply a mix of aggressive, short-term and trend-following strategies.
[B]Custodian (Custy)[/B]
A term used for banks that process cross-border securities trades, keep financial assets safe and services the associated portfolios. An example for a large custodian is HSBC.
[B]DAX[/B]
Stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange
[B]Dealers[/B]
Market makers at the dealing banks. They earn a profit from the spread (difference between the Bid and the Ask price) and occasional proprietary trading. For example, if a dealer has bought 50 million Euros from a client, he can either get rid of his inventory in the interbank market (selling it immediately) or hold the position and wait for a better price to sell them (speculating).
[B]Doves/Dovish[/B]
An economic outlook which generally supports lower interest rates. Doves take the position that lower interest rates are preferable based on current economic conditions.
[B]ECB[/B]
European Central Bank
[B]EBS[/B]
Electronic Brokerage System – a wholesale electronic trading platform used to trade foreign exchange with market making banks
[B]Exotic currencies[/B]
Less liquid and less frequently traded currencies, e.g. the Singapore Dollar or Thai Baht
[B]Fast Money/Hot Money[/B]
Short-term speculators that try to profit from rapid price movements using high leverage
[B]Fed[/B]
Federal Reserve
[B]Flat[/B]
Having no open position; for example, if a trader closed his USD/JPY long position and has no open trade, his positioning is „flat“
[B]FOMC[/B]
Federal Open Market Committee
[B]Handle[/B]
See term „Big Figure“
[B]Hawk/Hawkish[/B]
An economic outlook which generally supports higher interest rates. Hawks take the position that higher interest rates are preferable based on current economic conditions.
[B]Hedge Funds (HFs)[/B] – leveraged funds; they are flexible; they can be specialized in a certain asset class (FX only) or trade a variety of markets. Also, they can apply both short-term and long-term strategies at the same time to diversify.
• Global Macro (Macros) – funds that take sizeable positions in anticipation of global macroeconomic events in order to generate a risk-adjusted return. There are only a handful of really large macro funds, but they can be powerful players in the market, especially if they have the same trade running. For example, long USD/JPY was a very popular trade early 2013 and there was probably not a single macro fund that did not have this position running.
• Directional – they tend to place directional bets on the prices of underlying assets and are usually highly leveraged.
[B]Interbank Market (Tier 1)[/B]
The top-level foreign exchange market where banks trade with each other, either directly or through electronic brokerage platforms such as EBS and Reuters Dealing.
[B]IMF[/B]
International Monetary Fund
[B]Kiwi[/B]
Nickname for the New Zealand Dollar
[B]Left-Hand Side (LHS)[/B]
The left side of a quote, refering to the Bid
[B]Leveraged money/accounts/names[/B]
All market participants that use leverage in their trading, e.g. hedge funds and CTAs
[B]Loonie[/B]
Nickname for the Canadian Dollar
[B]Middle East Names (ME)[/B]
The term often refers to the powerful sovereign wealth funds of oil-rich countries in the Middle East, e.g. Kuwait Investment Authority, Abu Dhabi Investment Authority, Qatar Investment Authority.
[B]Model funds/System funds[/B]
An investment fund that uses computer-based models to speculate in the foreign exchange market. They will often buy/sell on momentum, but the strategies applied are not limited to this.
[B]Month End[/B]
Fixings related to the adjustments that international portfolio managers need to make to their currency hedges based upon the performance other asset classes they hold positions in. These portfolio managers usually reweigh their portfolios at the end of each month if moves were larger than anticipated.
[B]Names[/B]
When market participants mention terms like „US names“, „UK names“, „European names“ etc., they usually refer to a large bank based in the specific country/region.
[B]Offers[/B]
Resting limit orders to sell a currency at a specified price (higher than the current one)
[B]NY Cut[/B]
Options that expire at 10:00 AM New York time
[B]PBOC[/B]
People’s Bank of China
[B]Position Covering[/B]
Closing a position; for example a trader who closed his long EUR/USD position has „covered“
[B]Prime Brokers[/B]
Hedge funds can gain direct access to the markets by using a banks credit line in exchange for a specified fee
[B]RBA[/B]
Reserve Bank of Australia
[B]RBI[/B]
Reserve Bank of India
[B]RBNZ[/B]
Reserve Bank of New Zealand
[B]Reuters Dealing[/B]
An electronic trading platform; main competitor of EBS
[B]Real Money (RM)[/B]
Institutional investors that do not use leverage and tend to place medium-term to long-term bets. RM usually refers to large asset managers, like pension funds and mutual funds.
[B]Reserve Manager[/B]
Usually refers to the central bank of a specific country
[B]Right-Hand Side (RHS)[/B]
The right side of a quote, referring to the Offer
[B]SNB[/B]
Swiss National Bank
[B]Sovereign Wealth Funds (SWFs)[/B]
State-owned investment funds that invest globally. Most SWFs are funded by revenues from commodity exports or from foreign-exchange reserves held by the central bank.
[B]Squeeze[/B]
A situation where market positioning arrived at extreme levels and the crowded side gets squeezed out of their positions. For example, if the market is very short GBP/USD, but there is an event that changes sentiment for the Pound, price will move rapidly and many traders who were short will be forced to cover their positions.
[B]Stops[/B]
Stops are often magnetic and targeted by dealers and short-term specs. Stop hunts can also fail and those who have targeted them must be quick to cover then. For example, if there is talk of large stops above 1.36 in EUR/USD, specs will perhaps buy the pair if the current market price is near (30-50 pips). However, if there are large sovereign offers resting ahead of that level, the stop hunt will fail and the specs & dealers will be squeezed out of their positions.
[B]Swissie[/B]
Nickname for the USD/CHF pair
[B]Toshin[/B]
Japanese investment funds which invest in non-domestic assets and are active participants in the foreign exchange market
[B]Trade Sizes[/B]
A million is the standard trading size in the interbank market. If traders say „Sovereign name bought 50 EUR/USD“ they mean that a sovereign name has bought 50 million of EUR/USD. For billions, the term „yard“ is used (see below).
[B]WMR Fixing Rate[/B]
WM calculates daily standardized spot and forward rates for global foreign exchange transactions at 16:00 London time, using rates provided by Reuters. These rates are recognized globally as the standard.
[B]Yard[/B]
Term used for a billion
[I]FXWW Team[/I]