Futures Exchange-Traded Contracts
They are firm agreements to deliver (or take delivery of) a standardised amount of a product or asset on a certain date at a predetermined price. Futures exist in currencies, money market deposits, bonds, shares and commodities. They are traded on an exchange with the clearing corporation guaranteeing the contract and moreover the trade is done on a mark to market basis.
A contract traded on a futures exchange which requires the delivery of a specified quality and quantity of a commodity, currency or financial instruments a specified future month, if not liquidated before the contract matures.
A term for USD/CAD/Fungibles Instruments that are equivalent, substitutable and interchangeable in law. May apply to certain exchange traded currency contracts offered on a number of exchanges.
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.
Analysis based on economic and political factors.
Total reserves held by a bank less the reserves required by the authority.
Fractional pips are a new pricing feature which allows you to see more price action detail and will help you to make more informed trading decisions. A fractional pip is a tenth of a pip and the addition of this feature to your account allows you to take advantage of smaller price increments and moves in the market.
The rate at which a foreign exchange contract is struck today for settlement at a specified future date which is decided at the time of entering into the contract. 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.
The interest rate differential between two currencies expressed in exchange rate points. The forward points are added to or subtracted from the spot rate to give the forward or outright rate depending on whether the currency is at a forward premium or discount.
A deal with a value date greater than the spot value date.
Sometimes used as synonym for "forward deal" or "future". More specifically, for arrangements with the same effect as a forward deal between a bank and a customer.
An abbreviation of foreign exchange.
The purchase or sale of a currency against the sale or purchase of another currency. The maximum time for a deal is defined when the deal opens, the deal can be closed at any moment until the expiry date and time. A deal cannot be closed in its first 3 minutes, due to technical reasons.
A position under which one party agrees to purchase from or sell to the other party an agreed amount of foreign currency.
The purchase or sale of a currency against the sale or purchase of another.
(1) An agreement with a counterparty that sets a lower limit to interest rates for the floor buyer for a stated time.
(2) A term for an exchanges trading area (cf. screen based trading), normally the trading area is referred to as a pit in the commodities and futures markets.
Floating Exchange Rate
When the value of a currency is decided by the market forces dictating the demand and supply of that particular currency.
(1) see Floating exchange rate.
(2) Cash in hand or in the course of being transferred between banks.
(3) Federal Reserve Float arises from the system where cheques sent to the Federal Reserve Banks are credited sometimes in advance of the depositing bank loosening the reserve.
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. The system is also used in the London Bullion market.
Fixed Exchange Rate
Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower bands, leading to intervention by the central bank.
Use of taxation as a tool in implementing monetary policy.
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.
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.
The United States Federal Reserve. Federal Deposit Insurance Corporation Membership is compulsory for Federal Reserve members.
Cash balances held by banks with their local Federal Reserve Bank. The normal transaction with these funds is an interbank sale of a Fed fund deposit for one business day. Straight deals are where the funds are traded overnight on an unsecured basis.
Fed Fund Rate
The interest rate on Fed funds. This is a closely watched short term interest rate as it signals the Feds view as to the state of the money supply.
Rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported.
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.