Financial Terms Glossary
People in foreign exchange love using complicated vernacular, acronyms and long rigmarole (see?). It can sometimes be overwhelming. That's why we offer a jargon-free service and put this financial terms glossary together, to help you make sense of any terms you might not have heard of before.
We hope this is of use but if you have a question that is not answered below then please call us on +44 020 7989 0000 and we will be happy to help.
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A code used by the American Bankers Association to define a bank. Often used when sending payments to America.
Bankers Automated Clearing Service: a process of making Sterling payments between UK bank accounts. These payments are usually free but take three days to credit the account to which they are sent.
The currency which other currencies are quoted against.
A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001), and is used to denote the percentage change in a financial instrument.
Bank Identifier Code: often used in conjunction with an IBAN number (see below) when sending payments to the eurozone.
The price a buyer is willing to pay to purchase a currency and sell another at a particular time.
Bank of England: the central bank of the United Kingdom.
A government body that often controls the monetary policy of a nation including the setting of interest rates usually.
Confederation of British Industry - a leading UK business organisation that speaks on behalf of more that 240,000 businesses in the UK
Clearing House Automated Payment System: a fast way of making Sterling payments between UK bank accounts. Usually same day payments, banks often charge £20 - £45 pounds for these. (FC Exchange charge a maximum of £10 for these but often they are free of charge).
European Central Bank
The amount of money which is at risk due to foreign exchange market movement (can be removed with a Forward Contract).
Faster Payments Service
A new way of sending UK domestic payments online and via the phone. These payments can credit within a few hours if not minutes. They are often free but have a limit of £10,000.
Federal Open Market Committee (FOMC)
The body responsible for setting interest rates and credit policies of the Federal Reserve System in America.
Automatic tax increases and spending cuts due to take effect on 1 January 2013 in the USA. According to economists, this would push the US into recession and in turn have global consequences.
Forex or FX
Abbreviations for Foreign Exchange.
A contract used to fix the exchange rate. A future date is agreed upon with a client, at a pre-determined, agreed rate. A deposit (or margin) is usually required in forward transactions but can increase buying power today ten-fold, e.g. a client could book $150,000 at a rate of $1.50 for a date in the future, costing £100,000 and just pay £10,000 within two days of agreeing to the transaction with the £90,000 balance due in the future.
Protecting against future fluctuations in the foreign exchange rate (see Forward Contract)
International Bank Account Number: an international standard for identifying bank accounts across national borders. The prefix is often the country code and the digits contain the account number and other banking information relation to the beneficiary account. Almost always used when sending payments to the eurozone. You may find our IBAN checker helpful.
The foreign exchange rates at which large international banks trade currency between themselves in very large amounts. This is the most commonly used indicative rate to follow the market by rather than a buy or sell price.
A deposit provided by a client as collateral to cover a Forward Contract.
A request for additional funds during the time period of a Forward Contract in order to maintain an agreed deposit level due to volatile exchange rate fluctuations. This is not an extra cost as the additional funds are deducted from the net balance due.
Monetary Policy Committee
The group of nine members who set the UK interest rates by meeting on the first Thursday of the first full week every month.
You can place a ‘stop’ or ‘limit’ order with us to execute a trade on your behalf if a particular exchange rate is achieved. These can be left in the market 24 hours a day and are useful to benefit or mitigate risk outside trading hours.
This is a pair of orders stating that if one order fills/is executed, then the other order is automatically cancelled. It uses a stop order with a limit order. When either the limit level or stop level is reached and the order executed, the other order will cancel automatically.
Acronym for 'Percentage in Point' .Represents a small incremental move that an exchange rate can make. It is one one hundredth of a percent, e.g. if a currency moves from 1.2000 to 1.2005 it has moved 5 pips.
Quantitative Easing: monetary policy used by central banks to stimulate the national economy. A central bank implements quantitative easing by purchasing financial assets from banks and other businesses in the private sector with new electronically created funds.
Single Euro Payments Area – within and to which SEPA payments can be sent.
The final stage of a transaction - this is the date for the exchange of payments.
A six-digit number, normally formatted as three pairs of numbers. E.g. 12-34-56 that identifies both the bank and the branch in the UK where the account is held.
A transaction at a specified rate usually for settlement in two working days.
The current price for a spot trade.
The current rate for a spot trade.
This is the difference between the rate at which a bank or broker buys and what they pass on to clients and is the profit on a trade. The spread a bank can take is often around 4%. As a specialist FC Exchange can take a smaller spread and save clients money.
Society of Worldwide Interbank Financial Telecommunications - a dedicated network set up to support fund transfer messages between member institutions worldwide.
Analysis based on market activity through chart study, volume, trends, moving averages, patterns, formations and other technical indicators.
The direction of the market - often split into three categories: major, intermediate and short term trends. Three directions are also associated with a trend; that is, uptrend, downtrend, and a sideways trend.
The date in a transaction for the exchange of payments.
A measure of price fluctuations.