FX Glossary

Published on in Foreign Exchange News by

BACS: (Bankers Automated Clearing Services)
The process for Sterling clearing for domestic banks. Usually takes 3 business days.

CHAPS: (Clearing House Automated Payment System)
A faster means of making payments. Usually occurs on the same day.

Exposure:
The amount of money at risk due to Foreign Exchange movements.

Forward Rate:
The rate at which two currencies can be exchanged on a preset future date, e.g. sterling dollar exchange rate today for transfer in 3 months time.

Forward Points:
The difference between the spot rate and the forward rate.

Forward Contract:
A contract to exchange a specific amount of one currency for another on a future date at a predetermined rate. A deposit is normally required for forward contracts.

GTC – Good Till Cancelled:
A GTC foreign exchange order will be left in the market until executed or cancelled by you.

Hedge:
Protection against future currency movements.

OCO – “One Cancels Other”:
A combination of a ‘Stop Loss’ order and a ‘Take Profit’ order. When one of these two orders is executed, the other order is automatically cancelled.

Order:
You can leave an “order” with us to transact on your behalf if a particular exchange rate is reached.

Spot rate:
The foreign exchange rate at which two currencies can be exchanged in 2 days time.

Spot Transaction:
The exchange of one currency for another at a specified rate for settlement in 2 working days.

Stop Loss Order:
A stop loss order is a means of limiting your risk from adverse exchange rates. A currency level is set. If that currency level is reached, the trade is automatically executed in the market. The currency level used for a stop loss order is always worse than the current market price. This is a way to protect you from adverse changes in exchange rates without needing to constantly monitor the rate.

Take Profit Order:
Like a stop loss order, a take profit order first involves setting a currency level. Once that currency level is reached, the trade is executed in the market. The currency level used for a take profit order is always better than the current market price. This is a way to capitalize on improvements in exchange rates without needing to constantly monitor the rate.

Settlement Date:
The date for the exchange of payments.

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