AGM |
Annual General Meeting |
Alternative Investment Market (AIM) |
A UK trading market used by smaller companies looking to raise finance. AIM listed shares avoid full compliance with LSE rules. |
American Depository Receipts (ADR) |
Certificates issued in the US representing the right to ownership in a UK company. |
Arbitrage |
The simultaneous sale (or purchase) of a financial instrument and the taking of an equal and opposite position in a similar instrument to provide a profit. That is, exploiting pricing differences (anomalies) across markets. True arbitrage is risk free. The rise of global electronic trading has made this process much faster and easier, enabling arbitrageurs - as they're called - to switch huge sums of money across continents in seconds in an attempt to exploit small differences in the quoted prices of investments in different markets - foreign currency, for example. In share trading, so-called risk arbitrageurs attempt to make profits from the usual share price movements of companies that are in takeover situations. These investors will simultaneously buy stock in the target company, whose share price normally rises, while selling that of the bidder, whose share price normally falls. They will also invest in the target company if they think there's a chance the bidder will have to raise the offer price. |
Ask |
The lowest price at which someone will sell an investment at a given moment. |
Auction |
Many auctions occur in the financial markets, however the most common is the post market auction on the FTSE 100. This occurs from 1630 to 1645 and then the official settlement is declared. |
Authority to deal |
Authorising someone to spread bet on your behalf. For this we would require your written notification. |
Averaging |
Averaging the price you have paid for a currency pair is achieved by buying more on a fall or selling some on a rise in value. |
Backwardation |
This occurs when the bid price exceeds the offer price for a stock. This is a market distortion usually when stock is suspended or under a share repurchase scheme. |
Balance of Payments |
A measure of transactions resulting in payments from one country to all other countries during a specified period of time. If more money flows in than out, the balance of payments is positive. These transactions take place in either the Current Account, the Financial Account or the Capital Account. Balance of payments serves as another economic indicator of a country’s relative value, and includes the trade balance, foreign investments and investments by foreigners. |
Bank of England |
The UK's central bank that is responsible for setting interest rates via the Monetary Policy Committee (MPC). |
Bargain |
Stockbroker jargon for a share transaction. |
Base Currency |
The foreign exchange deal currency against which another currency is measured. Currency pairs are usually identified by a six letter grouping. The first three letters identify the BASE currency. |
Base Rate |
The rate at which the Bank of England lends to the Retail Banks. |
Basis |
The difference between the price of a futures contract and that of the underlying. |
Basis Point (bp) |
A measure which is mainly used in the statement of interest rates. One hundredth of 1% – 25 basis points is equal to 0.25%. |
Bear, Bearish, Bear Market |
A bear is a person who believes that the prices in the market will decline. This person would be considered bearish. A bear market is a market that is declining (e.g., if the pound versus the US dollar rate is falling). If the decline were expected to continue, the market would be bearish. |
Bid Price |
The highest price a prospective buyer is willing to pay at a particular time for securities, futures contracts or foreign currencies. |
Bid/Offer Spread |
The standard differential between the price of buying and selling securities. It is usually quoted as a monetary amount for shares, a percentage term for unit trusts. |
Blue Chip |
The term used to define a company regarded as being a solid, and consequently safe, investment. The company will almost certainly be large, well established and profitable, but be conservatively managed. |
Blue chip stock |
Generic term given to a company that is regarded as traditional and not technical. Blue chip companies are almost certainly large, profitable, conservatively managed and well established. The term is American in origin and refers to the highest valued poker chip. |
Bobl |
Medium term German Government debt. |
Bollinger Band |
A Bollinger Band is plotted two standard deviations away from the FX pair’s simple moving average. When the FX pair exchange rate increases in volatility, its Bollinger Bands widen away from each other. The bands converge during times of lower volatility. An unusually long period during which the bands are tight often portends a looming spike in volatility. FX pair exchange rates hugging the upper band may indicate overbought conditions, while FX pairs trading at the lower band may be oversold. |
Bretton Woods |
The place in New Hampshire, where the post-war system of foreign exchange was agreed upon in 1944. |
Bull, Bullish, Bull Market |
A bull is a person who believes that prices in the market will rise. This person would be considered bullish. A bull market is a market that is rising (e.g., if the pound versus the US dollar rate moves higher). If the advance were expected to continue, the market would be bullish. |
Bullion |
Gold, silver, platinum, or palladium, in the form of bars or ingots. |
Cable |
Foreign exchange jargon for the British pound versus the US dollar exchange rate. It alludes to the cable laid under the Atlantic, which linked the tickertape machines used by trading houses in New York and London during the 1970s and early 1980s. |
CAC 40 |
An index of the largest 40 companies listed on the French CAC market. The CAC index is published by the Societe des Bourse Francaises. |
Call |
A financial derivative instrument used in options trading. A 'call' would give an investor the right, but not the obligation, to buy shares at a fixed price up to a predetermined date. The opposite of a 'call' is a 'put'. |
Cash Market |
The market for the purchase and sale of physical currencies. Settlement is two business days from transaction date. |
Central Bank |
The bank that provides financial and banking services to the government of a country and its commercial banking system and which implements the government’s monetary policy. |
Closed Position |
An equal and opposite transaction, i.e. buying 1000 BT shares then selling 1000 BT shares, the position will be automatically closed. |
Closing Price |
The closing price is the last price for a tradable instrument at the time the market closes. |
CME |
Chicago Mercantile Exchange. |
COMEX |
Commodities Exchange in New York. |
Commodity |
A physical substance, such as food, grains, and metals, which is interchangeable with another product of the same type, and which investors buy or sell, usually through futures contracts. |
Contingent Order |
An order which is to be executed only if another order is executed first. An example of a contingent order would be to sell one specific security if another specific security has been bought. |
Contracts for Difference (CFDs) |
CFD means Contract for Difference. They were developed to allow clients to receive all the benefits of owning a stock without having to physically own the stock. In other words you cannot take delivery of a CFD so you have to settle the difference between where you bought the contract and where you sold it. The difference is either profit or loss. |
Controlled Risk Bet (CRB) |
A Controlled Risk Bet (CRB) is sometimes known as a guaranteed Stop loss order and can be placed on a range of instruments that we offer. A CRB allows you to open a specific bet and attach to it a guaranteed Stop loss order at a price you are prepared to be stopped out. Therefore you have a known ‘worse case scenario' should the market move against you, and you have a defined loss you are prepared to accept on that trade. |
Corporate Action |
Any event initiated by a corporation which impacts its shareholders. For some such events, shareholders may or must respond to the corporate action or select from a list of possible actions. Examples of corporate actions include dividend payments, mergers, rights issues and stock splits.(See: Dividend, Stock Split, Rights Issue and Consolidation) |
Cost of Carry |
How much it costs to finance a position. |
Cross Rate |
An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies, measured against the US dollar, except for the British pound, where the US dollar is measured against sterling. |
CSCE |
Coffee, Sugar and Cocoa Exchange, New York. Opening times can be viewed in our market information sheets. |
Currency Hedging |
Trying to reduce or eliminate exchange rate risks by buying forward, using financial futures or borrowing in the exposed currency. |
Currency Swap |
Contract which commits two counter-parties to exchange streams of interest payments in different currencies for an agreed period of time and to exchange principal amounts in different currencies at a pre-agreed exchange rate at maturity. |
Currency Warrant |
OTC option; long-dated (more than one year) currency option. |
Indices
