Key Information
Foreign Exchange Market:
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is the largest and most liquid financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex and related markets currently is almost US$ 4 trillion.
_______________________________________________________________________________
Currency:
A currency is a unit of exchange, facilitating the transfer of goods and/or services. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value. A currency is the dominant medium of exchange. To facilitate trade between currency zones, there are exchange rates, which are the prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other.
_______________________________________________________________________________
Market Liquidity:
Market liquidity is a business, economics or investment term that refers to an asset's ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to that quality of a business which enables it to meet its payment obligations, in terms of possessing sufficient liquid assets; and to such assets themselves.
_______________________________________________________________________________
Central Bank:
A central bank, reserve bank, or monetary authority is the entity responsible for the monetary policy of a country or of a group of member states. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a "bailout" lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.
_______________________________________________________________________________
Speculation:
Speculation (in a financial context) is the assumption of the risk of loss, in return for the uncertain possibility of a reward. Only if one may safely say that a particular position involves no risk may one say, strictly speaking, that such a position represents an "investment." Financial speculation involves the buying, holding, selling, and short-selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives, or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. Speculation or agiotage represents one of four market roles in Western financial markets, distinct from hedging, long- or short-term investing, and arbitrage.
_______________________________________________________________________________
Multinational Corporation:
Multinational corporation (or transnational corporation) (MNC/TNC) is a corporation or enterprise that manages production establishments or delivers services in at least two countries. Very large multinationals have budgets that exceed those of many countries. Multinational corporations can have a powerful influence in international relations and local economies. Multinational corporations play an important role in globalization; some argue that a new form of MNC is evolving in response to globalization: the 'globally integrated enterprise'.
_______________________________________________________________________________
Government:
A government is "the organization, that is the governing authority of a political unit,"[1] "the ruling power in a political society,"[2] and the apparatus through which a governing body functions and exercises authority.[3] "Government, with the authority to make laws, to adjudicate disputes, and to issue administrative decisions, and with a monopoly of authorized force where it fails to persuade, is an indispensable means, proximately, to the peace of communal life."[4] "A compulsory territorial monopolist of protection and jurisdiction equipped with the power to tax without unanimous consent."[5] Statist theorists maintain that the necessity of government derives from the fact that the people need to live in communities, yet personal autonomy must be constrained in these communities.
_______________________________________________________________________________
Financial Market:
In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient market hypothesis.
_______________________________________________________________________________
Exchange Rate:
In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. For example an exchange rate of 102 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 102 is worth the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some estimates, about 2 trillion USD worth of currency changes hands every day.
_______________________________________________________________________________
Leverage:
In finance, leverage (or gearing) is using given resources in such a way that the potential positive or negative outcome is magnified and/or enhanced. It generally refers to using borrowed funds, or debt, so as to attempt to increase the returns to equity.
_______________________________________________________________________________
Perfect Competition:
In neoclassical economics and microeconomics, perfect competition describes a market in which no buyer or seller has market power. Such markets are by nature allocatively and productively efficient.[1] Because the conditions for perfect competition are very strict, there are few perfectly competitive markets.
_______________________________________________________________________________
Market Manipulation:
Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency.[1] Market manipulation is prohibited under Section 9(a)(2)[2] of the Securities Exchange Act of 1934, and in Australia under Section s 1041A of the Corporations Act 2001. The Act defines market manipulation as transactions which create an artificial price or maintain an artificial price for a tradable security.
_______________________________________________________________________________
BIS:
The Bank for International Settlements (or BIS) is an international organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." [1] The BIS carries out its work through subcommittees, the secretariats it hosts, and through its annual General Meeting of all members. It also provides banking services, but only to central banks, or to international organizations like itself. Based in Basel, Switzerland, the BIS was established by the Hague agreements of 1930.
_______________________________________________________________________________
Foreign Exchange Spot Trading:
Foreign exchange spot trading is buying one currency with a different currency for immediate delivery, rather than for future delivery.
The standard settlement timeframe for Foreign Exchange Spot trades is T+2 days, i.e., 2 days from the date of trade execution. A Notable exception is the USD/CAD currency pair which settles T+1.
_______________________________________________________________________________
Forward Contract:
A forward contract is an agreement between two parties to buy or sell an asset at a specified point of time in the future. The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time of trade is not the time where the securities themselves are exchanged.
_______________________________________________________________________________
Forex Swap:
In finance, a forex swap (or FX swap) is an over-the-counter short term interest rate derivative instrument. In emerging money markets, forex swaps are usually the first derivative instrument to be traded, ahead of forward rate agreements and before exotics.
_______________________________________________________________________________
Derivative:
Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and swaps.
_______________________________________________________________________________
Futures Contract:
In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price.
_______________________________________________________________________________
Electronic Trading:
Electronic trading, sometimes called eTrading or e-Trading, is a method of trading securities (such as stocks, and bonds), foreign currency, and exchange traded derivatives electronically. It uses information technology to bring together buyers and sellers through electronic media to create a virtual market place. NASDAQ and Globex are examples of electronic market places.
_______________________________________________________________________________
Market Maker:
A market maker is a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread.
_______________________________________________________________________________
Bid/Ask Spread:
The bid/offer spread (also known as bid/ask spread) for assets (such as stock, futures contracts, options, or currency pairs) is the difference between the price available for an immediate sale (bid) and an immediate purchase (ask). The trader initiating the transaction is said to demand liquidity, and the other party (counterparty) to the transaction supplies liquidity. Liquidity demanders place market orders and liquidity suppliers place limit orders. For a round trip (a purchase and sale together) the liquidity demander pays the spread and the liquidity supplier earns the spread. All limit orders outstanding at a given time (i.e., limit orders that have not been executed) are together called the Limit Order Book. In some markets such as NASDAQ, dealers supply liquidity. However, on most exchanges, such as the Australian Securities Exchange, there are no designated liquidity suppliers, and liquidity is supplied by other traders. On these exchanges, and even on NASDAQ, institutions and individuals can supply liquidity by placing limit orders.
_______________________________________________________________________________
Pips:
In finance, a percentage in point (pip or point) is the smallest measure of Price move used in forex trading. For instance, if the currency pair EUR/USD is currently trading at 1.3000 and then the exchange rate changes to 1.3010, the pair did a 10 pips (smallest units) move. The pip is the smallest measure regardless of the fractional representation of the currency exchange rate. Thus, 1.3000 to 1.3010 is the same move in pips terms as 110.00 to 110.10.
_______________________________________________________________________________
Hedge Fund:
A hedge fund is a private, largely unregulated pool of capital whose managers can buy or sell any assets, bet on falling as well as rising assets, and participate substantially in profits from money invested. It charges both a performance fee and a management fee. Typically open only to qualified investors, hedge fund activity in the public securities markets has grown substantially, accounting for approximately 10% of all U.S. fixed-income security transactions, 35% of U.S. activity in derivatives with investment-grade ratings, 55% of the trading volume for emerging-market bonds, and 30% of equity trades.[citation needed] Hedge Funds dominate certain specialty markets such as trading within derivatives with high-yield ratings and distressed debt.[1]
_______________________________________________________________________________
Dirty Float:
Managed float regime is the current international financial environment in which exchange rates fluctuate from day to day, but central banks attempt to influence their countries' exchange rates by buying and selling currencies. It is also known as a "dirty float".
_______________________________________________________________________________
Over-The-Counter:
Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via corporate-owned facilities constructed for the purpose of trading (i.e., exchanges), such as futures exchanges or stock exchanges.
_______________________________________________________________________________
Financial Instruments:
Financial instruments are cash, evidence of an ownership interest in an entity, or a contractual right to receive, or deliver, cash or another financial instrument.
_______________________________________________________________________________
Arbitrage:
In economics and finance, arbitrage is the practice of taking advantage of a price differential between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, a risk-free profit. A person who engages in arbitrage is called an arbitrageur. The term is mainly applied to trading in financial instruments, such as bonds, stocks, derivatives, commodities and currencies.
_______________________________________________________________________________
<Further Information Is On The Next Page>
^ Top | Home | Key Information | Links | About FAMS | Contact | More Information