Active fund managers believe securities are mis-priced and can spot opportunities to outperform the market through asset allocation and/or stock selection. See also index tracking and passive management.
American Depository Receipt
The simultaneous buying and selling of a security at two different prices in the same market, with the aim of creating risk-free profit
At a price equal to the face value of a security
An exchange break during which buy and sell orders in a security are matched up. In the UK, this typically happens just before the 8am stock market open, and then again from 16:30 to 16:35, although it may also happen during the day if a market moves beyond pre-defined tolerances
This occurs when the bid price exceeds the offer price for a market
The official rate at which the Bank of England lends to the market
Basis point is a way of expressing variations in bond yields. One basis point is 0.01 of a percentage point. Basis points also are used for interest rates
Basis of Expiry
A description of the way in which an expired contract is settled, for example, cash or physical settlement.
A market distinguished by declining prices.
The price at which you can sell. It is always the lower of the two-way price quoted
The difference between what buyers are willing to pay and what sellers are asking for in terms of price
The bond market is where participants buy and sell debt securities. UK Gilts, German Bunds and US Treasuries are all Bonds. We quote prices derived from the underlying futures markets of the relevant contracts.
A market distinguished by rising prices.
Buy (“take” or “go long”)
You would ‘Buy’ a market if you believed the market was about to rise. You would also make a buy to close out an existing sell (short) position.
Centrally Cleared Trades
Trades that are sent through to a Clearing House, which acts as a central counterparty, which assumes the counterparty risk to trades which are registered with it and by doing so underpins many important financial markets.
Contract for Difference
A person who uses charts to analyse the markets
A clearing house is an organisation that assumes the counterparty risk to trades which are registered with it and by doing so underpins many important financial markets.
The price at which an open position is closed. Also refers to the price of the last transaction in a days’ trading session
Refers to markets in raw or primary products like gold, silver or oil. Most commodities are traded on regulated exchanges, and are bought and sold in standardised contract sizes. We quote commodity prices derived from the underlying futures markets of the relevant contracts.
The month during which a futures contract expires and during which delivery may take place according to the terms of the contract. Since all CFDs are derived contracts you will never have to take delivery of the underlying product.
The confirmation of your trade describing the market, the unit of trading, the action (buy or sell), the price and the expiry date. These days this is normally sent to you via email.
Securities issued by a company (as opposed to government). Investors accept credit risk in exchange for potentially greater returns.
The regular payment made on fixed income securities.
Consumer Price Index. This is used as a measure of inflation
Rating given to a company or institution by a credit rating agency as an indication of the likelihood of default on its bonds or other debt. The highest (lowest risk) rating is AAA (triple A).
The UK settlement system for shares, gilts, money market securities, ADRs and mutual funds. Institutions may be sponsored members of CREST or settle using broker nominee accounts.
Refers to foreign exchange rate between two currencies other than the US dollar
FX or Forex Trading is the name given to trading one currency against. These markets are traded in ‘pairs’ of two separate currencies, for Example GBP/ USD (also known as ‘Cable’) is the Sterling versus USD currency pair. When a ‘Buy’ trade is made in a currency pair the client is anticipating that the first quoted currency is going to rally versus the second. So if a client buys the GBP/ USD he wants the GBP to rally against the USD.
Safe keeping of client assets. Firms are required to be able to identify client assets separately from firm’s assets. The firm may use nominee accounts (see below) to pool securities of different clients. A global custodian is responsible for this operation on a worldwide basis. They may appoint local custodians (depots or sub-custodians) in certain countries.
Security that is sensitive to fluctuations in the economic or business cycle (eg, capital goods, banks).
A style of trading where trader does not hold positions overnight, but opens and closes a position in the same contract on the same day
Security that is less sensitive to movements in the economic or business cycle, eg, utilities, tobacco.
To remove a stock’s listing on an exchange
Delivery versus Payment (DVP)
Cash and securities are switched simultaneously between client accounts, reducing settlement risk.
A security whose price is derived from an underlying asset (e.g. a share, currency, commodity or index) and may not give the holder any of the actual rights or benefits associated with the underlying asset. All CFDs are derivative contracts.
Fall in value of a currency in the global markets.
The client delegates decision making to a third party, eg, discretionary portfolio management or discretionary stock lending (undertaken by the global custodian).
Risk reduction by spreading investments across a range of asset classes.
The part of a company’s profits distributed to shareholders, usually on a regular basis. If you have an open buy position on a share that goes ex-Dividend you will be credited with 80% of the relevant dividend if you have an open sell position you will be debited 100% of the relevant dividend.
Double Witching Day
The last trading day before expiry of options and futures on the same underlying asset
Dow Jones Industrial Average (‘Dow’)
Unweighted arithmetic index of 30 industrial US stocks.
European Central Bank
Earnings per Share (EPS)
The net (after tax) profits of a company divided by the number of ordinary shares in issue. This is used as the ‘E’ term in the P/E ratio to value shares.
Statistic that gives an indication of current point of the economic cycle eg price inflation, unemployment figures, wage rises etc
A developing or newly industrialised country. Low GDP per head. Can deliver high returns due to rapid pace of industrialisation, but can be risky due to poor legal protection, currency, custody & settlement risk, government corruption etc.
Equities (shares, stocks)
Also known as shares or stocks, equities represent holdings in the capital of a company. Equities are traded via the share (or equity) market. As equity CFDs are derived from the underlying share price, this does not give you all the ownership rights of the shares nor does it give you, at any time, the right to require or request delivery of those shares from us. You have no voting rights over the shares represented by your trade.
Exchange-Traded Funds (ETFs)
ETFs are exchange-traded open-ended funds that track an index. They are bought and sold on the LSE throughout the day on SETS and settle via CREST in dematerialised form.
US ETFs include SPDRs, Webs, Diamonds, Cubes and Opals.
The date on which the relevant underlying contract expires. This may not necessarily be the same as our Last Day of Trading in a market.
Instructions to buy or sell, given directly to a broker or fund manager without receiving any advice.
Price at which contracts are settled if they are left to expiry
Excessively rapid trading in a specific security that causes a delay in its electronic updating
Fed Funds Rate
The official rate at which the US Federal Reserve lends to the market
Federal Reserve Bank (Fed)
US Central Bank. Branches in main financial centres of the US. Fights inflation and controls markets using interest rates and control of money supply.
Execution of an opening or closing order
Financial Conduct Authority (FCA)
The FCA is an independent body that regulates the financial services industry in the UK. FXStat is authorised and regulated by the Financial Conduct Authority (FCA), license number 537787
Financial Services Compensation Scheme (FSCS)
Scheme established to compensate claimants where authorised persons are unable to satisfy claims against them in connection with regulated activities.
Financial Services Ombudsman (FOS)
Part of a statutory complaint procedure. The Ombudsman deals with complaints against investment firms, that neither the firm nor the regulator has been able to resolve.
Fixed Income Securities
Bonds and preference shares. Holder receives a regular fixed income. This may be waived in the case of preference shares.
Floating Rate Notes (FRNs)
Bonds with variable coupon. The coupon is re-negotiated at the date of each payment.
First issue of shares by a company of a stock exchange. An example of an IPO (initial public offering).
Income that has already had withholding tax deducted at source. Higher-rate taxpayers may have a further liability. Non-taxpayers may be able to reclaim the deduction.
FTSE 100 Index
The main UK index used to represent the price movements of (approximately) the largest 100 companies. The index is a market capitalisation weighted index of price relatives. It is a price index and excludes reinvestment of dividends.
FTSE All-Share Index
Summarises the state of the UK equity markets. It covers about 600 of the top UK industrial,
commercial and financial companies
Examination of a company’s financials, assets, management, market niche, and products to determine value
A futures contract is an agreement to conduct a transaction in a specified asset at a specified time in the future at a price agreed now. Therefore, it means that the expiry date is at some point in the future. Our futures contracts are cash settled so you will never be required to actually deliver, or take delivery of, the physical product
Gap (“gapping” or “slippage”)
Where a market moves directly from one correctly quoted price to another and there is no trading at any of the prices in between. There can be many reasons for gapping: economic figures, company announcements, political events, natural disasters etc, but the effect is that any fill on a stop loss, limit or new order may be at a different level from that requested by the client
Gearing (or Leverage)
Clients can buy or sell a financial product with substantially less money than the actual full market value of that financial product. This is known as gearing. A position in a contract with high gearing or leverage stands to make or lose a large amount from a small percentage movement in the underlying instrument
Good For The Day (GFD)
An order to buy or sell a market at a set price that is active until the close of business on the day the order is placed or until the order has been filled
Good Till Cancelled (GTC)
An order to buy or sell a market that remains active until the order is executed or is cancelled
Period between the announcement of an issue and the time the issue takes place. Investors can buy and sell the shares during this period for settlement after the issue date.
Gross Domestic Product (GDP)/Gross National Product (GNP)
Measures the amount of goods and services produced each year. GDP measures the products made in the country. GNP measures products made by UK companies worldwide.
The action of reducing the risk of an outright position in one market by taking an opposite position in a similar or derivative market, For example, if you had a long (buy) position in the US Dow you might enter a short (sell) position in the German 30. In this case although the hedge would not be exact, it is unlikely that the German 30 will move heavily in the opposite direction to the Dow (but, of course, not impossible)
Indices are a customised basket of securities that track a particular market or segment. Each index has its own calculation methodology and its own specific process in order to select particular securities
The rate at which the general level of prices for goods and services is rising. In the UK, price inflation is measured using the RPI or CPI.
Initial Margin Requirement
Amount needed as available trading resources in your account in order to open a position
Initial Public Offering. A private company’s first offer of stock to the public
Knowingly trading in shares when in possession of price-sensitive information that is not widely known. This is illegal in many countries.
International Securities Identification Number (ISIN)
An internationally recognised unique securities code.
International Securities Market Association (ISMA)
Trade association of secondary market dealing with securities trading mechanics and regulation.
Last Dealing Day
The last day in the contract month of which a customer may deal in the product (may be significantly different to the Expiry day)
A clearing house formed by a merger between The London Clearing House Limited and Clearnet
The part of a portfolio that is held in cash or cash-like securities.
Or: The ability to buy or sell an asset quickly or to convert to cash quickly.
Economic indicators that change before the economy changes. They help predict which way an economy/ market is moving.
Live pricing system that provides market depth
Also known as gearing, where a position can be taken in product with only a fraction of its value.
London Inter-Bank Offered Rate (LIBOR)
The rate of interest charged by one bank to another from overnight loans. LIBOR is quoted daily. Corporate loans are quoted relative to LIBOR.
An order to close an existing open position at a better price than that which is currently available.
Limit up, limit down
Maximum price change, either up or down, a product is allowed to make during one day of trading
The ability of an asset to be converted into cash quickly, without any price discount and any restriction to size of transaction. Liquidity also refers to a market that is regularly traded
A client is said to be long if he/she has an open buy position
Margin is the amount of money in a client’s account that is currently being used to support existing trades. Margin is calculated as the amount of money you must have in your account to satisfy us that you are able to honour your debt should your trade lose money.
A call from the credit department for further funds to be deposited in the account to support additional exposure from running losses
The number of shares of a company in issue multiplied by its share price
A market professional who buys and sells stock on behalf of the broker-dealer firm. In London, market makers are obliged to post firm two-way prices throughout the trading day. Market makers are exempt from Stamp Duty and are able to sell stock ‘short’, ie, sell more than they own.
Mark to Market
Valuing the price of a stock or portfolio on a daily basis, to record profits/losses.
Aiding drug traffickers, arms dealers and other criminals to invest their proceeds and take ‘clean’ money out of the system. An international criminal offence.
National Association of Securities Dealers Automatic Quote (NASDAQ)
The OTC market run in the US on a market-making basis specialising in high technology and
Normal Market Size (NMS)
A system that categorizes the size of transactions that are normal for a particular security and forces market makers to deal within these sizes
OCO (One Cancels Other)
Where you have two orders, one above and one below the current market price and were the first to be executed the other is automatically cancelled.
The price at which you can Buy. It is always the higher of the two-way price quote
A long or short position whose value will change with a change with price movements
A security that confers the right to buy or sell an underlying asset at a pre-determined strike (or exercise) price on or by a certain date. Options can be bought and sold to profit from the move in price of the option itself.
An order is an instruction to make a trade at a price that is not currently available in the market but might be available at some future time
A term used for the SETS system employed in London. Orders to buy and sell are allowed to collect on an order book where they can match and execute against one another
An option or warrant that is not worth exercising.
Unregulated markets for dealing in assets or securities.
A larger investment in a stock/sector/region than the relevant benchmark weighting.
A pip/ tick/ point are the general terms for the smallest incremental move possible in any market quoted by us. Clients should always be aware of what the underlying stake or unit risk is for all markets in which they wish to trade
A collection of investments, real and/or financial
Price Tolerance is the amount of slippage you are prepared to accept in order for your trade to be executed, even if at the time of execution, the price has moved away from that selected by you. This is commonly referred to as slippage, though the benefit of Price Tolerance is that you can control the amount of slippage you are prepared to accept
Prudential Regulation Authority (PRA)
Established as an operationally independent part of the Bank of England for regulation of deposit takers (ie banks, building societies, credit unions), insurers and systemically important investment firms
These contracts expire prior to or on their expiry date in March, June, September or December. They can be closed out at any time before the expiry date
A two-way prices that is separated by our spread. See also Spread.
A real-time stock or bond quote is one that states a security’s most recent price as opposed to a delayed quote.
A price level which is supposedly difficult for a particular market to rise above.
Retail Prices Index (RPI)
Measure of cost of living (inflation) in the UK (usually use RPIx which excludes mortgage interest rates).
A privilege allowing existing shareholders to buy shares shortly before they are offered to the public at a specified and usually discounted price and usually in proportion to the number of shares already owned.
Transferring a trade that is near expiry into the next contract period
Securities and Exchange Commission. This is the US equivalent of the FCA.
Used to characterize a group of securities that are similar with respect to industry
Sell (“give” or “go short”)
Selling means you have gone short in anticipation of a market falling. You would also make a sell to close out an existing buy position
The price at which we settle a position at the last trading day
Selling more of an asset than the investor owns in order to make a profit once the price falls.
This is usually not permitted for authorised funds and pension funds, but may be a strategy of hedge funds. The fund will need to borrow stock to cover a short position.
A client is said to be short if he/she has an open sell position
A form of trading where traders from all over the world can link together into one big network to watch, follow and copy one anothers trades.
The difference between the buy and sell price of Our Quote. A client may sell at the lower price or buy at the higher price of Our Quote.
Market in which FX or commodities are bought and sold for cash and immediate delivery
Stop Loss Order
A pre-determined order to close an open position in a contract at a given price should that contract reach the price designated at some point in the future. An open sell would have a buy stop above the current quoted price and an open buy would have a sell stop below the current quoted price. If a market gaps your stop loss may not be filled at the level you requested.
A price level which is supposedly difficult for a particular market to fall below.
Temporary halt in trading in a particular security, in advance of a major news announcement or to correct an imbalance of orders to buy and sell. The imbalance may typically be corrected via an auction. Also see Auction.
Refers to a type of short term (one day to a couple of weeks) trading, triggered by technical analysis, for example, momentum
Analysis of a financial market by the utilisation of historical price data (usually charts) in an attempt to predict future price activity
A market where prices are range bound by a higher and lower price band. Normally markets will range trade when there is little or no news. Relates to Technical Analysis.
Trading Resources are the funds you have available to make new trades or to move any of your existing stop loss orders on any open trades further away from the current quoted price.
A stop that moves up or down in the direction of a profitable trade. It is used to automatically lock in a higher profit as a position moves further in your favour
Our quotes are always based upon the prices received from the various financial exchanges around the world. These prices are said to represent the underlying market
Value at Risk (VaR)
An estimate of the maximum expected loss, over a specified period within a given degree of confidence.
A term used to describe and quantify the relative movement of a given market over a specified period of time. A market whose price moves around great deal is said to be ‘volatile’.
An order that remains working until it is filled or cancelled