Back Office
Settlement and related processes.
Backwardation
Term referring to the amount that the spot price exceeds the forward price.
Balance of Payments
A systematic record of the economic transactions during a given period for a country. (1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements. (2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values.
Band
The range in which a currency is permitted to move. A system used in the ERM.
Bank Line
Line of credit granted by a bank to a customer, also known as a " line".
Bank Rate
The rate at which a central bank is prepared to lend money to its domestic banking system.
Base currency
United States Dollars. The currency to which each transaction shall be converted at the close of each position.
Basis
The difference between the cash price and futures price.
Basis Point
For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms.
Basis Trading
Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket
A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear
A person who believes that prices will decline.
Bear Market
A market characterized by declining prices.
Bid
The rate at which a dealer is willing to buy the base currency.
Big Figure
The first three digits of an exchange rate, e.g. USD 1.62 per pound or DEM 1.49 per dollar.
Book
The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities. If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book. Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York.
Bretton Woods
The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker
Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull
A person who believes that prices will rise.
Bull Market
A market characterized by rising prices.
Bundesbank
Central Bank of Germany.
Buying Rate
Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate. |
