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For your information, we have provided some useful terminology that is used within our industry.

Bank Rate
The minimum rate at which the Bank of Canada makes short-term advances to the chartered banks, other members of
the Canadian Payment Association, and investment dealers. Since 1980, the Bank Rate has been set at ¼ of 1% (25 basis points) above the weekly average tender rate of 91-day Government of Canada treasury bills.

Bear
One who expects that the market price of a particular currency or the market itself will decline.

Bid and Asked Quotations
Bid is the highest price a prospective buyer is willing to pay. Asked is the lowest price the seller will accept. Together they are referred to as a 'quotation' or 'quote.'

Bull
One who expects that the market or the market price of a particular currency will rise.

Bull Market
A rising market.

Confirmation
Also called a contract. A printed acknowledgment giving
details of the purchase or sale of a currency and normally mailed to a client by the broker within 24 hours of an order being executed.

For more information about the Products and Services we provide to our corporate clients, click on the following:

Products, for

  • Spot Contracts
  • Multi-Currency Drafts
  • Wire Settlements

Services, for

  • Customized Orders
    (ATM, MIT, O/O, SLO)
  • Rate Updates
  • Round the Clock Rate Watch
  • Foreign Cheques and Wire Receipts

Exposure
The amount of money at risk due to foreign exchange rate movements.

Foreign Exchange
Currency and money claims, such as bank balances and bank drafts, expressed in the equivalent value in foreign money. Thus, a pound sterling note is money in Great Britain but is foreign exchange in the U.S. The term foreign exchange is also used to refer to transactions involving the conversion or transfer of money from one country into the money of a different country. The use of foreign exchange arises because different countries have different monetary units and the currency of one country cannot be used for making payments in another country.

Hedge
A protective measure intended to reduce the risk of loss from price fluctuations in a transaction.

Leading Indicators
Statistical data which, on average, indicate highs and lows in the business cycle ahead for the economy as a whole. They relate to capital investment, business start-ups and failures, corporate profits, stock prices, inventory adjustments, housing starts and certain commodity prices.

Margin
Because of the foreign exchange risk on forward contracts, an acceptable collateral is required from the client.

Offer
The lowest price at which a person is willing to sell a currency. The opposite is a bid, which is the highest price at which one is willing to buy.

Price Fluctuation
Foreign exchange is a commodity and its price fluctuates in accordance with supply and demand. By international agreement, fixed exchange rates with a narrow margin of fluctuation existed until 1973, when floating rates were adopted that fluctuate as supply and demand dictate. Ordinarily, and without government restrictions, the rate of exchange will depend on the relative purchasing power of the two currencies in the world markets. Gold and wealth tend to flow from countries that buy more than they sell abroad. At times, speculation in foreign exchange by dealers, brokers or investors becomes a major influence on exchange rates.

Prime Rate
The interest rate charged by banks to their most credit-worthy borrowers.

Quotation
A quotation (or quote) is an indication of the market value of a currency. This is not considered a commitment.

Real Interest Rate
The nominal rate of interest minus the percentage change in the Consumer Price Index (the rate of inflation).

Settlement or Value Date
The date on which a currency buyer must pay for a purchase or a seller must deliver the currencies sold. For most currencies, settlement must be made on or before the second business day following the transaction date. An exception to this rule are forward contracts which have a settlement date for a specified time in the future.

Spot Transaction
The exchange of one currency for another at a specified rate, for immediate delivery. A spot transaction is the most common type of foreign exchange trade.

Spread
The gap between bid and asked prices in the quotation for a currency.

Thin Market
A market offering comparatively few bids to buy or offers to sell (or both). The phrase applies to both a single currency or to the entire currency market and signifies that price fluctuations between transactions are usually larger than when the market is liquid. A thin market in a specific currency may represent disinterest in that currency or a limited supply.

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