Rapid movement in a market caused by strong interest by
buyers and/or sellers. In such circumstances price levels
may be omitted and bid and offer quotations may occur too
rapidly to be fully reported.
The United States Federal Reserve. Federal Deposit
Insurance Corporation Membership is compulsory for Federal
Reserve members. The corporation had deep involvement in
the Savings and Loans crisis of the late 80s.
Fed Fund Rate
The interest rate on Fed funds. This is a closely watched
short term interest rate as it signals the Feds view as to the
state of the money supply.
Cash balances held by banks with their local Federal
Reserve Bank. The normal transaction with these funds is an
interbank sale of a Fed fund deposit for one business day.
Straight deals are where the funds are traded overnight on
an unsecured basis.
Foreign Exchange Dealers Association of India is an
association of all dealers in foreign exchange which sets the
ground rules for fixation of commissions and other charges
and also determines the rules and regulations relating to
day-to-day transactions in foreign exchange in India. The
FEDAI has recognized 38 currencies for dealing.
Federal National Mortgage
A privately owned, but US government sponsored,
corporation that trades in residential mortgages. Its
activities are funded by the sale of instruments commonly
known as Fannie Maes.
Federal Open Market
Committee See FOMC.
Federal Reserve Board
The board of the Federal Reserve System, appointed by the
US President for 14 year terms. One member of the board
is appointed chairman every four years.
Federal Reserve System
The central banking system of the US comprising 12 Federal
Reserve Banks controlling 12 districts under the Federal
Reserve Board. Membership in the Fed is compulsory for
banks chartered by the Comptroller of Currency, and
optional for state chartered banks.
Financial Future A futures contract based on a financial instrument.
Fine Rate (1) A quote with a narrow spread. (2) The most favorable
rate charged to a high quality borrower.
The price given in response to a request for a rate at which
the quoting party is willing to execute a deal for a
reasonable amount, for spot settlement. Screen quotes are
indicative. Quotes on matching systems are normally firm
depending on the system's requirement to reconfirm rate
prior to completing matching.
Fiscal Policy Use of taxation as a tool in implementing monetary policy.
Fixed Dates The monthly calendar dates similar to the spot. There are
two exceptions. For detailed description see value dates.
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Fixed Exchange Rate
Official rate set by monetary authorities for one or more
currencies. In practice, even fixed exchange rates are
allowed to fluctuate between definite upper and lower
bands, leading to intervention by the central bank.
A method of determining rates by normally finding a rate
that balances buyers to sellers. Such a process occurs either
once or twice daily at defined times. Used by some
currencies, particularly for establishing tourist rates . The
system is also used in the London Bullion market.
Where a client has not traded in that currency, or where an
earlier deal is reversed thereby creating a neutral (flat)
position. For example, you bought $500,000 then sold
$500,000 = FLAT .
Flexible Exchange Rate
Exchange rates with a fixed parity against one or more
currencies with frequent revaluation. A form of managed
(1) See Floating exchange rate. (2) Cash in hand or in the
course of being transferred between banks. (3) The Federal
Reserve Float exists because checks sent to the Federal
Reserve Banks are sometimes credited in advance of the
depositing bank loosing the reserve.
Floating Exchange Rate
When the value of a currency is decided by the market
forces dictating the supply and demand of that particular
(1) An agreement with a counterparty that sets a lower
limit to interest rates for the floor buyer for a stated time.
(2) A term for an exchanges trading area (cf. screen based
trading), normally the trading area is referred to as a pit in
the commodities and futures markets.
Federal Open Market Committee, the committee that sets
money supply targets in the US, which tend to be
implemented through Fed Fund interest rates etc.
Foreign Exchange The purchase or sale of a currency against the sale or
purchase of another.
A position in which one party agrees to purchase from or
sell to the other party an agreed amount of foreign
Forex An abbreviation of foreign exchange.
The purchase or sale of a currency against the sale or
purchase of another currency. The maximum time for a deal
is defined when the deal opens. The deal can be closed at
any moment until the expiry date and time. For technical
reasons, a deal cannot be closed in its first 3 minutes.
Sometimes used as synonym for "forward deal" or "future".
More specifically, it referes to arrangements with the same
effect as a forward deal between a bank and a customer.
Forward Cover Taking Forward contracts intended to protect against movements
in the exchange rate.
Forward Deal A deal with a value date greater than the spot value date.
Forward / Forward A forward / forward deal is one where both legs of the deal
have value dates greater than the current spot value date.
Forward Margins Discounts or premiums between spot rate and the forward
rate for a currency. Normally quoted in points.
Forward Maturities Trading days on which day contracts can be transacted later
than the spot date.
Foreign exchange transactions for which the fulfillment of
the mutual delivery obligations is made on a date later than
the second business day after the transaction was
A commitment to buy or sell a currency for delivery on a
specified future date or period. The price is quoted as the
spot rate minus or plus the forward points for the chosen
The interest rate differential between two currencies
expressed in exchange rate points. The forward points are
added to or subtracted from the spot rate to give the
forward or outright rate, depending on whether the
currency is at a forward premium or discount.
The rate at which a foreign exchange contract is struck
today for settlement at a specified future date, which is
decided at the time of entering into the contract. The
decision to subtract or add points is determined by the
differential between the deposit rates for both currencies
concerned in the transaction. The base currency with the
higher interest rate is said to be at a discount to the lower
interest rate quoted currency in the forward market.
Therefore the forward points are subtracted from the spot
rate. Similarly, the base currency with the lower interest
rate is said to be at a premium, and the forward points are
added to the spot rate to obtain the forward rate.
Forward Rate Agreements
The FRA is an agreement between two parties that
determines the interest rate that will apply to a notional
future loan or deposit of an agreement.
Free Reserves Total reserves held by a bank less the reserves required by
Front Office The activities carried out by the dealer, normal trading
Fundamental Analysis Analysis based on economic and political factors.
The macro economic factors that are accepted as forming
the foundation for the relative value of a currency. These
include inflation, growth, trade balance, government
deficit, and interest rates.
A term for USD/CAD/Fungibles Instruments that are
equivalent, substitutable and interchangeable in law. May
apply to certain exchange traded currency contracts offered
on a number of exchanges.
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A contract traded on a futures exchange that requires the
delivery of a specified quality and quantity of a commodity,
currency or financial instruments within a specified future
month, if not liquidated before the contract matures.
They are firm agreements to deliver (or take delivery of) a
standardized amount of something on a certain date at a
predetermined price. Futures exist in currencies, money
market deposits, bonds, shares and commodities. They are
traded on an exchange with the clearing corporation
guaranteeing the contract and moreover the trade is done
on a mark to market basis.