Glossary

Broker: Common name used to define, generally, firms that act as the middle-man in the financial markets. There are two types of brokers, market makers (dealing desk) or ECNs (non-dealing desk).

ECN: Electronic Currency Network. Directs the client straight through the interbank market, usually resulting in tighter spreads. Most ECN’s have a fixed commission per roun/turn lot.

Leverage: The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

Lot: Pack in which trading units are being sent to the market. There are 3 types of lots: mini and regular. A micro lot consists of 1,000 units units of the base currency. A mini lot consists of 10,000 units of the base currency. A regular lot consists of 100,000 units of the base currency.

Margin: The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.

Market Maker: Middle-man between the interbank market and the retail user. The interbank liquidity provider charges the market maker a small commission for providing access to tradeable volumes. The market maker also charges commission to its clients (in the form of spread, direct commission or both) to provide them access to tradeable prices in the currencies market.

Pip: The smallest price change that a given exchange rate can make.

Spread: The difference between the bid and the ask price of a security or asset.

STP: Straight Through Processing. It is the complete streamlining and automation of an entire transaction. In other words, as soon as a trade request is made, there's no manual intervention — gone is the to and fro of phone calls and faxes to authorize, confirm and settle trades. No manual intervention also, of course, leaves no room for human error.This allows traders to place orders that match off electronically with a broker's bank feeds without interacting with a “middle man” whose job is to try to make money trading between customers.