Back Months - Those futures delivery months with expiration or delivery dates furthest into the future; futures delivery months other than the spot or nearby delivery month.
Back Office - The departments and processes related to the settlement of financial transactions.
Back to Back - (1) Transaction where all the obligations and liabilities in one transaction are mirrored in a second transaction. (2) Transaction where a loan is made in one currency in one country against a loan in another country in another currency.
Backwardation - A market in which futures prices are progressively lower in the distant delivery months; the opposite of Contango. See also Inverted Market.
Bad Faith - Dishonesty or fraud in a transaction, such as entering into an agreement with no intention of ever living up to its terms, or knowingly misrepresenting the quality of something that is being bought or sold.
Balance of Forex market trading - The value of a country's exports minus its imports.
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.
Balance of Trade - The value of exports less imports. Invisibles are normally excluded, and is otherwise referred to as mercantile or physical trade. Figures can be quoted on FoB/ FaS , customs cleared, or Fob export, FoB export.
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 Notese - Bank notes are paper issued by the central or issuing bank and are legal tender, but are not usually considered to be part of the FX market. However bank notes can be converted, in some counties, into FX. Bank notes are normally priced at a premium to the current spot rate for a currency.
Bank Rate - The rate at which a central bank is prepared to lend money to its domestic banking system.
Banker's Acceptance - A draft or bill of exchange accepted by a bank where the accepting institution guarantees payment. Used extensively in foreign trade transactions.
Bar Chart - The image of the price schedule in the form of the stylar diagram.
Barrier Option - A family of path dependent options whose pay-off pattern and survival to the expiration date depend not only on the final price of the underlying currency but also on whether or not the underlying currency breaks a predetermined price level at any time during the life of the option. See Down and Out call/put, Down and in call/put, Up and out call/put, Up and in call/put.
Base Currency - In general terms, the base currency is the currency in which an investor or issuer maintains its book of accounts. In the FX markets, the US Dollar is normally considered the 'base' currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.
Base Rate - A term used in the UK for the rate used by banks to calculate the interest rate to borrowers. Top quality borrowers will pay a small amount over base.
Basis - The difference between the current cash price of a commodity and the futures price of the same commodity.
Basis Convergence - The process whereby the basis tends towards zero as the contract expiry approaches.
Basis Grade - The grade of a commodity used as the standard or par grade of a futures contract.
Basis Point - Basic item. The 100-th share of percent; it is used concerning interest rates.
Basis Price - The price expressed in terns of yield maturity or annual rate of return.
Basis Quote - Offer or sale of a cash commodity in terms of the difference above or below a futures price (e.g., 10 cents over December corn).
Basis Risk - The risk associated with an unexpected widening or narrowing of basis between the time a hedge position is established and the time that it is lifted.
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 - The participant of the market, selling short the prices.
Bear Market - A market distinguished by declining prices.
Bear Spread - The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation does not materialize. In agricultural products, this is accomplished by selling a nearby delivery and buying a deferred delivery.
Bear Vertical Spread - A strategy employed when an investor expects a decline in a commodity price but at the same time seeks to limit the potential loss if this expectation is not realized. This spread requires the simultaneous purchase and sale of options of the same class and expiration date but with different strike prices. For example, if call options are spread, the purchased option must have a higher exercise price than the option that is sold.
Beta - A measure of the variability of rate of return or value of a stock portfolio compared to that of the overall market.
Bid - An expression indicating a desire to buy a commodity at a given price; the opposite of Offer.
Bid/Ask Spread - The difference between the bid and offer price, and the most widely used measure of market liquidity.
Bid Forex rate - The Forex rate at which a Forex market trader is willing to buy a currency.
Big Figure - Dealer expression referring to the first few digits of an exchange Forex rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen Forex rate might be 107.30/107.35, but would be quoted verbally without the first three digits i.e. "30/35".
Bilateral Clearing - A system used where foreign currency is limited. Payments are usually routed through the central banks, and sometimes require that the trade balance is equaled every year.
Binary Options - A binary "call" (or "step up") is like a standard European call option except that the pay off at expiry is fixed at one unit of the counter currency, if the call expires in the money.
Black Scholes Model - An option pricing formula initially developed by F. Black and M. Scholes for securities options and later refined by Black for options on futures.
Block Order - A futures or option order placed at the same time for more than one account.
Board of Trade - See Contract Market.
Board of Trade Clearing Corporation (BOTCC) - An independent corporation that settles all trades made at the Chicago Board of Trade. The BOTCC acts as a guarantor for all trades cleared by it, reconciles all clearing member firm accounts each day to ensure that all gains have been credited and all losses have been collected, and sets and adjusts clearing member firm margins for changing market conditions. Also referred to as a Clearing Corporation. See also Clearing House.
Board Order - Also known as a Market-if-Touched (MIT) Order. An order that becomes a market order when a particular price is reached. A sell MIT is placed above the market; a buy MIT is placed below the market.
Boiler Room - A enterprise which often is operated out of inexpensive, low-rent quarters (hence the term "boiler room") that uses high-pressure sales tactics (generally over the telephone) and possibly false or misleading information to solicit generally unsophisticated investors.
Book - In a professional trading environment, a 'book' is the summary of a Forex market trader's or desk's total positions.
Book Entry Securities - Electronically recorded securities that include each creditor's name, address, Social Security or tax identification number, and dollar amount loaned, (i.e., no certificates are issued to bond holders, instead the transfer agent electronically credits interest payments to each creditor's bank account on a designated date).
Booked - The recording of a transaction outside the country where the transaction is itself negotiated.
Booking the Basis - A forward pricing sales arrangement in which the cash price is determined either by the buyer or the seller within a specified time. At that time, the previously agreed basis is applied to the then-current futures quotation.
Boris - Slang for Russian trading.
Box Transaction - An option position in which the holder establishes a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same commodity.
Branch Office - Any location, other than the main business address of a registrant, at which the registrant employs persons engaged in activities requiring registration as an associated person.
Branch Office Manager - The person at a branch office designated to supervise the activities of that office.
Break - A rapid and sharp price decline.
Break Even Point - The trading profit that a commodity pool must realize in the first year of a participant's investment to equal all fees and expenses such that such participant will recoup its initial investment.
Breakout - Sharp movement of a Forex rate through some conditional border (the previous top or a bottom, a level of consolidation).
Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange Forex rate for the major currencies.
Brief - A written document that outlines a party's legal arguments in a case.
Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a 'dealer' commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent Forex market trading with another party.
Broker Association - Two or more exchange members who (1) share responsibility for executing customer orders; (2) have access to each other's unfilled customer orders as a result of common employment or other types of relationships; or (3) share profits or losses associated with their brokerage or trading activity.
Broker-Dealer - Firms that act as securities dealers or brokers, or perform both functions. A broker is an individual or firm who acts as an intermediary between a buyer and seller, usually charging a commission. A dealer is any person or company in the business of buying and selling securities for his or her own account, through a broker or otherwise.
Brokerage - Commission charged by a broker.
Brokerage Fee - Also known as a Commission Fee. A fee charged by a broker for executing a transaction.
Brokerage House - Also known as a Futures Commission Merchant. An individual or organization that solicits or accepts orders to buy or sell futures contracts or options on futures and accepts money or other assets from customers to support such orders. Also referred to as Commission House or Wire House.
BUBA - Bundesbank, the reserve bank of Germany.
Bucket Shop - A brokerage enterprise which "books" (i.e., takes the opposite side of) a customer's order without actually having it executed on an exchange.
Bucketing - Directly or indirectly taking the opposite side of a customer's order into the broker's own account or into an account in which the broker has an interest, without open and competitive execution of the order on an exchange.
Bull - The participant of the market playing on increase of the price.
Bull Market - A market distinguished by rising prices.
Bull Spread - The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a rise in prices but at the same time limiting the potential loss if this expectation is wrong. In agricultural commodities, this is accomplished by buying the nearby delivery and selling the deferred.
Bull Vertical Spread - A strategy used when an investor expects that the price of a commodity will go up but at the same time seeks to limit the potential loss should this judgment be in error. This strategy involves the simultaneous purchase and sale of options of the same class and expiration date but with different strike prices. For example, if call options are spread, the purchased option must have a lower exercise or strike price than the sold option.
Bulldogs - Sterling bonds issued in the UK by foreign institutions.
Bundesbank - Germany's Central Bank.
Business Conduct Committee - A committee empowered by a Self-Regulatory Organization to supervise the business conduct of the organization's members and, at some self-regulatory organizations, conduct investigations. A Business Conduct Committee may also issue formal Complaints, review settlement offers, conduct hearings and issue decisions.
Butterfly Spread - A three-legged spread in futures or options. In the option spread, the options have the same expiration date but differ in strike prices. For example, a butterfly spread in soybean call options might consist of two short calls at a $6.00 strike price, one long call at a $6.50 strike price, and one long call at a $5.50 strike price.
Buy on Close - To buy at the end of the trading session within the closing price range.
Buy on Opening - To buy at the beginning of a trading session within the open price range.
Buyer - A market participant who takes a long futures position or buys an option. An option buyer is also called a Taker, Holder or Owner.
Buyer's Market - A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that previously prevailed.
Buying Hedge - Hedging transaction in which futures contracts are bought to protect against possible increases in the cost of commodities. See also Long Hedge.

C

Cabinet Trade - A trade that allows options traders to liquidate deep out-of-the-money options by trading the option at a price equal to one-half tick.
Cable - Forex market trader jargon referring to the Sterling/US Dollar exchange Forex rate. So called because the Forex rate was originally transmitted via a transatlantic cable beginning in the mid 1800's.
Cable Transfer - Telegraphic transfer of funds from one centre to another. Now synonymous with inter bank electronic fund transfer.
CACE - Citrus Associates of the Cotton Exchange.
Calendar Spread - See Horizontal Spread.
Call - An option that gives the holder the right to buy the underlying instrument at a specified price during a fixed period.
Call Option - The buyer of a call option acquires the right, but not the obligation, to purchase a particular futures contract at a stated price on or before a particular date.
Call Rule - An exchange regulation under which an official bid price for a cash commodity is competitively established at the close of each day's trading. It holds until the next opening of the exchange.
Canceling Order - An order that deletes a customer's previous order.
Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
Capital Account - Juxtaposition of the long and short term capital imports and exports of a country.
Capital Gain - The profit made from the sale of a capital asset, such as real estate, a house, jewelry or stocks and bonds.
Capping - Effecting commodity or security transactions shortly prior to an option's expiration date; depressing or preventing a rise in the price of the commodity or security so that previously written call options will expire worthless and the premium the writer received will be protected.
Carry - The interest cost of financing securities or other financial instruments held.
Carrying Broker - A member of a futures exchange, usually a clearinghouse member, through whom another broker or customer chooses to clear all or some trades.
Carryover - Grain and oilseed commodities not consumed during the marketing year and remaining in storage at year's end. These surpluses are "carried over" into the next marketing year and added to the quantities produced during that crop year.
Carry-Over Charge - A finance charge associated with the storing of commodities (or foreign exchange contracts) from one delivery date to another.
Cash - normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same day deals.
Cash and Carry - The buying of an asset today and selling a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.
Cash Commodity - The actual physical commodity as distinguished from the futures contract based on the physical commodity. Also known as Actuals.
Cash Contract - A sales agreement for either immediate or future delivery of the actual product.
Cash Forward Sale - A cash transaction common in many industries, including commodity merchandising, in which a commercial buyer and seller agree upon delivery of a specified quality and quantity of goods at a specified future date. A price may be agreed upon in advance, or there may be agreement that the price will be determined at the time of delivery.
Cash Market - A place where people buy and sell the actual commodities. Also known as Forward Cash Contract. See also Spot Market.
Cash Price - The price in the marketplace for actual cash or spot commodities to be delivered via customary market channels.
Cash Settlement - A method of settling certain futures or options contracts whereby the seller pays the buyer the cash value of the commodity traded according to a procedure specified in the contract.
CBOE - Chicago Board Options Exchange.
CBOT - Chicago Board of Trade.
CD - Certificate of Deposit.
CEI - Commodity Exchange, Inc. (also known as COMEX).
Central Bank - A government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
Central Rate - Exchange rates against the ECU adopted for each currency within the EMS.Currencies have limited movement from the central rate according to the relevant band.
Certificate of Deposit (CD) - A negotiable certificate in bearer form issued by a commercial bank as evidence of a deposit with that bank which states the maturity value, maturity rate and interest rate payable.CDs vary in size with maturities ranging from a few weeks to several years. CDs may normally be redeemed before maturity only by sale on the secondary market but may also be redeemed back to issuing bank through payment of a penalty.
CFFE - Cantor Financial Futures Exchange
CFTC - See Commodity Futures Trading Commission.
CFTC Administrative Action - An action taken by the Commodity Futures Trading Commission to enforce the provisions of the Commodity Exchange Act and Regulations.
CFTC Injunctive Action - An action brought by the Commodity Futures Trading Commission in federal court to obtain an order requiring a party to refrain from doing or continuing to do a particular act or activity.
CHAPS - Clearing House Automated Payment System.
Chart - Graphic representation of changes of the price (Forex rate).
Charting - The use of graphs and charts in the technical analysis of futures markets to plot price movements, volume, open interest or other statistical indicators of price movement. See also Technical Analysis.
Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Forex market trader.
Cheap - Colloquialism implying that a commodity is underpriced.
Cheapest to Deliver - Usually refers to the selection of bonds deliverable against an expiring bond futures contract.
CHIPS - The New York clearing house clearing system. (Clearing House Interbank Payment System). Most Euro transactions are cleared and settled through this system.
Chooser Option - An option which is transacted in the present but which at some prespecified future date is chosen to be either a put or call option.
Churning - Excessive trading that results in the broker deriving a profit from commissions while disregarding the best interests of the customers.
CIBOR - Copenhagen Interbank Rate, the rate at which the banks lend the Danish Krone on an unsecured basis. The rate is calculated daily by the Danmarks Nationalbank (the Danish Central Bank), based on rules set out by the Danish Banker's Association.
Circuit Breaker - A system of trading halts and price limits on equities and derivatives markets designed to provide a cooling-off period during large, intraday market declines.
Civil Action - An action maintained to protect a private, civil right, or to compel a civil remedy, as distinguished from a criminal prosecution.
Civil Monetary Penalty - Fines imposed by the Commodity Futures Trading Commission as a sanction for wrongdoing.
Claim - A demand for money or other relief.
Claimant - A party who asserts a right to money or property.
Clear - The process by which a clearinghouse maintains records of all trades and settles margin flow on a daily mark-to-market basis for its clearing member.
Clearing - The process of settling a Forex market trading.
Clearing Corporation - See Board of Trade Clearing Corporation.
Clearing House - An agency or separate corporation of a futures exchange that is responsible for settling trading accounts, collecting and maintaining margin monies, regulating delivery and reporting trade data.
Clearing Margin - Financial safeguards to ensure that clearing members (usually companies or corporations) perform on their customers' open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and sellers of futures and options contracts are required to deposit with brokers. See also Customer Margin.
Clearing Member - A member of an exchange clearing house. All trades of a non-clearing member must be registered and eventually settled through a clearing member.
Clearing Procedures Action Type - A violation arising from the failure to abide by clearing procedures.
Close - The period at the end of the trading session, officially designated by the exchange, during which all transactions are considered made "at the close."
Closed Position - A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
Closing Price - The price (or price range) recorded during trading that takes place in the final moments of a day's activity that is officially designated as the "close."
Closing Purchase Transaction - The purchase of an option identical to one already sold to liquidate a position.
Closing Range - A high and low range of prices at which futures transactions took place during the close of the market.
CME - Chicago Mercantile Exchange.
Co Respondent - Other individuals or firms named in the disciplinary, reparation or arbitration action are referred to as co-respondents in the action.
Coincident Indicator - An economic indicator that generally moves in line with the general business cycle such as industrial production.
Collateral - Something given to secure a loan or as a guarantee of performance.
COM Membership - A Chicago Board of Trade membership that allows and individual to trade contracts listed in the commodity options market category.
COMEX - Commodity Exchange, Inc. (also known as CEI).
Commission - A transaction fee charged by a broker.
Commission Fee - A fee charged by a broker for executing a transaction. Also referred to as brokerage fee.
Commission House - See Futures Commission Merchant.
Commitments - See Open Interest.
Commodity - The goods.
Commodity Credit Corporation - A government-owned corporation established in 1933 to assist American agriculture. Major operations include price support programs, foreign sales and export credit programs for agricultural commodities.
Commodity Exchange Act - The federal act that provides for federal regulation of futures trading.
Commodity Exchange Authority - A regulatory agency of the U.S. Department of Agriculture established to administer the Commodity Exchange Act prior to 1975; the predecessor of the Commodity Futures Trading Commission.
Commodity Futures Trading Commission (CFTC) - The 1974-established federal regulatory agency that administers the Commodity Exchange Act. The federal oversight agency which monitors the futures and options on futures markets to detect and prevent price distortion and market manipulation and to protect the rights of customers who use the markets for either commercial or investment purposes.
Commodity Option - See Option Contract, Put Option and Call Option.
Commodity Pool - An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options contracts.
Commodity Pool Operator (CPO) - An individual or organization which operates or solicits funds for a pool, that is, an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options contracts. Generally required to be registered with the Commodity Futures Trading Commission.
Commodity Trading Advisor (CTA) - An individual or organization that, for compensation or profit, directly or indirectly advises others as to the value of or the advisability of buying or selling futures or options contracts. Providing advice indirectly includes exercising trading authority over a customer's account. Registration with the Commodity Futures Trading Commission is generally required.
Compensatory Damages - An amount intended to cover actual losses.
Complaint - Formal, written charges brought by a regulatory or self-regulatory organization which set forth the rules or requirements alleged to have been violated and describe each act or omission that constituted the alleged violations. Also, the initial document filed in a court to initiate a civil action.
Compound Option - An option on an option, the dates and price of such option being fixed.
Computerized Trading Reconstruction System - A Chicago Board of Trade computerized surveillance program that pinpoints in any trade, the traders, the contract, the quantity, the price and the time of execution to the nearest minute.
Concurrent Indicators - See Lagging Indicators.
Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.
Confirmation Statement - A statement sent by a futures commission merchant to a customer when a futures or options position has been initiated. The statement shows the number of contracts bought or sold and the prices at which the contracts were bought or sold. Sometimes combined with a purchase and sale statement.
Congestion - (1) A market situation in which shorts attempting to cover their positions are unable to find an adequate supply of contracts provided by longs willing to liquidate or by new sellers willing to enter the market, except at sharply higher prices; (2) in technical analysis, a period of time characterized by repetitious and limited price fluctuations.
Consent Order - Generally, any order to which all parties agree.
Consolidation - The figure of the technical analysis describing movement of the price (Forex rate) aside without the certain increasing or decreasing tendency.
Consumer Price Index (CPI) - A major inflation measure computed by the U.S. Department of Commerce. It measures the change in prices of a fixed market basket of some 385 goods and services in the previous month.
Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the 'Asian Contagion'.
Contango - A market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery months; opposite of Backwardation.
Contract - The standard unit of trading.
Contract Expiration Date - The date on which a currency must be delivered to fulfill the terms of the contract. For options, the last day on which the option holder can exercise his right to buy or sell the underlying instrument or currency.
Contract Grades - Those grades of a commodity which have been officially approved by an exchange as deliverable in settlement of a futures contract.
Contract Market - A board of trade designated by the Commodity Futures Trading Commission to trade futures or option contracts on a particular commodity. Commonly used to mean any exchange on which futures are traded.
Contract Month - The month in which delivery is to be made in accordance with a futures contract.
Contract Unit - The actual amount of a commodity represented in a contract.
Contributor - The Commodity Futures Trading Commission, National Futures Association and any U.S. futures exchange which includes its disciplinary actions in NFA's BASIC system.
Controlled Account - Any account for which trading is directed by someone other than the owner. Also called a Managed Account or a Discretionary Account.
Convergence - The tendency for prices of physical commodities and futures to approach one another, usually during the delivery month.
Conversion Factor - A factor used to equate the price of T-bond and T-note futures contracts with the various cash T-bonds and T-notes eligible for delivery. This factor is based on the relationship of the cash-instrument coupon to the required eight percent deliverable grade of a futures contract as well as taking into account the cash instrument's maturity or call.
Corner - (1) Securing such relative control of a commodity or security that its price can be manipulated; (2) in the extreme situation, obtaining contracts requiring the delivery of more commodities or securities than are available for delivery.
Correspondent Bank - The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.
Cost of Carry - See Carrying Charge.
Cost of Living Index - Broadly equivalent to Retail Price Index or Consumer price.
Counterclaim - A claim by a respondent against a claimant.
Counterparty - One of the participants in a financial transaction.
Counterparty Risks - Foreign Currency Inter-bank Exchange (FOREX) instruments are Positions (Buys and/or Sell) between the Client and its Counterparty and, unlike exchange-traded foreign exchange instruments which are, in effect, guaranteed by a clearing organization affiliated with the exchange on which the instruments are traded, are not guaranteed by a clearing organization. Thus, when the Customer purchases an OTC foreign exchange instrument, it relies on the Counterparty from which it has purchased the instrument to fulfill the contract. Failure of a Counterparty to fulfill a Position could result in losses of any prior payment made pursuant to the Positions well as the loss of the expected benefit of the transaction.
Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
Coupon - (1) On bearer stocks, the detachable part of the hide behind nominee status. Certificate exchangeable for dividends
Coupon Value - The annual rate of interest of a bond.
Cover - (1) Purchasing futures to offset a short position. Same as Short Covering. See Offset or Liquidate; (2) to have in hand the physical commodity when a short futures or leverage sale is made, or to acquire the commodity that might be deliverable on a short sale.
Covered Interest Rate Arbitrage - An arbitrage approach which consists of borrowing currency A, exchanging it for currency B, investing currency B for the duration of the loan, and, after taking off the forward cover on maturity, showing a profit on the entire set of deals. It is based on the theorem of interest rate parity (one of the key theoretical economic relationship) which says that the return on a hedged foreign investment will just equal the domestic interest rate on investments of identical risk. When the covered interest rate differential between the two money market is zero, there is no arbitrage incentive to move funds from one market to another.
Covered Option - A short call or put option position which is covered by the sale or purchase of the underlying futures contract or physical commodity.
CPI - Consumer Price Index. Monthly measure of the change in the prices of a defined basket of consumer goods including food, clothing, and transport. Countries vary in their approach to rents and mortgages.
CPO - See Commodity Pool Operator.
CPSS - Committee on Payment and Settlement Systems.
Crawling Peg (Adjustable Peg) - An exchange rate system where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency. The official rate may be changed from time to time.
Credit Risk - Default risk of credit obligations.
Creditor - A person who is owed money by others.
Crop Reports - Reports compiled by the U.S. Department of Agriculture on various ag commodities that are released throughout the year. Information in the reports includes estimates on planted acreage, yield, and expected production, as well as comparison of production from previous years.
Crop Year - The time period from one harvest to the next, varying according to the commodity (i.e., July 1 to June 30 for wheat; September 1 to August 31 for soybeans).
Cross Claim - A claim filed by one respondent against a co-respondent.
Cross Deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.
Cross Forex rate - The exchange Forex rate between any two currencies that are considered non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/JPY quote would be considered a cross Forex rate, whereas in UK or Japan it would be one of the primary currency pairs Forex market traded.
Cross Hedge - Hedging a cash market position in a futures contract for a different, but price-related commodity.
Cross Margining - A procedure for margining related securities, options and futures contracts jointly when different clearing houses clear each side of the position.
Cross Trading - Offsetting or noncompetitive matching of the buy order of one customer against the sell order of another customer, a practice that is permissible only when executed in accordance with the Commodity Exchange Act, CFTC regulations and the rules of the contract market.
Crush Spread - In the soybean futures market, the simultaneous purchase of soybean futures and the sale of soybean meal and soybean oil futures to establish a processing margin. See Gross Processing Margin.
CSCE - Coffee, Sugar & Cocoa Exchange, Inc.
CTA - See Commodity Trading Advisor.
Curb Trading - Trading by telephone or other means that takes place after the official market has closed. Originally it took place in the street on the curb outside the market. Under CFTC rules, curb trading is illegal. Also known as Kerb Trading.
Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for Forex market trading.
Currency Basket - Various weightings of other currencies grouped together in relation to a basket currency(e.g. ECU or SDR). Sometimes used by currencies to fix their rate often on a trade weighted basket.
Currency Risk - The probability of an adverse change in exchange rates.
Currency Swap - The simultaneous conclusion of two opposite transactions in a direction on an exchange of two currencies with different terms of their delivery.
Current Account - The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.
Current Asset - Cash and other assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold during the next 12 months.
Current Balance - The value of all exports (goods plus services) less all imports of a country over a specific period of time, equal to the sum of trade and invisible balances plus net receipt of interest, profits and dividends from abroad.
Current Delivery Month - The futures contract which matures and becomes deliverable during the present month. Also called Spot Month.
Current Yield - The ratio of the coupon to the current market price of the debt instrument.
Customer Margin - Within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfilling of contract obligations. FCMs are responsible for overseeing customer margin accounts. Margins are determined on the basis of market risk and contract value. See also Clearing Margin
Customer Segregated Accounts - A special account used to hold and separate customers' assets from those of the brokerage house or firm.
Cycle - The set of expiration dates applicable to different classes of option.
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D

Daily Price Limit - The maximum price advance or decline from the previous day's settlement price permitted during one trading session, as fixed by the rules of an exchange.
Daily Trading Limit - The maximum price range set by the exchange each day for a contract.
Day Order - An order that if not executed expires automatically at the end of the trading session on the day it was entered.
Day Trader - A speculator who will normally initiate and offset a position within a single trading session.
Day Trading - Refers to positions which are opened and closed on the same trading day.
Dealer - An individual who acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent Forex market trading with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
Dealer Option - A put or call on a physical commodity, not originating on or subject to the rules of an exchange, in which the obligation for performance rests with the writer of the option. Dealer options are normally written by firms handling the underlying commodity and offered to public customers, although the reverse may also be true.
Decision - A formal, written judgment or verdict.
Deck - The orders for purchase or sale of futures or option contracts held by a floor broker.
Decorum and Attire Action Type - A violation arising from an individual's demeanor or attire on an exchange floor.
Default - The failure to perform on a futures contract as required by exchange rules, such as a failure to meet a margin call or to make or take a delivery.
Deferred Delivery - The distant delivery months in which futures trading is taking place, as distinguished from the nearby futures delivery month.
Deferred Futures - The futures contracts that expire during the most distant months. Also called Back Months. See also Forward Purchase or Sale.
Deficit - A negative balance of Forex market trading or payments.
Deliverable Grades - The standard grades of commodities or instruments listed in the rules of the exchanges that must be met when delivering cash commodities against futures contracts. Grades are often accompanied by a schedule of discounts and premiums allowable for delivery of commodities of lesser or greater quality than the standard called for by the exchange. Also referred to as Contract Grades.
Deliverable Stocks - Stocks of commodities located in exchange-approved storage, for which receipts may be used in making delivery on futures contracts. In the cotton trade, the term refers to cotton certified for delivery.
Delivery - The tender and receipt of an actual commodity or warehouse receipt or other negotiable instrument covering such commodity, in settlement of a futures contract.
Delivery Date - The date on which the commodity or instrument of delivery must be delivered to fulfill the terms of a contract.
Delivery Instrument - A document used to effect delivery on a futures contract, such as a warehouse receipt or shipping certificate.
Delivery Month - The specified month within which a futures contract matures and can be settled by delivery.
Delivery Notice - The written notice given by the seller of his intention to make a delivery against an open short futures position on a particular date. This notice, delivered through the clearing house, is separate and distinct from the warehouse receipt or other instrument that will be used to transfer title.
Delivery Option - A provision of a futures contract which provides the short with flexibility in regard to timing, location, quantity, or quality in the delivery process.
Delivery Points - Those locations designated by commodity exchanges where stocks of a commodity represented by a futures contract may be delivered in fulfillment of the contract.
Delivery Price - The price fixed by the clearing house at which deliveries on futures are invoiced, generally the price at which the futures contract is settled when deliveries are made.
Delta - A measure of how much an option premium changes, given a unit change in the underlying futures price. Delta often is interpreted as the probability that the option will be in-the-money by expiration.
Delta Margining - An option margining system used by some exchanges for exchange members and/or floor traders which equates the changes in option premiums with the changes in the price of the underlying futures contract or physical commodity.
Delta Value - The expected change in an option's price given a one-unit change in the price of the underlying futures contract.
Demand - A claim filed by a claimant against a respondent on the form provided by NFA.
Deposit - The initial outlay required by a broker of a client to open a futures position, returnable upon liquidation of that position.
Deposition - The pre-trial testimony of a witness given out of court with no judge present. The witness is placed under oath to tell the truth and lawyers for each party may ask questions.
Depreciation - A fall in the value of a currency due to market forces.
Derivative - A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.
Designated Self Regulatory Organization (DSRO) - When a futures commission merchant (FCM) is a member of more than one Self-Regulatory Organization (SRO), the SROs may decide among themselves which of them will be primarily responsible for enforcing minimum financial and sales practice requirements. With approval, the SRO will be appointed DSRO for the particular FCM.
Devaluation - The deliberate downward adjustment of a currency's price, normally by official announcement.
Diagonal Spread - A spread between two call options or two put options with different strike prices and different expiration dates.
Differentials - This discount (premium) allowed for grades or locations of a commodity lower (higher) than the par of basis grade or location specified in the futures contract. See also Allowances.
Direct Quote - Representation of cost of unit of a foreign currency in terms of national currency. Directly Crossing Orders - A trader acts as both a buyer and seller for orders on a matched transaction.
Directly Taking the Other Side - A trader buys and sells his own orders to each other; trading with himself on behalf of others.
Disclosure Document - The document that must be provided to and signed by prospective customers of CPOs and CTAs that describes fees, performance, etc.
Discount - (1) The amount a price would be reduced to purchase a commodity of lesser grade; (2) sometimes used to refer to the price difference between futures of different delivery months, as in the phrase "July is trading at a discount to May", indicating that the price of the July futures contract is lower than that of May; (3) applied to cash grain prices that are below the futures price. See also Option Premium.
Discount Basis - Method of quoting securities where the price is expressed as an annualized discount from maturity value.
Discount Forex rate - The interest Forex rate from which the central bank gives credits to financial establishments of the country.
Discount Method - A method of paying interest by issuing a security at less than par and repaying par value at maturity. The difference between the higher par value and the lower purchase price is the interest.
Discretionary Account - An arrangement by which the owner of the account gives written power of attorney to someone else, usually the broker or a commodity trading advisor, to buy and sell without prior approval of the account owner. Often referred to as a Managed Account.
Dismiss - In a legal context, to terminate a case without a complete trial.
Dismissal - In a legal context, the removal of a case out of the court; the termination of a case without a complete trial.
Dismissal With Prejudice - Usually considered an adjudication upon the merits and will operate as a bar to future action.
Dismissal Without Prejudice - Usually an indication that the dismissal affects no right or remedy of the parties (i.e., is not on the m