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Glossary
 
A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
A
  • Account closure (depositor account) - The closure of beneficiary and pool accounts by the investor and the clearing member or at the discretion of the participant, if the client has defaulted in its obligations towards the participant.
  • Accounts Receivable - Any money due to a business for merchandise or securities that it has sold or for services it has rendered. This is a key determinant in analyzing a company’s liquidity.
  • Accrued Interest - The interest accruing on a security since the previous coupon date. If a security is sold between two payment dates, the buyer usually compensates the seller for the interest accrued, either within the price or as a separate payment.
  • Analyst - A firm / company / an individual who is engaged either on his own behalf or on behalf of any other firm or organization that is regularly publishing securities recommendations based on research either through print media and /or electronic media.
  • Algorithmic trading - Algorithmic trading or automated trading, also known as algo trading, black-box trading, or robo trading, is the use of computer programs for entering trading orders with the computer algorithm deciding on certain aspects of the order such as the timing, price, or even the final quantity of the order.
  • American Style Options - Option in which the buyer (holder) of the option can choose to exercise his option at any given period of time between the purchase date and the expiry date of the underlying futures contract.
  • Appreciation - A rise in a currency's value.
  • Approved Delivery Facility - Any bank, depository, stockyard, mill, warehouse, plant or elevator authorized by the Exchange for delivery of Exchange contracts.
  • Approved Warehouse - Any warehouse which has been officially approved by the exchange and from which actual deliveries of commodities may be made on futures contracts.
  • Arbitrage - The simultaneous purchase of cash, futures, or options in one market against the sale of cash, futures or options in a different market in order to profit from a price disparity.
  • Ask - Also called "offer" Indicates a willingness to sell a futures or options on futures contract at a given price.
  • Asset Based Financing - Method of financing in which lenders and equity investors look principally to the cash flow from a particular asset or set of assets for a return on, and the return of, the financing.
  • ATS - Automated trading system (ATS); a case in which a computer makes decisions and enters orders without a person entering those orders. This is a programmatic way of representing the trader.
  • At-The-Money - An option whose strike price is equal to the current market price of the underlying asset. If the option is on a commodity futures contract, when the strike price of the option is equal to the underlying futures price, the option is said to be at-the-money.
  • Auction - When a seller is not in a position to deliver the securities he has sold, the buyer sends in his applications for buying-in, so that the securities can be bought from the market and delivered to him. This process by which the securities are procured on behalf of the defaulter is known as Auction.
  • Auditor - A person who is professionally qualified to examine and scrutinize accounts. He/she inspects records and reports on the profitability and financial position of the company.
  • Average daily volume - Volume for a specified time period divided by the number of business days within that same time period.
B
  • Backwardation - A market condition in which commodity futures prices are lower than the spot price of the physical commodity.
  • Bank Draft - A draft addressed to a bank
  • Bar chart - A graph of prices, volume and open interest for a specified time period used by the chartist to forecast market trends. For example, a daily bar chart plots each trading session's high, low and settlement prices.
  • Base Currency - Currency being traded and expressed first in a direct quotation.
  • Base price - Base price for existing futures contracts is normally taken as the official closing price of the contract during the previous trading session. However, at the time of making the contract available for trading on the system for the first time (at the time of listing a commodity for trading), the exchange decides the base price of the contract based on the spot market price of the commodity on the previous day(s) and a notional carrying cost as the case may be. Base Value The standard unit based on which the price of the contract is quoted for trading is called quotation or base value. Eg. for gold contract, the quotation or base value is 10 gram
  • Basis - The difference between the spot or cash price and the futures price of the same or a related commodity. Basis is usually computed to the near future, and may represent different time periods, product forms, qualities and locations. The local cash market price minus the price of the nearby futures contract.
  • Basis contract - A forward contract in which the cash price is based on the basis relating to a specified futures contract.
  • Basis of Allotment - An allotment pattern of an issue among different categories of applicant
  • Basis Point - One-hundredth (.01) of a full index point.
  • Basis Risk - The risk that the interest rate of different assets, liabilities and off-balance sheet items may change in different magnitude is termed as basis risk.
  • Bear market - A market in which prices are declining.
  • Bear spread - A vertical spread involving the sale of the lower strike call and the purchase of the higher strike call, called a bear call spread. Also, a vertical spread involving the sale of the lower strike put and the purchase of the higher strike put, called a bear put spread.
  • Bench Mark - Security used as the basis for interest rate calculations and for pricing other securities. Also denotes the most heavily traded and liquid security of a particular class
  • Benchmark index - Indicators used to provide a point of reference for evaluating a fund’s performance
  • Best Ask - The lowest price, which any seller is willing to accept at a given time for the commodity futures contract.
  • Best Bid - The highest price that any buyer is willing to pay at a given time for the commodity futures contract.
  • Beta - The relationship between the movement of an individual stock or a portfolio and that of the overall stock market.
  • Bid (or buy) - An offer to buy a specific quantity of a commodity at a stated price. The price that the market participants are willing to pay.
  • Bid Spread - The difference between the stated and /or displayed price at which a market maker is willing to sell a security and the price at which he is willing to buy it. A bid is the demand for a security on behalf of an investor that is entered by the syndicate/sub-syndicate members in the system. The two main components of a bid are the price and the quantity.
  • Bid Ask Spread - The difference between bid and ask price
  • Bidder- The person who has placed a bid in the Book Building process.
  • Block Trade - A privately negotiated futures transaction executed apart from public auction market, either on or off the exchange trading floor. There are minimum order size requirements that vary according to product and order type, and eligibility for engaging in such trades is strictly regulated.
  • Bond - Instrument traded on the cash market representing a debt of the government or of a company.
  • Breakeven - The point at which an option buyer or seller experiences no loss and no profit on an option. Call breakeven equals the strike price plus the premium; put breakeven equals the strike price minus the premium.
  • Bridge Financing - Interim financing of one sort or another used to solidify a position until more permanent financing is arranged
  • Broker - A person paid a fee or commission for executing the buy or sell orders of a customer. In futures trading, the term may refer to one of several entities: Floor broker - a person who actually executes the trade in the trading pit or electronically; Account Executive (AE), Associated Person (AP), or Registered Commodity representative (RCR) - the person who deals with customers in Futures Commission Merchant (FCM) offices; and FCM - a firm or person engaged in executing orders to buy or sell futures contracts for customers. A full-service broker offers market information and advice to assist the customer in trading. A discount broker simply executes orders for customers.
  • Broker dealer - Any person, other than a bank engaged in the business of buying or selling securities on its own behalf or for others.
  • Brokerage - The fee paid to a floor broker for executing orders. May be a flat amount or a percentage; also referred to as a commission.
  • Brokerage house - A firm that handles orders to buy and sell futures and options contracts for customers.
  • Bull Market - A market in which prices are rising in the medium and longer term.
  • Bull spread - A vertical spread involving the purchase of the lower strike call and the sale of the higher strike call, called a bull call spread. Also, a vertical spread involving the purchase of the lower strike put and the sale of the higher strike put, called a bull put spread.
  • Bullion - Precious metals such as Gold and Silver in the form of Bars and Ingots, which are serially numbered and cast in standardized sizes, quality and weights is commonly referred to as Bullion.
  • Business Day/Trading Day - Any day on which the exchange is open for trading or deliveries.
  • Bylaws - Rules and practices that govern management of an organization
C
D
  • Daily trading limits - The maximum price range permitted a contract during one trading session. Trading limits are set by the exchange for certain contracts.
  • Day Order - Orders that have time validity until the close of the day's trading. If the order is not executed by the end of the day, the order is cancelled.
  • Day Trading - Establishing new positions and subsequently offsetting existing positions in the commodity futures market during the course of the trading day in order to leverage on intra-day volatility to make profits is commonly referred to as Day Trading.
  • Dealer - A firm or individual who puts up capital and takes one side of a position, seeking to earn a spread (profit) through closing out the position in another trade with a different party.
  • Debentures - Bonds issued by a company bearing a fixed rate of interest usually payable half yearly on specific dates and principal amount repayable on a particular date on redemption of the debentures.
  • Debit spread - An option spread in which there is a net payout of premium.
  • Default - Failure to perform on a contract as required by exchange rules, such as the failure to meet settlement variation, a performance bond call, or to make or take delivery.
  • Deferred Tax Assets - Unabsorbed depreciation and carry forward of losses which can be set-off against future taxable income which is considered as timing differences result in deferred tax assets. The deferred Tax Assets are accounted as per the Accounting Standard 22. Deferred Tax Assets have an effect of decreasing future income tax payments, which indicates that they are prepaid income taxes and meet definition of assets. Whereas deferred tax liabilities have an effect of increasing future year's income tax payments, which indicates that they are accrued income taxes and meet definition of liabilities
  • Dematerialization - A process by which physical certificates are converted into electronic form
  • Demutualization - Process of transition from “mutually-owned” association to a company “owned by shareholders”. In other words, transformation of the legal structure from a mutual form to a business corporation form and privatisation of the corporations so constituted, is referred to as demutualization.
  • Depository -  A Depository is a facility for holding securities, which enables securities transactions to be processed by book entry. To achieve this purpose, the depository may immobilize the securities or dematerialize them (so that they exist only as electronic records). India has chosen the dematerialization route. In India, a depository is an organization, which holds the beneficial owner’s securities in electronic form, through a registered Depository Participant (DP).
  • Depository or warehouse receipt - A document issued by a bank, warehouse or other depository indicating ownership of a stored commodity.
  • Depreciation - Decline in the value of one currency relative to another. Occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency.
  • Derivative - An investment tool that is derived from an underlying instrument.
  • Devaluation (of currency) - A government's reduction of the value of its currency, generally through an official announcement.
  • Deviation - A noticeable or marked departure from the appropriate norm, plan, standard, procedure, or variable being reviewed. Similar to variance.
  • Diversification - A strategy of spreading investments among many different securities or sectors to reduce the risk of owning any single investment. Diversification reduces both the upside and downside potential and allows for more consistent performance under a wide range of economic conditions.
  • Dividend - A distribution of earnings to shareholders of a corporation or an investment company.
  • DMA - Direct Market Access refers to electronic facilities that allow buy side firms to more directly access liquidity for financial securities they may wish to buy or sell. Using DMA, the firms still use the infrastructure of sell side firms but take over more of the control over the way a transaction ("trade") is executed
E
  • EMS - An execution management system (EMS) is a software-based platform that facilitates and manages the execution of securities orders typically through the Financial Information eXchange (FIX) protocol
  • Electronic Trading Platform - An application or  trading solution by which a trader, usually a forex trader, trades currencies or equities via computer
  • Electronic trade poster (ETP) - The application for viewing electronic trades, as well as marking them for post-trade processing such as give-up, average pricing or mutual offset. ETP displays prior day pit trades not marked for post-trade processing as well as current and prior day pit trades marked for give-up.
  • Electronic fund transfer (EFT) - System which utilizes computer and electronic components in order to transfer money or financial assets. EFT is information based and intangible.
  • Emerging Markets - Term used to describe the financial markets of developing countries. Definitions vary of which countries are emerging and which are not. However, the emerging market indices compiled by the IFC and Morgan Stanley are often used as benchmarks.
  • Equity - Instrument traded on the cash market representing a share in the capital of a company. The net worth of a commodity account as determined by combining the ledger balance with an unrealized gain or loss in open positions as marked to the market.
  • Exchange traded fund - A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
  • Extrinsic Value - The amount by which the market price of an option exceeds the amount that could be realized if the option were exercised and the underlying commodity liquidated. Also known as time value.
  • European Option - Option in which the buyer (holder) of the option can choose to exercise his option only upon the expiry (maturity) of the option.
  • Exercise Price -Also called Strike Price, it is the price at which the holder (buyer) of the option can purchase or sell the underlying asset (commodity futures contract) at the time of exercising the option
  • Expiration Date - It is nothing but the last day of the existence of the contract when the settlement price is to be decided as per the contract specifications. If the expiry date is a holiday, then the contract would expire on the immediate previous working day. If the preceding day is suddenly declared a holiday, then the contract shall expire on the succeeding working day.
  • Exotic commodities - Derivative Contracts where the underlying assets may be exotic products like freight, weather, rain, etc.
F
  • FIX - The Financial Information eXchange (FIX) Protocol is a messaging standard developed specifically for the real-time electronic exchange of securities transactions
  • Foreign exchange (or FX) - An over-the-counter market where buyers and sellers conduct foreign exchange transactions. Also called foreign exchange market.
  • Foreign exchange risk - The risk of an investment's value changing due to changes in currency exchange rates.
  • Foreign Institutional Investor - An institution established or incorporated outside India which proposes to make investment in India insecurities; provided that a domestic asset management company or domestic portfolio manager who manages funds raised or collected or brought from outside India for investment in India on behalf of a sub-account, shall be deemed to be a Foreign Institutional Investor.
  • Forms - All forms referred to herein; e.g., "Buyer Delivery Commitment," shall be forms prescribed by the exchange.
  • Forward contract - A private, cash-market agreement between a buyer and seller for the future delivery of a commodity at an agreed price. In contrast to futures contracts, forward contracts are not standardized and not transferable.
  • Forward Contract Regulations Act, 1952 (FCRA) - FCRA is a Central Act that governs Commodity Markets and Commodity Derivatives trading in India.
  • Forward Market Commission (FMC) - FMC is a regulatory authority which is overseen by the Ministry of Consumer Affairs and Public Distribution,Government of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act,1952. This is the regulating authority for all Commodity Derivatives Exchanges in India.
  • Forward Points - A metric that can be employed to calculate forward exchange rates. , Forward Points express the premium or discount for the base currency in terms of the quote currency. Forward Points are a function of the spot exchange rate, interest rates, and time. Forward points are added to the spot rate to obtain the forward rate.
  • Futures contract - An obligation to deliver or to receive a specified quantity and grade of a commodity during a designated month at the designated price. Each futures contract is standardized and specifies commodity, quality, quantity, delivery date and settlement.
  • Futures price - The price of a given commodity contract.
G
  • General risk - Risk that relates to overall market conditions while specific risk is risk that relates to the issuer of a particular security
  • Good Till Date (GTD) - GTD is the time validation of a buy or sell order for futures contracts submitted through the online trading system. The order is valid only until the end of the date specified at the time of placing the order.
  • Good Till Cancelled (GTC) - GTC Good-till-cancelled order lasts till the order is executed or cancelled, regardless of how many days or weeks it takes. Investors often use GTC orders to set a limit price that is far away from the current market price. A GTC order is available for execution till the maturity of the contract, or till it is cancelled, whichever is earlier.
H
  • Hedge - A strategy used to manage investment risk.
  • Historical volatility - A term used to describe historical price variability. It is the annualized standard deviation of daily returns of a specific FX futures contract, based on the most recent daily settlement prices of the FX futures contract.
I
  • Independent Software Vendor (ISV) - A vendor who makes and sells software products that run on one or more computer hardware or operating system platforms.
  • Index - An indicator that is representative of a whole market or market segment, usually computed by a sum product of a list of instruments' current prices and a list of weights assigned to these instruments. The index variations give trends of the market/market segment measured.
  • Index tracking - A fund designed to track the performance of an index.
  • Indian Depository Receipt - A receipt, evidencing an underlying foreign security, issued in India by a foreign company which has entered into an agreement with the issuer and depository, custodian and depository or underwriters and depository, in accordance with the terms of prospectus or letter of offer, as may be prescribed.
  • In-The-Money - A call option is said to be in-the-money when the price of the underlying asset is more than the strike price. While a put option is said to be in the money when the price of the underlying asset is less than the strike price. Institutional Trading cum Clearing Member (ITCM): An ITCM can be only an institution or corporate while a TCM is mostly an individual, though, corporates are also allowed to take TCM membership. Similarly, both can indulge in proprietary trades as well as client deals and clear and settle them. But for ITCM the net worth requirement is much higher. Besides sub-brokers and authorized persons, ITCM can appoint Trading Members while a TCM cannot appoint Trading members. Some categories of ITCMs may not be entitled to trade on their own account like the Stock Exchanges or Commodity Exchanges or Trade Associations and such ITCMs will clear and settle trades only on own account of their members. Company and Institution such as Commodity Exchanges, Stock Exchanges, Trade and Industry Associations, Co-operative Bodies and large Retail Network Stock and Commodity Brokers can become ITCM.
  • Inter-commodity Spread - An inter-commodity spread is the difference between prices of two future contracts of different commodities, but with the same expiration period.
  • Interest Rate Risk - The deviation of interest rate that can have adverse impact on the cost of carry of the commodities is referred as interest rate risk.
  • Interim Dividend - A dividend payment made during the course of a company’s financial year. Interim dividend, unlike the final dividend, does not have to be agreed in a general meeting.
  • Internal Rate of Return (IRR) - The rate at which future cash flows must be discounted in order to equal the cash cost of the investment.
  • Investment banker - Financial conglomerate which conducts a full range of investment related activities from advising clients on securities issues, acquisitions and disposal of businesses, arranging and underwriting new securities, distributing the securities etc.
  • Initial margin - The initial amount which customers have to put in before taking up a futures contract to guarantee the transaction.
  • Initial Public Offering (IPO) - The first public issue by a public limited company.
  • Insider - Any person who, is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access, connection, to unpublished price sensitive information in respect of securities of a company, or who has received or has had access to such unpublished price sensitive information
  • Insider trading - Practice of corporate agents buying or selling their corporation’s securities without disclosing to the public significant information which is known to them but which has not yet affected the price.
  • Intraday - During a single trading day.
L
  • Latency - Latency is a time delay between the moment order is initiated, and the moment it becomes detectable
  • Leverage -  It is the margin multiplier number to arrive at the market value of the commodity futures contract. Commodity future contracts are highly leveraged instruments as the margin required is usually in the range of 4 -10% of the contract value. Hence the purchasable contract value can be 10-25 times of the margin money.
  • Limit Order - A limit order enables you to specify the price below or above which the buy or sell trade will be executed.
  • Long - One who has bought a futures contract or owns a cash commodity.
  • Long Hedge -  Purchase of futures against the fixed price forward sale of a cash commodity.
  • Long Position -  The purchase of a futures contract in anticipation of an actual purchase in the cash market. Used by processors or exporters as protection against rise in cash prices (See hedge, short hedge)
  • Listed Company - A company which has any of its securities offered through an offer document listed on a recognized stock exchange and also includes Public Sector Undertakings whose securities are listed on a recognised stock exchange.
  • Liquidation - A condition that describes the depth of market orders. A liquid market is able to accept large orders to buy or sell a commodity, with little change to the current price; ease of entry into, and exit from, the market.
M
  • Margin - It is the security deposit given by the trading members to the exchange in order to deal in different contracts listed over there. The clients deposit this money with the members who in turn transfer it to the respective exchanges. The purpose of collecting margin money by the exchange is to avoid the counter party risk of defaulting by its members or their clients in fulfilling their obligations. It is part of the risk management system as prescribed by the market regulator, Forward Markets Commission (FMC).
  • Margin call - A demand for additional funds to bring margin deposits up to initial levels.
  • Mark-to-market - The daily account adjustment of traders' positions relative to current prices to reflect the value of open positions; resulting in settlement variation debits/credits. Determined by comparing the price of an open position against the closing price of the contract, and then debiting or crediting the traders' accounts accordingly.
  • Market capitalization - The market value of a company, calculated by multiplying the number of shares issued and outstanding by their current market price.
  • Mark to market margin (MTM) - Collected in cash for all Futures contracts and adjusted against the available Liquid Net worth for option positions. In the case of Futures Contracts MTM may be considered as Mark to Market Settlement.
  • Market maker - A firm or person with trading privileges on an exchange who has an obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders. In the futures industry, this term is sometimes loosely used to refer to a floor trader or local who, in speculating for his own account, provides a market for commercial users of the market. Occasionally a futures exchange will compensate a person with exchange trading privileges to take on the obligations of a market maker to enhance liquidity in a newly listed or lightly traded futures contract.
  • Market risk - Risk of loss arising from movements in market prices or rates away from the rates or prices set out in a transaction or agreement.
  • Matched trade - The execution of the buy and sell orders that together consummate a trade; consists of one or more contracts and occurs when the same price is specified by buy and sells orders, for a specified number of contracts.
  • Maturity - Period within which a futures contract can be settled by delivery of the actual commodity; the period between the first notice day and the last trading day of a commodity futures contract.
  • Maximum price fluctuation - The maximum amount the contract price can change up or down during one trading session, as stipulated by exchange rules.
  • Merchant Banker- An entity registered under the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1999.
  • Mutual Fund - Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. A fund established in the form of a trust to raise monies through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instruments.
N
  • Near Month Futures Contract - The month of the futures contract whose expiry (maturity) date is the closest to the prevailing calendar date.
  • Negotiable Warehouse Receipt - A legal document issued by a warehouse describing and guaranteeing the existence of a specific quantity (and sometimes a specific grade) of a commodity stored in the warehouse.
  • Net asset value - Value of all the fund assets minus the value of the liabilities, divided by the number of shares outstanding.
  • Net change - The amount of increase or decrease from the previous trading period's settlement price.
  • Net margining - A method by which a clearing firm's margins are based on the net position, e.g. the remaining position after netting long positions in a contract against the short positions in the customer origin. For example, if a firm had only two accounts for two customers in its customer segregated origin and one of those accounts had three open long positions and the other had two open short positions, the firm's margin would be based on the one net long position.
  • Net position - The difference between the long open contracts and the short open contracts held in any one commodity.
  • Notice to Members - Except as otherwise specifically provided, notice shall be affected by posting on the bulletin board and by first class mail addressed in accordance with the "Register" of memberships.
  • Notional value - The underlying value (face value), normally expressed in U.S. dollars, of the financial instrument or commodity specified in a futures or options on futures contract.
O
  • Offer - An offer to sell a specific quantity of a commodity at a stated price. (Opposite of a bid.)
  • Offset - To remove a position from an account by establishing a position opposite an existing position, making or taking delivery, or exercising an option (i.e., selling if one has bought, or buying if one has sold
  • Offsetting a hedge - For a short hedger, to buy back futures and sell a commodity. For a long hedger, to sell back futures and buy a commodity. Also called lifting a hedge.
  • Offsetting a long option - Offsetting a put by selling a put with the same strike price. Offsetting a call by selling a call with the same strike price.
  • Open interest - The total number of futures contracts long or short in a delivery month or market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery Also known as Open Contracts or Open Commitments. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted.
  • Open order - An order that remains good until filled, canceled, or eliminated.
  • Opening - The period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made "at the opening."
  • Open position - It is the net difference between the amounts payable and amounts receivable in a particular instrument or commodity. It results from the existence of a net long or net short position in the particular instrument or commodity.
  • Opening price - The range of prices at which the first bids and offers were made or first transactions were completed.
  • Opening range - The range of prices at which the first bids and offers were made or first transactions were completed.
  • Options - An option is the right but not the obligation of the holder, to buy or sell the underlying asset by a certain date at a certain price. There are two types of option:
    Call Options:
    A call option is a contractual agreement which gives the owner (holder) of the option the right but not the obligation to purchase a stated quantity of the underlying asset (commodities, shares, indices, etc) at a specified price (the ‘strike price’), on or before the expiry date.
    Put Options:
    A put option is a contractual agreement which gives the owner (holder) of the put option the right but not the obligation to sell a stated quantity of the underlying asset (commodities, shares, indices, etc.) at a specified price (called the strike price), on or before the expiry date.
  • Option Premium - Option premium is the consideration paid upfront by the option holder to the option writer to get the right to buy / sell the underlying.
  • Order - A request by a trader to buy or sell a given futures instrument with specified conditions such as price, quantity, type of order.
  • Order type - A property of an order, containing the conditions to which this order must adhere for execution (e.g., limit, market, stop).
  • Origin - The type of account (house, customer, or customer non-segregated) for which a trade was executed. Also see segregation type.
  • OTC - Over The Counter; a market in which custom-tailored contracts such as stocks and foreign currencies are bought and sold between counterparties and are not exchange traded.
  • OMS - An order management system, or OMS, is a computer software system used in a number of industries for order entry and processing
  • Out trade Session - A session that the exchange holds to ensure the resolution of outstanding out trades.
  • Out-of-the-money - A term used to describe an option that has no intrinsic value. A call option with a strike price higher (or a put with a strike price lower) than the current market value of the underlying futures commodity. Since it depends on current prices, an option can vary from in the money to out of the money with market price movements during the life of the options contract.
  • Out-trade - An unmatched trade. Generally results when there is some confusion or error on a trade - for example, when both traders think they were buying.
P
  • Participating dealers - Large institutional investors who are authorized to create and redeem shares of an ETF. They may also be market makers.
  • Pay-in of funds at the time of delivery - It refers to the transfer of funds from the buyer-member's settlement account to the exchange before he takes delivery of the commodity from the exchange specified warehouse.
  • Payout of funds at the time of delivery - It refers to the transfer of funds to the selling-member's settlement account from the exchange, after the buyer lifts the commodity.
  • Payoff - The likely profit/loss that would accrue to a market participant with change in the price of the underlying asset.
  • Premium - The price a buyer (holder) of option contract pays to an option writer who sells the former an option contract.
  • Primary market - Where a newly issued security is first offered. All subsequent trading of this security occurs is done in the secondary market.
  • Price - Price to which the given instrument should be traded in an order or a trade. Also called limit.
  • Price limit - The maximum daily price fluctuations on a futures contract during any one session, as determined by the Exchange. (Also known as limit).
  • Price order - An order to sell or buy at a certain price or better.
  • Price Volatility - It is a measure of fluctuations or deviations in the commodity prices. Volatility is the measure of the uncertainty of the returns realized on an asset, investment or on an exposure. Price volatility occurs due to the variations in the demand and supply of a given commodity, which in turn depends on a host of factors such as social, economic, political and natural or man-made.
R
  • Rally - An upward movement of prices following a decline; the opposite of a reaction.
  • Range - The difference between the high and low price during a given period.
  • Resistance - A price level at which rising prices have stopped rising and either moved sideways or reversed direction; usually seen as a price chart pattern.
  • Reference price - The price of future contract used as "reference" e.g., for determining an opening price, starting an algorithm, or figuring into an index; is usually the settlement price or last closing price.
  • Regulated Electronic Device - Any Electronic Device supplied to a specific member or clearing member by the Exchange that belongs to a class or category of Electronic Devices for which the Exchange has established terms and conditions of use.
  • Regulated Floor Device - Any Regulated Electronic Device that has been authorized by the exchange for use at locations on the exchange trading floor and its environs.
  • Regulated Remote Device - Any Regulated Electronic Device that has been authorized by the exchange for use at locations other than, or in addition to, the exchange trading floor and its environs.
  • Reporting levels - The number of positions at or above that a firm must provide daily reports for a specific account to the Market Regulation Department.
  • Risk Asset Ratio - A bank's risk asset ratio is the ratio of a bank's risk assets to its capital funds. Risk assets include assets other than highly rated government and government agency obligations and cash, for example, corporate bonds and loans. The capital funds include capital and undistributed reserves.
  • Risk identification - Determining which risk events are likely to affect a project.
S
  • Secondary market - The market in which securities are traded after they are initially offered in the primary market.
  • Securitisation - The process whereby similar debt instruments/assets are pooled together and repackaged into marketable securities which can be sold to investors. The process of loan securitisation is used by banks to move their assets off the balance sheet in order to improve their capital asset ratios.
  • Self clearing member - A member of a clearing corporation or clearing house of the derivatives exchange or derivatives segment of a stock exchange who may clear and settle transactions on its own account or on account of its clients only and shall not clear or settle transactions in securities for any other trading members.
  • Selling Short - A manner in which an investor sells securities he does not posses in the hope of buying them back later at a lower price.
  • Settlement date - The third market day following the trade day.
  • Settlement or settle price - The settlement price determined at the end of the regular trading hours; used to calculate gains and losses in futures market accounts, performance bond calls and invoice prices for deliveries. The official daily closing prices of a futures contract.
  • Settlement Period - Settlement period is the cycle, which includes trade Execution to settlement of that trade. Daily settlement includes trades done on that day and are settled by of MTM profit or loss on the next working day i.e on T+1 (Bank working day) basis
  • Settlement Variation - The sum of all changes in currency amount (gain or loss) for each firm's positions as figured to the settlement price each day paid daily in cash.
  • Short cash - A trader who needs and plans to buy a commodity.
  • Short hedge - The sale of a futures contract in anticipation of a later cash market sale. Used to eliminate or minimize the possible decline in value of ownership of an approximately equal amount of the cash financial instrument or physical commodity.
  • Short the Basis - Position where a hedger is short the cash market and long the futures market
  • SPAN® Performance Bond System - The Standard Portfolio Analysis of Risk (SPAN) Performance Bond System). A program that determines portfolio performance bond requirements for futures, options, cash, and other instruments. SPAN is a portfolio based approach to risk performance bond calculations which may be applied easily to any exchange's margining methodology, either gross or net, and may be incorporated into any firm's bookkeeping system.
  • Speculator- An individual who does not hedge, but who trades in commodity futures or options with the objective of achieving profits through the successful anticipation of price movements. The speculator has no interest in taking delivery.
  • Spot market - The market in which cash transactions occur -- commodities (cattle, currencies, stocks, etc.) are bought and sold for cash and delivered immediately.
  • Spot Commodity - An actual or physical commodity, as opposed to a futures contract.
  • Spot Delivery Contract - A contract which provides for
    (a) actual delivery of securities and the payment of a price therefore either on the same day as the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefore through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality;
    (b) transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository.
  • Spot month - The contract month of a futures contract which is also the current calendar month. Usually used as the current delivery month for a commodity.
  • Spot price - The price at which a physical commodity for immediate delivery is selling at a given time and place. The cash price.
  • Stakeholder - Any individual or group who has an interest in a firm; in addition to shareholders and bondholders, includes labor, consumers, suppliers, the local community and so on.
  • Standard Deviation - A statistical term that denotes price variability for an FX futures or an FX options contract. In financial markets the annualized standard deviation of daily returns (or percentage price changes) is used to characterize the historical price volatility of a market.
  • Standardized FX Futures Contract - An obligation to make or take delivery of the underlying currency, where all terms are predetermined according to an industry norm.
  • STP - Straight Through Processing, banking term where a financial transaction is automatically completed without manual intervention
  • Stock - A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
  • Stop Loss Order - Stop loss orders are placed to restrict losses, which may be incurred due to adverse movement of commodity futures prices. These orders are kept by the system in suspended or abeyance mode and are activated only on the trigger of a price, as defined in the order. It can enable closing out of existing positions.
  • Strike price - The price at which the option may be exercised (price at which the option buyer may purchase or sell the underlying futures contract). Strike prices on options are at exchange designated intervals. See also exercise price.
  • Supply - The quantity of a commodity that producers are willing to provide to the market at a given price.
  • Support - A historical price level at which falling prices have stopped falling and either moved sideways or reversed direction; usually seen as a price chart pattern
  • Swaps - Private agreements between two parties to exchange cash flows in the future, according to a pre-arranged formula.
  • Systematic Risk - Systematic risk, also known as "non-diversifiable risk" or "market risk", is common to the entire market. Inflation, GDP growth, Interest rates, recession, wars, etc. form part of the systematic risk. Systematic risk cannot be avoided through diversification.
T
  • Target price - An expected selling or buying price. For long and short hedges with futures: futures price + expected basis. For puts: futures price - premium + expected basis. For calls: futures price + premium + expected basis.
  • Technical analysis - The study of historical price patterns to help forecast futures prices.
  • Ticker - Display of summarized instantaneous information on instruments of an exchange. Provides information on performed trades by displaying the instrument and the last trade price in scrolling mode.
  • Time Value - Time value of an option is the difference between the option premium and the intrinsic value of the option at a given point of time. It is proportional to the time left to maturity.
  • Tick Size - It refers to the minimum price difference or it’s multiple required between two quotes while punching orders into the system.
  • Trader Work Station (TWS) - An online screen based trading system for the registered members/brokers of MCX, which provides an automated trading facility and complete market information on a real-time basis.
  • Trading cum Clearing Member - An individual or corporate can be admitted by the Commodity Exchange as a Trading-Cum-Clearing Member (TCM) conferring upon them a right to trade and clear through the clearing house of the Commodity Exchange. Moreover, the member may be allowed to make deals for himself (proprietary positions) besides trading on behalf of registered approved / authorized users and to clear/ settle them.
  • TPS - Transactions per second.
  • Trade (transaction) - The purchase or sale of a specified number of contracts on the Exchange trading floor made in accordance with Exchange Rules.
  • Trade date - The date on which a trade was executed.
  • Trade price - The original price at which a trade was executed on the trade date.
  • Trader
    1. A person who takes positions in the futures market, usually without the intention of making or taking delivery. 2- A member of the exchange who buys and sells futures and options through the floor of the exchange. See "day trader", "floor broker", "position trader," and "scalper".
  • Trading day - Period within which all executed trades for a given class are cleared on the same day. Hours of trading as determined by the Board for each contract starting with the opening of trading and ending with the close of trading for such contract; this period may very well exceed 24 hours. One or more sessions could take place. Often referred to as clearing day.
  • Transaction - This term is context-dependent. From an operational standpoint, it refers to a matched trade, but it has a different meaning for clearing purposes and another meaning for technology purposes. Because of these multiple meanings, for clarity it is recommended that this term not be used. Instead of the term "transaction," the terms "matched trade," "system transaction," "clearing trade transaction" and "clearing non-trade transaction" should be used.
  • Trend - The general direction of the market.
U
  • Underlying - The stock, commodity, futures contract, or cash index against which a futures or options contract is valued.
  • Underlying futures contract - The futures contract that may be purchased (in the case of a call) or sold (in the case of a put upon the exercise of the option.
  • Uptrend - A price trend characterized by a series of higher highs and higher lows.
V
  • Value at risk (VAR) - It is a method for calculating and controlling exposure to market risk. VAR is a single number (currency amount) which estimates the maximum expected loss of a portfolio over a given time horizon (the holding period) and at a given confidence level.
  • Venture capital Fund - A fund with the purpose of investing in start-up businesses that is perceived to have excellent growth prospects but does not have access to capital markets.
  • Volatility - Another term used to describe price variability that is tied either to the actual or expected standard deviation of daily returns of a specific FX contract. Volatility is typically stated on an annualized basis.
  • Volume - The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity.
W
  • Warehouse - A warehouse that is exchange approved for delivery.
  • Weighted Moving Average (WMA) - A moving average that gives more weightage to recent prices as compared to older historical prices.
  • Writer of an Option - The seller or issuer of an option contract is commonly referred to as the writer of the option.
Y
  • Yield - A measurement of the annual return on an investment.
  • Yield change - One day's change in the futures' interest rate - equal and opposite to change in the settlement price.
  • Yield settlement - The interest rate implied by the settlement price
 
 
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