Cash in circulation plus demand deposits at commercial banks.


Includes demand deposits time deposits and money market mutual funds excluding large CDs.


In the UK, M3 comprises of M1 plus public and private sector time deposits and sight deposits held by the public sector.

Make a Market

A dealer is said to make a market when he or she quotes bid and offer prices at which he or she stands ready to buy and sell.

Managed Float

When the monetary authorities intervene regularly in the market to stabilise the rates or to aim the exchange rate in a required direction e.g. The Bank of Japan.


Margin is a cash deposit provided by clients as collateral to secure a trade and cover any losses (if any) that may result from adverse movements in exchange rates.

Margin Call

A demand for additional funds to restore the originally agreed margin percentage of a contract that has been affected by an adverse movement in the exchange rate.

Mark to Market

The regular adjustment of an outstanding position to reflect accrued profits and losses, often required to calculate margin calls.


Participants routinely use Support Levels as a guide to place automated orders such as Stop Loss Orders. See Resistance Level.

Market Marker

A market maker is a dealer or firm authorised to create and maintain a market in foreign exchange by supplying prices and being prepared to buy or sell at those bid and ask prices.


Date for settlement of a contract.


A school of economics that believes that strict control of money supply is the principal tool for implementing monetary policy, especially against inflation. Policies include cuts in public spending and interest rates.

Monetary Easing

Part of Central Bank monetary policy where the interest rate is decreased or the money supply increased to stimulate an economy.

Monetary Policy

A central bank's management of a country's money supply. Economic theory underlying monetary policy suggests that controlling the growth of the amount of money in the economy is the key to controlling prices and therefore inflation. However, central banks monetary capability is severely limited by global money movements. This forces them to use the indirect tool of exchange rate manipulation.

Monetary Tightening

Part of Central Bank monetary policy where the interest rate is increased or the money supply reduced to ward off inflation.

Monetary Union

An agreement between countries to maintain a fixed exchange rate between their currencies. The Euro is a monetary union between 12 countries and the US Dollar is a monetary union between all States in the Union.

Money Market

A market consisting of financial institutions and dealers in money or credit who wish to either borrow or lend.

Money Supply

The amount of money in the economy, which can be measured in a number of ways. See definitions of M1-M3.

Naked Intervention

A central bank type of intervention in the foreign exchange market that consist solely of the foreign exchange activity. This type of intervention has a monetary effect on the money supply and a long-term effect on foreign exchange.


A process that enables institutions to settle only the net positions with one another at the end of the day, in a single transaction, not trade by trade as in gross settlement.

Nostro Account

A foreign currency current account maintained with another bank. The account is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident.


Acronym for Organisation of Economic Co-operation and Development.


The rate at which a dealer is willing to sell currency at.

Offered Market

Temporary situation where offers exceed bids.

Old Lady

Old lady of Threadneedle Street, a term for the Bank of England.

One Cancels Other (OCO) Order

Where the execution of one order automatically cancels a previous order. Commonly used when a dealer is asked to place both a Stop Loss and Limit Order in the market to buy or sell currency at predetermined exchange rates. When either order is triggered the remaining order is automatically cancelled.

Open Market Operations

Central Bank operations in the markets to influence exchange and interest rates.

Open Position

Any deal that has not been settled by physical payment or reversed by an equal and opposite deal for the same value date.

OTC (Over-The-Counter)

A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange-trading floor.

Outright Forward

A forward deal that is not part of a swap operation.

Outright Rate

The forward rate of a foreign exchange deal based on the spot price plus/minus forward points.

Overheated Economy

Is an economy where high-growth rates placing pressure on production capacity resulting in increased inflationary pressures and higher interest rates.


A trade that remains open until the next business day.

Overnight Trading

Refers to the buying or selling of currencies between the hours of 9.00pm and 8.00am the following day. Stop Loss and Limit Orders are commonly used for this purpose.

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