The following Glossary provides a detailed overview of frequently-used industry terms & phrases.
A base currency is the currency denomination of your account and refers to the first quotes currency in a currency pair, i.e. AUD in AUD/USD.
Bonds are debt securities that like any other instrument, can be purchased or sold. Bonds are issued by borrowers who wish to raise money from investors, and therefore when you purchase a bond, you are essentially lending money to the issuer.
In exchange for your purchase, the issuer pays a specified rate of interest throughout the life of the bond, as well as repay the face value of the bond when it is due after a set time period.
Our price quotes for bonds are derived directly from the underlying futures markets of the relevant contracts.
A buy is the process of purchasing a financial instrument. If you were to anticipate a rise in the market, a buy would mean to ‘go long’. A buy is also made when closing out an existing sell position (go short).
Commodities are markets that are based on raw or primary products such as gold and oil. These products are regularly traded on regulated exchanges, in which they are bought and sold in standardised contract sizes.
Derivatives are a financial product whose price is derived from an underlying asset (e.g. a share, currency, commodity or index) and does not give the holder any actual rights to the underlying asset.
Exchange essentially has the same meaning as a “financial market” which is defined under section 767A of the Corporations Act and includes any futures, derivatives or stock exchange or any other organised market used for transacting financial products.
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A future CFD is a CFD transaction in which the underlying instrument that relates to it, is a derivative futures contract that is traded on an exchange.
Gapping is a movement in the price of a market where no trade occurs. This could be caused by anything that changes the price of a market, unanticipated profits warning, a natural disaster or a major political event. A gapping event is normally more common when a market re-opens but it can, and does, occur when the markets are actively trading. It is important to understand that a gap in the market can adversely affect your trades and your capital and to select a trading stake that minimises this risk and matches your risk appetite.
When an investor goes short, they anticipate that the price of a financial instrument will decline. In these instances, a sell position will be opened whereby an investor sells shares in borrowed stock.
Learn more about short selling at Investopedia
The last time and date as set out in the Market Information Sheets that you can close an open position in a future CFD.
Leverage allows investor to use borrowings or credit to gain a larger exposure to an investment than would typically be possible by investing only equity or other capital. By using leverage, clients can buy or sell a financial product with substantially less money than the actual full market value of that financial product. A position in a contract with high leverage stands to make or lose a large amount from a small percentage movement in the underlying instrument.
A bank or other financial institution or third party that provides executable two-way quotes in respect of relevant underlying instruments, to which the CFD products relate, on a continuous and regular basis.
A client is said to be long if he/she has an open buy position.
The additional margin required to ensure that total margin is sufficient to cover open positions.
A CFD transaction that is active and open and has not been closed by you or your CFD broker.
An instruction to make a Trade at a price that is not currently available in the CFD but might be available at some future time. There are three types of Order: ‘Limit’, ‘Stop Loss’ and ‘New’ Order.
The general term for the smallest incremental move possible in any market quoted by a broker. Clients should always be aware of what the underlying stake or unit risk is for all markets in which they wish to trade.
The second quoted currency in a currency pair, i.e. USD in AUD/USD.
Selling means to ‘go short’ typically in anticipation of a falling market. You would also make a sell to close out an existing buy position.
The price at which a position is settled on expiry.
The difference between the Buy and Sell price of a broker’s quote. A client may Sell at the lower price or Buy at the higher price of the quote.
One or more continuous trading periods within the trading hours.
A term used to describe and quantify the relative movement of a given market in the recent past. A market that experiences significant movement is said to be volatile.
The ask price is the specified price at which you can purchase CFDs. It is always the higher of the two prices quoted and is called the ask or the ask price.
The bid price is the price at which you can sell CFDs. It is always the lower of the two prices quoted and is called the bid or the bid price.
The cash balance is the net amount of cash you have deposited into your account, less any charges that have been levied (bank fees, commissions etc.), and adjusted for realised profit and loss.
The commission, charges or other remuneration in connection with the opening or closing of a CFD transaction.
The payment made to shareholders by a company representing the distribution of company profits. Such payments are usually made on a regular basis. If you have an open buy position on an ASX equity CFD that goes ex-dividend you will be credited with the 100% of the net dividend. If you have an open sell position you will be debited 100% of the gross dividend.
A futures contract is an agreement to conduct a trade at a specified time in the future where the price is agreed upon now. Therefore, it means that the expiry date is at some point in the future.
When a buy position is taken out it is referred to as ‘Going Long’.
Hedging is the action of reducing the risk of an outright position in one market, by taking an opposite position in a similar, or derivative market.
For example:
If you held a long (Buy) position in the Australia 200 CFD, you may enter a short (Sell) position in the Wall Street CFD. In this case, although the hedge would not be exact, it is unlikely that the Australia 200 CFD will move heavily in the opposite direction to the Wall Street (but, of course, this is not impossible).
The inability of an asset to be converted into cash quickly, without any price discount and any restriction to the size of the trade. Liquidity also refers to a market that is regularly traded.
Indices are a customised basket of securities that track a particular market or segment. Each index has its own calculation methodology and its own specific process used to select particular securities. We offer prices on all of the major financial indexes, such as the S&P/ASX 200, UK 100, Germany 30, Wall Street and S&P 500.
The ability of an asset to be converted into cash quickly, without any price discount and any restriction to the size of trade. Liquidity also refers to a market that is regularly traded.
The amount of trading resources required to open a trade, or to maintain an existing position.
Represents the aggregate amount of margin being used for all open positions at any one time in your base currency.
A person who is not qualified as a Professional Investor.
The aggregate amount of unrealised profit and loss on all of your open positions at any one time in your base currency.
A financing adjustment made to your account when an open position is held overnight. This includes positions held overnight on a non-business day, a Saturday or Sunday and any bank or public holiday.
As defined in the Corporations Act 2001.
The meaning given by the Corporations Act 2001.
The action of closing an open position in a future CFD and then opening a new CFD transaction in the next available contract period.
The expiry date and time of a future CFD as set out in the Market Information Sheets. If such date is not a business day, it will be the business day immediately preceding the futures settlement date unless otherwise specified in the Market Information Sheet.
A client is said to be short if he/she has an open sell position in the market.
The amount of cash that you have available at any given time to withdraw from your account or place an order to open a CFD transaction.
The asset or instrument (generally quoted on a recognised exchange or, in the case of some markets, is provided by a quoting liquidity provider) upon which the price of a CFD is derived.