Glossary of foreign exchange terms

When making a money transfer to the USA, you’ll need to ask for your payee’s ABA number.
An ABA number, also known as a bank routing number, is a nine-digit code that identifies banks in the U.S.

A beneficiary can be a person or organization who is the recipient you wish to pay.

Bankers’ Automated Clearing Services - the process for making Sterling payments via domestic banks. Mostly used for direct credits and direct debits. BACS payments tend to take three business days to clear.

The movement of funds from one entity to another. When related to moving cash from one location (country) to another, this is often interchanged with terms including; currency transfer, foreign exchange, currency converting and more.

Clearing House Automated Payment System - a faster way of making payments. Usually cleared on the same working day.

This is the process of moving funds from one location, and therefore currency, to another.

The amount of money at risk due to foreign exchange movements. Essentially another word for financial risk.

A global market which exists for the effective movement of capital (cash/money) from one destination to another. Also referred to as Forex, FX and currency market, the foreign exchange market facilitates the trading of currencies. Some of the items that make the FX market unique compared to any other trading entity include; the global natural of the industry, the volume of transactions taking place, myriad factors impacting exchange rates and the use of leverage to enhance profit and loss margins.

FX is the abbreviated version frequently used for foreign exchange. FX is the global trading market for the movement of currencies.

Protection against future currency movements. The financial products used to provide this protection are often called Currency Options.

IBAN stands for International Bank Account Number. It’s a standardised way to identify a bank account and it’s used to facilitate the processing of cross-border transactions without error. It consists of up to 34 characters.

This is an example format of a UK IBAN number:

GB 29 ABCD 601*** 945*****

[Country code] [Check digits] [Bank code] [Branch code] [Bank account number]

Read our detailed guides for more:

• What is an IBAN number?
• The difference between IBAN and SWIFT

This term has many different meanings depending on context, but when we use it it's to describe the profit we make from the transference of funds. See ‘Spread’ below for more details.

Currency is bought by the customer at the offer rate and sold at the bid rate. The mid-market rate is the mid-point between the bid and offer rates.

Money can be transferred in a number of ways from country to country, and spanning a variety of volumes and currency types. Some of the most common types of money transfers include; electronic funds transfers, wire transfers, Giro and money orders.

You can leave an order with us to transact on your behalf if a particular exchange rate is reached.

The foreign exchange rate at which two currencies can be exchanged in two days' time.

The exchange of one currency for another at a specified rate for settlement in two working days.

A stop loss order is a means of limiting your risk in case exchange rates get worse. A currency stop loss level is set. If that currency level is reached, the trade is automatically executed in the market to stop any further loss. The currency level used for a stop loss order is always worse than the current market price. This is a way to protect yourself from adverse changes in exchange rates without needing to constantly monitor the rate.

The spread is the profit taken by a bank or a broker between the rate they receive and the rate they pass on to clients. We take a smaller spread than most banks and other currency companies, and pass this benefit on to our clients.

SWIFT codes are not the same as sort codes.

A SWIFT code (sometimes also called a SWIFT number) is an international bank code that identifies banks all over the world for international payments. It is also known as a Bank Identifier Code (BIC).

A SWIFT code is a set of 8 or 11 characters (numbers and letters) that represents a bank branch, and is made up of the first three or all four of the following:

• Bank code
• Country code
• Location code
• Branch code

Read our guide to the difference between IBANs and SWIFT codes.

Like a stop loss order, a take profit order first involves setting a currency level. Once that currency level is reached, the trade is executed in the market. The currency level used for a take profit order is always better than the current market price. This allows you to capitalise or take profit on improvements in exchange rates without having to keep an eye on the rate.

The date the transference of your funds will take place.

The date when a currency transaction takes places or a trade being booked.