Forex Glossary M-O

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Cash in circulation plus demand deposits at commercial banks. There are variations between the precise definitions used by national financial authorities.

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

In the UK it is M1 plus public and private sector time deposits and sight deposits held by the public sector.

In the US it is M2 plus negotiable CDs.

Maintenance Margin

The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract.

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.


(1) Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward.
(2) For options the sum required as collateral from the writer of an option.
(3) For futures a deposit made to the clearing house on establishing a futures position account.
(4) The percentage reserve required by the US Federal Reserve to make an initial credit transaction.

Margin Call
A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.

Marginal Risk
The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract.

Mark to Market
The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.


Market Amount
The minimum amount conventionally dealt for between banks.

Market Maker
A market maker is a person or firm authorised to create and maintain a market in an instrument.

Market Order
An order to buy or sell a financial instrument immediately at the best possible price.

Marshall - Lerner
A model that states that if the sum of the elasticity's of demand for a country's and that of the imports exceed one, then devaluation will have a positive effect upon the trade balance.

Where a dealer is able to match two customer deals which off set one another.

Matched Book
If the distribution of the maturities of a banks liabilities equal that of its assets , it is said to be running a matched book.

The process of ensuring that purchases and sales in each currency and deposits given and taken in each currency are in balance, by amount and maturity.

Matching Systems
Electronic Systems duplicating the traditional brokers market. A price shown by a bank is available to all trades.

Maturity Date
(1) The last trading day of a futures contract.
(2) Date on which a bond matures, at which time the face value will be returned to the purchaser. Sometimes the maturity date is not one specified date but a range of dates during which the bond may be repaid.

Mid-price or Middle Rate
The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.

Minimum Price Fluctuation
The smallest increment of market price movement possible in a given futures contract.

Minimum Reserve
Reserves required to be deposited at central banks by commercial banks and other financial institutions. Sometimes referred to as Registered Reserves.

(1) A mismatch between the interest rate maturities of a banks assets and liabilities.
(2) Forward purchases differ in the value date from the forward sales in a given currency.

Japanese ministry of International Trade & Industry.

Money Markets.

A school of economics which 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 high interest rates.

Monetary Base
Currency in circulation plus banks' required and excess deposits at the central bank.

Monetary Easing
A modest loosening of monetary constraint by changing interest rate, money supply, deposit ratios.

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 Union
An agreement between countries to maintain a fixed exchange rate between their currencies. A process which the EMS is intended to lead to, especially after the Maastricht Treaty.

Money Market

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

Money Market Operations
Comprises the acceptance and re-lending of deposits on the money market.

Money Supply
The amount of money in the economy, which can be measured in a number of ways. See definitions of M0-M4.

Most Favoured Nation (MFN)
An undertaking to give the rate of tariff concession offered to members of the GATT. More concessionaire rates can exist.

Moving Average
A way of smoothing a set of data, widely used in price time series.

Naked Intervention

A central bank type of intervention in the foreign exchange market which 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.

Narrow Money
Limited definition of money to include cash or near cash, i.e. M1 or M0.

Nearby Contracts
The closest active futures contracts, i.e. those that expire the soonest.

Negative Sloping Yield Curve
A yield curve where interest rates in the shorter dates are above those in the longer dates.

A process which 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.

Net Position
The number of futures contracts bought or sold which have not yet been offset by opposite transactions.

Next Best Price Stop-loss Order
A stop-loss order which must be executed after the request level was reached.

Nominal Quotation

Used in Futures markets to refer to the estimated price for a future month or date for which there is no bid, ask or trade price.

Nominee Name

Name in which a security is registered and held in trust on behalf of the beneficial owner.

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.

A financial instrument consisting of a promise to pay rather than an order to pay or a certificate of indebtedness.

Notice Day

Any day on which notices of intent to deliver on futures contracts may be issued.

Odd Lot
A non standard amount for a transaction.

Organisation of Economic Co-operation and Development. Membership is the more than developed countries.

The price at which a seller is willing to sell. The best offer is the lowest such price available.

Offered Market
Temporary situation where offers exceed bid. 

The closing-out or liquidation of a futures position. Official Settlements Account
A U.S. balance of payments measure based on movement of dollars in foreign official holdings and US reserves. Also referred to as reserve transaction account.

Old Lady

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

Omnibus Account
An account maintained by one broker with another in which all of the accounts of the former are combined and carried only in its name, rather than designated separately.

Open Interest
The total number of outstanding option or futures contracts that have not been closed out by offset or fulfilled by delivery.

Open Outcry

A public auction method of trading conducted by calling out bids and offers across a trading ring or pit and having them accepted.

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

Open position

The difference between assets and liabilities in a particular currency. This may be measured on a per currency basis or the position of all currencies when calculated in base currency.

A contract conferring the right but not the obligation to buy (call) or to sell (put) a specified amount of an instrument at a specified price within a predetermined time period.

Option Class

All options of the same type - calls or puts -listed on the same underlying instrument.

Option Series
All options of the same class having the same exercise/strike price and expiration date.

Original Margin
See Initial Margin.

A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor. These markets have not been very popular. They were never part of the Stock Exchange since they were seen as "unofficial". Each OTC firm operates a market in the shares of a restricted list of (generally small and little-known) companies. Sometimes the dealer simply puts would-be buyers and sellers together but does not take a position in the shares themselves. These days OTC trading is seen as "consumer-friendly," meaning that it is interested in getting the buyer and seller the best possible price. Some see this as what share-trading is all about. However, market makers, many of whom create market movements purposefully, feel they are being elbowed out by OTC, and that speculation, arbitrage and "smart-trading" are undermined by the new market.

A put option is out-of-the-money if the exercise/strike price is below the price of the underlying instrument. A call option is out-of-the money if the exercise/strike price is higher than the price of the underlying instrument.

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

A holding of foreign exchange that is temporarily unable to be converted from the reserve currency into other reserve assets.

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

Overnight Limit
Net long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures.


A deal from today until the next business day.

Over the Counter
See OTC.

Quantitative methods designed to provide signals regarding the overbought and oversold conditions.


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