Leads and Lags: Accelerating the transaction is called leads and slowing it
down is called lags. An expected increase in foreign exchange rate is likely to
increase the payments and expected decrease in foreign exchange rate is likely
to decrease the payments. Leads and lags are used in an attempt to increase profits.
Left-Hand Side: The bid side of a two way price quote. Left-hand side or
the bid indicates the price at which the market maker is willing to buy the
security.
Limited Convertibility: A situation where the government of a country restricts
the conversion of its currency into a foreign currency. Since the government
can only limit the currency transactions within the boundaries of its country,
foreigners can still trade the currency outside, it is called limited
convertibility.
Linked Exchange Rate System: In this system the currency of a system is linked to
another base currency and is held at fixed ratio in deposits at domestic banks.
The currency is immediately taken out or added into the circulation if the exchange
rate deviates from the fixed ratio. The currency is issued only when there are
excess reserves in deposits. Once the currency is linked to another base
currency, the country’s monetary policy decisions do not affect the exchange
rate. It is slightly different from pegged currency.
Liquidation Level: Forex trading is highly leveraged and the dealer who holds
the account for a trader takes the risk that the trader’s position will go
against him (her) and he (she) will not be able to repay the borrowed funds to
the dealer. Liquidation level is a specified value of a trader’s account below
which the trader's position is automatically executed at the best available
exchange rate. It fixes the minimum margin that the forex dealer will tolerate
before liquidating the trader's position to avoid the possibility of default.
London Spot Fix: It is the price per ounce of precious metals (Gold, Silver,
Platinum and Palladium) which is determined daily at 10:30 GMT and 13:00 GMT by
the five members of London Gold Pool (Barclays Capital, HSBC, Deutsche Bank,
Societe Generale and Scotia-Mocatta). It is also known as London a.m. fix and
London p.m. fix or London morning fix and London afternoon fix.
Long Dated Forward: It refers to the forward contracts that have settlement
date longer than one year. Long dated forward contracts are commonly used in
foreign currency transactions and are frequently used to hedge foreign currency
exposures. Usually long dated forward contracts have bid/ask spreads larger
than the short term contracts which makes them more expensive.
Loonie:
Slang term for Canadian Dollar.
Losing the Points: When the bank’s buying price in the forward market is lower
than the bank’s selling price in the spot market. A trader loses the points by buying
at one price and agreeing to sell at lower price in future. It is opposite of
earning the points.