Glossary of trading terms

IBOR stands for Interbank Offered Rate – a type of interest rate benchmark that represents an average of the rates that banks will offer each other for loans of various maturities.

The most well-known and widely used IBOR is LIBOR. However, you might also encounter EURIBOR, TIBOR and other rates.

IBORs have been used in financial markets for a long time and feature in a huge variety of different products and transactions. Over-the-counter (OTC) derivatives in particular have long been associated with IBORs.

Little volume being traded in the market; a lack of liquidity often creates choppy market conditions.

An illiquid market is a market that is difficult to sell assets in due to a lack of interested buyers, available assets, or because the market itself is not viable as a financial asset. Assets in these markets are often difficult to convert to cash without losing a significant portion of its value because of their large bid-ask spreads.

Illiquid markets can hold high-value assets, but if no willing buyers are found, sellers may be forced to lower their price or hold on to their assets longer than preferred.

Industrial production is a measure of the output of the industrial sector of an economy. The industrial sector includes manufacturing, mining, utilities (like gas and electricity), and, at times, construction output.

Industrial production is calculated over a period by recording the change in the volume of output produced.

Inflation is the decline of a specific currency's purchasing power over time. It’s calculated by measuring the cost of a basket of widely consumed goods and services in an economy.

Inflation reduces each unit of currency's purchasing power and increases living costs; consumers must spend more to fill a shopping basket or get a haircut. As prices rise, money buys less, so inflation can reduce living standards over time.

The initial margin requirement is the amount of money required to open a position in a given market through a brokerage. It is usually represented as a percentage of the total amount you seek to open as a position.

A trader looking to trade $100,000 in the forex marketplace may pay $10,000 to a brokerage as a 10% initial margin requirement and would still get the total $100,000 exposure through the brokerage.

The interbank rate is the interest rate charged by banks when conducting transactions of foreign currency with other banks. These rates are typically lower than interest rates paid by retail traders, but they are used to set those higher interest rates paid by individuals and institutions. Like all foreign currency exchange rates, these fluctuate constantly.

An interest rate is the percentage of money charged above the lender's principal – the amount of money loaned – for using its capital. Global central banks set base interest rates to manage their domestic economies. Base rates are the benchmark all banks use to decide their borrowing and investment rates.

Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

Symbol for S&P 500 index.

IPO stands for initial public offering, a process by which a company can offer its shares for sale on a stock exchange for the first time. An IPO enables retail investors to take a stake in the company – turning it from a private enterprise into a public one.

Businesses undertake IPOs to help them raise capital by selling stock to public investors. Listed companies tend to be subject to far more rules and regulations than private ones, though, so getting a business ready for an IPO can be a lengthy process.

Once a company is ready to list, it will decide how many shares it wants to sell. It will then work with an investment bank to set an initial price for those shares and begin the selling process.

The ISM manufacturing index is a survey of over 300 purchasing managers and supply management executives. The report is regarded as a vital indicator of the state of the US economy as it can affect investor and business confidence.

The ISM manufacturing index gives equal weighting to production, employment, supplier deliveries, new orders, and inventories and seasonally adjusts each factor.

The ISM Non-Manufacturing Index (now called the Services PMI) is an index used to assess the performance of services companies in the US. The reading, published monthly, is based on surveys of more than 400 purchasing and supply managers in non-manufacturing (services) firms.

Monitoring the ISM Services PMI helps traders and investors gain insight into the country’s economic conditions.

The index is compiled and published by the ISM (Institute for Supply Management) as part of the ISM Report On Business.