There is a market convention that determines for any currency pair which currency is CCY1 and CCY2,
based on the value of each currency and a hierarchy of exceptions. For example, a rate between CHF
(Swiss Franc) and JPY (Japanese Yen) will be quoted as CHF/JPY because one Swiss Franc is worth more
than one Japanese Yen. The less valuable currency is typically CCY2 (giving a rate higher than 1) except
for:

These currencies are always CCY1, unless they are quoted against each other in which case the earlier
currency in this list will be CCY1. For example, a rate between GBP (Pound Sterling) and AUD (Australian
Dollar) will be quoted as GBP/AUD because GBP appears earlier in the above list. Certain currency pairs
not in the above exception list have a rate below 1 because of the high value of the currency, e.g. USD/BHD
and USD/KWD.

In certain local markets, however, many corporates prefer their own domestic currency always to be CCY1 or CCY2. Swiss corporates, for example, prefer CHF always to be CCY2, so they ask their banks to give them a JPY/CHF rate rather than a CHF/JPY rate. This is not market convention but a local market practice.

CCY1 is sometimes known as \u201cbase currency\u201d and CCY2 is sometimes known as \u201cterms currency\u201d. \u201cBase
currency\u201d is also used to describe a bank\u2019s domestic or accounting currency, hence expressions such as
\u201crate-to-base\u201d. For example, if a British bank, whose \u201cbase currency\u201d (accounting currency) is GBP, is
trading EUR/GBP, the \u201cbase currency\u201d (CCY1) of the trade nevertheless is EUR. Therefore be careful when
using the term \u201cbase currency\u201d and avoid ambiguity.

Although most FX trades are spot trades, it is possible to settle an FX trade on any value date that is a
business day for both currencies in the pair. In addition to the spot date, there are many standard tenors
(periods) on which it is possible to settle an FX trade. These include \u201c1 month\u201d, \u201ctomorrow\u201d (tom) and \u201c6
months\u201d. The post-spot tenors are calculated from the spot date rather than from the trade date. It is also
possible to settle on any value date between any standard tenor. This is known as a \u201cbroken date\u201d.

For all major currency pairs except NZD/USD, global market convention is that value dates roll forward to the
next business day at 5pm New York time. Value dates for NZD/USD roll forward at 7am Auckland time. This
means that the local time of the value date roll-over varies throughout the year, depending on daylight
savings time conventions. Some emerging markets currency pairs such as USD/TRL have slightly more
complicated rules on value date roll-over.

NZD \u2013 Kiwi
SEK \u2013 Stocky (named after Stockholm)
NOK \u2013 Nocky (named after the ISO currency code)
SGD \u2013 Sing
HKD \u2013 Honky
MXN \u2013 Mex
ZAR \u2013 Rand
HUF \u2013 Huff (named after the ISO currency code)

For example, USD/CAD is known as "Dollar Canada", USD/JPY is known as "Dollar Yen", and AUD/USD is known as "Aussie Dollar". An exception is GBP/USD, which is known as "Cable", which stems from the days when a cable under the Atlantic Ocean was used to synchronise the GBP/USD rate between the London market and the New York market. Before IEP (Irish Pound) became a denomination of the euro, IEP/USD was likewise known as "Wire", particularly in the forward market.

Typical interbank traded amounts in major currency pairs such as EUR/USD or USD/JPY include amounts
such as EUR 5 million and USD 10 million, and amounts are usually quoted in millions. A billion
(1,000,000,000) is called a "yard", which originates from the French "milliard". For example, traders say "ten
dollars" to mean USD 10,000,000, say "half a quid" to mean GBP 500,000 and say "three yards of Yen" to
mean JPY 3,000,000,000.

FX spot prices are usually quoted to between 4 and 6 significant figures. For example, EUR/USD, the most
frequently traded currency pair, has seen rates such as 0.8225, 1.0015 or 1.5235. The number of decimals
does not vary for a particular currency pair according to movements in the rate, except in the case of
devaluations.

The bid price is where the bank is willing to buy CCY1 and the offer price is where the bank is willing to sell CCY1. In this case, the bank is willing to buy EUR against USD at 1.0345 and is willing to sell EUR against USD at 1.0347. The difference between the bid and the offer is called the spread. It is market convention always to talk about what you are doing with CCY1. For example, if someone is "buying USD/JPY", they are buying USD and selling JPY.

Market participants are generally expected to know what the first part of the rate will be (in this case 1.03..),
and this part is known as the "big figure". Because the current big figure does not usually vary from one
minute to the next, traders normally quote only the last 2 digits of the rate (3 digits for some currency pairs),
and these digits are known as the "pips". A trader would therefore quote the bid and offer in this example as
"45 47". When trading over the phone, it is common to quote only the pips, whereas e-commerce systems
generally display the entire rate, although the pips may be given more prominence.

EUR/GBP is displayed in a slightly different way from most other currency pairs in that although one pip is
worth 0.0001, the rate is often displayed to five decimal places. The fifth decimal place can only be 0 or 5
and is used to display half pips. Many trading systems display the half pip digit in a smaller font than the two
main pip digits.

Electronic brokers have evolved to become the primary method of trading spot FX. One drawback of
electronic brokers (known by traders as \u201cthe machine\u201d or \u201cthe toy\u201d) is that they cover only the most major
currencies as well as some of the most popular exotic (or \u201cemerging markets\u201d) currencies. Prices for many
infrequently traded currencies are therefore covered only by voice brokers.

Many more currencies are traded in D2 than EBS. Although EBS supports around 20 currency pairs, in
practice, most traders use it only for trading EUR/USD, USD/JPY, EUR/JPY, USD/CHF and EUR/CHF. D2
supports more than 40 currency pairs, although some are rarely used.

In the interbank spot market, regardless of trading channel, all standard currency pairs are quoted as EUR/xxx, USD/xxx or xxx/USD. Most currencies are traded interbank against USD, except for certain European currencies which are traded primarily against EUR.

A cross spot rate is a currency pair that is not a standard interbank pair. Conventionally, a cross spot rate is
considered to be any currency pair that does not involve USD, as historically all standard interbank pairs
involved USD. For example, GBP/CHF is a cross because neither currency of the pair is USD and it is not a
standard interbank currency pair. EUR/GBP for example is considered by many not to be a cross because,
although neither currency is USD, EUR/GBP is a standard interbank pair.

GBP/CHF is actually a EUR cross rather than a USD cross, because EUR/CHF and EUR/GBP are much
more actively traded (i.e. more \u201cliquid\u201d) than GBP/USD and USD/CHF. AUD/SGD, however, is a USD cross
as it is derived from AUD/USD and USD/SGD.

Banks\u2019 e-commerce pricing engines source their rates from EBS and D2, which are subsequently blended
and spread. Rates from both these sources are carried by Reuters on TIB or Triarch infrastructures as
illustrated by the following diagram:

Because EBS and D2 rates are tradable prices from trading systems, they are very suitable for use in a
bank\u2019s pricing engine. Reuters contributed rates are not suitable for pricing engines, although some banks
choose to use them. The danger of using contributed rates to create a tradable rate is that they are simply
indicative rates that banks contribute to Reuters. Banks may contribute any rate they like because they
know the rate is not tradable. In practice, if a rate is required for a currency pair not supported in EBS or D2,
then most banks source the rate from an internally contributed source, e.g. an emerging markets desk.

Some of the largest FX banks use an additional rate source \u2013 traded rates. The bank\u2019s systems know the rates that have been traded by the bank in the last second or two, and these rates can be used as a price source. This only works for banks with very high trading volumes, otherwise the frequency of trades is too low to provide timely updates.

Triangulation is an analytical term used to describe the crossing of one currency pair with another. The resulting spread is wider after triangulation because the spreads of the two crossed currency pairs are merged together by multiplication or division.