Counterparty - A counterparty is the other party that participates in a financial transaction/trade with
an OTC desk.
Slippage - Refers to the difference between the expected price of a trade and the price at which the
trade is executed. This occurs when placing market orders in illiquid markets and during periods of
Inventory - Refers to the assets/currency the desk are currently holding on their books.
Liquidity - From a trading perspective, refers to the ability to buy or sell an asset without causing a
significant movement in the price. So the more liquidity an exchange has the more of an asset you can
buy/sell without moving the price and vise versa.
Order Book - An order book is an electronic list of buying and sell orders for a specific asset or financial
instrument organized by price level.
Lit pool - Is essentially another name for an exchange, they’re effectively the opposite of ‘dark’ pools.
Where ‘dark’ venues do not display prices at which participants are willing to trade, lit pools/exchanges
do show these various bids and offers in the form of a publicly visible order book.
Dark Pool - In finance, a dark pool is a private forum for trading securities, derivatives, and other
financial instruments. One of the main advantages for institutional investors in using dark pools is for
buying or selling large blocks of securities without showing their hand to others and thus avoiding
market impact as neither the size of the trade nor the identity are revealed until some time after the
trade is filled.
Quote/price - The offer that is made by a trader to a counterparty to buy/sell a particular asset.
Size - When traders talk about ‘size’ they are referring to the ‘size of the trade’ e.g. the dollar value or
amount of assets the counterparty wishes to buy/sell.
Block - This refers to a large sale or purchase of an asset, ‘block trades’ are usually $100k and above.
Hedging - Or a ‘hedge’ is a strategy used to minimize the chance that your assets will lose value by
investing in two assets with negative correlations.
Execution - Execution is the completion of a buy or sell for an asset, and happens when both parties
confirm they are in agreement.
Arbitrage - refers to the trading strategy that takes advantage of the price differential between two or
more markets for the same underlying asset. Investors and traders profit from the price differential by
buying at the cheaper price and selling at the higher price or vice versa.
Clip(s) - Is a trading term that is used to refer to a large round number, for example, if a counterparty
wants to buy 1000 bitcoin the trading desk may decide to execute this in 10 ‘clips’ of 100btc.
Done/Confirm - is what both parties have to say before the trade is finalized.
Pass - is what a counterparty says if they do not wish to accept the quote offered by the desk.
Off - Is what the desks trader would say if the quote offered is no longer on the table.
Refresh/Re-quote - If a counterparty is unhappy with a quote they may ask the desk if they can get a
‘refresh’ on the price usually after some time has elapsed.
Bid - Or ‘bid price’ refers to the maximum price that a buyer is willing to pay for an asset.
Ask/Offer - Or ‘ask price’ refers to the minimum price that a seller is willing to receive.
Spread - Refers to the difference between the bid and ask prices and is a key indicator of the liquidity
of the asset. In general, the smaller/tighter the spread, the better the liquidity.
Tick - A tick is a measure of the minimum upward or downward movement in the price of an asset, this
can vary depending on the asset, so it could be $0.5 or it could be $0.01. The term tick can also be
used to describe the direction of the price of an asset. An uptick indicates a trade where the
transaction has occurred at a price higher than the previous transaction and a downtick indicates a
transaction that has occurred at a lower price.
Axe - An axe (or "axe to grind") is the interest that a trader shows in buying or selling an asset that is
typically already on his books.
Bear - An investor who has a negative view on a market and is likely to be net short.
Bull - An investor who has a positive view on a market and is likely to be net long.
Lift the offer - Is a phrase used to describe an event where a trader agrees to buy at a ask/offer price
quoted by another trader.
Hit the bid - Is a phrase used to describe an event where a trader agrees to sell at a bid price quoted
by another trader.
Long - A long (or long position) is the buying of an asset or currency with the expectation that the asset
will rise in value.
Short - A Short (or short position) is the selling of an asset or currency with the expectation that the
asset will decrease in value.
Flow - Refers to the the ‘order flow’ passing through the desk at any given time.
Volatility - Volatility refers to the amount of uncertainty or risk related to the size of changes in an