Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Deal ticket
A deal ticket is the official documentation of a transaction, containing all the essential information about the trade at the time it was completed. It’s the financial counterpart of a receipt, but with much more information and much greater legal force.
A standard deal ticket will capture the instrument traded, the direction of the trade (buy or sell), the size, the price, the time of the trade, the counterparties to the trade, the value date, and any other terms relevant to the trade.
In pre-electronic trading days, deal tickets were literal slips of paper filled out by hand on the trading floor. In present-day electronic markets, they are automatically generated the instant a trade is confirmed.
They are the main registry towards settlement, compliance, and resolving any conflict regarding what was settled and when.
Example: A corporate treasury desk has a large forward currency contract with its bank. The deal ticket produced at the point of execution displays the actual rate, the notional amount, the settlement date, and the names of the two counterparties.
Three weeks later, when the confirmation of the bank comes in with a slightly different rate, it is a deal ticket, timestamped and system-generated, that resolves the dispute.
Dealing spread
Dealing spread is the gap between the price that a market-maker will offer (the offer or ask) and the price that they will buy at (the bid). It does not appear anywhere on any invoice as a line item, but it is a very real cost, and one that is quietly built into every single trade that you conduct.
If EUR/USD is quoted at 1.1050/1.1052, you buy at 1.1052 and can only immediately sell at 1.1050. You’re two pips behind before the market has moved a single tick. The compensation the market-maker receives for providing liquidity and accepting the other side of your trade is that gap.
In deep, liquid markets, the spread is tight as competition among dealers maintains the spread tight. In thinner markets, or during times of stress or uncertainty, the spreads increase, in some cases dramatically.
Example: A retail forex trader decides to purchase GBP/USD minutes before a Bank of England rate decision. Normally, the spread is 1 pip. Right now it’s 8.
The market-maker on the other side is widening the spread because they are not sure which way the decision will send the pound, and they need that cushion to manage the risk he is taking on.
Debt ceiling
The debt ceiling is the legal maximum of the amount of money that the United States federal government is permitted to borrow. Congress sets the number, and once the Treasury reaches its limit, the Treasury may no longer issue debt to fund government operations or to meet existing obligations unless Congress votes to raise or suspend the limit.
One should realize that the debt ceiling is not a limit on future spending. The budget process has already been applied to make spending decisions. The ceiling constrains the government’s ability to borrow the funds needed to finance what it has already promised.
Once the limit is hit and Congress is slow to respond, the Treasury resorts to what it terms “extraordinary measures”, accounting gimmicks that afford Congress a few additional weeks of breathing room.
Should they run out of funds and no agreement is forthcoming, the US will face a default on its obligations, and the eventual impact on the world’s financial markets may be disastrous.
Markets got anxious in the summer of 2023 as the US hit its debt ceiling and the deadline approached. Treasury yields surged, the credit default swap spread widened and the dollar came under pressure.
All of these are signs that investors were tentatively pricing in the possibility that the world’s biggest economy could default. A few days before the deadline, they reached an agreement.
Debt security
A financial instrument that represents a company or government’s debt, such as a bond or note.
Debt-to-equity ratio
A financial ratio that measures a company’s debt relative to its equity.
Debt-to-GDP ratio
The debt to GDP ratio is a measure of a country’s total debt compared to its economic production (GDP) over a year. It is one of the most popular markers of a country’s financial health. The logic is clear enough. A huge economy can easily support more debt than a tiny economy. Looking at debt, in isolation, doesn’t tell you anything about a country.
It gives you a sense of size in terms of GDP, how big the debt burden is relative to the ability of the country to generate income and finally repay. A rising ratio could be a sign that a government is borrowing faster than its economy is growing, leading to questions of sustainability in the long run.
A declining ratio can imply that the economy is growing out of its debt or that the government is running surpluses. A high or low ratio is not necessarily good or bad. It depends on the circumstances, interest rates and currency of denomination.
Japan’s debt-to-GDP ratio has been well above 200% for years now, which, by traditional measures, seems alarming. Nonetheless, it has been able to borrow at very cheap rates, because most of its debt is held domestically and is denominated in the yen, which it controls. The ratio alone does not reveal the whole story.
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