Currency
converter's foreign exchange FAQs
You
will be assigned a dedicated dealer who will guide you throughout
your transaction. There are three types of deals you can book.
A “Spot deal” for those who want to change currency
and send it abroad within a few days. A “forward option”
guarantees a rate for future purchase and payment. And finally,
a “limit order” is executed when the exchange rate
reaches a level that you want. We will buy on your behalf
and contact you immediately (these deals can also be “fused”
as in “spot limit” or “forward limit”).
How
does it work?
Just 4 easy steps
1. Open an account with us on the Internet, fax or post at
no cost or obligation.
2. Once the account has been opened, we will provide you with
the most competitive rate from the market.
3. If you wish to proceed with that rate, we will guarantee
and confirm it in writing in a matter of minutes.
4. We will then transfer your money to any destination in
the world.
Our
service is simple and hassle free.
You will remain in control with the free option to cancel
at any stage
Frequently
Asked Questions
1. We can help you to buy a property overseas
2. You get the best rates
3. Protect your capital
4. Buying a property outright: how do
you deal with us?
5. Opening an account, placing your order
6. Built-in protection
7. Making the most of your time and your
money
8. Rigging the safety net: the 'stop'
9. Buying outright: spot the 'instant'
deal
10. Buying properties under development
11. 'Forward' transactions
12. Forward pricing in practice: the
'fixed forward'
13. Forward pricing in practice: the
'forward option'
14. Forward options and the private
client
15. Spot the 'instant' deal: buying
outright
16. What happens next?
17. How do you settle your account?
18. Who transfers the currency to
its destination?
19. What do you owe us?
20. How do I start?
1
We can help you to buy a property overseas
Let's take another look at the property-buying scenario from
our introductory page. Then let's discover how different the
experience would have been if we had handled the transaction
instead of your bank.
You have found a property in Europe. It is for immediate sale.
You are able to buy it outright. The price is €100,000
. Your bank quotes you an exchange rate of €1.55 to £1,
which equals to £ 64,516.13 . It takes a month to finalise
the paperwork. You then give your bank the go-ahead to buy
the €100,000 . But instead of asking you for a total
of £ 64,516.13, the bank demands £71,428.57 .
An additional £6,912.44 .
During the four weeks since the bank quoted its rate of €1.55
to the £1 the Euro has strengthened. Now £1 buys
a mere €1.40 . (It could have been worse and could have
happened faster).
You were aware that the market fluctuates from time to time.
But never for a moment did you anticipate such an adverse
change in such a short time. Even if you were aware of the
risk, you were unaware you could protect yourself against
it. No-one at the bank mentioned the subject. No-one referred
to 'stops' and 'limits', the automated mechanisms which big
business uses as a matter of course to protect their money
when undertaking foreign currency exchanges. Nor did you have
any idea that you might have been able to find a more advantageous
rate than 1.55 to the £1 in the first place.
2.
You get the best rates
Let's look at this all-important question of the currency
exchange rate. The rate offered to you by your bank is not
the one and only rate available. And it certainly won't be
the best, simply because the major banks make their money
out of dealing in corporate millions, not by dealing in the
sort of sums that buy an attractive overseas property.
We
aim to provide a foreign currency exchange service which fills
this very gap. And because of the sheer volume of transactions
we carry out on a daily basis - not just on behalf of property-buyers,
but primarily of small to medium businesses - we can obtain
the foreign currency exchange rates normally available only
to large corporations: 'wholesale' rather than 'retail' rates
3.
Protect your capital
Our property-buying scenario gave you some idea of the
volatility of the foreign exchange markets.
How can we protect your capital against such an eventuality?
We offer you all the financial mechanisms such as 'stops',
'limits', 'forward contracts' and 'forward options' which
corporations use automatically to protect their capital. We'll
illustrate how they work with straightforward examples in
a moment, but if you want to remind yourself how they work
in theory, just click back to An ABC of trading in the introductory
pages.
4.
Buying a property outright: how do you deal with us?
You can register with us and then talk to one of our property
specialists. Tell them about the property you have chosen,
the price, the currency you will be dealing in and the date
by which you must complete the transaction. Our dealer will
give you an indication of the best rate you can hope for between
the day of your conversation and the settlement deadline,
assuming your funds are already available.
The rate a clearing bank would offer you would depend on the
size of your individual transaction. £10,000 equals
'small' in their eyes and small equals unwelcome. All transactions
have the same highly competitive rates regardless of whether
you are exchanging £10,000, £1 million or more.
5.
Opening an account, placing your order
If you are happy with the rate, you open an account (the formalities
are simple, the amount of information required by us is minimal).
You're then ready to place your order.
Let's say the property you intend to buy is the one valued
at €100,000 or £64,516.13 when the Euro stands
at 1.55 to £1. You need to decide how much more you
would be prepared to spend to secure it just in case sterling
takes a dive. Let us say you are happy to pay the asking price,
would be delighted to pay less, but wouldn't pay more than
£66,666.67 (€1.50 to £1)
6.
Built-in protection
You will remember we said on our opening pages that foreign
currency exchange is a 24-hour business. The working hours
of the major markets London, New York and Tokyo overlap one
another round the clock. So the trading is done electronically.
That's why we need to know the margins within which you are
happy to operate (between €1.55 & €1.50 to £1
for the purposes of this particular story) in case either
limit is reached overnight in London. Your dealer will build
these margins into your order - a €1.55 limit order and
a €1.50 stop - together with the date by which the exchange
must be made. First we will explain how the limit order works,
and then the stop.
7.
Making the most of your time and your money
It may be to your advantage, for one reason or another,
to be able to exchange your currency earlier than the absolute
deadline. It would certainly be to your advantage if you could
obtain the €100,000 for less than £64,516.13 before
the deadline.
If the market moves the right way and enables you to buy £50,000
worth of the foreign currency within your time-scale, the
limit order will trigger the deal. On the other hand if your
dealer judges that the pound is strengthening steadily and
looks likely to enable you to secure the asking price for
less than £64,516.13 he will let you know. Then you
can cancel the limit order without cost, wait until the very
last moment, and take advantage of the situation.
8.
Rigging the safety net: the 'stop'
On the other hand, if the pound begins to weaken suddenly
and unexpectedly against the Euro , the stop mechanism will
automatically trigger the deal. The stop is effective twenty-four
hours a day and is the most efficient barrier available against
sudden and unexpected adverse changes in currency rates.
9.
Buying outright: spot the 'instant' deal
Most property deals by their nature take a certain amount
of time. However, if an opportunity comes 'out of the blue'
and you have to seize the moment here and now, call currencies
direct and we can carry out a spot transaction. As we explained
in An ABC of trading, the benchmark for spot transactions
is the rate at which one bank will sell to another. The currency
is bought in today's market for cash.
10.
Buying properties under development
Buying a property outright is relatively simple. But what
happens if you are buying a property that is no more than
an architect's blueprint and a developer's plan? You will
be asked to pay a deposit, and then to make three or four
subsequent payments several months apart. You may know precisely
when you have to make each payment or you may not. You may
know exactly what proportion of the total price you have to
pay each time or you may not.
Although the market might move in your favour during the months
it will take to conclude the deal, equally it might move in
the opposite direction. Unless you take precautions at the
outset, you are putting your capital at risk. How can you
avoid the gamble?
11.
'Forward' transactions
You arrange with your dealer here at currencies direct to
use the mechanism that all big businesses use to protect themselves
when exchanging a large sum into a foreign currency: you use
what is known as a forward transaction. There are two versions:
the fixed forward and the forward option. We'll show you how
each one works.
12.
Forward pricing in practice: the 'fixed forward'
Let's deal with the fixed forward. This is the mechanism your
dealer will suggest if you know in advance the dates on which
you need to make your payments, and the amounts in every case.
Let's say you must pay a deposit of 10 per cent of the price
of the property within the next few days; another 40 per cent
in 3 months' time; another 20 per cent six months from now;
and the balance at nine months. (We can arrange fixed forward
prices over a period of up to twelve months).
You provide your dealer with all the information the percentages
of the sum total and the dates - and he or she will be able
to offer a price for each of those staged payments. They will
be the most competitive fixed forward prices available. To
give you an idea of how it might work in practice, the 10
per cent deposit would be exchanged at that day's 'spot price'.
(Let's use the Euro as an example once again and call today's
'spot price' €1.55 to the pound). The forward price for
the second payment in three months' time would be something
like €1.5440 ; the third payment in six months, perhaps
€1.5380 ; and in nine months maybe €1.5320 . These
are nothing more than examples. The figures will vary. The
good sense behind the principle and the practice does not.
13.
Forward pricing in practice: the 'forward option'
It's possible, however, that you know little more than the
final price of the property. . You do know you need to pay
15 per cent now, and the developer has promised your house
will be ready to move into in eight months' time.
We can arrange to exchange the 15 per cent on that day's spot
market at the most competitive rate available. We can then
arrange a price which will cover all the subsequent payments.
The limiting factors are simply the eight-month time period
and the sum total of €100,000 at this agreed rate. You
will then be free to pay out lumps of currency as and when
you need to, at this pre-arranged rate, secure in the knowledge
that whatever may happen during eight months to cause the
French franc to strengthen, this will not adversely affect
you.
14.
Forward options and the private client
As we said in our opening pages, mechanisms such as limit
orders, stops, fixed forwards, and fixed options are rarely
if ever offered by the clearing banks to smaller businesses,
let alone to individuals. But you are offered them as a matter
of course.
15.
Spot the 'instant' deal: buying outright
Most property deals by their nature take a certain amount
of time. However, if an opportunity comes 'out of the blue'
and you have to seize the moment here and now, call currencies
direct and we can carry out a spot transaction. The benchmark
for spot transactions is the rate at which one bank will sell
to another. The currency is bought in today's market for cash.
16.
What happens next?
When we have bought the currency according to your instructions,
we fax a currency contract to you. You need to sign this,
complete add the details of where you would like the currency
to be sent and fax it back to us.
17.
How do you settle your account?
You can pay funds to us from overseas by telegraphic transfer.
From within the UK we can accept payment by bank transfer
(chaps, TT, Bacs), by cheque, by direct debit or in certain
cases by debit card. The same applies from outside of the
UK- international electronic transfers can apply where ever
you are in the world.
18.
Who transfers the currency to its destination?
We do: promptly and efficiently by telegraphic transfer according
to the instructions you have provided on the fax see 'What
happens next?'.
19.
What do you owe us?
The only money you will owe to us for our service is the fixed
fee for telegraphically transferring your funds to their destination
overseas. The cost for this express service is a fixed fee
of £15.
20.
How do I start?
For
a no obligation, free consultation on amounts of
currency over £4,000, $5,000 or
€5,000 please call 0845
389 0910 and ask for the exclusive
Wise Money business forex service
For
your online cash
currency converter
please click here now for cash
deliveries in the UK of
less than £4,000,
$5,000 or €5,000
Your
confidentiality is guaranteed at all times
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