Foreign exchange company

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A non-bank foreign exchange company also known as foreign exchange broker or simply forex broker is a company that offers currency exchange and international payments to private individuals and companies. The term is typically used for currency exchange companies that offer physical delivery rather than speculative trading. i.e. there is a physical delivery of currency to a bank account.

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Foreign exchange companies are normally distinct from money transfer companies or remittance companies and bureaux de change as they typically perform high-value transfers unlike their money transfer counterparts that focus on high-volume low-value transfers generally by economic migrants back to their home country or to provide cash for travelers. The transactions offered by foreign exchange companies are usually either spot transactions or forward transactions. [1]

Some foreign exchange companies, such as Moneycorp [2] and Global Reach, [3] offer foreign exchange options for business clients too. Given the increased regulation and capital requirements around foreign exchange products of this nature, the foreign exchange companies who offer these products do so through a separately regulated entity.

Companies by country

India

Foreign exchange markets in India have shown a steady increase in volumes as a result of increasing levels of foreign trade, driven by improvements in the communications systems and greater access to the international exchange markets.

The volume of transactions in these markets amounting to around USD 2 billion [4] per day does not compete favorably with a well developed foreign exchange market of international repute but with the entry of online Foreign Exchange Companies the market is steadily growing.

Around 25% of currency transfers/payments in India are made via non-bank Foreign Exchange Companies. [5] Most of these companies use the USP of better exchange rates than the banks. They are regulated by the Foreign Exchange Dealer's Association of India (FEDAI) and any transaction in foreign exchange is governed by the Foreign Exchange Management Act (FEMA) 1999.

Uganda

Australia

The Australian foreign exchange market has grown considerably to be the highly liquid, globally integrated market that it is today. [6] The foreign exchange market in Australia is regulated by the Australian Securities and Investments Commission (ASIC). In 2022, the local market was the eleventh largest in the world and the AUD/USD was the sixth most traded currency pair globally. [7]

United Kingdom

The UK non-bank foreign exchange market is one of the most advanced and competitive around the world. In 2006, it was estimated that 14% of currency transfers/international payments processed in the UK were made via non-bank Foreign Exchange Companies. [8] In 2016, the share of Britain’s biggest banks in the market supplying UK companies' daily foreign currency needs fell for a second year running. The biggest non-bank provider in the UK was U.S.-headquartered Western Union whose market share rose to 3.4 percent from 3.0 percent. [9]

UK foreign exchange companies are regulated by the Financial Conduct Authority (FCA). They are usually authorised by the FCA as either an Electronic Money Institution or Authorised Payment Institution.

The selling points of UK foreign exchange companies are usually price and service. For individuals and SMEs, they will usually offer better exchange rates and cheaper payment fees than a customer's bank. Many foreign exchange companies will provide clients with a dedicated account manager too. Something that is generally not possible for individuals and SMEs with a bank.

Recently reported net profit/loss of well-known UK originated foreign exchange companies (taken from companies house):

CompanyAccounting DatePre Tax Net Profit/Loss
AFEX31 December 2020£487,815
Currencies Direct Ltd30 June 2020£9,037,000
Currency Solutions31 March 2020£144,559
Foreign Currency Direct31 October 2020(£3,105,409)
Global Reach Group 31 December 2019(£4,036,000)
Halo Financial31 March 2020(£237,887)
HiFX (XE Money Transfer)31 October 2020£1,387,000
Moneycorp [nb 1] 31 December 2019(£5,428,000)
TorFX30 June 2020£15,015,000
WorldFirst UK Ltd 31 December 2019(£44,477,000)

United Arab Emirates

As per the world bank report, the money exchange business in the UAE has shown steady growth in 2014 as remittances rose nearly five per cent to $29 billion. [10] Most of the GCC states have announced major plans for converting their countries into world-class business hubs. This will further enhance exchange business in the region.the money transfer business in the UAE continued to grow last year as exchange companies reported up to 10 to 15 per cent increase in transactions in 2014 compared to the previous year. New development around the UAE is also set to give a boost to the tourism sector, which would, in turn, increase demand for currency exchange services [11]

Two major Foreign Exchange companies in UAE

Singapore

In Singapore, foreign exchange companies are governed by the Monetary Authority of Singapore under the Money-Changing and Remittance Businesses Act [12] which sets out the criteria for license application [13] as well as guidelines when it comes to the prevention of money laundering and countering the financing of terrorism. [14] As of June 2019, there are 391 money changing businesses and 114 remittance companies in Singapore. [15]

See also

Notes

  1. ↑ TTT Moneycorp Limited also has High Street and airport/station Bureaux de Change included in this total.

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<span class="mw-page-title-main">Foreign exchange market</span> Global decentralized trading of international currencies

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Wire transfer, bank transfer, or credit transfer, is a method of electronic funds transfer from one person or entity to another. A wire transfer can be made from one bank account to another bank account, or through a transfer of cash at a cash office.

Foreign exchange reserves are cash and other reserve assets such as gold held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.

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Joel Nathan Ward is a former foreign currency trader, who has confessed to fraud and money laundering and was sentenced to nine years in Federal prison, plus three years of supervised release.

The interbank market is the top-level foreign exchange market where banks exchange different currencies. The banks can either deal with one another directly, or through electronic brokering platforms. The Electronic Broking Services (EBS) and Thomson Reuters Dealing are the two competitors in the electronic brokering platform business and together connect over 1000 banks. The currencies of most developed countries have floating exchange rates. These currencies do not have fixed values but, rather, values that fluctuate relative to other currencies.

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Travelex is a foreign exchange company founded by Lloyd Dorfman and headquartered in Peterborough. Its main businesses are foreign currency exchange, issuing prepaid credit cards for use by travellers, supplying central banks with foreign currency and global remittance. Travelex operates more than 1,100 stores and 900 ATMs in over 20 countries.

MRC Markets is an Austrian financial brokerage firm offering on-line trading in Forex and contracts for difference. It has membership of the Vienna Stock exchange and licensed in Russia and Lithuania. It has offices in Russia, the UK and India.

Moneycorp is an international payments fintech that provides payment products and services. The company was founded in London in 1979. Its clients include corporations, financial institutions, and individuals and it has a footprint in the United Kingdom, North America, Europe, Brazil, Hong Kong, and the United Arab Emirates.

<span class="mw-page-title-main">UAE Exchange</span> Emirati company

UAE Exchange is a United Arab Emirates based company dealing primarily in remittance, foreign exchange and bill payment services. The company is headquartered in Abu Dhabi, UAE, and operates through 800 locations across 31 countries either as UAE Exchange, or Unimoni.

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CLS Group, or simply CLS, is a specialized financial infrastructure group whose main entity is the New York-based CLS Bank. It started operations in 2002 and operates a unique global multicurrency cash settlement system, known as the CLS System, which plays a critical role in the foreign exchange market. Although the forex market is decentralised and has no central exchange or clearing facility, firms that chose to use CLS to settle their FX transactions can mitigate the settlement risk associated with their trades.

<span class="mw-page-title-main">Midpoint (company)</span> Canadian financial services company

Midpoint is a UK headquartered, Toronto and Frankfurt listed company providing international payments and peer-to-peer foreign exchange services to individual and corporate customers. Midpoint is the world’s first dedicated peer-to-peer international foreign currency matching platform. The company's patented matching technology was the first application of peer-to-peer concept in the spot forex market.

CurrencyTransfer.com is a British company operating an online marketplace for businesses and private clients that acts as a foreign exchange aggregator. The company was founded in 2014 and has its headquarters in London. It is the first company to provide an online marketplace and booking platform of multiple non-bank, FCA regulated foreign currency exchange suppliers.

<span class="mw-page-title-main">Unified Payments Interface</span> Indian interbank transfer system

The Unified Payments Interface (UPI) is an instant payment system developed in India, by the National Payments Corporation of India (NPCI). The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used on Mobile devices to instantly transfer funds between two bank accounts. The mobile number of the device is required to be registered with the bank. The UPI ID of the recipient can be used to transfer money. It runs as an open source application programming interface (API) on top of the Immediate Payment Service (IMPS), and is regulated by the Reserve Bank of India (RBI). Indian Banks started making their UPI-enabled apps available on the Google Play Store on August 25, 2016. It is considered to be one of the most successful payment systems in the world, in terms of the number of users, the volume of transactions, and the number of transactions.

Merchantrade Asia (Merchantrade) is a Money Services Business (MSB), Digital Payment Service and Mobile Virtual Network operator (MVNO) provider, based in Malaysia.

References

  1. ↑ "Spot and Forward Transactions" (PDF). USBank. Archived from the original (PDF) on 4 April 2012. Retrieved 13 December 2013.
  2. ↑ "Currency Hedging Strategies". Moneycorp. Retrieved 21 June 2021.
  3. ↑ "FX Products | Corporate and Personal Clients | Global Reach". www.globalreachgroup.com. Retrieved 21 June 2021.
  4. ↑ "Archived copy" (PDF). Archived from the original (PDF) on 17 October 2016. Retrieved 6 October 2016.{{cite web}}: CS1 maint: archived copy as title (link)
  5. ↑ Julian, Saidur. "Top Forex Brokers". Fx Daily Report. Retrieved 7 October 2016.
  6. ↑ Guy, Debelle (17 November 2006). "The Australian Foreign Exchange Market".
  7. ↑ "Triennial Central Bank Survey of foreign exchange and OTC derivatives markets in 2022". 5 December 2022.
  8. ↑ The Sunday Times (UK), 16 July 2006
  9. ↑ Graham, Patrick (11 January 2017). "UK banks' share of corporate currency business dips". Reuters. Retrieved 21 June 2021.
  10. ↑ "Foreign Exchange Industry to Thrive" . Retrieved 19 July 2015.
  11. ↑ "UAE is an economic hub". 20 May 2013. Retrieved 20 May 2013.
  12. ↑ "Money-changing and Remittance Businesses Act - Singapore Statutes Online". sso.agc.gov.sg. Archived from the original on 21 June 2019. Retrieved 21 June 2019.
  13. ↑ "How to Set Up a Money Changer Business". Biz4x. Retrieved 21 June 2019.
  14. ↑ "MAS Notice 3001 Notice on Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Money-Changer's License and Remittance License". www.mas.gov.sg. Retrieved 21 June 2019.
  15. ↑ "Financial Institutions Directory". eservices.mas.gov.sg. Retrieved 21 June 2019.
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