Transfer Basics
Currency Online's Foreign Exchange explained

Every foreign exchange transaction involves the buying of one currency and the selling of another.

Currency Online, as your online broker, lets you do this.

Basic Process

Basic Transfer Process Diagram

Say you have a supplier in Japan. To pay them you’ll need to buy Japanese Yen. If you’re in the United States, you’ll likely want to sell United States Dollars (USD) to pay for the Yen.

So you’ll sell your USD to Currency Online. Following payment of your USD, we’ll then pay your supplier in Japan as per your instructions.

Spot Contracts - Request a Live Rate

The most common type of transaction is a Spot contract. When you need to buy currency immediately, and at the prevailing market rate, you agree and enter into a Spot contract with Currency Online. You can also enter into a Forward contract, or place an Order to attempt to benefit from favourable market movements. Forward contracts and Orders are discussed in a later section.

Spot Contracts

Say your supplier has invoiced you for JPY¥250,000. To see how much this will cost you in USD, you log in to the Currency Online trading platform to request a live rate. You specify that you need to buy JPY¥250,000 and that you’ll be selling USD to pay for the Yen.

In this example, the rate offered is 86.10 Yen to each USD, meaning that the JPY¥250,000 will cost USD$2,903.60. You can sit and watch the offered rate move with the market. The value date for the contract is the date on which the contract will be executed. It also depends on the means by which you will be paying the sold currency to Currency Online. Typically, the spot date is two trading days in the future

Spot Contracts - Agree and enter into a Spot Contract

If you’re happy with the rate and decide to proceed, you then enter a spot contract with Currency Online. At this point, you can specify how the purchased currency is to be disbursed. You might choose to hold it in your JPY account with Currency Online, or you might choose to disburse some or all of the funds to a nominated beneficiary you have created earlier (you can also create a new beneficiary at this stage). When you create the beneficiary, you also create the beneficiary bank details. Given that you need to pay your supplier in this example, you will either select them from the list of available beneficiaries, or create them as a new beneficiary and specify that they are to receive the entire proceeds of the contract.

Your account balances are updated to reflect the current transaction. Your sold currency account (USD) will be debited, and your purchased currency account (JPY) will be credited (if you held the funds on account, they will not be available until the contract is settled).

Settling a Contract.

At this point, you need to settle the contract by submitting the amount of the sold currency (USD$2,903.60) to us as per the specific instructions on the contract. All the details you require, including the bank name, branch, and account number are found in the settlement instructions section of the contract.

Forward Contracts.

Forward contracts are similar to spot contracts in that the transaction is executed at the prevailing market rates. The difference is that the value date of the contract might be weeks or months in the future. You specify the forward value date when you request a rate for a forward contract. Forward contracts also typically require that a USD equivalent minimum is met (usually about USD$15,000).

When you enter a forward contract, a percentage (typically 10%) of the value of the contract is to be paid immediately, while the balance is paid one trading day before the value date of the contract. Disbursement of the contract proceeds is the same as with spot contracts.

Orders

Orders To attempt to benefit from favourable movements in the market, or to mitigate losses from unfavourable movement, you can place a market order with us. Once logged-in to your Currency Online account, you can identify current market rates and determine the saving or cost involved should the market reach the order rate you specify.

The orders you place are monitored by us and automatically executed if the market hits your nominated rate. Currency Online’s order management facility allows you to amend or cancel orders as you wish during trading hours.