What is foreign exchange?
Foreign exchange, or FX, is the process of converting one currency for another.
Foreign exchange may be necessary in order for you to trade in, and pay for, stocks that are quoted in different currencies than sterling. You may also need to convert sale proceeds from a different currency back to sterling, or a payment arising from Corporate Actions and Dividends that are paid in the underlying currency.
HMRC rules state that you can't hold foreign currency in a Stocks & Shares ISA, therefore if the base currency of a stock is not sterling, an FX must be done at the time of trade. Any income from non-UK holdings is converted to sterling automatically.
FX is determined by an exchange rate. Exchange rates can fluctuate and so can create additional risk to international investment if a market's currency rises against sterling. However, movements in currencies can also work to your advantage.
Benefits of our foreign exchange (FX) service
- Live prices for standalone FX conversions - "the price you see is the price you get".
- The FX rate and quantity will be shown on all statement and contract notes.
- Tiered costs available online as well as by telephone Monday to Friday; these are dependent on the size of the FX transaction.
- Reduce need for FX and therefore FX charges by holding cash already in a foreign currency ready for when you trade.
- Exchange between any 2 of our 9 currencies.
- In the event a live FX rate is not available, your transaction will be executed at our House FX rate plus the applicable margin. Please note the House FX rate is not a live FX rate but is updated periodically throughout the day.
- Pounds sterling (GBP), US dollars (USD), euros (EUR), Canadian dollars (CAD), Hong Kong dollars (HKD), Singapore dollars (SGD), Australian dollars (AUD), Swedish krona (SEK), Swiss francs (CHF)
When can I place FX conversions?
The facility is live online from midnight on Sunday to midnight on Friday, with telephone support available 7.45am - 9.00pm Monday to Friday.
Two FX services
1. FX arranged at the time of a trade:
When trading international stocks you will receive a currency rate of exchange for the trade you wish to place as well as a price for the underlying stock. The rate of exchange is a live price and is open to the same fluctuations as share prices.
Multi-fills may apply to an international share trade. This means that your order may be traded in separate blocks, and therefore the same FX rate may not apply to each.
If a multi-fill is applied, only one trade will be shown on your contract note showing an average FX rate.
2. A standalone FX transaction (available funds only):
You can choose which of the 9 currencies you wish to convert your available funds into, and will receive a real time exchange rate from the market.
Standalone FX transactions will be clearly shown on contract notes and statements.
What does FX cost?
The exchange rate is known as a spot rate provided by the market. We charge a 1.50% margin on the value of that spot rate for all transactions less than £25,000. We can however, reduce our margin for transactions above this amount.
This table shows the tiered margin costs:
|Transaction Value||Margin Rate|
|£0 - £24,999.99||1.50%|
|£25,000 - £49,999.99||1.25%|
|£50,000 - £99,999.99||1.00%|
|£100,000 - £599,999||0.50%|
|£600,000 - £999,999.99*||0.25%|
* Maximum electronic transaction size.
These rates will be applied to standalone FX conversions, but because of the possibility of an international share trade being subject to a multi-fill (traded in separate blocks) we can only apply these reduced margin rates if the stock trade goes through in one lump.
Examples of how the reduced margin rates may be applied:
|Spot rate to convert GBP to USD = 1.3000||FX charge|
|£10,000 convert to USD at a rate of 1.28050 = $12,805.00 (1.5% margin)||$195|
|£30,000 convert to USD at a rate of 1.28375 = $38,512.50 (1.25% margin)||$487.50|
|£60,000 convert to USD at a rate of 1.28700 = $77,220.00 (1% margin)||$780|
|£200,000 convert to USD at a rate of 1.29350 = $258,700.00 (0.5% margin)||$1,300|
|£700,000 convert to USD at a rate of 1.29675 = $907,725.00 (0.25% margin)||$2,275|
The value of your investments and the income derived from them may go down as well as up. You may not get back all the money that you invest.
The value of international investments may be affected by currency fluctuations which might reduce their value in sterling.
We may receive two elements of commission in relation to international dealing - Trading Commission and our FX Charge. Please see our Rates and Charges for full details of the costs.
Please note for trades which have required multiple fills to execute, you will be charged an FX at the rate applicable to each individual fill. This may result in a higher FX charge than would be calculated against the whole.
If you are unsure about any aspects of the features or risks of these products, you should obtain advice from a qualified financial adviser.
Please be aware that we have a revenue sharing agreement for the FX charge with a third party. If you require further information please write to us.