About Currency Brokers

What is a currency broker?

A currency broker is a firm or a person that acts as a mediator between the buyer and the seller in a currency exchange transaction. Why do we need currency brokers?­­­ – Because even though buying and selling of currencies directly through banks and other financial institutions are possible, currency brokers tend to offer services that can benefit the traders using their speciality and benefits such as analysis tools and charting platforms. Using currency brokers for transferring large sums of money are usually used for buying property overseas, sending money home while living overseas or transferring money from your home country to your new country of residence, paying for school fees and other large scale living expenses overseas, or even receiving your pension in another country.

 Expats receiving a regular salary will want to explore the benefits of setting a fixed exchange rate or future rates. This can be negotiated before you sign your relocation contract. Currency brokersmean to help you, so talk to both, your HR manager and a currency broker.

Companies looking at paying an assignee salary in another currency can find an extra benefit in a currency broker to add to the expatriate package of the employee. As such, the human resource manager can offer a fixed rate over the duration of the assignment or have the currency broker determine a preferential rate, this will mitigate the assignee risk towards the host country currency.

A currency broker can also help global companies getting paid in another currency for regular contract payments. Because brokers handle very large volume of transaction, they can offer lower margins on the exchange rate.

Is it safe?

There are several advantages in using currency exchange brokers especially when transferring large sums of money. However, there are also a few safety issues to be aware of.

The first thing you need to know is to check if the company is authorised by a renowned financial authority, either in your home country or in your country of residence. In the UK for example, currency exchange brokers are regulated by the Financial Conduct Authority (FCA) and the Financial Services Authority (FSA). The FCA checks if the currency brokerage company keeps their customers' money separate from their own funds to make sure that the customers' money is protected if in case the company runs into financial trouble. Bear in mind that a company can be registered with the FCA or other financial authorities, but does not necessarily offer financial protection. This is where you need to check the fine print of the contracts or agreements before you start your transactions.

In the US, there are several government and non-government agencies that regulate the foreign exchange movement in the country. Be sure to check the company’s membership or registration with the CFTC (Commodity Futures Trading Commission), and NFA (National Futures Association).

Asian countries such as Singapore and Hong Kong have government agencies that also regulate foreign currency exchange in the country, though they are less hands on when it comes to big Forex transaction regulations, they still enforce proper laws for foreign currency exchange in the country. The Monetary Authority of Singapore enforces stability and regulations for forex in the country. 

Hong Kong’s forex is managed by the Hong Kong Monetary Authority with specific regulations for money brokers in the country. You can view these regulations in their official website. 

When to change money?

It is better to use currency exchange brokers to transfer large sums of money abroad, usually about £3,000 or higher. As currency exchange brokers specialise in handling large sums, the company makes their money from a small difference between the actual exchange rates and interbank rate. Therefor they do not advertise as taking a fee on the transaction as the fee is a difference in the rate they buy and rate they sell to you. It is very similar to the money changer in the street, except more regulated and structured.

Timing will depend on your own needs and your appreciation of risk. But as markets are volatile, there is no guidance to get. It is often considered that small forex trader is only merely replicating the strategies of

If you compare your personal finance to a corporate finance strategy, you might want to consider a general rule for CFOs that is not to expose your profit margin to currency fluctuation. It is then to take the same exchange rate for your cost and revenue to assure the exchange rate will maintain the profit margin. If you are buying a house overseas from selling another one, it would be to set the forward rate of purchase at the time of sale of the previous house and thus not getting any surprise at the time of signing the papers.