What does foreign exchange entail?
Foreign exchange is the settlement and arrangement of funds around the world by buying and selling currencies. More than USD$4 trillion is exchanged daily by banks and foreign currency traders all over the world.
What is a Cambridge Forward Contract?
This type of transaction is often used by businesses to reduce their exchange rate risk. Forward transactions
enable you to lock into a specific exchange rate, for delivery at a future date; you can book a forward contract
from three business days to as long as one year in the future. You and your Account Executive will agree to a
predetermined exchange rate.
What are the different types of Forward contracts?
There are two different types of Forward Contracts; a Closed Forward Contract and an Open Forward Contract.
A Closed Forward is a contract in which the foreign exchange rate is fixed for value or settlement on a future date. This type of contract requires you to complete the transaction on the date it expires, also known as the value date at the previously agreed rate of exchange.
For example, on November 3, 2010 you purchased a forward for $100,000 US at 1.17 against Canadian Dollars for a value date on January 3, 2010. In this case you have a trade on January 3, 2005 at a fixed rate of 1.17.
An Open Forward lets you set a rate today for a future date value and settlement. Unlike the Closed ForwardContract, the Open Forward gives you an option to trade within the period specified on the contract, or up to a three-month window of the contract.
For example, if you have a number of bills to pay, then you can drawdown any amount of the contract in order to satisfy your bill payments, at the agreed-upon rate from the time of purchase of the contract.
Are there extra fees for doing a Forward Contract as oppose to doing a SPOT deal?
Cambridge does not charge fees for doing any deal type. However, 5 percent of the total contract amount is
required for deposit when you engage in a forward contract.
Why are the rates charged by currency trading companies different from retail or change bureaus?
Currency exchange rates come from international wire services which are based on the dealing price. With
currencies being traded around the clock, retail rates will always be behind the actual dealing price.
How are currency values affected by interest rate changes?
Higher rates attract foreign investors in search of better returns. The resulting flow of money in or out of a
nation’s economy will affect the value of that nation’s currency.
What is the difference between currency exchange and currency speculation?
We exchange currency, this helping you manage the associated risk. Currency speculation on the other hand is
about day trading to make a quick buck. This is not what we do. The currency speculator is actually willing to take risk. As a commercial client this is precisely the risk you want to avoid.
Are there any hidden charges or fees for spot deals or Forward Contracts?
No. Your costs are all spelled out in advance, so you quickly know exactly what you are expected to pay when you enter into the agreement.
What is a wire payment?
A wire payment is an electronic method of transferring money from one individual or institution to another. Wire payments are transferred in a manner that offers the ability to provide finality of payment once the payment is received by the recipient. Wire payments provide immediate availability of funds. Proceeds of a wire payment are generally made available to the beneficiary by their bank on the value date specified on the payment.
What is an EFT (Electronic Funds Transfer) service?
An Electronic Funds Transfer is a web-based funds transfer system which is an ideal solution to pay suppliers, employees and collect customer payments, and can assist you to achieve more predictable cash flows and reduce costs. Unlike paper cheques/checks, EFTs also helps to mitigate the risk of fraud because payments cannot be lost, stolen or fraudulently altered.
What is the difference between wire and EFT payments?
EFT is a payment and collection service which offers clients the ability to process transactions within Canada and the US, for these domestic currencies. EFTS are typically used for low volume and low value payments.
Wire payments are used for transactions both internationally and within North America. Wire payments are most efficiently used for time sensitive payments that are low in volume and high in value.
What is the difference between a wire and a draft?
A wire is an instant electronic transfer of funds. A draft is the issuing of an international cheque/check.
What are the cut off times for wires?
To provide value for same day with central banks the settlement must be completed by a specified time. These times can vary by currency. If the payment is sent after the cut-off time for value that day, these payments must be valued for the next business day.
How do holidays affect wire payments?
On a bank holiday in Canada or the country where the currency of the payment is denominated cannot be value dated to a holiday. For example, a USD wire payment cannot be value dated on Canadian or US Thanksgiving.
How can I get my money in my hands now that my customer in Taiwan has unloaded my shipment?
With accounts in major banks in all major trading nations, Cambridge Mercantile Group can collect your funds from anywhere in the world; and wire it to your account immediately.
What is routing information?
In order to get a wire payment to the beneficiary’s bank, at times it is necessary to route a wire payment through another bank. In the event that additional instruction is required, the beneficiary will typically advise of that information. Wire payments can have up to three banks specified in the routing information; these banks are identified in the following order: Receivers Correspondent, Intermediary Institution, and Beneficiary’s Bank.
I’m closing a major business deal in Los Angeles today. Can I get the money there to seal the deal on time?
In the US and Canada, yes. In Europe it normally takes 2 business days, however in exceptional circumstances we can execute same day settlement in Europe, subject to certain limitations.
How can I guarantee my suppliers will get their money on time?
Your Cambridge Foreign Exchange Account Executive will ensure your funds settlement is tracked from order to delivery. This means that it arrives at your suppliers on time and confirmation is in your hands right away.