An online foreign exchange trading service has been launched in the UK that will enable small and medium sized firms to exchange currencies without going through a bank.
The service, called FXauctions.com, will allow parties of all sizes to exchange currencies at near inter-bank rates.
Vijay Kumar, MD, fxAuctions.com, says historically business customers have had to pay a surcharge of between one and seven per cent over inter-bank rates to their banks when seeking to exchange foreign currency. The new peer-to-peer service enables counterparties to trade directly with one another at a mutually agreed exchange rate for lower transaction fees, which start at 0.1 per cent.
"To date, importers and exporters have had to engage their bankers to arrange foreign currency exchange and the subsequent transfer of funds. What we are doing is offering these individuals the ability to trade directly with one another, essentially removing the need for an intermediary and in turn presenting the opportunity for significant cost savings," says Kumar.
If a counterparty is not be available, any outstanding trades will be handed to fxAuctions.com which will undertake to settle at the reserve rate of the auction - the prevailing inter-bank rate at the start of the auction - plus a premium of 0.25 per cent.
Standard membership of the service is free, although a premium subscription service is available to UK-based members for £500 who then benefit from the preferential transaction fee of 0.1 per cent. The transaction fee for standard members is 0.2 per cent.
Escrow accounts are provided by Barclays Bank and registration is open to any organisation that is able to meet the identification requirements of the UK's Customs and Excise.