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 stocks that are quoted in currencies different from sterling, whereby you would need to convert your sterling for the relevant currency in order to pay for your desired stock. 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 an 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 none 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) Services

  • Live prices for stand alone 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 dependant 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.
 

Two Foreign Exchange Services from TD Direct Investing:

  1. Where FX is arranged at the time of a trade rather than on the settlement date when prices and exchange rates may have changed.
  2. The facility to place a stand alone FX transaction, for example, to convert funds to another currency in readiness for trading in a different market.

Our multi currency facility helps to reduce the need for FX by letting you hold cash in your TD Trading and TD SIPP Accounts in 9 currencies:

  • Pounds Sterling (GBP)
  • US Dollars (USD)
  • Euro (EUR)
  • Canadian Dollars (CAD)
  • Hong Kong Dollars (HKD)
  • Singapore Dollars (S$)
  • Australian Dollars (AUD)
  • Swedish Krona (SEK)
  • Swiss Francs (CHF)
 

How does FX work?

When FX is 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.

When a stand alone FX transaction is made

You can choose which of the 9 currencies you wish to convert into your cleared funds, and will receive a real time exchange rate from the market.

Stand alone FX transactions will be clearly shown on contract notes and statements.

 

What does Foreign Exchange Cost?

The exchange rate is known as a spot rate provided by the market. TD charges a 2.00% 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 2.00%
£25,000 - £49,999.99 1.75%
£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 stand alone 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 = 1.5800 FX charge
£10,000 convert to USD at a rate of 1.5484 = $15,484.00 (2.0% margin) $316
£60,000 convert to USD at a rate of 1.5642 = $93,852.00 (1% margin) $948
£200,000 convert to USD at a rate of 1.5721 = $314,420.00 (0.5% margin) $1,580
£700,000 convert to USD at a rate of 1.5761 = $1,103,235.00 (0.25% margin) $2,730

When can I place Foreign Exchange Conversions?

The facility is live online from midnight on Sunday to midnight on Friday, with telephone support available 7.30am - 9.00pm Monday to Friday.

Important Note: Please be aware that we have a revenue sharing agreement for the FX charge with a third party (which may be a member of TDBG) if you require further information please write to us

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Risks

  • The value of your investments can go down as well as up. You may not get back all the funds that you invest.
  • The potential for profit or loss from transactions on international markets or in foreign denominated contracts will be affected by fluctuations in exchange rates.