Foreign exchange company

A non-bank foreign exchange company also known as foreign exchange broker or simply forex broker is a company that offers currency exchange and international payments to private individuals and companies. The term is typically used for currency exchange companies that offer physical delivery rather than speculative trading. i.e., there is a physical delivery of currency to a bank account.

Foreign exchange companies are normally distinct from money transfer companies or remittance companies and bureaux de change as they typically perform high-value transfers unlike their money transfer counterparts that focus on high-volume low-value transfers generally by economic migrants back to their home country or to provide cash for travelers. Transactions can be either spot transactions or forward transactions.[1]

Companies by country

India

Foreign exchange markets in India has shown a steady increase as a consequence of increase in the volume of foreign trade of the country, improvement in the communications systems and greater access to the international exchange markets. The volume of transactions in these markets amounting to about USD 2 billion [2] per day does not compete favorably with any well developed foreign exchange market of international repute but with the entry of online Foreign Exchange Companies the market is steadily growing.

Around 25% of currency transfers/payments in India are made via non-bank Foreign Exchange Companies.[3] Most of these companies use the USP of better exchange rates than the banks. They are regulated by Foreign Exchange Dealer's Association of India (FEDAI) and any transaction in foreign Exchange is governed by Foreign Exchange Management Act (FEMA) 1999.

Uganda
Main article: List of foreign exchange bureaus in Uganda

Australia

The Australian foreign exchange market has grown considerably to be the highly liquid, globally integrated market that it is today.[4] The foreign exchange market in Australia is regulated by the Australian Securities and Investments Commission (ASIC). In 2016, the local market was the eighth largest in the world and the AUD/USD was the fourth most traded currency pair globally.[5]

United Kingdom

It is estimated that in the UK, 14% of currency transfers/payments[6] are made via non-bank Foreign Exchange Companies. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank.

The 10 largest companies in the UK by net profit as at August 2012:

No. Company Accounting Date Pre Tax Net Profit
1 Western Union Business Solutions (formerly Travelex)[nb 1] 31 December 2010 £11,048,000
2 Moneycorp[nb 2] 31 August 2011 £7,660,000
3 WorldFirst UK Ltd 31 January 2012 £4,494,000
4 HiFX 30 June 2011 £4,486,000
5 Currencies Direct Ltd 30 June 2011 £4,471,000
6 Schneider (renamed Monex Europe Limited) 31 March 2012 £3,500,278
7 OPT 09 Feb 2014 £3,387,157
8 Foreign Currency Direct 31 October 2011 £1,687,364
9 AFEX 31 December 2011 £1,583,459
10 Global Reach Group 31 December 2011 £1,289,000

United Arab Emirates

As per the world bank report, the money exchange business in the UAE has shown steady growth in 2014 as remittances rose nearly five per cent to $29 billion.[7] Most of the GCC states have announced major plans for converting their countries into world-class business hubs. This will further enhance exchange business in the region.the money transfer business in the UAE continued to grow last year as exchange companies reported up to 10 to 15 per cent increase in transactions in 2014 compared to the previous year. New development around the UAE is also set to give a boost to the tourism sector, which would, in turn, increase demand for currency exchange services[8]

Two major Foreign Exchange companies in UAE

Singapore

In Singapore, foreign exchange companies are governed by the Monetary Authority of Singapore under the Money-Changing and Remittance Businesses Act[9] which sets out the criteria for license application[10] as well as guidelines when it comes to the prevention of money laundering and countering the financing of terrorism.[11] As of June 2019, there are 391 money changing businesses and 114 remittance companies in Singapore.[12]

See also

Notes
  1. It is difficult to tell the exact revenue generated by Travelex from their private and corporate foreign exchange due to the number of entities and enterprise areas they have. £10m is an estimate although the group parent entity Travelex Holdings Ltd posted a loss of £150m for the year to 31 December 2009.
  2. TTT Moneycorp Limited also has High Street and airport/station Bureaux de Change included in this total.

References
  1. "Spot and Forward Transactions" (PDF). USBank. Retrieved 13 December 2013.
  2. http://www.pondiuni.edu.in/storage/dde/downloads/ibiv_forex.pdf
  3. Julian, Saidur. "Top Forex Brokers". Fx Daily Report. Retrieved 7 October 2016.
  4. Guy, Debelle. "The Australian Foreign Exchange Market".
  5. "Triennial Central Bank Survey of foreign exchange and OTC derivatives markets in 2016".
  6. The Sunday Times (UK), 16 July 2006
  7. "Foreign Exchange Industry to Thrive". Retrieved 19 July 2015.
  8. "UAE is an economic hub". Retrieved 20 May 2013.
  9. "Money-changing and Remittance Businesses Act - Singapore Statutes Online". sso.agc.gov.sg. Retrieved 21 June 2019.
  10. "How to Set Up a Money Changer Business". Biz4x. Retrieved 21 June 2019.
  11. "MAS Notice 3001 Notice on Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Money-Changer's License and Remittance License". www.mas.gov.sg. Retrieved 21 June 2019.
  12. "Financial Institutions Directory". eservices.mas.gov.sg. Retrieved 21 June 2019.
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