How Forward trades work
To make a Forward trade, you agree to exchange a specific amount of one currency for another at a fixed exchange rate, then settle that trade on a date you have chosen, which can be up to 12 months in the future.
- You set the amount of currency required, the exchange rate and settlement date on the day that you agree the trade, avoiding the exchange rate risk during that time. You simply pay a small deposit to secure the exchange rate, and then no payment is required until the agreed settlement date for the trade.
- Currency trades can be booked against the vast majority of freely tradable currencies and not just against Pounds Sterling.
- In practice, the ability to set an exchange rate in advance in this way guarantees the amount of currency that you will need to pay for or receive in exchange for a given amount of foreign currency, regardless of what happens to exchange rates between the date you agree the transaction and the settlement date.
- You can also make multiple payments from the initial lump sum and set the length of the Forward trade for a time that suits your needs, giving you complete payment flexibility.
Because the exchange rate is fixed, your exchange rate will be protected from currency movements during the time you have agreed. This is ideal for future payments at times when exchange rates are uncertain, so your money is protected from unfavorable currency market movements between now and the time you need to make your international payment.
By fixing the exchange rate in advance, you are able to eliminate the risk of currency fluctuations on your international transactions. You will be able to calculate the value of all your future transactions within the period of the Forward trade with certainty, taking the stress out of continuing international transfers.
Making a Forward trade
For Forward trades (trade now, pay later) you will need to make two transfers to Halo Financial. You will need to send us a deposit of 10% up front, or other agreed percentage of the full value of the currency trade. The remaining 90% balance must be paid before the agreed settlement date (the future date that the currency has been reserved for).
How to pay for a Forward trade
Both the deposit and balance payment can be paid for by CHAPS, Faster Payment (dependent on your bank) or BACS, assuming your settlement currency is Sterling.
You will need to settle Forward trades that are to be settled in any currency other than British Pounds, or from Sterling funds held in accounts outside of the UK, by electronic Telegraphic Transfer (TT) – this is also known as a SWIFT transfer.
It’s important to factor in enough time for the transfer to clear into Halo’s client accounts: CHAPS transfers and Faster Payments clear the same day and BACS on the third business day.
If you have any questions, call us today on +44 (0)20 7350 5473 or visit
our FAQs pages.
