January 3, 2018

Supply Clusters – Foreign Exchange


Most businesses do not consider foreign exchange as an avenue to save money.

Most businesses believe that they are receiving a ‘good rate’ from their provider. Few know the actual margin applied to each FX trade. Bank and non-bank providers use non-transparent pricing tactics. This leads to over-charging and maximisation of profits. Many businesses transact foreign exchange through their main bank provider. By doing so the many opportunities to save money without any risk are lost.

In our experience, such opportunities can represent significant amounts for even the smallest businesses.

Choosing the right provider delivers certainty and risk mitigation. Even in a global market where currency instability makes forward planning difficult.

The majority of FX providers including banks do not deliver transparent pricing. This may lead to over-charging the margin on trading. It is important to know that the security and ease that exists when dealing with a bank is also possible with a non-bank provider. There are also benefits such as significant cost savings, increased transparency and market insight.



The key things to watch out for in relation to foreign exchange are:

A lack of transparency on the margin applied
Most businesses believe they are receiving a ‘good’ rate from their provider. Few actually know the margin that is being applied to each FX trade. By not telling you what margin you received, you are unable to check whether you have in fact, received a ‘good rate’. While not exclusive to financial institutions, this is a tactic to maximise profit. This allows them to play the market and maximise profits with your money. You are rarely the wiser.

Dealers on commission
When a dealer receives a commission on your FX it is simple math. The higher the margin the higher the commission the dealer receives. This is a conflict of interest. After all, they receive more in their pocket if they make more money from you. Such a conflict of interest is not likely to provide the best results for your business.

Advisors on commission
The same outcome applies as dealers on commission. Such a conflict of interest is highly unlikely to generate the optimal results for your business.

Margin creep that occurs over time
Your provider may offer to match margin when confronted with a comparative rate. Do not be fooled into a false sense of security by this. Unless your FX provider is willing to be transparent on all trades you will likely find that the margin creeps up over time.

Most institutions charge fees per transaction. Consider that over time these may add up to become a significant cost. These are often tiered based on the volume you trade.

Security of your funds.
Some non-bank FX providers take custody of your funds. In many cases, this means that your funds are no longer provided the protection offered by Tier 1 banks. It is important that you consider this as part of your risk management strategy.

Specialised knowledge
Thinking you understand foreign exchange may be a dangerous assumption. FX providers may use any knowledge gaps to their own advantage rather than yours.

Any of these factors may lead to you paying too much. You may also miss out on valuable market advice.



Considering the best approach for your business ensures a lower risk profile. It also offers a reduction in the cost of foreign exchange. We recommend a provider who delivers on the following criteria:

  • Ensures you receive transparent margin reporting that provides certainty and helps avoid margin creep.
  • Offers capped margin rates which means you can avoid unnecessary cost and plan more effectively.
  • Ensures you are working with an advisor or a dealer who is not on commission.
  • Can confirm that your advisor is not also your dealer.
  • Guarantees that your provider offers the same security for your funds as a Tier 1 bank provider.


Supply Clusters has partnered with HiFX to help take the cost and lack of transparency out of foreign exchange.

Supply Clusters members receive the following benefits through HiFX:

  • A capped, low margin / spread on wholesale currency rates
  • Free trade audit. A complimentary review which identifies opportunities to reduce costs and improve currency risk management
  • No foreign currency transfer fees

HiFX customers enjoy:

  • Security of their funds held in trust through a ‘big four’ Tier 1 Australian bank
  • Dealers and advisors who are not on commission
  • Proactive risk management expertise advising you what to do, when to do it and how
  • An unrivaled level of transparency
  • Free foreign currency accounts through a large Australian bank