Foreign Exchange Trading FAQ
1. Who can operate a Foreign Exchange Margin Trading Classic Account?
Anyone who is 21 years of age or older with a USD5,000 (or its equivalent) deposit can open a BEA Foreign Exchange Margin Trading Classic Account. You have a choice of nine types of foreign currency for the margin deposit:
- Australian dollar
- British pound
- Canadian dollar
- Euro
- Hong Kong dollar
- Japanese yen
- New Zealand dollar
- Swiss franc
- US dollar
2. How is the account being operated?
Spot foreign exchange contracts can be bought or sold (including short sale) for up to 20 times the value of your margin deposit. These transactions do not involve the physical movement of funds and are on non-delivery basis. Upon closing of your foreign exchange position, the net balance representing your profit or loss is credited or debited from your Margin Trading Account.
3. How do I benefit from opening a Foreign Exchange Margin Trading Classic Account?
Adventurous investors can use the account to trade in currencies that they expect to experience a rate rise or decline.
If you are more of a strategic investor, this facility enables you to combine profits on expected currency movement together with the interest yield differential between two currencies.
4. Will I have difficulty in obtaining a price for opening and closing out my foreign exchange position?
No. This facility offers you the convenience of trading by telephone. That is, you can do it anywhere, at home or in the office. With a mobile phone, you can even make transactions while on the move. BEA will at all times quote a buying and selling price based on the prevailing inter-bank spot market.
5. Is there a time limitation for me to close out my foreign exchange positions?
You may open and close out any foreign exchange position on the same day or carry an open position longer than a day. This is because BEA will pay you interest on the long currency position and finance your short currency position. Technically, your outstanding position is always on value spot basis. Therefore, it is unnecessary for you to have any roll-over or settlement of maturing contracts; you may hold the position without any time constraints.
6. How is interest calculated?
Interest is paid or charged to your Margin Trading Account at the end of each month at the respective currencies’ interest rates on:
1) Daily credit / debit balance of the Margin Trading Account.
2) The daily net long / short currency position (i.e. credit / debit leverage currency balance).7. What risks do Foreign Exchange Margin Trading Classic Account holders face?
The only major risk in establishing a foreign exchange position is the fluctuations in the exchange rates. A rise in the value of the currency you purchased will increase your earnings. However, there is also a possibility that the currency’s exchange rate could move adversely and take the value of your position along with it.
8. How can I manage risk?
To faciliate better risk management of your portfolio, we offer investors online inter-bank spot rate quotations. This offers an efficient and quick manner in which you may enter and leave positions. The convenience of placing FX orders with us and the structure of the facility provide you with a high degree of flexibility in managing your portfolio according to your strategy and risk appetite.
