Want to convert a few US$100K to Euros, then xfer out.. Best Method?

M

maxplanck

I want to convert a few US$100K to Euros. I don't want to "close" the trade, I simply want to convert US$ to Euros, then transfer those Euros out to either hold in a bank or purchase assets denominated in Euros.

Since Banks offer crap conversion rates if you simply contact them and ask them to convert for you, it seems far better to make the exchange through a Forex marketplace, such as the various ECNs (IdealPro, HotspotFX, etc.)

My question for you guys is: If you wanted to do what I described above, how would you do it?

What broker would you use?

Would you break your trades down into smaller chunks? If so, what size?


Here's an idea that I'd also like to get your opinion on: Since any broker could potentially pull a Refco at any time (please correct me if I'm wrong here, but as I understand it Refco had billions, on the same order of magnitude as today's most well capitalized Forex brokers), and since Forex accounts are not covered by any insurance in the event of a broker's failure, there is cliff risk in holding money in a Forex account, even for a short period of time.

I could reduce my exposure to this risk by putting only say $10K in a Forex account, use leverage to bump my account total up to $100K, convert that $100K to Euros, transfer those Euros out to my bank, then paying the broker $90K to pay off my debt. In that scenario, I would only have $10K exposed to broker cliff risk, as opposed to $100K.

I don't know if this is workable, I would probably have to give the broker a lien on the bank account holding that $90K in order for them to allow me to transfer out those $100K worth of Euros without initiating a margin call.

If my idea here sounds unworkable, can you suggest modification(s) that would make it workable? Or a better alternative method?


Finally: Any other advice?

I've been reading this forum for a few days now and have picked up a lot of useful information, thanks for posting guys
 
If you want physical delivery on a trade and wire out the funds, you will have to deposit the full amount (obviously).

I know only about IB and Oanda(FxGlobalTransfer) who can do this in the retail space, and of course every bank, but as you say, they are likely to be way more expensive than the latter two unless you are a corporate/institutional customer.
 
Quote from Pippi436:

If you want physical delivery on a trade and wire out the funds, you will have to deposit the full amount (obviously).

I know only about IB and Oanda(FxGlobalTransfer) who can do this in the retail space, and of course every bank, but as you say, they are likely to be way more expensive than the latter two unless you are a corporate/institutional customer.
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Will a US futures broker accept money coming from Oanda ?
 
I don't know. But Oanda will not accept any incoming deposits other than from an account in your name (so you can't withdraw from your futures broker to your oanda account). I dont know if funding an account through oanda and withdrawing to your personal bank account complies with money laundering regulation. Guessing the compliance dept of your broker can advise.
 
FXCM says "no" b/c of money laundering regulations ("we want you to trade," i.e. speculate in and out to generate lots of broker commissions, lol what a joke, I wouldn't want to use their service anyway).

Oanda says "yes," and I asked them specifically if there would be a problem due to money laundering regs, and they said it would not be a problem.

IB says "yes." I am waiting for a response on whether they allow unleveraged spot trading.

I talked to Barclays, but they said that you can't do unleveraged trading on BARX, and that you need 500K£ to do business w/ Barclays Private Bank.

How about splitting it up into smaller chunks? What do you think would get me the best overall deal (best spreads, best access to liquidity, etc)? Basically, if I do large chunks (say 100K) @ a time, am I more likely to get fucked over than if I do smaller chunks (say 25K) at a time?

Thanks for the replies
 
Dear Max,

Are you serious?

In your futures account (if you don't have one, open directly with a clearing FCM) just BUY or SELL the Euro future.

The contract size is 125,000 Euros & it's DELIVERABLE.

Easy enough.
 
Quote from maxplanck:

FXCM says "no" b/c of money laundering regulations ("we want you to trade," i.e. speculate in and out to generate lots of broker commissions, lol what a joke, I wouldn't want to use their service anyway).

Oanda says "yes," and I asked them specifically if there would be a problem due to money laundering regs, and they said it would not be a problem.

IB says "yes."

How about splitting it up into smaller chunks? What do you think would get me the best overall deal (best spreads, best access to liquidity, etc)? Basically, if I do large chunks (say 100K) @ a time, am I more likely to get fucked over than if I do smaller chunks (say 25K) at a time?

Thanks for the replies
More...

IB shows 4,000,000 ask 2,500,000 bid on the GBPUSD right now. With tottal 30,240,000 on the bid and 27,425,000 on the ask spread over 10 pips or so.

Depends what you consider being fucked it seems like you should be able to do it at once unless you want to trade. The price might get better or worse for you in the next 10 minutes.

Make sure the price is around the volume weighted average price for the day and it should be OK.
 
Quote from GCSICLRBC:

Dear Max,

Are you serious?

In your futures account (if you don't have one, open directly with a clearing FCM) just BUY or SELL the Euro future.

The contract size is 125,000 Euros & it's DELIVERABLE.

Easy enough.
More...

I hadn't considered that one can take delivery on currency futures. Thanks for that idea.

Money held in futures accounts is covered by SIPC insurance, right? Of course, I'd still be exposed to counterparty risk on the contract itself though..

Of course a futures contract carries counterparty risk, which the buyer of the contract bears for the entire duration of the contract, which is probably longer than I'd have exposure to broker cliff risk doing a quick in-out spot transaction.

I'll have to think about this some more..
 
The OP asked for physical cash exchange. With futures you can do sometehing like that only 4 times a year during the delivery period (when future and spot trade essentially at the same price). There is virtually no counterparty risk since its cleared through a central counterparty (exchange clearing house, and none of those did ever go bankrupt until now).

Is there even a retail broker that allows you taking delivery at all? The ones i know don't.
 
You have almost zero counterparty risk when you use a Clearing member of the CME. Don't let anyone cloud the issue. it is the safest way to take posession of any "commodity" bar none.
 
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