Foreign Exchange Rate Fee

I have noticed that in the latest Terms of Reference, Users are now required to pay an exchange rate fee. I have raised this with Freetrade as it means that buying US Stocks are no longer free.

They always paid a fee. You can’t covert £ to $ anywhere free.

FT do not make any money on this.

I have bought and sold US stocks and not noticed a fee being charged. Was this fee always charged but not previously notified?

It wasn’t clearly shown before, but it has always been there. You can’t buy any currency without a fee! That’s why people trade currency.

Thanks for the explanation!!

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In the pitch deck for this round of crowdfunding Freetrade lists FX as one of their income streams so I’m not sure this is the case anymore.

The fee has always been there, though.

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Ahh I am still in the dark ages. I noticed that too - but hadn’t heard anything official so assumed it was still future.

FT used to execute at 0.45% which was the charge they were charged. Maybe they now charge the same, but are able to get it a bit cheaper? Possibly Adam or Viktor can comment and confirm.

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Yeah would be nice to have it clarified but it might be too sensitive for them to share. I wonder if the new platform they have developed has lowered/removed their cost.

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You can a lot of the time now. A number of brokers etc. only charge the interbank rate. FX spreads have come down massively and for most major currency pairs should be down to 10 bps.

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I think they said once that the fee was taken by a third parties they used before the Invest platform was finished. I’m assuming going forward most or all of that is revenue.

Way back when there was a post saying Freetrade charge the 0.45% to cover third-party costs, and that when they move to their own platform they’ll be able to look at lowering or evening dropping the fee.

It’s apparent to me now that they’ve decided to keep the fee as-is to generate some revenue (evidence for: on invest platform and no change, and pitch deck lists as revenue).

On balance, I think I’m OK with this.

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I’m personally OK with this too. Would be good in the to allow multiple currencies to avoid a doue charge but I understand the need to make revenue.

It would be great if a Plus account “removes” or replaces this fee :slight_smile:

Hey, just to clear this up as it has been communicated before but appreciate not everyone has read all our blogs etc.

Prior to launching fractional shares, all US stock orders were routed to London Stock Exchange market makers. That’s the same way all UK orders are executed.

The LSE market makers quote US stocks in GBP. Embedded within that quote is an FX conversion. The rate includes a 0.45% spread over the spot rate. It wasn’t very visible for users as we could only show the GBP price quoted and received on the contract note (the LSE market maker earns the FX conversion fee on these trades).

Now, we are routing US orders directly to the US markets via our US clearing broker Drivewealth. All this happens in USD now, so we need to convert your GBP to USD and get it to the US before the trade settles. We do the FX conversion for you now, so the contract note reflects the buy or sell price in USD (previously it was GBP) and shows the FX rates and fees more transparently. The FX rates and fees have not changed, except now we earn the fee instead of the LSE market maker.

Hope that all makes sense.

Best
Adam

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Thanks for clearing that up Adam.

Considering this fee is a source of revenue, do you plan to allow users to hold balances in multiple currencies to avoid conversion fees? Is FT allowed to hold cash balances in other currencies for customers?

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Multi-currency accounts is something we’ll certainly look at in the future. Lots of other things to get out the door first.

The next big milestone on the currency front will be EUR-denominated accounts for our European expansion.

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Multi-currency accounts is something we’ll certainly look at in the future.

Cool :slight_smile:

EUR-denominated accounts for our European

I agree that this is definitely more important than USD balances for UK customers. :+1:

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0.45% is actually pretty decent… most banks hide this rate in the spread and pretend they don’t have fees. GBP -> USD on TransferWise is something like 0.35% and it’s their business to make this as cheap as possible so I’m pretty comfortable with that cost.

The one thing that does get me a bit more upset though is when I want to sell one US stock in order to purchase another, and then I end up paying the exchange rate twice… without create a multi-currency account you could consider creating a sell-buy flow maybe… not sure it’s worth it though, and would probably be pretty confusing.

Other option is to sell US stock and choose to keep proceeds in USD but I don’t know what the law is around keeping USD inside an ISA wrapper, I thought I read somewhere that you can’t.

https://www.ii.co.uk/investing-with-ii/international-investing/foreign-exchange

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People don’t trade forex because there is a fee, but to take advantage of the fluctuations in exchange rates.

I agree multi-currency should be an option to avoid having to pay an FX fee multiple times. On a £10k buy and then sell, it’s almost £45 in fees each way. Interactive Investor have multi-currency options and Trading 212 do not charge a FX fee from what I understand.