FX rate

I can’t quite get my head around how the FX rate is calculated on buy and sell contract notes. I understand that the FX rate should be base FX rate + 45bps (or 0.45%).

Now these rates don’t make sense:
Base FX rate £1 = $1.2709 - FX rate £1 = $1.2643 (sell contract) - shouldn’t it be $1.2766??
Base FX rate £1 = $1.2561 - FX rate £1 = $1.2618 (buy contract) - shouldn’t it be $1.2504??

Can someone help with the math please? :dizzy_face: :exploding_head: :confounded:

You’ve inverted the additions. The 45 basis point addition is not a ‘plus’ but rather a deterioration of the FX rate by 45 basis points in whichever relation you are transacting.

Can you show me the math based on the base rates above?

For the sell:
1.2709 / 1.0045

For the buy

1.2561* 1.0045

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How do you explain this rate then?

I always thought of it as if you are charged .45% before any of your money is converted

So in this case £100.03 x 0.45% = 45p goes to freetrade

So the actual rate you get is more like £99.58 = $122.90
Which is the same as £1 = $1.2342

I think this is how they do it (The FX Fee is already included in the FX Rate)

priceShare = $19.19
fxRate = 1.2290
priceSharePounds = priceShare / fxRate => £15.6143

noOfShare = 6.40437727
total = noOfShare * priceSharePounds  => £100

Not sure why it is £100.03 (most likely there were more decimals somewhere and they are not fully displayed on your order note)

Still none the wiser :confused:

Here are some of the base FX rate / FX rate pairs I have had on my buy notes:
$1.2342 / $1.2290
$1.2634 / $1.2691
$1.2561 / $1.2618
$1.2897 / $1.2839

and on sell notes:

$1.2709 / $1.2643
$1.2497 / $1.2553
$1.3164 / $1.3223
$1.2957 / $1.3015

Whoever solves this mystery first, wins a trip to Mars (no need to self-isolate on return) and my boundless admiration. :1st_place_medal: :trophy:

I’m not sure what’s causing the small differences. I feel it’s rounding error somewhere but can’t say for certain. The maths above is correct but the numbers are off slightly

Edit:
I’ve just done the maths on one of my trades and it’s a heap of rounding errors. Whichever rate you take it’s essentially been rounded up at some point for the contract note

Shouldn’t the FX rate be higher than the base rate on this one though??

Essentially all you need to do is -> Base rate * 99.55%

It still doesn’t apply to all the pairs above. I think they are using some kind of witchcraft to get these numbers :face_with_raised_eyebrow:

I agree, there’s definitely a difference and it’s bigger in some of you above pairs than others. Most likely caused by rounding one or more of the elements. The Base FX Rate and or price per share could be a rounded figure which would lead to differences.

For your Apple example I was out by 0.002% when trying to get your total cost:
1.2897*99.55%= 1.28389635
To get GBP/USD pair 1/1.28389635 = 0.77887907384424
$110.15 * 0.77887907384424 = £85.793529983943
£85.793529983943 * 115.15415342 Shares = £9879.48131421434

Turns out there was a bug causing the base FX rate to be miscalculated before the 6th of Aug. It has since been fixed apparently. Mystery solved!!
:star_struck: :fist_right: :fist_left:

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Will all the contract notes be amended?

I doubt it.