FX rip off: Tops and bottoms. Or, more on poor punter service
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Foreign Exchange

FX rip off: Tops and bottoms. Or, more on poor punter service

Tops and bottoms can make you realise service levels are rotten. My old mucker Paolo has been on to me again (see Retail rip off). If he takes his complaint further, we could soon see the first punishment handed out for breaching Mifid, which came into force in November 2007 and should ensure best execution for investors.


In a nutshell, Paolo wanted to transfer a £50,000 holding he had in a Canadian mining company into his pension. His first request was to ask his pension fund holder if he could do a cross, which really confused it.


He was told he’d have to sell the stock and buy it back in the market, involving two commissions. But it also incurred a completely unacceptable FX cost. The stock was sold on October 22 through a reputable broker and bought back through another. The two transactions effectively were done at the same time. Yes, Paolo bought them from himself but the GBP/CAD rate on the sale was 1.7559, while the rate on the purchase was 1.7268. According to Thomson Reuters, the day’s range was 1.7293/1.7444.


Talking to a senior sell-side trader only confirms what a complete rip off this is: “If banks are prepared to stream a 1-pip price to Mrs Watanabe in USD/JPY, the argument that small amounts incur a wider spread doesn’t hold up.”




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