Hi, i want to make a GBP transfer into my account
(It is a GB account obvs)
When i purchase a US based stock in USD, what conversion rate is applied?
Hi, i want to make a GBP transfer into my account
The conversion rate which is actual on the moment of execution of your order. Conversion rate will be used as long as you hold shares, so it will affect the result. Result isn’t only profit/loss in share price.
There are many forms of conversion rate.
At the time of purchase, where do i see the ‘actual’ rate which is applied?
What other forms are there? I was only aware of 1, the USD/GBP exchange rate.
If anyone has this same question and need this information in the future - refer to the below.
The question basically being, ‘what is the usd rate you apply and where can you find it’ I have provided the message that support sent me below.
Thank you for contacting us, we hope this email finds you well!
When you are placing a trade with a stock which is traded in a different currency than yours, we convert your money to the respective currency by using the current exchange rates which we display on our CFD platform, which you can access by having a CFD account.
In case you would like to see the exchange rates which we apply, I would advise you to create a Practice CFD account.
Should you have any further questions, please do not hesitate to contact us.
Where does one look to find an fx rate on the CFD platform? I see buy and sell prices for CFD currency pairs, but that is not the same thing as currency conversion charge of 0, is it?
@Richard.W The existence of bid & ask doesn’t mean that there’s a charge - there’s always a bid & ask, even when banks exchange currency between themselves.
OK. I was under the mistaken impression that currency conversion was being done at some midpoint spot rate. Still $12298 -> £10000 -> $12296 is a small round trip loss.
I have been trying to determine the true cost of GBP/USD currency conversion when investing/trading with T212. I have seen other brokers applying fx charge of 1.5%, 1%, 0.1% and 0.02%. In the case of one broker I know the 0.1% is applied to the mid spot rate. I am curious what is the effective % currency conversion cost when investing with T212.
Although T212 provide the benefit of “no fee for currency exchange”, they do have a bid/ask spread on the CDF platform. As has been noted in other posts, the CDF prices are used when converting currency on the Invest platform. Presumably, T212 profits from this spread, just as they do on the spread of all CFDs, - fair enough.
But let’s try to understand how it works. Currently sell and buy of 1 GBP is $1.23627 and $1.23747. Target spread is said to be 0.00015, though above it is actually 0.0012, which about 8 times greater. This represents 0.0006 about the midpoint of 1.23687, which means effectively a 0.0485% fx cost. So better than most brokers - though not as good as the 0% that it could be, — for all but initial funding and final withdrawal —, if one were able to hold funds in a USD balance, as people have been requesting (and which two brokers that I know do provide.).
When I construct a limit buy or limit sell order in the trade box I find I can buy or sell 100 shares of GOOG at price $1237.49 for a sum of exactly £100,000. So the rate being used for both sell and buy calculations appears to be exactly 1.23749. This confuses me since this is neither the CFD sell, buy or mid price. I would expect the GBP money involved in a trade to be different depending on whether it involves selling or buying USD.
I would expect the proceeds of a sell to be 100x1237.49/1.23747= £100001.62 (divisor being the current CDF buy price) and the cost of a buy to be 100x1237.49/1.23627=£100098.68 (divisor being the current CDF sell price).
I have deliberately carried out this calculations at the weekend when exchange rates are frozen. I am left puzzled by what I find. Can anyone explain the discrepancies? There questions arise.
(a) Is “target spread” for GBP/USD often achieved? I do not often look at the GBP/USD CFD, but the times I have done so I have never seen difference of bid and ask as small as the target of 0.00015.
(b) How is the GBP value of a buy or sell limit order for US shares computed within the trade box? Is it making use of the actual current CFD platform bid and ask prices - or is it only an approximation, using some other conversion rate?
(c ) Would not clients benefit if it were possible for them to maintain multiple currency balances? In the example above, the round trip currency conversion cost on 10 GOOG shares at $1237.49 is about £9.60, representing about 0.1%. This is significant - as much as the spread on the share price itself.
(d) Some clients do not have a CFD account, or do not know how to understand the data it shows. Would it not be useful if within the Invest account there were a place that users could check the currency exchange rates that will be applied to their trades? I had thought a way to check the rate would be to create a fictitious limit order for a purchase costing $10000 and see what it is costed in GBP. But based on the above, I am not sure that is a reliable way to find the applicable exchange rate.
So if I understood correct the previous feedback is nit accurate?
I expect the statement about CFD rates being used for conversion is accurate, but there appears to be some inconsistencies across the platform in reflecting that.
As I explain by an example, the conversions I am seeing in a trade box are not the same as one would obtain if current CFD rates were being used for currency exchange computation.
My aim is to make a good estimate of the cost of currency conversion on the platform. We know it is “fee free”, but it is not “cost free”. I would like to know the typical cost of currency conversion on Trading 212, as expressed in % terms - so I can compare to other brokers who quote currency conversion fees as say 0.10%.
I have also reiterated in (c ) the previously requested plea for multi-currency accounts, and suggested (d) that fx rates be accessible on the Invest platform for those who do not understand or use the CFD side.
I also did some brief checks of buy sell stocks in GBP from USD account. Spread didn’t seam 0.00012 like it was seen on CFD.
But then again I didn’t do much testing.
Anyway I hope in long run t212 provides us with multicurrency accounts.
To answer my own question this morning I am seeing spread 0.00030 to 0.00015, occasionally hitting the target 0.00015. Below it is 0.00018.
At that spread, if my calculations are correct, foreign exchange is costing the investor about 0.008%, ie 8 per 100000. That is better than any broker I am aware of, excepting where a USD balance can be held. It is a tighter spread, at least right now, than that being offered by Revolut for currency exchange. So this is looking very good. But I am still not clear on (b) above.
@Richard.W The CFD rate is close to the one we’re actually using but it’s not equal. However, it is a pretty good approximation & that’s why it’s helpful looking at it.
CFDs have larger spreads than raw prices, that’s why it wouldn’t be okay to use CFD rates.
The actual raw rates we get from Bloomberg BGNE, those aren’t visible anywhere.
(c ) - It’s tricky. Some would, for others it means additional hassle In keeping X amount of currency balances.
(d) - Unfortunately, raw Bloomberg BGNE data isn’t free to redistribute openly. We’ll try to think of an alternative solution.
Thanks, Those are helpful answers. I understand @David to be saying that the true cost of currency conversion to the investor is actually less than the CDF rates would imply since the Bloomberg data is with tighter spread. All to the good for customers then.
Re (c ) Some brokers offer both options and let clients choose.
But one thing to be said in favour of the way Trading 212 currently handles currency is that it makes it much easier to keep records for dividend and capital gains taxes. HMRC expects investors to calculate gains and income using the exchange rate that applied at the time of the transaction or dividend payment, not at the time of moving money from one currency account to another. (I speak about taxes in Invest account. One is not allowed to keep non-GBP currencies in an ISA.)