Banks vs Exchange: where it is more profitable to buy currency

Traditionally, when residents of Russia have a need to buy or sell foreign currency, they turn to the bank to carry out the relevant operations. Banks in our country are generally the most authoritative financial organizations and are perceived as a single-source tool for performing various actions with money.

In fact, this is not quite the right approach, since financial markets in some aspects provide greater opportunities than banks can offer (including in the area of financial preservation ). Today we consider a specific example of such a situation - the purchase and sale of currency.
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Need to buy dollars

The overwhelming majority of our compatriots do not use foreign currency on a permanent basis, but sometimes the need to buy (or sell) dollars, euros or other currencies occurs in almost everyone. At the same time, when the amount of the transaction is not quite small (for example, several thousand dollars or euros), then making a transaction in the exchanger becomes not as profitable as it would be desirable - the rate set for a bank to buy and sell differs from the official rate of the Bank of Russia and the exchange exchange rate specific currency.



Because of this, the buyer or seller of currency in any case loses a certain part of the money, often quite substantial - this is especially true in relatively turbulent times, when people periodically have concerns about the future of the ruble, with the concomitant desire to buy currency to save money.

In the situation of the need to buy or sell several thousand foreign banknotes or to carry out such operations on a regular basis, it is more logical and more profitable to pay attention to the exchange market of the Moscow Exchange.

What are we talking about

When the words “exchange” and “currency” are mentioned in one sentence, a significant part of the audience has an association that makes them think that this is a Forex market. This is absolutely not the case - in the overwhelming majority of cases, forex brokers are the so-called “kitchens”, which do not take client orders to buy or sell on the free market - the second side in transactions is often the forex broker, thus “playing” against its own customers and only interested in the fact that they have lost their money. We described the operation scheme of this market in more detail in two separate topics - one and two times .

This foreign exchange market is characterized by its freedom and, at the same time, the responsibility of its participants - brokers providing access to it, are officially accredited and obtained licenses from the Bank of Russia and comply with Russian legislation - unlike forex kitchens, which are almost always registered offshore, and their activities in our country does not imply obtaining licenses.

The Moscow Exchange's foreign exchange market is the oldest organized trading platform in Russia where foreign exchange trading takes place - operations have been carried out since 1992. The exchange market is the center of liquidity in currency transactions — suffice it to say that the Bank of Russia sets the official exchange rate for the Russian ruble on the basis of the results of exchange trading.

How to buy currency on the exchange

In order to buy currency on the stock exchange (as well as shares of various companies, such as Yandex ), it is necessary to conclude an agreement with a broker company that has access to the desired market - in this case, the currency market. Next, the client gets a special account, he transfers money to him and can buy and sell currency over the Internet using a trading terminal (for example, SmartX ).



There are two modes of transactions - non-deliverable, in which physical “delivery” of foreign exchange transactions by the parties is not expected — this method is used by investors to carry out speculative transactions or implement arbitrage trading strategies in various markets. In the case when there is a need to buy real currency, the second trading mode is more suitable - deliverable. There are two variants of calculations - T + 0, in which the calculations for the transaction take place on the day of its implementation, and T + 1 with the calculations on the next day. Both of these modes are suitable for buying currency.

In general, the algorithm for buying a currency will look like this:

1. Opening an account with a broker.
2. Transfer of funds for transactions.
3. Installation of the trading terminal.
4. Buying the necessary financial instrument - for example, if you need to purchase the euro, you need to purchase the EURRUB_TOD instrument - the purchase currency is indicated first, then the payment currency, then the execution date (today).
5. At the time of making a purchase, the broker will withhold from the client a commission for the operation (it is significantly less than the price spread in exchange offices).
6. Further, the currency will be credited to the client’s foreign exchange brokerage account, and he will be able to issue an electronic order for withdrawing money to a bank account.

Brokers usually take a commission in the amount of hundredths of a percent of the transaction amount when buying or selling a currency. Some companies also keep a small amount when withdrawing funds from a brokerage account to a bank account - all fees are always indicated in the fees of a particular broker.

pros

The main advantage of buying currency on the stock exchange is the fact that the difference between the prices of buying and selling there amounts to tenths of a penny, and not several tens of kopecks, as in bank exchange offices.



Green indicates purchase orders, and red indicates sales. As you can see, the spread is quite small (1 contract lot = 1 thousand dollars)

In addition to the favorable exchange rate, there are other advantages:

• Security - all operations are performed via the Internet, which removes the risk of fraud or physical weaning of money by intruders.
• Convenience of operations - again thanks to the technology, which allowed to transfer all actions to the network.
• It is possible to use currency purchased on the stock market as collateral for transactions in other markets, such as stocks or futures. This opens up good opportunities for professional gambling.
• • In addition, the income from currency operations at the stock exchange is not taxed - in the event that the amount has been entered into the brokerage account for its conversion into currency, and then this currency has been withdrawn. In the case of profit from the game on the difference in rates - the bidder must file a tax return and pay income tax.

It is most beneficial to buy currency on the exchange for those who are faced with the need to regularly perform such operations - such a need may arise in a number of cases, for example, if there are large regular expenses abroad (rent payments, etc.). In such a situation, a person will be able to regularly buy, sell and withdraw currency to a bank account via the Internet - a physical presence will be needed only once when entering into a contract with a broker.



Of course, not everything is so smooth, and the exchange currency market has its limitations, which may not suit some potential buyers and sellers of currency.

Minuses

The main inconvenience of the exchange currency market arises from the presence of several links in the chain of actions from the appearance of the desire to make a currency transaction, to the receipt of this currency in a bank account. Opening an account with a broker, withdrawing funds to the bank takes some time - in this regard, it will be faster to reach the exchanger, however, if such operations take place on a regular basis, then it’s more profitable to open an account once and make a purchase or sale in a comfortable environment.

findings

The Moscow Exchange's foreign exchange market is quite a convenient tool for buying or selling currencies, however, like any instrument, it has a certain scope.

When making transactions in the foreign exchange market, you need to understand that if you need to buy thousands of dollars to go on vacation, it is more logical to contact the bank’s exchanger. However, if the amount is more (for example, from several thousand dollars or euros) and operations are performed on a more or less regular basis, then the option of working in the foreign exchange market of the exchange is much more profitable than constant visits to exchangers.

PS On the Moscow Exchange, in addition to currency, the precious metals market also appeared - we told about how to buy gold and silver bars in a separate topic. On September 11, ITinvest and the Moscow Exchange seminar will be held, at which various issues of work in this market will be discussed. Participation is free, by prior registration - you can do it here . Waiting for you!

P. P .S. If you notice a typo or error in the article, write a personal message and we will fix everything promptly. Thank you for reading us.

Articles and related links:

• How is the exchange trading in Russia
• How-to: How to buy shares of technology companies on the example of "Yandex"
• Stock market and saving finances: How to buy gold bars
• Foreign exchange market and precious metals market of the Moscow Exchange