We return for a new season of The Armchair Trader podcast this week, featuring interviews with listed companies, investment managers, research analysts and other market participants. Make sure you follow us on the podcast platform of your choice for what will be regular updates from us and our guests.
We lead off the season with Rob Brown, CEO of Sugarcane Capital, who joins the podcast to discuss forex markets, and more specifically how they can cost investors and traders thousands of pounds if they are not careful. Rob has a background in the FX space having previously worked for CMC Markets and LMAX.
Sugarcane Capital was set up in 2018 to operate money transfers and money remittances for both individuals and corporations. They support UK-based investors who are buying big ticket items in other currencies. The company seeks to deliver a much higher level of transparency to its clients. He argues that when investors are not simply trading forex for its own sake, but need it to buy other things, there is still a high degree of opacity in the market.
As he says, in the FX trading world, it is usually very cheap to trade currency pairs, but when it comes to converting money and sending it cross border, it can become unreasonably expensive.
The forex market remains very reliant on the banks, but beyond the interbank market, it can be hard to work out the actual cost of a foreign exchange trade.
Rob talks to us about how Sugarcane Capital works with larger traders who can often find they are paying too much in terms of FX costs with their equity broker (nigh fees can apply for buying overseas shares that can sometimes be incorporated into the spread). The most sophisticated clients frequently get the best rates, but it can often boil down to asking the right questions.
One of the most startling things about the Sugarcane white paper is the sheer variety in the transaction fees being charged by brokers for the same transaction. It can vary from €340 to many thousands. It clearly demonstrates that it pays to do your homework in this area.
Sugarcane works with investors who are contemplating an FX transaction of more than £20,000.
“For larger ticket items it really is very simple,” Rob says. “We have wholesale liquidity that comes to us and we make that up on the volume the client will trade.”
The firm offers a highly personalised service and can take currency orders over the telephone. It regularly works with investors who are not experienced with global FX markets. The company even works as an FX provider for other brokers.
We also take the opportunity to ask Rob about the impact of Brexit and the COVID pandemic on the forex markets and on larger brokerage firms. We also discuss how Bitcoin and altcoins are affecting the cross-border currency transfer market.
Sugarcane Capital has published a white paper on the costs of currency transactions. Investors who are interested in receiving a copy can apply for it via the firm’s website.