As we all know, while execution in FX is generally excellent, for many of us the cost of dealing FX for physical delivery is exorbitant. In fact, many of the spreads quoted make even those in gold look reasonable. It has long baffled me that small punters can trade equities at the same price as institutions, but when it comes to buying physical FX, they have to hand over their arms and legs, even liver and kidneys too.
Competition has, to an extent, brought in spreads, but it always make me laugh to read that a bureau de change offers a commission free service, then quotes you a price so wide you could drive a bus through it. A couple of years ago, when I bought an overseas property, my bank, HSBC, quoted me an offer in euro/sterling 70 pips away from the market. Now, I consider HSBC’s euro/sterling dealer as a personal friend and many moons ago he was my position keeper. And while he wasn’t responsible for the quote, the days when I’d gift him £3,000 are long gone. Eventually, I did manage to do the deal 20 pips away from the market, which I think is a reasonable cost for the amount, but it took a lot of not exactly painless shopping around.