Forex minnow beats banks at own game

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br BANKS-FOREX-CONSUMERS_0707_11 Reuters Ariaratnam Sakthitharan is a founder of Best FX, which some surveys rate as offering the UK's best forex deals. Photo: Reuters

London - From a small, white-washed basement close to London’s Liverpool Street station, Ariaratnam Sakthitharan is beating banks at what you would have thought was their own game – and it is relatively easy.

On a recent morning in the heart of London’s City financial district, Sakthitharan’s firm, Best FX, would sell you e124 (R1 820) for £100 (R1 851). Less than 20m along the street, the world’s third-biggest trader of foreign currencies, Barclays, would only give you e118.

The difference is a familiar one: surveys show consumers tend to seek travel money from bureau de change booths in preference to banks because the rates are better and Best FX is rated by a number of consumer surveys as offering the UK’s best deal.

But at a time when banks are seeking to defend themselves from charges that they manipulated the $5 trillion (R54 trillion)-a-day currency market, the gap stands as a refutation of the lenders’ claims that their foreign exchange market has become extremely efficient for everyone.

The exchange rates on the board are not even the best ones that Sakthitharan and his colleagues give bigger or regular clients.

“If people from any one of the big firms we serve want a better rate, we give it to them,” he says. “There is enough leeway there.”

It is not an accident that four of Best FX’s six London locations are in the financial district. Ask around in some of the City’s major currency dealing rooms and traders say they use the company for money for business trips and holidays simply because they get more bang for their pound.

Sakthitharan lists clients from some of the biggest global banks – US giants JPMorgan Chase and Citigroup, or their UK competitors Barclays and HSBC. He also has regular custom from workers at the brokers, information technology and data providers whose businesses feed off the banks.

“This is predominantly a City area. It is not tourists,” Sakthitharan says. “You have to be extremely competitive on price because they know the market. But if you give the best rates they will stay with you – and we have a lot of repeat custom.”

Bank executives are nervous about how the allegations of currency market manipulation, now being investigated in half a dozen jurisdictions worldwide, will play out.

First, there is the potential for fines from regulators that top the e6 billion they have already paid out in the row over fixing London interbank offered rates. But another reason is the possibility that the investigations will lead to a more detailed look at the structure of a market from which banks rake in billions annually.

While most of those institutions have moaned loudly this year about falling profits from foreign exchange, Barclays for example made £5.54bn from all trading last year.

Sakthitharan says he is increasingly looking at another bigger and complementary market in bank transfers, where he says banks are charging holders of current accounts such large spreads he can beat them even when he swallows the fees the banks charge him.

His business is beholden to banks for a number of basic services and he is reluctant to criticise lenders outright. But when pushed on the issue of competitiveness he says with a sigh that he thinks the banks “could do better”. – Reuters


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