Quick FX questions.

[Laxputs]

When buying/selling international companies on a foreign market (say, Hong Kong or Australia) using International Brokers, are most buying the currency the stock is listed in using IB, and then after selling the stock, converting back to USD? And most people aren't hedging?  Seems to me the foreign exchange fees are minimal?

 

Just want to make sure I'm not missing anything. As when I covert USD-CDN and vice versa in my RBC Direct Investing account, I do a Norbert's Gambit.

 

Many thanks.

[valuesource]

I used it a few times back in the Nortel days. Sometimes, given a bit of volatility, you could do a bit better than spot. But I knew I shouldn't be doing that.  I'm a full service broker and I push the firm to squeeze our margins on the f/x.  If we're taking 1% commission you can't take 1% on the f/x too.  In fact, I can often cross the currencies for free which is a good option for smaller amounts.  An outright buy of $1,000,000+ would cost less than 3bps (0.0003). I just bulk all the trades together and it's usually free or negligible).  That's USD/CAD. For AUD it's more difficult but I call RBC and BMO (who we deal with on currencies). The AUD/CAD cross isn't as active. Could be 0.0005-0.0008 spreads. The banks will usually jitney through USD/AUD and USD/CAD.  They never do anything free so it usually costs me 0.0015 to 20 bps.  My last transaction was $220,000 fyi , so the was a fair amount of fee to pay.  Grrrr