FxPro: dollars as a contract

A contract on a currency pair, beside dollars changed at a bank counter

A bank counter sells you dollars as banknotes or as a telegraphic transfer; you hand over rupees and receive dollars in an account or in your hand. The bank's board quotes a buy and a sell price, and the spread between them is the bank's charge for changing the money. A contract for difference on a currency pair does not deliver any currency: it is a position that gains or loses as the exchange rate moves, and it is settled in the account's currency.

The two are not substitutes. A traveller needs banknotes; an importer needs to pay a supplier in dollars. A contract for difference is a trading position, not a payment. Opening an FxPro account takes identification and a day or two, and a practice account costs nothing. The account is with FxPro, an international broker, and this site is not the broker and takes no money from the reader.

Why a bank's buy and sell spread has no counterpart in a contract that delivers no banknotes

A bank's spread exists because the bank holds inventory in two currencies and must manage the risk of the rupee moving while it holds dollars. The spread covers that risk and the cost of handling cash or transfers. A contract for difference delivers no banknotes and no metal; there is no inventory to hold, and no delivery to make. The cost of trading is not a spread on banknotes but the contract's own terms: the financing charge, the spread on the quoted contract, and any commission or fee the broker states.

FxPro quotes gold and currency pairs as contracts for difference. No metal and no banknotes are delivered, weighed or stored. A contract for difference is settled in the account's currency and carries no claim on a bar, a piece of jewellery or a bank's dollars. A reader who wants a bank's spread should look at the bank's board; a reader who wants a trading position should read the contract's terms, not assume the two costs are the same.

What to read in the terms before an account is opened from Sri Lanka

A trading account is a contractual relationship, and the contract's terms are the only description of the product that matters. The reader should read the broker's terms for the financing charge on a position held overnight, the spread on the quoted contract, the commission or fee if any, the margin requirement, and the circumstances in which a position is closed. The terms will state the account's currency and how a profit or loss is settled.

Opening an account requires identification, and the process takes a day or two. A practice account exists and costs nothing; it is the one way to see the platform and the contract's behaviour without putting money at risk. This site does not promise profit or safety, and does not state that the broker is licensed, registered or supervised in Sri Lanka. The reader should ask the broker for its regulatory status and read the terms before opening an account.

FxPro is not licensed by the Securities and Exchange Commission of Sri Lanka. An account is opened with a company regulated outside Sri Lanka - the group is authorised by the FCA in the United Kingdom and CySEC in Cyprus - so a resident here deals with a foreign firm and the protections of a locally licensed one do not apply. Sending money abroad for trading is subject to the exchange control rules of the Central Bank of Sri Lanka. Nothing on this site is investment advice.