FOREIGN EXCHANGE TRADING:

PRODUCT PLAN

Prepared by: (Provide Name of Officer) (Provide Name of Company)

Description/Definition
Foreign exchange trading involves the buying and selling of one currency in exchange for another e.g. USD against JAD, KYD against JAD, USD against GBP, USD against CAD, USD against JAD etc. With spot trading, settlement must occur within two (2) days of initial trade or risk cancellation or other penalty. Generally, settlement must occur on the day of initial agreement. However, when trading with international entities, settlement is extended to two days from confirmation. Forward trading involves an agreement to buy/sell one currency for another at some specified rate in the future on a specified date in the future. Ideally, one should buy at a low price and sell at a higher price, allowing a spread. However, due to uncertainty in the market, a profit is never guaranteed and one can often break even or make a loss depending on the actions of the market.

Target Market/Customers
The target markets are those individuals or groups who are importers or exporters of foreign goods or services. These include: Hotels, Jewellers, Automobile Dealers, Food Importers/ Exporters, Airlines, Pharmaceutical Distributors, Telephone Companies, Insurance Companies, Brokerage Companies, Cambios and Authorised Dealers.

Cost/Benefit Analysis
Benefits Fx trading has a 24-hour market. Thus profit can be made around the clock, since at every hour in the day some market in the world is still open. The Fx trading market is a very liquid one. At the end of the day, one is able to use the same funds, which was used to trade, and invest in the securities market without any complications. Fx trading can be used as a hedging strategy to provide protection against adverse movements in exchange rates that affect the companys revenue or holdings

In times of great volatility, Fx trading can be very profitable.

Costs See Risk & Management below. Prepared by: (Provide Name of Officer) (Provide Name of Company)

Risks & Management

Foreign Exchange Trading is exposed to risks daily and as such, these need to be hedged to prevent unnecessary losses to (Provide Name of Company). I. Losses due to charges: To hedge against these, (Provide Name of Company) charges fees for services rendered which incur a cost to us. These include: Transaction Type Managers cheques Wire Transfer Stop Payment orders (JAD) Stop Payment orders (CAD) Stop Payment orders (GBP) Stop Payment orders (USD) Cash Lodgement Applicable Fee JAD $ USD $ JAD $ CAD $ GBP $ USD $ 0.0%

The above fees are based on the charges, which (Provide Name of Company) incur transacting with commercial banks and helps minimise losses and maximise gains. II. Negative Spreads To prevent this, as much as possible, all purchases should be matched with sales, with sales obviously negotiated at a higher price. However, this may not always be possible, and so in times of great volatility, a position should not be kept of more than US$amount or its equivalent unless authorized by the Treasury Manager or a higher authority. III. Losses due to stipulated surrenders: Each day, a minimum of X percent (X%), up to a maximum of Y percent (Y%) of all commercial purchases must be surrendered to the Central Bank at the days weighted average selling rate. To prevent transactional losses, it is critical that Traders factor surrender prices in determining their overall selling prices. In addition, when surrenders may incur losses due to the rate at which currency was purchased, only X percent (X% the lower surrender limit) should be surrendered as opposed to the optional Y percent (Y%).

Prepared by: (Provide Name of Officer) (Provide Name of Company)

IV. Settlement/Default Risk: This refers to the risk that a client may not settle within two days, resulting in losses due to overdraft, or the opportunity cost of not being able to use the funds at a specific time. In such cases, (Provide Name of Company) reserves the right to cancel the transaction or charge interest on funds extended for late payment. In all transactions, (Provide Name of Company) runs the risk that the counterparty may default on a transaction. To avoid this, especially with transactions in excess of US$amount, the traders should prepare confirmation letters which should be signed by counterparty before any payment is made. V. Credit Risk This refers to the risk that cheques accepted might be returned by the bank due to lack of funds in the counterparts account. To reduce this risk, personal cheques should not be accepted until a relationship is established with a client. Until approved, only certified cheques should be accepted from the customer. Operating Structure The operating Structure of (Provide Name of Company) is such that the foreign exchange traders are responsible for the confirmation of all trades up to a maximum of USD$amount or its equivalent in other currencies. For trades in excess of this amount, authorization must me sought from the Treasury Manager, before the trade is confirmed. Upon Authorization, a contract note should be prepared by the trader, which should specify the rate and amount of the trade (see Internal Documentation below). This contract note should be checked and signed by the Operations Manager and then be passed on to the Operations Clerk to prepare the relevant cheque. A copy of the signed cheque should be kept on file and the original passed on to the cashier to await payment/collection to/from the counterparty. Payment may also be passed on to an authorised (Provide Name of Company) bearer who should deliver the relevant cheque and return payment to (Provide Name of Company). Clients/Bearers should sign for all cheques/cash received, and the relevant document kept on file, to determine liability in the event of loss, theft or other.

Prepared by: (Provide Name of Officer) (Provide Name of Company)

Accounting Guide Purchasing: Currency USD Debit USD Base Account Bank USD Account/ Broker USD Account GBP Base Account Bank GBP Account CAD Base Account Bank CAD Account Credit Bank JAD Account USD Position Account

GBP

Bank JAD Account GBP Position Account Bank JAD Account CAD Position Account

CAD

Selling: Currency USD Debit USD Position Account Bank JAD Account Credit USD Base Account Bank USD Account/ Broker USD Account GBP Base Account Broker GBP Account CAD Base Account Broker CAD Account

GBP

GBP Position Account Bank JAD Account CAD Position Account Bank JAD Account

CAD

Regulatory Issues
(Provide Name of Company) is governed by the Central Bank of (Country). The company and its Traders are bound to certain regulatory provisions which speak to proper procedure in regards to: The Purchase and Sale of Foreign Exchange Surrender to the Central Bank Reporting Maintenance of Bank Accounts Examination of Accounts

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The companys Fx trading operations are also guided by the duration and Renewal of its Fx Trading licence and prescribed fees. All trading is supervised by local and international Anti-Money Laundering Guidelines. (These guidelines are readily available online).

Taxation
The profit accumulated from foreign exchange trading is not directly taxable. However, the company is subject to taxation when corporate taxes are being paid at a rate of (provide tax rate applicable).

Internal Documentation
In addition to the recording of all transactions on the respective positions, all confirmed transactions should be recorded on a contract note, which specifies the: Transaction Type Counterparty Current, Effective & Settlement Date Currency Amount Exchange rate Other Currency Equivalent Charges Payee Cheque No.

All contract notes should be signed by at least one of the directors before any payments are made. All external correspondence concerning the settlement of a trade should be signed by at least two of the directors and /or managers, before being dispatched to counter parties.

Prepared by: (Provide Name of Officer) (Provide Name of Company)