In order to satisfy the growing demand of Indian investors, Spread Co has created a new financial product which has the benefits of traditional share trading and offering leverage. The new asset class is known as Premium Securities.
Premium Securities Overview
Trading FX Premium Securities is the new way to trade a range of different currency pairs, and all from one online trading account at your fingertips. Our goal is to make your FX trading experience efficient and enjoyable, and support you in what you are looking to achieve.
Puts you in control of your own trading
You can see the prices you are trading at. You can choose to deal straight away or place orders to deal at a future time. You can trade everything simply from one account at your fingertips. You really are in control of your own trading.
Deal in small or large amounts
Unlike trading physical shares, when trading Premium Securities with us, you can trade as little as one share, one index unit and five thousand units of currency in certain instruments.
Instant execution of trades
When trading Premium Securities with Spread Co, your trade will be confirmed almost immediately you select the buy / sell button (this is subject to the deal or order size being within permitted limits and the instrument being priced correctly.) You should not have to wait more than a few seconds for prices to be confirmed, except in unusual market circumstances.
Flexibility - Ability to Hold an Investment in a Buy or Sell Position
Premium Securities give you the flexibility to go long or short. If you buy (go long) a Premium Security, you will make profits should the market price rise and incur losses if market price falls. On the contrary, if you sell (go short) a Premium Security, you will make profits if market price falls and incur losses if market price rises.
Medium Risk Trading
Premium Security trading can be considered medium risk. Unlike margin trading, where you can lose more than your initial margin, losses are limited to the Investment Amount (as increased by top ups you elect to make). Once your Investment Amount falls to zero, your investment will be automatically liquidated. You are protected by Spread Co who automatically creates a stop loss when you open a position for investment.
Access to a range of Global Currency Pairs
Spread Co provides access to a large number of currency pairs - from highly liquid G7 currencies to some of the more exotic currencies.
Extended Trading Hours
24 hours between 10pm on Sunday evening (GMT) to 10pm on Friday evening (GMT), markets are open and available for trading.
Leverage
Premium Securities are leveraged financial instruments. When you buy or sell Premium Securities, you only need a fraction of the nominal amount - the “valuation”. If the market moves in your favour, your valuation will increase. If the market moves against your favour, your valuation will decrease. The maximum amount you can lose is the initial Investment Amount (as increased by top ups you elect to make). Unlike margined products, profits are potentially unlimited while losses are limited.
Earn interest
You will have the potential to earn financing interest when buying/selling a FX Premium Security Investment..
No Physical Settlement
Foreign Exchange Premium Securities are also always cash settled. The purchase of a foreign exchange Premium Securities contract is made through a cash Investment Amount. Similarly, upon the sale of the Premium Securities contract the sales proceeds are credited back to your account as a cash payment.
Brand New Product Class
Premium Securities are a new product and launched as collaboration between Anand Rathi and Spread Co. We are the first to launch this product. Please click here to get more information regarding Premium Securities.
Competitive prices
We believe we are one of the most competitive providers in the marketplace for the instruments we offer. See our Fees List for full details of the current charges.
New technology with additional features
ou can customise your trading screen and lay it out how you want to see it. You can also store numerous layouts for easy access to what you need to see quickly. Alternatively you can simply use the default versions Spread Co will provide you with. See User Guides for more details.
Transparency
Spread Co provides total transparency on your trading history through daily and monthly statements. These will be emailed to you and are also always available through the trading system itself.
See Daily Statements and Monthly Statements for examples of these.
What is a FX
The foreign exchange (FX or Forex) market is where the world trades currencies. It is the largest, most heavily traded market in the world, with an estimated daily turnover of US$1.9 trillion. It is a true 24-hour market from Sunday 10:00 PM GMT to Friday 10:00PM GMT. Trading starts every day in Sydney and then moves round the world as the business day starts in each financial centre; Tokyo, then London, then New York.
This means that, unlike any other financial market, traders can respond to currency fluctuations caused by economic, social and political events at the time they occur, without having to wait until the relevant Exchange opens.
Spread Co enables you to trade foreign exchange using FX Premium Securities which simulate the price performance of an exchange rate without the need to physically own the relevant currencies.
Currency pairs
During an FX Premium Securities trade, you buy one currency while simultaneously selling another in order to pay for the first currency.
The two currencies which are the subject of a single FX trade are referred to as a currency pair. For example, USDJPY is a commonly traded currency pair. USD stands for United States Dollar and JPY stands for Japanese Yen. The most commonly traded (and therefore most liquid) currencies are known as the “Majors” and this includes the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. Each currency is referred to for the purposes of FX trading by a three-letter code.
The first currency in a currency pair is called the 'base currency'. The second currency in a currency pair is called the 'quote' or' term currency'. The exchange rate quoted for the purposes of FX trading is how much of the quote currency you need to sell in order to buy one unit of the base currency.
Quotation principles
Exchange rates are almost always quoted with five significant figures. This means that most currencies are quoted to the ten thousandth of a currency unit. For example, 1.8525 would be a valid quote for GBPUSD.
The smallest possible exchange rate movement is called a pip. For example, GBPUSD can increase by 0.0001 from 1.8500 to 1.8501, therefore one pip is equal to 0.0001 for GBPUSD. USDJPY can increase by 0.01 from 115.00 to 115.01 therefore one pip is equal to 0.01 for USDJPY. If USDJPY goes up by 0.15, you would say, "USDJPY went up 15 pips".
The Spread
The spread, also known as “the dealing spread” or “the Buy/Sell spread”, is the difference between the prices at which you can buy and sell.
The spread is how market makers such as Spread Co are compensated for creating a market for you to trade FX. A wide or large spread is more expensive to you. A narrow or small spread is cheaper for you.
The size of the spread represents how much the market must move in your favour before you begin to make a trading profit. Your trades will always begin at a loss calculated by multiplying the trade quantity by the size of the dealing spread.
For example, if you buy 100,000 USDJPY at a JPY 0.03 spread, your trade will begin at a JPY 3000 loss. See more examples on the left.
Popular currency codes
| AUD | Australian Dollar |
| CAD | Canadian Dollar |
| CHF | Swiss Franc |
| EUR | Euro |
| GBP | British Pound |
| JPY | Japanese Yen |
| NZD | New Zealand Dollar |
| SGD | Singapore Dollar |
| USD | US Dollar |
If the exchange rate for USDJPY is 115.00, you must sell 115.00 Japanese Yen to purchase 1.00 US dollars. This means:
- When you BUY ("go long") 100,000 USDJPY, you buy 100,000 USD while simultaneously selling 11,500,000 JPY.
- When you SELL ("go short") 100,000 USDJPY, you sell 100,000 USD while simultaneously buying 11,500,000 JPY.
The underlying instrument for a Spot Gold Premium Securities is one troy ounce of gold. If Spot Gold is trading at $700.00 - $701.00 per one troy ounce of gold, then Spread Co will quote a price for Spot Gold Premium Securities at or around this price. For example: $700.30 – 700.80.
Example of the Spread
If Spread Co is quoting GBPUSD at 1.7895 / 1.7900, the lower figure (1.7895) is the sell price and the higher figure (1.7900) is the buy price. This means that you can sell GBPUSD at 1.7895 and buy at 1.7900*.
*Subject to quantity limits set according to current market depth and other conditions.
Trading FX
The two main ways to profit from FX trading are as follows:
1. Buy at one exchange rate then sell at a higher rate
e.g. Buying USDJPY at 115.00 and selling USDJPY at 117.00 means a trading profit of 2 JPY per USD. If you buy and sell 100,000 USDJPY, your profit would be JPY 200,000.
2. Sell at one exchange rate then buy at a lower rate
e.g. Selling GBPUSD at 1.8500 and buying GBPUSD at 1.8300 means a trading profit of USD 0.02 per GBP. If you sell and buy 100,000 GBPUSD, your profit would be USD 2,000.
The two main ways to lose in FX trading are to:
1. Buy at one exchange rate then sell at a lower rate
e.g. Buying USDJPY at 115.00 and selling USDJPY at 113.00 means a trading loss of 2 JPY per USD. If you buy and sell 100,000 USD at these rates, your loss would be JPY 200,000.
2. Sell at one exchange rate then buy at a higher rate
e.g. Selling GBPUSD at 1.8500 and buying GBPUSD at 1.8700 means a trading loss of USD 0.02 per GBP. If you sell and buy 100,000 GBP at these rates, your loss would be USD 2,000.
Example Trades
To help you understand how FX trading works, here are two example trades:
USD account - Profit Making Long Investment
GBP/USD is trading at 2.0101/04 and you feel that the price is going to rise in value. You decide to go long so you buy 100,000 GBP/USD Premium Security at 2.0104. You now hold a buy investment of 100,000 GBP/USD at 2.0104 with a contract size of $201,040 (100,000 x 2.0104). A sell stop loss order has been created by Spreadco to protect your investment.
The Investment Amount required for this investment is USD$4,020.80{(100,000/50) x 2.0104}. This amount will be allotted to this investment and debited from your account. If the market moves against you, the maximum amount of losses that you will incur will be limited to $4,020.80, the Investment Amount.
You decide to hold the investment overnight. GBP/USD closed at 2.0110. Financing credits for one day = (Closing Price x Financing Interest Rate)/Days in calendar year = (2.0110 x 2%)/365 days = $0.0001101. Your financing credits will be less off from your traded price of 2.0104. Your adjusted traded price will be 2.0104 - 0.0001101 = 2.0102899. As a result of the financing credits, you are now long 100,000 GBP/USD at the price of 2.0102899.
On the next day, the price of GBP/USD rose to 2.0140/2.0143 and you decide to sell the investment to collect your profits. You sell 100,000 GBP/USD at 2.0140. Your sell stop loss order has been automatically cancelled by Spread Co.
Initially, you bought 100,000 GBP/USD at 2.0104, then your traded price was adjusted to 2.0102883 and later you sold 100,000 GBP/USD at $2.0140. As a result, you made a profit of $371.01 [(2.0140 – 2.0102899) x 100,000]. Your Investment Amount of $4,020.80 and profits of $371.01 will be credited back to your account.
USD account - Loss Making Short Investment
EUR/USD is trading at 1.4098/1.4101 and you feel that the price is going to fall in value. You decide to go short so you sell 100,000 EUR/USD Premium Security at 1.4098. You now have a sell investment of 100,000 EUR/USD at 1.4098 with a contract size of $140,980 (100,000 x $1.4098). A buy stop loss order has been created by Spread Co to protect your investment.
The Investment Amount required for this investment is $2,819.60 {(100,000/50) x 1.4098}. This amount will be allotted to this investment and debited from your account. If the market moves against you, the maximum amount of losses that you will incur will be limited to $2,819.60, the Investment Amount.
You decide to hold the investment overnight. EUR/USD closed at 1.4085. Financing credits for one day = (Closing Price x Financing Interest Rate) / Days in calendar year = (1.4085 x 2%)/ 365 day = $0.0000771. As you are selling Euro Dollar which has a higher interest rate compare to US Dollar, you will be charged with financing differential. The financing debit is adjusted into the traded price of $1.4098. Your adjusted traded price will be $1.4098 – 0.0000771 = $1.4097229. As a result of the financing debits, you are now short 100,000 EUR/USD Premium Security at the price of 1.4097229.
On the next day, the price of EUR/USD rose to 1.4110/13 and you intend to buy your investment back to realize your losses. You buy 100,000 EUR/USD at 1.4113. Your buy stop loss order has been automatically cancelled by Spreadco.
Initially, you sold 100,000 EUR/USD Premium Security at 1.4098 and then your trade price was adjusted to 1.4097229 and later you bought 100,000 EUR/USD at 1.4113. As a result, you incurred a loss of -$157.71 [(1.4097229 – 1.4113) x 100,000]. Your Investment amount of $2,819.60 less losses of $157.71 = $2,661.89 will be credit back to your account.
Charges
There are two main costs when you invest in FX. The first are daily rollover financing charges. Your trade price will be adjusted to receive a rollover financing credit for being long in a higher interest yielding currency and short in a lower interest yielding currency. Conversely, your trade price will be adjusted to incur a rollover financing debit for being short in a higher interest yielding currency and long in a lower interest yielding currency.
The second cost is the dealing spread. The dealing spread is an indirect cost of buying and selling Premium Securities that is incurred both when you place a trade and when you close the associated position. As mentioned, the spread is difference between the Buy and Sell rates at which you can buy and sell the Premium Securities.
Financing
When you hold a Premium Security overnight, you will pay or receive financing interest. If you have an investment with a buy position in a higher interest yielding currency and short in a lower interest yielding currency, you will receive financing credit. If you have an investment with a buy position in a lower interest yielding currency and short in a higher interest yielding currency, you will incur financing debit. Financing is adjusted into the traded price and funds are not debited or credited to your account.
You sold 100,000 USDJPY Premium Securities at 103.00. USDJPY closed at 103.50 that day.
Since USD has a higher interest than JPY, you will have to pay financing charges.
Financing charges paid by you = [103.50 x 3.75% / 360 days] x 1 day = 0.0107812
On day 2, the adjusted trade price = 103.00 – 0.0107812 = 102.98922. You are selling at a slightly lower price because of financing charges.
You bought 100,000 USDJPY Premium Securities at 103.00. USDJPY closed at 103.50 that day.
Since USD has a higher interest than JPY, you will receive financing credits.
Financing credits received by you = [103.50 x 3.75% / 360 days] x 1 day = 0.0107812
On the day 2, the adjusted trade price = 103.00 – 0.0107812 = 102.98922. You are buying at a slightly lower price because of financing credits.
How to calculate Financing
Financing = [Closing Price X Interest Rate] / days X days in calendar year
- Closing Price : Price at which the Premium Security closed at.
- Interest rate : interest rate is based on the interbank overnight interest rate plus a haircut charged by Spread Co. The haircut is essentially Spread Co’s mark up.
- Days : Number of days to charge financing.
Days in calendar year : 360 or 365 days, depending on the instrument