Sun. Sep 15th, 2019

Business Owner And Stock Exchange?

4 min read

To grow and develop, companies need to constantly look for new sources of revenue and cost savings. Today we will tell you how stock exchange instruments help different types of business in this process.

Currency exchange at exchange rate

Companies perform foreign exchange transactions. Banks do not offer the most favorable rate. In order to avoid undesirable expenses, you can choose a more efficient method – trading directly on the Moscow Exchange currency market.

The exchange rate is always more profitable than the bank rate due to the absence of a bank markup for buying and selling.

To start buying or selling currency on the exchange, it is necessary to sign a contract with a broker, open a brokerage account (it can be done online), replenish it and start operations.

“Access to the currency section of the Moscow Exchange is needed for companies with settlements in foreign currency: importers/exporters, companies that attract financing in foreign currency, companies that buy foreign equipment.

Companies that perform conversion operations on a regular basis, or those who need a one-time conversion from $1 million/euro, will also benefit from this option.

The service becomes especially relevant in periods of high volatility in the market, because during these periods banks intentionally increase the selling price and reduce the currency purchase price, and the brokerage/exchange commission always remains fixed regardless of the market situation.

Now a new segment of the currency section is gaining momentum – the conversion of “soft” currencies of the CIS countries: the Kazakh tenge, the Belarusian ruble

Currency Swap

Sometimes companies get a cushion of free cash. Keeping them “dead weight” in the company’s account is a bad option, because no one canceled inflation. If a business has available funds, it is possible to “lend them” to the stock exchange for an additional percentage.

Placement of cash

Very similar to a currency swap instrument, only free roubles are given by the company under the pledge of liquid securities. The next day the reverse operation takes place, and the company also receives interest.

Insurance of currency risks

Hedging is a tool to protect a company from financial risks. The main objective of hedging is not speculation for the sake of additional income, but long-term financial planning.

It is an opportunity for the company to stabilize its financial condition and reduce the dependence of key indicators on currency fluctuations.

A common mistake in business is the use of hedging in an ad hoc manner: the dollar has “jumped” again or a new wave of ruble devaluation is coming, and everybody wants to hedge their capitals. However, hedging should be regular, implemented at the level of the organization’s policy practice. There is a need for a unified approach to financial risk management, which consists of

  • of the group’s major financial risks;
  • principles and methods of their assessment;
  • measures applied to limit financial risks;
  • the procedure of control and monitoring of financial risks.

Turnover of goods is 3 months. The cost of a hedge is, say, 9% per annum. All other things being equal, it means that your prices will be 2.25% higher than those of your competitors. But what happens if the euro increases by 7-10%, for example, in April-May 2018 or by 15% in April-July 2017? Competitors will be forced to raise prices to compensate for the fall in the rouble, but you won’t, thanks to insurance, which compensates for the unfavorable currency movement.

Turnover of goods is 3 months. The cost of a hedge is, say, 9% per annum. All other things being equal, it means that your prices will be 2.25% higher than those of your competitors. But what happens if the euro increases by 7-10%, for example, in April-May 2018 or by 15% in April-July 2017? Competitors will be forced to raise prices to compensate for the fall in the rouble, but you won’t, thanks to insurance, which compensates for the unfavorable currency movement.

Pledged financing of goods

This option is suitable for large companies (turnover of at least 1 billion rubles per year) engaged in the production, supply or storage of petroleum products or grain.
On the security of these products or for their purchase on the stock exchange, the company can receive financing on favorable and comfortable terms. At the same time, the money received is not a loan: it does not increase the credit burden on the company, as the basis of the purchase/sale transaction.

Brokerage service

Free company funds can be used for investments. For example, you can make a long-term investment portfolio with a clear financial plan for several years or regular dividend payments. Consult with the Broker and make a portfolio that is optimal for your purposes and the size of your capital.

An excellent mix of stock exchange instruments available for business can be made, which will help to significantly reduce costs and increase profits. A competent manager is always interested in saving and increasing profits, and a good broker is always interested in the profits of his client.

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