Foreign exchange broker

Foreign exchange brokers buy and sell foreign currencies on behalf of their clients to secure a profit on fluctuations in foreign exchange rates. They undertake technical analysis of financial information, such as market liquidity and volatility, to predict the future rates of currencies on the foreign exchange market.

Foreign exchange brokers typically do the following duties:

• Contact prospective clients to present information and explain terms of service
• Offer advice on the purchase or sale of currencies
• Buy and sell currencies
• Monitor financial markets and the performance of currencies.

Most foreign exchange transactions are between pairs of the currencies of the 10 nations that make up the G10. The nations and their currencies include the U.S. dollar (USD), the Euro (EUR), the pound sterling (GBP), the Japanese yen (JPY), the Australian dollar (AUD), the New Zealand dollar (NZD), the Canadian dollar (CAD), and the Swiss franc (CHF).

Most foreign exchange brokers allow customers to trade in other currencies, including those of emerging markets.

The following job titles also refer to foreign exchange broker:

broker in foreign exchange
forex traders
forex broker
forex brokers
foreign exchange traders
forex trader
fx broker

Most foreign exchange brokers work many hours under stressful conditions. The pace of work is fast, and managers are usually demanding of their workers, because both commissions and advancements are tied to sales.

Because computers can conduct trades faster than people can, electronic trading is quickly replacing verbal auction-style trades on exchange floors. The environment of the stock exchange is changing as a result, with more traders carrying out orders behind a desk and fewer working on the exchange floor.

Foreign exchange brokers usually work full time and some work more than 40 hours per week. In addition, they may work evenings and weekends because many of their clients work during the day.

Foreign exchange brokers typically need a bachelor’s degree to enter the occupation. A common field of degree is business, which usually includes coursework in topics such as finance, accounting, and economics. Summer internships often provide useful experience, and employers may prefer to hire candidates who have worked as interns.

Most employers provide intensive on-the-job training, teaching employees the specifics of the job, such as the products and services offered.

Most of the time, a license is required to work as a foreign exchange broker. The conditions vary based on the location of the position, but it often involves passing an exam.

ISCO skill level is defined as a function of the complexity and range of tasks and duties to be performed in an occupation. It is measured on a scale from 1 to 4, with 1 the lowest level and 4 the highest, by considering:

• the nature of the work performed in an occupation in relation to the characteristic tasks and duties
• the level of formal education required for competent performance of the tasks and duties involved and
• the amount of informal on-the-job training and/or previous experience in a related occupation required for competent performance of these tasks and duties.

Foreign exchange broker is a Skill level 3 occupation.

These occupations, although different, require a lot of knowledge and skills similar to foreign exchange broker.

foreign exchange trader
commodity trader
futures trader
commodity broker
securities underwriter

These occupations require some skills and knowledge of foreign exchange broker. They also require other skills and knowledge, but at a higher ISCO skill level, meaning these occupations are accessible from a position of foreign exchange broker with a significant experience and/or extensive training.

securities analyst
investment fund management assistant
investment analyst
corporate banking manager
middle office analyst

This knowledge should be acquired through learning to fulfill the role of foreign exchange broker.

• Foreign valuta: The currencies of different countries such as the euro, dollar or yen including their exchange rate and the methods of currency conversion.
• Economics: Economic principles and practices, financial and commodity markets, banking and the analysis of financial data.
• Financial markets: The financial infrastructure which permits trading securities offered by companies and individuals govern by regulatory financial frameworks.
• Commercial law: The legal regulations that govern a specific commercial activity.
• Financial jurisdiction: Financial rules and procedures applicable to a certain location, whose regulatory bodies decide on its jurisdiction

These skills are necessary for the role of foreign exchange broker.

• Analyse market financial trends: Monitor and forecast the tendencies of a financial market to move in a particular direction over time.
• Perform financial risk management in international trade: Evaluate and manage the possibility of financial loss and non-payment following international transactions, in the context of foreign exchange market; apply instruments like letters of credit.
• Analyse economic trends: Analyse developments in national or international trade, business relations, banking, and developments in public finance and how these factors interact with one another in a given economic context.
• Trade foreign currencies: Buy or sell foreign currencies or valuta on the foreign exchange market on your own account or on behalf of a customer or institution in order to make a profit.
• Advise on financial matters: Consult, advise, and propose solutions with regards to financial management such as acquiring new assets, incurring in investments, and tax efficiency methods.
• Apply technical communication skills: Explain technical details to non-technical customers, stakeholders, or any other interested parties in a clear and concise manner.
• Analyse financial risk: Identify and analyse risks that could impact an organisation or individual financially, such as credit and market risks, and propose solutions to cover against those risks.
• Forecast economic trends: Gather and analyse economic data in order to predict economic trends and events.

This knowledge is sometimes, but not always, required for the role of foreign exchange broker. However, mastering this knowledge allows you to have more opportunities for career development.

• Financial products: The different types of instruments that apply to the management of cash flow that are available on the market, such as shares, bonds, options or funds.
• International trade: The economic practise and study field that address the exchange of goods and services across geographic borders. The general theories and schools of thought around the implications of international trade in terms of exports, imports, competitivity, GDP, and role of multinational companies.
• Banking activities: The broad and continuously growing banking activities and financial products managed by banks ranging from personal banking, corporate banking, investment banking, private banking, up to insurance, foreign exchange trading, commodity trading, trading in equities, futures and options trading.
• International commercial transactions rules: Pre-defined commercial terms used in international commercial transactions which stipulate clear tasks, costs and risks associated with the delivery of goods and services.
• Securities: The financial instruments traded in financial markets representing both the right of property over the owner and at the same time, the obligation of payment over the issuer. The aim of securities which is raising capital and hedging risk in financial markets.
• Statistics: The study of statistical theory, methods and practices such as collection, organisation, analysis, interpretation and presentation of data. It deals with all aspects of data including the planning of data collection in terms of the design of surveys and experiments in order to forecast and plan work-related activities.
• Stock market: The market in which shares of publicly held companies are issued and traded.
• Actuarial science: The rules of applying mathematical and statistical techniques to determine potential or existing risks in various industries, such as finance or insurance.
• Accounting: The documentation and processing of data regarding financial activities.

These skills and competences are sometimes, but not always, required for the role of foreign exchange broker. However, mastering these skills and competences allows you to have more opportunities for career development.

• Trace financial transactions: Observe, track and analyse financial transactions made in companies or in banks. Determine the validity of the transaction and check for suspicious or high-risk transactions in order to avoid mismanagement.
• Perform stock valuation: Analyse, calculate and appraise the value of the stock of a company. Use mathematic and logarithm in order to determine the value in consideration of different variables.
• Protect client interests: Protect the interests and needs of a client by taking necessary actions, and researching all possibilities, to ensure that the client obtains their favoured outcome.
• Review investment portfolios: Meet with clients to review or update an investment portfolio and provide financial advice on investments.
• Maintain records of financial transactions: Collate all the financial transactions done in the daily operations of a business and record them in their respective accounts.
• Communicate with banking professionals: Communicate with professionals in the field of banking in order to obtain information on a specific financial case or project for personal or business purposes, or on behalf of a client.
• Negotiate with stakeholders: Negotiate compromises with stakeholders and strive to reach the most beneficial agreements for the company. May involve building relationships with suppliers and customers, as well as ensuring products are profitable.
• Operate financial instruments: Work with financial instruments such as stocks, bonds, mutual funds and derivatives.
• Monitor stock market: Observe and analyse the stock market and its trends on a daily basis to gather up-to-date information in order to develop investment strategies.
• Trade securities: Buy or sell tradable financial products such as equity and debt securities on your own account or on behalf of a private customer, corporate customer or credit institution.
• Build business relationships: Establish a positive, long-term relationship between organisations and interested third parties such as suppliers, distributors, shareholders and other stakeholders in order to inform them of the organisation and its objectives.
• Provide financial product information: Give the customer or client information about financial products, the financial market, insurances, loans or other types of financial data.
• Handle financial transactions: Administer currencies, financial exchange activities, deposits as well as company and voucher payments. Prepare and manage guest accounts and take payments by cash, credit card and debit card.

3311 – Securities and finance dealers and brokers

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References

1. Foreign exchange broker – ESCO
2. Securities, Commodities, and Financial Services Sales Agents : Occupational Outlook Handbook – U.S. Bureau of Labor Statistics
3. Forex Broker: Definition, Role, Regulation, and Compensation – Investopedia
4. Featured image: Photo by m. on Unsplash