Buy high, sell low…

Executive summary
If you have ever watched currency exchange rates, you would notice that they fluctuate, up or down, depending
on factors affecting the economic health of countries1. Consider the following scenario:

1. Given that today’s exchange rate from GBP (Sterling) to EURO is 0.8609, Peter, buys 5000 worth of €s in
British Sterling, thus holding €4304.50, excluding commissions and charges payable to his broker.
2. The exchange rate from GBP (Sterling) to EURO drops to 0.85530, and, Peter sells back €4304.50 to British
Sterling, and, holds £ 5032.74 on his account.

Peter holds … Exchange rate Peter buys …

Day 1 €5,000.00 0.8609 £4,304.50
Day 2 £4,304.50 0.8553 € 5,032.74
What Peter earned … €5032.74 less €5000.00 €32.74

Thus, Peter has earned €32.74, solely because of the fluctuation in the exchange rates.

The simple concept of trading foreign currency can be leveraged by anyone possessing a calculator, or a
spreadsheet, thus empowering any individual with some spare cash, and, a personal computer to trade foreign
exchange rates and make some money.

Situation analysis, strategy and vision

Research suggests that fluctuations in exchange rates are usually caused by actual monetary flows as
well as by expectations of changes in monetary flows caused by changes in Gross Domestic Product
(GDP2), growth, inflation, interest rates, budget and trade deficits or surpluses, cross-border mergers
and acquisitions, and other macro-economic conditions.

Keeping abreast with financial news would help potential customers get more involved with the market
trends and be in a position to attempt to predict the fluctuation of exchange rates. Professional
financial advice is also available by recurring to a financial institution, although this would normally carry
consulting charges.

The idea behind this simple mathematical concept is to make some money, taking advantage of
exchange rate fluctuations, thus further financial analysis is considered beyond the scope of this
document.

1
For further information read 6 Factors That Influence Exchange Rates, an article written by Jason Van Bergen, available online at
http://www.investopedia.com/articles/basics/04/050704.asp, last accessed February 2011.
2
Wikipedia defines Gross Domestic Product (GDP), as the market value of all goods and services produced within a country in a given period. It
is often considered an indicator of a country’s standard of living. The definition is available at
http://en.wikipedia.org/wiki/Gross_domestic_product .
 In Malta, the Copyright Act 20003, and, the Intellectual Property Rights (Cross-Border Measures) Act
20004 establish the legal framework for protecting trademarks and regulating trademarks relating to
brand names and trademarks. The Malta Financial Services Authority 5 provides the legal framework for
licensing the provision of investment services, whilst the Office of Fair Trading, in Malta, is established to
ensure that consumer rights are protected 6.

Since the author is not a qualified legal advisor, it is suggested that independent legal advice is
undertaken to ensure mutatis mutandis, that the business plan benefits from the latest updates within
the legal framework, including legal notices issued by the Government of Malta 7.

From a technological point of view, it is envisaged that the development of a website that is available for
commonly used browsers8, and on smartphones9 would support the marketing of a foreign exchange
trading platform, which would enable a number of users (buyers and sellers) to trade a number of
currencies at pre-established exchange rates.

Initially vouchers for signing up to the trading platform will be distributed at conferences related to
finance and commerce (e.g. accounting students), and, also at supermarkets. This would enable us to
quantify the potential customers who are ready to sign up.

In order to pay the bills and promote a fair deal to the consumer, the trading platform is envisaged to:

 Charge a commission (see Table 1 on the following page) of the profit earned by the trader on
currency deals (buying or selling).
 Pay interest on money held with the trading platform, rates being competitive with those
provided by financial institutions.
 Pays a commission to referring customers who encourage new customers to sign up to the
scheme, based on the initial amount invested by the new customer, as an incentive to
encourage networking (see Table 1 on the following page).
 Promote trading of foreign exchange deals by publishing financial news on the website, and,
marketing through social media, online user forums, and, on other media (such as TV, online
and printed newspapers and magazine) that targets audience interested in financial markets.
 Provide professional financial advise at a charge (upon request), by certified professionals
working for the trading platform. Advice would be available upon request, by telephone, email,
or live chat, through the website.

3
The Copyright Act 2000 is available [online] at http://www.commonlii.org/mt/legis/consol_act/ca133.pdf, last accessed February 2011.
4
The Intellectual Property Rights (Cross-Border Measures) Act is available [online] at
http://www.commonlii.org/mt/legis/consol_act/iprma561.pdf, last accessed February 2011.
5
For further information refer to the Malta Financial Services Authority website, available at http://www.mfsa.com.mt/pages/default.aspx.
6
For basic information refer to Consumer Rights available at http://www.eccnetmalta.gov.mt/consumer_rights.
7
For further information refer to the Department of Information website, available at http://www.doi.gov.mt/EN/parliamentacts/malta
%20legislation.asp, last accessed February 2011.
8
For further information see article titled Internet Browser Software Review 2011, available at http://internet-browser-
review.toptenreviews.com, which ranks internet browsers by popularity. Last accessed February 2011.
9
Wikipedia defines a Smart phone as a mobile phone that offers more advanced computing ability and connectivity than a contemporary
feature phone. Further information is available at http://en.wikipedia.org/wiki/Smartphone. Last accessed February 2011.
 Equivalent amount invested Commission payable Commission payable
to customer to referring
customer
Up to €500 3% 2%
€500 to €1,000 4% 3%
€1,000 to €1,000,000 0.2% 0.2%
€1,000,000 upwards 0.1% 0.1%
Table 1 - Commissions

Although market research has to be carried out in this area, the provision of financial services and
business advisory services is a highly competitive market, and, an in-depth analysis is suggested to be
carried out to ensure feasibility of this project.

Market research still has to be carried out to establish the potential market size, and, initial target
segments that would sign up, encourage peers to sign up. The initial focus group will be personal
customers, having relatively small amounts (e.g. starting from €500) to spare. Corporate customers and
high-net worth individuals are not expected to join the scheme, since these markets are successfully
tapped by the larger financial institutions, in the author’s opinion.

Research indicates that cold-calling is considered to be an unsophisticated way of targeting potential

investors which may negatively affect on the professional image of a financial advisor selling using soft
skills which are considered more ethical. Thus this option will not be considered for this campaign.

Strengths
 Trading can be easily done by numeric and
computer literate persons armed with a
calculator, an internet browser, and,
ideally a spreadsheet
 Business model is transparent and easy to
understand i.e. take it or leave it
Opportunities
 Customers can earn some money and
mimic financial advisors who continuously
exploit financial markets, and, thus
motivate them to carry out business sitting
behind a personal computer or hitting a
few keys on their Smartphone.
 The foreign exchange trading platform is
expected to tap into the personal
customer market.

Weaknesses Threats
 Foreign exchange trading can be risky for  Existing financial services providers and
the customer due to the dynamic foreign exchange trading platforms
fluctuation of exchange rates available internationally
Financials and controls
In order to establish how much money we need to invest in the trading platform, it is being suggested to
draw up a business plan, which is envisaged to be carried out at a later stage. No sales and market
forecasts are available to date either.

Revenues earned by the customers and aggregates of the commissions and charges earned by the
trading platform is envisaged to be included within the design of the trading platform, as this would
enable the entrepreneur to monitor revenues being earned, and, to further segment the market using
mathematical and statistical methods.

At a high level, the marketing campaign is expected to include the following activities:

Campaign activity Expected duration Pre-requisite(s)

Distribute flyers asking potential customers to sign 2 weeks to 1 month Flyers to be
up at conferences and supermarkets. designed printed.

The initial focus group will provide information to Project budget to

enable the marketer (project manager) to ensure be drafted.
business feasibility of the campaign being proposed.

Recruitment or sub-contracting of professional 1 month Project budget and

financial advisors. campaign financing
to be approved.

Human resources
requirements,
budget to be
planned.
Design of website that enables potential customers 1 month to 6 months Project budget and
to trade foreign exchange including a version for campaign financing
Smart phones. to be approved.

Initially a prototype is suggested to be available to Technical feasibility

customers who sign up for a trial period. and business
feasibility
(sampling) after
initial feedback.
Quantify potential customers, personal details, 1 week Database design to
demographic data (e.g. age, location, and, disposable be created and
income). organized.

Number crunching and analysis of customers.

Budget review and campaign success monitoring Ongoing
The above activities are not sequential and may be carried out in parallel, depending on the human,
technological, and, financial resources assigned to carry out the work at hand.

References
1. Porter generic strategies article available at http://en.wikipedia.org/wiki/Porter_generic_strategies,
last accessed February 2011.
2. European Central Bank website available at http://www.ecb.int/ecb/html/index.en.html, last accessed February 2011.
3. Foreign exchange market article available at http://en.wikipedia.org/wiki/Foreign_exchange_market, last accessed February 2011.
4. 6 Factors That Influence Exchange Rates by Jason Van Bergen, available at
http://www.investopedia.com/articles/basics/04/050704.asp, last accessed February 2011.
5. Paul Mc Cord, Lead Generation: Does Cold Calling Work article available at
http://www.eyesonsales.com/content/article/lead_generation_does_cold_calling_work, last accessed February 2011.