Buy high, sell low…

Executive summary
This brief summarizes the introduction of a foreign exchange trading platform for investors who are willing to
spend their time watching exchange rates fluctuate.

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, sells 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 carry
consulting charges.

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 .

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

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 7.

The Malta Financial Services Authority 8 reports that “Malta continued to be highly ranked for its
performance in the financial sector. The World Economic Forum’s Global Competitiveness Index 2009-
2010 ranked Malta 13th out of 133 countries for its financial market sophistication, while the banking
system was reported to be the 13th soundest in the world.”.

The report further states that “new licenses were granted by the Malta Financial Services Authority in
2009”.

From a technological point of view, it is envisaged that the development of a website that is available for
commonly used browsers9, and on smartphones10 would support the marketing of a foreign exchange
trading platform, which would enable a buyers and sellers to trade a number of currencies at pre-
established exchange rates. Exchange rates are calculated in a way as to allow the business to earn a
profit from the difference between the buying and the selling exchange rates, as is common practice
within the financial services industry. Moreover, research 11 indicates that the popularity for
smartphones is expected to increase due to falling prices in consumer prices, and, sales are expected to
retain an upward trend, particularly in emerging markets.

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 help the
marketer quantify the potential customers who are ready to sign up.

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
Independent legal advice is suggested to be undertaken to ensure, that the business plan benefits from the latest updates within the legal
framework, including legal notices issued by the Government of Malta.
For 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
Media Release titled Finance sector growth continues with new licenses in every sector and employment
Numbers up, says MFSA annual report (2009), available online at http://www.mfsa.com.mt/Files/Announcements/PressReleases/Media
%20Release%2006-2010%20MFSA%20AR2009.pdf, last accessed March 2011.
9
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.
10
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.
11
Iohana Georgescu writes an article forecasting trends titled, In 2011 Smartphones to become more affordable, sell a lot, available at
http://www.metrolic.com/in-2011-smartphones-to-become-more-affordable-sell-a-lot-more-154023/, last accessed March 2011.

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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; ideally rates would be 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 and promote the services through viral marketing (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.
Advice would be available upon request, by telephone, email, or live chat feature available on
the website.

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

The provision of financial services and business advisory services is a highly competitive market, and, a
feasibility study 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, and, the commission
structure (see Table 1) is intended to attract an initial large number of customers holding smaller
amounts of disposable funds. Should they be successful in making profit investors would be motivated
in topping up more dispensable liquidity for trading on the platform. Corporate customers and high-net
worth individuals are not expected to join the scheme, since the market is successfully tapped by
established financial institutions.

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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.

Strengths
 Trading can be easily done by numeric and
computer literate persons armed with a
calculator, an internet browser, and,
ideally a personal computer that has
access to a spreadsheet solution i.e. easy
to learn.
 Business model is transparent and easy to
understand i.e. take it or leave it.
Opportunities
 The foreign exchange trading platform is
expected to tap into the personal
customer market, and, attract a large
number of small deposits, initially.
 Customers are motivated by the
opportunity to influence money markets
collectively.
 International reach of the trading
platform, with the exception of countries
where this practice might be prohibited 12.

Weaknesses Threats
 Foreign exchange trading can be risky for  Strong competition. Existing financial
the customers due to the dynamic services providers and foreign exchange
fluctuation of exchange rates trading platforms available internationally.

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Since the Internet is commonly accessible, this would pose no technological implications on the business, since a country which might restrict
persons from accessing websites is expected to take the necessary measures to implement this decision. However legal advice is to be taken to
ensure the appropriate disclaimers are used on the trading platform’s website.

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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. No sales and market forecasts are available to date either to forecast the
expected revenues at the time of writing.

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 up at 2 weeks to 1 month Flyers to be designed
conferences and supermarkets. printed.

The initial focus group will provide information to enable Project budget to be
the marketer (project manager) to ensure business drafted.
feasibility of the campaign being proposed.
Legal requirements
to be met and
approval from the
Malta Financial
Services Authority,
which requires
professional business
advice.

Trademarks and
copyrights.
Recruitment or sub-contracting of professional financial 1 month Project budget and
advisors. campaign financing
to be approved.

Human resources
requirements,
budget to be
planned.
Continued on next page

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 Campaign activity Expected duration Pre-requisite(s)
Design of website that enables potential customers to 1 month to 6 months Project budget and
trade foreign exchange including a version for Smart campaign financing
phones13. to be approved.

Revenues earned by the customers and aggregates of the Technical feasibility

commissions and charges earned by the trading platform is and business
envisaged to be included within the design of the trading feasibility (sampling)
platform, as this would enable the entrepreneur to after initial feedback.
monitor revenues being earned, and, to further segment
the market using mathematical and statistical methods. Legal requirements
to be met and,
A system for loading exchange rates in a manner that approval from the
would enable the trading platform to make a profit on the Malta Financial
difference between the buying and selling exchange rates Services Authority.
is considered to be profitable. This business concept is
currently practiced by existing financial institutions. Trademarks and
copyrights.
Initially a prototype is suggested to be available to
customers who sign up for a trial period, at a reduced sign-
up fee.

Search engine optimization techniques would improve the

visibility of the website in search engines.
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. Jason Van Bergen, 6 Factors That Influence Exchange Rates, 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.

A copy of this proposal is also available at online since February 2011.

13
General Information about Smartphones review the article at http://en.wikipedia.org/wiki/Smartphone, last accessed March 2011.