Different point of view from a 35 year practitioner. When you look at spread, margins etc. this should be looked at in a very holistic manner. For instance if you are a global company with many entities that are buying and selling currency, the best strategy may be to look for a system that aggregates payments.
For instance: I had a client that sent about 20,000 FX wires per month globally from their 128 subsidiaries around the world. Most of these payments were Inter-company. Just looking at wire fees at $10 each they were paying $200,000 a month. I helped them put together a process to capture all of these payments in one place, NET them across all of their entities, make the accounting entries, and then do 1 net payment per month. Reduced their # of payments from 20,000 per month to under 200. We also reduced their monthly FX exposure from $200,000,000 a month to between $5-$7MM per month. This was a case where the Margin on FX (although it high and concerning) was really a secondary consideration to taking advantage of Natural Hedges and off-setting exposure within the company.
To address the original topic directly, any institution is going to charge MORE spread for smaller transactions. They have to, as it costs the same and takes the same amount of effort to process each transaction. Also, most FX providers will look at the holistic relationship. In other words, looking at the yearly volume of not only the FX, but total transactions. Then use a rate that works for all transactions across the board.
Happy to share my experiences with others.
Dave
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