Although we are not speculators in the money market, we regularly need to know (and so do you) what our dollars will buy in foreign currencies and vice versa. As explained to me by Steven Dengler, CEO of XE.com, the exchange rate is not centrally regulated. It is like an enormous bazaar where buyers and sellers offer and sell currencies at different rates. The mid-market rates quoted by XE.com provide a mid-range guideline, a thumbnail sketch, for figuring out what it will cost to buy or sell. What you actually pay, however, depends entirely upon the methodology you use to make the exchange.

If you do not take control over the exchange methodology you are at the mercy of the bank, credit card company, or third-party site (or the price in dollars quoted by the vendor).

What we chose to do was to set up an account with XEtrade, (www.xetrade.xe.com), the on-line discount foreign exchange service of XE.com. XE.com is the world's most popular foreign exchange website. This is confirmed by all independent metrics companies, including giants like Alexa, Nielsen, and ComScore. As a transaction aggregator, XEtrade is able to give us the service, the focus, and the competitive rates that only the largest companies have heretofore enjoyed with their banks.

An XEtrade account is free and does not require us to change or alter our banking relationships. They do, however, require copies of personal identification and the same information one might supply to a bank when opening a new account. Once the account is set up, it can be used to perform any number of extremely useful bookselling functions.

Here are some examples:

We have a U.K. corporation and a bank account in L (United Kingdom pounds) in London we use for European sales. Routinely we transfer funds from the U.K. to our home bank here in Massachusetts. In the past I would initiate a transfer by faxing a signed request to the U.K. with the wire information of the USA bank. The U.K. bank would charge a fee, do the currency conversion and then send our money in $ (US dollars) to our bank here. Our home bank would also charge a fee for the incoming wire. The conversion rate was just what parties decide to charge (or think they can get away with). -- that is, the UK bank could give us pretty much any rate they wished at the time the conversion occurred. In retrospect, that was a pretty poor business methodology for us, but it had never occurred to us that we could do better.

With an XEtrade account the methodology and the results are very different. After creating the XEtrade account, I set up the USA bank as a wire beneficiary and the London bank as a wire source of funds. XEtrade is up 24/7, so I can initiate transactions at any hour. I identify the amount I wish to transfer and the source and target currencies, then select the source bank and the beneficiary bank from my pull-down lists. The site immediately quotes the exchange rate and the wire transfer fee. When I submit the transaction, a print-out is produced that I can fax to my bank in London.

Now, here's where the magic happens. My bank in London does not do a conversion and does not do a foreign wire, both of which are expensive. Instead, they wire funds in pounds sterling to another London bank, an account tied to XEtrade with a unique transaction number that identifies my entire funding process. It is a local wire.