Managed FX / Currency Overlay / SMA Services

Managed FX is a mandate given by a client to MCAP FX to manage their foreign exchange operations and essentially act as an outsourced treasury operation. The objectives of this service vary depending on client needs, but nearly always involve favourable price seeking activities. A typical client profile mainly deals in the spot market due to uncertain foreign AR/APs with some light hedging activities. Payments to/from vendors and clients are handled by MCAP FX, although there has been an increasing trend for companies to retain these payment activities as banks push clients online to do-it-yourself, "low-cost" transactional platforms, and despite our idea of "low cost" being at odds with the banks', prices are reasonable but the main the benefit for the client is easy visibility and tracking.

Currency Overlay (MCAP FX's modified version for SMEs) is a service where companies retain us to manage their currency risk / exposures, separating their core business decisions and currency risk management, so they can focus on the former. We seek to reduce the currency-specific risks of your operations, which can be just as time consuming as your core business, and take an active approach seeking to limit the downside currency exposure through Dynamic Currency Hedging while also increasing the returns from a favourable currency move through tactical hedging. In our Active Currency Overlay program, we vary the currency hedge ratio to reflect prevailing macroeconomic, financial market and specific country conditions as well take into account broad market positioning and imbalances and other technical considerations. A very important benefit of an Active vs Passive hedging strategy is that passive hedging can lead to very substantial (potentially extinction level) negative cash flows from margin calls and large realized losses if the exchange rate move is extreme, such as what happened during the financial crisis when the US dollar drastically appreciated. Active hedging, by its very nature, drastically cuts down the potential of being caught on the wrong side of such a move and the subsequent negative cash flows.

Hedging FX exposures is important but too many "experts" focus on exposures without taking into account cash flows, which are just as, if not more, important. Under an Active strategy if you are an exporter, the hedge ratio would be increased (lowered for an importer) when we anticipate base currency strength and lowered (increased for an importer) in anticipation of the base currency depreciating. As complicated and resource intensive as this may be, the best part is that we do ALL the work, saving you a substantial amount of time and effort, which can be reallocated to more profitable and important tasks.

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Dynamic Currency Hedging Benefit vs 100% Spot, 100% Options, 100% Forward & 50% Spot/Forward

Previous years' results from Dynamic Currency Hedging:

  • 2018's DCH Results
  • 2019's DCH Results
  • 2020's DCH Results
  • Source: MCAP FX calculations.

    Important Information: Period under review is January 2021 to December 2021. Results are from a model portfolio trading US$1,000,000 per month (total US$12 mln/year). Figures are quoted gross of fees. The returns presented year-to-date reflect the hypothetical performance a Canadian exporter would have obtained had it utilized the applicable strategy to hedge its U.S. dollar revenues. Hedging can be viewed as a binary event in that if an exporter should hedge, an importer should not hedge. Our view for Dynamic Currency Hedging in 2021 is that importers will benefit less than exporters from a DCH strategy (the opposite of 2020). The results shown are for a Dynamically Hedged Currency (DHC) model portfolio versus the four most common methods of currency management for corporations. The first portfolio has its foreign exchange needs satisfied by trading 100% spot USD/CAD at month end. The second strategy hedges 100% via FX Forwards at the current month end's spot closing rate for the following month's needs. The third sells 50% of needs at month end spot rate and 50% via forwards at the current month end's spot closing rate for the following month's needs. The fourth strategy is buying a plain vanilla call option at the current month end's spot rate for settlement at the following month's end. The premium (cost to buy the option) for the underlying option is paid at the time of buying the option. The premium (cost) is then subtracted from the option's payout at month-end expiry should it be exercised or added as a cost to the spot purchase should it not be exercised. Please note that these results, although based upon actual market data for USD/CAD, are hypothetical as each and every clients' needs and circumstances are unique and the program can be constructed in any manner of ways to achieve diverse objectives. These results are for illustrative purposes only; to highlight the benefits that may accrue from an active approach to a firm's currency management against the typically passive currency management in place at most corporations. Past performance does not guarantee future results!

Foreign Exchange Market Daunting?

Let our Foreign Exchange and Risk Management professionals support you. We will guide you through the increasingly incomprehensible market movements, which are the norm today. Our aim is to inform and educate you, our clients, so that you come to see us as not just "order takers" like most other brokers and banks, but as valued business advisors since our unique philosophy is that the better we can help you do, the better we all do. We are your partners through rain, sleet and snow; not just fair weather friends.

Foreign Exchange Dealing: Working the Order

We are not "order takers" like what most of you are used to and what many of our competitors do, but rather we actively "work" your foreign exchange order whether it be for Spot, Forwards, Limit Orders, Options, etc. to maximize profitability. Working an order is where you tell us what you need (amount, currency, time frame) and then rely on the ability and experience of your trader or trading team, whom apply a full range of trading techniques, market analysis and foreign exchange products, to "work" the order in the market to actively gain price betterment. By gaining an understanding and internalizing your specific needs through a consultative approach, we seek to increase the efficacy of your foreign exchange transactions via market timing. We realize you are not glued to a rate screen all day, but we are as we eat, sleep and breathe the markets. Talk about putting your money to work for you!

Limit Orders

Currencies can be extremely volatile despite mostly trading in a range, or even when trending. Regardless of market movements, Limit Orders can allow us to capture better rates than Spot to generate higher returns on your foreign exchange deals. The FOREX market trades 24 hrs/day, 5.5 days/week and this 'round-the-clock' trading enables us to take advantage of volatile swings in other time zones. We gauge the probability/extent of a favourable run (and unfavourable as where there is reward, there is risk) in the targeted currency pair via a plethora of technical and macro factors to enter the Limit Order at a price level that fits your risk tolerance, time frame and needs. Let us help you manage your cash flow and offer trading plans and risk management solutions.

Spot Foreign Exchange, Forward Contracts, Swaps & Options

We offer a variety of solutions & products to hedge the foreign exchange rate exposure you encounter during your normal course business. Have funds in a foreign currency coming in one month down the road but need domestic currency today? Use a Swap to meet your domestic currency funding needs and "swap" the foreign currency for the domestic currency at the later date without having to do a Spot transaction and pay the market spread. Quoting on a project in a foreign country using a foreign currency for pricing but not sure if you will win the contract? Use an Option to hedge the exchange rate risk and not be on the hook to deliver the currency as would be the case if you used a Forward Contract. Your "options" (pun intended) are limitless as we work together with you to determine what type of product mix is right for your particular phase, outlook and situation.

Online Dealing

Using our secure and encrypted platform, make your foreign exchange transactions a breeze in a one stop shop of do-it-yourself convenience. We offer you the online ability through our platform to transact in the Spot and Forward market, send domestic and international payments, upload beneficiary information and a multitude of other features designed to make your already busy workday just a little bit easier and more manageable.

Business Executives & Owners

You need a risk management and trading plan — one that addresses your cash flow needs and foreign exchange risks for every stage of your business's operating cycle and takes into account your company's goals. We will diligently work with you to understand every aspect of your business in order to help tailor a trading & FX risk solution that fits your goals and alleviates your concerns with regards to exchange rate fluctuations and their effect on your profit margins.

Trading & Settlement Limits

Together, after understanding your objectives, challenges, FX exposures and profit margin sensitivity to exchange rate movements, we'll put together a proposal (FX Policy) to integrate your trading needs (e.g. currencies, limits orders, forwards) with making settlement efficient and hassle free. Our payments to your vendors and your company are sent only via encrypted networks (e.g. SWIFT network).

Services Overview

We offer a comprehensive portfolio of FX Products, Risk Assessment, and Risk Management Solutions & Services designed to meet your needs.

Currency Overlay

We recognize that cutting costs and increasing profitability is such an integral part to the success of your business, we have made a special commitment to our clients to be more than just their foreign exchange dealer, but to be a trusted and valued business advisor, partner and friend. We will help you make the most of your resources to achieve your business's objectives in a straightforward, transparent and consultative manner. Unlike at other FX providers, where you don't know what you are being charged and why, where you feel you are not getting value for the high fees you pay, with us you will always know exactly what you are being charged and why. We take pride in our commitment of acting with honesty, fairness and integrity!


Dealing involves a number of risks and we have taken the appropriate and necessary steps in our compliance regime, our I.T. infrastructure (even our public website is only available via 256 bit encryption!) and our financial services relationships. Know that every step of the way we take every precaution available and then some to ensure we're not the next one on WikiLeaks.

Other Services

Our Company’s primary focus is risk mitigation and order management. However, our goal is to be able to advise, counsel and offer solutions for all of our clients' foreign exchange service needs. Whether you decide to stay with your existing FX provider or not, we are happy to work with you in a consulting capacity to analyze your business to build an FX risk management policy and to implement the policy and its tactics in an agency model as an authorized trader with your bank or broker (no handling of settlements or payments).

We Make Managing Your Currency Risk to Protect Your Profits Hassle, and Worry Free

MCAP FX leads the industry in foreign exchange services. Our Corporate Foreign Exchange Traders put the "Person" back in Personal; right where it should be!

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