geo necf 2015 - currencies and global money movement
TRANSCRIPT
Jon Doyle, International Law Solutions, PCPatricia Landry, Solium
Ken Lockett, American Stock Transfer & Trust Company, LLCErin Madison, Broadcom
Thierry Vo, UBS Financial Services Inc.
Currencies and Global Money Movement
Types of Payment Methods
Payro
ll
Local
Disbursements
Chec
ks Wires
PaymentMethods
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Checks• Checks can be a good
solution for local and low volume payments
• Possible drawbacks:– They are not a good
vehicle for moving money across borders
– They can be lost or stolen in the mail
– Delivery delays– Check fraud
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Wires• Good solution for
international low to mid volume payments
• Most traceable of the payment methods
• Generally more expensive than other delivery methods
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Wires
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Requesting a Wire
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Local Disbursements• Good solution for
international higher volume payments
• Low-cost electronic disbursement
• No ability to track payments through the system– If the amount is
larger or tracking is needed, a wire would be better
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Requesting an ACH
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Payroll
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Currency control functionality could be leveraged where a trade needs to be
executed
There may be some situations in which disbursing through payroll makes sense
Generally causes more work and complexity for the issuer
Currency Conversion: Basic Terms
A variable markup between 50 and 150 basis points is typically applied by brokers to a transaction involving currency conversion
An exchange rate (also known as a "foreign-exchange rate," "forex rate," "FX rate" or "Agio") between two currencies is the rate at which one currency will be exchanged for another
Basis points (also knows as "bps," "bips," or "beeps") is a common unit of measure for exchange rates. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001), and is used to denote the percentage change in a FX rates. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point
A transaction fee may also be added, depending on the broker and the type of disbursement requested (e.g., international wire, check in local currency)
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Currency Conversion: Example 1
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Here’s an example for currencies quoted in direct terms (U.S. dollars per currency), such as the British Pound, Euro and Australian Dollar. In this case, to determine the approximate net proceeds in currency upon conversion, subtract the transaction fee from U.S. dollar proceeds and divide by the exchange rate plus the markup.
For this example, assume that the net proceeds from the exercise of stock options was 5,000 US Dollars (USD) and are converted into British Pounds (GBP). This example uses an exchange rate of 1.5654 Dollars per Pound.
In this example, the proceeds of 5,000 USD would be converted into 3,178.24 GBP
A. Net Proceeds In U.S. Dollars $5,025B. Net Proceeds Less $25 Transaction Fee $5,000C. Exchange Rate 1.5654 (Dollars per Pound)D. Markup 0.005 bpsE. Exchange rate plus markup 1.5732 [1.5654 x 1.005]F. Proceeds in Pounds (B / E) £3,178.24
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Currency Conversion: Example 2
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Here’s an example for currencies quoted in indirect terms (currency per U.S. dollar), such as the Japanese Yen, Canadian Dollar and Swiss Franc. In this case, to determine the approximate net proceeds in your local currency upon conversion, subtract the transaction fee from the U.S. dollar proceeds and multiply by the exchange rate less the markup.
For this example, assume that the net proceeds from the exercise of stock options was 5,000 US Dollars (USD) and are converted into Japanese Yen (JPY). This example uses an exchange rate of 78.62 Yen per Dollar.
In this example, the proceeds of 5,000 USD would be converted into 391,150 JPY
A. Net Proceeds In U.S. Dollars $5,025B. Net Proceeds Less $25 Transaction Fee $5,000C. Exchange Rate 78.62 (Yen per Dollar)D. Markup 0.005E. Exchange rate minus markup 78.23 [78.62 / 1.005]F. Proceeds in Yen (B x E) ¥391,150
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Currency Conversion: Broker Practices• Market data• Interbank rates• Indicative rate feeds• Bulk currency conversion• Timing, timing, timing!
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Money Movement Challenges
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Employee Stock Purchase Plan
Equity Plans – Restricted awards, Options
IncomingPlan sponsor – Contributions –
Payroll – Lump sum1 2
OutgoingParticipant – Proceeds – Check (local currency), wire, ACH, EFT
Outgoing Plan sponsor – Option cost
and Taxes
OutgoingParticipant – Proceeds – Check (local currency), wire, ACH, EFT
Other considerations –
OFAC
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Global Hotspots: Things may not be that easy….
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What do you need in your Money Movement Toolkit?
• Employee Stock Purchase Plan
• Restricted Awards• Stock Options
Brazil
China
Germany
India
Poland
Hong Kong
Countries at a glance
Vietnam
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South AfricaArgentina
South Korea
Best Practices to Consider
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Provide multiple proceeds delivery methods so employees can find their own balance of cost and timing
• Trade settlement period• Additional time for currency exchange, if applicable• Any additional processing time (ACH, SAFE)
If you don’t know, ask your provider
• What is the difference between proceeds delivery methods? Cost/timing• How do participants provide/update bank information?• How do participants get desired conversion information? • When are conversions from USD to local executed?• What are basis points?• What happens when valid wire instructions are not provided?
Set expectations with employees Provide communication materials to address employee questions
Q&A: “If only I knew then, what I know now…”
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Contact UsKenneth Lockett, Jr.SVP, Business Head North
AmericaAST Equity Plan [email protected]
Jon DoyleManaging Shareholder
International Law Solutions, [email protected]
Erin MadisonSr Manager, Equity
CompensationBroadcom Corporation
Patricia LandrySVP, Mid-Market Segment, USA
Thierry VoDirector of Strategy
UBS Equity Plan Advisory Services
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