Cross-Currency Settlement Risk

In the wild and wooly world of buying and selling foreign currency, there is always the risk that one would purchase and pay for a particular currency, but not receive the currency he or she is buying at the exact same time.

For example, a U.S. bank might pay $20 million for British pounds, but due to different time zones, the bank may not receive the pounds at the exact same time. The currency can move a meaningful amount in that time period, such that, by the time the transaction settles legally…somebody has lost money.

Time really is money.