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Benefits and Risks of CMTs

   
22/01/2019 9:42 p.m.
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NZ/AU Markets   
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Cash Management Account   

Benefits

Cash Management Trust (CMT) accounts allow you to avoid currency conversions at the time of trade settlement when you purchase or sell shares on an overseas market.

For example, you may choose to sell Australian (AU) shares on Day 1 in order to buy more AU shares on Day 3.

The possible outcomes of this scenario are outlined below:

          With the CMT Without the CMT
 

The sale proceeds, in AUD, are credited to your AUD CMT account balance. There is no currency conversion so there is no currency conversion margin payable.

Overnight, those funds start earning interest.

Later, you can pay for the shares purchased on Day 3 with the AUD obtained from the sale on Day 1. There's no conversion so there's no conversion fee.

 

The sale proceeds from the sale on Day 1 would be converted into NZD and credited to your nominated bank account.

There is a currency conversion margin of up to 1.5% of the sale proceeds.

On Day 3 you would pay NZD for the AU shares you purchase and face a second currency conversion fee of up to 1.5% of the purchase amount.

Please note: settlement of AU buy trades from AUD, US buy trades from USD or UK buy trades from GBP is only possible if there are sufficient funds held in the relevant CMT account at the time your order is placed.

Limitations

The CMT is unable to support real-time transfers between currencies. Transfer requests made by investors will be processed at least once within the hour between 9:00am NZT and 6:00pm NZT.

The CMT cannot show the exact exchange rate at the time of the currency transfer request. Instead, you will see an indicative rate as at the time your transfer has been requested. Once the transfer has been completed, we'll send you an FX Transfer confirmation that will display the exact rate used.

The CMT does not currently allow withdrawals in any currency other than NZD.

Risk

The CMT is offered to Direct Broking clients by First NZ Capital Securities Limited (operating as Direct Broking).

All monies received from you or on your behalf will be held by First NZ Capital Securities Limited in a Cash Management Trust account with ANZ therefore you are exposed to credit risk on the performance of ANZ. The CMT account monies are held on trust on your behalf, unless and until it is disbursed to settle transactions on your behalf or otherwise distributed in accordance with your instructions.

There is a risk that funds held in your CMT will be exposed to currency fluctuations. In other words, the exchange rate between the NZD and the currencies of your CMT balances can change significantly over short periods of time, resulting in the value of your CMT balances, when expressed in NZD, to fluctuate. Sometimes this fluctuation will be to your advantage; other times it will be to your disadvantage.

It is up to you to consider these risks and manage them appropriately.


FAQs

Deposit Funds

Rates & Fees