The business focus of a bureau de change or currency exchange involve the buying and selling of foreign currency against common currency. This includes the sale or redemption of travelers checks and held common stock.
A currency exchange outlet earns profit through tactical adjustments on the exchange rate which they apply for computing transactions, as well as the official commission they charge.
The rates of exchange billed at the bureau de change are normally connected to the spot prices usable for major interbank transactions, and are modified to derive a profit. The rate that a currency exchange purchases varies from the selling rate, in respect of all currencies it trades.
A second area of operations involves buying and selling of gold, be it gold coins or gold bullion. Trading in other precious metals such as silver, platinum or silver coins can be complementary.
If the exchange is operated by a financial transfer business, it normally acts as an agency for international suppliers, for example, Western Union. The exchange rates are based on the official fixed exchange rates plus or minus a margin. In general, only banknotes are bought or sold. This distinction has its origin in higher costs for storage and appropriate handling or shipping of the metal coins to the country of origin.
Running the exchange business can be affected by government regulations. Examples include the fact that states with non-convertible currencies often regulate the export of domestic currency, or limit the exchange of foreign currency.
Customs regulations can be instructed to declare that the traveler must be in possession of specified amount of foreign currency, and not more. And to document the conversion into national currency in the relevant documents.
A currency exchange can be operated by both entities and legal persons, the business is often handled by banks. And generally requires a business license, and may be required before commencement of operations depending on national legislation.
However, the bureau de change business model can be distressed by a currency run in the event that there are many buyers than sellers (or the other way around) which leads to perceptions of a given currency being overvalued or undervalued.
Commission is normally levied as a percentage of the sum of money to be converted, or a fixed fee. Some currency exchange entities promote themselves on the grounds of being commission-free, while at the same time overcharging on their offered rates of exchange. It is also common for some bureaux to avail special bargains for clients bringing back unexpended foreign currency at the end of a vacation.
Currency exchange firms seldom purchase or sell coins and whenever they do, the transactions are exorbitantly priced to cover the high handling costs associated with the coins.