Frequently Asked Questions & Answers

Export Development Canada (EDC) & Mercantile Exchange Corporation (MEC) Alliance

Q:How does this program work?

A:It’s simple. First of all, you have to be pre-approved by EDC. In order to qualify you must complete some documents and return it to Mercantile Exchange. We will then forward the application to EDC along with the results of our due diligence and recommendation for approval. Immediately after the approval is received from EDC you will be notified in writing with details of limits, expiry, etc. “Voila!” you are now set to book forward contracts with Mercantile Exchange without pledging the usual margin deposit.

Q: The paperwork seems to be overwhelming. Do I have to go through this every time I wish to book a trade without pledging margin deposit?

A:Unfortunately the paperwork is mandatory in order to qualify and it is a one-time hassle only. On the brighter side once approved the benefits are countless.

Q: Do I have to pay any service fee to EDC or MEC for the guarantee?

A:No you don’t pay a penny for the benefit. The exchange rate we quote you is the final amount you pay. There are no extra fees to you for wire transfers, drafts, cheques, deliveries or the EDC Guarantee.

Q: How do I benefit from this program?

A: You gain the financial capacity to enter into a Foreign Exchange Forward Contract to protect yourself against a possible foreign exchange loss. It frees up your working capital without the additional cost of borrowing. Your existing bank operating line is not impacted. You can focus on increasing sales while protecting your profits in international markets.

Q: How does EDC benefit from this program?

A: EDC’s mandate is to help and protect Canadian exporters and investors, especially the small businesses, in achieving their goals. EDC receives a fee for extending the guarantee, which is paid exclusively by MEC.

Q: How does MEC benefit from this program?

A: Mercantile Exchange is devoted to helping Canadian businesses save money on their foreign exchange transactions. MEC is now able to book forward contracts for its export clients without the usual margin deposit and share its risks with EDC against a possible foreign exchange loss in the unlikely event you (the customer) renege on the contract. Most importantly this opportunity has helped MEC increase its forward contract volumes.

Q: Does this mean that I never have to pledge any margin deposit?

A: You may have to pay us a deposit of 5% only if the prevailing market rates at any given time fluctuate drastically from your booked exchange rate during the life of the forward contract. The deposit and any interest you earn from it will be returned to you on final settlement date.

Q: What do I lose if I sign up and never use the facility?

A: Absolutely nothing! You have nothing to lose but everything to gain. We are quite confident this facility will be of value to you.