Most large corporates have significant volumes of international receipts and payments, but are required to report their financial position and profitability in a single home currency.

As a result, many companies choose to hedge their foreign exchange positions by undertaking FX activities with their corporate bank.

These banks have a deep understanding of what the company's foreign currency needs might be.

Foreign exchange services could involve a combination of SPOT FX trades, which are for immediate settlement FX forwards, which lock in an exchange rate for a future exchange of currency and FX options, which for a fee provide an exchange rate for future currency exchange, but which are only used if the exchange rate moves against the corporate, but not if it moves in their favor.

Generally, the higher the value of a specific trade, the more likely the corporate is to pay the fee to have an option.

Smaller value FX positions are more likely to be hedged with spot or forward transactions.

FX trades can be significant drivers of profitability for corporate banks.

Since unlike lending activities, there is limited risk exposure to the bank, which reduces the regulatory cost of trading.