Overview
The Foreign Exchange (FX) Service provides CRKN members with additional certainty for the administration of their collections budgets. Through the FX Service, CRKN offers two options, bidding and USD billing, on selected license products to help members minimize the impact of foreign exchange fluctuation.
Members participating in the FX Service are eligible to bid their preferred rates, choose spot rates, or select direct USD billing. CRKN will levy an additional administration fee for participation in the FX Service.
Background
CRKN negotiates the bulk of its content licenses on multi-year agreements denominated in US dollars (USD) but typically invoices its members in Canadian dollars (CAD). To facilitate the billing of its members, CRKN employs forward contracts to invoice members. Forward contracts are commitments to purchase known quantities of USD at a known price and date in the future. While this is administratively simple for CRKN, it exposes the membership to some foreign exchange risk and pricing uncertainty.
In 2012, CRKN introduced the Foreign Exchange Service to provide greater control and predictability for member budgets. With this Service, members can direct CRKN to purchase USD on their behalf by allowing them to lock in an exchange rate three to six months sooner, or to leave a bid in the market for up to six months for a rate better than is currently available in the market. Participating institutions sign a commitment form to confirm participation and provide instructions for all, or a portion, of their estimated license amounts through the FX Service. CRKN charges a small administrative fee to cover the process. While the Service helps to ensure cost predictability, it does not guarantee better pricing for members.
Since 2015-2016, CRKN has also offered members the option to be invoiced and pay in USD directly, also for a small administrative fee. CRKN recognizes that members have varying constraints and challenges in their ability and preference for USD billing.
CRKN bills the majority of its license amounts in October, November, and December. In general, this is also the time that CRKN would finalize billings in CAD and USD, including booking forward contracts to finalize any un-met foreign exchange requirements.