Letter: How exchange rates work.
READERS of the article 'Putting pride before the fall' (January 8) may well have been left with the misapprehension that the BHA's exchange rate governs the amount in sterling that an owner receives for winning a race abroad. It does not. Similarly, the rate does not govern the amount received in local currency for overseas connections who win a race in Great Britain.
The amount an owner receives if successful abroad will be determined by the prevailing exchange rates at the time the prize-money is paid.
The official exchange rate system, adopted around the world, is used to determine how one country will treat the winner of races in other countries.
For many of our races, whether a horse is qualified to run and what weight it is to carry will be determined by the class of the races it has won.
Take, for example, a Flat race from which horses are debarred if they have won, say, a Class 1 or 2 race. Would-be entries may have won races abroad, where our system of race classification does not apply. How, then, to treat such performances?
The rules set out notional value ranges for each class - for example, overseas weight-for-age races outside Pattern and Listed company deemed to be worth more than pounds 15,000 are treated as equivalent to Class 2.
This is where the official exchange rates come in.
In 2008, when the official rate was EUR1.36 to the pound, an EUR18,000 race would be deemed to be worth pounds 13,235 and a winner of such a race would qualify for our example race, above. But the winner of the same EUR18,000 race in 2009, now that the official exchange rate has fallen to just pounds 1.03 to the pound, would be deemed to be worth pounds 17,476, above the threshold and therefore a win would disqualify the horse from our race.
The system is also used to convert prices realised at bloodstock sales, where these are relevant to qualification for races or to the weights allotted.
The rates are set for a period of a year for good reason. This convention gives connections certainty, when planning a campaign, as to the implications of success on how their horse would subsequently be treated.
Chris Brand Director of finance & corporate services BHA