forex desk
A quoted spread is not one number. It is at least three stacked on top of each other, and only one of them belongs to the market. Separating them is the difference between knowing your cost of trading and guessing at it.
The three layers
01
Interbank spread
What the liquidity providers quote to the broker. On EUR/USD in London hours this is often a fraction of a pip.
02
Broker markup
Added before you see the price. Fixed on standard accounts, near zero on raw accounts where a commission replaces it.
03
Volatility component
Real widening when providers pull depth. Genuine, but the broker also controls how much of it reaches you.
Raw plus commission versus spread only
The two pricing models are usually close in total cost, and the difference is transparency. Published figures make the comparison concrete. Pepperstone lists its Razor account as raw spreads from 0.0 pips with commission from GBP 2.25 per lot per side, against a standard account starting at 0.4 points with no commission. IC lists raw spread accounts at 0.0 pips with USD 3.50 per lot round turn, or a standard account at 0.8 pips commission-free.
| Model | Visible cost | Hidden cost | Suits |
|---|---|---|---|
| Raw plus commission | Commission per lot, printed | Markup is small but not always zero | Frequent traders who measure fills |
| Spread only | Nothing itemised | The entire markup | Infrequent traders, simpler accounting |
Measuring your own
- 01Log the quoted spread on your main pair every fifteen minutes for a week, including two data releases.
- 02Compare the same timestamps against a second venue or an independent feed.
- 03Record entry and exit slippage separately. Asymmetry between the two is a pricing signal, not noise.
- 04Convert the result into cost per trade, then into cost per month. That is your real fee schedule.
The market sets one part of your spread. Your broker sets the other two, and only one of them is disclosed.
Written by Aram Latifi. Ex-quant developer, now writing about the plumbing of retail trading. No affiliate links on this site.
