What Is an FX Spread?
An FX spread is the difference between the market rate for a currency pair and the rate offered to a client. It is one of the main ways banks, brokers and payment providers earn revenue from foreign exchange transactions.
The market rate and the client rate
In any FX trade, there is a market rate available between professional market participants. The rate a company receives from its bank, broker or payment provider may be different. The difference between those rates is the spread.
For example, if the market rate for GBP/USD is 1.2500 and a company receives 1.2450, the difference represents the pricing spread included in the transaction.
Why the spread matters
The spread matters because it directly affects how much currency the company receives. A small difference in rate can become a meaningful monetary cost when the trade size is large or when the company trades regularly.
For a business exchanging hundreds of thousands or millions each year, spread can become a real cost even when no explicit fee is shown.
Is a spread always unfair?
No. FX providers need to earn revenue, manage operational costs, cover risk and provide service. The issue is not whether a spread exists. The issue is whether the spread is reasonable, consistent and competitive for the client's requirements.
How to check your FX spread
To check an FX spread, compare the rate you received with a relevant market or benchmark rate from around the time of the trade. The difference can then be translated into pips, basis points and monetary cost.
Analyse a Trade — Use Alto's free FX Cost Checker to analyse a recent FX trade in around 30 seconds.