Spread policies differ considerably from broker to broker. In fact, many brokers don't even mention the word “spread” because they don’t want to uncover their hidden fees.
The rates posted by brokers are often daily rates, which means they are set in the morning and don't change at all throughout the day. While a broker might boast that there’s room for negotiation, daily rates usually have such wide spreads that brokers lose very little by giving you a slightly better rate. These wide spreads help mitigate the risk of rate fluctuation throughout the day - the only way your broker can ensure a profit on almost every transaction.
Since spreads often are not very transparent, it makes comparing brokers exceptionally difficult.
- Some brokers have different spreads for different clients: those with larger accounts or those who make larger trades may receive tighter spreads, while clients referred by an introducing broker might receive wider spreads in order to cover the costs of the referral.
- Other brokers may offer everyone the same spread regardless of who they are.
- Some brokers offer fixed spreads that are guaranteed to remain the same regardless of market liquidity. (But since fixed spreads are trditionally wider than average variable spreads, you are effectively paying an insurance premium throughout most of the trading day for protection from rare outbursts of short-term volatility.)
- Other brokers offer traders variable spreads depending on market liquidity. These spreads are tighter when there is good market liquidity but widen as liquidity dries up.
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