Why do different forex brokers have different prices?

If you pull up two different brokers’ forex platforms, you’ll notice exchange rates will be slightly different. It is common for brokers to show different prices and this guide explains why.
By:  &  James Knight
Updated: Jul 4, 2022

This beginner friendly guide explains why different forex brokers have different prices. We’ll run through where forex prices come from and break down why each broker has a different exchange rate for currency pairs. 

Why are prices different?

Forex brokers have different prices for two main reasons. First, they use different liquidity providers and second, they markup rates to make profits for themselves. The currency market is decentralised and traded over the counter. This means there is no central exchange where forex is traded. 

Unlike the stock market which has a centralised exchange and everyone sees the same price, the FX market is made up of lots of different participants including banks, hedge funds, investment banks, and central banks. These institutions trade currencies with each other on what is known as the interbank market. The interbank market is where brokers get their prices and liquidity. 

Here’s a short break down of the reasons why prices are different:

Liquidity source

Forex brokers get their liquidity and data from different providers, which is referred to as the ‘interbank market’. All liquidity pools will have slightly different exchange rates at any given time and, as brokers don’t all use the same liquidity, prices will be different for each.  

Markup

When a broker has sourced their liquidity to fulfil your trade they will often mark up the price in order to generate profits for themselves. This markup is known as the ‘spread’ and is where the broker makes their money. Every broker can markup by as much or as little as they want, which means different platforms will show different prices. Spreads and commissions are included in the price you see on your platform. 

Where do forex broker exchange rates come from?

As previously mentioned, the forex market is decentralised and brokers get their prices from the interbank market. The interbank market is made up of the spot market, forward market, and SWIFT (Society for Worldwide Interbank Telecommunication). 

It is where large organisations exchange currencies with each other. This can include investment banks, central banks, hedge funds, and large trading businesses. These organisations are connected through sophisticated trading platforms like Bloomberg. 

As these organisations trade with each other on the interbank market they feed in bid/ask prices using their software. This in turn creates an order ladder with volume represented at different prices. These orders are known as liquidity. Forex brokers are connected to it using aggregator software. 

The software automatically searches for the best prices and adds in the brokers markup (spread). When you log into your trading platform you will see the best prices your broker has obtained from their liquidity source, including its markup.  

How can different prices impact my trading?

Prices will affect your trading depending on the method you use to time your buys and sells. For example, if you’re using a forex signal service but using a different broker to that of the service provider then you’ll likely have different prices which may affect your results. If you’re a short term scalper then spreads will play a role in your trading results and it is important to use a forex broker for scalping.  

For long term traders, or intraday traders, price differentials between brokers may not be such an issue unless you use a platform that has a high spread markup on liquidity pool prices. Generally, it is ECN brokers that offer the closest prices to that of the interbank market.

FAQs

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Prash Raval
Financial Writer
When not researching stocks or trading, Prash can be found either on the golf course, walking his dog or teaching his son how to kick a… read more.
James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.