FX transaction costs or ‘foreign exchange transaction costs’ represent the expenses incurred by buying and selling and foreign currencies from a foreign exchange broker/dealer. In currency markets, transaction costs comprise commissions charged by foreign exchange brokers and ‘spreads’ charged by both brokers and foreign exchange dealers. While operational costs are easily identifiable by customers, the spread is often hidden in the exchange rate. To properly evaluate FX transaction costs, a firm should examine the mid-market rate at the exact time when the transaction was concluded, and compare it with the rate applied by the bank or FX dealer. The difference in the exchange rate plus the operational costs (commission) gives a clearer view of the effective FX transaction costs.