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Navigate the complex world of currency management with our comprehensive dictionary of financial terms and definitions.

foreign exchange commission

A foreign-exchange commission, charged by an FX broker, is part of the cost of executing of foreign currency transactions. Brokers are middlemen who try to match the buy and sell order from their clients to other clients buy and sell orders. Because they have established connections with liquidity providers, they can offer very tight spreads. To compensate for the tight spreads, brokers charge fixed foreign exchange commissions. For example, If a broker charges 50% of a pip spread, it can also charge a fixed EUR 6 commission per standard lot of EUR 100,000 to buy and sell. So a EUR 100,000 trade to buy and sell would produce EUR 17 to the broker. Still, that compares favourably with the EUR 30 cost of a dealer who would charge no foreign exchange commission, but a full pip spread instead.