Raw spread
Family IV · Costs
Not to be confused with spread, forex spread, good spread.
Raw spread refers to the bid-ask spread on a trading instrument that reflects the underlying interbank or liquidity-provider market without an added markup by the broker. It is most common in forex and CFD trading, where the broker charges a separate commission instead of widening the spread. Raw spreads are variable and can be extremely tight during liquid market hours but widen during news events or low liquidity.
How raw spreads work
In a raw spread account, the broker passes through the spread it receives from its liquidity providers and adds a fixed or variable commission per lot traded. This contrasts with a standard or markup account, where the broker widens the spread and charges no commission. The total cost of a trade in a raw spread account is therefore the raw spread plus the commission, which may be higher or lower than a standard account depending on the instrument and market conditions.
Raw spreads are often quoted in pips or points and are typically tighter than standard spreads because they exclude the broker's markup. However, the commission can vary by broker, account type, and regulatory jurisdiction, so the overall cost must be evaluated on a case-by-case basis.
Worked example
Suppose a trader buys 1 standard lot (100,000 units) of EUR/USD with a raw spread of 0.2 pips and a commission of $7 per lot round turn. The raw spread cost is calculated as: 0.2 pips × $10 per pip = $2. The total cost is $2 + $7 = $9.
Variability and considerations
Raw spreads are not fixed; they fluctuate with market liquidity, volatility, and the specific liquidity providers used by the broker. During major news releases or off-market hours, raw spreads can widen significantly. The commission charged also varies widely between brokers and account types, and some brokers may impose additional fees such as swap charges or inactivity fees.
Regulatory requirements may affect how raw spreads and commissions are disclosed to clients, and the availability of raw spread accounts can differ by country. Traders should review the specific terms of their account agreement to understand the total cost structure.
Often confused with
- spread
- A spread is the general difference between bid and ask prices, while a raw spread specifically excludes broker markup and is paired with a commission; the visible sign is the presence of a separate commission line in the cost breakdown.
- forex spread
- A forex spread is the spread on currency pairs, which may include broker markup, whereas a raw spread is the unmarked-up interbank spread; the visible sign is that raw spreads are typically quoted with a commission, while forex spreads may not be.
- good spread
- A good spread is a subjective assessment of a tight spread relative to market conditions, while a raw spread is an objective measure of the unmarked-up spread; the visible sign is that good spread is an evaluative term, whereas raw spread is a factual cost component.