[dclusin]

Amen. The forex market is very different than the stock market. FX is relationship driven. What this means is that the prices you can get are based on the relationship you negotiate with your provider.

When Forex prices flash across cspan or similar they are typically quoting the interbank offered rate. Retail traders don’t get anything close to this rate. You usually go through several intermediaries who each add a spread. There’s not best price law in fx.

Using prices from retail fx brokers usually isn’t a good idea either since their spreads are so outrageous. Oanda has reasonable rate info I’m told, but it’s more geared for professional traders.

[Scoundreller]

> Using prices from retail fx brokers usually isn’t a good idea either since their spreads are so outrageous.

What's wrong with averaging them together? That should negate the spread unless they're really short of one currency and long on the other. I guess your local bank would post bad rates on some pairs because of their carrying costs, but someone like transferwise?

Back in 2009, I recall one Canadian bank having competitive rates when you wanted to sell them USD, but terrible rates when you wanted to buy their USD. I guess they were in dire need for USD and didn't want to sell what they had to their retail customers.

[dclusin]

I guess it depends on what your requirements are. I’m not too knowledgeable on the pricing side but your price increases/decreases as you noticed aren’t linear and vary based on the amount you’re buying or selling. Buying or selling currencies from a trading partner exposes them to fluctuations in that currency so they’re going to need to be compensated to cover their trading costs like hedgeing (if your transactions are large enough) as well as some sort of profit for them.

If you’re just doing it for a retail perspective some sort of averaging scheme like you mentioned would probably be okay. If you’re dealing with large amounts regularly you’d probably want to negotiate with multiple liquidity providers to get an idea of what kind of rates you’d get for a given currency pair.

[Scoundreller]

All valid concerns.

It's funny how much was based on LIBOR when it provided zero indication of depth-of-market for the banks feeding it numbers.

[dclusin]

Yeah. As far as my limited knowledge goes on pricing, I don't believe LIBOR had a direct impact on fx rates. FX forwards and swaps are more impacted by the interest rate on treasury bills. LIBOR & EURIBOR would have an effect on interest rates on money being lent to people doing carry trades for example. But I don't think that it would affect pricing of the underlying trades afaik. Maybe a trader can chime in.

[samdung]

100% agree. I always get the best rate by picking up the phone and talking to my relationship manager at my bank.