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What’s it all about – Variable vs Fixed Spread

This is a question often asked by traders starting out. Variable spreads are relatively new to SB as most brokers would offer a fixed spread, although during the Asian trading session the fixed spread would widen. This worked – traders knew at all times what spread they would be paying. However, in the last decade most brokers have gone the variable spread route.

The cynic in me says this is because it allows them a chance to spin their marketing headlines ‘Trade €/$ from as low as 0.0 pips’, or ‘spreads starting from 0.1 ticks’. Is this false advertising? I have no doubt that at some point during the day their €/$ price is spread free, but if this happens once at 0230 when traders are tucked up in bed then it is extremely misleading and wrong. We traders would prefer to know what their average spread is as this gives us a much better idea of what the likely cost to trade actually is. Do brokers publish this and who is policing what they call their ‘typical spread’.

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