Spread Markup

A spread mark-up is the difference between the raw interbank or exchange spread on an instrument and the wider spread a broker quotes to retail clients. It is the primary revenue mechanism for brokers that do not charge an explicit commission. Because the mark-up is embedded in the quoted bid and ask prices, the trader pays it implicitly on every trade — entering at the ask (which includes the mark-up) and exiting at the bid (also including the mark-up). The total cost of a round trip includes two mark-ups. The size of the mark-up varies by broker, instrument, and market conditions.

In plain English — The raw spread on a liquid instrument reflects the natural difference between what buyers are willing to pay and what sellers are willing to accept in the interbank or exchange market. When a broker distributes that price to retail clients, it often adds a small amount to both sides of the quote — widening the spread. That addition is the spread mark-up. It is the broker's built-in revenue and is paid by the trader the moment a position is entered, since you buy at the ask and sell at the bid. The mark-up is invisible in the sense that it is embedded in the quoted price rather than shown as a separate line item, unlike a commission.

The raw interbank bid-ask on EUR/USD at a given moment is 1.08498 / 1.08500 — a 0.2-pip spread. A broker applying a 0.8-pip mark-up quotes the pair to its clients as 1.08494 / 1.08506 — a 1.0-pip spread. A trader buying 1 standard lot (100,000 units) at 1.08506 immediately has an unrealised loss equal to the full 1-pip spread (approximately $10 on a USD-denominated account). Of that $10, approximately $2 was the natural market spread; the remaining $8 was the broker's mark-up. These figures are illustrative — actual raw spreads and mark-ups vary continuously.