How banks set your FX price: algorithms, mark-up and different treatment between clients

The foreign exchange market is the largest financial market in the world: 9.6 trillion dollars change hands every day, according to the Bank for International Settlements' April 2025 Triennial Survey. One might conclude that there is one price, the same for everyone. There is not.

When a company asks its bank for a quote, the price it receives is produced by the bank's own pricing engine, which starts from the market price and adds a mark-up. That mark-up is neither public nor the same for every client — and the market's code of conduct says so explicitly.

What happens between your request and your price

1. 1
   The current market price

   The bank's engine starts from a mid rate, between the best bid and the best offer available on the interbank market at that moment.

2. 2
   The mark-up

   The bank adds a mark-up. The market's code of conduct defines it as compensation for risks taken, costs incurred and services rendered to a particular client.

3. 3
   Adjustment to the client

   The mark-up varies with the trade, but also with the client relationship. The code of conduct asks banks to tell clients that different clients may receive different prices for trades that are the same or similar.

4. 4
   Internal matching

   Your trade does not necessarily go to the market. According to the BIS, dealers match more than 80% of customer trades within their own liquidity pools, offsetting them against other clients' trades.

5. 5
   Last look

   On electronic platforms, some banks reserve a short window to accept or reject a request at the displayed price: this is "last look". The code of conduct governs it and forbids using it to gather information.

What the data measure: more than ten times more expensive for the same contract

Since the European EMIR regulation, banks report their derivatives trades to trade repositories. Four economists used these data to measure what non-financial companies actually pay on EUR/USD forward contracts: about half a million trades between 204 banks and 10,062 corporate clients, from April 2016 to March 2017.

To put it in perspective: on a one-million-euro EUR/USD forward, one pip is worth 100 dollars. Thirty pips amount to 3,000 dollars; 2.5 pips to 250 dollars. On the same contract, under comparable conditions, the gap exceeds a factor of ten.

What the rules of the game say

The FX market has no central exchange; its practices are framed by a code of good conduct, the FX Global Code, maintained by central banks and market participants within the Global Foreign Exchange Committee. The code creates no legal obligation: it supplements regulation by defining good practice, which banks sign up to through a statement of commitment.

The Mark Up applied to Client transactions by Market Participants acting as Principal should be fair and reasonable.

The code goes beyond the principle. Its illustrative examples distinguish two situations:

• a bank charging a company a higher mark-up than others of the same size, credit risk and relationship, exploiting its lack of sophistication in challenging the price: not fair and reasonable;
• a bank charging different mark-ups to comparable companies because the volume of business they give it differs: acceptable.

In other words, a price difference is acceptable when it reflects the relationship, not when it exploits the client's lack of knowledge. The European study shows that the line is not always respected.

What brings your price down

The factors that, in the data, go with a better price are factors a company can act on:

1. 1
   Measure

   Compare every price obtained with the market mid at the same moment. A bank that knows its client measures does not quote the same price as to a client who does not.

2. 2
   Put banks in competition

   Ask several banks for the same trade, directly or through a multi-dealer platform. That is the factor which, in the European data, removes the different treatment.

3. 3
   Ask for the disclosures the code provides for

   Principle 14 provides that banks publish information on how they determine their mark-up. Ask yours whether it has signed up to the code and where that information is published.

4. 4
   Negotiate with figures

   A review request backed by measured gaps, trade by trade, gets an answer in figures. A request in principle gets an answer in principle.

Sources

• Bank for International Settlements, 2025 Triennial Survey: "Global FX trading hits $9.6 trillion per day in April 2025", press release, 30 September 2025.
• Bank for International Settlements, "The FX trade execution landscape through the prism of the 2025 BIS Triennial Survey", BIS Quarterly Review, 8 December 2025 (internal matching of more than 80% of customer trades).
• Schrimpf, A. and Sushko, V. (2019), "FX trade execution: complex and highly fragmented", BIS Quarterly Review, December 2019.
• Hau, H., Hoffmann, P., Langfield, S. and Timmer, Y. (2017), "Discriminatory pricing of over-the-counter derivatives", ESRB Working Paper No 61; published in Management Science, 2021, pp. 6660-6677.
• Global Foreign Exchange Committee, FX Global Code, December 2024 version: Principle 14 (mark-up), Principle 17 (last look), Annex 1 (examples), foreword (non-binding scope).