Every broker has to earn a return, and the way it does so shapes the product you receive. Understanding revenue lines makes it easier to see where a low headline fee might be recovered elsewhere.
Common revenue lines
- Commissions charged per trade, share or contract.
- Spread markup added to the market price.
- Overnight financing on leveraged positions and margin loans.
- Currency conversion markups on deposits, trades and withdrawals.
- Interest earned on client cash and share lending, where permitted.
- Payments from third parties for routing orders, in markets where this is allowed.
A conflict to be aware of
Brokers that profit when clients lose, such as some market-maker CFD models, have an incentive that differs from yours. This does not make them dishonest, but it is why regulators require disclosure and why execution quality deserves scrutiny.
How to use this
Ask for each product: where does the broker earn? Then compare total cost for your own scenario instead of a single advertised number.
Risk warning: Trading forex and CFDs involves a high level of risk and may not be suitable for all investors. You may lose more than your initial investment.
Topicsfeesbusiness-modeltransparency