Foreign Exchange Rate Integrity®

FX Pre-Agreed Spread Agreements

A written spread over the interbank mid-market rate moves your FX cost out of the bank's discretion and into an agreement you can check.

Why it matters

Your bank is a counterparty, not an adviser.

Banks do not act in a fiduciary or advisory capacity in the foreign exchange market. They are not required to put the client's interest first; they deal as counterparties aiming to maximize their own profitability. Most retain broad discretion over pricing and markups, citing transaction size, currency pair, market volatility and liquidity. Because those factors are loosely defined, the bank effectively reserves the right to set the spread as it sees fit, often without disclosing how it decides or what it expects to earn.

Many banks also do not reveal the components of the all-in rate, and many apply "last look," a final check that lets them reprice or reject a trade if the market moves. A pre-agreed spread limits that discretion. It establishes consistent, upfront pricing and gives you predictability and fairness where transparency would otherwise be missing.

The fine print

What banks reserve in their FX disclosures

Principal, not agent
The bank deals for its own account, at arm's length, and does not act as your agent, fiduciary or financial adviser.
No best execution
Unless agreed in writing, the bank does not commit to giving you the best available price.
Its own interests
As a market maker, the bank manages its own risk and positions, which can conflict with yours, including the price it quotes you.
Consent by dealing
Continuing to trade with the bank can be treated as agreeing to its disclosure terms.

Summarized from the published FX dealing disclosures of major U.S. banks.

From our library

Three real arrangements, compared

Sample A

Pre-agreed spread

Spread: 10 bps over the interbank mid-market rate
Fiduciary?: No, stated explicitly
Last look: Yes
Scope: At least three trading channels and ten currency pairs

Sample B

Counterparty, not a fiduciary

Spread: 8 bps, varying by transaction type
Fiduciary?: No; may deviate for costs, channel, credit risk and the overall relationship
Last look: Yes
Other: No liability for data interruptions; trades may be delayed or cancelled

Sample C

Standardized spread

Spread: 10 bps over the interbank mid-market rate
Fiduciary?: Not stated, but implied no
Last look: Not mentioned
Other: How markups are calculated is not disclosed

Even a good spread can come with exceptions. An agreement is only as strong as its wording and the monitoring behind it.

Checklist

What to include in your written agreement

Confirmed pre-agreed spreads for defined FX flows, set according to your annual FX flow and its characteristics, for example 5, 10 or 20 bps.
A schedule, attached as Exhibit A, showing the spread for each FX payment channel and each subsidiary covered.
The spread measured over the interbank mid-market rate, as shown by historical rate data from Bloomberg, BestX or other acceptable market sources.
Prompt notice to you whenever the bank is unable, or chooses not, to deal at the rate and spread in the schedule.
A clear statement of the operational, market, legal or credit circumstances in which the bank may not apply the agreed spread.
Your freedom to move your FX flow to another bank if the agreed spreads are not maintained, for any reason.

Sample

Exhibit A

FX Markup / Spread Schedule

Effective (date to be confirmed), the below FX markup / spreads will be applied where FX transactions are executed through the following execution channels.

Legal vehicle(s)	Client legal vehicle(s)	Reference number	Rate	Execution channel	Spread (basis points)
ABC Bank - Singapore	Steel Company - Singapore	123456	Rate source: Interbank Market Rate	FX Platform	8-10
ABC Bank - Singapore	Steel Company - Singapore	123456	Rate source: Interbank Market Rate	Internet Banking Platform (Treasury Management)	10
ABC Bank - China	Steel Company - China	993225	Rate source: Interbank Market Rate	FX Platform	8
ABC Bank - China	Steel Company - China	993225	Rate source: Interbank Market Rate	Internet Banking Platform (Treasury Management)	10
ABC Bank - Korea	Steel Company - Korea	593613	Rate source: Interbank Market Rate	FX Platform	20
ABC Bank - Korea	Steel Company - Korea	593613	Rate source: Interbank Market Rate	Internet Banking Platform (Treasury Management)	30
ABC Bank - Brazil	Steel Company - Brazil	864411	Rate source: Interbank Market Rate	FX Platform	20
ABC Bank - Brazil	Steel Company - Brazil	864411	Rate source: Interbank Market Rate	Internet Banking Platform (Treasury Management)	50
ABC Bank - Mexico	Steel Company - Mexico	526775	Rate source: Interbank Market Rate	FX Platform	10
ABC Bank - Mexico	Steel Company - Mexico	526775	Rate source: Interbank Market Rate	Internet Banking Platform (Treasury Management)	10

Swipe sideways to see the full table.

After it is signed

Then make sure it holds

Once new spreads take effect, Blades International performs recurring reviews testing each provider's compliance. Variances are documented and, where significant, can warrant a refund.

FX Rate Integrity Process →

Find out what your spread should be

Simply share your FX rate data, including the trade date, time stamp, time zone, amounts and currencies sold and bought, and currency pair. We will provide you with complimentary indications of your markups.

Please do NOT send confidential account or payee information.

Get a Complimentary FX Rate Review →