What's the Better Currency Trade:
Forex Futures or Spot FX?
Learning Markets, February 24, 2009
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Spread -- Advantage: Currency Futures
The spread in the currency futures market is not fixed. Depending on the liquidity of the market at the time, the spread can be one pip or less, and an effective limit order may cut the spread to nothing. In the spot forex market, you can have a variable spread like this, which may widen with market conditions or a fixed spread, which does not change but is usually wider (2-3 pips on the majors) on average than a variable spread.
It is important to note that some spot dealers offer spreads on some pairs that are below one pip, but that is not the case for all pairs they offer. On average, the spread in the futures market is narrower across the majors and major crosses than the spot market because the futures market has more liquidity and price competition than an individual dealer.
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