“Are my FX rates and margins fair?” As a corporate treasurer, this is an important question to ask. But due to a lack of transparency around market data, obscure bank jargon and opaque trading processes, it’s not an easy question to answer. 

Without access to accurate, real-time market data, it’s very difficult to get a clear picture of business FX rates. Banks understand this obscurity and use it to their advantage, meaning that the answer to the question is most likely no, your business FX rates and margins aren’t fair.

Rates are driven primarily by market conditions, which puts them outside of businesses' and banks’ control. However, the margins added on top of rates are within the banks’ control.

But you can’t know what a fair margin looks like unless you have the data to understand and benchmark ‘fair’ in the first place. Thankfully, this is now possible. New FX tools are giving businesses visibility into market data, equipping them with the information they need to understand what their banks are really charging — and enabling them to do something about it.

What influences rates and margins?

First, it’s important to recognise the difference between rates and margins. Rates are the market price at which one currency is exchanged for another: the rate of exchange. These are influenced by a range of external factors out of business’s control, including:

  • Inflation
  • Interest rates
  • Government policy
  • Changes in trade agreements or negotiations
  • Market expectations 

An FX margin, on the other hand, is the amount your bank adds on top of the trade. This is what they charge you for facilitating the trade. But the margins themselves are often hidden or, at least, unclear in how they’ve been calculated. Margins are influenced by factors including: 

  • Liquidity: Due to the bank’s perception of the risk, the lower the liquidity of the currency pair, the higher the margin. The USD/EUR pair, for instance, is the most traded and most liquid on the market.¹
  • Tenor length: The longer the tenor, the greater the period of uncertainty on rates and the company's position, which adds risk. This means the longer the tenor, the higher the margin.
  • The bank (or banks) you’re using: The number of providers, or banks, a company has can impact margins. Maintaining multiple providers allows a company to compare rates and reduce margins by creating competition between the providers for access to flow.
  • Your business’ credit: If your bank decides you have low credit, they might perceive you as having less leverage in potential negotiations, and charge you more. 

This doesn’t mean, however, that margins are entirely subjective. They needn’t be wildly inconsistent from bank to bank. While rates can change, the margin banks charge is within their control. And that means it’s in your business’ control, too.

Why your business FX margins probably aren’t fair

Trading foreign currencies has inherent risk, which means businesses and banks are looking for ways to reduce it. For banks, charging margins is a way to hedge against risk. The higher the perceived risk, the higher the margin; the lower the perceived risk, the lower the margin.

For banks, relatively illiquid currency pairs represent a higher risk, as do forward contracts with long tenors. In these trades, the bank will levy a higher margin to cover themselves. The company’s credit profile is also relevant to the bank.

But mitigating against risk is one thing, charging an unfair margin is another. The fairness aspect comes in how big that margin should be. And, at the moment, banks can charge pretty much whatever they want — unless a company challenges those margins.

How does this happen?

Lack of transparency

This is perhaps the biggest issue with unfair business FX rates and margins. When you submit a trade, your bank provides you with a quote, inclusive of all costs. But beyond that, visibility into what they’re charging or why is limited.

This makes it impossible to see what the trade would actually cost based on the currency rates alone — and what margin your bank is charging on top of that.

It's complicated

FX trading is full of jargon and insider "conventions" — the industry rules that have built up over time. These conventions govern, for example, how currencies are quoted, the complex maths behind those quotes, the rules of trading and when traded currencies can or cannot settle. But many companies and treasurers aren’t familiar with these complex and often opaque practices, putting them at a disadvantage when trying to negotiate lower margins.

This is why it’s invaluable to have a tool that navigates these rules and makes margin analysis straightforward for companies and their treasurers.   

A lack of access to real-time data

Businesses typically don’t have access to the data that banks use to generate their quotes, putting them at a significant disadvantage. It’s virtually impossible to negotiate better margins if you don’t know exactly what you are negotiating, let alone understand if what you’re being charged is fair or not.

Even if you don’t want to negotiate, access to live data on trade currencies lets you understand what’s going on in the market, helping inform your FX strategies.

Other factors that impact margins

Flow size

Your bank might also be charging you different margins depending on the size of your flow — your annual trade volumes. The bigger your annual trade volumes, the more likely it is that your bank (or banks) will keep a tighter rein on your margins because they are incentivised to keep access to that flow.

Companies that trade over 100 million USD, for example, can use the leverage of their flow size to negotiate with their bank and keep margins low. Companies with smaller trade volumes might need to work harder, and negotiate savvier, with their bank in order to bring their margins down.

Company credit and service profile

If you’re a smaller business with less credit or a bigger business with credit risk, or if you depend heavily on your bank for other key services, you’re likely to have less leverage when it comes to asking for lower margins, even though the SME sector forms 21% of the total international payments market.²

Established businesses with good credit, however, will find themselves in a stronger position to negotiate — or might be receiving lower margins in the first place.

Get fairer margins and better visibility over rates

Unfair margins aren’t inevitable. By understanding how to benchmark your trades using real-time rates from the interbank market, tailored to the tenor of your trade, companies can see the margins their banks are taking. Getting to grips with this gives companies the information they need to start a conversation with their bank. 

Benchmark your FX trades 

First, this means using an FX benchmarking tool. Thanks to a new generation of FX tools, treasurers now have access to real-time interbank market data that they need to understand rates and margins. 

This data allows you to compare your bank’s quote with the rates used by banks to trade currencies in the interbank market, enabling you to gain transparency into the margin your bank is charging. 

Second, the best tools give you visibility not only into spot rates but (crucially) forward rates too. Some tools like Yahoo Finance, however, provide access only to spot rates. But many businesses hedge their exposure with forward contracts, which are priced with a combination of the spot rate and forward points. Depending on how far in the future the trade will settle, those forward points can be significant.

Just’s FX Benchmark, however, benchmarks forward contracts, providing insight into what a fair margin would be for longer tenors (and helping you understand how costs would vary based on when you choose to settle trades).

Having access to this more comprehensive information can strengthen your hand in a negotiation, as you can see how various factors — such as tenor length and liquidity — influence your bank’s quote.


Armed with data from FX Benchmark, you can regain control over your margins by negotiating with your bank. This means you enter the negotiation with the same data the banks have access to.

Coming to negotiations equipped with data is one thing. Often, simply presenting the information and showing the banks that you’re aware of the margins they have been or are proposing to charge can immediately lower the margins. But it’s important also to approach FX negotiations in an inquisitive and conversational manner, for example asking the bank to explain their rationale, rather than in an adversarial way.

But before you do this, you need to decide your appetite for negotiation. Every business is different, and there are many factors that influence a company's decision. How your banks perceive you, and whether they’d be willing to lose you as a customer, alters the strength of your negotiating position. Besides, if your bank is unwilling to negotiate with you, you might be able to secure fairer margins elsewhere.

Even if you decide not to negotiate, the data provided by FX benchmarking tools can help you understand rate direction, the differences in quotes from bank to bank, how currency pairs are performing, and when to trade. Together, this information can help you build a stronger FX strategy and get fairer margins, both over the short and long term.

Level the playing field with Just’s FX Benchmark

Many businesses often say, "I trust my bank".  But access to the best rates isn't a question of trust. If companies don’t benchmark trades to see what their bank is charging, and don't have the information to challenge costs, banks will continue to optimise their profits. All this means that your margins probably aren’t fair. 

With FX benchmarking tools, you gain access to the same data on which the banks base their foreign exchange rates and margins. This levels the playing field, providing both parties with visibility, and sets the stage for productive discussions about fairer quotes. 

Just’s FX Benchmark provides businesses with accurate, real-time interbank data for spot and forward rates, as well as historical data. By entering your trade details alongside the bank’s quotes, you can see the spread between the rates banks can access and what they charge to their customers.

Using this data, our customers have been able to negotiate better deals with their banks: frame a renewable energy company realising a 64% reduction in annual FX trade costs, and a global retailer cutting its annual costs by 58%.

Overall, FX Benchmark has helped benchmark over $140+ billion in FX trades, helping companies gain huge savings. To see how FX Benchmark can help you understand the actual currency rates and secure fairer margins for your business, try FX Benchmark today

¹  Triennial Central Bank Survey - Foreign exchange turnover in April 2019 

²  Bank charges on international payments - An analysis of the UK SME market