What is a retail FX broker actually selling you?
A retail FX platform shows a EUR/USD price, a buy button and a sell button, and the natural inference is that pressing buy buys euros. It does not. Nothing is bought, nothing is delivered and no currency ever reaches you. What you enter is a contract with the broker whose value tracks a currency pair. Getting this right is the foundation of the two lessons that follow, because every cost in them falls out of the structure.
Rolling spot — a contract that never settles
Unit 1 established that a spot trade has a value date two business days out. A retail position never reaches it. At 17:00 New York each day, the broker rolls the value date forward using a tom-next FX swap, and the position continues unchanged into the next day.
Some regulators name the product for exactly this: a rolling spot forex contract, classified as a derivative rather than a currency purchase. Structurally it is a contract for difference on a currency pair — the same instrument covered in What is a CFD?, with a currency underlying.
The consequence that matters: the roll has a price, and that price is charged to your account every night. It is the subject of the last lesson in this unit.
The broker is your counterparty
There is no exchange, no order book you are trading on, and no clearing house standing behind the contract. The price is the broker's price, and the other side of your position is the broker itself. Firms manage that risk in two ways, and most use a mix: passing it on to a liquidity provider, or keeping it internally, where a client's loss is the firm's revenue.
Stating this is not an accusation — it is the disclosed, supervised structure of the product, and the Derivatives domain examines the conflict in detail. It is simply the most important structural fact about the account, and it is in the client agreement rather than the marketing.
The four charges, all of which are real
- The spread. Paid on the way in and priced into the way out. Widens when liquidity thins (Unit 4).
- Commission. On raw-spread account types, a per-lot charge replaces part of the spread. Same money, different label.
- The overnight roll. Charged or credited daily on the full notional. The next-but-one lesson computes it.
- Currency conversion. The one people forget, so it deserves the arithmetic.
The conversion charge, worked
Your profit and loss arises in the quote currency of the pair, not the currency of your account.
Trade 1 lot of USD/JPY with a euro-denominated account and gain 40 pips:
- P&L in the quote currency: 40 × JPY 1,000 = JPY 40,000
- Converted to USD at 150.00: USD 266.67
- Converted to EUR at 1.0800: EUR 246.91
Each conversion happens at the broker's rate, which typically carries its own markup — often quoted around 0.3% to 0.5% per conversion, varying by firm. Two conversions at 0.5% remove roughly EUR 2.47 of that EUR 246.91, about 1% of the gain, before spread and before the overnight roll. Small per trade. Not small per hundred trades.
Availability is not universal
Retail leveraged FX is permitted in some jurisdictions under strict conditions, tightly restricted in others and prohibited in some. The same brand often operates several legal entities in different countries with materially different protections, and which entity you contract with is in the paperwork, not on the homepage. Unit 4 covers the landscape generically.
This course explains what the contract is. It does not suggest that anyone open one.
Try it now
- Both rates you need are below, on the same dates. Read the latest close off each and reproduce the two-step conversion above: yen into dollars, dollars into euros.
- Add a 0.4% markup to each conversion and express the total as a percentage of the gross gain. Two conversions, two markups, and neither of them appears on a trade confirmation as a line item.
- Write down the four charges in order of how visible they are to a new account holder. The order is almost exactly the reverse of their annual cost — which is the point of the next two lessons.