Spread

The spread is the difference between the price at which a trader can sell (bid) and buy (ask) a financial instrument. It is one of the primary ways Forex and CFD brokers generate revenue. Every time a trader opens a position, the spread represents an implicit cost -- and a revenue event for the broker. The tighter the spread, the lower the trading cost for the client, but also the lower the revenue per trade for the broker.

In affiliate and Introducing Broker (IB) programs, the spread becomes the basis for spread-based commission models. Instead of paying a fixed amount per lot, the broker pays the partner a portion of the spread revenue generated by referred traders. This ties partner income directly to broker revenue and can result in variable earnings depending on market conditions, instrument type, and trading volume.

Spread markups are another mechanism brokers use to fund IB commissions. A broker may add a small markup to the raw spread and allocate that markup as the partner rebate. This approach keeps the commission structure transparent while ensuring the broker covers partner costs from actual trading revenue. Understanding how spreads work is essential for IBs negotiating deal terms, as lot-based commissions and spread-based models produce different earnings profiles depending on the instruments traded.