Let’s say you have an account denominated in GBP. You open a long position on 1 unit of US Wall St 30 @ 29,000 and close your trade @ 29,100, generating a profit of USD100.
The cost of converting USD100 profit back to your home currency (GBP) would be GBP0.39, based on current market rates at the time of calculating.
How this is calculated:
In order to convert USD100 of profit to your account home currency (GBP), you would use the USD/GBP exchange rate plus the currency conversion fee.
Let’s assume the USD/GBP exchange rate is:
In this case, the profit is a credit to the account, so the bid price is used (if it had been a debit as a result of a loss, the ask price would have been used):
Profit converted to GBP without the mark-up = 0.7700 X 100 = GBP77.00.
We charge a mark up on the mid-price for the currency conversion to your account’s home currency:
New bid = midpoint price x (1 - x%)
New ask = midpoint price x (1 + x%)
Where x% = mark-up (0.50%)
Midpoint price = (ask + bid)/2
Midpoint price = (0.77000 + 0.77005)/2 = 0.770025
Fee adjusted exchange rate to convert USD to GBP = 0.770025 x (1 - 0.5%) = 0.766174875.
The USD100 profit on the trade will result in a credit to your account when it is denominated in GBP of: 0.766174875 X 100 = GBP76.61.
This is GBP0.39 less than using the straight exchange rate and represents the cost of trading in USD when the account is denominated in GBP for this example.