The Case for Mid-Market Rates in Over-the-Counter FX Transaction Cost Analysis

11 Jan 2021
Date submitted
11 Jan 2021
Resource type
Best practice
File type
pdf PDF file (313.13K)
This paper asserts that the mid-market price should be the benchmark data set against which transaction
costs are measured in OTC currency markets. On average, market-making banks trade at the mid-market
price. The cost in basis points between the transacted rate and the mid-market rate, multiplied by the
volume of the empirical trade, provides a universally applicable cost benchmark in OTC foreign
exchange.
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