Crypto Intermediary Pricing: Exchanges vs. Brokers, Spread and Slippage.

Crypto Intermediary Pricing: Exchanges vs. Brokers, Spread and Slippage.

Valentin Hautefeuille
December 6, 2023

Who has never wondered about the pricing of their financial intermediary when buying or selling cryptocurrencies?Why is the execution price different from one exchange to another? How does a broker's pricing scheme work? We will explain everything you need to know.

Before delving into the topic of spreads, it's essential to first grasp the fundamental definition of a price. 

For those unacquainted with the industry, a glance at a price often reveals just a singular value, be it the last traded price or an average between bid and ask prices when examining a chart. There are however three essential components to a price: the last traded price, the asking price, and the offering price. When you wish to buy or sell an asset, you should be aware of those three prices, each associated with a specific trading volume.

The last traded price usually only matters if the trade occurred at a significant volume. This isn't much of a concern if you're on a liquid market like Euronext and trading an established stock like Total. However this changes when dealing with less liquid markets, such as private cryptocurrency exchanges. In these realms, where Bitcoin and Ethereum pairs in USDT dominate trading, the multitude of exchanges introduces a myriad of prices for the same pairs. The importance of understanding the source of a Bitcoin price becomes evident in this context, as it carries different implications based on its origin. Just like how the Apple stock is listed on both NASDAQ and Xetra, the Bitcoin asset is listed across multiple private exchanges in various countries, leading to a myriad of Bitcoin prices.

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Two types of intermediaries can quote you a price: Exchanges and Brokers.


Exchanges operate by matching client orders within their order books, providing a transparent view of market depth. On the other hand, brokers connect to various exchanges, offering a price valid for a specific time and volume without divulging the underlying trades. The choice between exchanges and brokers brings forth a nuanced decision-making process, influenced by factors such as competitiveness, transparency, and execution guarantees.

Exchanges, driven by liquidity providers, often offer more competitive prices but require fast response time from the buyer. Achieving a fixed price in real-time may demand entering an aggressive limit order, delving into the intricacies of the order book. The greater the guarantee of execution you seek, the less favorable the price may be. It's a profession in its own right.


Conversely, brokers, though potentially less transparent, provide flexibility by offering fixed prices in the buyer’s account currency and for the volume needed, even for assets with minimal liquidity on exchanges. Brokers aren't tied to a single market for executing a price. This convenience, however, may come at a higher cost.

Even if an asset's liquidity is almost non-existent on exchanges, brokers can quote a synthetic pair, removing the need to procure a different currency or cryptocurrency to access a scarcely traded asset. A broker will offer only one step, whereas some exchanges that do not quote the buyer’s currency in the desired crypto will require two steps making it more expensive.

In the realm of regulated exchanges, spreads inherently bear transparency through the order book. They represent the difference between the best buying and selling prices provided by platform participants, with commissions based on transaction size.

Spread exemple for a trade ticket - Fipto Research

When placing a buy order for a given asset, an exchange will apply commission fees to the order depending on its volume. In addition, you will pay the market spread, which can grow depending on the size of the order. This is called slippage.

In the example below (Kraken exchange, LINK/EUR pair, 30 Nov. 2023), if a buy order is placed for 200,000 EUR, the order will absorb the order book and all its spreads for that given volume. The average price of the order will be 13.44 EUR, while the mid price stands at 13.39 EUR. Admit that your broker charges you a 0.4% commission fee. If you want to buy right now, you'll need to place a market order or an aggressive order. In reality, you will pay 800 EUR for the exchange gross margin, plus an additional 740 EUR (0.37%) for the market spread due to the lack of liquidity. Therefore, the total cost for your order execution will be 1,540 EUR (0.77%).

Kraken exchange, LINK/EUR pair, 30 Nov. 2023

Conversely, brokers adjust the price based on your transaction direction and volume. They will fetch the available volume from various exchanges and over-the-counter (OTC) platforms. They not only charge a commission but also include an additional spread on top of the market spread by security. This spread can vary based on several factors: the broker's risk, asset liquidity, and the transaction amount. This additional cost, while not always transparent, serves as a trade-off for guaranteed liquidity at a specific price.

Calculating and understanding these costs is paramount for clients. Simulating simultaneous buy and sell transactions and challenging brokers about bid and ask prices for assets like BTC can offer clarity. Caution is advised against brokers advertising zero commissions, as the allure of low commission rates often conceals widened spreads to maximize profits, particularly when targeting less knowledgeable retail investors.

A prudent approach involves comparing prices on different exchanges while ensuring a comparison of bid or ask prices for similar pairs. A BTC/USDT price isn't directly comparable to BTC/USD, even less so with a synthetic BTC/EUR using BTC/USDT and EUR/USDT. Markets charge a premium where liquidity is scarcer. EUR/USD isn't the same as EUR/USDT, although they might be close. Liquidity constraints differ. USDT is traded as a crypto with liquidity constraints, and price depends on bid and ask market conditions even if it is backed by USD Tether (USDT) and guaranteed.

While brokerage spreads are justified by the services they offer, clients should always seek clarity and transparency. Engaging with brokers on questions of cost, risk, and liquidity guarantees is not only prudent but essential in establishing trust in the complex landscape of financial markets.

At Fipto, we operate as a broker, facilitating trades by sourcing liquidity from various exchanges and OTC markets instead of executing orders between clients. Our goal is to ensure the best possible prices for our clients with full transparency. Fipto is designed to cater to the specific needs of businesses, serving as a specialized intermediary. The platform and its features have been carefully crafted to address the requirements of various roles within enterprises, including treasurers, CFOs, accountants, and Heads of Risk.

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December 6, 2023

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