Spread-Based Commission

Spread-based commission is one of the two primary compensation models for introducing brokers (IBs) in the Forex industry. When a referred trader opens a position, they pay a spread -- the difference between the bid and ask price of a currency pair. The broker captures this spread as revenue, and in a spread-based commission model, a portion of that spread is paid to the IB who referred the trader. The IB earns on every trade, making this a volume-driven, recurring income model similar to RevShare.

Spread-based commissions differ from lot-based commissions in how they are calculated and how they respond to market conditions. Lot-based models pay a fixed amount per lot traded, regardless of market volatility or spread width. Spread commissions, by contrast, fluctuate with market conditions -- wider spreads during volatile periods can increase IB earnings, while tight spreads during quiet markets reduce them. This makes spread-based models less predictable but potentially more lucrative during high-volatility events.

Brokers choose between spread-based and lot-based models based on their pricing structure and IB program goals. Brokers that primarily earn revenue through spreads (rather than fixed commissions per trade) naturally align with spread-based IB compensation. Some brokers offer both options, allowing IBs to select the model that fits their client base. For example, an IB whose clients trade frequently in major pairs with tight spreads might prefer lot-based commissions for their consistency, while an IB with clients who trade exotic pairs may benefit more from spread-based compensation.