Rebate vs Spread: does a forex rebate change your spread?

A common question: does having a rebate mean a lower spread? No - a rebate and a spread are two different things.

What the spread is

The spread is the difference between the bid and the ask. It is a main source of broker revenue and one of your trading costs. It is set by the broker and market liquidity, not by your rebate channel.

What a rebate is

A rebate is part of your cost returned on an agreed schedule, outside the trade. It comes from the commission the broker pays to the introducing broker (IB), rather than lowering your spread.

Three common myths

• Myth: a rebate lowers the spread. Reality: the spread is unchanged; the rebate is an extra refund.
• Myth: a rebate worsens execution. Reality: prices and spread are unaffected.
• Myth: a rebate is a broker subsidy. Reality: it comes from IB commission and does not change the broker's quotes.

Quantify both

Look at spread cost and rebate together for your true cost: net cost ~ spread cost - rebate. Use the rebate calculator to estimate the rebate part; see a sample broker scheme.