Direct answer: what to check
For a regulated entity, start by checking the items that it publishes as part of pricing and holding costs. Then compare those published components to the execution reality you observe in practice. The key idea is to separate:
- Published costs (what the entity says you pay or how it defines the price components).
- Variable outcomes (what changes with market conditions, liquidity, and how orders are executed).
At minimum, look for spreads (how the buy/sell difference is presented), commissions or dealing fees (if any), and financing/overnight charges for holding positions.
Mechanics: separating stable inputs from variable results
1) Spreads
A spread is the difference between a quoted buy price and sell price. It can be presented as a fixed value or as a variable value that changes with liquidity and volatility.
What to check:
- Whether the entity states how spreads are determined (fixed vs variable).
- Whether the entity describes spread widening during fast markets or low liquidity.
- Whether the entity provides examples or definitions that clarify which time the spread applies to (quote time vs execution time).
Why it matters: spreads directly affect the cost to enter and exit. Even if published spreads look reasonable, the effective cost can differ when the execution price is not the same as the quote you saw.
2) Commissions and dealing fees
Some providers add a commission on top of the spread. Others may have spread-only pricing. These fees can vary by instrument type, account type, or volume.
What to check:
- The fee schedule: commission rate, minimums, and how volume is measured.
- Whether fees apply per trade, per lot, or per some other unit.
- Any conditions that can change the fee basis (for example, account tier or instrument category), assuming those conditions are clearly documented.
3) Financing and overnight charges
If you hold a position past a certain cutoff, there may be financing or overnight charges/credits. These are often calculated using an underlying reference and an entity-specific adjustment.
What to check:
- The entity’s description of cutoff times (in general terms, what moment triggers the financing).
- The calculation components: base rate, adjustment, and any caps or special cases.
- Whether financing differs by instrument and direction.
4) Other published cost items
Beyond the three major categories, published documents may mention additional charges, such as:
- Fees related to specific order types or special services.
- Costs for inactivity or account maintenance (if applicable to the entity’s model).
Check what is published for your account type, because fees are frequently account- and instrument-dependent.
Evidence or example: how to test “published vs execution”
Because outcomes vary, use an assumption-driven example rather than live market expectations.
Assume you trade a single instrument with:
- A published spread component (stated definition).
- A commission per unit volume (stated schedule).
- Financing set to a documented method (even if the numerical result depends on reference rates).
Then compute a cost snapshot for entering and exiting at the same effective prices you would expect under ideal conditions. Next, compare that to what actually happens when you place orders:
- If execution happens worse than the quote, the difference is not “a new fee”; it’s an execution outcome (often described as slippage or quote-to-execution difference).
- If financing is applied when you hold through the stated cutoff, confirm that the entity’s model matches your observation.
This method helps you verify whether the published items you checked correspond to your real costs.
Limitations and risks: common failure modes
At least one material limitation to expect is cost variability:
- Market conditions change spread behavior and execution quality.
- Liquidity and volatility can cause spreads to widen beyond the level you saw earlier.
Other failure modes:
- Incomplete fee disclosure: some documents explain one cost type but omit how it interacts with another (for example, commission plus spread).
- Hidden cost basis changes: fees may depend on account tier or instrument category; using the wrong schedule can mislead comparisons.
- Timing mismatch: financing cutoff and fee application timing can differ from when you believe a position became “held.”
Also note a general limitation: historical relationships do not establish future results, especially around execution quality.