Direct answer
Execution venue affects indirect quotes mainly because the venue determines (1) where the order can be executed, (2) which liquidity sources are reachable, and (3) how costs and timing are applied. That can change the effective indirect quote price you observe, even when the underlying market relationships are the same.
Mechanism and definition
An indirect quote expresses the value of one currency through an intermediate reference currency rather than quoting it directly. In practice, an observed indirect quote is often the result of combining prices from multiple legs (for example, a currency-to-intermediate rate and an intermediate-to-target rate) and then converting the result into the indirect format.
When you send an order, the execution venue (the place/route through which an order can be matched or filled) influences which prices and which legs are used. Even without assuming a specific broker model, the general chain looks like this:
- Your order is routed through venue-specific infrastructure.
- The venue selects from available liquidity sources that may quote directly or through internal/connected pricing.
- The venue applies venue-specific handling such as queueing, matching rules, and timing of when quotes are checked.
- The system produces an output price for the order, which may be based on one or more pricing snapshots.
Because indirect quotes commonly require at least one conversion step, inconsistencies can arise when the venue sources prices from different places or at slightly different times. Small time differences can matter: market moves during the time needed to price multiple legs can make the combined indirect quote drift.
Evidence or example (with explicit assumptions)
Assume you want an indirect rate that depends on two legs, A→C and C→B. Consider two execution venues, V1 and V2.
- Assumption 1: Both venues can execute both legs, but they may source them from different liquidity pools.
- Assumption 2: The indirect output is computed by multiplying the legs (or an equivalent conversion), using pricing snapshots taken when the system prepares execution.
If, at the snapshot time:
- Venue V1 uses A→C from Liquidity Pool P1 and C→B from Pool P1, then both legs are effectively “synchronized.”
- Venue V2 uses A→C from Pool P2 and C→B from Pool P3, then the legs may reflect different micro-moments and different cost structures.
Even if the underlying market relationship remains broadly consistent, the combined indirect quote can differ because (a) the two legs may be priced at different times and (b) each venue may incorporate different effective costs (for example, wider quoted prices or different commission treatment).
Limitations and risks (material failure modes)
A few limitations can affect how you interpret venue-driven indirect quotes:
- Timing risk: indirect quotes that depend on multiple legs can be sensitive to micro-timing. A venue that checks pricing at different instants can produce wider dispersion.
- Liquidity selection risk: if the venue’s accessible liquidity differs by venue, the order may face different depth and different effective prices across sizes.
- Partial fill and repricing: if the order executes in parts, each part may use a different pricing snapshot, creating an average effective indirect rate that differs from the first visible quote.
- Cost composition mismatch: different venues may display or apply costs differently. The “quote” you see may not include all components that affect the effective price.
Because these factors are variable with market conditions and system behavior, historical observations do not guarantee future results.
Verification and next question
You can independently verify venue effects without relying on promises by testing a controlled comparison:
- Choose a single indirect quotation format and the same order characteristics (size, time window, and execution urgency).
- Record the observed indirect quote and the effective executed outcome (if you have execution data).
- Repeat across venues and multiple time windows to see whether differences track timing, costs, or depth conditions.
If you want to go deeper, a useful next question is: how can indirect quotes be measured in a way that separates price movement from venue-specific cost and timing effects?