Direct answer
Costs that affect indirect quotes come from two broad places: (1) the built-in mechanics of how a quote converts one currency value into another, and (2) charges that apply when orders are priced, executed, or settled. Even if the market “true value” is stable, the rate you receive under an indirect quote can shift because spreads widen, fees are charged, or execution occurs under different liquidity and timing conditions.
Mechanics: what “indirect” means and where costs enter
An indirect quote expresses one currency’s value through a second currency. In practice, that means the final displayed/received rate can be influenced by how the provider maps currency conversion steps into one tradable quote.
When costs affect indirect quotes, they usually do so through components such as:
- Bid/ask spread and pricing model: The spread is a direct cost because you buy at the ask and sell at the bid. Under indirect quoting, the provider’s conversion may effectively reflect the spread structure of the underlying pricing inputs.
- Provider commissions and markups: Some providers add a commission per trade or embed a markup inside the displayed rate. This can change the effective conversion cost even when the mid-market movement is small.
- Execution costs (slippage): If your order is filled using available liquidity that is thinner than expected, the average fill price can drift away from what you initially saw. Indirect quotes can be especially sensitive when conversion requires multiple internal steps or liquidity sources.
- Settlement and platform-related charges: Certain venues apply charges related to trading infrastructure, account services, or settlement processing. These are often not visible in the headline rate but can affect the net result.
Assumption used in examples below: the “market value” is whatever mid-point you choose as a reference at a specific moment, and the “indirect quote result” is the price implied by bid/ask plus any listed fees or commissions.
Evidence or example: how you can check what’s driving the cost
A practical way to verify indirect-quote costs is to separate what is displayed from what is charged.
- Compare the displayed bid/ask to a reference at the same time
- Pick a reference moment and compute an approximate mid price as the average of bid and ask (assumption: linear averaging is acceptable for a sanity check).
- If your indirect quote implies a mid-point that systematically differs from your chosen reference, that difference may reflect spread effects, markups, or conversion mechanics.
- Match the net execution to any stated fee schedule
- If a provider lists commissions or execution-related fees, apply them to the notional size you traded (assumption: the fee schedule applies proportionally or as specified).
- Then compare the implied cost from the actual execution price versus the displayed quote. If the difference aligns with commissions, the “cost” is explicit; if not, it may be partly execution timing or slippage.
- Look for differences between quoted price and average fill price
- Many platforms provide an execution report. If the average fill deviates from the displayed price range, that deviation is typically an execution cost rather than a “quote definition” cost.
Limitations and risks: what can fail or change
- Market conditions vary: spreads widen during volatility and liquidity drops. That can make indirect-quote costs rise even if your fee schedule is unchanged.
- Timing matters: a quote you observe is time-specific. By the time execution occurs, the available liquidity and internal pricing inputs may differ.
- Indirect mapping can amplify differences: because an indirect quote depends on how conversion steps are combined, differences in underlying liquidity can produce costs that are not obvious from a single headline rate.
- Historical relationships do not guarantee future results: even if past comparisons were stable, future executions can differ when liquidity or execution quality changes.
Material failure mode to watch for: you assume the displayed indirect quote already includes all costs, but commissions, markups, or execution slippage can be applied after the fact, causing your realized cost to be higher than the simple bid/ask view suggests.
Verification or next question
To verify indirect-quote costs independently, you generally need three inputs:
- The quote you observed (bid and ask, and the timestamp or time window).