When you look up exchange rates with a currency exchange service, you’ll see two options:
The difference between the Buy and Sell rates is called the spread.
A mid-market rate is the middle point between the buy and sell rate
It’s the only real exchange rate, because it shows you the actual exchange rate between two currencies, without any extra fees or hidden overheads.
Currency traders take the live mid market rate and add extra fees and overheads without telling you.
Knowing the mid market rate is the only way to tell if you’re getting a fair deal on your currency exchange.
Let’s say that your UK-based eCommerce business needs to pay £1000 to your suppliers in the Netherlands. You need to sell your GBP and buy Euros. Here’s how it works:
Statistics / Rate | Desc | for £1 |
---|---|---|
Sell rate | GBP into Euros | €1.10 |
Buy rate | Euros into GBP | €1.30 |
Spread | €1.30 - €1.10 | €0.20 |
Mid rate | for GBP to EUR | €1.20 |
You say:
€1.20 | for | £1 |
£1 | to | €1.20 |
The exchange rate is not an average, but taken from a specific point in time.
An Exchange Rate can be defined as: