How to check the markup in an exchange rate

Trupari is an FX rate benchmarking service. It compares a quoted or published exchange rate with a mid-market reference, naming that reference's source and observation date, and with peer providers. Its Consensus Engine reconciles an institution's own rate feeds into one defensible rate.

The short answer. An exchange rate's markup is how far it sits from the mid-market rate — the midpoint between the prices at which the market buys and sells a currency. Compare the rate you were quoted with a mid-market reference for the same currency pair, taken at about the same time, and express the gap in basis points: hundredths of a percent.

The formula

Write the quoted rate the way most providers show it: how many units of the currency you receive for one unit of the currency you send. Then:

markup (basis points) = (mid-market rate − quoted rate) ÷ mid-market rate × 10,000

A positive result means you receive less than you would at the mid-market rate. 100 basis points is 1%, so a markup of 172 basis points is 1.72% of what you send.

A worked example

You are sending pounds to euros and are quoted 1.1400 euros per pound. A mid-market reference for GBP to EUR at the same time reads 1.1600.

(1.1600 − 1.1400) ÷ 1.1600 × 10,000 = 172 basis points, or 1.72%.

On £1,000 that is €1,160.00 at the mid-market rate against €1,140.00 at the quoted rate: €20.00 less, before any fee.

Illustrative figures, not a current rate.

If the rate is quoted the other way round

Some providers quote how much you pay for one unit you receive — for example 0.8800 pounds per euro. Turn it round first: 1 ÷ 0.8800 = 1.13636 euros per pound. Against the same reference of 1.1600, that is (1.1600 − 1.13636) ÷ 1.1600 × 10,000 = about 204 basis points. Keep the extra decimal places when you turn a rate round: rounded to 1.1364 it would give 203. Comparing the two directions without turning one round gives a wrong answer, often with the wrong sign.

What makes a fair comparison

The same currency pair and direction. GBP to EUR and EUR to GBP are different corridors.
A reference taken at about the same time. Exchange rates move during the day. A daily reference, such as the European Central Bank's euro reference rates, is fixed once a day, so a quote taken hours later is compared against a rate the market may already have moved from. Always note when the reference was observed.
A named source. A mid-market rate with no source and no date cannot be checked, so it cannot settle anything.
Fees counted separately. The markup is in the rate. A fixed transfer fee comes on top, and on a small transfer it can be larger than the markup. To compare providers overall, compare the amount that arrives after all fees.

Check a rate with Trupari

Trupari's free exchange-rate check does this arithmetic for you. Enter the rate you were quoted and it shows how far it sits from a mid-market reference, in basis points, naming the reference's source and the date it was observed, and flagging a reference that is too old to rely on. Free, no sign-up, fair-use limits apply. It compares rates only, not fees.

Check a rate free

If you publish exchange rates for customers, the same comparison, corridor by corridor and against the peer providers you choose, is what Trupari for businesses is for. How every figure is calculated is published in the methodology.

Questions

Does the markup include the transfer fee?

No. The markup is the gap between the quoted exchange rate and the mid-market rate. A transfer fee is charged separately, so to compare two providers overall, compare the amount the recipient receives after all fees.

Why is my quoted rate different from the rate I see in a search engine?

A rate shown in a search engine or a currency converter is usually a mid-market figure from a data source, not a rate anyone offers you. A provider's quote is the rate at which it will actually exchange your money, and the difference between the two is the markup. The two may also have been taken at different times.

Can I get the mid-market rate itself?

Usually not as a customer. The mid-market rate is a reference point between buying and selling prices; providers typically quote a rate on one side of it. That is why the useful question is how far a quote sits from the reference, not whether it matches it.

Glossary

Mid-market rate: The midpoint between the prices at which a currency is being bought and sold in the market. It is a reference, not a rate a provider offers.
Exchange rate markup: How far a quoted exchange rate sits from the mid-market rate. Also called the spread or the margin in the rate. It is separate from any transfer fee.
Basis point: One hundredth of a percent: 100 basis points is 1%. Small differences between exchange rates are usually expressed in basis points.
Corridor: A currency pair in one direction, such as GBP to INR. Rates, markups and competition differ from corridor to corridor.
Reference source: The organisation whose published rate is used as the mid-market reference, such as a central bank's daily reference rates. A reference is only as useful as its source and the date it was observed.
Pegged currency: A currency whose official rate is fixed to another by treaty or policy, such as the CFA franc to the euro. Its reference rate follows from the peg.
Managed or parallel-rate currency: A currency whose official rate differs from the rate at which it actually trades. A mid-market comparison against the official rate looks precise and means little, so Trupari flags these rather than guessing.

Peer and competitor rate comparisons are Powered by Wise. FX reference rates are sourced from FRED, ECB, Wise, treaty-fixed pegs and open reference data, and are indicative only. Benchmarking covers freely-traded currencies; corridors in managed or parallel-rate currencies (e.g. ZWL, ARS) have no reliable mid-market reference and are shown as such. Peer and competitor rates are customer-provided or retrieved through approved provider APIs where access rights are confirmed. This product uses the FRED® API but is not endorsed or certified by the Federal Reserve Bank of St. Louis. By using Trupari you agree to be bound by the FRED® API Terms of Use. Rates By Exchange Rate API. Includes statistics sourced from the Bank for International Settlements (BIS); the BIS does not endorse this product.