How is the spread calculated for crypto prices?
When a customer makes an investment, the cost of execution is included within the spread plus a fixed fee equal to 1% of the quoted price.
Crypto prices on TBanque are based on the Bid-Ask spread that comes from eToroX, a Distributed Ledger Technology (DLT) licensed trading platform affiliated with TBanque EU. eToroX maintains cryptoasset order books which are populated by liquidity providers and other crypto traders, and form the basis for the Bid-Ask spread. TBanque may apply an additional fee to the prices it receives from eToroX which is part of the price shown to the customer.
Here are two examples of how TBanque determines its prices — one which applies to variable spreads (as with cryptoasset prices) and one which applies to fixed spreads.
Variable spread (e.g., Crypto)
The price of the real/physical cryptoasset (to the customer) is 98 – 100. Let’s assume that TBanque is receiving a price from its feed or liquidity provider of 98.98 – 99 After applying an additional mark-up of 1% to both the buy and sell price, the price that is available to the customer is 98 – 100.
Here is how this is calculated:
Feed/Liquidity Provider Price (Sell):98.98
Feed/Liquidity Provider Price (Buy): 99
Customer Price (Sell): 98 = (98.98 – (98.98 * 1%))
Customer Price (Buy): 100 = (99 + (99 * 1%))
The mark-up represents an implied fee component that is added to the spread from the feed/liquidity provider, and is incorporated within the price that is shown to the customer. The incorporation of the fee “widens” the spread; meaning that it has the effect of lowering the price at which the customer can sell and increasing the price at which the customer can buy.
To illustrate the variable nature of spreads of this type, now let’s consider a scenario whereby the width of the (market) spread of the price provided to TBanque changes and widens, but the mark-up remains consistent at 1%:
Feed/Liquidity Provider Price (Sell): 97.50
Feed/Liquidity Provider Price (Buy): 100.50
Customer Price (Sell): 96.525= (97.50 – (97.50 * 1%))
Customer Price (Buy): 101.505 = (100.50 + (100.50 * 1%))
As this example shows, the impact of widening the market spread is to increase the overall spread provided to the customer (even though the mark-up remains the same).
Fixed spread (does not apply to cryptoassets)
TBanque provides a price to its customers of 16000 – 16002. In this case, the spread provided is fixed by TBanque at a width of 2. If TBanque receives a price from its feed or liquidity provider of 16000.5 – 16001.5, the price for TBanque customers is formed by taking the mid-price of the market spread (16001) and then adding and subtracting half of the total customer spread (2) to the market offer and bid price respectively.
How this is calculated:
Feed/Liquidity Provider Price (Sell): 16000.5
Feed/Liquidity Provider Price (Buy): 16001.5
Customer Price (Sell): 16000 (((16000.5 + 16001.5)/2) – 2/2)
Customer Price (Buy): 16002 (((16000.5 + 16001.5)/2) + 2/2)
The fee is added to the spread from the feed/liquidity provider, and is therefore incorporated within the price that is shown to the customer. The incorporation of the fee therefore “widens” the spread; i.e., it lowers the price at which the customer can sell and increases the price at which the customer can buy.
To illustrate the fixed nature of spreads of this type, now let’s consider a scenario whereby the width of the (market) spread of the price provided to TBanque changes and widens, but the overall spread width provided to the customer remains constant at 2:
Feed/Liquidity Provider Price (Sell): 16000.25
Feed/Liquidity Provider Price (Buy): 16001.75
Customer Price (Sell): 16000 (((16000.25 + 16001.75)/2) – 2/2)
Customer Price (Buy): 16002 (((16000.25 + 16001.75)/2) + 2/2)
As this example shows, the impact of widening the market spread has no increase on the overall spread provided to the customer.
