Why Do CFD Price Feeds Vary Between Brokers?

Have you ever wondered why CFD (Contract for Difference) prices can vary between brokers, even with the same symbols? For forex traders, who are used to the currency price feeds on their platforms aligning with what the institutional traders see, it raises questions whether you are trading with just your broker or the market as a whole or just its liquidity provider.

Not only can there be differences between brokers using the same symbol for a CFD but there can be differences between symbols for the same underlying asset (e.g. US500 vs S{X500, NAS100 vs NDX100, etc). Trying to compare pricing in these cases is like trying to compare apples and oranges.

What is a CFD?

A CFD (Contract for Difference) is a financial derivative which traders use to speculate on price changes of an underlying asset, such as stocks, indices, commodities, metals, cryptos without having to take delivery or own the asset itself.

US500 Chart (underlying asset S&P500)

Snapshot quotes: us500

Broker 1

Why Do CFD Price Feeds Vary Berween Brokers?

What may account for differences in CFD pricing?

Liquidity Providers and Sources of Pricing

Brokers get their price feeds from different liquidity providers, such as banks, institutions or exchanges.

Some brokers combine prices from more than one liquidity provider to create their own price feeds while others rely on only one source for their pricing.

As a result, variations in CFD pricing between brokers can be the result of differences in liquidity feeds.

In addition, not only can pricing vary between brokers using the same symbols but also from different symbols for the same underlying asset (e.g. US500 vs SPX500, NAS100 vd NDX100, etc). Trying to compare pricing in these cades is like trying to compare apples and oranges.

Different broker models

What is a “B book?”

A “B-book” is a trading model used by brokers in financial markets, such as forex and CFD (Contracts for Difference) trading. In this model, the broker takes the trade into its own book by not passing on customer trades directly to the market. In other words, the broker takes the other side of the customer’s trade by acting as the counterparty.

Some brokers call themselves market makers and run a B book where they take the other side of customer trades. As a result, the prices shown on its platform may reflect its net positions adjusted to manage risk, profit margins, or customer trading patterns.

Other brokers, who pass through all or most of customer trades directly to their liquidity providers, will show pricing that is more consistent with what pricing it is receiving (whether aggregated or from a single source).

Why Do CFD Price Feeds Vary Berween Brokers?

Differences in spreads

There was a time when brokers offered fixed spreads, This is no longer the case where spreads are variable and can widen based on market volatility based on current market conditions. As a result, volatility can account for temporary differences in pricing between brokers. How wide or narrow a spread between brokers or whether it is quoted with or without commissions can by themselves account for some minor differences in pricing.

To sum up, CFDs offer an opportunity to trade assets that might otherwise only be available on futures exchanges. However, trying to compare price feeds between brokers is pot luck and reflect individual broker liquidity feeds, models, etc. For a currency trader like myself who feels like the prices I trade off of reflect the real market, CFD pricing feels like a something that may follow the underlying asset but depends more on what the individual broker decides to display as its price feed

Why Do CFD Price Feeds Vary Berween Brokers?

Why Do CFD Price Feeds Vary Between Brokers?