Precision Pre-Trade Analytics for a Data-Driven FX Market 

Our Expected Spread Model empowers our clients to anticipate, assess, and optimise the cost of FX transactions with unprecedented clarity. 

The Problem with Historical Averages 
Traditional methods of estimating FX spreads rely on backward-looking databases of past trades. While intuitive, these approaches often fail due to inconsistent data, inadequate granularity, and a lack of real-time relevance—especially in the forward market where credit and market structure dynamics make comparisons unreliable. 

A Model Built for Today 
We have developed a model-based alternative that reflects how spreads are determined: by market liquidity, volatility, and trade size. Grounded in academic research and tuned with real trade data, the model delivers dynamic, real-time estimates that adjust for the trading window, currency pair, and market conditions. 

Dynamic Insights Across the Trade Lifecycle 

• Pre-trade: Plan execution timing based on expected cost. 
• In-trade: Evaluate the fairness of a live quote. 
• Post-trade: Benchmark outcomes with neutral, consistent metrics. 

Combined with our Forwards365™ product, New Change FX offers a comprehensive and reliable suite of pre-trade tools—providing clients with actionable insight, improved execution, and defensible trading decisions. 

When Precision Meets Prediction: Rethinking FX Costs with New Change FX 

Foreign exchange is undergoing a quiet but profound transformation. The days of opaque pricing and guesswork are giving way to a new orthodoxy—one in which empirical data and predictive analytics drive strategic decisions. At the heart of this shift is data and the pre-trade toolkit, and we at New Change FX are at the forefront of this innovation. 

Among the most powerful instruments in the trader’s toolkit is an Expected Spread Model, a pre-trade analytics tool that replaces conjecture with clarity. In essence, it answers a deceptively simple question: what should you pay to execute an FX trade? 

The answer, it turns out, is far from simple. As market participants seek more transparent and defensible execution, the challenge lies in measuring the “right” cost fairly, consistently, and without bias. We believe that a model-based approach—not a rear-view mirror of historical averages—provides the best insights. 

The Problem with Looking Backwards 

Most market participants have, until recently, leaned on historical databases of previously executed trades to estimate expected spreads. The appeal is obvious: what happened before offers a rough guide to what might happen again. But this method has structural flaws. Execution costs in spot FX, for instance, are only as reliable as the data underpinning them—data that must include consistent time stamps, high-fidelity mid-rate benchmarks, and rigorous bucketing by trade size, counterparty, currency pair, and market conditions. Even with vast data sets, the complexity of these variables leads to fragmentation, bias, and unreliable comparisons. 

In the forward market, the situation is even more precarious. Prior to our launch of Forwards365TM, forward-rate data lacked the necessary granularity and accuracy to assess historic costs meaningfully. The credit component embedded in forward pricing—variable across time, counterparties, and exposures—renders historical analysis almost meaningless without appropriate adjustments. 

The conclusion is stark: relying on precedent alone is not just inefficient—it may be misleading. 

A Model for Modern Markets 

Faced with the limitations of retrospective analytics, we chose a different route. The model-based approach leverages the dynamics that drive pricing: market depth, liquidity, volatility, and trade size. 

At its core, the model assumes what market microstructure theory has long implied—FX dealers adjust spreads to compensate for inventory risk; and liquidity, not loyalty, determines cost. Market capacity—the ability to absorb volume without distortion—is the principal determinant of the spread. 

Empirical data supports this thesis. In highly liquid pairs like EUR/USD, spreads exhibit three distinct regimes: flat across smaller volumes, a kink around mid-size trades, and then a linear rise beyond. Less liquid pairs, such as AUD/USD, behave differently. When viewed on a logarithmic scale, spreads widen more aggressively as trade size increases, reflecting dealers' heightened risk aversion. 

Yet this is only part of the story. Liquidity fluctuates not just across currency pairs but across the trading day. Drawing on academic research and proprietary data, we have modelled intra-day market activity, identifying patterns in volume and volatility. The result is a “dollar cost of volatility” —a measure of what it costs to hold a 10-million-unit FX position for five minutes, recalculated every five minutes. 

This innovation enables our Expected Spread Model to deliver dynamic, time-sensitive forecasts that reflect current market conditions, not stale averages. The model is underpinned by both theoretical rigour and empirical evidence, aligning closely with the findings of leading academics, who identified trade size and expected volatility as the two dominant factors influencing FX transaction costs. 

A Tool for the Entire Trade Lifecycle 

The Expected Spread Model is not just a theoretical construct—it is a practical tool used by our clients to inform decision-making before, during, and after execution. Pre-trade, it helps traders identify optimal execution windows. In real-time, it signals whether an offer is priced fairly. Post-trade, it benchmarks performance against a robust, neutral standard. 

Combined with Forwards365™, we offer a suite of analytics that empowers traders to plan, contextualise and evaluate their FX activity with confidence. 

In a market increasingly governed by data, models that bring clarity to complexity are more than a competitive advantage—they are a necessity. Our Expected Spread Model turns uncertainty into insight, ensuring that the cost of trading foreign exchange is no longer a mystery, but a metric. 

For More Information

Discover how NCFX’s Expected Spread Model and Forwards365™ can transform your FX strategy with data-driven precision.

Contact us at info@newchangefx.com