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That's because the law of one price is purely theoretical and never applies in real life https://en.wikipedia.org/wiki/Law_of_one_price https://en.wikipedia.org

That's because the law of one price is purely theoretical and never applies in real life https://en.wikipedia.org/wiki/Law_of_one_price https://en.wikipedia.org/wiki/Law_of_one_price There is no such thing as a "live rate" or "market price"

Youden 5y ago
I'm not talking about the law of one price here, just the fact that the global currency exchange trade is decentralised. There's no one exchange that aggregates everything and can give you a single authoritative price. In other assets, like equities, there often is a single central exchange. If you want to buy CURI for example, it's only listed on NASDAQ, so the price on NASDAQ is The One True Price as far as a normal person is concerned. There's no such central exchange for currencies.
- kasey_junk 5y ago
  It’s not even true (anymore) that CURI is only listed on NASDAQ. It’s traded at lots of venues but there is at least a benchmark bid/ask based on US securities law. In fx it’s the law of whoever has the most information because there is no benchmark market at all. It’s why fx pricing is so hard to do right.
  - wdaareg 5y ago
    Based on our experience speaking with a number of institutional players, including traders and banks, what we found is that the institutional rates are unbelievably efficient, but the situation immediately gets worse as you move away from these centers of liquidity. If you talk to 3rd party institutional FX providers, they'll immediately mark up rates because its how they make all of their money.
- 323 5y ago
  What you say doesn't really apply to currencies, at least not to major ones. All currency exchanges track each other extremely closely, because it's extremely easy to arbitrage between them.
NovemberWhiskey 5y ago
OK, sure, but you can look at bid/offer spreads across different market makers to get some sense of how liquid and efficient the overall market is. For GBP/USD, spreads are measured in small numbers of tenths of a penny. Forex is essentially the largest, most liquid market there is.
wdaareg 5y ago
FX Prices effectively converge to a single price, because FX is an efficient market with little to no arbitrage that would be visible (thanks to the proprietary trading firms that specialize in it).

Youden 5y ago

I'm not talking about the law of one price here, just the fact that the global currency exchange trade is decentralised. There's no one exchange that aggregates everything and can give you a single authoritative price. In other assets, like equities, there often is a single central exchange. If you want to buy CURI for example, it's only listed on NASDAQ, so the price on NASDAQ is The One True Price as far as a normal person is concerned. There's no such central exchange for currencies.

kasey_junk 5y ago
It’s not even true (anymore) that CURI is only listed on NASDAQ. It’s traded at lots of venues but there is at least a benchmark bid/ask based on US securities law. In fx it’s the law of whoever has the most information because there is no benchmark market at all. It’s why fx pricing is so hard to do right.
- wdaareg 5y ago
  Based on our experience speaking with a number of institutional players, including traders and banks, what we found is that the institutional rates are unbelievably efficient, but the situation immediately gets worse as you move away from these centers of liquidity. If you talk to 3rd party institutional FX providers, they'll immediately mark up rates because its how they make all of their money.
323 5y ago
What you say doesn't really apply to currencies, at least not to major ones. All currency exchanges track each other extremely closely, because it's extremely easy to arbitrage between them.

NovemberWhiskey 5y ago

OK, sure, but you can look at bid/offer spreads across different market makers to get some sense of how liquid and efficient the overall market is. For GBP/USD, spreads are measured in small numbers of tenths of a penny. Forex is essentially the largest, most liquid market there is.

wdaareg 5y ago

FX Prices effectively converge to a single price, because FX is an efficient market with little to no arbitrage that would be visible (thanks to the proprietary trading firms that specialize in it).