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How FX Pair Order Size Is Specified in Base or Quote Currency

Article Quant Q&A · Author: Khaine775
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Summary

For a GBP/USD trade, the document explains the usual convention: an order amount refers to units of the base currency, GBP in this pair. At the stated rate of 1.45, buying 100,000 GBP therefore requires 145,000 USD. A separate arrangement, called non-base trading in one answer, specifies an amount in the quote currency instead; the platform or dealer must know which currency defines the amount.

The replies also caution that order handling can depend on dealer and platform conventions. One answer says the order needs an amount currency because spreads may depend on which asset the dealer is managing. The discussion is brief and does not establish that every venue follows the same convention, so traders should check the product settings or confirm the amount currency when placing an order.

Key ideas

  • In a GBP/USD pair, GBP is the base currency and the standard order size is expressed in GBP.
  • At a rate of 1.45, buying 100,000 GBP costs 145,000 USD.
  • A quote-currency-sized trade specifies the USD amount and lets the GBP quantity depend on the exchange rate.
  • Platforms and dealers may require an explicit amount currency to price and process the order.

Tags

ForexExecutionMarket microstructure
Full text
# Is order amount related to base or quote in a currency pair?


# Is order amount related to base or quote in a currency pair?












Say I have a currency pair `GBP/USD` at rate `1.45`, buying `1 GBP` costs `1.45 USD` and selling `1 GBP` gives me `1.45 USD`.

Now I put an order of `100,000` on this pair on the buy side. Does this usually mean (if there even is a fixed convention for this) I buy `100,000 GBP`, which means it costs me `145,000 USD`, or does it mean I pay `100,000 USD` and get `68,965 GBP`?

## Answer by szhang (score 1)

https://quant.stackexchange.com/a/40510

The convention is, buying 100,000 GBPUSD means that you want 100,000GBP. Order size is the base currency amount. It will cost you 145,000 USD if the offer rate is 1.45.

If you want to sell a particular USD amount and let the market rate determine the GBP amount that you will get, it is called "non-base trading" - order size is not the size of base currency. You will set the trading product to USD and quantity to 100,000. Field names may vary between platforms. Or just say "sell 100k USD, buying sterling" in phone order.

## Answer by rupweb (score 0)

https://quant.stackexchange.com/a/36592

Neither. Your order would be rejected without an "amount currency" to specify the size of the quote (or deal) otherwise the dealer can't properly assign a spread to you. Spreads are decided according to asset / inventory in this case either GBP or USD and the dealer needs to know which one.

What you're touching on is market convention about which way around dealers like to deal with currency instruments. There's an established order, 1 underlying reason for that is which way round is it easier to do the conversion maths... but again whether you're priced in GBPUSD or USDGBP you need to give your order a size either in USD or GBP.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.