Why do spreads widen during market open/close, market rollover and news releases

As a broker, we depend on the liquidity offered by our liquidity providers.

Darwinex sources liquidity from its liquidity providers (LPs) on behalf of its customers. In other words, we act as a mere intermediary between our clients and the liquidity available in the market as provided by our LPs.

This has its pros and its cons. On the plus side, our customers can rest assured that we won’t trade against them and hence have no interest whatsoever in our customers losing money. On the contrary, the more our customers win, the better for us because the more commissions they’ll generate in the long run!

On the downside, we depend entirely on the liquidity offered by our LPs (i.e. we have no control over the spreads they offer). 

Daily market rollover

Liquidity is low per se around rollover because interbank liquidity is literally closed. The LPs’ reluctance to provide liquidity on Sunday open and around rollover time gives rise wider spreads and larger candles on market open.

News releases

The release of new economic information generates peaks in uncertainty, which temporarily fuels volatility until information has been processed by market participants. In high volatility conditions, offering tight spreads is very risky for liquidity providers, who thus widen their spreads. These are the very spreads that we pass on to you.