
THE FOREIGN EXCHANGE MARKET: STRUCTURE AND OPERATIONS 11
rate. The bid–ask spread is large in the retail segment because of higher average costs of
retail transactions. For the most actively traded currency pairs, the spread is generally at
3 pips. But sometimes, the spread can be at 1 pip or 2 pips because of competition. The
bid–ask rates are reviewed and revised from time to time, keeping in view the market
factors.
Pip and Lot A pip measures the amount of change in the exchange rate of a pair of cur-
rencies. That is, a pip is the smallest price increment a currency can make against the other
currency in the trading of a currency pair ...