In the Schweser L2 Concept Checkers section, the solution to the first question (the question itself is irrelevant) has this statement “Dealer spreads are lower for smaller orders as compared to larger orders”. Is this a true statement? This seems pretty counter-intuitive compared to other markets where larger orders could get you lower spreads.
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It’s more difficult for a dealer to find a buyer for $100 million than a buyer for $10 million; hence, to cover his risk of not finding a buyer, he’ll charge a higher spread for a $100 million transaction than for a $10 million transaction.
Or so says CFA Institute.
It’s not explained in the curriculum, but from what I understand, it’s a supply issue.
You need more liquidity, and thus the volume weighted order quotes would most definetly be higher than the current spot ask. For very large orders, you become more of a price maker, than a price taker. Even though the fx market is extremely large and liquid. The dealer also needs to be compensated for volatility and providing liquidity on such a risky transaction.