The FX Conversion Spread Cost — The Hidden Toll of Overseas Investing
To buy U.S. stocks, you first have to convert won into dollars. But did you know there is a cost that quietly leaks out during this conversion process?
What Is the FX Conversion Spread
The FX conversion spread is the difference between "the exchange rate applied when you buy dollars" and "the exchange rate applied when you sell dollars." Banks and brokerages sell a bit more expensively and buy a bit more cheaply than the reference rate, and that difference is their revenue and your cost.
For example, if the reference rate is 1,000 won but it is 1,010 won when you buy and 990 won when you sell, the spread is 2%. If you resell immediately after buying, you lose exactly this 2% on the spot.
The FX conversion spread is a "hidden cost" charged separately from the brokerage commission. Even during a commission-free promotion, the FX conversion spread can still occur.
The Meaning of the Preferential FX Rate
When a brokerage says "90% FX preferential rate," it means they shave off 90% of the original spread.
For example, if the base spread is 1% (at a rate of 1,000 won) and the preferential rate is 90%, the actual spread shrinks to 0.1%. It becomes 1,001 won when you buy and 999 won when you sell. The higher the preferential rate, the lower the conversion cost, so the larger the amount you convert, the more advantageous it is to compare each brokerage's preferential rate.
It Is Charged Twice on a Round Trip
The conversion cost occurs twice in total: once when you buy (won → dollars) and again when you later sell and convert back to won (dollars → won).
So even if the spread looks small on the surface, the burden grows when calculated on a round-trip basis. The more often you repeat conversions in your trading, the more this cost accumulates. For reference, in 2025 the Financial Supervisory Service has been intensively reviewing brokerages' overseas-stock commission and FX-conversion practices, among other things, strengthening scrutiny of this hidden cost.
Some brokerages offer a service that automatically converts when you order directly in won; in that case, if you do not check the applied rate and preferential conditions, you may pay a larger spread.
よくある質問
Q. Is conversion free with a 100% FX preferential rate?
In theory the spread approaches zero, but the eligible currency, amount, and period are often limited, and additional conditions may apply. A "100% preferential rate" does not necessarily mean all costs are zero, so you should check the detailed conditions.
Q. Isn't it always a gain if the exchange rate rises?
The gain or loss from exchange-rate movement and the FX conversion spread cost are separate. Even if the exchange rate moves favorably, the spread is always deducted as a cost when you buy and sell. Even if you expect an FX gain, you must always subtract the spread to see your actual profit.
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