Anyone stepping into brokerage operations for the first time runs into the same two terms immediately: spread and leverage. Both are simple once explained plainly, and both directly shape how your business actually earns money.
What a spread is
Every tradable instrument has two prices at any given moment: the bid, which is what the market will buy it from a trader for, and the ask, which is what the market will sell it to a trader for. The gap between those two numbers is the spread, and it is one of the primary ways a broker earns revenue. A trader who buys pays the ask and immediately owns a position worth the bid, meaning the spread is effectively the cost of entering a trade.
How leverage works
Leverage lets a trader control a position larger than their own account balance would otherwise allow, expressed as a ratio like 1 to 100. A trader with a thousand dollar account and 1 to 100 leverage can open a position worth up to a hundred thousand dollars. This is not free money. It magnifies both gains and losses proportionally, which is why responsible leverage limits and margin call systems matter as much as the headline number you advertise.
Where the revenue actually comes from
For most white-label brokerages, revenue comes primarily from the spread markup applied to each trade, sometimes paired with a separate commission on higher volume account tiers. Volume matters more than any individual trade, since a modest markup applied consistently across thousands of trades adds up to real, predictable revenue over a month.
Why this matters for how you set your own rules
Setting your spread markup too high pushes serious traders toward competitors who quote tighter pricing. Setting it too low leaves real revenue on the table. Most new operators start with a moderate markup, watch how it affects client retention over the first couple of months, and adjust from there rather than guessing at a perfect number on day one.