Also known as:Spread Markup Limit, Maximum Markup, Markup Ceiling
What is Markup Cap?
A markup cap is the maximum amount a broker allows an Introducing Broker or partner to add on top of the broker's base spread or commission. It sets a hard ceiling on the extra cost a partner can pass to their referred clients, protecting traders from being overcharged while still letting the partner earn.
In many IB programs the partner is given the ability to "mark up" pricing — for example, adding 0.3 pips to the broker's raw EUR/USD spread and keeping that difference as revenue. The markup cap defines how far that can go: a broker might cap markup at 1.0 pip per side on forex, or at a fixed USD amount per lot on other instruments.
Key takeaways
A hard ceiling on how much markup a partner can add to base pricing.
Protects clients and the broker's brand from overcharging.
Usually set in pips/side on forex and USD/lot elsewhere.
Enforced at the platform level — cannot be exceeded manually.
Signals that scaling volume, not overpricing, is the path to growth.
Suppose a broker's raw spread on EUR/USD is 0.2 pips and the markup cap is 1.0 pip. A partner can price clients anywhere from 0.2 up to 1.2 pips, but no higher. If they try to set 1.5 pips, the platform either rejects it or automatically clamps it back to the 1.2-pip ceiling.
Markup caps exist because pricing that a partner controls directly affects the end client's cost. Regulators and brokers both care about treating clients fairly, so the cap keeps partner economics aligned with a competitive, non-exploitative client experience.
How it works
The broker configures the maximum markup in the partner CRM or pricing engine, usually as pips-per-side on forex and as a USD-per-lot figure on commission-based or non-forex instruments. When the partner sets client pricing, the system validates the requested markup against the cap and rejects or trims anything above it.
On the trade, the client pays base cost plus the partner's markup; the broker collects the total, keeps its base revenue, and credits the marked-up portion to the partner. Because the cap is enforced at the platform level, it cannot be exceeded by editing a spreadsheet — the limit lives in the broker's system of record.
1
Broker sets the cap
The maximum allowed markup (e.g. 1.0 pip/side or $10/lot) is defined per instrument in the partner pricing engine.
2
Partner chooses a markup
The IB selects a markup up to the cap that balances earnings against staying competitive.
3
System validates against the cap
Any requested markup above the ceiling is rejected or automatically clamped to the cap.
4
Client trades at base + markup
The referred client pays the combined cost; the broker collects the total on execution.
5
Markup is credited to the partner
The broker keeps its base revenue and pays the marked-up portion to the IB on its settlement schedule.
Why it matters for partnership: The markup cap defines the ceiling on per-trade earnings, so partners must grow client volume rather than overcharge a few. Staying well under the cap also keeps your pricing competitive, which improves client retention and lifetime value.
Formula
Client Cost = Base Spread/Commission + min(Chosen Markup, Markup Cap)
Real World Example
A broker gives an IB a 1.0-pip markup cap on EUR/USD, where the raw spread is 0.2 pips. The IB sets a 0.5-pip markup, so clients see a 0.7-pip spread and the IB earns roughly $5 per lot on the marked-up portion. When the IB tries to push markup to 1.4 pips to boost margins, the CRM clamps it to the 1.2-pip ceiling, keeping the client's price competitive.
Capped markup vs uncapped IB pricing
Aspect
Capped markup
Fixed rebate (no markup control)
Client cost
Partner-influenced up to a ceiling
Set by broker, partner has no control
Earnings lever
Markup within the cap
Volume only
Client-fairness risk
Contained by the cap
Low — broker sets the price
Pro Tip
If you hit the markup cap and still want higher margins, negotiate a better base rebate by climbing the broker's volume tiers instead of trying to squeeze clients harder.
Common Pitfalls
Attempting to bypass the cap through duplicate sub-accounts or off-book pricing is easily detected by brokers and usually triggers immediate partnership termination and clawback of earnings.
FAQ
Why do brokers impose a markup cap?
To protect clients from being overcharged and to keep the broker's pricing competitive and its brand reputable. Regulators expect fair client treatment, and uncapped partner markups create that risk.
Is markup the same as a lot rebate?
No. A lot rebate is a fixed amount the broker pays you per lot. A markup is extra cost you add to client pricing and keep. Some programs offer one, some the other, and some both.
How is a markup cap measured?
Commonly in pips per side on forex pairs and as a fixed USD amount per lot on commission or non-forex instruments. The exact unit is defined in your partnership agreement.
Can I set different markups for different clients?
Often yes, within the cap, if the broker's CRM supports client-group pricing. Every group still cannot exceed the ceiling.
Does a higher markup always mean more income?
Not necessarily. Pricing near the cap raises per-trade revenue but can drive price-sensitive clients away, lowering total volume and lifetime value. Test where your book is most profitable.
Can the broker change the markup cap later?
Yes, brokers can revise caps under the partnership terms, usually with notice. Review your agreement and monitor the pricing engine for updates.
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